SEPTEMBER 2016 BAD FAITH CASES: SUPREME COURT TO RULE ON ELEMENTS OF STATUTORY BAD FAITH CLAIMS
The Pennsylvania Supreme Court had granted an appeal on the following issue:
AND NOW, this 30th day of August, 2016, the Petition for Allowance of Appeal is GRANTED, LIMITED TO the issue[s] set forth below. Allocatur is DENIED as to all remaining issues. The issue[s], as stated by petitioner, is:
Whether this Court should ratify the requirements of Terletsky v. Prudential Property & Casualty Insurance Co., 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 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?
Terletsky has been the gold standard for section 8371 bad faith for over 20 years, and two of its criteria have not been controversial: “to recover under a claim of bad faith, the plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim.” This standard is common in other jurisdictions as well.
There has been dispute over other language in Terletsky, i.e., what was the Superior Court intending when it talked about showing the insurer’s self-interest or ill will. Is this a third element, or is it merely a reference to evidence that can establish the second element?