The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
MICHAEL MCGUIGAN and BRIDGET
MCGUIGAN,
Plaintiffs, CIVIL ACTION
NO. 25-01553
v.
AMERICAN STRATEGIC INSURANCE
CORP.,
Defendant.
OPINION
Slomsky, J. July 15, 2025
I. INTRODUCTION
This case concerns an insurance dispute arising out of property damage to Plaintiffs
Michael McGuigan and Bridget McGuigan’s (“Plaintiffs”) residence. (See Doc. No. 7.) Plaintiffs
acquired home insurance from Defendant American Strategic Insurance Corporation (“Defendant”
or “ASI”) for the protection of their residence located in Limerick, Pennsylvania. (Id. at ¶¶ 3, 13.)
When the residence suffered property damage, Plaintiffs submitted a claim to Defendant for the
loss but ASI denied the claim.1 (Id. at ¶¶ 13-15.) As a result, Plaintiffs brought the instant suit,
alleging in an Amended Complaint, the following claims against Defendant: (1) breach of contract
(“Count I”), (2) statutory bad faith under 42 Pa. Cons. Stat. § 8371 (“Count II”), and (3) fraudulent
misrepresentation (“Count III”). (See id.) In response, Defendant filed a Motion to Dismiss the
Amended Complaint, seeking dismissal of the bad faith and fraudulent misrepresentation claims
alleged in Counts II and III, respectively, pursuant to Federal Rule of Civil Procedure 12(b)(6).
1 The Amended Complaint does not indicate the specific property damage nor the cause of the
damage.
(See Doc. No. 9.) Defendant does not seek dismissal of the breach of contract claim alleged in
Count I. (See id.) For reasons that follow, Defendant’s Motion to Dismiss Counts II and III of the
Amended Complaint (Doc. No. 9) will be granted.
II. BACKGROUND
As mentioned above, Plaintiffs Michael McGuigan and Bridget McGuigan are adult
individuals residing in Limerick, Pennsylvania. (Doc. No. 7 at ¶¶ 1-2.) Plaintiffs purchased an
insurance policy from Defendant ASI for their residence. (Id. at ¶¶ 3, 9.) This insurance policy
provided for the following coverages: (1) buildings, (2) personal property, (3) fire damage, and
(4) water damage for any losses which may occur on the property. (Id. at ¶ 11.) The insurance
policy was in effect for the calendar year 2022. (Id. at ¶ 12.)
On October 5, 2022, Plaintiffs’ residence suffered significant property damage. (Id. at ¶
13.) Plaintiffs promptly notified Defendant of the damage and filed a claim under their home
insurance policy. (Id. at ¶ 14.) However, Defendant denied the claim. (Id. at ¶ 15.) The Amended
Complaint does not specify why Defendant denied Plaintiffs’ claim. (See id.)
On February 21, 2025, Plaintiffs filed a Complaint against Defendant in the Court of
Common Pleas of Montgomery County, Pennsylvania. (Doc. No. 1.) On March 24, 2025,
Defendant removed the case to the United States District Court for the Eastern District of
Pennsylvania. (See id.) On March 31, 2025, Defendant filed a Motion to Dismiss the Complaint
for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 6.) In
response, on April 9, 2025, Plaintiffs filed an Amended Complaint and, on the same day, this Court
issued an Order denying Defendant’s Motion to Dismiss the Complaint without prejudice as moot.
(Doc. Nos. 7, 8.)
On April 22, 2025, despite the additional allegations Plaintiffs added to the Amended
Complaint, Defendant filed a Motion to Dismiss the Amended Complaint, seeking dismissal of the
bad faith and fraudulent misrepresentation claims alleged in Counts II and III. (Doc. No. 9.) In
the Motion, Defendant argues Plaintiffs have not sufficiently alleged specific facts to support their
bad faith and fraudulent misrepresentation claims. (See id.) On May 5, 2025, Plaintiffs filed a
Response to Defendant’s Motion to Dismiss the Amended Complaint. (Doc. No. 10.) In the
Response, Plaintiffs first contend the Amended Complaint pleads specific conduct that constitutes
bad faith. (See id.) Second, Plaintiffs assert the Amended Complaint sufficiently alleges each of
the elements of fraudulent misrepresentation. (See id.)
On May 12, 2025, Defendant filed a Reply in Support of its Motion to Dismiss the
Amended Complaint. (Doc. No. 12.) In the Reply, Defendant again asserts Plaintiffs have failed
to provide any factual support for the allegations made in the Amended Complaint. (See id.) On
June 17, 2025, the Court held a hearing on the Motion, at which counsel for both parties were
present. Defendant’s Motion to Dismiss the Amended Complaint (Doc. No. 9) is now ripe for
disposition.
III. STANDARD OF REVIEW
The motion to dismiss standard under Federal Rule of Civil Procedure 12(b)(6) is set forth
in Ashcroft v. Iqbal, 556 U.S. 662 (2009). After Iqbal it is clear that “threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements do not suffice” to defeat a
Rule 12(b)(6) motion to dismiss. Id. at 663; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544
(2007). “To survive a motion to dismiss, ‘a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face.’” Tatis v. Allied Interstate,
LLC, 882 F.3d 422, 426 (3d Cir. 2018) (quoting Iqbal, 556 U.S. at 678). Facial plausibility is
“more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Iqbal, 556 U.S.
at 678). Instead, “[a] claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. (quoting Iqbal, 556 U.S. at 678).
Applying the principles of Iqbal and Twombly, the Third Circuit in Santiago v. Warminster
Twp., set forth a three-part analysis that a district court in this Circuit must conduct in evaluating
whether allegations in a complaint survive a 12(b)(6) motion to dismiss:
First, the court must ‘take[e] note of the elements a plaintiff must plead to state a
claim.’ Second, the court should identify allegations that, ‘because they are no more
than conclusions, are not entitled to the assumption of truth.’ Finally, ‘where there
are well-pleaded factual allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement for relief.
629 F.3d 121, 130 (3d Cir. 2010) (quoting Iqbal, 556 U.S. at 675, 679). The inquiry is normally
broken into three parts: “(1) identifying the elements of the claim, (2) reviewing the complaint to
strike conclusory allegations, and then (3) looking at the well-pleaded components of the
complaint and evaluating whether all of the elements identified in part one of the inquiry are
sufficiently alleged.” Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). The court must
“accept all factual allegations in the complaint as true and view them in the light most favorable
to the plaintiff . . . [and dismiss if] the plaintiff can prove no set of facts that would entitle her to
relief. Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006).
A complaint must do more than allege a plaintiff’s entitlement to relief; it must “show”
such an entitlement with its facts. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir.
2009) (citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008)). “[W]here the
well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct,
the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Iqbal,
556 U.S. at 679 (alteration in original) (citation omitted). The “plausibility determination is a
“context-specific task that requires the reviewing court to draw on its judicial experience and
common sense.” Id.
IV. ANALYSIS
A. Plaintiffs Fail to State a Bad Faith Claim
In Count II of the Amended Complaint, Plaintiffs fail to state a bad faith claim because
they have not pled facts showing Defendant lacked a reasonable basis for denying benefits or knew
or recklessly disregarded the lack of a reasonable basis. Plaintiffs allege Defendant acted in bad
faith as defined under 42 Pa. Cons. Stat. § 8371 through its refusal “to provide coverage to said
claim of damages even though all appropriate premiums have been provided to Defendant.” (Doc.
No. 7 at ¶ 33.) Defendant counters that Plaintiffs’ bad faith claim should be dismissed because it
“offers no more than conclusory allegations of bad faith.” (Doc. No. 9-1 at 5.) Defendant further
argues that Plaintiffs’ bad faith claim should be dismissed because it is merely “boilerplate
allegations that the insurer acted in bad faith.” (See id.)
Pennsylvania’s bad faith statute, 42 Pa. Cons. Stat. § 8371, permits policyholders to recover
damages if they can show that an insurance company knowingly denied benefits and lacked a
reasonable basis to do so. Section 8371 provides:
In an action arising under an insurance policy, if the court finds that the insurer has
acted in bad faith toward the insured the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date the claim was made
by the insured in an amount equal to the prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.
42 PA. CONST. STAT. § 8371. While the statute does not define “bad faith,” the Pennsylvania
Superior Court defines bad faith as “any frivolous or unfounded refusal to pay the proceeds of a
policy.” Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994)
(quoting Bad Faith, Black’s Law Dictionary (6th ed. 1990)). The Third Circuit has adopted this
definition and added that this sort of bad faith is in “breach of a known duty (i.e., good faith and
fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is
not bad faith.” Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 137 (3d Cir. 2005).
In addition, the Third Circuit has applied a two-part test to bad faith claims brought under
§ 8371:
both elements of which must be supported by clear and convincing evidence: (1)
whether the insurer lacked a reasonable basis for denying benefits under the
insured’s policy, and (2) whether the insurer knew or recklessly disregarded the lack
of a reasonable basis.
Smith v. State Farm Mut. Auto. Ins. Co., 506 F. App’x 133, 136 (3d Cir. 2012).
Bad faith claims are fact specific and turn on the conduct of the insurer toward the insured.
Dougherty v. Allstate Prop. And Cas. Ins. Co., 185 F. Supp. 3d 585, 598 (E.D. Pa. 2016). Because
bad faith claims are fact specific, to survive a motion to dismiss “a plaintiff must plead specific
facts as evidence of bad faith and cannot rely on conclusory statements.” Toner v. GEICO Ins.
Co., 262 F. Supp. 3d 200, 208 (E.D. Pa. 2017) (citing Smith v. State Farm Mut. Auto. Ins. Co., 506
F. App’x 133,136 (2d Cir. 2012)). Accordingly, “[a] plaintiff cannot merely say that an insurer
acted unfairly, but instead must describe with specificity what was unfair.” Id.
Here, viewing the allegations in the Amended Complaint in the light most favorable to
Plaintiffs, the allegations consist only of conclusory statements and fail to cite specific facts to
support the two elements of a bad faith claim, which are, as noted above, (1) whether the insurer
lacked a reasonable basis for denying benefits under the insured’s policy, and (2) whether the
insurer knew or recklessly disregarded the lack of a reasonable basis. See Smith, 506 F. App’x at
136. Thus, the allegations in Count II of the Amended Complaint do not plausibly allege a bad
faith claim.
1. Plaintiffs Do Not Plausibly Allege Defendant Lacked a Reasonable
Basis for Denying Benefits
First, Plaintiffs have not pled facts showing that Defendant lacked a reasonable basis for
denying benefits. Plaintiffs’ allegations of bad faith are numerous. (See Doc. No. 7 at ¶ 37.)
Specifically, Plaintiffs allege the following bad faith actions:
(a) Unreasonably delaying and/or denying Plaintiffs’ claim;
(b) Failing to properly investigate the damage;
(c) Providing misleading or incomplete information about the claim process;
(d) Refusing to pay the full amount of covered losses without justification;
(e) Engaging in deceptive claims-handling practices intended to frustrate
policyholders;
(f) Failing to properly adjust said losses;
(g) Failing to engage in claims revision of any claim supplementals;
(h) Failing to properly inspect and/or evaluate acknowledged loses found by Kery
Adjusting, Inc.
(Id.)
Several courts in the Third Circuit have considered similarly pled bad faith claims and
concluded they lack specific factual details and consist of only “bare-bones allegations.” For
example, in Brown v. LM Gen. Ins. Co., the plaintiff listed thirty-eight (38) bare-bones allegations
of bad faith in her amended complaint. No. 21-2134, 2021 WL 3809075, at *2 (E.D. Pa. Aug. 26,
2011). The court summarized these allegations as follows:
[The plaintiff] alleges that . . . [the defendant], among other things, engaged in
“dilatory and abusive claims handling”; acted “unreasonably and unfairly”; failed
to pay the disputed amount owed; failed to reasonably and adequately investigate;
failed to conduct their own medical evaluation of . . . [the plaintiff]; that . . . [the
plaintiff] transmitted medical documentation establishing that her injuries resulted
from the accident; that . . . [the defendant] failed to consider that documentation,
despite “continuously and endlessly” requesting more evidence as a means to delay
resolution of the claim; and that . . . [the defendant] relied on the judgment of a
nonmedically trained claims adjuster.
Id. In Brown, the court held these allegations were “conclusions—not facts,” noting that, while
the complaint took issue with the claims adjusters’ lack of medical education, it failed to allege
“that the claims adjusters . . . [were] somehow ill-equipped to perform their job.” Id. at *3.
Ultimately, the court held that the amended complaint merely reflected “a disagreement over the
amount of settlement of . . . [the plaintiff’s] claim” and dismissed her bad faith claim with
prejudice. Id.
Similarly, in MBMJ Props., LLC v. Millville Mut. Ins. Co., the plaintiffs also included a
list of bare-bone allegations of bad faith in their complaint. No. 18-5071, 2019 WL 1651667, at
*5 (E.D. Pa. Apr. 17, 2017). These claims included allegations of “forwarding correspondence . .
. representing to Plaintiff . . . that his claim was not . . . covered under the Defendant’s policy of
insurance” and “not having a reasonable basis for denying Plaintiff’s benefits under the policy.”
Id. at *4-5. When considering these allegations, this Court held that the plaintiff “based their bad
faith claim solely on conclusory allegations that are insufficient to withstand [the defendant’s]
Motion to Dismiss.” Id. at *6. Specifically, the Court found that the plaintiffs’ allegation that the
defendant “failed to promptly and thoroughly investigate their claim” did not include facts to
support this conclusion. Id. For example, the plaintiffs did not plead “(1) the timing of the alleged
investigation . . . (2) the methods and procedures by which the investigation was conducted, or (3)
the length of the investigation from start to finish.” Id. As such, the Court concluded that the
plaintiffs’ claims were insufficient to raise a plausible bad faith claim. Id.
Here, Plaintiffs’ bad faith allegations, similar to those in Brown and MBMJ Props., consist
only of conclusory statements. Although Plaintiffs cite § 8371 and pled conclusions to show how
Defendant acted in bad faith, they fail to plead specific facts honing in on Defendant’s conduct.
(Doc. No. 7 at ¶ 37.) Similar to Brown, Plaintiffs provide no dates regarding when they notified
Defendant. For instance, Plaintiffs allege that Defendant “fail[ed] to properly investigate the
damage,” but provide no examples of how Defendant handled Plaintiffs’ claim. (Id. at ¶ 37(b).)
Although Plaintiffs allege that they promptly notified Defendant of the damage and filed a claim
under the policy, they do not provide any dates or further communications sent to Defendant. (Id.
at ¶ 14.) Therefore, as in Brown, Plaintiffs’ assertion that Defendant “fail[ed] to properly
investigate the damage” is conclusory and unsupported by sufficient facts. (See id. at ¶ 37(b).)
In addition, like the plaintiffs in MBMJ Props., Plaintiffs here allege that Defendant
“fail[ed] to properly inspect and/or evaluate acknowledged loses found by Kery Adjusting, Inc.”
(Id. at ¶ 37(h).) But, as noted above, this conclusion is unsupported by facts alleging the methods
and procedures of the investigation. See MBMJ Props., 2019 WL 1651667, at *6. While the
Amended Complaint identifies Kery Adjusting, Inc. as the adjuster, it does not allege any details
about the adjustor’s investigation. Without additional facts regarding the investigation,
correspondence between the parties, or unreasonable conduct, “the Court cannot infer bad faith”
on Defendant’s part. See Shadow v. State Farm Mut. Auto. Ins. Co., No. 20-01336, 2020 WL
1508376, at *2 (E.D. Pa. Mar. 30, 2020) (“Absent additional facts regarding . . . [the plaintiff’s]
insurance claim and the accompanying investigation, negotiations, or communications that took
place, the [c]ourt cannot infer bad faith on . . . [the defendant’s] part”), and accepting the
allegations in the Amended Complaint as true, it is unclear what motivated Defendant to deny
Plaintiffs’ benefits under their policy. By not providing specific examples of ill will or disregard
for the policy, Plaintiffs do not plead the absence of a reasonable basis to deny benefits under the
homeowner’s policy. Therefore, Plaintiffs do not plausibly allege Defendant acted in bad faith in
violation of § 8371.
2. Plaintiffs Have Not Plausibly Alleged That Defendant Knew or
Recklessly Disregarded a Reasonable Basis Upon Which to Deny
Benefits
Second, Plaintiffs have not pled facts showing that Defendant knew or recklessly
disregarded the lack of a reasonable basis to deny benefits. See Smith, 506 F. App’x at 136. In
the Amended Complaint, Plaintiffs allege Defendant acted in bad faith by “engaging in deceptive
claims-handling practices intended to frustrate policyholder.” (Doc. No. 7 at ¶ 37.) But for the
same reasons listed above, the allegation is conclusory and lacks the specificity required to survive
a motion to dismiss.
Therefore, even when viewing the Amended Complaint in the light most favorable to
Plaintiffs, the allegations in Count II lack the details necessary to meet the required specificity to
support a bad faith claim. Accordingly, Defendant’s Motion to Dismiss the Amended Complaint
(Doc. No. 9) will be granted on Plaintiffs’ bad faith claim (Count II).
B. The Gist of the Action Doctrine Precludes Plaintiffs’ Fraudulent
Misrepresentation Claim
Defendant argues in its Motion to Dismiss that the fraudulent misrepresentation claim
alleged in Count III is “barred by Pennsylvania’s gist of the action doctrine.” (Doc. No. 9-1 at 7.)
The Court agrees and will grant Defendant’s Motion to Dismiss Count III of the Amended
Complaint. (Doc. No. 9.)
Under Pennsylvania law, the gist of the action doctrine “prohibits a plaintiff from bringing
a tort claim that simply reproduces a claim for breach of contract.” Ohama v. Markowitz, 434 F.
Supp. 3d 303, 319 (E.D. Pa. 2020). Specifically, the gist of the action doctrine bars the following:
a tort claim
(1) [a]rising solely from a contract between the parties; (2) where the duties allegedly
breached were created and grounded in the contract itself; (3) where the liability stems
from a contract; or (4) where the tort claim essentially duplicates a breach of contract claim
or the success of which is wholly dependent on the terms of a contract.
Hart v. Arnold, 884 A.2d 316, 340 (Pa. 2005). In other words, “[w]here the alleged
misrepresentation or fraud concerns the performance of contractual duties, ‘then the alleged fraud
is generally held to be merely collateral to a contract claim for breach of those duties.’” Smith v.
Lincoln Ben. Life. Co., 395 F. App’x 821, 823 (3d Cir. 2010) (quoting eToll, Inc. v. Elias/Savion
Adver., 811 A.2d 10, 19 (Pa. Super. Ct. 2002)).
For example, in Yakubov, the court barred the plaintiff’s intentional misrepresentation
claim under the gist of the action doctrine. See Yakubov v. GEICO General Ins. Co., No. 11-3082,
2011 WL 5075080, at *2 (E.D. Pa. Oct. 24, 2011). There, the plaintiff was injured in a motor
vehicle accident by an uninsured motorist and submitted a claim to their insurance company
seeking damages. See id. at *1. The defendant insurance company, however, refused to pay the
plaintiff for the amount alleged in the claim. Id. Following the defendant’s refusal, the plaintiff
filed a complaint against the defendant alleging the following claims: “a claim for [uninsured
motorist] benefits (Count I); a claim for income loss benefits (Count II); a claim alleging a violation
of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) (Count III);
a claim of bad faith (Count IV); and a claim alleging intentional misrepresentation (Count V).” Id.
In response, the defendant filed a motion to dismiss, arguing the intentional
misrepresentation claim was barred by Pennsylvania’s gist of the action doctrine. Id. In the
complaint, the plaintiff alleged that the defendant “represented to him that his Policy provided
income loss coverage and charged a premium for income loss coverage, but that [the defendant’s]
promise to pay income loss benefits was ‘wholly illusory’ and [the defendant] never intended to
pay income loss benefits.” Id. at *2. The court agreed with the defendant and applied the gist of
the action doctrine, finding that “the relationship and duties of the parties arise under the Policy.”
See id. As such, the court concluded that, because the plaintiff’s “‘misrepresentation’ claim [wa]s
‘really about’ [the defendant’s] alleged breach of its obligations under the Policy,” the
misrepresentation claim was “duplicative of and collateral to [the plaintiff’s] contract claims” and
thus barred by the gist of the action doctrine. Id.
Here, Plaintiffs’ fraudulent misrepresentation claim, like the misrepresentation claim in
Yakubov, is merely a tort claim arising from the parties’ contractual relationship defined in the
Policy. Plaintiffs allege in their misrepresentation claim that Defendant knowingly made false
representations regarding “the scope of coverage, claim payments, and policyholder rights with
the intent to deceive Plaintiff.” (Doc. No. 7 at ¶ 40.) In addition, Plaintiffs allege Defendant
“fraudulently misrepresented the value of their damaged property” by “under compensat[ing]
them.” (Id. at ¶ 41.) But like the misrepresentation claim in Yakubov, this claim here is really
about Defendant’s alleged breach of its obligations to Plaintiffs under the Policy and is thus
“duplicative of and collateral to [Plaintiffs’] contract claim[].” Yakubov, 2011 WL 5075080, at *2.
Therefore, like the claim in Yakubov, the gist of the action doctrine bars the fraudulent
misrepresentation claim in Count III, which will be dismissed.
V. CONCLUSION
For the foregoing reasons, Defendant American Strategic Insurance Corporation’s Motion
to Dismiss Counts II and III of the Amended Complaint (Doc. No. 9) will be granted. An
appropriate Order follows.