In a brief decision, the federal district court denied the insurer's motion for summary judgment on the insured's bad faith claims. Gulf Prod. Co. Inc. v. Hoover Oilfield Supply, Inc., 2012 U.S. Dist. LEXIS 3390 (E.D. La. Jan. 11, 2012).

     The insured was sued for a defective flowline that allegedly splayed when pressure tested below its advertised maximum pressure limit was reached. This allegedly caused a delay of production of mineral's from the customer's wells, the basis of a suit filed against the insured. A defense was provided under a reservation of rights, but a declaratory judgment was filed to determine the insurer's coverage obligations.

     The court noted that whether an insured has breached its duty of good faith and is liable required a factual determination. The insured's answer outlined several reasons for its bad faith claims, which centered around the scope of coverage under the policy. For example, the insured alleged the insurer's continued efforts to disclaim coverage was a bad faith breach of its duty of good faith and fair dealing. In response, the insurer argued that it was providing a defense to the insured under a reservation of rights, making it impossible for the insurer to be in bad faith.

    The court disagreed. There was no support for this argument and the motion for summary judgment was denied.