Usually policyholders are left with the option of suing their insurance carriers for breach of contract and bad faith, however a recent ruling in Pennsylvania opens up the door for policyholders to sue for negligence as well. The case is Bruno v. Erie Ins. Co., No 25 WAP 2013 (Pa. Dec. 15, 2014).

In Bruno, the policyholders purchased a home and obtained a policy from Erie. Shortly after moving in to the home, they began to renovate the basement and discovered leaking pipes and black mold. The policyholders notified Erie and requested that Erie open a claim. Erie sent and adjuster and an engineer who both inspected the mold. The adjuster and engineer both told the policyholders that “the mold was harmless and that they should continue tearing out the existing paneling [and] that health problems associated with mold were a media frenzy and overblown.” Based upon those representations, the policyholders continued their renovations and remained in the home. Over the next few weeks, each member of the Bruno family began to develop respiratory illnesses that got much worse over time.

The policyholders filed suit on the theory of negligence, alleging that they followed the advice of Erie’s agents and it caused them harm. Erie attempted to dismiss the negligence count with the argument that this really was a breach of contract claim in disguise and since they eventually did pay the mold sublimit on the policy, there was no claim. The trial court and an intermediate appellate court agreed with Erie. However, the Pennsylvania Supreme Court reversed that decision stating:

a negligence claim based on the actions of a contracting party in performing contractual obligations is not viewed as an action on the underlying contract itself, since it is not founded on the breach of any of the specific executory promises which comprise the contract. Instead, the contract is regarded merely as the vehicle, or mechanism, which established the relationship between the parties, during which the tort of negligence was committed.

Thus, Erie was appropriately held responsible for the actions of their agents which put the Bruno family in harm’s way. I believe this case may have far reaching implications beyond mold cases and could impact carrier for their failure to pay for proper repairs of many different kinds of losses. Time will tell, but this does bring to mind one of my favorite Billy Joel songs. . . .