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The court dismissed the insured’s breach of contract claim because the damages were speculative. The court then dismissed the bad faith claim because there was no predicate cause of action on which the bad faith claim rested. Both dismissals were without prejudice.

Middle District Judge Wilson ruled as follows:

A bad faith claim under section 8371 is distinct from the predicate claim. Nealy v. State Farm Mut. Auto. Ins. Co., 695 A.2d 790, 793 (Pa. Super. Ct. 1997) (ruling bad faith claims are distinct from underlying contract claims). As such, there must be a predicate contract claim in order for a section 8371 claim to proceed. Polselli v. Nationwide Mut. Fire. Ins. Co., 126 F.3d 524, 530 (3d Cir. 1997) (observing that “a section 8371 claim may not be the sole claim of an insured”). A breach of contract claim can serve as one such predicate action. See, e.g., Rancoscky, 170 A.3d at 161 (recognizing a section 8371 claim brought along with a breach of contract claim). While the predicate claim need not be tried together with the section 8371 claim, the predicate cause of action “must be ripe for a § 8371 claim to be recognized.” Polselli, 126 F.3d at 530. The Pennsylvania Supreme Court has also recognized this requirement. See Ash v Continental Ins. Co., 593 Pa. 523, 932 A.2d 877, 882 (Pa. 2007) (holding that section 8371 “applies only in limited circumstances—i.e., where the insured has first filed ‘an action arising under an insurance policy’ against his insurer”).

In this case, while Moses Taylor has alleged a breach of contract claim along with its section 8371 bad faith claim, the court’s dismissal of the breach of contract claim removes the predicate cause of action otherwise required to accompany the section 8371 claim. As another court within this circuit has articulated, a bad faith claim in a vacuum is not actionable. MP III Holdings, Inc. v. Hartford Cas. Ins. Co., No. 08-CV-4958, 2011 U.S. Dist. LEXIS 72370, at *83–88 (E.D. Pa. June 30, 2011). Thus, because there are no other actionable claims raised in this case that could serve as a predicate cause of action, Moses Taylor’s section 8371 claim for bad faith will be dismissed without prejudice to reinstatement if the breach of contract claim is replead. See Polselli, 126 F.3d at 530.

This Blog has long discussed the argument that there is no statutory bad faith claim possible absent the denial of a benefit, i.e., either a refusal to defend or indemnify third party claims, or to pay damages on first party claims. See this post as one of many examples.

Date of Decision: March 17, 2021

Moses Taylor Foundation v. Coverys & Proselect Insurance Co., U.S. District Court Middle District of Pennsylvania No. 3:20-CV-00990, 2021 WL 1017371 (M.D. Pa. Mar. 17, 2021) (Wilson, J.)