In certain circumstances, an insurance company may be liable for punitive damages because of its wrongful refusal to defend, failure to provide an adequate defense, breach of its duty to settle, breach of its duty to indemnify, or breach of its general covenant of good faith and fair dealing.
Since the enactment of §8371 in 1990, punitive damages may be awarded if an insurer is found to have acted in bad faith.
Under Pennsylvania law, punitive damages are intended “to punish a tortfeasor for outrageous conduct and to deter him or others from similar conduct.” One trial judge noted that a punitive damages award “is sometimes the only type of justice available to deter powerful entities from using their position of strength to defeat the lesser party only because that party cannot compete on the same level as the giant.” However, punitive damages may only be imposed where the plaintiff establishes that the conduct of the defendant is “outrageous,” “malicious,” “wanton,” “reckless,” “willful,” or “oppressive.”
When it comes to meeting one’s threshold burden for the consideration of punitive damages, the question arises – do you need to prove more than “bad faith” for punitive damages to imposed? Several jurisdictions which allow imposition of punitive damages in bad faith cases hold that bad faith alone does not establish the plaintiff’s entitlement to punitive damages; rather, the policyholder must prove additional facts in order to demonstrate entitlement to a punitive award.
To date, Pennsylvania’s Supreme Court has not ruled on this issue. However, a Superior Court panel en banc has suggested that more than bad faith under §8371 is not required before punitive damages may be imposed, stating that, although “a finding of bad faith does not compel an award of punitive damages, it does allow for the award without additional proof, subject to the trial court’s exercise of discretion….”
 Kirkbride v. Lisbon Contractors, Inc., 555 A.2d 800, 803(Pa. 1989); see also Chambers v. Montgomery, 192 A.2d 355, 358(Pa. 1963).
 Berg v. Nationwide Mut. Ins. Co., 2014 Pa. Dist. & Cnty. Dec. LEXIS 543, at *56(Berks Co. 2014).
 Feld v. Merriam, 485 A.2d at 742, 748
 Hollock v. Erie Ins. Exch., 842 A.2d 409, 418(Pa. Super. 2004); see also Zimmerman v. Harleysville
Mut. Ins. Co., 860 A.2d 167(Pa. Super. 2004).