Third-party bad faith claims typically arise from a common fact pattern: an insured defendant, hit with an excess verdict because his insurer refused to make a reasonable settlement offer, assigns to the plaintiff the right to bring a bad faith claim against the insurer.

Indeed, it is well-established in Pennsylvania that an insurer breaches its contractual duty to act in good faith, and its fiduciary duty to its insured, when it refuses to settle a claim that could have been resolved within the policy limits, unless the insurer has “a bona fide belief … that it has a good possibility of winning.” See Birth Center v. St. Paul Companies, 787 A.2d 376, 379 (Pa. 2001), quoting Cowden v. Aetna Casualty & Surety, 134 A.2d 223, 229 (Pa. 1957). Pennsylvania’s bad faith statute, 42 Pa.C.S.A. Section 8371, authorizes special damages if a court finds that an insurer acted in bad faith.

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