Pennsylvania Bad Faith Insurance Practices Demand Letter

If your insurance company in Pennsylvania has unreasonably denied, delayed, or underpaid your claim, you may have a bad faith claim under one of the strongest insurance statutes in the country. Pennsylvania's bad faith statute, 42 Pa.C.S. §8371, allows policyholders to recover not just their unpaid benefits, but also punitive damages, interest above the prime rate, and attorney's fees. A well-drafted demand letter citing this statute often prompts insurers to reevaluate their position before litigation. Pennsylvania courts have developed a robust body of case law defining bad faith broadly, covering everything from lowball offers and unjustified delays to failures to investigate. Sending a strong, statute-specific letter is often the fastest path to a fair settlement.

Pennsylvania's primary bad faith remedy is found at 42 Pa.C.S. §8371, enacted in 1990 in response to the Pennsylvania Supreme Court's ruling in D'Ambrosio v. Pennsylvania National Mutual Casualty Insurance Co. The statute applies to any action arising under an insurance policy and provides three powerful remedies when an insurer acts in bad faith: (1) interest on the claim amount at the prime rate plus 3%, (2) punitive damages, and (3) court costs and attorney's fees. To prove bad faith, a policyholder must show by clear and convincing evidence that the insurer (a) lacked a reasonable basis for denying benefits and (b) knew or recklessly disregarded the lack of a reasonable basis. This standard was confirmed by the Pennsylvania Supreme Court in Rancosky v. Washington National Insurance Co. (2017), which clarified that the insured does not need to prove subjective ill-will or self-interest, only knowing or reckless disregard. Pennsylvania also has the Unfair Insurance Practices Act (UIPA) at 40 P.S. §1171.1 et seq., which prohibits practices like misrepresenting policy provisions, failing to acknowledge claims promptly, refusing to pay claims without conducting reasonable investigations, and failing to provide a reasonable explanation for denials. While the UIPA itself does not create a private right of action, courts often look to its standards as evidence of bad faith conduct under §8371. Common examples of bad faith in Pennsylvania include unjustified claim denials, undue delays in payment, lowball settlement offers without investigation, misinterpreting policy language to deny coverage, failing to communicate, and refusing to defend an insured in third-party claims. The two-year statute of limitations applies because Pennsylvania treats bad faith as a tort claim under 42 Pa.C.S. §5524.

An effective Pennsylvania bad faith demand letter does more than complain—it builds a documented record that insurers and their counsel take seriously. Start by identifying the policy, claim number, and date of loss, then lay out a clear chronology showing every interaction with the insurer: dates of submissions, calls, written communications, and the insurer's responses (or silence). Specifically cite 42 Pa.C.S. §8371 and explain how the insurer's conduct meets the Rancosky standard—a lack of reasonable basis combined with knowing or reckless disregard. Reference applicable UIPA provisions at 40 P.S. §1171.5 to reinforce that the conduct violates established Pennsylvania insurance standards. Itemize damages clearly: the unpaid policy benefits, statutory interest at prime plus 3%, anticipated punitive damages, and attorney's fees. Attach key supporting documents such as the policy, denial letters, repair estimates, medical bills, or expert reports. Set a firm deadline for response, typically 30 days, and explicitly state your intention to file suit in the Court of Common Pleas if the matter is not resolved. A professional, fact-driven tone is more persuasive than emotional language—Pennsylvania insurers and their adjusters respond to letters that demonstrate the writer understands §8371 exposure. Many bad faith claims settle after a strong demand because punitive damages and fee-shifting create real financial risk for carriers.

Bad faith claims in Pennsylvania must be filed in the Court of Common Pleas in the county where the insured resides, where the policy was issued, or where the bad faith occurred. Small claims (Magisterial District Court) in Pennsylvania has a $12,000 limit and can handle straightforward unpaid claim disputes, but bad faith claims under §8371 typically belong in Common Pleas due to the punitive damages component. Filing fees in Common Pleas vary by county, generally ranging from $200 to $400. Bad faith claims are subject to a two-year statute of limitations. There is no jury trial right for §8371 damages—those are decided by the judge—though underlying contract claims may be tried to a jury. Federal diversity jurisdiction may apply if the insurer is out-of-state and damages exceed $75,000.