In this Of Interest post, we highlight a notable matter that is currently unfolding in the Pennsylvania Supreme Court. Here, we provide an up-to-date history of Rancosky DBN v. Washington National Insurance Company in order to prepare readers for the significance of the eventual PA Supreme Court ruling.

In 1998, LeAnn Rancosky purchased a Cancer Policy from Washington National Insurance Company (now “Conseco”) to be paid through automatic payroll deductions from her employer, the United States Postal Service. LeAnn was diagnosed with Stage III ovarian cancer on February 4, 2003 and was unable to work from that day forward. However, due to accrued vacation time and sick days, LeAnn was paid – and therefore her Cancer Policy premiums were paid – through June 24, 2003.

Beginning May 20, 2003, LeAnn sent multiple Waiver of Premium (“WOP”) forms to Conseco, and assumed these forms were accepted, as Conseco continued to pay LeAnn’s cancer treatment bills through 2005. But when LeAnn relapsed in 2006, Conseco refused coverage on the grounds that LeAnn’s policy lapsed in May 2003 because they never received a completed WOP form correctly identifying a valid date of disability. LeAnn continued to send in form after form over the next five years, but Conseco was firm in denying coverage. In truth, Conseco needed only to tell LeAnn that she made a simple date error on her WOP form that, if corrected, would remedy all coverage issues, but Conseco never did this.

As a result, on December 22, 2008, LeAnn sued Conseco for, among other counts, bad faith. The case continued after LeAnn’s death in February 2010, and a non-jury trial conducted in June 24, 2014 ruled in Conseco’s favor on the bad faith claims. The lower court ruled against LeAnn because she failed to show that Conseco had a “dishonest purpose” or “motive of self-interest or ill-will” against her.

The appeals court reversed this ruling under 42 Pa. C.S.A. § 8371, holding that “ill-will” is not a third requirement to prove bad faith, but rather a point of consideration to be determined in connection with the second aspect of the well-settled two-prong bad faith test: (1) whether the insurer had a reasonable basis for denying benefits under the policy; and (2) whether the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim. The appeals court ordered a new trial for LeAnn on her bad faith claims against Conseco, and the Pennsylvania Supreme Court is currently reviewing that decision.

In light of this background, is important to note that 42 Pa. C.S.A. § 8371 does not actually define “bad faith”, nor has the PA Supreme Court ever done so. Thus, this pending case has the potential to both clarify and expand – or narrow – the scope of an insurer’s bad faith depending on how the Court chooses to incorporate the “ill-will” consideration. We will update this posting with a report on the decision of the PA Supreme Court as it becomes available.

Thanks to Melanie Brother for her contribution.

For more information contact Denise Fontana Ricci at .