October 19, 2007

Re: Bad Faith Litigation

To The Companies In Interest

I thought you might have some interest in the attached paper I prepared in conjunction with the Pennsylvania Bar Institute's seminar on Bad Faith Litigation which was conducted last week in Harrisburg. I was honored to be a Course Planner for the seminar and contributed the enclosed article outlining the current state of Pennsylvania Bad Faith law with respect to several issues raised but not answered in the Pennsylvania Supreme Court's recent Toy v. Metropolitan Life decision.

Since the time that paper was prepared, there have been two significant developments in the bad faith arena in Pennsylvania, both in the form of decisions from the Pennsylvania Supreme Court. First, in Ash v. Continental the Supreme Court concluded that a two year statute of limitations applies to bad faith claims predicated on section 8371, Pennsylvania's bad faith statute. Earlier lower court and federal court opinions had split between a two year, four year and even six year statute.

In addition, just this week the Supreme Court decided Schwartz v. Rockey which holds that Pennsylvania's standard for the imposition of punitive damages (typically, outrageous conduct) does not apply to the provision in the Pennsylvania Unfair Trade Practices and Consumer Protection Law which allows for the imposition of treble damages upon a defendant which violates that law. Rather, some not well defined standard under which the court is to examine the intent or recklessness of the defendant applies to the treble damages provision. Thought Schwartz did not involve insurance company conduct, we quite frequently see a claim under the UTPCPL included in bad faith litigation. As a result, the Schwartz decision is one about which we need to be aware. If you would like to review either opinion, links to them are available on our website or you can call my assistant, Denise Patsch, at 215-665-3349 and we will be happy to provide copies.

Should you have any questions about any of these materials, please feel free to contact me.

Very truly yours,
Louis E. Bricklin

Ash opinion: http://www.courts.state.pa.us/OpPosting/Supreme/out/J-7-2006mo.pdf
Rocky majority opinion: http://www.courts.state.pa.us/OpPosting/Supreme/out/J-4A&B-2007mo.pdf
Toy v. Metropolitan Life Insurance Company – Questions Unanswered