Pennsylvania's Supreme Court in a unanimous opinion dated September 28, 2017, in a case of first impression clarified the elements of an insurance bad faith action under Pennsylvania's bad faith statute found at 42 Pa.C.S. Section 8371. The Court stated "... we adopt the two-part test articulated by the Superior Court in Terletsky v. Prudential Property & Cas. Ins. Co., 649 A. 2d 680 (Pa. Super. 1994), which provides that, in order to recover in a bad faith action, the plaintiff must present clear and convincing evidence (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis. Additionally, we hold that proof of an insurance company's motive of self-interest or ill-will is not a prerequisite to prevailing in a bad faith claim under Section 8371, as argued by Appellant. While such evidence is probative of the second Terletsky prong, we hold that evidence of the insurer's knowledge or recklessness as to is lack of a reasonable basis in denying policy benefits is sufficient." Additionally, the Court noted that mere negligence is insifficient for a finding of bad faith under Section 8371.

Click here to see the opinion