Building on its ruling in Hamill v. Pawtucket Mutual Insurance Company, 179 VT 250 (2005), the Vermont Supreme Court rejected the notion that an insured has a cognizable claim for negligence against his carrier in connection with the inspection and handling of a first-party property insurance claim. Murphy v. Patriot Insurance Company, 2014 VT 96 (2014).
In Murphy, the plaintiff / insured brought suit against Patriot Insurance Company (“Patriot”) its homeowner’s insurer asserting claims for breach of contract, negligence and bad faith in connection with the adjustment of a claim for water damage that resulted in mold. With respect to the negligence claim, plaintiff alleged that Patriot, through its adjuster, failed to handle the claim in a reasonable manner by negligently inspecting and processing the claim.
In affirming the trial court’s dismissal of the negligence count, the Supreme Court explained:
[T]he relationship between insurer and insured is fundamentally contractual, “defined and governed” by the coverage provisions in the insurance policy and the covenant of good faith and fair dealing implied therein…. We have held on numerous occasions that a negligence claim can exist only if “there is a duty independent of any contractual obligations….” [W]e recognized the existence of a first-party bad faith action against an insurer in part because no alternative independent remedy was available…. The bad faith remedy would generally be superfluous if mere negligence in handling a claim would be sufficient for liability.
The Court also noted that a majority of jurisdictions have likewise rejected an independent tort duty of the party of the insurer and limited actions by insureds against their insurers to breach of contract or the implied covenant of good faith and fair dealing.