Dismissal Affirms Bad-Faith Judgment

The Pennsylvania Supreme Court's decision to dismiss an appeal by Erie in regards to Hollock v. Erie Insurance Exchange maintains the Superior Court's decision that an insurance company's duty of good faith and fair dealing continues through litigation. The dismissal means that a previous judgment award of $2.8 million in punitive damages will stand.

The Superior Court ruled that the conduct of Erie Insurance Exchange in the bad-faith litigation could be considered in determining whether Erie acted in bad faith toward its policyholder, Jean Hollock. The trial court had found that the conduct of Erie's witnesses at trial was “an intentional attempt to conceal, hide or otherwise cover-up the conduct of Erie employees.” The Superior Court ruled that “it was appropriate for the trial court to consider Erie's continued conduct in relation to its insured,” because the statutory remedy was designed to resolve all instances of insurance company bad faith, whether occurring before, during, or after litigation.

The Superior Court also ruled that, in order to recover punitive damages under the bad-faith statute, a policyholder need not prove anything more than bad faith. The policyholder need not also prove malice, vindictiveness, or a wanton disregard of the rights of others, which may be required to obtain punitive damages in a case of common law fraud in Pennsylvania.

“The Pennsylvania Supreme Court's ruling leaving the Superior Court decision intact ensures that insurance companies will not be permitted to disregard their obligations to their policyholders when policyholders fight back in court,” said Timothy Law of Anderson Kill & Olick, a law firm that submitted an amicus brief for the case. “The courts in Pennsylvania take very seriously the obligations of insurance companies to fulfill their promises with utmost good faith and diligence and to treat their customers with respect.”