Allstate Prop & Casualty Ins Co, Aplt v. Wolfe, J.
105 A.3d 1181
Pa.2014Background
- Wolfe was injured in an auto collision; he sued the tortfeasor Zierle and obtained a jury verdict awarding compensatory and punitive damages. Allstate, Zierle’s insurer, paid compensatory damages but refused to pay punitive damages.
- Wolfe agreed to forbear executing on the punitive-damages portion in exchange for an assignment from Zierle of any claims Zierle had against Allstate related to the insurer’s handling of the underlying claim.
- Wolfe sued Allstate under common-law bad-faith principles and under 42 Pa.C.S. § 8371, seeking punitive damages for Allstate’s alleged refusal to settle in good faith.
- Allstate argued Wolfe lacked standing because Ash treats § 8371 claims as torts and Pennsylvania law generally bars assignment of unliquidated personal tort claims (champerty concerns).
- Lower federal courts split on assignability; the Third Circuit certified the question to the Pennsylvania Supreme Court, which granted certification to decide whether § 8371 damages are assignable.
- The Pennsylvania Supreme Court concluded the Legislature did not intend to preclude assignments of § 8371 damages when those remedies are integrated into pre-existing assignable contract-based actions and therefore allowed assignment to an injured plaintiff/judgment creditor.
Issues
| Issue | Plaintiff's Argument (Wolfe) | Defendant's Argument (Allstate) | Held |
|---|---|---|---|
| Whether an insured may assign the right to recover § 8371 (punitive) damages to an injured third party | Assignments promote deterrence, settlement parity, and judicial efficiency; § 8371 supplements contract remedies and thus assignments should follow pre-existing contract-based assignability | § 8371 is a statutory tort (per Ash); unliquidated tort claims are inherently personal and nonassignable; assignment would encourage champerty and perverse settlement incentives | Allowed: § 8371 damages may be assigned where they are tied into pre-existing assignable contract-based liability and the Legislature did not evince intent to forbid assignments |
| Whether § 8371’s creation of additional remedies alters pre-existing assignability rules | Legislative silence should not be read to alter long-standing assignment practice tied to contract-based bad-faith claims; allowing assignment avoids splitting causes of action | Legislative creation of statutory remedies with tort attributes implies nonassignability unless Legislature expressly provided for assignment | Held for Wolfe: statutory construction favors assignability in this context |
| Whether public policy (champerty, litigation incentives) bars assignment | Assignment does not create an officious intermeddler here because the assignee is the injured party with direct stake; assignments aid deterrence and access to remedies | Assignment creates champerty, encourages unreasonable demands, increases litigation and insurer costs, and may skew factfinding | Court found policy arguments mixed but ultimately favored assignability given statutory context and pre-existing law |
| Whether courts should treat assignability as a procedural/substantive issue preventing judicial rulemaking | Not raised as dispositive; parties may seek legislative change if court erred | Allstate suggested separation-of-powers concerns but did not press as controlling | Court declined to resolve separation-of-powers dimension; focused on statutory intent and common-law backdrop |
Key Cases Cited
- Cowden v. Aetna Cas. & Sur. Co., 389 Pa. 459, 134 A.2d 223 (recognizing insurer liability for failure to settle under common-law contract theory)
- Gray v. Nationwide Mut. Ins. Co., 422 Pa. 500, 223 A.2d 8 (discussing assignability of contractual bad-faith claims and policy reasons for assignments)
- Ash v. Continental Ins. Co., 593 Pa. 523, 932 A.2d 877 (treating § 8371 actions as statutorily-created torts for certain purposes)
- Brown v. Candelora, 708 A.2d 104 (Pa. Super. 1998) (held § 8371 claims assignable; cited in lower federal decisions)
- Birth Center v. St. Paul Cos., 567 Pa. 386, 787 A.2d 376 (discussing § 8371’s relationship to preexisting common-law remedies and statutory construction)
- Sensenig v. Pa. R.R. Co., 229 Pa. 168, 78 A. 91 (illustrating the common-law rule that pure tort causes of action are generally not assignable)