Bad faith insurance claim?

My friend bought a home in September of 2008. He was required to have a home inspector look the property over and write a report. The report indicated that roof was not in need of repair. Three weeks ago the roof began leaking so bad that a drywall ceiling in one room fell to the floor. He contacted his insurance and asked me to look at it. I found the problem- the whole roof was installed improperly. It needed to be removed and a new roof installed in its place. I contacted a few roofers I had worked with and they all agreed the roofing and some of the sheathing had to come off. My friend contacted his insurance company and was told that the seller of the property had a similar claim in 2007 and that the insurance carrier issued him a check to replace the roof. Since the carrier paid for a new roof, they were not going to pay the new owners for any damages, other than the ceiling and that in order to renew his insurance at renewal time, he had to replace not only the roof on the house but on three outbuildings on the property at his expense. Since the previous owner (seller) disclosed that the roof was less than five years old, isn’t the insurance company liable to the new insured (my friend) to repair or replace the existing roof and the damaged ceiling? There was no warranty transferred but it appears that the seller used most of the claim money on other things and just repaired the roof using the Three Stooges Construction Company. Is this what they call bad faith?