Submitted: February 15, 2017
Below: Superior Court of the State of Delaware C.A. No.
STRINE, Chief Justice; VALIHURA, and SEITZ, Justices.
Collins J. Seitz, Jr. Justice
13th day of March, 2017, having considered the
briefs and the record below, it appears to the Court that:
February 12, 2009, the Bennetts' toilet cracked causing
water damage to their condominium as well as their
belongings. The property was governed by a condominium
association, which had insurance with Philadelphia Indemnity
Insurance Company ("PIIC"). The Bennetts also had
their own insurance policy with USAA. After the condominium
association, USAA, and PIIC refused to cover the loss, the
Bennetts filed suit against them alleging breach of contract
and bad faith denial of insurance coverage. This appeal
involves only the suit against USAA.
trial, USAA moved for a directed verdict on the bad faith
claim, contending that the Bennetts failed to present
evidence that USAA lacked a reasonable justification to deny
their claim. The Superior Court granted the motion, and
instructed the jury that the bad faith claim was no longer in
the case. After trial, the jury returned a verdict in favor
of USAA on the breach of contract claim. In this appeal, the
Bennetts raise two arguments. First, they contend that the
Superior Court improperly required them to produce evidence
that USAA did not have a reasonable justification for denying
their claim. Second, they argue that the court should not
have told the jury that the bad faith claim was no longer in
the case. For the reasons stated below, we affirm the
decision of the Superior Court.
William and Debra Bennett owned a condominium in Lewes,
Delaware. On February 12, 2009, the property manager
of their condominium association, Plantations East
Condominium Association (the "Association"), called
them and told them that neighbors had reported water gushing
out of the walls of their home. The Bennetts called ServPro
of Sussex County at the Association's recommendation.
ServPro determined that the source of the leak was a broken
toilet in the Bennetts' condominium.
Bennetts sustained major water damage to their condominium
and their personal property inside the home. They filed a
claim with their insurance company, USAA. The USAA policy
contained an "other insurance" provision, which
stated that if the condominium was covered by other insurance
"in the name of a corporation or association of property
owners covering the same policy, " the USAA policy would
be secondary to that policy. USAA requested that the Bennetts
provide a copy of the Association's bylaws so that it
could determine who was responsible for the repairs. Mr.
Bennett forwarded them to USAA. The Bennetts also filed a claim
with the Association and the Association's insurance
carrier, PIIC. The Bennetts later hired an attorney,
Georjan Overman, to handle the claims against the Association
There were significant delays in getting PIIC and the
Association to pay for repairs to the property. On May 21,
2009, Mr. Bennett sent an e-mail to USAA stating "[a]s
you were informed by our attorney, Georjan Overman, the
actual repair to our property is presently in limbo despite
the [Association's] insurer, [PIIC], accepting the claim
to repair the damaged structure." In the summer of
2009, the Bennetts agreed to mediate their claim with the
Association and PIIC to move the repair process
along. USAA was not involved in the
mediation. During that time, the Bennetts did not
request that USAA pay for repairs to the condominium.
While the Bennetts were pursuing their claims against the
Association and PIIC, USAA requested that the Bennetts
provide a list of items damaged by the leak. On October 19,
2009, the Bennetts first mailed USAA their
list. On December 17, 2009, a USAA adjuster
inspected the condominium and prepared an estimate of the
loss. USAA paid a portion of the amount the Bennetts
requested for their damaged personal property. On January 28,
2010, the Bennetts contacted USAA to inform them that PIIC
and the Association had not paid any benefits for their unit
repairs, and demanded benefits under their dwelling coverage
with USAA. On January 29, 2010, USAA sent a denial letter to
the Bennetts, informing them that USAA's coverage was
secondary to that of the Association, and requested that if
their claim was denied by PIIC, that they forward the denial
letter to it for review.
February 9, 2010, the Bennetts filed suit against USAA for
breach of contract and bad faith. At their jury trial, the
Bennetts testified in their case-in-chief regarding the
damages to their condominium and personal property. A
contractor witness also testified. The Bennetts did not call
a representative from USAA to explain what information USAA
knew or considered in rendering its decision to deny the
the conclusion of the Bennetts' case, USAA moved for a
directed verdict on the bad faith claim, arguing that the
Bennetts failed to present sufficient evidence to support the
claim. Specifically, USAA argued that the Bennetts had the
burden to produce some evidence to show that USAA lacked a
reasonable justification to deny primary dwelling coverage.
During argument on the motion, the court asked why the
Bennetts did not call a USAA representative as a witness:
Court: Let me just - let me ask one thing. I would have
thought that you would have had Ms. Johnson testify to
explain why she did what she did. Was there any reason why
you didn't do that, Mr. Schaffer?
Counsel: Yeah, Your Honor. There are risks, of course, that
she could get on the stand and say, I did do
Court: Your - Ms. Bennett did say that Ms. Bowman did not ask
for the insurance policy and I think she said she didn't
look at it or that she was surprised that Ms. Bowman did not
look at it. I don't know how Ms. Bennett would have
actual knowledge of that. She may. Someone could have told
her. Ms. Bowman could have told her. I doubt that, but she
could have learned it through the litigation . . . But
I'm certainly very troubled that we didn't have Ms.
Bowman on the stand to say why she did what she did or why
she didn't do what she didn't do and, you know - but
what I'm left with right now is USAA paid on the personal
property; the condo docs were sent to USAA; USAA, through
great effort by Mr. Greenberg, was aware of the lawsuits
against both the condo association and the Philadelphia
Indemnity Insurance Company, but I - as I sit here, I
don't know at all why Ms. Bowman did or [did] not do
anything. I mean, I don't know.
Counsel: Well, I believe the burden is that . . . someone at
USAA . . . has to testify that she had a reasonable basis for
denying these claims. And if she didn't read the
insurance policy, I don't see how that is reasonable.
Court: I mean, I think you have the burden to say they denied
it without any reasonable justification.
Counsel: Which we did.
Court: I really have no information as to why she denied it.
Counsel: So then how do we know whether their excuse is
reasonable or not?
Court: Well, you put her on the stand and ask her, [w]hy did
you deny it? And she says, [w]ell, I did 10 things, or,
[e]very 29th, I deny all the claims that come in
just as a matter of company policy. That's just what I do
and I get a bonus ...