Progressive total-loss offers in Pennsylvania: how the appraisal clause works

Pennsylvania layers five authorities: the Motor Vehicle Physical Damage Appraiser Act at 63 P.S. §§ 851 et seq. (mandatory MVPDA license issued by the Insurance Commissioner after a written examination), the Unfair Insurance Practices Act at 40 Pa. Stat. § 1171.5 (no private right of action), the implementing claim-handling regulations at 31 Pa. Code § 146.1 through § 146.10 (and the auto-specific provisions at § 146.8), the bad-faith statute at 42 Pa. C.S. § 8371 (interest at prime + 3%, punitive damages, and court costs and attorney fees on a clear-and-convincing showing of bad faith), and the Terletsky/Klinger/Rancosky framework defining the bad-faith standard. SecondAppraisal Inc supplies the market research and valuation analysis a Pennsylvania-licensed appraiser may rely on, rather than serving as the appraiser of record. 63 P.S. §§ 851–863 — Motor Vehicle Physical Damage Appraiser Act (Act 367 of 1972). Under the Act, an appraiser "shall include all persons in this State who practice the appraisal of motor vehicle physical damage," and "[n]o person shall directly or indirectly act or hold himself out as an appraiser unless such person has first secured a license" (Act of Dec. 29, 1972, P.L. 1713, No. 367, §§2(1), 3(a)). The Insurance Commissioner issues the license after a written examination that includes appraising one or more damaged motor vehicles. A violation of the Act is a misdemeanor punishable by a fine of up to $500, imprisonment of up to one year, or both, and the Commissioner may suspend or revoke a license. 40 Pa. Stat. § 1171.5 — Unfair Insurance Practices Act (UIPA). The statute prohibits acts that constitute unfair claim settlement practices when committed or performed with such frequency as to indicate a business practice, including: misrepresenting pertinent facts or policy or contract provisions relating to coverages at issue; failing to acknowledge and act promptly upon communications with respect to claims; failing to adopt and implement reasonable standards for the prompt investigation of claims; refusing to pay claims without conducting a reasonable investigation based upon all available information; failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed and communicated; not attempting in good faith to effectuate prompt, fair and equitable settlements when the company's liability has become reasonably clear; and compelling persons to institute litigation by offering substantially less than the amounts due and ultimately recovered. The Pennsylvania Supreme Court held in D'Ambrosio v. Pennsylvania National Mutual Casualty Insurance Co., 494 Pa. 501 (1981), that § 1171.5 does not create a private right of action; enforcement is by the Department of Insurance. 42 Pa. C.S. § 8371 — Statutory Bad-Faith Remedy. The statute provides that in any action arising under an insurance policy, if the court finds the insurer acted in bad faith toward the insured, the court may award: (1) 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) punitive damages against the insurer; and (3) court costs and attorney fees against the insurer. Terletsky v. Prudential Property & Casualty Insurance Co., 649 A.2d 680 (Pa. Super. 1994), set the standard that Rancosky v. Washington National Insurance Co., 170 A.3d 364 (Pa. 2017), adopted: bad faith requires (a) the insurer did not have a reasonable basis for denying benefits under the policy, AND (b) the insurer knew of or recklessly disregarded its lack of a reasonable basis. The standard of proof is clear and convincing evidence. Klinger v. State Farm Mutual Automobile Insurance Co., 115 F.3d 230 (3d Cir. 1997), predicted that the Pennsylvania Supreme Court would apply the Terletsky standard to § 8371 claims. 31 Pa. Code Chapter 146 — Unfair Claims Settlement Practices (UIPA-implementing regulation). The chapter's substantive content includes: § 146.7 (Standards for prompt, fair, and equitable settlements applicable to insurers, generally) — (a) acceptance or denial of a first-party claim within 15 working days after receipt of properly executed proofs of loss; (b) written claim-file notation when a denial is communicated orally; (c) extended-investigation notice procedure (15 working days initial notice, 30-day update, every 45 days thereafter); (d) no delay-pending-payment-by-others; (e) 30-day pre-limitations notice to unrepresented claimants in negotiations; (f) restrictions on time-limit statements to third-party claimants. § 146.8 (Standards for prompt, fair, and equitable settlements applicable to automobile insurance) — (a) insurers may not recommend that third-party claimants make claim under their own policies solely to avoid paying claims under the insurer's policy; (b) reasonable-travel limit on inspections; (c) deductible recovery via subrogation; (d) reasonable repair-cost appraisals; (e) itemized betterment/depreciation deductions; (f) restore-to-pre-loss-condition when the insurer elects repair; (g) cash settlement not less than repair cost (non-total-loss). NOTE: Neither § 146.7 nor § 146.8 sets a 30-/35-day right of recourse on total-loss settlements. 75 Pa. C.S. § 1161 — Certificate of Salvage Required. The statute governs who must apply for a salvage certificate (owners, insurers, and self-insurers who own, possess, or transfer a salvage vehicle), the application process, and certificate-issuance effects. 75 Pa. C.S. § 1165 (reconstructed vehicles) is the companion pathway for rebuilt-title vehicles. SecondAppraisal Inc is not licensed in Pennsylvania; our market-research and valuation analysis can serve as one of the foundations of the independent opinion of the appraiser the policyholder names under the appraisal clause.