As my colleague, Denise Sze, pointed out in her recent blog post, “When Does a ‘Date of Loss’ Actually Manifest in California,” for both the policyholders and the attorneys representing them, the statute of limitations of a claim is extremely important. In Pennsylvania, Title 42 Pa.C.S.A. §5225, sets the limitations on time for bringing suit on various types of claims. For our purposes today, we’ll be looking at breach of contract and bad faith.

42 Pa.C.S.A. §5525(a) sets forth the statute of limitations on a breach of contract claim at four (4) years. However, this statute can be reduced by written agreement of the parties pursuant to 42 Pa.C.S.A. §5501, so long as the shortened time is not “manifestly unreasonable.” The Pennsylvania Courts have reviewed this issue and stated that, “[i]t is long established in Pennsylvania that such a contractual modification of the ordinary statute of limitations is valid and enforceable.”1 All insureds and attorneys should be mindful and check the policy for a potential reduced time limit.

With regard to bad faith claims, Pennsylvania operates a little differently and allows for two separate and distinct bad faith claims:

The first consists of a statutory bad faith tort claim under 42 Pa.C.S. §8371, pursuant to which the insured may recover only the damages set forth in the statute, including punitives, attorney fees, court costs, and interest.

The second involves a contract claim for breach of the implied contractual duty to act in good faith, which is separate and distinct from the statutory bad faith claim…[wherein] an insured can recover traditional contract damages, including compensatory damages.2

Each distinct bad faith claim also has its own separate statute of limitations. With regard to the first type of bad faith claim, the statutory bad faith claim, “the Pennsylvania Superior Court concluded that…claims brought under 42 Pa.C.S. § 8371 are statutorily created tort actions subject to a two-year statute of limitations.” Whereas the second type of bad faith claim, is “a common law bad faith claim [which] sounds in contract, [and] is subject to the four year statute of limitations for contract actions, per 42 Pa.C.S. § 5525.”3

Pennsylvania Courts have also addressed when these statutes begin to run. For the statutory bad faith claim, the Courts have held that the carrier’s first denial starts the clock despite any continued or subsequent denials:

[W]here an insurer clearly and unequivocally puts an insured on notice that he or she will not be covered under a particular policy for a particular occurrence, the statute of limitations begins to run and the insured cannot avoid the limitations period by asserting that a continuing refusal to cover was a separate act of bad faith.4

Similarly, when addressing common law bad faith claims sounding in contract, the Courts held the “statute of limitations begins to run when a cause of action arises or accrues, which in the case of a bad faith claim, is when coverage is denied.”5

As indicated above, Pennsylvania policyholders and their attorneys need to pay extremely close attention to policy itself as well as any letters denying coverage to properly determine their statute of limitations.

During the next part of this installment, we’ll explore the two separate bad faith claims further and how each one may apply to a potential claim and if a shortened statute of limitation can affect each claim.

On a side note: I spent several years living in Philadelphia while attending Temple University for my Bachelor’s Degree, and loved every minute of it. During law school, I lived in Delaware just minutes from the Pennsylvania border and regularly visited Philly, New Hope and Glenn Mills. When it came time to decide what State Bar or Bars I should sit for, I decided that New Jersey (my home) and Pennsylvania would be the best options. I’m happy with the decision I made, and I’m proud to be the only attorney at Merlin Law Group licensed to practice law in Pennsylvania.

As always, I’ll leave you with a tune; here is Philadelphia’s own G. Love & Special Sauce with “Cold Beverage”: 


1 Toledo v. State Farm Fire & Cas. Co., 810 F.Supp. 156, 157 (E.D. Pa. 1992) [citations omitted].
2 CRS Auto Parts, Inc. v. National Grange Mut. Ins. Co., 645 F.Supp.2d 354, 364 (E.D. Pa. 2009).
3 Id.
4 Id. at 365
5 Id. at 365