Bad Faith: River Realty v. Farm Family
The First Circuit Court of Appeals ruled a $120,000 disparity between an insurer’s appraisal of ice-dam damage and the award obtained in a reference hearing did not constitute bad faith under Massachusetts General Laws Chapter 176D, and granted summary judgment for the insurer.

An adjuster estimated the water damage at $17,825. However, the policyholder estimated a $154,000 loss, and when the conflict ended in a reference hearing, the panel awarded the insured $137,888.

The insurer allegedly mixed up the claim number of the policyholder with that of a separate claim made by the property’s residents, causing a delay in the insurer’s response. The policyholder alleged additional delays caused by the insurer.

The Court recognized that the insurer may have been negligent, but it did not amount to bad faith. The Court reasoned because the initial estimate, likely made before all damage was revealed, was less than what the insurer later offered the insured, does not mean the estimate was “outside of the scope of reasonableness.” The insured also neglected to identify ways in which the insurer “failed to act reasonably in estimating the damage” and failed to show that the insurer’s “estimate varied from industry practice.”