Insurance Bad Faith

All insurance contracts contain an implied covenant of good faith and fair dealing. In 1990, the Pennsylvania Legislature codified that covenant by enacting 42 Pa. C.S.A. § 8371, which provides as follows:

In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith towards the insured, the court may take all of the following actions:

  1. Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus three percent.
  2. Award punitive damages against the insurer.
  3. Assess court costs and attorney’s fees against the insurer.

The purpose of insurance is to provide a financial safety net to assist you, your family, or your business after a tragic event. We all purchase insurance for peace of mind and to provide help in the event of a tragedy. Unfortunately, sometimes insurers become the tragedy instead of the help. That’s when § 8371 provides much needed help to the insured, both as a deterrent and a remedy.

A “bad faith” claim is a lawsuit against an insurance company for wrongful conduct that rises above a mere mistake in judgment. Conduct that may give rise to a bad faith claim includes: low-ball estimates, dilatory or abusive claims handling, deliberately misstating the law or policy, failing to provide detailed reasons based upon the facts, the law and the policy for the denial of a claim or the offer of the compromised settlement, ignoring the Pennsylvania Unfair Insurance Practices Act and the Pennsylvania Unfair Claims Settlement Practice Regulations, failing to conduct a reasonable investigation; misrepresenting benefits and/or misleading an insured and otherwise acting inconsistently with their statutory and contractual obligation of good faith and fair dealing.

A “bad faith” claim allows you to recover, not just the benefits owed to you under your insurance policy, but also extra contractual damages such as interest, attorneys’ fees, and punitive damages.

Our firm has extensive experience in bringing claims against insurance companies for their bad faith conduct.