{"id":122188,"date":"2026-02-24T16:37:07","date_gmt":"2026-02-24T16:37:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-pa\/122188\/"},"modified":"2026-02-24T16:37:07","modified_gmt":"2026-02-24T16:37:07","slug":"pennsylvania-supreme-court-holds-that-pennsylvanias-bad-faith-statute-does-not-apply-to-surety-bonds-houston-harbaugh-p-c","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-pa\/122188\/","title":{"rendered":"Pennsylvania Supreme Court Holds That Pennsylvania\u2019s Bad Faith Statute Does Not Apply To Surety Bonds | Houston Harbaugh, P.C."},"content":{"rendered":"

Pennsylvania\u2019s bad\u2011faith statute, 42 Pa. C.S.A. \u00a7 8371, permits insureds to recover certain damages in \u201caction[s] arising under an insurance policy \u2026 [if] the insurer has acted in bad faith towards the insured \u2026.\u201d In Eastern Steel Constructors, Inc. v. Inter\u2019l. Fidelity Ins. Co., __ A.3d __, 2026 WL 457805 (Pa. Feb. 18, 2026)<\/a>, the Pennsylvania Supreme Court addressed whether \u00a7 8371\u2019s proscriptions extend to surety contracts issued by insurance companies. Relying upon the differences between an insurance contract and a surety contract, the Pennsylvania Supreme Court held that \u00a7 8371 does not encompass actions under a surety contract.<\/p>\n

Eastern Steel arose after Ionadi Corporation (\u201cIonadi\u201d) defaulted on a subcontract with Eastern Steel Constructors, Inc. (\u201cEastern\u201d) in connection with the construction of the Millenium Science Center Complex on the Pennsylvania State University\u2019s campus. As Ionadi had secured the subcontract with a surety contract issued by International Fidelity Insurance Company (\u201cFidelity\u201d), Eastern sought to recover from Fidelity the balance due on the subcontract pursuant to the surety contract. Fidelity paid an undisputed amount to Eastern, but withheld an additional $253,788.08 that Eastern alleged remained unpaid under the subcontract. After securing an arbitration award against both Ionadi and Fidelity, Eastern sought to confirm the award in the Centre County Court of Common Pleas. As part of the confirmation proceedings, Eastern asserted a claim of bad faith under \u00a7 8371 against Fidelity. The trial court ultimately dismissed Eastern\u2019s bad\u2011faith claim, holding that \u00a7 8371 did not encompass bad\u2011faith claims arising from a surety contract. The Superior Court of Pennsylvania affirmed.<\/p>\n

On further appeal, the Pennsylvania Supreme Court applied the Statutory Construction Act, which requires courts to ascertain and effectuate the intention of the General Assembly when engaging in statutory interpretation. This requires courts to given effect to all statutory provisions, and to enforce statutory language pursuant to the letter of it, where the statutory language is clear and free from all ambiguity. To this end, courts are bound by a statute\u2019s plain language and are not free to disregard the letter of the law under the pretext of pursuing its spirit.<\/p>\n

Turning to the issue at hand, the Pennsylvania Supreme Court contrasted insurance contracts and surety contracts. An insurance policy is generally defined as \u201c[a] contract of insurance, including the insured\u2019s application, the declarations page, the coverage forms, and any endorsements or riders that amend them,\u201d whereas surety contracts are \u201cbond[s] given by a surety to cover any amounts that, because of the general contractor\u2019s default, are not paid to a subcontractor or materials supplier.\u201d The Supreme Court of Pennsylvania also noted differences between an \u201cinsurer\u201d and a \u201csurety,\u201d with the former being \u201c[o]ne who underwriters insurance policies and issues them to insureds; esp. a company or association that undertakes to indemnify against losses and to perform other insurance\u2011related functions.\u201d Sureties, on the other hand, are those \u201cwho [are] primarily liable for paying another\u2019s debt or performing another\u2019s obligation.\u201d And, a \u201csuretyship\u201d is \u201c[t]he legal relation that arises when one party assumes liability for a debt, default, or other failing of a second party.\u201d<\/p>\n

The Pennsylvania Supreme Court, therefore, concluded that insurance and surety contracts have their own, distinct definitions, and that they operate in different ways \u2013 insurance protects the party to the contract, i.e., the insured, and places the risk upon the insurer, whereas surety contracts protect others from the principal\u2019s default and place the risk of loss upon the principal because the surety has a right of indemnification from the principal. Given these distinctions, the Pennsylvania Supreme Court agreed with the United States Supreme Court that \u201csuretyship is not insurance,\u201d and concluded that \u201cSection 8371 clearly and unambiguously does not encompass a surety bond.\u201d Had the General Assembly intended to create a private cause of action for bad\u2011faith claims arising from surety contracts, the Pennsylvania Supreme Court declared, it could have done so expressly. Section 8371 indicated no such intent.<\/p>\n

The Pennsylvania Supreme Court, therefore, affirmed the Superior Court of Pennsylvania because \u00a7 8371does not apply to surety contracts or actions of a surety.<\/p>\n","protected":false},"excerpt":{"rendered":"Pennsylvania\u2019s bad\u2011faith statute, 42 Pa. C.S.A. \u00a7 8371, permits insureds to recover certain damages in \u201caction[s] arising under…\n","protected":false},"author":2,"featured_media":49263,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[28,30,29],"class_list":{"0":"post-122188","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-pennsylvania","8":"tag-pennsylvania","9":"tag-pennsylvania-headlines","10":"tag-pennsylvania-news"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts\/122188","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/comments?post=122188"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts\/122188\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/media\/49263"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/media?parent=122188"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/categories?post=122188"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/tags?post=122188"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}