2.3 Pennsylvania Property Claims Handling

The Legal Framework: UIPA and Chapter 146

Pennsylvania claim handling rests on two layers. The Unfair Insurance Practices Act (UIPA), 40 P.S. 1171.1 et seq. (Act 205 of 1974), prohibits unfair methods of competition and unfair or deceptive acts. Its claim-specific regulations live at 31 Pa. Code Chapter 146 (Unfair Claims Settlement Practices). A crucial nuance the exam tests: these standards become an enforceable unfair claims settlement practice when they are violated with a frequency that indicates a general business practice — a single mistake is not, by itself, a UIPA violation, but a pattern is.

Enforcement belongs to the Insurance Commissioner, who may impose penalties, order corrective action, and suspend or revoke a license. Importantly, the UIPA itself does not create a private right of action for a policyholder to sue an insurer for damages — that remedy comes from the separate bad-faith statute discussed below.

Claim-Handling Timelines (the numbers to memorize)

Chapter 146 fixes specific deadlines a first-party property claim must meet:

If the insurer cannot decide within 15 working days, it must send written notice explaining why more time is needed, then provide a written update every 45 days stating the reason for the delay and when a decision is expected. These 10-day and 15-day working-day figures (and the 45-day update cycle) are the most frequently tested Pennsylvania claims numbers.

Proof of Loss and Good-Faith Investigation

After a loss, the insured files a proof of loss — a sworn statement of the facts and amount of the claim. The insurer must promptly supply the necessary forms (within 10 working days of notice) and may request reasonable documentation, but it may not demand that the insured submit a preprinted form as the only acceptable proof if the insured otherwise reasonably documents the loss.

Chapter 146 obligates the insurer to investigate promptly and in good faith. Prohibited conduct includes:

• Misrepresenting policy provisions relating to the coverage at issue
• Failing to acknowledge and act promptly on claim communications
• Failing to adopt reasonable standards for prompt investigation
• Refusing to pay a claim without conducting a reasonable investigation
• Not attempting in good faith to make a prompt, fair, equitable settlement once liability is reasonably clear
• Compelling the insured to sue by offering substantially less than the amount ultimately recovered
• Failing to give a reasonable written explanation for a denial or for an offer of compromise

A denial must be in writing, must reference the specific policy provision, condition, or exclusion relied upon, and a copy must be kept in the claim file.

Prompt Payment

Once liability is clear, the insurer must pay the undisputed portion of a loss promptly even while disputing the remainder — it cannot withhold money it concedes is owed to pressure the insured into a global settlement. A claim payment must be accompanied by a statement of the coverage under which payment is made.

Bad Faith: 42 Pa.C.S. 8371

Separate from the UIPA, Pennsylvania gives the policyholder a statutory private cause of action for insurer bad faith under 42 Pa.C.S. 8371 (enacted 1990). To win, the insured must prove by clear and convincing evidence that (1) the insurer had no reasonable basis for denying benefits, and (2) the insurer knew of or recklessly disregarded that lack of a reasonable basis. (The Pennsylvania Supreme Court has held the insured need not prove the insurer's self-interest or ill will.)

If bad faith is found, the court may:

This statute is the teeth behind Pennsylvania's good-faith claim duty — and a frequent exam contrast with the UIPA, which carries only regulatory penalties.

Dispute Resolution: Appraisal and Public Adjusters

Most property policies contain an appraisal clause. When the insurer and insured agree coverage applies but disagree on the amount of loss, either party may demand appraisal: each selects a competent, impartial appraiser, the two appraisers choose an umpire, and agreement by any two of the three (the two appraisers, or one appraiser and the umpire) sets the amount. Appraisal resolves the dollar value of the loss only — it does not decide coverage questions, which remain for the courts.

Pennsylvania also licenses public adjusters, who represent the policyholder (not the insurer) for a fee. A public adjuster must hold a Pennsylvania license, use a written contract disclosing the fee, and is restricted from soliciting an insured at certain times immediately following a loss or disaster. A public adjuster may negotiate and document the claim but may not practice law or adjust on behalf of the insurer.