The Superior Court of Pennsylvania recently affirmed a trial court’s finding that an insurer acted in bad faith by i) “failing” to adequately investigate liability, and ii) never changing its valuation of the insured’s damages “despite mounting evidence” that the insured’s damages surpassed the insurer’s initial valuation. However, the Superior Court also found that the trial court did not abuse its discretion in not awarding punitive damages to the insured’s estate. See Sartain v. United Servs. Auto. Ass’n., 2021 WL 401954 (Pa. Super. Ct. Feb. 4, 2021).
In Sartain, the trial court entered judgment in favor of the insured’s estate in an action for bad faith arising from the insurer’s handling of the insured’s claim for UIM benefits. The insured was involved in an accident in which the insurer initially determined the other driver to be at fault. Upon opening and reviewing the insured’s claim, the insurer valued the claim at $200,000. The insured subsequently provided a medical report from a psychologist who attributed the insured’s PTSD to the accident. The insurer maintained its $200,000 valuation of the claim and initiated arbitration. Thereafter, counsel for the insurer advised the insurer that the insured, rather than the other driver, could be at fault for the accident. The insurer did not retain an expert to evaluate liability. However, at the time of arbitration, the insurer took the position that the insured was wholly liable for the accident. At arbitration, the arbitrator found that the insured was not at fault for the accident and valued her injuries at $600,000. The insured’s estate subsequently pursued a bad faith action against the insurer.
The trial court found that the insurer had acted recklessly and without a reasonable basis in continually valuing the insured’s claim at $200,000. The trial court also concluded that the insurer’s change of position on liability represented a “significant failure” by the insurer in its ongoing responsibility to investigate and reconsider its position during its handling of the claim. The trial court awarded interest and attorney’s fees as bad faith damages but declined to award punitive damages. The insurer appealed, arguing that the evidence did not support a finding of bad faith. The insured’s estate cross-appealed the trial court’s decision not to award punitive damages.
The Superior Court found no error of law and found that the evidence supported the trial court’s findings of fact. The Superior Court held that the insurer never changed its valuation of the insured’s claim “despite mounting evidence” that the insured’s damages surpassed $200,000. While the insurer argued that it did not change its value of the claim because of its position on liability for the accident, the Superior Court was not persuaded, finding that the evidence did not show that the insurer’s valuation of the claim hinged on the insured’s alleged comparative negligence. Rather, the Superior Court found that the evidence showed that the insurer put a $200,000 value on the claim from the outset, did not consider evidence of the insured’s psychological damages, and did not modify its evaluation.
Despite the finding of bad faith, the Superior Court found that the trial court did not abuse its discretion in declining to award punitive damages. The Superior Court held that a finding of bad faith does not compel an award of punitive damages, and there was no evidence to conclude that the trial court’s decision was manifestly unreasonable or the result of partiality, prejudice, bias, or ill-will.