The federal district court granted the insurer’s motion for summary judgment, finding no bad faith despite the appraisal award exceeding the amount the insurer initially paid. Jazi Kat 4659 Rockridge LLC, et al. v. Travelers Cas. Ins. Co. of Am., et al., 2026 U.S. Dist. LEXIS 105634 (D. Ariz. May 13, 2026).

Plaintiffs sued Travelers for breach of contract and bad faith, alleging that Travelers failed to pay money plaintiffs were owed under the policy. Plaintiffs held a commercial property policy for two properties. A fire destroyed one of the properties. Travelers adjusted the claim and issued two payments. Plaintiffs disagreed with the amount of the payments and demanded an appraisal. Travelers agreed to the appraisal.

Believing that Travelers still had not issued sufficient payment or complied with the terms of the policy, plaintiffs filed suit while the appraisal process was ongoing. Plaintiffs alleged breach of contract and bad faith. As a result of the appraisal process, Travelers issued an additional payment. Travelers moved for summary judgment.

Travelers argued that its agreement to participate in the appraisal process defeated any claim that it breached the policy. It further argued that even if plaintiffs could establish a breach, they could not establish damages because Travelers promptly paid the appraisal award.

Plaintiffs responded that compliance with the appraisal process could not defeat the bad faith claim. Plaintiffs believed that Travelers committed a breach because the payments following appraisal were more than Traveler’s initial payments. Travelers asserted that because it complied with the express terms of the policy by participating in the appraisal and thereafter promptly paying the award, it did not breach to policy as a matter of law. The court agreed.

Turning to the bad faith claim. plaintiffs had no recoverable damages to support a claim of bad faith. Nor were plaintiffs entitled to punitive damages. Plaintiffs failed to address their burden or point to any evidence to prove bad faith.

Even if plaintiffs had recoverable damages, they still did not present evidence suggesting that Travelers intentionally denied, failed to process, or failed to pay their claim without a reasonable basis. The dispute centered on whether one of the insured buildings needed to be completely demolished. Plaintiffs offered no evidence to show that their claim was not fairly debatable and thus there was no genuine dispute of fact. Because there was undisputed evidence that plaintiffs’ claim was fairly debatable, plaintiff could not establish that Travelers acted in bad faith. Travelers was entitled to summary judgment on plaintiffs’ bad faith claim.