J-A19006-20

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

KEB HANA BANK USA, NATIONAL 

ASSOCIATION, F/K/A BNB HANA 

BANK, NATIONAL ASSOCIATION, 

F/K/A BNB BANK NATIONAL 

ASSOCIATION

v.

FIDELITY NATIONAL TITLE 

INSURANCE COMPANY, SUCCESSOR 

IN INTEREST TO LAWYERS TITLE 

INSURANCE CORPORATION 

Appellant

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 IN THE SUPERIOR COURT OF

 PENNSYLVANIA

 No. 207 EDA 2020

Appeal from the Order Entered December 9, 2019

In the Court of Common Pleas of Monroe County 

Civil Division at No(s): No. 7113-CV-2019

BEFORE: PANELLA, P.J., McLAUGHLIN, J., and COLINS, J.*

MEMORANDUM BY PANELLA, P.J.: FILED SEPTEMBER 29, 2020

Fidelity National Title Insurance Company (“Fidelity”) (defendant 

below), appeals from the trial court’s December 9, 2019 order, entered in the 

Court of Common Pleas of Monroe County, sustaining in part and denying in 

part its preliminary objection in the nature of a motion to compel arbitration.1 

On appeal, Fidelity contends the trial court erred in failing to compel 

____________________________________________

* Retired Senior Judge assigned to the Superior Court.

1 An order denying a motion to compel arbitration is immediately appealable. 

See 42 Pa. C.S.A. § 7320(a)(1); Pa.R.A.P. 311(a)(8).
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arbitration of Appellee’s, KEB Hanna Bank USA (KEB) (plaintiff below), bad 

faith claim. After careful review, we affirm.

Because we write primarily for the parties and because of the nature of 

the issues raised in this matter, we need not provide a detailed summary of 

the facts underlying this case. We briefly note, on September 11, 2019, KEB 

filed a complaint against Fidelity. The complaint arose out of Fidelity’s policy 

insuring title to which KEB had a mortgage interest. See Complaint, 9/11/19, 

at 1-6. KEB claimed that due to Fidelity’s numerous errors, KEB’s “insured 

first lien priority [m]ortgage had been compromised.” Id. at 4. 

KEB’s complaint included two counts, the first for breach of contract and 

the second for bad faith in violation of 42 Pa.C.S.A. § 8371.2 Id. at 6-8. Count 

II of the complaint states, in pertinent part:

28. [KEB] has suffered a covered loss pursuant to the terms of 

the [t]itle [p]olicy.

____________________________________________

2 Section 8371 provides:

In an action arising under an insurance policy, if the court finds 

that the insurer has acted in bad faith toward the insured, the 

court may take all of the following actions:

(1) Award interest on the amount of the claim from 

the date the claim was made by the insured in an 

amount equal to the prime rate of interest plus 3%.

(2) Award punitive damages against the insurer.

(3) Assess court costs and attorney fees against the 

insurer.
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29. As of the date hereof, [Fidelity] has neither denied nor 

accepted [KEB’s] claims.

30. [Fidelity] has no reasonable basis for denial of [KEB’s] claims.

31. [Fidelity] has delayed, obstructed and frustrated the 

processing of [KEB’s] claims.

32. As a result thereof, [KEB] has incurred unnecessary costs and 

expenses and has further been delayed in enforcement of its rights 

and remedies under its [m]ortgage. Moreover, [KEB] has been 

compelled to institute the above-captioned litigation in order to 

enforce its just and valid claims under the [t]itle [p]olicy.

33. [Fidelity’s] actions and omissions constitute bad faith under 

Pennsylvania law.

Id. at 7-8.

Fidelity responded a month later by filing preliminary objections seeking 

to compel arbitration. It contended paragraph 13 of the title insurance policy 

contained an arbitration clause. Preliminary Objections, 10/11/19, at 4. This 

clause reads in pertinent part:

Either [Fidelity] or the insured may demand that the claim or 

controversy shall be submitted to arbitration . . . Arbitrable 

matters may include but are not limited to, any controversy or 

claim between the Company and the insured arising out of or 

relating to this policy, any service in connection with its insurance 

or the breach of a policy provision, or to any other controversy or 

claim arising out of the transaction giving rise to this policy.

All arbitrable matters when the [a]mount of [i]nsurance is 

$2,000,000 or less shall be arbitrated at the option of either 

[Fidelity] or the insured.

Id. at Exhibit 1 D, Conditions § 13.

The trial court subsequently overruled the preliminary objections in part 

and granted them in part. It sustained the preliminary objections as to the 
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breach of contract claim but denied them as to the statutory bad faith claim, 

stating: 

The bad faith claim is separate and apart from the breach of 

contract issue. A bad faith claim pursuant to 42 Pa.C.S.A. Section 

8371 cannot be heard by an arbitration panel and must remain in 

the Court of Common Pleas. See Nealy v. State Farm Mutual 

Auto Insurance Co., 695 A.2d 79 (Pa. Super. 1997).

Order, 12/09/19, at 2.

The instant, timely appeal followed. The trial court ordered Fidelity to 

file a concise statement of errors complained of on appeal. See Pa.R.A.P. 

1925(b). Fidelity timely filed its Rule 1925(b) statement on January 23, 2020, 

and on that same day, the trial court issued a statement declining to write an 

opinion and instead adopting its December 9, 2019 Order. 

In its first issue, Fidelity argues that the title insurance policy contains 

a valid, enforceable agreement to arbitrate. See Fidelity’s Brief, at 2, 11-13. 

However, this issue is not in dispute on appeal. It appears the trial court, 

because it sustained the preliminary objection as to the breach of contract 

claim, found there was a valid, enforceable agreement to arbitrate.3 Fidelity 

prevailed on this argument in the court below, as the court compelled 

arbitration on the breach of contract claim. Nor has Fidelity demonstrated that 

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3 The trial court’s decision to rely on its brief December 9, 2019 order rather 

than writing a proper Rule 1925(b) opinion may have cause some confusion 

or uncertainty on the part of Fidelity. The order does not contain any findings 

of fact and provides little explanation of its conclusions of law. See Order, 

12/09/19, at 1-2. 
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it was aggrieved by this conclusion. Fidelity therefore lacks standing to raise 

it on appeal. See In re J.G., 984 A.2d 541, 546 (Pa. Super. 2009). KEB did 

not file a cross-appeal, and we see nothing which demonstrates it intended to 

raise the issue of lack of an agreement to arbitrate on appeal. Therefore, we 

will not further address this issue.

In its second issue and third issues, Fidelity argues that the trial court 

erred in declining to enforce the arbitration agreement with respect to its bad 

faith claim. See Fidelity’s Brief, at 2, 13-26. Specifically, Fidelity contends: 

(1) the trial court erred in finding the bad faith claim was outside the scope of 

the arbitration agreement; and (2) it erred in finding this Court’s decision in 

Nealy controls this matter. Id. We disagree.

We review claims that a court improperly refused to enforce an 

arbitration clause according to contract interpretation principles:

We begin by noting that our review of a claim that the trial court 

improperly denied preliminary objections in the nature of a 

petition to compel arbitration is limited to determining whether

the trial court’s findings are supported by substantial evidence and 

whether the trial court abused its discretion in denying the 

petition. As contract interpretation is a question of law, our review 

of the trial court’s decision is de novo and our scope is plenary. 

Petersen v. Kindred Healthcare, Inc., 155 A.3d 641, 644 (Pa. Super. 

2017) (citations omitted).

Pennsylvania law favors settlement of disputes by arbitration. See 

Provenzano v. Ohio Valley General Hosp., 121 A.3d 1085, 1096 (Pa. 

Super. 2015). When deciding whether a trial court should have compelled 
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arbitration, we employ a two-part test: (1) does a valid agreement to arbitrate 

exist, and (2) is the dispute within the scope of the agreement. See Smay 

v. E.R. Stuebner, Inc., 864 A.2d 1266, 1270 (Pa. Super. 2004). “[I]f a valid 

arbitration agreement exists between the parties and [the plaintiff’s] claim is 

within the scope of the agreement, the controversy must be submitted to 

arbitration.” Highmark Inc. v. Hospital Service Ass'n. of Northeastern 

Pennsylvania, 785 A.2d 93, 98 (Pa. Super. 2001). “[T]he scope of arbitration 

is determined by the intention of the parties as ascertained in accordance with 

the rules governing contracts generally.” Henning v. State Farm Mut. Auto. 

Ins. Co., 795 A.2d 994, 996 (Pa. Super. 2002) (citations and internal 

quotation marks omitted).

Here, however, we need not address Fidelity’s contention the bad faith 

claim fell within the scope of the arbitration agreement. The record does not 

demonstrate that the trial court found the claim to be outside the scope of the 

agreement; rather, it found Nealy to be binding. See Order, 12/09/19, at 2. 

Nealy arose out of a motor vehicle accident, the Nealys sued their insurance 

company after it denied coverage under their uninsured/underinsured motor 

vehicle coverage (“UM/UIM”). See id., 695 A.2d at 790-91. At the request 

of the Nealys, the trial court severed its claims against the insurance company 

from its claims against its insurance agent, and the claims against the 

insurance company proceeded to mandatory arbitration. See id. at 791. 

Initially, the arbitrators agreed they could not hear the Nealys’ bad faith claim 
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pursuant to 42 Pa.C.S.A. § 8371. See id. Despite this, the arbitrators 

ultimately ruled in favor of the insurance company on the bad faith claim. See 

id. The Nealys filed an application to vacate, modify and/or correct the 

arbitration order in the Court of Common Pleas. See id. The trial court 

denied the application and the Nealys appealed. See id. 

On appeal, this Court held bad faith claims pursuant to Section 8371, 

“are distinct from the underlying contractual insurance claims from which the 

dispute arose.” Id. at 792. Instead, section 8371 “provide[s] an independent 

cause of action to an insured that is not [dependent] upon success on the 

merits, or trial at all, of the contract claim.” Id. at 793. We went on to hold:

Both this Court and our sister federal courts have decided a myriad 

of cases that impinge in some respect upon the workings of § 

8371. No court, however, has squarely decided the question of 

whether an arbitration panel is vested with the jurisdiction to 

entertain such a claim. After careful consideration, we conclude 

that original jurisdiction to decide issues of § 8371 bad faith 

is vested in our trial courts.

Our research shows that, as a procedural norm, virtually all § 8371 

claims have been commenced in our courts of common pleas 

without first being submitted to arbitration. Although some of 

these cases remained in our state courts throughout litigation, a 

vast majority were removed to federal court upon motion by the 

defendants, [invoking] federal diversity jurisdiction. Although 

federal caselaw interpreting and applying Pennsylvania state law 

is not binding upon this Court, it remains a valuable source of 

judicial interpretation and should be carefully considered when 

deciding issues of first impression. 

In Winterberg v. Transportation Insurance Co., 72 F.3d 318 

(1995), the Court of Appeals for the Third Circuit was called upon 

to determine the interplay between this state’s workman’s 

compensation statute and the bad faith provision embodied in § 

8371. After a thorough and comprehensive review of the inner 
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workings and intent of the worker’s compensation scheme, the 

Court held that referees appointed to hear compensation claims 

“have no authority to hear actions brought under the ‘bad faith’ 

statute” and that “[t]he language of the statute plainly focuses on 

suits in courts of law based on insurance policies.” Id. at 324 

(emphasis added).

We find Winterberg to be both factually similar and legally 

persuasive. Although involving the jurisdiction of a workman’s 

compensation board and not an arbitration panel, the Court 

correctly recognized that the jurisdiction granted to these types of 

non-judicial panels is limited in nature and should not be 

expanded merely because the events which gave rise to the initial 

cause of action may or must be initiated in a non-judicial or quasijudicial forum.

* * * *

Arbitration panels are designed to ease the burden on our courts 

by deciding issues of damages and liability as they pertain to the 

factual dispute that gave rise to the contractual insurance claim. 

A § 8371 bad faith claim, however, is initiated based upon 

behavior of the insurance company occurring subsequent 

to the negligent or intentional behavior of a third party that 

spawned the contractual suit. Thus, because the behavior 

complained of is temporally and factually distinct from any 

behavior that would impact upon the outcome of the 

damages and liability disposition of the contract claim, we 

see no reason to expand upon the panels’ jurisdiction.

We therefore hold that the trial court in the instant matter properly 

concluded that the arbitration panel did not have jurisdiction to 

decide the § 8371 bad faith claim and that the arbiters’ gratuitous 

comments to the effect that State Farm did not act in bad faith 

were merely dicta. Just as appellants were contractually required 

to initially litigate their insurance claims at the arbitration level, 

they were statutorily required to commence their bad faith claim 

against their insurer in the court of common pleas.

Id. at 793-94 (emphases added, footnotes and some case citations omitted).
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Fidelity argues, without citation to pertinent authority, the holding in 

Nealy is limited to UM/UIM cases. See Fidelity’s Brief, at 20-21. This 

argument lacks merit. Section 8371 applies to, “action[s] arising under an 

insurance policy[.]” 42 Pa.C.S.A. § 8371. It does not just apply to UM/UIM 

actions. See, e.g., Michael v. Stock, 162 A.3d 465, 480 (Pa. Super. 2017) 

(applying Nealy in to a bad faith claim against a title insurer). 

Further, there is nothing in the above-quoted language from Nealy

which limited its holding to UM/UIM cases. Rather, the Nealy court based its 

decision on the language of section 8371, the types of damages it provided, 

and the differences between bad faith claims and claims arising under the 

insurance contracts. See Nealy, 695 A.2d at 793-94. Moreover, in reaching 

its conclusion the Nealy court relied upon a case that arose out of a worker’s 

compensation dispute, not a UM/UIM dispute. See id. Lastly, if we were to 

adopt Fidelity’s argument, it would result in an untenable situation where 

UM/UIM bad faith claims would be filed in the Courts of Common Pleas, while 

other insurance bad faith claims would be subject to arbitration.

Moreover, we find Fidelity’s attempts to distinguish Nealy unpersuasive. 

Despite Fidelity’s arguments to the contrary, the language of the complaint, 

quoted above, clearly shows KEB’s bad faith claim, like the bad faith claim in 

Nealy, was based upon Fidelity’s post-breach conduct and thus is temporally 

and factually distinct from its breach of contract claim. See Complaint, 

9/11/19, at 7-8; Nealy, 659 A.2d at 794. 
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Nor are we persuaded by Fidelity’s contention Nealy is not good law. 

Some of the cases Fidelity cites to predate Nealy, and thus are of no utility. 

Others do not discuss Nealy, do not concern bad faith claims, or discuss a 

different issue with respect to bad faith claims. The remainder are not binding 

on this Court because they are either federal cases or Court of Common Pleas 

cases. See Sears, Roebuck & Co. v. 69th St. Retail Mall, L.P., 126 A.3d 

959, 972 (Pa. Super. 2015) (holding that “court of common pleas decisions 

provide, at most, persuasive but not binding authority”); Kleban v. Nat. 

Union Fire Ins. Co. of Pittsburgh, 771 A.2d 39, 43 (Pa. Super. 2001) 

(citation omitted) (noting that federal court decisions are not binding upon 

this Court). The decision in Nealy controls this matter and thus is binding on 

this Court. See Commonwealth v. Pepe, 897 A.2d 463, 465 (Pa. Super. 

2006). Fidelity’s second and third claims do not merit relief.

Accordingly, for the reasons discussed above, we affirm the order of 

the trial court.

Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 9/29/20
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