September 06, 2007

Pennsylvania Supreme Court Limits Bad Faith Actions

Pennsylvania’s bad faith statute permits claims of first party bad faith in actions “arising under an insurance policy.” Practitioners have debated the scope of this language virtually since the bad faith statute was enacted in 1990. Many insurers have contended that there must first be a claim denial before a policyholder may assert bad faith. Policyholders, on the other hand, have often maintained that a bad faith claim may be appended to any cause of action relating to an insurance policy. A decision in the case of Toy v. Metropolitan Life Ins. Co., Nos. 33 & 34 WAP 2005, 2007 Pa. LEXIS 1463 (Pa. Super. Ct. July 18, 2007), appears to have settled this issue in favor of insurers.

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