For the first time, the Pennsylvania Supreme Court, the highest court in the state, enunciated the elements of a bad faith insurance claim brought pursuant to Pennsylvania’s bad faith statute, 42 Pa.C.S. § 8371.  The decision can be found at Rancosky v. Washington Nat’l Ins. Co., No. 28 WAP 2016 (Pa. Sep. 28, 2017).  Since the 1994 decision from the intermediate appellate court in Terletsky v. Prudential Property & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. 1994), courts in Pennsylvania had followed a two-part test which provides that, in order to recover in a bad faith action, the insured must present clear and convincing evidence (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 years, Pennsylvania state and federal courts had debated whether the Supreme Court would impose a third requirement that looked to the subjective intent of whether the insurance company acted with a motive of self-interest and ill-will towards its insured.  In Rancosky, the Supreme Court adopted the two-part Terletsky test, and specifically held that proof of malice is not a prerequisite to prevailing in a bad faith claim under Section 8371. Instead, the Court held that proof of an insurance company’s motive of self-interest or ill-will is merely probative of the second Terletsky prong.  

Throughout its opinion, the Supreme Court rejected any attempts to impose an unduly high threshold on bad faith claims. The Court reasoned its interpretation is consistent with the historical development of bad faith in Pennsylvania and reflects the intent of the legislature in enacting Section 8371.   The Rancosky holding may provide an incentive to insureds and their attorneys, who previously may have hesitated in bringing a bad faith cause of action due to the practical challenges of proving malice on the part of the insurer, to bring bad faith claims against insurance companies in a wide variety of insurance coverage disputes.  It may also make it more difficult for insurers to win dismissal of bad faith claims through pre-trial motions.