Punitive Damages in Insurance Bad Faith Claims

Insurance companies sometimes act in bad faith toward their policyholders — denying valid claims, delaying payment, or even making threatening statements — but there are laws in place to protect you from such bad-faith behavior. In fact, you might be able to receive punitive damages in addition to your benefits if you can demonstrate that your insurance company acted in bad faith.

Bad Faith Claims

Under US law, insurance companies can be held responsible for acts of bad faith; they owe you, the insured, fair dealing and good faith. If the court finds that your insurance company has acted in bad faith toward you, you can file a claim in an attempt to recover punitive damages, interest, attorney fees, and court costs in addition to the benefits you should have received.

Punitive Damages


In the state of Pennsylvania, punitive damages are only available when the conduct of the insurance company falls under the category of “outrageous.” Conduct is considered outrageous as defined in a legal context when it shows evidence of being malicious, wanton, willful, oppressive, or shows reckless indifference to the interests of others. Under Pennsylvania law in such cases, though, there is no clear difference made between interest, costs, and punitive damages. This means that it can be difficult for you to prove that your insurance company acted in such a way as to deserve punitive damages under the law.

Proving Bad Faith

The landmark case that laid the groundwork for how punitive damages are handled in insurance bad faith claims was Rancosky v. Washington National Ins. Co., 2017 WL 4296351 (Sep. 28. 2017). This case established that in order to win a claim against an insurer for bad faith, you must be able to provide clear, convincing evidence that (1) the insurer did not have a reasonable basis for denying your benefits and (2) that the insurer either lacked a reasonable basis for denying your claim or they recklessly disregarded the fact that they did not have a reasonable basis. Negligence alone is not enough to support a claim of bad faith on the part of the insurer, nor is the fact that insurance denied your claim.

On the other hand, your bad faith claim cannot be dismissed just because you cannot show that your insurance company acted with ill will when denying your claim. For example, your claim may have been denied by the insurance company simply because they failed to investigate an incorrect date on the documentation submitted; in such a case, there is no need to prove that the insurance company was willfully denying your rights.

What Bad Faith Looks Like

Here are some examples of what bad faith on the part of an insurance company looks like:

Personal injury settlement
  • Refusing to pay your claim even though it is valid
  • Denying your claim without informing you of why
  • Denying your claim for an invalid reason
  • Denying your claim to avoid setting a precedent that might impact the insurance company’s profits (e.g., your valid claim for a modern medical treatment is denied because the insurance company does not want to start paying for that treatment in connection with other policyholders)
  • Failing to conduct a prompt and complete investigation into your claim
  • Delaying payment of your claim when it is valid (e.g., insurance approved your claim for home repairs after a serious storm but waits three months to issue the check)
  • Delaying or denying decisions on your claim
  • Delaying or denying decisions related to your request for approval for medical treatment (insurance companies are expected to act quickly on such requests)
  • Offering you less money than what your claim is actually worth
  • Refusing a reasonable request for copies of documentation (e.g., if your claim is denied and you request to see a copy of the documentation they used in denying your claim, and the insurance company refuses to provide this)
  • Misrepresenting either the language of your policy or the law that enforces it (e.g., being told that you can be found guilty of insurance fraud because of an honest error on a claim submission)
  • Threatening you (e.g., your home has been damaged in a fire and you file a valid claim, but one of the insurance representatives accuses you of arson and threatens to call the police when you inquire about the status of your claim)

And remember that proving the motive of the insurance company is not necessary to a bad faith claim and is not necessary when seeking punitive damages.


Denied stamp

Under Pennsylvania law, there is a two-part test for proving bad faith: (1) the insurance company did not have a reasonable basis for denying your claim and (2) the insurance company either knew or recklessly disregarded the lack of reasonable basis. In addition, you do not have to prove ill will in order to receive punitive damages.

Contact Sacchetta & Baldino

If you or someone you know has been the victim of bad faith on the part of an insurance company, the law office of Sacchetta & Baldino can help. Our attorneys have significant experience in successfully prosecuting bad faith insurance claims. We can either help you reach a settlement or take the claim all the way to trial. Just because your claim has been denied does not mean it is not a valid claim. Contact us today so that we can put our years of experience and successful track record to work for you and make sure you receive the benefits and punitive damages that the law provides.