FEBRUARY 2015 BAD FAITH CASES: COURT WOULD NOT STRIKE ALLEGATION THAT BAD FAITH EXISTED BASED UIPA VIOLATION, SINCE THE SAME CONDUCT THAT COULD VIOLATE UIPA MIGHT ALSO BE EVIDENCE TO ESTABLISH BAD FAITH, DISTINCTLY FROM BEING LABELED AS A UIPA VIOLATION (Philadelphia Federal)
In Moore v. State Farm Fire & Cas. Co., the insurer moved to strike an averment that it violated the bad faith stated because it violated the Unfair Insurance Practices Act. The court found that although the bad faith statute 42 Pa.C.S. § 8371 does not set forth a standard, Pennsylvania courts have uniformly adopted the Terletsky standard that an insured must prove “(1) that the insurer did not have a reasonable basis for denying benefits under the policy; and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis in denying the claim.”
Prior to Terletsky some courts had looked to the UIPA for standards, but that practice was not to be followed post-Terletsky. “Thus, a violation of the UIPA does not per se constitute bad faith.” On the other hand: “Nor does the fact conduct violates the UIPA prevent the conduct from also being evidence of bad faith.” “Instead, the question is whether the particular conduct (that may or may not violate the UIPA) is relevant to show that the insurer lacked a good faith basis for denying benefits and knowingly or recklessly disregarded that fact.”
The court stated: “Based on these principles, the Court will not conclude at this juncture, that evidence regarding conduct that allegedly violated the UIPA ‘ha[s] no possible relation to the controversy’ or evaluate the extent to which it ‘may cause prejudice to one of the parties.’” The court thus refused to strike the averment.