Insurers unaware of their rights when defending against bad-faith claims risk exploitation by plaintiffs who are motivated by the possibility of a large settlement. This trend has become particularly strong in Pennsylvania, which has rather lucrative pockets in which "entrepreneurial" lawsuits are filed, based largely upon inaccurate perceptions or characterizations of bad-faith law.
In fact, few areas of Pennsylvania law have so wide a disparity between myth and reality as the Pennsylvania Bad-Faith Statute. That disparity can have significant ramifications for insurers in bad-faith cases when they go unchecked. The following six myths are the most common and the most dangerous. Insurers — both in and out of Pennsylvania — who are aware of these traps may be able to get more equitable results in such cases.
Myth # 1: Insurers have few, if any, rights.
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