If your Pennsylvania insurance company has denied, delayed, or undervalued your claim, you may have a bad faith insurance claim under Pennsylvania law. Attorney Michael A. Siddons has extensive experience representing policyholders whose insurers have acted in bad faith. Pennsylvania’s bad faith statute, codified at 42 Pa. C.S. § 8371, provides a clear framework for holding insurers accountable. This comprehensive guide explains your rights, the legal standards you must meet, and the remedies available to you.
Has your insurance claim been wrongfully denied? Call (610) 255-7500 today for a free consultation with Michael A. Siddons. Contact us online
Pennsylvania’s Legal Framework for Bad Faith Insurance Claims
Pennsylvania recognizes bad faith insurance claims under 42 Pa. C.S. § 8371, which defines unfair claim settlement practices. This statute prohibits insurers from engaging in conduct that is unfair or deceptive in trade or commerce, specifically including the failure to attempt good faith settlement of claims where liability is reasonably clear. The statute creates both a statutory cause of action and establishes standards that courts use to evaluate insurer conduct.
Pennsylvania distinguishes between first-party claims (where you are the claimant against your own insurer) and third-party claims (where you are pursuing a claim against another’s insurer). Both types are actionable under Pennsylvania law, though the legal standards and available remedies may differ in certain respects.
The Terletsky/Rancosky Two-Prong Test
Pennsylvania’s seminal case on bad faith, Terletsky v. Prudential Insurance Co. (1994), established the two-prong test that governs bad faith claims in the Commonwealth. To succeed in a bad faith claim, you must establish:
Prong One: No Reasonable Basis
First, you must prove that the insurer did not have a reasonable basis for denying benefits under the policy. This requires demonstrating that the insurer acted unfairly or unreasonably in handling your claim—that its conduct fell outside the range of reasonable actions an insurer could take under similar circumstances. This might include failing to investigate adequately, misrepresenting policy language, failing to respond to communications, or denying a claim without any reasonable basis.
Prong Two: Knowledge or Reckless Disregard
Second, you must establish that the insurer knew of, or recklessly disregarded, its lack of a reasonable basis for denying benefits. This means there must be evidence that the insurer was aware its position was unfounded or that it acted with such disregard that it should have known.
The Pennsylvania Supreme Court’s decision in Rancosky v. Washington National Insurance Co. (2017) clarified these principles, holding that to establish bad faith under § 8371, you must show both prongs. Importantly, the Court held that evidence of subjective self-interest or ill will is probative but not required to satisfy the second prong—reckless disregard is sufficient.
The Clear and Convincing Evidence Standard
Pennsylvania law requires that bad faith claims be proven by “clear and convincing evidence”—a higher standard than the typical preponderance of the evidence used in most civil cases. This demanding standard reflects Pennsylvania’s recognition that bad faith claims carry significant implications and that courts should be highly confident in findings of bad faith before allowing damages.
Meeting this standard requires comprehensive documentation of the insurer’s improper conduct, expert testimony regarding industry standards, and often testimony from claims adjusters, underwriters, or other insurer employees demonstrating knowledge of improper practices. An experienced bad faith attorney understands how to build a clear and convincing case and what evidence will be most persuasive to a jury or court.
Statute of Limitations in Pennsylvania
Pennsylvania recognizes two different statutes of limitations for bad faith claims. First, you may pursue a statutory bad faith claim under 42 Pa. C.S. § 8371 within two years of the alleged violation. Alternatively, you may pursue a common law bad faith claim within four years of the alleged improper conduct. The longer four-year period applies to claims based on the insurer’s breach of the implied covenant of good faith and fair dealing.
The clock on these statutes typically begins running when the insurer denies your claim or when you discover (or should have discovered) the insurer’s improper conduct. Given the complex nature of these time periods, it is critical to consult with an attorney promptly if you believe your insurer has acted in bad faith.
Available Remedies and Damages
If you successfully establish bad faith, Pennsylvania law allows for several forms of recovery:
Policy Benefits
First and foremost, you recover the full amount of benefits owed under your insurance policy. This is the baseline recovery.
Pre- and Post-Judgment Interest
Pennsylvania law allows recovery of interest on unpaid benefits. Pre-judgment interest typically runs at the prime interest rate plus 3%, applying from the time the claim should have been paid. Post-judgment interest applies from the date of judgment until payment.
Attorney’s Fees
In a successful bad faith claim, you may recover reasonable attorney’s fees incurred in prosecuting the claim. This means you are not bearing the sole cost of holding your insurer accountable.
Punitive Damages
Pennsylvania allows punitive damages in bad faith cases, particularly where the insurer’s conduct is egregious or demonstrates recklessness. Punitive damages are assessed to punish the insurer for wrongful conduct and deter similar behavior in the future. The amount is within the discretion of the jury, though courts review awards to ensure they are not excessive.
Additional Consequential Damages
You may also recover other damages proximately caused by the insurer’s bad faith, such as costs of temporary housing following a property loss, medical expenses resulting from delayed claims, or lost business income.
What Constitutes Bad Faith in Pennsylvania
Pennsylvania courts have identified numerous types of insurer conduct that constitute bad faith, including:
- Failure to Investigate: Denying a claim without conducting a reasonable investigation or relying solely on the claimant’s statement without independent verification.
- Misrepresentation of Policy Terms: Incorrectly stating what the policy covers or does not cover.
- Unreasonable Delays: Unjustifiably prolonging claim processing, investigations, or decision-making.
- Unsupported Denials: Denying a claim that the insurer knows or should know is covered under the policy.
- Ignoring Evidence: Disregarding medical records, repair estimates, or other evidence supporting the claim.
- Lack of Communication: Failing to respond to reasonable requests for information or updates on claim status.
- Shifting Burden of Proof: Requiring the claimant to prove coverage when that burden should rest on the insurer.
Key Pennsylvania Bad Faith Cases
Terletsky v. Prudential Insurance Co., Inc., 666 A.2d 1039 (Pa. 1994): This landmark decision established the two-prong test for bad faith and remains the primary authority in Pennsylvania bad faith law.
Hollock v. Erie Insurance Exchange, 842 A.2d 409 (Pa. 2004): This case addressed claims arising from failure to promptly pay property damage claims and clarified the scope of bad faith remedies available to first-party claimants.
Rancosky v. Washington National Insurance Co., 141 A.3d 1090 (Pa. 2017): This decision reaffirmed the two-prong test and held that subjective ill will is probative but not required—reckless disregard of the lack of a reasonable basis is sufficient.
Frequently Asked Questions About Pennsylvania Bad Faith Insurance Claims
Do I have a bad faith claim if my insurance company simply made a mistake?
Not necessarily. An insurer’s honest error in interpreting a policy or assessing a claim, standing alone, does not constitute bad faith. However, if the insurer’s error results from negligence, carelessness, or a failure to follow its own procedures, or if the insurer ignored clear evidence of coverage, bad faith may be established.
Can I sue my insurance company even while my claim is still being processed?
Generally, you should allow the claims process to reach completion before filing a bad faith lawsuit. However, if the delay itself constitutes bad faith, or if the insurer has clearly denied your claim, you may proceed without waiting further.
What evidence do I need to prove bad faith?
Evidence supporting a bad faith claim includes: the insurance policy and its terms; claims file documents showing what the insurer knew and how it handled the claim; communications between you and the insurer; expert testimony regarding standard industry practices; and testimony from insurer employees.
Can I recover punitive damages in my Pennsylvania bad faith case?
Yes. If your insurer’s conduct is particularly egregious or demonstrates recklessness, punitive damages are available. The specific amount is determined by a jury, subject to court review.
How long will my bad faith case take?
The timeline depends on case complexity, whether the case settles, and whether it must be litigated. Many cases resolve through negotiation or mediation. If litigation is necessary, cases typically take 18–36 months from filing to trial.
Contact Michael A. Siddons for Your Bad Faith Claim
If your Pennsylvania insurance company has wrongfully denied, delayed, or undervalued your claim, you deserve an experienced advocate. Michael A. Siddons has successfully represented Pennsylvania policyholders in bad faith claims against major insurers. The consultation is free, and you pay nothing unless we recover money for you.
Call (610) 255-7500 or contact us online to discuss your claim today.
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