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Case Bulletin – Pennsylvania Supreme Court Rules that Insureds Can Assign Bad Faith Claims to Injured Third Parties

On December 15, 2014, the Pennsylvania Supreme Court ruled that an insured can assign his or her bad faith claim against his or her insurance carrier to the injured party.  In  Allstate Property and Casualty Insurance Company v. Jared Wolfe, a man was injured when his vehicle was struck by a drunk driver.  At trial, a jury awarded the injured party $15,000.00 in compensatory damages and $50,000.00 in punitive damages.  The insurance carrier for the at-fault driver paid the compensatory damages only.  Rather than the at-fault party paying the $50,000.00 to the injured party in punitive damages, they entered into an agreement in which the at-fault party assigned all of his claims against his insurance carrier to the injured party.  The injured party then filed a lawsuit against the at-fault party’s insurance carrier claiming that it refused to settle the case prior to the initial trial and that the refusal reflected bad faith on the part of the insurance carrier.

The jury determined that the insurance carrier had engaged in bad faith conduct and awarded the injured party $50,000.00 in punitive damages.  The insurance carrier then filed an appeal in the United States Court of Appeals for the Third Circuit alleging that the injured party lacked standing to bring a lawsuit since he was not insured under the policy.  Upon certification from the federal appeals court, the Pennsylvania Supreme Court upheld the assignment.  Therefore, under 42 Pa.C.S.§ 8371, an insured may assign his or her bad faith claim to an injured third party.