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Federal Court Clarifies Statute of Limitations in Pennsylvania Bad-Faith Claims

By James P. Goslee, Esquire

On August 30, 2012, a federal district court judge weighed in on an important issue concerning the statute of limitations for Pennsylvania bad-faith claims. Although common law insurance bad-faith claims in Pennsylvania have a four-year statute of limitations, in Katzenmoyer v. Allstate, Judge Norma L. Shapiro was confronted with an issue undecided by Pennsylvania’s courts concerning when the limitations period begins to run.

In Katzenmoyer, Judge Shapiro noted that no Pennsylvania court has ever decided when the statute of limitations period begins in common law bad-faith claims. As a result, there is an open question as to whether the four-year limitation period starts when an insurer refuses to settle a claim on behalf of an insured, or after an excess verdict is rendered. Judge Shapiro predicted that the Pennsylvania Supreme Court would hold that the limitations period runs from the date a verdict is entered, not from the date an insurer rejects a settlement offer. According to Judge Shapiro, insureds cannot maintain a bad-faith claim before entry of an excess verdict because they have “not yet suffered damages.”

Although Judge Shapiro’s decision in Katzenmoyer is not binding on Pennsylvania courts, it is persuasive authority that provides guidance on an unsettled question of insurance law. Therefore, it is important that practitioners familiarize themselves with this important decision.

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