In response to the Pennsylvania Supreme Court's refusal to create a cause of action by an insured for bad faith on the part of an insurer in D'Ambrosio v. Pennsylvania National Mutual Casualty Insurance Co., the Pennsylvania General Assembly enacted Section 8371. Section 8371, also known as Pennsylvania's bad faith statute, allows for the award of interest, attorney's fees and punitive damages if the insurer acted in bad faith toward its insured. The potential liability of insurance companies under Section 8371 is enormous. For example, on June 22, 1994, a jury in the United States District Court for the Western District of Pennsylvania awarded Plaintiffs Alphons and Dorothy Smokowicz a total of $1.82 million in damages ($1.5 million of which was the punitive damage award) against their insurance company under Section 8371. Because the punitive damage section of Section 8371 provides the potential for substantial damage awards, the enactment of Section 8371 has spawned a great deal of litigation during its rather brief existence. Litigation under Section 8371, however, has been riddled with an abundance of recurring, and largely unsettled issues due to the Pennsylvania General Assembly's failure to provide definitions and guidance within the Section. This article highlights those issues which commonly arise in bad faith litigation under Section 8371 and surveys judicial treatment and interpretation of those issues.
Tina M. Oberdorf,
Bad Faith Insurance Litigation in Pennsylvania: Recurring Issues under Section 8371,
Duq. L. Rev.
Available at: https://dsc.duq.edu/dlr/vol33/iss3/4