In Pennsylvania, tort claims are generally not assignable. In Brown v. Candelora, the Pennsylvania Superior Court held that bad faith claims brought under Pennsylvania’s Bad Faith Statute §8371 can be assignable to injured third parties, but not all Pennsylvania courts have followed Brown. Accordingly, when the Third Circuit was presented with the issue of whether a §8371 bad faith claim may be assigned to an injured third party, it certified the question to the Pennsylvania Supreme Court.

In Allstate Property and Casualty Insurance v. Wolfe, the Pennsylvania Supreme Court held that insureds may assign a §8371 bad faith claim against their carrier to injured third parties. The underlying case involved an automobile accident between an alleged drunk driver, Karl Zierle (“Zierle”) and Jared Wolfe (“Wolfe”). Zierle was insured with Allstate and had a policy limit of $50,000. Wolfe demanded $25,000 to settle the matter, and Allstate only ever offered $1,200 in return. At trial, the verdict awarded Wolfe $15,000 in compensatory damage and $50,000 in punitive damages. Zierle subsequently assigned his right to pursue a bad faith claim to Wolfe who filed suit in state court, and the insurer removed the lawsuit to the United States Middle District of Pennsylvania.

Allstate argued that Pennsylvania has a long history of opposing the assignment of tort claims. Additionally, Allstate contended that allowing such an assignment would create overzealous plaintiffs who could pursue inflated settlement demands in addition to bad faith claims that would normally not be proper. Wolfe countered that bad faith claims brought under §8371 have been held to be assignable to injured third parties by the Pennsylvania Superior Court. Furthermore, Wolfe contended that allowing such an assignment would further public policy by encouraging good faith settlement negotiations and efficient management of claims.

In a 5-1 vote, the Pennsylvania Supreme Court held that assignment of bad faith claims to injured third parties should be allowed. In reaching this decision, the PA Supreme Court relied on the legislative intent of the bad faith statute.

We expect to see much hand-wringing in the new year over the impact of this decision. To our mind, however, the formal allowance of the assignment of a bad faith claim to the underlying plaintiff simply puts Pennsylvania into the US jurisprudential norm. So long as carriers continue to avoid being slow, sinister or stupid in their claims handling decisions, there really isn’t much to fear here. While bad faith litigation can be quite expensive, the mere fear of it cannot supersede good claims handling practices.

Special thanks to Eric Clendening for his contributions to this post. For more information, please contact Bob Cosgrove at