Before the enactment of § 8371, private causes of action for bad faith could not be brought against insurers under Pennsylvania law. American Franklin v. Galati, 776 F. Supp. 1054, 1062-1063 (E.D. Pa. 1991). Although insurance companies conducting business within the Commonwealth were nevertheless affirmatively bound to administer their policies in good faith, the Pennsylvania General Assembly had determined that the bad faith of insurance carriers was exclusively a regulatory matter. Ibid. at 1062. Effective as of July 1, 1990, however, § 8371 created such a private right of action in Pennsylvania. This Court, therefore, must decide if that recent statute can be invoked in this case which involves the administration of a policy in effect from April 16, 1985, through April 16, 1986.
There is a division of authority within this District regarding the applicability of § 8371 to cases such as the one at bar. A few opinions have held that the statute applies only to causes of action arising out of insurance contracts that were entered into after § 8371's effective date. See Amissah v. William Penn Life Insurance Co., 1992 U.S. District LEXIS 8854 (E.D. Pa. May 29, 1992); McAlister v. Sentry Insurance Co., 1991 U.S. District LEXIS 7945 (E.D. Pa. June 11, 1991); Bryant v. Liberty Mutual Insurance Co., 1990 U.S. District LEXIS (E.D. Pa. Dec. 20, 1990). The majority of the cases considering this issue, however, have held that actions brought under § 8371 are appropriate where they arise out of actions taken by an insurer after the statute's effective date. See Rottmund v. Continental Assur. Co., 1992 U.S. Dist. LEXIS 11705 (E.D. Pa. Aug. 4, 1992); Resolution Trust v. Independence Blue Cross, 1992 U.S. Dist. LEXIS 13182 (E.D. Pa. Sept. 1, 1992); American Franklin Life Ins. Co. v. Galati, 776 F. Supp. 1054 (E.D. Pa. 1991); Coyne v. Allstate Insurance Co., 771 F. Supp. 673 (E.D. Pa. 1991); Santoro v. Allstate Insurance Co., 1991 U.S. District LEXIS 13591 (E.D. Pa. Sept. 25, 1991); and Wazlawick v. Allstate Insurance Co., 1990 U.S. Dist. LEXIS 15986 (E.D. Pa. Sept. 28, 1990). See also Liberty Mut. Ins. Co. v. Paper Manufacturing Co., 753 F. Supp. 156, 160 (E.D. Pa. 1990). See further Seeger v. Allstate Ins. Co., 776 F. Supp. 986 (M.D. Pa. 1991).
This Court concludes that the latter view is the more persuasive one. There is no reason not to impose liability on an insurer, once it has notice of the statute's enactment, for subsequent bad faith conduct toward its insureds. Consequently, the action brought against Home under § 8371 may go forward as to any of its actions which occurred on or after July 1, 1990, the statute's effective date.
Finally, Home contends that it is entitled to summary judgment as to the claim for relief brought under § 8371 because the evidence in the record, even viewed in the light most favorable to the insureds, could not establish bad faith. A review of the record, however, demonstrates that genuine issues of material fact exist. The issue of bad faith on the part of Home, from July 1, 1990 onward, is not susceptible to summary judgment disposition. Like the question of prejudice, the question of whether Home acted in bad faith as to the insureds after the effective date of § 8371, is for the jury to decide.
AND NOW, this 17th day of November, 1992, for the reasons set forth in the foregoing Memorandum, it is hereby ORDERED that the motions for summary judgment filed by plaintiffs M. Mark Mendel, Ltd., M. Mark Mendel, Esquire, and Daniel Murray, Esquire, and by defendant, The Home Insurance Company, are DENIED.
It is further ORDERED that partial summary judgment is GRANTED pursuant to Rule 56(d) of the Federal Rules of Civil Procedure, and that this Court hereby DETERMINES that the following matters are without substantial controversy in accordance with Rule 56(d):
1. The Home Insurance Company Policy Number LPL 1544603 excludes from coverage the December 9, 1991 judgment entered against M. Mark Mendel, Ltd., M. Mark Mendel, Esquire, and Daniel Murray, Esquire, for the intentional interference with contractual relations and with prospective contractual relations, in Silver v. Mendel, et al., United States District Court for the Eastern District of Pennsylvania, Civil Action No. 86-7104.
2. Plaintiff M. Mark Mendel, Ltd. is not entitled to invoke the innocent party exception of professional malpractice insurance Policy Number LPL 1544603 which was issued to it by defendant, The Home Insurance Company.
3. Plaintiffs M. Mark Mendel, Ltd., M. Mark Mendel, Esquire, and Daniel Murray, Esquire, received notice of defendant The Home Insurance Company's reservation of rights, pursuant to the exclusionary clause of Policy Number LPL 1544603, on September 7, 1990.
4. Notwithstanding paragraph 1 of this Order, plaintiffs may proceed with their claim for relief based on the theory that The Home Insurance Company is estopped from denying coverage because plaintiffs M. Mark Mendel, Ltd., M. Mark Mendel, Esquire, and Daniel Murray, Esquire were actually prejudiced by Home's delay, until September 7, 1990, in issuing its reservation of rights.
5. The claim for relief of plaintiffs M. Mark Mendel, Ltd., M. Mark Mendel, Esquire, and Daniel Murray, Esquire, alleging bad faith by The Home Insurance Company, brought pursuant to 42 Pa. Cons. Stat. Ann. § 8371, shall be considered by the jury only to the extent that it concerns allegations of bad faith conduct committed on or after July 1, 1990.
BY THE COURT:
Harvey Bartle, III