Mantia v. Northern Insurance

39 Pa. D. & C.4th 71, 1998 Pa. Dist. & Cnty. Dec. LEXIS 107
CourtPennsylvania Court of Common Pleas, Lancaster County
DecidedApril 27, 1998
Docketno. 3849-1992
StatusPublished
Cited by4 cases

This text of 39 Pa. D. & C.4th 71 (Mantia v. Northern Insurance) is published on Counsel Stack Legal Research, covering Pennsylvania Court of Common Pleas, Lancaster County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mantia v. Northern Insurance, 39 Pa. D. & C.4th 71, 1998 Pa. Dist. & Cnty. Dec. LEXIS 107 (Pa. Super. Ct. 1998).

Opinion

STENGEL, J.,

The court has been asked to determine the proper statute of limitations to apply to an action for bad faith. The cause of action asserted by Mr. Mantia against defendants is based on 42 Pa.C.S. §8371, which provides:

“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:
[73]*73“(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 percent.
“(2) Award punitive damages against the insurer.
“(3) Assess court costs and attorney fees against the insurer.”

The bad faith statute itself does not provide a statute of limitations. As of this writing, no state court in Pennsylvania has addressed the issue of the applicable statute of limitations.

Defendants contend that an action for bad faith under section 8371 sounds in tort and, thus, would be subject to a two-year statute of limitations under 42 Pa.C.S. §5524(7).1 Plaintiff argues that 42 Pa.C.S. §5527 applies to an action under §8371 and that the applicable period of limitations for such an action is six years.2

There are, however, three cases from the United States District Court for the Eastern District of Pennsylvania which have addressed this very issue. In Nelson v. State Farm Mutual Automobile Insurance Co., C.A. no. 97-4653 (E.D. Pa. December 12, 1997), the federal court predicted that the Supreme Court of Pennsylvania would conclude that an action under section 8371 sounds in [74]*74tort, and thus would be subject to a two-year statute of limitations under section 5524(7). Contrary to this position, two other judges have predicted that the Supreme Court would find that “an action under [section] 8371 is so steeped in both contract and tort law that the six-year statute of limitations should apply.” Nelson, slip op. at 6, citing Woody v. State Farm Fire and Casualty Co., 965 F. Supp. 691 (E.D. Pa. 1997), and Miller v. The Cincinnati Insurance Co., C.A. no. 97-1223 (E.D. Pa. July 9, 1997).

Defendants contend that section 8371 established a “new tort” to provide a remedy for insureds whose benefits are denied without good reason or explanation. Defendants’ position very closely mirrors the view advanced in Nelson, supra. Nelson cites essentially three reasons in support of using the two-year limitation period. Considered individually or cumulatively, these reasons do not convince me that an action under section 8371 sounds exclusively in tort.

The first reason given in Nelson is that “the history of ‘bad faith’ ” as a cause of action in Pennsylvania makes recognition of a “new tort” consistent and expected. In terms of Pennsylvania decisional law, Nelson primarily relies on D’Ambrosio v. Pennsylvania National Mutual Casualty Insurance Co., 494 Pa. 501, 431 A.2d 966 (1981),3 for the conclusion that first-party [75]*75bad faith must be viewed as a tort. Actually, the court in D’Ambrosio held exactly the opposite. The Supreme Court held that the plaintiff could not bring an action in tort against the insurer because the facts alleged did not state a cause of action in tort. D’Ambrosio, 494 Pa. at 510, 431 A.2d at 971.

While the Pennsylvania Supreme Court recognized that California had been the first state to create this “new tort” in Gruenberg v. Aetna Insurance Co., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973) (en banc), the court declined to follow California’s lead in creating a new common-law cause of action for bad faith. Noting that California courts have been criticized for creating this “new tort,” the D ’Ambrosio court went on to quote one critic of the Gruenberg decision:

“The California courts have created this ‘new tort’ in an obvious attempt to afford more protection to insureds. However, it has not really been established that there is a need of this additional protection. . . . State insurance departments are intended to serve the public and handle complaints from insureds as to insurer practices on a regular basis. Likewise, state legislatures are capable of prohibiting what are considered to be unfair claims handling practices and of imposing penalties for violations.” D’Ambrosio, 494 Pa. at 507-508, 431 A.2d at 970, quoting Kircher, Insurer’s Mistaken Judgment — A New Tort?, 59 Marq.L.Rev. 775, 786 [76]*76(1976). In an expression of agreement with this comment, the Supreme Court held:

“Surely it is for the legislature to announce and implement the Commonwealth’s public policy governing the regulation of insurance carriers. In our view, it is equally for the legislature to determine whether sanctions beyond those created under the [Unfair Insurance Practices] Act [40 P.S. §1171 et seq.] are required to deter conduct which is less than scrupulous.” D’Ambrosio, 494 Pa. at 508, 431 A.2d at 970.

Nelson notes that, while rejecting the creation of a new common-law cause of action for bad faith, the Pennsylvania Supreme Court in D’Ambrosio referenced three other state Supreme Court cases which recognized a common-law cause of action for bad faith sounding in tort: Bibeault v. Hanover Insurance Co., 417 A.2d 313 (R.1.1980); Anderson v. Continental Insurance Co., 85 Wis.2d 675, 271 N.W.2d 368 (1978), and Gruenberg, supra. The Supreme Court cited Gruenberg because “[i]n arguing for the reinstatement of his count in trespass, appellant [D’ Ambrosio] would have this court adopt the position of the Supreme Court of California which, in Gruenberg,” held that “bad faith” conduct may give rise to a cause of action in tort. D’Ambrosio, 494 Pa. at 505, 431 A.2d at 968.

Moreover, the D Ambrosio court noted that, in asking the court to recognize a new cause of action in tort for bad faith conduct, the plaintiff provided no factual support for the suggested cause of action and referred to Bibeault, supra, and Anderson, supra, in this way:

“[E]ven those jurisdictions which have recognized a cause of action for bad faith conduct have cautioned that ‘[i]f the claim is “fairly debatable,” no liability in tort will arise,’ Bibeault [supra] and that ‘a plaintiff must show the absence of a reasonable basis for denying [77]*77benefits of the policy and the defendant’s knowledge or reckless disregard of the lack of a reasonable basis for denying the claim. ’ Anderson [supra].”D ’Ambrosio, 494 Pa. at 510, 431 A.2d at 970.

These references by the Pennsylvania Supreme Court to Gruenberg, Bibeault and Anderson do not imply support for the creation of a “new tort” of first-party bad faith. If anything, the citations to these other courts demonstrate a lack of support for the creation of such a “new tort.”

Further, the comment by Christopher Hasson,

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Bluebook (online)
39 Pa. D. & C.4th 71, 1998 Pa. Dist. & Cnty. Dec. LEXIS 107, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mantia-v-northern-insurance-pactcompllancas-1998.