Insurers have notched an important win in Pennsylvania in connection with the payment of general contractor overhead and profit on homeowners' claims. The victory comes in a series of class actions by insureds against insurance companies, a type of case that has increased dramatically in the last several years.

Judge Mark I. Bernstein of the Philadelphia Court of Common Pleas on March 25 declined to certify breach of contract and bad faith class action claims filed against five insurance companies—two of them Ballard Spahr clients—for failure to make an automatic payment of such fees to the insureds. Property damage claims are unique, the Judge said, and so defy such certification. Judge Bernstein also ruled that the homeowners had not shown that there is an industry standard in Pennsylvania of paying general contractor overhead and profit whenever more than one trade is involved in a repair. Each claim must be evaluated on its specific facts, the Judge concluded, making a class action unmanageable. Judge Bernstein based his decision on Pennsylvania Superior Court rulings that general contractor overhead and profit payments to an insured are not automatic and that an insurer should determine whether to make them on a case-by-case basis.

Ballard Spahr played a leading role in defending this matter. The firm regularly represents and advises insurance companies in a variety of contexts, and it has extensive experience handling insurance-related class actions and other litigation. To discuss the challenges presented by class actions against insurance companies and other insurance issues, please contact Mark J. Levin, a partner in the Litigation Department and a member of the Insurance Group, the Consumer Financial Services Group and the Business Litigation Group, or Douglas Y. Christian, a partner in the Litigation Department and partner-in-charge of the Insurance Group.

Copyright © 2008 by Ballard Spahr LLP.
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