The court denied the insurer’s motion for partial summary judgment on the insured’s bad faith claim, but granted the motion on the insured’s claim for punitive damages. Serbian Orthodox Church v. Brotherhood Mut. Ins. Co., 2026 U.S. Dist. LEXIS 58234 (S.D. Cal. March 19, 2026).

On February 1, 2023, the Church filed a claim for water damage with Brotherhood Mutual Insurance Company (BMIC). The claim was based on rain and wind that caused extensive water intrusion into the Sanctuary, damaging its plaster walls and ceilings and fresco paintings. The claim was assigned to Patrick Hurley. Hurley sent a letter discussing potential bars to coverage and requesting further information and documents from the Church.

BMIC assigned a filed adjuster who inspected the property and noted interior damage to the Sanctuary that may have been due to long-term water damage and “water stains that may have happened multiple times” as opposed to solely from the reported event. A second inspector found moisture damage to the tower section of the dome indicating long-term moisture intrusion.

On April 25, 2023, BMIC sent a reservation of rights letter stating the investigation was ongoing, listed possible exclusions that may bar coverage, and requested information and documents related to a prior 2017 water damage claim.

After delays in processing the claim, the Church filed suit on August 2, 2024, alleging breach of contract, bad faith, and entitlement to punitive damages. In October 2024, Hurley was placed on limited duties because he was having trouble getting things completed properly and timely. In December 2024, Hurley was fired because of diminished mental capacity and was replaced by his supervisor, Peter Kujak.

On October 8, 2025, Kujak sent a coverage explanation letter and a check for $543,711.73. The letter explained that BMIC agreed to pay for the interior water damage caused by rain based on testimony from the Church’s presidents that they saw water seeping through the fresco and photographs and videos produced in August 2025.

BMIC moved for partial summary judgment on the bad faith and punitive damage claims. Neither party moved for summary judgment on the breach of contract claim, so a question of material fact remained as to whether benefits due under the policy were withheld and/or delayed – the first prong of the bad faith claim. Therefore, the court only addressed the reasonableness of BMIC’s actions.

The Church argued that a jury could find BMIC’s handling of the claim was unreasonable based on evidence that BMIC’s investigation was inadequate and that it did not need information that it repeatedly sought from the Church. The Church contended that BMIC’s investigation was inadequate because BMIC could have sought testimonies it relied on to adjudicate the claim far earlier, Hurly was an incompetent adjuster, and Kujak neglected the claim.

Although the claim was filed in February 2023, BMIC did not depose the Church officials until May 2025. A jury could find BMIC unreasonably delayed the claim by not seeking and considering testimony from these officials earlier. The Church further argued that Hurley was incompetent and BMIC failed to supervise him. Kujak neglected the claim after being assigned in December 2024. BMIC also requested photographs and videos from before the loss date which it ultimately did not need.

In all, the Church sufficiently showed that a jury could conclude BMIC”s conduct was unreasonable based on the totality of the evidence which included failing to seek crucial information earlier. The motion seeking a determination that the handling of the claim was reasonable and not in bad faith was denied and left for the jury.

The court found, however, that punitive damages were not warranted. The evidence was insufficient. BMIC’s conduct could not be described as evil, criminal, recklessly indifferent to the rights to the Church, or with a vexatious intention to injurye The court granted summary judgment to BMIC on the issue of punitive damages and dismissed the claim.