When an insurer acts in bad faith in its dealings with a policyholder, Pennsylvania law provides remedies.
When you buy an insurance policy, you are protecting the value of your interests and against the costs of potential liability. You are in essence paying the insurance company to be your ally and protector; to pay for losses insured by the policy and for protection against financial ruin if you should be at fault or liable in circumstances covered by the policy.
For example, under homeowners’ insurance, the insurance company agrees to pay the cost of certain physical losses within the home under certain circumstances, such as fire or theft, depending on the policy. In the case of a motor vehicle collision, an at-fault driver’s policy may cover damage to his or her car and medical costs as well as similar expenses for the other vehicles involved, plus the insurer may have the duty to defend the liable driver (its insured) in the claim.
What Happens When Insurers Don’t Honor Valid Claims?
So when you have a claim, what do you do when your insurer acts like an adversary instead of being on your side? Under Pennsylvania common law (court made), if the insurer fails to uphold its end of the bargain by, for example, failing to pay a valid claim, the insured party has a legal claim for compensatory damages, meaning for financial loss flowing directly from the insurer’s breach of the contract.
An insurance contract brings with it the implied duty of good faith and fair dealing, a duty implied in every valid contract.
Pennsylvania Law Protects Against Insurers Acting in Bad Faith
Flowing from this duty, Pennsylvania statute 42 Pa.C.S.A. § 8371 has also provided for a bad faith lawsuit against the insurance company if it handled the claim in bad faith since 1990. A successful bad faith claim can result in a punitive damage award, designed to punish bad behavior and deter other insurers from similar behavior. Punitive damages are over and above the compensatory damages for the contract breach.
In a bad faith claim, the court may also assess against a liable insurer interest on the original claim at prime rate plus 3 percent, as well as legal fees and court costs.
What constitutes bad faith on the part of the insurer depends on the facts of the individual case, but it has to be conduct more serious than negligence or mere mistake. The insured party has to prove insurer bad faith based on clear and convincing evidence.
Reasons to File a Bad Faith Insurance Lawsuit
In discerning whether there might be a bad faith claim, the following acts may indicate bad faith behavior by the insurance company:
- Unfounded or unreasonable failure to pay a valid claim (although failure to pay is not necessarily a requirement for a finding of bad faith)
- Inadequate or shoddy investigation into the facts behind the claim
- Poor professional treatment like not returning your phone calls, secretiveness or rudeness
- Failure to reasonably settle a claim when going to trial is likely to open up the insured to higher liability
- Misrepresentation, or fraudulent or deceptive communication or behavior (although bad faith can be found short of actual fraud)
- Insurer “self-interest or ill will,” according to Pennsylvania courts
- And more
Philadelphia Bad Faith Insurance Lawyers On Your Side
It is important that any Pennsylvanian who has had trouble in dealings with its insurance company that might constitute a bad faith claim speak with an experienced attorney who can assess the situation and provide informed legal advice about legal rights and potential legal remedies.
The attorneys at Philadelphia-based The Colleran Firm have the skills, knowledge and experience to provide advice and representation in bad faith claims against insurers by insured parties across the commonwealth. Contact them today for a free case evaluation.