The opinion of the court was delivered by: DANIEL H. HUYETT, 3RD
In its third motion in limine, defendant Continental Assurance Company moves the Court to bar Plaintiff from pursuing any claim for special damages under 42 Pa.C.S.A. § 8371. Defendant argues that Plaintiff is barred from seeking damages under Section 8371 because Defendant's denial of Plaintiff's claim occurred on March 30, 1989, well before the statute's enabling date of July 1, 1990.
Plaintiff opposes Defendant's motion arguing that Defendant engaged in at least two additional acts of bad faith after July 1, 1990.
When it decided D'Ambrosio v. Pennsylvania National Mutual Casualty Insurance Co., 494 Pa. 501, 431 A.2d 966 (Pa. 1981), the Pennsylvania Supreme Court declined to create a new cause of action in Pennsylvania insurance law for "bad faith." D'Ambrosio, 431 A.2d at 970. Instead, the court left the creation of a new cause of action to the legislature. Id. The legislature responded to the court's suggestion by enacting 42 Pa.C.S.A. § 8371 which creates a new cause of action for bad faith conduct. Liberty Mutual Insurance Co. v. Paper Manufacturing Co., 753 F. Supp. 156, 158 (E.D.Pa. 1990). The legislature designated Section 8371 to go into effect on July 1, 1990. Id. Section 8371 cannot be applied retroactively. Id. Therefore, Defendant cannot be held liable unless its allegedly bad faith acts occurred on or after July 1, 1990.
The issue of retroactivity leads to the question of what constitutes "bad faith." This question has been considered by a number of district courts in the Eastern District of Pennsylvania and two related points of view have developed. One court has held that liability is determined from the date that the defendant insurer initially denied the plaintiff insured's claim. Wazlawick v. Allstate Insurance Co., 1990 WL 294273 (E.D.Pa. 1990). If that denial occurred prior to July 1, 1990, then the insured has no cause of action. Id. Another court has held that an insurer can be held liable for continuing bad faith acts that occur after July 1, 1990, even if the initial denial of the claim occurs before the enabling date. Liberty Mutual Insurance Co. v. Paper Mfg. Co., 753 F. Supp. 156 (E.D.Pa. 1990); see also Shamusdeen v. The Hartford Insurance Co., 1991 WL 108675 (E.D.Pa. 1991). It has been held, however, that initially denying the claim and subsequently reasserting that denial after July 1, 1990 does not constitute continuing acts of bad faith giving rise to liability. American Int'l Ins. Underwriters Corp. v. Zurn Indus., Inc., 771 F. Supp. 690, 703 (W.D.Pa. 1991); see also Wazlawick v. Allstate Insurance Co., 1990 WL 294273 (E.D.Pa. 1990). The post-enabling date activity must be separate acts of bad faith, not a continuation of a previous denial. Id..
The issue of what constitutes post-enabling date activity giving rise to liability under Section 8371 has not been addressed by either the Third Circuit or Pennsylvania appellate courts. As I stated in Lombardo v. State Farm Mut. Auto. Ins. Co., 1992 WL 41643 (E.D.Pa. 1992), I find the approach developed by my colleagues persuasive and will adopt it as my own. For purposes of applying Section 8371, one must look to the date on which the defendant insurance company first denied the insured's claim in bad faith. If that date is prior to July 1, 1990, the insured's claim under Section 8371 is barred. If the insurer denies the claim prior to July 1, 1990 and then reaffirms that denial after July 1, 1990, the insured's claim is also barred. If the insurer denies the claim before July 1, 1990 and then undertakes additional acts of bad faith, the insurer can be held liable for those additional acts under Section 8371 if the acts occur after the July 1, 1990 enabling date.
Applying the foregoing principles to this case, the Court will allow plaintiff to pursue her claims under Section 8371. Plaintiff argues that in addition to denying her claim, Defendant engaged in two additional acts of bad faith which occurred after July 1, 1990. Plaintiff has presented a claim which, if proved, could possibly lead to liability for Defendant under Section 8371. Therefore, the Court will deny Defendant's third motion in limine.
EDITOR'S NOTE; The following court-provided text does not appear at this cite in 813 F. Supp. 1104.
An appropriate order follows.
Daniel H. Huyett, 3rd, Judge