In Zaloga v. Provident Life & Accident Ins. Co. of Am., the insurer argued that the insured’s claim for breach of the covenant of utmost fair dealing, should be dismissed for failure to state a claim upon which relief may be granted because the Pennsylvania bad faith statute, 42 Pa. Cons. Stat. Ann. § 8371, is the only remedy for extra-contractual damages. The court addressed the issue of whether the duty of good faith and fair dealing is implied in insurance contracts in Pennsylvania, and if so, whether it is a separate cause of action from breach of contract.
The court stated that the covenant of good faith and fair dealing “acts as a term of the contract, and that covenant arises from the contract itself.” The court held that in Pennsylvania, the breach of the covenant of good faith and fair dealing exists as a breach of contract and may allow for the award of compensatory damages beyond the damages provided for a bad faith claim under § 8371.
Date of Decision: November 24, 2009
Zaloga v. Provident Life & Accident Ins. Co. of Am., United States District Court for the Middle District of Pennsylvania, Case No. 3:09-CV-635, 671 F.Supp. 2d 623, 2009 U.S. Dist. LEXIS 109648 (M.D. Pa. November 24, 2009) (Kosik, J.)