Insurance claims not only consist of claims in which a victim makes claim from an insurer for the conduct of another, but also involves the direct claims against an insurer for what Pennsylvania Law describes as “Bad Faith”. 

    Bad Faith claims are statutorily enacted causes of action pursuant to 42 Pa.C.S.A. §8371 which give direct causes of action to persons victimized by abusive insurance companies.

    Pennsylvania follows a two-part test in determining whether an insured has established a Bad Faith claim against the applicable insurance carrier.  This standard requires plaintiff to prove that (1) the insurer lacked a reasonable basis for denying the benefits and (2) that the insurer knew or recklessly disregarded its lack of reasonable basis.

    Generally, the duty to act in good faith in representing the interests of its insured compels the insurer to accord the interests of its insured the same faithful consideration it gives its own interests.  The insurer must treat a claim against its insured as if the insurer alone were liable for the entire amount. The insurer must also assess the impact upon its insured of the insurer's decision to settle or to litigate the claim against its insured. This duty is said to arise not under the terms of the contract, but because of the contract, and to flow from the contract. 

    In the context of the insurer's decision to litigate or settle a third party claim brought against its insured, Pennsylvania Courts have explained:

[A] decision not to settle must be a thoroughly honest, intelligent and objective one.   It must be a realistic one when tested by the necessarily assumed expertise of the company.   This expertise must be applied, in a given case, to a consideration of all the factors bearing upon the advisability of a settlement for the protection of the insured.   While the view of the carrier or its attorney as to liability is one important factor, a good faith evaluation requires more.   It includes consideration of the anticipated range of a verdict, should it be adverse;  the strengths and weaknesses of all of the evidence to be presented on either side so far as known;  the history of the particular geographic area in cases of similar nature;  and the relative appearance, persuasiveness, and likely appeal of the claimant, the insured, and the witnesses at trial.

    An insurer does not satisfy the good faith standard  merely by showing that it acted with sincerity.  Likewise, when an insurer decides to litigate the claim, it is not automatically liable to its insured simply because the outcome of the litigation is adverse to the insured. Thus, the insurer does not have an absolute duty to settle a claim just because it is possible that a judgment against the insured may exceed the policy limits.  However, where there is little possibility of a verdict within the policy limits, the insurer's decision to litigate must be based on a reasonable assessment of the circumstances of the case and a real and substantial chance of a verdict in favor of the insured.  Thus, the insurer's right under the policy to litigate or settle a claim against the insured is not a right to risk the insured's financial well- being unless there is both a real and a substantial chance of a finding of nonliability.

    Ferrara Law offices has successfully prosecuted “Bad Faith” cases on behalf of a number of victims.   

    If you believe that you were victimized by an insurance company, call Ferrara Law Offices for a free consultation.