Documentation-Driven UIM Claim Valuation Constitutes a “Reasonable Basis” That Defeats Pennsylvania Bad-Faith Liability Under 42 Pa. C.S. § 8371

1. Introduction

In Jenna Ockford v. Encompass Insurance Company, Jenna Ockford and her husband Justin Herbst (collectively, “Plaintiffs”) pursued underinsured motorist (“UIM”) benefits under their automobile policy with Encompass Insurance Co. (“Encompass”), which provided up to $200,000 per person. After settling with the tortfeasor’s insurer for the $25,000 per-person liability limit, Plaintiffs sought additional UIM payments from Encompass and later sued, alleging statutory bad faith under 42 Pa. C.S. § 8371.

The core dispute was not whether Plaintiffs were injured, but whether Encompass handled and valued the UIM claims so unreasonably—particularly through low initial offers and incremental increases—that a jury could find “bad faith” by clear and convincing evidence. The Third Circuit affirmed summary judgment for Encompass, holding the record could not support a finding of unreasonable conduct in light of Plaintiffs’ delayed and incomplete documentation.

2. Summary of the Opinion

The Third Circuit affirmed the District Court’s grant of summary judgment on Plaintiffs’ Pennsylvania bad-faith claim. Applying Pennsylvania’s two-part bad-faith standard, the court concluded that “no reasonable factfinder could find Encompass’s actions were unreasonable” where:

  • Encompass repeatedly requested medical, billing, and wage-loss documentation over many months;
  • Plaintiffs provided little or incomplete supporting documentation for roughly a year after the accident;
  • Encompass made offers “based upon the information available” and increased them as Plaintiffs substantiated additional injuries and losses;
  • Plaintiffs sued without answering document requests and shortly after Encompass indicated an independent medical opinion might be necessary.

The court also noted Plaintiffs’ discussion of offer amounts failed to account for the $25,000 per-person offsets reflecting the tortfeasor’s liability payments.

3. Analysis

A. Precedents Cited

1) Rancosky v. Wash. Nat'l Ins. Co., 170 A.3d 364 (Pa. 2017)

Rancosky supplies the governing Pennsylvania framework: to prove statutory bad faith, a plaintiff must show by clear and convincing evidence (1) the insurer lacked a reasonable basis for denying benefits (or, more broadly, for its conduct in handling the claim) and (2) the insurer knew or recklessly disregarded that lack of a reasonable basis. The Third Circuit treated Rancosky as the controlling articulation of the elements and burden of proof.

In practical effect, Rancosky makes “reasonableness” the fulcrum: even sharp disputes about claim value do not become bad faith unless the insurer’s conduct is shown to be objectively unreasonable and accompanied by knowing or reckless disregard.

2) Gibson v. State Farm Mut. Auto. Ins. Co., 994 F.3d 182 (3d Cir. 2021)

The court relied on Gibson for a decisive proposition: “all that is needed to defeat a claim of bad faith under [42 Pa. C.S.] § 8371 is evidence of a reasonable basis for the insurer's actions or inaction.” This quote framed the summary-judgment inquiry—once the record demonstrates a reasonable, document-linked basis for the insurer’s valuation and conduct, the bad-faith claim fails as a matter of law.

Here, the repeated requests for information, the timing of Plaintiffs’ partial disclosures, and the insurer’s upward offer adjustments as documentation arrived constituted the “evidence of a reasonable basis” contemplated by Gibson.

3) Le Pape v. Lower Merion Sch. Dist., 103 F.4th 966 (3d Cir. 2024)

Le Pape was cited for the standards of review and summary judgment principles: de novo appellate review, and the requirement that summary judgment is appropriate where there is “no genuine dispute as to any material fact” and the movant is entitled to judgment as a matter of law. It also anchors the court’s obligation to view facts and draw inferences in favor of the nonmovant—important here because the panel nonetheless concluded Plaintiffs’ evidence could not meet the clear-and-convincing threshold for bad faith.

B. Legal Reasoning

The court’s reasoning is best understood as a structured application of the “reasonable basis” element to a claims-handling record dominated by the flow (and lack) of information:

  1. Information asymmetry and claimant control of proof. Plaintiffs and their counsel controlled access to much of the medical and wage-loss documentation needed to evaluate UIM damages. Encompass’s adjuster repeatedly requested treatment, billing, wage-loss, and related records over months and received little to nothing for extended periods.
  2. Offers tethered to the record—not to speculation. When the first meaningful packet arrived in December 2023 (almost a year post-accident), it did not substantiate key aspects of the claimed damages (e.g., the asserted elbow fracture diagnosis and other loss components). Encompass extended offers “based upon the information available,” explicitly indicating openness to re-evaluation upon receipt of more documentation.
  3. Incremental increases as corroboration increases. As Plaintiffs later produced additional records (including documentation supporting an elbow fracture and wage loss), Encompass increased offers—again while requesting further specific documentation (including radiological reports/films) to support further valuation. The court treated these increases not as evidence of earlier bad faith, but as evidence of responsive valuation consistent with a reasoned claims process.
  4. No bad faith inferred from not commissioning independent medical review under the timeline presented. Plaintiffs argued Encompass should have sought independent medical opinions or researched comparable settlements. The court rejected this as a basis for bad faith on this record: Plaintiffs sued shortly after Encompass raised the possibility of an independent medical opinion and did so without responding to outstanding document requests—undercutting any inference that Encompass “unreasonably” failed to pursue additional evaluation before litigation.
  5. Offsets matter to assessing “low” offers. Plaintiffs criticized offer amounts without acknowledging that each was reduced by $25,000 to reflect the tortfeasor’s liability payments, a routine feature of UIM valuation. This contextual point supported the court’s conclusion that the offers were not irrational on their face.

Taken together, the court concluded Plaintiffs had not produced evidence from which a factfinder could conclude—by clear and convincing proof—that Encompass lacked a reasonable basis or acted with knowing/reckless disregard. Summary judgment therefore was appropriate.

C. Impact

Although designated “NOT PRECEDENTIAL,” the decision has practical persuasive value for Pennsylvania UIM bad-faith litigation in federal court:

  • Reinforces documentation-centered reasonableness. An insurer can defend a § 8371 claim by showing a coherent paper trail: repeated document requests, valuations tied to the records received, and willingness to revise when new proof arrives.
  • Limits “low initial offer” narratives. The opinion signals that low opening offers—and subsequent increases—do not, without more, create a triable bad-faith issue, particularly where the claimant’s proof arrives late or in fragments.
  • Encourages claimant cooperation before filing suit. Filing suit without responding to specific document requests may weaken later arguments that the insurer failed to investigate, especially when the insurer’s stated reason for needing more time or independent review is tied to missing documentation.
  • Clarifies the interaction between investigation duties and timing. The decision implies that an insurer is not necessarily acting in bad faith by not immediately pursuing an independent medical examination where the claimant has not provided basic substantiation and then accelerates the dispute into litigation.

4. Complex Concepts Simplified

  • Underinsured Motorist (UIM) benefits: Coverage that can pay an insured for damages exceeding the at-fault driver’s liability limits. Payments typically account for (i.e., are offset by) what the insured already received from the at-fault driver’s insurer.
  • Bad faith under 42 Pa. C.S. § 8371: A statutory claim allowing remedies (including punitive damages, interest, fees) if an insurer acts unreasonably and knowingly/recklessly disregards that lack of reasonableness. It is more demanding than proving mere negligence or a valuation dispute.
  • “Clear and convincing” evidence: A heightened burden of proof requiring evidence that is strong, direct, and persuasive—more than “more likely than not.”
  • Summary judgment: A pretrial ruling where the court decides there is no genuine dispute of material fact for a jury to resolve and one party is entitled to judgment as a matter of law, even after viewing evidence in the nonmoving party’s favor.

5. Conclusion

The Third Circuit’s decision underscores a practical rule for Pennsylvania insurance bad-faith litigation: where an insurer repeatedly seeks substantiating documentation, makes valuations based on the information available, and increases offers as new proof arrives, a plaintiff will struggle to establish—by clear and convincing evidence—that the insurer lacked a reasonable basis or acted with knowing/reckless disregard. In UIM disputes especially, the opinion emphasizes that an evolving offer history can reflect reasonable claims handling rather than bad faith when the evidentiary record develops slowly and largely at the claimant’s control.