Tag Archives: Pennsylvania Supreme Court

Pennsylvania Supreme Court’s First Insurance Bad Faith Decision a Big Win for Plaintiffs

Supreme Court Wades Into Bad Faith

On Friday, the Pennsylvania Supreme Court delivered a groundbreaking decision in Rancosky v. Washington Nat’l Ins. Co., the first decision by the Court interpreting the requirements of Pennsylvania’s Bad Faith Statute, 42 Pa. C.S. § 8371. The Supreme Court’s decision in Rancosky was critical for two reasons.  First, it formally adopted the legal test set for bad faith, first established by the Pennsylvania Superior Court 23-years ago in Terletsky v. Prudential Property & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. 1994).  In Terletsky, the Superior Court held that in order to recover in a bad faith action, the plaintiffs must establish by clear and convincing evidence that: (1) the insurer did not have a reasonable basis for denying benefits under the policy; and (2) the insurer knew of or recklessly disregarded its lack of a reasonable basis. More significantly, the Supreme Court also held that the insurer’s motive of self-interest or ill will is not a requirement to recovering under Pennsylvania’s Bad Faith Statute. While evidence of self-interest or ill will on the part of the insurer is probative in considering the second prong of Terletsky, the Court held that “evidence of the insurer’s knowledge or recklessness as to its lack of a reasonable basis in denying policy benefits is sufficient.” This ruling is important as the Supreme Court explicitly rejected efforts to raise the threshold evidentiary showing necessary to prove insurance bad faith.

Rancosky v. Washington National Insurance

The Rancosky case arose out of Washington National Insurance Company’s, successor by merger of Conseco Health Insurance Company, denial of insurance benefits to plaintiff for failure to pay premiums.  The plaintiff in Rancosky brought claims of breach of contract and bad faith, which were bifurcated, and plaintiff’s bad faith claim proceeded to a bench trial. The trial court determined that the insurer’s handling of plaintiff’s claim was sloppy and even negligent, but that plaintiff failed to establish that the insurer lacked a reasonable basis for denying benefits under the insurance policy because the plaintiff did not prove the insurer had a motive of self-interest or ill will. The trial court entered judgment in favor of the insurer on plaintiff’s bad faith claim. The Pennsylvania Superior Court vacated the trial court’s judgment. Consistent with its previous decisions, the Superior Court held that motive of an insurer’s self-interest or ill will is probative of the second prong of Terletsky, but is not a prerequisite to recovery. The Superior Court went further and determined that, based upon its review of the record, the evidence did not support a finding that the insurer had a reasonable basis for denying plaintiff’s benefits under the policy. The Superior Court found that the insurer lacked a reasonable basis for denying the plaintiff’s benefits to meet the first prong of Terletsky and remanded to the trial court for a determination on the second prong.

Although the Supreme Court found that Superior Court erred in making the determination of the first prong from Terletsky, that the insurer lacked a reasonable basis for denying the plaintiff’s benefits, the Court agreed with the Superior Court in adopting the two (2) prong test of Terletsky.  Further, the Supreme Court sided with the Superior Court and concluded that in proving that an insurance carrier acted unreasonably and recklessly, a plaintiff does not need to show that an insurer’s conduct was motive of self-interest or ill will. The Court remanded to the trial court for consideration of plaintiff’s bad faith claim in accordance with the test set forth by the Court.

No “Ill Will” Needed for Bad Faith

The significance of Rancosky cannot be understated.  Given the Pennsylvania Supreme Court’s ruling, insurers will no longer be able to rely upon a failure to show self-interest or ill will to defeat bad faith claims.  As such, insureds do not need the “smoking gun” evidence some courts had previously demanded. This is a big win for insureds, as it preserves the ability to recover under the Bad Faith Statute. Had the Court found the other way, with motive of self-interest or ill will being a prerequisite to a bad faith claim, it would have effectively put an end to bad faith claims.  Indeed, as Justice Bear stated in his opinion, if a plaintiff were required to show that an insurance company acted with ill will, bad faith claims would be limited to “the most egregious instances” and “only where the plaintiff uncovers some smoking gun evidence indicating personal animus towards the insured.” Although it is still true that insureds have an uphill battle in establishing a bad faith claim given the clear and convincing evidentiary standard, the Supreme Court, with its well-reasoned decision, permits bad faith claims to continue. Therefore, insurers permitting delay in adjusting claims, inadequate investigations and/or unreasonable interpretations of policy provisions, all of which fail to reach the level of self-interest or ill will, continue to be subject to bad faith claims.

This article was co-written with James G. Begley, Esq.  James Goslee is a trial attorney in Philadelphia and can be reached at https://gosleelaw.com/about/

ARE YOU FROM PENNSYLVANIA? CONGRATULATIONS, HERE’S A 10 MINUTE PRIMER ON WHY YOUR GOVERNMENT SEEMS TO BE IMPLODING

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It’s tough to be a Pennsylvanian these days.  Especially if you are from Philadelphia.  Our State is on the verge of shutting down because we can’t pass a budget.  Our public school systems are still a problem and habitually underfunded.  And we can’t even take solace in our diversion of choice – sports (at least those of us in Philadelphia). The Flyers are terrible, the Eagles are worse and the Sixers are trying to lose games and have been for 3 years.

But compared to what’s going on in the upper echelon of our government, these seem like minor annoyances.  Because just now, Pennsylvania’s entire democratic government appears to be imploding.

The sheer volume and breadth of potentially career-ending allegations being asserted against the State’s political elite is astonishing and unprecedented.  If you haven’t been able to keep up with daily allegations of widespread political misconduct and corruption (and who could blame you), here is a quick rundown on the current state of your government:

  • Your elected Attorney General’s license to practice law has been revoked by the Pennsylvania Supreme Court and she is facing trial on multiple perjury charges, allegedly for lying about her role in leaking confidential grand jury information;
  • One of your elected Supreme Court Justices (Justice Seamus McCaffery) resigned after allegations that he sent pornographic, misogynistic and racially derogatory emails to other State employees, including prosecutors;
  • Governor Tom Wolf has formally requested that a second Supreme Court Justice (Justice Michael Eakin) resign, also for sending and receiving sexually and racially offensive emails. Justice Eakin has also been accused of exchanging offensive and inappropriate emails concerning female members of his staff;
  • A third Supreme Court Justice (the Court’s Chief Justice) has been accused of implementing a clandestine scheme to save his imperiled colleague’s job by appointing a ringer to the Court of Judicial Discipline – the Court responsible for doling out potential punishment to Justice Eakin; and
  • A number of your State’s top prosecutors have been accused of pursuing a racially tainted corruption sting targeting minorities. There are calls for some of these same prosecutors to resign or be fired for exchanging pornographic and offensive emails with the above referenced Supreme Court Justices.

The bullet points above are only an outline of recent headline grabbing allegations involving the leaders of your State.  The media has been using the term “Porngate” to describe the exponentially growing investigation into hundreds of arguably pornographic emails exchanged by government officials. As far as I know, none of the upper echelon political figures identified in these controversies has been convicted of a crime.  Most have not admitted to any wrongdoing, although Justice Eakin has issued an apology.  I can’t and won’t pass judgment on the guilt or innocence of any of the parties involved.  For the most part, these are all just allegations.  That said, every new, scandalous headline is a black eye for our home State.

At this point, these high-profile scandals have assumed a life of their own.  But what is remarkable, and lost in the avalanche of new allegations, is how this entire mess appears to have started in the first place.  Believe it or not, the ongoing investigations threatening to take down a significant chunk of Pennsylvania’s political elite seems to have grown from a small squabble between prosecutors.  Really!  It is like a Shakespearean tale.  Two prosecutors who didn’t like each other inadvertently set in motion a series of events that could result in the meltdown of Pennsylvania’s government (or at least its Judiciary).

Hard to believe?  Well, let me tell you a story . . . about what “allegedly” happened:

Way back in 2012, Pennsylvania’s Democratic Party backed former prosecutor Kathleen Kane for Attorney General.  It had been an awfully long time since a Democrat had been Attorney General in Pennsylvania. In fact, before Kane, no Democrat had EVER been elected Attorney General in Pennsylvania.   But Kane liked her chances and so did her supporters.

One of Kane’s campaign strategies was to criticize then Governor Tom Corbett’s handling of the Jerry Sandusky case. Governor Corbett had been serving as Pennsylvania’s Attorney General when the Attorney General’s Office began investigating claims that Jerry Sandusky was sexually abusing minors.  The primary attorney investigating Sandusky was Frank Fina, a well-known prosecutor with a long list of high-profile convictions.

During her campaign for office, Kane suggested that Corbett and Fina had delayed prosecuting Sandusky so that it would not impact Corbett’s successful bid to run for Governor in 2010.  On the campaign trail, she promised she would review Fina’s investigation into the Sandusky matter.

Kane was eventually elected as Pennsylvania’s Attorney General.  But, a number of newspapers reported that Fina was angry that Kane wanted to review his work on the Sandusky matter and that she criticized the way the prosecution was handled.

On March 17, 2014, the Philadelphia Inquirer broke a story that Kane, in one of her first significant acts as Attorney General, had quietly shut down an undercover sting operation that had succeeded in capturing various Philadelphia politicians accepting cash payments in return for favors. That sting operation had been run by Frank Fina.

The Inquirer story was critical of Kane shutting down the sting operation.  Particularly in light of the video evidence of politicians taking money as bribes.  Reportedly, Kane believed that Fina had leaked the story to the Inquirer. For her part, Kane told the Inquirer that she had shut the sting down because she believed that the individuals conducting the operation (i.e. Fina) had improperly targeted only black politicians.

Kane, angry about the Inquirer article, allegedly decided what is good for the goose is good for the gander and decided to leak negative information about Fina.  Reportedly, Kane leaked confidential memos from a 2009 Grand Jury investigation run by Fina.  Kane believed that Fina had botched the investigation and the memos proved it.  Fina, in turn, reported the illegal leak of Grand Jury memos to a Montgomery County judge.  That kick started a separate Grand Jury investigation into who exactly leaked the confidential memos.

Kane was then called to testify in front of a Grand Jury about her involvement in leaking the memos. She denied any wrongdoing, but the Grand Jury concluded there was sufficient evidence that she lied.  Boom! Kane is now facing a criminal trial in Montgomery County for multiple counts of perjury.

Still with me?  Good – because now things get a little crazy.

While Kane and Fina were allegedly busy trying to destroy each other, Kane made good on her campaign promise to review the Sandusky investigation.  Fina, who ran that investigation, was cooperating with the probe, but he had left the AG’s office and joined the Philadelphia District Attorney’s Office.  In order to better recollect his actions in the Sandusky probe, Fina reportedly requested his emails from that investigation.  That turned out to be an inadvertent, yet fatal mistake

When Kane started searching through Fina’s old emails from the Sandusky matter, she reportedly found additional emails he had sent or received that contained offensive and/or pornographic emails. Reportedly, this gave Kane leverage she could use to strike back at Fina and potentially destroy his career.

But Kane didn’t just find offensive emails from Fina.  She also found racially insensitive and offensive emails sent to and from Supreme Court Justices Seamus McCaffery and Michael Eakin, amongst others.  A number of people were included on these email chains, including prosecutors, making the emails not only offensive but evidence of troubling conflicts of interests (Supreme Court Justices really shouldn’t be exchanging personal emails with prosecutors when a significant part of a Justices job is to review the conduct of those same prosecutors). And this is the pivotal moment in this story.  Up until this point, the story playing out was simply a scorched earth personal dispute between two prosecutors.  But now, with these offensive emails being sent to and from Supreme Court Justices and high powered prosecutors, the controversy exploded.

Justice McCaffery resigned shortly after the emails uncovered by Kane came to light.  Justice Eakin did not resign. Special Counsel was hired to investigate Justice Eakin’s involvement and determined that the emails he sent weren’t really all that bad.  It was later reported that the Special Counsel had previously assisted with Justice Eakin’s re-election for the Supreme Court in 2011 . . . but that’s a different story.

Anyway, things with Justice Eakin were status quo for a time, but of course, in a story like this, it is inevitable that the next shoe would dropped.  And it did.  In a surprising move, the Supreme Court suspended Kane’s law licenses this past summer, ostensibly because of the criminal charges pending against her for perjury. By suspending Kane’s law license, the Supreme Court left the State’s lawyer-in-chief unable to practice law.

Now, it just so happens that not long after the Supreme Court moved to suspend Kane’s law license, additional emails from Justice Eakin were “discovered.”  These emails, reportedly included email exchanges between Justice Eakin and other men that contain highly suggestive and offensive discussions about female judicial staff members.

After the content of these “new” emails became public, Governor Wolf called for Justice Eakin to resign.  But, as a sitting Supreme Court Justice, it is for the Court of Judicial Discipline to decide whether Justice Eakin is fit to remain on the bench.

Now, you would think that if a Supreme Court Justice was subject to trial before the Court of Judicial Discipline the Court of Judicial Discipline would be independent of the Supreme Court.  But, of course you would be wrong. It turns out that the Supreme Court has the authority to appoint a judge to the Court of Judicial Discipline.  A few days ago the Inquirer broke a story that Justice Eakin and the Supreme Court’s Chief Justice Thomas Saylor were attempting to nominate Karen Snider, former secretary with the Department of Welfare, to the Court of Judicial Discipline because she would be sympathetic to Justice Eakin.  Regardless of the motives for appointing Snider, it appears Eakin was permitted to vote for Snider’s appointment, which seems like a potential conflict of interest.

I could go on for another dozen pages with this stuff, but my 10 minutes are up.  And you are now caught up on the current state of Pennsylvania politics!

PJames Goslee is a trial attorney in Philadelphia and can be reached at http://jamiegoslee.com/about/hoto Credit: Darastar, Everystockphoto.com

Attorney General Kathleen Kane Punches Back

City Hall

Beleaguered Pennsylvania Attorney General Kathleen Kane is facing mounting legal and political pressure to resign from office.  “Pressure to resign” is actually a bit of an understatement.  Kane is facing a criminal trial in Montgomery County for allegedly leaking confidential Grand Jury material to local newspapers in order to attack a political rival.  On top of that, the Pennsylvania Supreme Court has suspended her law license, and a Special Committee appointment by the State Senate has recommended that the legislature initiate potential impeachment proceedings.  But it is becoming increasingly clear that Kane does not intend to go down without a fight. And it could be a very long, very messy and very embarrassing fight for a number of elite government officials.

Only one week ago, a “Special Committee” appointed by the State Senate reported that it did not believe Kane could or should continue in her role as Attorney General.  The report was seen as the first step in initiating impeachment proceedings in the Senate. But today Kane threw a heavy counter-punch, hiring independent counsel to conduct an investigation  of her own into offensive and arguably pornographic emails allegedly exchanged by high-level State officials, including prosecutors and Supreme Court Justices.  Ostensibly, Kane appointed independent counsel to investigate and issue a report on potential crimes committed by individuals sending these offensive emails on government computers.  But the subtext is clear – her political enemies may succeed in forcing her out of office, but she is not going down quietly or alone.  Kane is going on the offensive.

During the press conference today, the Attorney General’s Office announced that it has appointment former Maryland Attorney General Douglas F. Gansler to conduct an independent investigation into the offensive emails. Gansler’s task is to determine if any crimes were committed in connection with these emails and make a recommendation as to whether individuals involved should be prosecuted.

Significantly, Gansler will not just be reviewing emails currently in the possession of the Attorney General.  He has been given authority to seek additional emails and has the ability to subpoena additional records.  The fact that Gansler has been tasked with expanding the scope of the investigation and has authority to issue subpoenas is important. His investigation may expand to implicate even more government employees.  Gansler’s investigation will almost certainly be viewed as a threat to Kane’s political rivals who are maneuvering to kick her out of office.  Kane’s back may be against the wall, but she is pushing back.

At today’s press conference, the Attorney General’s Office displayed a number of allegedly offensive emails.  These included racist and sexist jokes undisputedly offensive to women and minorities. Kane is clearly working to frame the emails as evidence of institutional bigotry within upper echelon of Pennsylvania’s government.  Her position is that she is being attacked by the politically powerful for trying to expose and root out this systemic prejudice.

Interestingly, Gansler went to great lengths at today’s press conference to establish that his investigation would be “independent” and that he would not be biased in anyway in favor of Kane.  It is always fair to question whether an independent investigator hired by an interested party can be truly “independent.” But Gansler didn’t do himself any favors by criticizing the Supreme Court for suspending Kane’s law license.  Gansler said at the press conference that the Supreme Court “waded across lines of separation of powers” in suspending Kane’s license.  If Gansler is truly conducting an “independent investigation” on behalf of Kane, he should probably refrain from offering her public support.

Regardless of the merits of either side’s argument, Kane’s actions today demonstrate that she is not afraid to throw a counter-punch and that her dramatic tenure as Attorney General will not end quietly.

James Goslee is a trial attorney in Philadelphia and can be reached at http://jamiegoslee.com/about/

 

Pennsylvania Senate Takes First Step Toward Removing Attorney General Kathleen Kane From Office

City Hall

I had previously written about the Pennsylvania Supreme Court’s suspension of Attorney General Kathleen Kane’s law license.  (see https://legalviewpoints.wordpress.com/2015/09/21/pennsylvania-supreme-court-suspends-attorney-general-kathleen-kanes-law-license-via-emergency-order/). Kane, of course, is facing multiple criminal charges in Montgomery County arising from allegations that she illegally leaked highly confidential grand jury information to the media in an effort to attack a political rival.  Kane has vigorously denied those allegations, but in September, Pennsylvania’s Supreme Court entered an unprecedented order temporarily suspending Kane’s law license in light of the criminal charges pending against her.  Although the Supreme Court effectively precluded the State’s lawyer-in-chief from practicing law, the Order specifically stated that it should not be interpreted as removing Kane from her public office.  Although the Supreme Court passed on removing Kane from office, it looks like the Pennsylvania Senate is positioning itself to do just that.

The Supreme Court’s September Order suspending Kane’s law license went into effect last week.  At the same time her law licenses was being revoked, Kane’s office released her “plan” explaining how she intended to continue in her position as Attorney General without having the ability to practice law. In short, Kane has taken the position that the vast majority of her job as Attorney General comprises of ministerial functions that she can continue to perform without technically “practicing law.”  A lot has been written about this law-versus-ministerial functions distinction.  Much of it critical and many legal scholars have argued that Kane is ethically barred from continuing as Attorney General without a law license.

But words mean little (sticks and stones and all of that) and the Pennsylvania Supreme Court has clearly signaled that it is not the judiciary’s responsibility to remove an elected official from office.  Enter the Senate.  Late last week state republican Senator Joseph B. Scarnati III, announced that the Senate was forming a bipartisan committee to investigate the “impact” the Supreme Court’s Order will have on Kane’s ability to carry out her duties as Attorney General.  In other words, the State Senate appears skeptical that Kane can actually continue in her role as Attorney General without the ability to practice law.

The Committee will issue a report summarizing its findings within 30 days.  If the Special Committee concludes that it is impractical or impossible for Kane to continue in her position without a law license, many suspect that the next step will be to remove her from office. Under the Pennsylvania Constitution, publically elected officials such as Kane can be removed from office by 2/3 vote of the Senate and confirmation of the Governor.  Governor Wolf has made it clear that he believes Kane should resign from office.

Bipartisan or not, it seems highly unlikely that the results of the Special Committee will be favorable to Kane.  Setting aside the political angle, it is difficult to make a compelling argument that the State’s Attorney General can effectively carry out her office without a law license.  And considering Governor Wolf’s repeated public calls for Kane to resign, it is also a stretch to assume he would veto any 2/3 vote by the Senate to remove Kane.

This is not to say that Kane is in imminent risk of being removed from office. The process of removing Kane will certainly take time.   But make no mistake, the Senate’s appointment of a Special Committee is intended to “get the ball rolling,” and Kathleen Kane’s time as Attorney General appears to running short.

Governor Wolf’s Executive Powers Under the Microscope

The Pennsylvania Supreme Court is currently hearing arguments on issues that will ultimately define the scope of Governor Tom Wolf’s powers as the State’s Chief Executive. This morning the Supreme Court is hearing arguments on Governor Wolf’s executive “moratorium” on the execution of death row prisoners in Pennsylvania. Since taking office, Governor Wolf has suspended the execution of prisoners until a legislative panel completes an ongoing study on the use of capital punishment in Pennsylvania. Most view this “temporary moratorium” as the first step in eliminating capital punishment altogether in Pennsylvania.

The death penalty case revolves around death row inmate Terrance Williams who was convicted of beating a Philadelphia man to death with a tire iron over 30 years ago. Williams had unsuccessfully sought a pardon and to have his death penalty sentence overturned or commuted. Since taking office in January, Governor Wolf has granted Williams 3 reprieves, indefinitely postponing Williams’ scheduled execution.

Governor Wolf has taken the position that all executions in Pennsylvania should be suspended until the State’s legislature completes a study on the use of capital punishment. The Governor’s Office argues that as the State’s Chief Executive, Governor Wolf has “unconditional power” to grant reprieves to death row inmates and state courts have no jurisdiction to review or challenge his exercise of executive power.

Philadelphia’s District Attorney Seth Williams has challenged Governor Wolf’s actions as “flagrantly unconstitutional” and outside the scope of the Governor’s authority.

Considering Governor Wolf’s criticism of the continued use of the death penalty, the Supreme Court’s decision in Williams will likely have a significant impact on the ongoing viability of capital punishment in Pennsylvania. It will also help define the scope and breath of the Governor’s powers as chief executive. Proponents and opponents of the death penalty are watching this case closely.

In addition to the “death penalty moratorium,” the Pennsylvania Supreme Court is also hearing arguments on Governor Wolf’s authority to remove Erik Arneson from his position as Executive Director of the Office of Open Records. The Arneson case is interesting, but more nuanced than the death penalty moratorium case. Arneson centers on former Governor Corbett’s last minute appointment of Erik Arneson to the position of Executive Director of the Office of Open Records. The Office of Open Records is a new, quasi judicial state agency that is tasked with making preliminary decisions as to whether government records should be turned over to the public under the State’s “Right to Know Law.” This potentially means the Office of Open Records will decide whether the public is entitled to otherwise private records from the Governor’s Office.

On January 13, 2015, in his last week as Governor, Tom Corbett appointed Erik Arneson as Executive Director of the Office of Open Records. By statute, the Executive Director will serve a 6 year term. On January 20, 2015, Tom Wolf officially became the new Governor of Pennsylvania and one of his first acts as Governor was to fire Arneson.

Arneson appealed the decision to the State’s Commonwealth Court. On June 10, 2015, an en banc panel of the Commonwealth Court found Governor Wolf acted outside his authority in firing Arneson without cause. The Commonwealth Court ordered Arneson to be reinstated and awarded him back pay. Governor Wolf’s office appealed the decision to the Supreme Court, which is hearing arguments this morning.

The primary issue before the Supreme Court is whether the State legislature intended the Executive Director position of the Office of Open Records to be “independent” of the Governor’s Office. In other words, when the legislature created the Office of Open Records, did it intend to immunize the Executive Director from political influence, including the influence of the Governor. If it intended the office to be “independent,” then Governor Wolf would not be permitted to fire Arneson except for cause. If the legislature did not intend the Office of Open Records to be independent, then Arneson serves at the pleasure of the Governor and the Governor has unfettered authority to remove him for any reasons or no reason at all.

Governor Wolf contends that nothing on the legislation creating the Office of Open Records indicates that the office was meant to be “independent” and there are no limitations on his ability to appoint and replace the Executive Director “at will.”

Arneson obviously disagrees, arguing that by granting the Executive Director a 6 year term, which exceeds the term of the Governor by 2 years, the State legislature intended the Executive Director to operate free from political pressure or threats of removal from the Governor’s Office. Arneson also argues that the Office of Open Records is responsible for making decisions as to whether government records, including records from the Governor’s Office should be made public under the State’s Right to Know Laws. Given that authority, Arneson contends that the legislature clearly intended the office to be “independent.”

As with the death row moratorium, the Supreme Court’s decision in Arneson will help shape the limits of the Governor’s authority. It will also resolve contentious political wrangling between the outgoing Governor and Governor Wolf. Regardless, hearing both arguments at the same time means that in short order the Supreme Court will be making unprecedented decisions that influence the shape and operation of our State’s government.

Check back for updates.