It is hard to believe that Rancosky v. Washington National Ins. Co., No. 28 WAP 2016, 2017 Pa. LEXIS 2286 (Pa. Sept. 28, 2017) is the Pennsylvania Supreme Court’s first foray into the proof required for statutory insurer bad faith claims, particularly since it has been over twenty-five years since the Pennsylvania legislature created the private cause of action. 42 Pa. Cons. Stat. § 8371. It was the Pennsylvania Superior Court that first articulated the elements of statutory bad faith in Terletsky v. Prudential Property & Cas. Co., 649 A.2d 680 (Pa. Super. 1994), appeal denied, 659 A.2d 560 (Pa. 1995). Under Terletsky, a plaintiff claiming bad faith must prove by clear and convincing evidence that: 1) the insurer did not have a reasonable basis for denying policy benefits; and 2) that the insurer knew or recklessly disregarded the lack of reasonable basis for denying the benefits. 649 A.2d at 688. Continue reading The Supreme Court of Pennsylvania Shores Up Nature of Intent Required for Statutory Bad Faith Claims against Insurers
The Pennsylvania Supreme Court recently clarified in Allstate Property and Casualty Ins. Co. v. Wolfe, No. 39 MAP 2014, 2014 WL 7088147 (Pa. Dec. 15, 2014) that statutory bad faith claims brought against insurers under 42 Pa. Cons. Stat. § 8371 can be assigned by insureds to injured third-party claimants. The decision originated from a certified question from the United States Court of Appeals for the Third Circuit. Continue reading The Assignment of Pennsylvania Statutory Bad Faith Claims: The Supreme Court Rules in Allstate Property and Casualty Ins. Co. v. Wolfe
On January 24, 2014, the Pennsylvania Supreme Court agreed to hear an appeal from the Pennsylvania Superior Court’s Order in Babcock & Wilcox Co. v. American Nuclear Insurers, 2013 Pa. Super. LEXIS 1640 (Pa. Super. Jul. 10, 2013). The Superior Court had ruled in Babcock & Wilcox that an insured cannot seek reimbursement for a settlement negotiated without the insurer’s consent when the insured tendered and the insurer accepted coverage subject to a reservation of rights. See Thomas, C., “Whose Defense is it, Anyway – Consent to Settlement Clauses Under Babcock & Wilcox v. American Nuclear Insurers,” August 29, 2013 Duane Morris Insurance Blog. The Pennsylvania Supreme Court’s appellate review is limited to the issue of whether a policyholder forfeits coverage by settling a claim without the insurer’s consent where the insurer is defending subject to a reservation of rights and the settlement was found to be fair and reasonable.
The recent Pennsylvania Superior Court ruling in Babcock & Wilcox Co. v. American Nuclear Insurers, 2013 Pa. Super LEXIS 1630 (Jul. 10, 2013) casts a new balance between the rights of insureds to control and settle litigation and the rights of insurers to enforce consent to settlement and cooperation clauses in insurance policies. The Court ruled that an insured cannot seek reimbursement for a settlement negotiated without the insurer’s consent when the insurer has tendered and the insured has accepted coverage subject to a reservation of rights. Babcock’s rationale is embedded in the rules of contract construction and remains subject to an insurer’s fiduciary and good faith obligations. An insurer tendering a defense with a reservation of rights has not committed a material breach of the insurance policy so as to give free rein to the insured to breach the consent to settlement clause.