District of Oregon Court Finds that Filing a Declaratory Judgment Action While an Underlying case is Pending is not Bad Faith

In State Farm Fire & Casualty Co. v. Arbor Vineyards Homeowners Association, Cause Number CV-10-504-HU (D. Or.), Federal Judge Hubel authored an opinion filed on January 18, 2011 that dismissed the insured's counterclaims against its insurer for breach of fiduciary duty and bad faith finding that the filing of a declaratory judgment action alone, while the underlying action is still pending, does not support a claim for breach of fiduciary duty or breach of the covenant of good faith and fair dealing against the insurer.  The court reasoned, ". . . without some authority, I am unwilling to conclude that the mere fact of filing the coverage action can constitute a breach of fiduciary duty or a breach of the implied covenant of good faith and fair dealing. That is, plaintiff's filing a complaint seeking clarification of its coverage obligations while the underlying lawsuit is pending is insufficient, as a matter of law, to support the counterclaims."