The Pennsylvania Supreme Court recently held that “ill-will” or “self-interest” is not necessary for a policyholder to successfully sue an insurer for bad faith.
Justice Max Baer writes in Rancosky v. Washington Natural, “Additionally, we hold that proof of an insurance company’s motive of self-interest or ill-will is not a prerequisite to prevailing in a bad faith claim under Section 8371, as argued by Appellant. While such evidence is probative of the second Terletsky prong, we hold that evidence of the insurer’s knowledge or recklessness as to its lack of a reasonable basis in denying policy benefits is sufficient.”
The two prong test developed in the 1994 Superior Court opinion of Terletsky v. Prudential remains. A party suing an insurer 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.”
For now, the precise effect of Rancosky is yet to be seen; however, what we know is that more plaintiff’s claims will survive motions for summary judgment. A significant win for the plaintiff’s bar, not so much for the defense.