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The carrier refused to defend or indemnify its insured against an underlying tort suit.  The insured sought declaratory relief, and claimed breach of contract and bad faith.  The carrier moved to dismiss the bad faith claim on statute of limitations grounds.

The carrier denied coverage on May 3, 2017.  The insured instituted the bad faith claim in April 2021.

Bad Faith Statute of Limitations Legal Principles

  1. The statute of limitations for claims under 42 Pa.C.S. § 8371 is two years.
  2. It starts to run when the plaintiff’s “right to institute and maintain the suit arises.”
  3. “Lack of knowledge, mistake, or misunderstanding do not toll the running of the statute of limitations.”
  4. “[A] claim accrues when a plaintiff is harmed and not when the precise amount or extent of damages is determined.”
  5. “A bad faith claim, in particular, accrues when the insurer definitively denies coverage.”
  6. “Thus, where an insurer clearly and unequivocally puts an insured on notice that he or she will not be covered under a particular policy for a particular occurrence, the statute of limitations begins to run and the insured cannot avoid the limitations period by asserting that a continuing refusal to cover was a separate act of bad faith.”
  7. “Repeated or continuing denials of coverage do not constitute separate acts of bad faith giving rise to a new statutory period.”

Law Applied to the Facts

The complaint itself alleged the carrier denied coverage in March 2017, and suit was filed in 2021.  Thus, the claim was barred on the face of the complaint.

The insured attempted to avoid this result by alleging new acts of bad faith after 2017, and that there is a contract based bad faith claim with a four-year statute of limitations.  The court rejected both arguments.

There were no New Facts Disregarded by the Insurer that could Trigger a New Statute of Limitations Period

The court observed there was case law standing for the proposition that if an insurer subsequently denies coverage after the insured brings “new evidence” to the insurer’s attention, this is a separate and independent injury that can trigger a new limitations period.  Where there are no new facts or evidence presented, however, “[i]n the context of an insurance claim, a continuing or repeated denial of coverage is merely a continuation of the injury caused by the initial denial, and does not constitute a new injury that triggers the beginning of a new limitations period.”

Western District Judge Colville found there were no allegations that the insured presented the insurer with “new facts or new evidence in the underlying claim such that [the insurer] should have reconsidered its denial….” Thus, no new limitations period was triggered.

There is no Distinct Common Law Bad Faith Claim Pleaded

  1. “[T]here are two separate ‘bad faith’ claims that an insured can bring against an insurer: a contract claim for breach of the implied contractual duty to act in good faith, and a statutory bad faith tort claim under 42 Pa. Cons. Stat. Ann. Section 8371.”
  2. “While statutory bad faith claims are subject to a two-year statute of limitations, contractual bad faith claims are subject to the four-year statute of limitations applicable to breach of contract claims generally.”

The complaint’s sole bad faith count only references statutory bad faith, not common law bad faith.  Moreover, even if a common law bad faith claim were pleaded, it would be duplicative of the breach of contract claim….”

Judge Colville states: “’In Pennsylvania, the common law duty of good faith and fair dealing is implied in every contract,’ … and a bad faith claim for breach of that duty sounds in contract and is subsumed within a breach of contract claim.” “Accordingly, any such presumed claim for the breach of the implied contractual duty to act in good faith … is dismissed with prejudice.”

Date of Decision:  March 9, 2022

Dana Mining Co. of Pennsylvania v. Brickstreet Mutual Ins. Co., U.S. District Court Western District of Pennsylvania No. 2:21-CV-00700, 2022 WL 704932 (W.D. Pa. Mar. 9, 2022) (Colville, J.)