The Law Office of
Scott C. Rosentrater, LLC
1500 Market Street
12th Floor, East Tower
Philadelphia, PA 19102
Tel: (215) 665-5616
Fax: (215) 569-8228
contact@rosentraterlaw.com
PRACTICE AREAS:
• Complex Litigation
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• Breach of Contract
• General Casualty
• Premises Liability
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• Insurance Law and Coverage
• Professional Negligence and Malpractice
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If you don’t see your needs covered by this list, contact us, as it may still fall within our area of legal expertise
Law Office of
Scott C.
Rosentrater, LLC
Insurance Bad Faith
As part of our personal injury practice, we are dedicated to the negotiation and litigation of insurance bad faith claims. We represent clients throughout Pennsylvania facing difficult issues related to coverage disputes and the delay or denial or an insurance claim.
Question:
What is 'first-party' insurance bad faith? Answer: An insurance company acts in bad faith if it: 1). does not have a reasonable basis for what it does, and 2). knows or recklessly disregards its lack of a reasonable basis. Under the law, an insurance company must act with the utmost good faith and fair dealing toward its insured, and give the interests of its insured the same faithful consideration that it gives its own interests. This heightened duty arises because of the special relationship between an insurer and its insured and the nature of the insurance contract. Put another way, bad faith occurs if an insurer knowingly or recklessly acts without a reasonable basis in handling an insured's claim. In deciding whether or not an insurance company acted in bad faith toward its insured, the fact finder must consider all of the company's actions, including its responses to communications from its insured, its investigation of the claim, and its handling of settlement negotiations. Insurance companies must investigate claims in a timely fashion, they have a responsibility to settle claims quickly, and clear explanation must accompany any claim denial or settlement. Failure of an insurance company to meet any of its obligations might be considered 'bad faith'. An insurance company acts recklessly if it acts with conscious disregard or deliberate indifference to the rights of its insured. |
Question:
What is 'third-party' insurance bad faith?
Answer:
An insurance company has a duty to act in good faith in handling claims against its insured. By inserting in its policy the right to handle all claims against the insured, including the right to make a binding settlement, the insurer assumes a fiduciary position toward the insured and becomes obligated to act in good faith and with due care in representing the interests of the insured. If the insurer is derelict in this duty, it may be liable regardless of the limits of the policy for the entire amount of the judgment secured against the insured.
This does not mean that an insurance company has an absolute duty to settle a claim against the insured merely because a possible judgment against the insured may exceed the policy limits. However, the insurer must give due consideration to the interests of the insured, as well as its own interest in determining whether to settle or litigate a case. This good-faith standard imposed on the insurer under Pennsylvania law requires more than mere proof of sincerity.
Intelligent and objective evaluation of the case by the insurer must be done in order to best decide the advisability of settlement. Where there is little or no likelihood of a verdict within the limits of the policy's coverage and the injured third party has offered to settle his or her claim within policy limits, the insurer must act with the utmost good faith toward the insured in deciding whether to settle the claim or risk litigation.
Good faith requires that the chance of a finding of non-liability be real and substantial and that the decision to litigate be made honestly. Failure to offer policy limits does not evidence bad faith where there was no possibility of settlement within the policy limits. There must be an expressed willingness on the part of the third party, the plaintiff in the underlying litigation, at some point in time, to accept an offer of policy limits.
The good faith or motives of the plaintiff during settlement negotiations are irrelevant because there is no duty running between the claimant and the insurer. The insistence of an insured that the case be tried rather than settled is a bar to a bad-faith claim against the insurance company. If the refusal to settle would be a reasonable course despite the exposure of the company to the full amount of the ultimate verdict, the refusal to settle is made in good faith. The insurer's obligation of good faith requires that a settlement be refused only where the chance of a finding of non-liability is real and substantial, and the decision to litigate is honestly made.
What is 'third-party' insurance bad faith?
Answer:
An insurance company has a duty to act in good faith in handling claims against its insured. By inserting in its policy the right to handle all claims against the insured, including the right to make a binding settlement, the insurer assumes a fiduciary position toward the insured and becomes obligated to act in good faith and with due care in representing the interests of the insured. If the insurer is derelict in this duty, it may be liable regardless of the limits of the policy for the entire amount of the judgment secured against the insured.
This does not mean that an insurance company has an absolute duty to settle a claim against the insured merely because a possible judgment against the insured may exceed the policy limits. However, the insurer must give due consideration to the interests of the insured, as well as its own interest in determining whether to settle or litigate a case. This good-faith standard imposed on the insurer under Pennsylvania law requires more than mere proof of sincerity.
Intelligent and objective evaluation of the case by the insurer must be done in order to best decide the advisability of settlement. Where there is little or no likelihood of a verdict within the limits of the policy's coverage and the injured third party has offered to settle his or her claim within policy limits, the insurer must act with the utmost good faith toward the insured in deciding whether to settle the claim or risk litigation.
Good faith requires that the chance of a finding of non-liability be real and substantial and that the decision to litigate be made honestly. Failure to offer policy limits does not evidence bad faith where there was no possibility of settlement within the policy limits. There must be an expressed willingness on the part of the third party, the plaintiff in the underlying litigation, at some point in time, to accept an offer of policy limits.
The good faith or motives of the plaintiff during settlement negotiations are irrelevant because there is no duty running between the claimant and the insurer. The insistence of an insured that the case be tried rather than settled is a bar to a bad-faith claim against the insurance company. If the refusal to settle would be a reasonable course despite the exposure of the company to the full amount of the ultimate verdict, the refusal to settle is made in good faith. The insurer's obligation of good faith requires that a settlement be refused only where the chance of a finding of non-liability is real and substantial, and the decision to litigate is honestly made.
Question:
What is the burden of proving insurance bad faith? Answer: In most civil cases, the plaintiff has the burden of proving her claims by a legal standard called "preponderance of the evidence, " which means a fact is more likely true than not. This standard does not apply when proving bad faith by an insurer. In Pennsylvania the "clear and convincing" standard is required to prove bad faith by an insurer pursuant to 42 Pa.C.S. § 8371. The "clear and convincing" standard is a higher burden of proof. "Clear and convincing evidence" means the evidence is so clear, direct, and substantial that you are convinced, without hesitation, that a fact is true. Although this is a significant burden of proof, it does not mean the plaintiff must prove the facts at issue beyond all doubt or beyond a reasonable doubt. |
Question:
What are the different kinds of damages that might be sought in insurance bad faith litigation?
Answer:
First-party bad faith in Pennsylvania has as its genesis the bad faith statute, 42 Pa.C.S. § 8371, which creates a cause of action on insurance policies. In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:
1). Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%.
2). Award punitive damages against the insurer.
3). Assess court costs and attorney fees against the insurer.
What are the different kinds of damages that might be sought in insurance bad faith litigation?
Answer:
First-party bad faith in Pennsylvania has as its genesis the bad faith statute, 42 Pa.C.S. § 8371, which creates a cause of action on insurance policies. In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:
1). Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%.
2). Award punitive damages against the insurer.
3). Assess court costs and attorney fees against the insurer.
Law Office of Scott C. Rosentrater, LLC
1500 Market Street
12th Floor, East Tower
Philadelphia, PA 19102
Tel: (215) 665-5616
Fax: (215) 569-8228
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