Jean A. HOLLOCK, Appellee v. ERIE INSURANCE EXCHANGE, Appellant.
Supreme Court of Pennsylvania.
Decided Aug. 22, 2006.
Resubmitted March 7, 2006.
903 A.2d 1185
231
James Michael Beck, Dechert, L.L.P., Philadelphia, for Products Liability Advisory Council, Inc., appellant amicus curiae.
Richard Bruce Morrison, Marshall, Dennehey, Warner, Coleman & Gоggin, P.C., Bethlehem, for Pennsylvania Defense Inst., appellant amicus curiae.
Michael Patrick Bodosky, Patricia Hale Becker, Mayer, Brown, Rowe & Maw, L.L.P., Washington, DC, for Chamber of Commerce of the U.S. appellant amicus curiae.
Brian Kyle Hanstein, James C. Haggerty, Swartz Campbell, P.C., Philadelphia, for Inc. Federation of Pennsylvania and Property & Cas. Insurers Assoc. of America, appellant amici curiae.
Christine S. Lezinski, John Josеph Warring, Timothy George Lenahan, Lenahan & Dempsey, P.C., Scranton, for Jean A. Hollock, appellee.
John Norig Ellison, Timothy Patrick Law, Anderson Kill & Olick, P.C., Philadelphia, for United Policyholders, appellee amicus curiae.
BEFORE: CAPPY, C.J., and CASTILLE, NEWMAN, SAYLOR, EAKIN, BAER and BALDWIN, JJ.
ORDER
PER CURIAM.
The appeal is hereby dismissed as having been improvidently granted.
Chief Justice CAPPY files a dissenting statement in which Justice CASTILLE joins.
Chief Justice CAPPY dissenting.
As I do not agrеe that this case should be summarily dismissed without an opinion on the merits of the claims presented, I am compelled to dissent.
I believe this case presents important issues regarding whether the trial court may consider the conduct of an insurer during the litigation of a bad faith claim brought pursuant to
What is lacking is an analysis by this court of the language of the statute, the intent of the legislation, and the policy considerations relevant to a resolution of these issues. For these reasons, I believe this court should go beyond entry of a simple order and, instead, offer the bench and bar below a well-reasoned opinion discussing the issues presented.
In 1990, the Pennsylvania Legislature established a statutory remedy familiarly known as the “bad faith” statute. The statute, at
In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.
1990, Feb. 7, P.L. 11, No. 6, § 3, effective July 1, 1990.
In the case at bar, Appellee, Jean Hollock, brought an action under
On appeal, the Superior Court affirmed. The Superior Court rejected Appellant‘s argument that the trial court erred in considering the conduct of the insurer during the course of the litigation of a bad faith claim as relevant to a finding of bad faith on the underlying insurance matter, and as a factor in the subsequent award of punitive damages. In reaching its conclusion the Superior Court discussed its previous decisions in O‘Donnell v. Allstate Ins. Co., 734 A.2d 901 (Pa.Super.1999), and Ridgeway v. United States Life Credit Life Ins. Co., 793 A.2d 972 (Pa.Super.2002).
In O‘Donnell, the insured became frustrated with the delay in processing a claim under a policy of insurance for damages arising during the course of a burglary and initiated suit under
The insured in Ridgeway obtained a judgment on a bad faith claim and then encountered difficulty in securing payment on the judgment. The insured instituted a secоnd bad faith claim asserting the actions of the insurer in failing to satisfy the judgment on the initial bad faith claim. The Superior Court rejected this second action as beyond the scope of the bad faith statute, which it found limited to protecting an insured from bad faith denials of coverage. 793 A.2d at 977. The Ridgeway court held that the insured had remedies for the enforcement of money judgments that wоuld provide relief for the conduct of the insurer in this case, and that the bad faith statute was not the appropriate avenue to pursue the insurer‘s actions post judgment. Id.
In the instant case, the Superior Court found that O‘Donnell and Ridgeway were sufficiently distinguishable from one another on the scope of the duty of an insurer towards its insured. Hollock, 842 A.2d at 415-16. The breaking point is the litigation arising from the insurance policy. The Superior Court found that the insurer has a continuing obligation to act in good faith towards its insured throughout the course of the litigation arising under the insurance policy. Once that litigation has concluded the obligation to act in good faith is terminated. Accordingly, the conduct of the insurer during the course of the litigation proceeding from the statutory cause of action is a relevant factor in arriving at a judgment on the question of bad faith itself. Id. at 416. The court then
I take issue with the conclusion of the Superior Court in extending the insurer‘s duty to act in good faith throughout the litigation on the bad faith claim, and within the award of punitive damages.3 In my opinion, once an action has been initiated by an insured against the insurer under the bad faith statute, the relationship has been severed and the duty of good faith and fair dealing no longer remains. It is only the conduct of the insurer in the processing of the insurance claim that is relevant to the resolution of the bad faith action. Should the insurer аct inappropriately during the litigation process, that conduct can be addressed through other available means. Reading the bad faith statute as extending the duty of the insured beyond the life of the insurance policy is simply, in my opinion, incorrect.
Because a bad faith claim is a creature of statute, the question of the extent of an insurer‘s duty to an insurеd is one that must be resolved under the rules of statutory interpretation. The following rules dictate our analysis on this issue.
(a) The object of all interpretation and construction of statutes is to ascertain and effectuate the intention of the General Assembly. Every statute shall be construed, if possible, to give effect to all its provisions.
(b) When the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.
(1) The occasion and the necessity for the statute.
(2) The circumstances under which it was enacted.
(3) The mischief to be remedied.
(4) The object to be attained.
(5) The former law, if any, including other statutes upon the same or similar subjects.
(6) The consequences of a particular interpretation.
(7) The contemporaneous legislative history.
(8) Legislative and administrative interpretаtions of such statute.
1972, Dec. 6, P.L. 1339, No. 290, § 3, imd. effective.
Thus, we begin with pertinent words of the statute:
In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions....
The obvious problem in looking at the words is the lack of clarity on the question of where the line should be drawn on the scope of the “action arising under an insurance policy” when assessing whether the insurer acted in bad faith. Is the scope of conduct limited to the conduct of the insurer on the underlying policy as Appellant argues, or does it extend to the entire litigation that resulted from the initial claim under the insurance policy, as the Superior Court found. As either interpretation can be supported by the words of the statute, the words are not clear and free from all ambiguity, аnd thus, we turn to consideration of the factors set forth in
The occasion and necessity for the statute is the starting point.
The circumstance for the legislation was the revelation that this Court considered the enactment of the Unfair Insurance Practices Act as the global response from the Legislature in providing a remedy for all policyholders involving unfair trade practices arising between an insurer and insured. D‘Ambrosio 431 A.2d at 970;
Related statutory provisions on the same subject are of course found in the Unfair Insurance Practices Act.
Finally, the only remaining point of statutory construction relevant to this particular case is
Specifically, a bad faith lawsuit is established when the insured proves a breach of thе duty of good faith in fair dealing that the insurer owes the insured when processing or settling a claim under a policy of insurance. The relationship between the parties is defined by the insurance policy. Once that policy has been terminated, the claim paid, or the claim denied the relationship is over. In its simplest terms, the duty to act in good faith has been dissоlved once the insured and insurer become adversaries in a bad faith suit. To find
In fact, the law currently provides other means for regulating the civility and professionalism of parties during the course of litigation. The rules of civil procedure, the disciplinary process, and the contempt powers of the courts, have always been sufficient instruments to harness the behavior of the litigants. The bad faith statute was not intended to replace or duplicate these very adequate tools.
Thus, based upon the statutory construction analysis above, I conclude the Legislature intended that only the acts of the insurer on the underlying denial of benefits on the insurance policy at issue are relevant to a finding of bad faith. The conduct of the insurer during the course of the litigation on the bad faith claim itself is not relevant to the conduct in dealing with claims under a policy of insurance. In my opinion, once the insurer is asked to defend an action under the statute, there can no longer be a relationship with its insured subject to a duty to act in good faith; adequate means exist to control the behavior of the insurer, or any party, during the litigation. Because I would find that the Superior Court erred in affirming the finding of bad faith, insofar as that conclusion considered the conduct of the insurer during the course of the litigation itself, I would reject the decision of the Superior Court on that point.7 Furthermore, because the
For the reasons stated above, I would prefer this Court to address the issues presented on their merits rather than summarily dismiss the appeal; as to the merits, I would affirm the judgment of bad faith on other grounds and remand for a new assessment of punitive damages.
Accordingly, I dissent.
Justice CASTILLE joins this dissenting statement.