By Kevin L. Connors, Esquire

The Pennsylvania Supreme Court has agreed to grant an Appeal in the case of Rancosky v. Washington National Insurance Company, to address the issue of what proofs are necessary to establish Insurer bad faith under 42 Pa.C.S.§8371.

Currently, the gold standard for determining bad faith under Section 8371 has been the Pennsylvania Superior Court’s ruling in Terletsky v. Prudential Property & Casualty Insurance Company, 649 A.2d 680 (Pa. Super. 1994), Appeal denied, 659 A.2d 560 (Pa. 1995).

Under Terletsky, a Plaintiff seeking to recover under a claim of bad faith must show that the Defendant did not have a reasonable basis for denying benefits under an insurance policy, and that the Defendant knew or recklessly disregarded its lack of a reasonable basis in denying the claim.

Since the Terletsky decision, there has been some judicial confusion as to whether the Terletsky Court required that a bad faith claim be supported by proof of an Insurer’s self-interest or ill-will, a disputed element of proof that will now be resolved by the Supreme Court.

On August 30, 2016, the Pennsylvania Supreme Court granted Allocator to decide the following issue in Rancosky:

Whether this Court should ratify the requirements of Terletsky v. Prudential Property & Casualty Insurance Company, 649 A.2d 680 (Pa. Super. 1994), Appeal denied, 659 A.2d 560 (Pa. 1995), for establishing Insurer bad faith under 42 Pa.C.S.§8371, and assuming the answer to be in the affirmative, whether the Superior Court erred in holding that the Terletsky factor of a “motive of self-interest or ill-will” is merely a discretionary consideration rather than a mandatory prerequisite to proving bad faith?

In all likelihood, the Supreme Court will not rule on this issue until well into 2017.

Presumably, the Pennsylvania Supreme Court will resolve this issue in favor of eliminating any factor of self-interest or ill-will, and limit the analysis to proving that the Insurer did not have a reasonable basis for denying benefits, further eliminating issues related to alleged poor claims handling practices being evidentiary in nature, and not a cognizable basis for statutory relief in and of itself.

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Questions concerning tort and/or contract liability that might arise in the context of casualty claims can be directed to Kevin L. Connors at [email protected] (Phone: 610-524-2100 Ext. 112).