Pennsylvania Superior Court reiterates two-pronged test for bad faith; ill-will or self-interest not required for first part.

The Pennsylvania Superior Court confirmed that the test for bad faith in Pennsylvania consists of two prongs: (1) the insurer did not have a reasonable basis for denying benefits under the policy; and (2) the insurer knew or recklessly disregarded its lack of reasonable basis in denying the claim. The trial court determined that the insureds failed to prove the first prong by clear and convincing evidence because they had not shown a “dishonest purpose” or a “motive of self-interest or ill-will” on the part of the insurer. The Superior Court reversed, holding that such proof should only be used in consideration of the second prong of the bad faith test and, thus, the trial court erred by granting summary judgment in favor of the insurer. The court considered that the trial court could not have considered whether the insurer had a dishonest purpose, a motive of self-interest or ill-will unless it had first determined that the insurer lacked a reasonable basis in denying benefits. The Superior Court also held that the insureds’ claims were not barred by the statute of limitations because each new independent act of alleged bad faith—including an inadequate investigation and wrongful denial of a reconsideration based upon new evidence—gave rise to a new statute of limitations and that the statute begins to run when the insureds are informed of these subsequent decisions. In light of this decision, insurers may see requests for reconsideration of a denial of benefits where a potential bad faith claim would otherwise be time-barred by the two-year statute of limitations.

_{Case Law Alerts, 2^nd Quarter, April 1, 2016}

_{Case Law Alerts is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2016 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}