DECEMBER 2017 BAD FAITH CASES: BAD FAITH CASE REINSTATED WHERE COVERAGE FOR SECONDARY LIABILITY ON PUNITIVE DAMAGES WAS POSSIBLE (Superior Court of Pennsylvania)
A jury awarded punitive damages against the insured, and the trial court ruled there would be no coverage as a matter of public policy, and dismissed breach of contract and bad faith claims, even absent a punitive damages exclusion in the policy. The Superior Court reversed. Public policy only prohibits coverage for punitives damages against insureds for their direct conduct. Public policy does not prohibit coverage where the insured’s liability for punitive damages is derivative from the acts of another. Because the carrier had not proven the punitive damages were solely from the insured’s own acts the judgment was reversed and the case was remanded to proceed on the issues of coverage and bad faith.