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While the Court granted summary judgment on the breach of contract claimed based on a contractual limitations period, and reiterated its earlier position that the bad faith statute does not allow for actual or consequential damages, the court did allow the statutory bad faith claim to proceed.

The court looked to the Third Circuit’s 2015 Wolfe opinion, finding a statutory bad faith claim viable even if the underlying claim was fully paid, where a delay in making that payment arose from bad faith claims handling. If bad faith delays were not actionable, an insurer could consistently act in bad faith with no consequences, i.e., take an unreasonable position on coverage, knowingly or recklessly disregard its unreasonableness in delaying payment, and then finally relent in paying to obviate itself from the consequences of the bad faith delays in paying a valid claim.

Further, Wolfe observes that courts will deem nominal damages to exist if there is a breach of contract, which can then form the basis for statutory remedies under section 8371.

Under both of these theories, an injured plaintiff can still pursue statutory interest, punitive damages, and attorneys’ fees under the bad faith statute, even if no compensatory damages are due.

[Note 1: In this case, unlike the Wolfe scenario, there was no breach of contract and no coverage due. Thus, there is a genuine issue as to whether the Third Circuit’s reasoning in Wolfe applies, as it is premised on the principles that (1) coverage was due and there was a bad faith delay in payment, and that (2) there was a breach of contract for which nominal damages are due. Neither circumstance exists in this case. That being said, there has been at least some older case law allowing a bad faith claim to proceed where the contract claim is denied on procedural grounds like the statute of limitations, rather than on the substantive policy language, an argument that is not put forward in this opinion.]

[Note 2: Although the court observed that compensatory and consequential damages are not available under the bad faith statute, this opinion implicitly recognizes such damages can be available under other, common law, theories. These are not detailed, but the Supreme Court’s Birth Center case is cited in Pratts, which allows compensatory or consequential damages under breach of contract bad faith theories in certain circumstances.]

Date of Decision: May 2, 2019

Pratts v. State Farm Fire & Casualty Co., U. S. District Court Middle District of Pennsylvania NO. 3:16-CV-2385, 2019 U.S. Dist. LEXIS 74141 (M.D. Pa. May 2, 2019) (Caputo, J.)

The court’s earlier ruling in Pratts can be found here.