If an insurance company in Philadelphia denied your claim, delayed it without a reason, or offered far less than your policy should pay, you can file a bad faith insurance lawsuit in Pennsylvania under 42 Pa.C.S. § 8371.1Justia. Pennsylvania Consolidated Statutes, Section 8371 A successful claim can recover interest on the unpaid benefits, punitive damages with no statutory cap, and your attorney fees and court costs. Paired with a common law breach-of-contract claim, you can also recover the actual financial harm the insurer’s conduct caused you.
What Insurer Conduct Counts as Bad Faith
The statute covers the entire claims-handling process, not just outright denials. Courts have recognized bad faith in situations including an unwarranted denial of a valid claim, settlement offers far below what the policy covers, failure to investigate thoroughly, unreasonable delays, misrepresentation of coverage or policy limits, and refusing to engage in settlement negotiations.2Reiff Law Firm. Insurance Bad Faith How the insurer investigates matters as much as what it decides.3FindLaw. Condio v. Erie Insurance Exchange
A warning on one scenario that comes up constantly in Philadelphia auto cases: a lowball offer alone is not bad faith. In West v. State Farm Insurance Company (E.D. Pa. 2016), the insurer offered $1,000 against more than $8,200 in documented medical bills, and the court still dismissed the bad faith claim. A low damages estimate, “even facially unreasonable, without more, does not rise to the level of bad faith.”4NoBadFaith.com. Low-Ball Settlement Offer on Its Own Is Insufficient to Support a Claim for Bad Faith Under Pennsylvania Law You need something more: the insurer ignored its own adjuster’s recommendation, disregarded clear medical records, or similar specific conduct.
Generic complaints also fail. In Carolan v. Progressive Advanced Insurance Company (E.D. Pa. 2025), the policyholders sought a $100,000 UIM limit against offers of $9,000 and then $15,000, and the court still threw out the bad faith count because the complaint recycled “nineteen conclusory allegations using boilerplate language” instead of pleading specific facts.5Marshall Dennehey. Bad Faith Claim Denied Due to Conclusory Language, Boilerplate Allegations in Complaint Specifics about what the insurer knew and when are what carries a case.
What You Have to Prove
Pennsylvania sets a higher bar for bad faith than for an ordinary civil case. You must prove your claim by clear and convincing evidence, not just by a preponderance. The two-part test comes from Terletsky v. Prudential Property & Casualty Insurance Co. (1994) and was affirmed by the Pennsylvania Supreme Court in Rancosky v. Washington National Insurance Company in 2017.6NoBadFaith.com. PA Supreme Court Addresses Level of Proof Required Under Statutory Bad Faith Claim
First, the insurer had no reasonable basis for denying benefits under the policy. This is objective: would a reasonable insurer have made the same decision on these facts? Second, the insurer knew it lacked a reasonable basis or recklessly disregarded that fact. This is subjective, focused on what the decision-makers actually understood or ignored.
You do not need to prove the insurer acted out of ill will or self-interest. Some courts used to require it, but Rancosky settled the question: evidence of ill will can help prove the subjective element, but it is not required.7McNees Wallace & Nurick. Rancosky: The Clarified Insurance Bad Faith Standard A policyholder can win simply by showing the insurer knew or should have known its denial was unjustified.
What You Can Recover
The statute authorizes three forms of relief when a court finds an insurer acted in bad faith:
- Interest on the claim amount from the date you first made the claim, calculated at the prime rate plus three percent.
- Punitive damages against the insurer, with no cap written into the statute.1Justia. Pennsylvania Consolidated Statutes, Section 8371
- Court costs and attorney fees.
What the statute does not provide is compensatory or consequential damages, and claims for emotional distress have been rejected under it.8PAMedMal.com. Negotiating Bad Faith and Insurance Coverage Claims That gap is why Pennsylvania attorneys routinely plead a common law bad faith claim alongside the statutory one.
The common law claim rests on breach of contract and comes from The Birth Center v. The St. Paul Companies, Inc., decided by the Pennsylvania Supreme Court on December 31, 2001. In that case, St. Paul refused to settle a medical malpractice suit within the $1 million policy limits even after three judges recommended it do so. A jury returned a verdict exceeding $4.3 million, and St. Paul eventually paid $5 million to settle. The Birth Center then sued for bad faith and won $700,000 in compensatory damages for harm to its reputation and credit.9Justia. The Birth Center v. The St. Paul Companies The Supreme Court affirmed, holding that an insurer acting in bad faith is liable for “known and/or foreseeable compensatory damages” that “reasonably flow” from its conduct, and that § 8371 was meant to add punitive damages and fees on top of existing contract remedies, not replace them.10FindLaw. Birth Center v. St. Paul Companies Under the common law track, some courts have also permitted emotional distress and loss of consortium damages that the statute itself does not reach.8PAMedMal.com. Negotiating Bad Faith and Insurance Coverage Claims
Punitive damages are uncapped by the statute, but constitutional due process still applies. In Jurinko v. The Medical Protective Company, a federal jury awarded $7.9 million, including $6.25 million in punitives, against an insurer that refused to offer policy limits in a medical malpractice case.11Feldman Shepherd. $7.9 Million Bad Faith Verdict Against Insurer The Third Circuit then found the punitive award constitutionally excessive and reduced it to roughly a 1:1 ratio with the compensatory damages.12Horvitz & Levy. Jurinko v. Medical Protective Company: Third Circuit Reduces Punitive Damages Award The Pennsylvania Supreme Court’s 2023 decision in Bert v. Turk clarified that you do not need to prove “outrageous conduct or evil motive” to be entitled to punitive damages under the statute.13The Legal Intelligencer. PA Supreme Court Evaluates Constitutional Parameters of a Jury’s Punitive Damage Award
Deadline to File
Statutory bad faith claims under § 8371 are generally subject to a two-year statute of limitations.14Burns White. Continued Denial of Coverage Does Not Extend Statute of Limitations Common law bad faith claims, which sound in contract, carry a four-year period.15Property Insurance Coverage Law. Breach of Contract Bad Faith Statutes of Limitation in Pennsylvania
The clock starts on the date the insurer first denies coverage. Follow-up letters repeating that denial do not restart it. A new period begins only if the insurer receives genuinely new facts or evidence that would require reconsideration.14Burns White. Continued Denial of Coverage Does Not Extend Statute of Limitations Check your policy, too. Pennsylvania law allows insurers to contractually shorten these periods, as long as the shortened timeframe is not “manifestly unreasonable.”15Property Insurance Coverage Law. Breach of Contract Bad Faith Statutes of Limitation in Pennsylvania One Philadelphia Court of Common Pleas decision, Trujillo v. State Farm (2001), applied a six-year catchall period, treating bad faith as sui generis,16Philadelphia Courts. Trujillo v. State Farm Mutual Automobile Insurance Co. but federal courts in Pennsylvania have generally stuck with the two-year rule, so planning around that shorter deadline is the safer approach.
Where the Case Gets Filed in Philadelphia
Most individual policyholder cases, meaning bad faith claims tied to personal auto, homeowner, or health insurance policies, are filed in the Philadelphia Court of Common Pleas and handled through the regular civil trial division.17Philadelphia Courts. Commerce Program Addendum to Civil Cover Sheet
The court also operates a Commerce Case Management Program for business disputes. Coverage and bad faith claims land there when they arise from a business or commercial insurance policy, such as a commercial general liability policy. Individual consumer claims against insurers are explicitly excluded.18Philadelphia Courts. Administrative Docket No. 12 of 2025
When the Statute Does Not Apply: ERISA Benefits
If your insurance is part of an employer-sponsored benefit plan governed by the federal Employee Retirement Income Security Act, Pennsylvania’s bad faith statute does not apply. The Third Circuit ruled in Barber v. UNUM Life Insurance Company of America (2004) that § 8371 is preempted by ERISA.19Debofsky, Mark. Ruling Undercuts ERISA Promise of Protection Employees who receive long-term disability or health insurance through a private employer’s plan generally cannot bring state bad faith claims and are limited to ERISA’s federal remedies, which do not include punitive damages. Policyholders with individual policies, or benefits through employers exempt from ERISA such as certain government or religious employers, keep full access to the Pennsylvania statute.20Seltzer Legal. ERISA Preemption of Pennsylvania Bad Faith Statute
If the Insurer Belongs to Someone Else
You do not necessarily need to be the policyholder to pursue a bad faith claim. In Allstate Property & Casualty Insurance Co. v. Wolfe (2014), the Pennsylvania Supreme Court ruled 5-1 that statutory bad faith claims can be assigned by an insured to an injured third party, reasoning that if the legislature had wanted to bar assignment it would have said so.21Cozen O’Connor. Pennsylvania Supreme Court Rules Statutory Bad Faith Claims Are Assignable
That principle produced one of the largest bad faith resolutions in the state. In 2007, Princeton Insurance Co. paid $20 million to settle a bad faith claim brought by Joseph Tuski, a highway worker left quadriplegic after being struck by a drunk driver in Warminster, Pennsylvania, in January 2001. Tuski had sued the Ivyland Cafe under the Dram Shop Act and won a $75 million jury verdict, later reduced to $37.5 million. The tavern carried only $1 million in insurance and assigned its bad faith rights to Tuski, who then sued Princeton for refusing to settle within policy limits. The $20 million settlement was reached through mediation in the Philadelphia Court of Common Pleas and came on top of the $1 million Princeton had already paid on the underlying claim.22Insurance Journal. Princeton Insurance Pays $20M to Settle Bad-Faith Claim Two 2022 decisions from the Eastern District of Pennsylvania have gone further, allowing third-party vendors such as water damage restoration companies to pursue bad faith claims under assigned rights from policyholders.23Marshall Dennehey. A Royal Assignment of Benefits: Ramifications for Insurers in the First-Party Property Context