Thursday, December 17, 2015

consumer - insurance - bad faith denial of claim


Rancosky v. Washington National Insurance Company –Superior Court – December 16, 2015

 


 

In the course of holding against an insurance company on a claim by its insured, the court said the following:

 

Insurance bad faith actions are governed by 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 toward 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 3%.

(2) Award punitive damages against the insurer.

(3) Assess court costs and attorney fees against the insurer.

 

The Pennsylvania legislature did not provide a definition of bad faith, as that term is used in section 8371, nor did it set forth the manner in which an

insured must prove bad faith. While our Supreme Court has not yet addressed these issues, this Court has ruled that, to succeed on a bad faith

claim, the insured must present clear and convincing evidence to satisfy a two part test: (1) the insurer did not have a reasonable basis for denying

benefits under the policy, and (2) the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim. Terletsky,

649 A.2d at 688.

 

“There is a requisite level of culpability associated with a finding of bad faith. Merely negligent conduct, however harmful to the

interests of the insured, is recognized by Pennsylvania courts to be categorically below the threshold required for a showing of bad faith.”

Greene, 936 A.2d at 1189. Bad faith claims are fact specific and depend on the conduct of the insurer vis à vis the insured. Condio v. Erie Ins.

Exchange, 899 A.2d 1136, 1143 (Pa. Super. 2006). The fact-finder must consider “all of the evidence available” to determine whether the insurer’s

conduct was “objective and intelligent under the circumstances.” Berg v. Nationwide Mut. Ins. Co., 44 A.3d 1164, 1179 (Pa. Super. 2012)

 

A “dishonest purpose” or “motive of self-interest or ill will” is not a third element required for a finding of bad faith. Greene, 936 A.2d at 1191; see

also Nordi v. Keystone Health Plan West Inc., 989 A.2d 376, 385 (Pa.Super. 2010). A “motive of self-interest or ill will” may be considered in

determining the second prong of the test for bad faith, i.e., whether an insurer knowingly or recklessly disregarded its lack of a reasonable basis for

denying a claim. Greene, 936 A.2d at 1190.

 

There is a heightened duty of good faith was imposed on the insurer in a first-party claim because of the special relationship between the insurer and its insured, and the very nature of the insurance contract. See Romano v. Nationwide Mut. Fire Ins. Co., 646 A.2d 1228, 1231 (Pa. Super. 1994) (holding that an insurer must act with the “utmost good faith” toward its insured).

 

Individuals expect that their insurers will treat them fairly

and properly evaluate any claim they may make. A claim must

be evaluated on its merits alone, by examining the particular

situation and the injury for which recovery is sought. An

insurance company may not look to its own economic

considerations, seek to limit its potential liability, and operate in

a fashion designed to “send a message.” Rather, it has a duty to

compensate its insureds for the fair value of their injuries.

Individuals make payments to insurance carriers to be insured in

the event coverage is needed. It is the responsibility of insurers

to treat their insureds fairly and provide just compensation for

covered claims based on the actual damages suffered. Insurers

do a terrible disservice to their insureds when they fail to

evaluate each individual case in terms of the situation presented

and the individual affected.

Bonenberger v. Nationwide Mut. Ins. Co., 791 A.2d 378, 382 (Pa.

Super. 2002).

 

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