Pennsylvania Supreme Court to Weigh-In On The Definition Of Bad Faith

On August 30, the Pennsylvania Supreme Court agreed to consider whether to ratify the standard for establishing statutory bad faith under 42 Pa.C.S.A.  8371.  This standard, originally established in the 1994 Superior Court case of Terletsky v. Prudential Prop. & Cas. Ins. Co., states that a bad faith plaintiff must prove that: (1) the insurer did not have a reasonable basis for denying benefits under an insurance policy; and, (2) the insurer intentionally, or recklessly, disregarded its lack of a reasonable basis in denying benefits.  We anticipate that the Supreme Court will also expressly address whether a plaintiff must prove that the carrier also had a “motive of self-interest or ill-will,” in order to prove a violation of the bad faith statute.

The Court’s agreement to consider this issue now is a curious one.  Since the 1994 Terletsky decision, over twenty years ago, the Supreme Court of Pennsylvania has had prior opportunities to revisit this oft-cited case.  In fact, since that time both state and federal courts have almost uniformly embraced the Terletsky standard.  Now, given this development, we may be witnessing the advent of the Court’s rationale to ratify the law as we know it, or to take the interpretation of the bad faith statute — and Pennsylvania’s bad faith law as we know it — in a new direction.

Timoney Knox will continue to monitor this important case and report any significant developments.  (August 31, 2016)

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