Less than 24 hours after the Pennsylvania Supreme Court issued its first ruling on the long-simmering debate over what it takes to bring bad-faith claims against an insurer in Pennsylvania, that case, Rancosky v. Washington National Insurance, was being briefed before the U.S. Court of Appeals for the Third Circuit.
Attorney Joe Mirarchi, who focuses on insurance and bad-faith litigation, said he came across the Supreme Court’s Sept. 28 decision the morning of Sept. 29, just hours before he was set to argue to have the bad-faith case he’s handling reinstated after it was tossed out by a federal district court. Mirarchi said he had to rush to revise his brief so it would include the recent pronouncement from the Supreme Court that plaintiffs do not need to have so-called “smoking gun” evidence of a carrier’s ill will in order to bring bad-faith claims.
Depending on which attorney you speak with, the Supreme Court‘s ruling either maintains the status quo, or is a big win for the plaintiffs bar, but all attorneys agree it is a significant case for litigators in the bad-faith insurance arena.
According to Mirarchi, the speed it took for the issue to come before the circuit court just goes to show what a “hot topic” it is in Pennsylvania.
“I happen to have the opportunity to raise the issue of the Rancosky decision in federal court within 24 hours of it being decided,” he said. ”Not only was it going to the district court, it’s going to the Third Circuit already.”
The high court’s ruling in Rancosky adopted the two-pronged test used for establishing bad-faith claims that the state Superior Court outlined in the 1994 decision Terletsky v. Prudential Property and Casualty Insurance. As part of its decision, the Supreme Court rejected arguments from an insurance carrier that, as part of the requirements under that test, plaintiffs need to prove that a carrier was motivated by self-interest or ill will.
Several attorneys said the ruling may not have a large effect going forward, given that much of what the Supreme Court did was adopt Superior Court law already in place. However, attorneys agreed that guidance from the Supreme Court will provide clarity and uniformity throughout the state.
There are some differences in how bad-faith claims are litigated across Pennsylvania, with the most obvious difference being that bad-faith cases are tried before judges in state courts, while, in federal court, juries hear bad faith cases. Additional discrepancies could also occur in how each court interpreted Terletsky, and, in particular, the weight given to evidence of ill will. The trial court in Rancosky, for example, granted summary judgment for the defendant because the plaintiff failed to provide specific evidence that the insurer acted with self-interest or ill will against the plaintiff.
According to several attorneys, the Supreme Court’s ruling forecloses the argument that such specific evidence is needed.
“To the extent that there was any confusion, it ends any confusion,” attorney Richard McMonigle of Post & Schell said. “They made it crystal clear that the insured is not obligated to prove a motive of self-interest, or ill will to succeed.”
McMonigle, who focuses on representing defendants, said he had not often seen discrepancies or confusion at the trial court level on this issue, and the Supreme Court’s ruling will cause any major shift in how bad faith claims are litigated.
However, Schmidt Kramer attorney Scott Cooper, who represents plaintiffs, said it had been very difficult to get a bad-faith case past the motion to dismiss, or summary judgment phases. Now, armed with the Rancosky decision, plaintiffs should be able to have their cases proceed further along into litigation, he said.
“It’s going to give the plaintiffs an even playing field to prove their case,” Cooper said.
With cases surviving longer, courts will likely become more lenient when it comes to granting discovery on issues aimed at uncovering an insurance carrier’s motives, Cooper said.
“It’s going to be like in a texting and driving, or drunk driving case where you get a wider ability to make certain discovery,” Cooper said. “That’s going to be where there’s a lot of disputes going on.”
Marshall, Dennehey, Warner, Coleman & Goggin attorney Brigid Alford, who wrote an amicus in the case for the Pennsylvania Defense Institute, noted that Rancosky also clarified that bad-faith claims need to be adjudicated under the higher clear and convincing standard. The focal point of litigation, she said, may shift towards disputes over exactly what it takes to overcome that burden.
“You’re still going to be looking for what clear and convincing evidence is there,” Alford said. “If it’s not ill will, or malice, then what does the plaintiff have that will support either or both of those prongs, and is it sufficient for meeting that threshold?”
Alford, however, noted that this issue is already hotly contested in bad-faith litigation, and she agreed Rancosky should not have a major effect on how cases are litigated.
Charles “C.J.” Haddick of Dickie, McCamey & Chilcote, who is also a defense attorney, agreed the ruling is more of a preservation of the status quo, and noted that the second part of the Terletsky test still involves the subjective question of whether an insurer acted with reckless disregard.
“You can make an argument that an insurer’s state of mind is still a part of the test,” Haddick said.
Rancosky, Haddick said, has provided a bit of a Rorschach test for both sides.
“If it had gone the other way, then you certainly would have defense lawyers like myself who would be screaming from the hills that you can’t make out a bad-faith claim, that you would need to prove something that’s a very difficult thing to prove,” he said.
Max Mitchell can be contacted at 215-557-2354 or email@example.com. Follow him on Twitter @MMitchellTLI.