Castillo v. Progressive Insurance, 3:19-cv-01628

Castillo was a passenger in a June 12, 2015 motor-vehicle crash; the striking driver was uninsured. Progressive was Castillo’s UM insurer; Castillo had elected limited-tort (recoverable non‑economic damages only upon proof of a “serious injury”).
Castillo delayed substantial treatment: ER visit day of crash, family‑doctor visit ~4 months later, then little treatment until ~19 months after the accident; counsel explained delay by pregnancy.
Castillo (through counsel) demanded Progressive’s UM limits in April 2019. GEICO (primary insurer) later tendered its $15,000 UM limit after counsel threatened suit.
Progressive claim rep Michael McHale reviewed medical records, spoke with GEICO and Allstate reps, doubted causation/limited‑tort threshold given treatment delays, and made a $1,000 initial settlement offer while inviting further demand.
Castillo’s counsel then disclosed a wage‑loss claim and filed suit; Castillo sued Progressive for breach of contract and statutory bad faith under 42 Pa. Cons. Stat. § 8371. Progressive moved for summary judgment on the bad‑faith count.
The court granted summary judgment for Progressive, finding McHale conducted a reasonable investigation and Castillo failed to present clear and convincing evidence that Progressive lacked a reasonable basis for its offer or knowingly/recklessly disregarded such lack.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Progressive acted in bad faith by making a $1,000 pre‑litigation offer	Castillo: offer was an unreasonably low “insignificant” settlement reflecting an inadequate investigation and bad faith	Progressive: adjuster reviewed records, consulted other insurers, reasonably doubted causation/limited‑tort threshold, and left offer open to negotiation	Court: No bad faith — offer grounded in reasonable investigation; summary judgment for Progressive
Whether post‑offer evidence (deposition, IME) or redactions show knowledge or reckless disregard of no reasonable basis	Castillo: later discovery and redacted notes show insurer’s state of mind and irrefutable proof of bad faith	Progressive: the later materials post‑date the June 2019 valuation and could not have informed the adjuster’s good‑faith evaluation	Court: Post‑offer evidence cannot prove insurer knowingly/recklessly undervalued the claim at time of offer; plaintiff failed to meet clear‑and‑convincing standard

Amica Mut. Ins. Co. v. Fogel, 656 F.3d 167 (3d Cir. 2011) (sets Terletsky‑based two‑part bad‑faith test and requires clear and convincing proof)
Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. 1994) (articulates elements of insurance bad faith)
Rancosky v. Wash. Nat’l Ins. Co., 170 A.3d 364 (Pa. 2017) (addressing bad‑faith standards under Pennsylvania law)
Post v. St. Paul Travelers Ins. Co., 691 F.3d 500 (3d Cir. 2012) (bad faith requires more than negligence; insurer need reasonable basis)
Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742 (3d Cir. 1999) (bad faith requires proof beyond mere negligence or bad judgment)
Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121 (3d Cir. 2005) (heightened summary‑judgment burden where trial standard is clear and convincing)
Brown v. Progressive Ins. Co., 860 A.2d 493 (Pa. Super. 2004) (bad faith can include lack of good‑faith investigation)
Hollock v. Erie Ins. Exchange, 842 A.2d 409 (Pa. Super. 2004) (example where low offer and other conduct supported a bad‑faith finding)