Opinion ID: 3013362
Heading Depth: 2
Heading Rank: 3

Heading: statute of limitations applicable to

Text: SECTION 8371 ACTIONS The next question that we must answer is what statute of limitations is applicable to this action. In an unfortunate omission which has caused considerable confusion, the legislature did not include a statute of limitations in Pennsylvania’s bad faith statute, 42 Pa. Cons. Stat.S 8371. Furthermore, the Supreme Court of Pennsylvania has not determined which of several potential limitation periods applies to actions under the statute. See Lochbaum v. United States Fid. & Guar. Co., 136 F. Supp. 2d 386, 387 (W.D. Pa. 2000). The possibilities include the two-year period applicable to action[s] upon a statute for a civil penalty and tort actions, 42 Pa. Cons. Stat.SS 5524(5), 5524(7) (West Supp. 2001),8 the four-year period applicable to contract actions, 42 Pa. Cons. Stat. S 5525(8) (West Supp. 2001),9 and the six-yearcatchall period applicable to actions that do not fall into an enumerated category and are not excepted from the application of a limitations period, 42 Pa. Cons. Stat. S 5527 (West Supp. 2001).10 See id. at 387-88. _________________________________________________________________ 8. In pertinent part, section 5524 provides: The following actions and proceedings must be commenced within two years: . . . (5) An action upon a statute for a civil penalty or forfeiture . . . (7) Any other action or proceeding to recover damages for injury to person or property which is founded on negligent, intentional, or otherwise tortious conduct or any other action or proceeding sounding in trespass, including deceit or fraud, except an action or proceeding subject to another limitation specified in this subchapter. 9. In pertinent part, section 5525 provides: [T]he following actions and proceedings must be commenced within four years: . . . (8) An action upon a contract, obligation or liability founded upon a writing not specified in paragraph (7), under seal or otherwise, except an action subject to another limitation specified in this subchapter. 10. Section 5527 provides: Any civil action or proceeding which is neither subject to another limitation specified in this subchapter nor excluded from the application of a period of limitation by section 5531 (relating to no limitation) must be commenced within six years. 10 In the absence of an opinion from a state’s highest court on a matter of state law, a federal court determining state law must predict how that court would rule on the matter if confronted with it. See Packard v. Provident Nat’l Bank, 994 F.2d 1039, 1046-47 (3d Cir. 1993). In making this determination, the federal court must consider relevant state precedents, analogous decisions, considered dicta, scholarly works, and any other reliable data tending convincingly to show how the highest court in the state would decide the issue at hand. Id. (quoting McKenna v. Ortho Pharm. Corp., 622 F.2d 657, 663 (3d Cir. 1980)). Of course, a court of appeals makes a de novo review of a district court’s determination of state law. Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S. Ct. 1217, 1221 (1991). The Pennsylvania state courts that have applied a statute of limitations in cases involving section 8371 claims have reached conflicting conclusions. See Susich v. Prudential Prop. & Cas. Ins. Co., 35 Pa. D. & C.4th 178, 181-82 (Ct. C.P. Beaver Co. 1998) (applying a two-year period on ground that bad faith claims fall into both thecivil penalty and tort categories); Trujillo v. State Farm Mut. Auto. Ins. Co., 54 Pa. D.& C.4th 241 (Ct. C.P. Phil. Co. 2001) (applying a six-year period on the ground that bad faith claims sound in both tort and contract); Mantia v. Northern Ins. Co. of New York, 39 Pa. D. & C.4th 71 (Ct. C.P. Lanc. Co. 1998) (applying a six-year period on ground that bad faith claims embody elements of both tort and contract). Likewise, the federal courts in Pennsylvania that have considered the issue have divided between the two- and sixyear possibilities. See Nelson v. State Farm Mut. Auto. Ins. Co., 988 F. Supp. 527 (E.D. Pa. 1997);11 Friel v. UNUM Life Ins. Co. of Am., No. 97-1062, 1998 U.S. Dist. LEXIS 18578 (E.D. Pa. Nov. 17, 1998); McCarthy v. Scottsdale Ins. Co., No. 99-978, 1999 U.S. Dist. LEXIS 12899 (E.D. Pa. Aug. 16, 1999); Mantakounis v. Aetna Cas. & Sur. Co. , No. 984392, 1999 U.S. Dist. LEXIS 12214 (E.D. Pa. Aug. 10, _________________________________________________________________ 11. In Northview Motors, 227 F.3d at 90, we cited Nelson with apparent approval. 11 1999); Liberty Mut. Fire Ins. Co. v. Corry Indus., No. 97172E, 2000 U.S. Dist. LEXIS 11735 (W.D. Pa. Mar. 30, 2000); Lochbaum v. United States Fid. & Guar. Co., 136 F. Supp. 2d 386 (each applying a two-year period), and Woody v. State Farm Fire & Cas. Co., 965 F. Supp. 691 (E.D. Pa. 1997); Miller v. Cincinnati Ins. Co., No. 97-CV-1223, 1997 U.S. Dist. LEXIS 23725 (E.D. Pa. July 9, 1997) (each applying a six-year period). The district court in this case relying on Lochbaum applied the two-year statute of limitations. The Lochbaum court determined that Pennsylvania’s bad faith statute sounded exclusively in tort and therefore concluded that if the Pennsylvania Supreme Court were presented with the issue, it would hold that the two-year statute of limitations applies. See Lochbaum, 136 F. Supp. 2d at 390. We affirmed the judgment in Lochbaum in a not precedential opinion and thus the issue is open in this court. Lochbaum v. United States Fid. & Guar. Co., 265 F.3d 1055 (3d Cir. 2001) (table). Haugh argues that the district court applied the wrong statute of limitations and that Pennsylvania’s six-year catchall statute of limitations applies to recovery of damages for bad faith under section 8371. See Br. of Appellant at 27. In support of this argument, he suggests that we should adopt the analysis of the Common Pleas Court of Philadelphia County in Trujillo, 54 Pa. D. & C.4th 241.12 While we regard certain aspects of the Trujillo court’s reasoning as convincing, for example its criticism that some courts that have found that section 8371 sounds in tort have failed to highlight the similarities between bad faith claims and contract claims, more significant aspects of its reasoning are inconsistent with our precedents. For example, Haugh puts great weight on the fact that Trujillo discredits those cases that interpret section 8371as a legislative attempt to create a ‘new tort’ in response to _________________________________________________________________ 12. The Superior Court of Pennsylvania reversed Trujillo in part and held that a two-year statute of limitations applied. See No. 269 EDA 2002, 2002 PA Super. LEXIS 2599 (Sept. 3, 2002). The Superior Court, however, promptly withdrew the opinion. See No. 269 EDA 2002, 2002 PA Super. LEXIS 3705 (Sep. 4, 2002). 12 certain language appearing in D’Ambrosio v. Pennsylvania Nat’l Mut. Casualty Ins. Co., 431 A.2d 966 (Pa. 1981). Br. of Appellant at 27. However, as discussed below, we have endorsed this interpretation that Trujillo discredits. Contrary to Haugh’s suggestion that the Supreme Court recently laid this issue to rest in Birth Center , Br. of Appellant at 28, apparently by recognizing a contractual basis for a bad faith claim, the majority opinion in Birth Center v. St. Paul Companies, Inc., 787 A.2d 376 (Pa. 2001), did not by its treatment of the bad faith claim there point to the statute of limitations applicable to section 8371 claims. See Birth Center, 787 A.2d at 389. Indeed, contrary to Haugh’s position, three of the seven justices in Birth Center made clear their belief that section 8371 sounds in tort, a conclusion that suggests that a two-year statute applies. See id. at 390-91. Justice Nigro was one of the three justices that made clear his belief that section 8371 sounds in tort. In his concurring opinion in Birth Center Justice Nigro explained that section 8371 sounds in tort because the section appears to have been enacted in response to D’Ambrosio and because it permits the insured to recover punitive damages, which are typically a remedy only in tort actions.13 _________________________________________________________________ 13. The following factors also support the application of a two-year statute of limitations: (1) courts historically have treated bad faith causes of action as torts, Mantakounis v. Aetna Cas. & Sur. Co., 1999 U.S. Dist. LEXIS 12214, at ; (2) the nature of a bad faith action suggests that it is based upon a standard of conduct imposed by society and is therefore similar to a tort, id. at -14; (3) the emerging jurisprudence among the lower courts in Pennsylvania treats an action for bad faith under section 8371 as a separate and distinct cause of action from the underlying contract claim, Nelson v. State Farm Mut. Auto. Ins. Co., 988 F. Supp. at 532; (4) the vast majority of states which have recognized a cause of action for bad faith have chosen to characterize the cause of action as a tort, see id. at 533; and (5) courts have a duty to construe section 8371 so as not to produce an absurd or unreasonable result; thus, as the court stated in Nelson, [i]t is hard to conceive that the Pennsylvania General Assembly could have intended to provide a six year limitations period for a bad faith claim under S 8371 if the cause of action sounded in areas of the law with only two and four year limitations periods. Put another way, given the options of two or four years, it does not strike us as a reasonable reading to add the two periods together. Id. at 534 n.11. 13 Id. at 391 n.3. We have supported the interpretation of section 8371 as being a direct response to D’Ambrosio. See Polselli v. Nationwide Mut. Fire Ins. Co., 23 F.3d 747, 750 (3d Cir. 1994). We also have recognized that under Pennsylvania law punitive damages are typically a remedy only in tort actions. See Murray v. Commercial Union Ins. Co., 782 F.2d 432, 436 (3d Cir. 1986). After considering the germane precedents we conclude that the district court correctly predicted that the Supreme Court of Pennsylvania would hold that an action under section 8371 sounds in tort and thus is subject to a two-year statute of limitations under 42 Pa. Cons. Stat. S 5224(7).