Kyle and Marie Stechert say they rushed to buy another car after their vehicle was “totaled” in an accident because their insurance carrier refused to keep paying for their rental vehicle.

The new car was twice as expensive as the one that was destroyed and turned out to be a lemon, the Quakertown, Pennsylvania couple says in a lawsuit. To add insult to injury, the Stecherts say their policy with Travelers Home and Marine Insurance Co. allowed for extended transportation expenses for as long as “reasonable,” up to 30 days.

The U.S. Third Circuit Court of Appeals ruled Friday that the Stecherts may pursue their bad faith breach of contract claim against Travelers, reversing a district court decision to grant summary judgment in favor of the carrier. The appellate panel said in a non-precedential opinion that Travelers’ internal documents appear to direct its agents to limit replacement vehicle coverage to five days, contrary to the 30-day limit set forth in the insurance policy.

“For claims against insurers in Pennsylvania, bad faith is “any frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent,” the opinion written by Judge Theodore A. McKee says. “A reasonable fact finder could conclude on this record that the manner in which the claim was handled evidenced Travelers’ bad faith.”

Marie Stechert’ was driving her 2014 Chevrolet Equinox on Jan. 23, 2015 when a vehicle turned in front of her, pushing her into a utility pole. She and her two small children were injured. The vehicle was insured by Travelers, which determined the car was a total loss.

Travelers provided a rental car under the terms of the policy, but only in five-day increments. The carrier extended the rental car twice, but the Stetcherts believed Travelers denied their request for a third extension because the carrier never sent them a letter extending the coverage. As a result, they felt they were forced to acquire a vehicle that they were not satisfied with.

“The Stecherts contend that they were injured as a result of Travelers’ actions because the vehicle that they felt compelled to lease was two years older than their Equinox, had almost 50,000 more miles, and cost nearly twice as much per month,” the appellate court opinion says.

As it happens, a Travelers claims adjuster had left a voicemail granting another five-day extension, according to testimony, but the Stecherts didn’t get the message before purchasing a 2012 Equinox.

The Lochs law firm and Richard M. Ochroch & Associates filed a lawsuit seeking to make the Stecherts the lead plaintiffs in a class-action against Travelers that would include all of Pennsylvania policyholders who were denied extended transportation benefits for the full 30-day term written in Travelers policies within the past six years.

“In effect, defendants have uniformly imposed on plaintiffs and the class a coverage limitation not found within the language of the policies, nor approved by the Pennsylvania Insurance Department,” the suit says.

Eastern Pennsylvania District Court Judge J. Curtis Joyner granted summary judgment in favor of Travelers. He said in a memorandum and order dismissing the case that the Stecherts had not show that Travelers had not actually refused to extend use of the replacement car, although the miscommunication was “unfortunate.” Joyner said that he may have ruled differently had Travelers actually refused to extend use of the replacement vehicle.

But the appellate court said a fact finder could find that Travelers breached the terms of its policy by imposing a five-day limit on the use of replacement vehicles and requiring policyholders to request extensions. The policy grants up to 30 days of use if that amount of time is deemed to be reasonable. The claims adjuster assigned to the case, Amanda Lanzy, testified that she never did reach a decision about what amount of time would be reasonable in the Stetcherts’ case, the 3rd Circuit said.

“She admitted that the letter appears to limit the coverage provided in the Stecherts’ policy,” the opinion says. A finding of bad faith would entitle the Stecherts to punitive as well as consequential damages.

The court offered no opinion on what damages the Stecherts would be able to prove and it did not address their attempt to declare a class of similarly situated plaintiffs. But the appellate panel found that summary judgment was inappropriate and remanded the case back to the district court.

*This story ran previously in our sister publication Claims Journal.