The Superior Court of Pennsylvania recently analyzed the elements necessary to sustain a bad faith claim in Greene v. United Services Automobile Association.
In Greene, the plaintiffs sustained property damage to their home allegedly due to a roof leak and a tree which fell onto plaintiffs’ home. The Greenes submitted claims under their homeowner’s policy issued by United Services Automobile Association. The insurer concluded that most of the damages were not covered under the plaintiffs’ policy. The Greenes subsequently filed a bad faith claim against their insurer due to its claims handling practices. Plaintiffs alleged that the insurer’s investigator failed to respond to correspondence, failed to return telephone calls and waited eight months to issue a reimbursement check. On appeal, Plaintiffs claimed that the trial court misinterpreted the law by requiring evidence of intentional misconduct as a prerequisite to sustaining a bad faith claim.
The Appellate Court began its analysis by stating that to constitute bad faith it is not necessary that an insurer’s conduct be fraudulent. Nevertheless, mere negligence or bad judgment is not sufficient to support a finding of bad faith. The Court stated that to support a bad faith claim, a plaintiff must prove, by clear and convincing evidence, that the insurer “(1) did not have a reasonable basis for denying benefits… and (2) knew or recklessly disregarded its lack of a reasonable basis in denying the claim.” The Court, however, also acknowledged that in previous opinions it had stated that to prove a bad faith claim a party “must show that the insurer breached its duty of good faith through some motive of self-interest or ill-will.” This in turn raised the question as to whether proof of ill-will was an additional element to the two-prong bad faith test. The Court predicted that the Pennsylvania Supreme Court would rule “consistently with the holdings of the Pennsylvania Superior Court concerning the level of culpability that needs to be associated with a finding of bad faith.” The Court held that although the “motive of self-interest or ill will” level of culpability is not a third element required for a finding of bad faith, it is probative of the second element requiring evidence that the “insurer knew or recklessly disregarded its lack of reasonable basis in denying the claim.” Ultimately, the Appellate Court concluded that United Services Automobile Association did not act with ill-will and affirmed the trial Court’s denial of plaintiffs’ bad faith claim.
Date of Decision: November 20, 2007