Both Pennsylvania and New Jersey recognize a policyholder's right to sue when an insurer acts in bad faith, unreasonably delaying payment, denying a claim without a proper investigation, or misrepresenting policy terms. Bad-faith claims can result in damages beyond the original policy limits, including attorney's fees and punitive damages in appropriate cases.
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We review the claims file, the insurer's investigation (or lack of one), and the correspondence timeline to determine whether the insurer's conduct crossed the line from a legitimate coverage dispute into bad faith.
Pennsylvania's bad faith statute, 42 Pa. C.S. § 8371, gives policyholders a distinct cause of action separate from the underlying coverage dispute, allowing a court to award interest, attorney's fees, and punitive damages once bad faith is proven. New Jersey recognizes similar protections through case law rather than a single statute. Because a bad faith claim exists independently of whether coverage was ultimately owed, it can proceed even after a coverage dispute itself is resolved, and its strength typically depends on how the insurer's internal claims file documents the reasoning behind a delay or denial.
