Pennsylvania Appellate Court Protects Non-Insurers Against Breach of Contract and Statutory Bad Faith Claims

June 25, 2026

Policyholder claims for breach of contract and statutory bad faith can only be asserted in Pennsylvania against insurance companies that underwrite the policies, not coverholders, claims administrators, or other non-insurers, according to a recent appellate court ruling.

To establish breach of contract in the Keystone State, a plaintiff must show: (1) the existence of a contract, including its essential terms; (2) a breach of a duty imposed by the contract; and (3) resultant damages. McCausland v. Wagner, 78 A.3d 1093 (Pa. Super. 2013). In order to recover under a statutory bad faith claim under 42 Pa.C.S.A. § 8371, a plaintiff must show that the “insurer”: (1) did not have a reasonable basis for denying benefits under the policy; and (2) knew or recklessly disregarded its lack of a reasonable basis in denying the claim. Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A. 2d 680 (Pa. Super. 1994).

In Oil City Hospitality v. Amalgamated Insurance Underwriters, 1171 WDA 2025 (Pa. Super., June 15, 2026), Oil City’s Days Inn suffered water damage in February 2021. Oil City dealt with Amalgamated during the application process and loss adjustment and alleged that Amalgamated issued the policy; Amalgamated said it only represented an insurance market comprised of multiple insurers and denied issuing, adjusting, or deciding coverage.

After its claim was denied, Oil City sued Amalgamated for breach of contract and statutory bad faith; the trial court ultimately dismissed those claims. Oil City then appealed to the Superior Court.

In affirming the trial-court decision, the Superior Court observed that no policy document listed Amalgamated as the insurer and the record showed only application‑stage involvement, the “Evidence of Commercial Property Insurance” identified Amalgamated as producer and explicitly said it was not a contract, the denial letter identified the underwriting carriers, there was no evidence of premiums paid to Amalgamated or policy terms involving Amalgamated, and no Amalgamated role in adjusting or denying the claim.

This aspect of the ruling aligns with recent federal court decisions rejecting breach of contract claims against non-insurers. See Keystone Sports and Entertainment LLC v. Federal Ins. Co., No. CV 21-609, 2021 WL 5789021 (E.D.Pa. Dec. 7, 2021) (insurance holding companies dismissed where insured’s policy issued by another entity); McLaren v. AIG Domestic Claims, Inc., 853 F. Supp. 2d 499, 511 (E.D. Pa. 2012) (“It is the general rule that an insured may bring claims for breach of contract and bad faith against the insurer who issued the policy but not against related parties, such as reinsurers and third party administrators, who are not in privity with the insured.”); Lockhart v. Fed. Ins. Co., No. Civ. A. 96-5330, 1998 WL 151019 (E.D.Pa. Mar. 30, 1998) (corporation not liable for breach of contract where policy identifies different company as insurer).

As to the bad faith claim, the Superior Court in Oil City reinforced that the statute only applies to “insurers,” observing that Amalgamated did not act as the insurer, much less issue any documents identifying it as the insurer. See Brown v. Progressive Ins. Co., 860 A.2d 493 (Pa. Super. 2004). An “insurer” is “any person who is doing, has done, purports to do, or is licensed to do an insurance business, and is or has been subject to the authority of, or to liquidation, rehabilitation, reorganization or conservation by any insurance commissioner.” Southeastern Pennsylvania Transp. Authority v. Holmes, 835 A.2d 851 (Pa. Commw. 2003) (self-insured transit authority, which did not issue policies, collect premiums, or agree to accept the liability of others in exchange for consideration, was not an “insurer” subject to Section 8371).

Old City serves as a reminder that insurer-adjacent companies are afforded protection under the law from breach of contract and statutory bad faith claims, even in the absence of due diligence by policyholders’ coverage counsel in identifying the proper underwriting companies.

For any further questions, please contact Michael Savett.