Rancosky v. Wash. Nat'l Ins. Co., No. 28 WAP 2016.

CourtUnited States State Supreme Court of Pennsylvania
Writing for the CourtJUSTICE BAER
Citation170 A.3d 364
Parties Matthew RANCOSKY, Administrator DBN of the Estate of Leann Rancosky and Matthew Rancosky, Executor of the Estate of Martin L. Rancosky, Appellee v. WASHINGTON NATIONAL INSURANCE COMPANY, as successor by merger to Conseco Health Insurance Company, formerly known as Capital American Life Insurance Company, Appellant
Decision Date28 September 2017
Docket NumberNo. 28 WAP 2016.

170 A.3d 364

Matthew RANCOSKY, Administrator DBN of the Estate of Leann Rancosky and Matthew Rancosky, Executor of the Estate of Martin L. Rancosky, Appellee
v.
WASHINGTON NATIONAL INSURANCE COMPANY, as successor by merger to Conseco Health Insurance Company, formerly known as Capital American Life Insurance Company, Appellant

No. 28 WAP 2016.

Supreme Court of Pennsylvania.

ARGUED: April 4, 2017
DECIDED: SEPTEMBER 28, 2017


170 A.3d 365

Jacob C. Cohn, Esq., Gordon Rees Scully Mansukhani, LLP, Rod Brandon McCullough, Esq., Henry M. Sneath, Esq., Picadio, Sneath, Miller & Norton, P.C., Katharine Joan Thompson, Esq., Gordon & Rees LLP, for Appellant.

Sean Peter Wajert, Esq., Shook, Hardy & Bacon, L.L.P., for Appellant Amicus Curiae.

Kenneth Robert Behrend, Esq., Kevin M. Miller, Esq., Behrend & Ernsberger P.C., for Appellee.

Scott B. Cooper, Esq., Schmidt Kramer, P.C., James C. Haggerty, Esq., Haggerty, Goldberg, Schleifer & Kupersmith, P.C., John Jacob Hare, Esq., Marshall, Dennehey, Warner, Coleman & Goggin, P.C., Michael Hillel Sampson, Esq., George L. Stewart II, Esq., Michael Patrick Yingling, Esq., Reed Smith LLP, Andrew M. Roman, Esq., for Amicus Curiae.

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

OPINION

JUSTICE BAER

In this discretionary appeal, we consider, for the first time, the elements of a bad faith insurance claim brought pursuant to Pennsylvania's bad faith statute found at 42 Pa.C.S. § 8371.1 For the reasons set forth below, we adopt the two-part test articulated by the Superior Court in Terletsky v. Prudential Property & Cas. Ins. Co. , 437 Pa.Super. 108, 649 A.2d 680 (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 its lack of a reasonable basis in denying policy benefits is sufficient. Therefore, we affirm the judgment of the Superior Court, which partially vacated the trial court's judgment and remanded for further proceedings on Appellee's bad faith claim.

I. Background2

In March of 1992, while working for the United States Postal Service ("USPS") Appellee LeAnn Rancosky ("Rancosky") purchased a cancer insurance policy as a supplement to her primary employer-based health insurance. The cancer policy was issued by Appellant Conseco Health Insurance

170 A.3d 366

Company ("Conseco").3 To pay for the policy, Rancosky's employer automatically deducted bi-weekly payments of $22.00 from her paycheck.

Of particular importance to the case sub judice , the policy contained a waiver-of-premium provision, which excused premium payments in the event Rancosky became disabled due to cancer. The waiver-of-premium provision read, in relevant part, as follows:

Subject to the conditions of this policy, you will not be required to make premium payments if:

• you are diagnosed as having cancer more than 30 days after the Effective Date; and

• you are disabled due to cancer for a continuous period of more than 90 consecutive days beginning on or after the date of diagnosis.

After it has been determined, as shown below that you are disabled, we will waive your premium payments for the period of disability, except those during the first 90 days of such period.

PROOF OF DISABILITY

You must send us a physician's statement containing the following:

• the date you were diagnosed as having cancer ;

• the date you were disabled due to such cancer ; and,

• the expected date, if any, such disability will end.

Plaintiff's Complaint In Civil Action, Exhibit 5, Conseco Cancer Policy at Section 5 (Reproduced Record ("R.R.") Vol. I at 115a). Additionally, Rancosky's policy provided that "disabled" means that:

• for the first 24 months you are unable to perform all the substantial and material duties of your regular occupation; and,

After 24 months, "disabled" means that:

• you are unable to work at any job for which you are qualified by reason of education, training or experience;

• you are not working at any job for pay or benefits; and

• you are under the care of a physician for the treatment of cancer.

Plaintiff's Complaint In Civil Action, Exhibit 5, Conseco Cancer Policy at Section 1 (R.R. Vol. I at 109a). Thus, pursuant to the above provisions, a policyholder who is "disabled," in that she is unable to work due to cancer, is excused from paying premiums on her policy following ninety days of such disability.

On February 4, 2003, Rancosky was admitted to the hospital due to intense abdominal pain. She was ultimately diagnosed with ovarian cancer and, over the subsequent months, underwent surgery and chemotherapy. Though, Rancosky did not return to her job with USPS following her February 4, 2003, hospital admission, she remained on her employer's payroll for several months because she had accrued unused vacation and sick days. Consequently, Conseco continued to receive payroll-deducted premiums from Rancosky until June 24, 2003, when Rancosky went on disability retirement. As the premium payments were made in arrears, and therefore paid for the prior month's coverage,

170 A.3d 367

the final premium payment extended coverage under her policy to May 24, 2003.4

Beginning in April 2003, Rancosky made several attempts to obtain waiver-of-premium status, claiming that she was unable to work and was thus "disabled" under her policy since her admission to the hospital in February of 2003. Upon Conseco's request, on November 18, 2003, she submitted waiver-of-premium forms along with the required physician statement. Unbeknownst to Rancosky, however, the submitted physician's statement inaccurately specified her date of disability as beginning on April 21, 2003, rather than on February 4, 2003.5 Believing that the premiums had been waived and that no further premiums were due on the policy because of her disability from cancer, Rancosky's final premium payment came from her June 24, 2003, payroll-deducted premium. Thus, over the next two years, as Rancosky experienced several recurrences of her cancer, she continued to submit claims to Conseco.

In early 2005, during an audit of its payroll-deducted premium policies, Conseco discovered, apparently for the first time, that Rancosky ceased making premium payments on her policy in June of 2003. Despite Rancosky's prior submissions and inquiries regarding her waiver-of-premium status in which she indicated the start date of her disability as February 4, 2003, and authorized Conseco to obtain information from her physicians and employer about her disability, Conseco informed Rancosky on January 28, 2005, that it deemed her policy to have lapsed as of May 24, 2003, the date to which her final payroll-deducted premium payment extended her coverage. Over the following months and years, Rancosky had an ongoing disagreement with Conseco as to whether she was on waiver-of-premium status, and thus entitled to continued coverage under her cancer policy. During this time, Rancosky, again reflecting February 4, 2003, as her disability start date, submitted numerous claim forms, waiver-of-premium requests, and authorizations permitting Conseco to contact her physicians, employer, or anyone else who might have information regarding her disability start date. Notwithstanding its contention that her policy had lapsed in May of 2003, Conseco paid for cancer related treatment Rancosky received in 2004 and 2005.

In 2006, however, following yet another recurrence of her cancer, Conseco denied Rancosky's claim for further benefits based upon her failure to pay premiums. In response, Rancosky sought reconsideration

170 A.3d 368

of Conseco's denial of benefits, again reiterating her oft-stated assertion that she was excused from paying premiums past her final payroll-deducted premium on June 24, 2003, because she was disabled within the meaning of her policy beginning on February 4, 2003, and made all required premium payments throughout the ninety-day waiting period of the waiver-of-premium provision. In evaluating Rancosky's reconsideration request, however, Conseco's review was limited to its in-house documentation, which at that time included, among voluminous and inconsistent filings, the physician's statement that erroneously indicated the start date of her disability as April 21, 2003.

Notwithstanding Rancosky's eight separate authorizations permitting Conseco to contact her employer or any other person with information as to the actual start date of her disability, Conseco did not undertake any investigation to clarify the discrepancy between Rancosky's claimed disability date of February 4,...

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    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
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    ...policy," and (2) "knew or recklessly disregarded its lack of a reasonable basis in denying the claim." Rancosky v. Wash. Nat'l Ins. Co., 170 A.3d 364, 377 (Pa. 2017). Because we have determined that State Farm had a reasonable—and in fact correct—basis for denying Eberhardinger's PIP and UI......
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    ...claim.'" Berg v. Nationwide Mutual Insurance Company, Inc., 235 A.3d 1223, 1232 (Pa. 2020) (quoting Rancosky v. Washington Nat'l Ins. Co., 170 A.3d 364, 376-77 (Pa. 2017) (adopting the two-part test articulated in Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. Ct. 1......
  • Berg v. Nationwide Mut. Ins. Co., No. 33 MAP 2019
    • United States
    • Pennsylvania Supreme Court
    • August 25, 2020
    ...knew or recklessly disregarded its lack of reasonable basis in denying the claim." Rancosky v. Washington Nat'l Ins. Co. , 642 Pa. 153, 170 A.3d 364, 377 (2017). "[P]roof of the insurer's subjective motive of self-interest or ill-will, while perhaps probative of the second prong of the abov......
  • Nelson v. State Farm Fire & Cas. Co., 2:19-cv-01382-RJC
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. Western District of Pennsylvania
    • June 3, 2020
    ...as to its lack of a reasonable basis in denying policy benefits is sufficient. Rancosky v. Washington Nat'l Ins. Co. , 642 Pa. 153, 170 A.3d 364, 365 (2017). Nelson's Complaint avers that the damage to the Property is covered under the terms of the Policy, and that State Farm denied her cla......
  • Request a trial to view additional results
163 cases
  • Eberhardinger v. City of York, CIVIL ACTION NO. 1:16-CV-2481
    • United States
    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
    • September 17, 2018
    ...policy," and (2) "knew or recklessly disregarded its lack of a reasonable basis in denying the claim." Rancosky v. Wash. Nat'l Ins. Co., 170 A.3d 364, 377 (Pa. 2017). Because we have determined that State Farm had a reasonable—and in fact correct—basis for denying Eberhardinger's PIP and UI......
  • Ironshore Specialty Ins. Co. v. Conemaugh Health Sys., Civil Action 3:18-cv-153
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. Western District of Pennsylvania
    • May 16, 2022
    ...claim.'" Berg v. Nationwide Mutual Insurance Company, Inc., 235 A.3d 1223, 1232 (Pa. 2020) (quoting Rancosky v. Washington Nat'l Ins. Co., 170 A.3d 364, 376-77 (Pa. 2017) (adopting the two-part test articulated in Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. Ct. 1......
  • Berg v. Nationwide Mut. Ins. Co., No. 33 MAP 2019
    • United States
    • Pennsylvania Supreme Court
    • August 25, 2020
    ...knew or recklessly disregarded its lack of reasonable basis in denying the claim." Rancosky v. Washington Nat'l Ins. Co. , 642 Pa. 153, 170 A.3d 364, 377 (2017). "[P]roof of the insurer's subjective motive of self-interest or ill-will, while perhaps probative of the second prong of the abov......
  • Nelson v. State Farm Fire & Cas. Co., 2:19-cv-01382-RJC
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. Western District of Pennsylvania
    • June 3, 2020
    ...as to its lack of a reasonable basis in denying policy benefits is sufficient. Rancosky v. Washington Nat'l Ins. Co. , 642 Pa. 153, 170 A.3d 364, 365 (2017). Nelson's Complaint avers that the damage to the Property is covered under the terms of the Policy, and that State Farm denied her cla......
  • Request a trial to view additional results

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