First-Party Property Damage Demand Letter - Pennsylvania

FIRST-PARTY PROPERTY DAMAGE DEMAND LETTER

Commonwealth of Pennsylvania

[LAW FIRM LETTERHEAD]

SETTLEMENT COMMUNICATION — FOR RESOLUTION PURPOSES ONLY
ADMISSIBILITY SUBJECT TO Pa.R.E. 408 AND F.R.E. 408, WHERE APPLICABLE

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [________________________________]

Date: [__/__/____]

[INSURANCE COMPANY NAME]
[________________________________]
[________________________________]
[________________________________], [____] [________]

Attention: [________________________________], [________________________________]
Re: FORMAL DEMAND FOR PAYMENT OF PROPERTY DAMAGE CLAIM — PENNSYLVANIA LAW
Insured: [________________________________]
Property Address: [________________________________], [________________________________], PA [________]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
Type of Loss: [________________________________]
Insurer's Estimate: $[________________________________]
Our Client's Claimed Amount: $[________________________________]
Disputed Balance: $[________________________________]
Response Deadline: [__/__/____] at 5:00 p.m. Eastern Time

Dear [________________________________]:

I. INTRODUCTION AND NATURE OF DEMAND

This firm represents [________________________________] ("our client") in connection with a first-party property damage insurance claim arising under the laws of the Commonwealth of Pennsylvania. This letter constitutes a formal demand for full payment of all policy benefits owed for covered losses sustained at [________________________________], Pennsylvania.

[________________________________] has [☐ unreasonably delayed payment / ☐ improperly denied coverage / ☐ substantially undervalued the loss / ☐ failed to investigate the claim properly]. Under Pennsylvania law, an insurer's duty of good faith extends to first-party property claims. Pennsylvania provides a robust statutory bad faith remedy under 42 Pa.C.S. § 8371, and [________________________________]'s conduct in this matter implicates that statute.

Our client has fulfilled all policy obligations — timely notice, cooperation, production of documents, submission to examination under oath — and is entitled to the full benefits promised under the policy.

II. PENNSYLVANIA PROPERTY INSURANCE LAW

A. Pennsylvania Unfair Insurance Practices Act — 40 P.S. § 1171.5

Pennsylvania's Unfair Insurance Practices Act (UIPA), 40 P.S. §§ 1171.1 et seq., identifies claims practices that are unfair when committed or performed with such frequency as to indicate a business practice. Section 1171.5(a)(10) lists them, including:

• § 1171.5(a)(10)(i): Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue
• § 1171.5(a)(10)(ii): Failing to acknowledge and act reasonably promptly upon communications with respect to claims
• § 1171.5(a)(10)(iii): Failing to adopt and implement reasonable standards for the prompt investigation of claims
• § 1171.5(a)(10)(iv): Refusing to pay claims without conducting a reasonable investigation based on all available information
• § 1171.5(a)(10)(v): Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed
• § 1171.5(a)(10)(vi): Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which the insurer's liability has become reasonably clear
• § 1171.5(a)(10)(vii): Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions
• § 1171.5(a)(10)(viii): Attempting to settle for less than a reasonable person would expect by reference to written or printed advertising material accompanying or made part of the insurance application
• § 1171.5(a)(10)(xiv): Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement

B. Pennsylvania Insurance Department Regulations — 31 Pa. Code §§ 146.5–146.7

The Pennsylvania Insurance Department's Unfair Insurance Practices regulations at 31 Pa. Code Chapter 146 impose specific, binding time standards on Pennsylvania insurers:

[________________________________] received notice of this claim on [__/__/____]. As of the date of this letter ([__/__/____]), [____] calendar days have elapsed since claim notification. [________________________________]'s compliance with these regulatory standards is addressed in Section VI below.

C. Pennsylvania Bad Faith Statute — 42 Pa.C.S. § 8371

Pennsylvania provides a statutory cause of action for bad faith under 42 Pa.C.S. § 8371. Under the two-part test established in Terletsky v. Prudential Property & Casualty Insurance Co., 649 A.2d 680 (Pa. Super. 1994), and affirmed by the Pennsylvania Supreme Court in Rancosky v. Washington National Insurance Co., 170 A.3d 364 (Pa. 2017), an insured must prove by clear and convincing evidence that:

1. The insurer did not have a reasonable basis for denying benefits under the policy; AND
2. The insurer knew of, or recklessly disregarded, its lack of a reasonable basis.

Rancosky clarified that subjective proof of ill will is not required — reckless disregard is sufficient for the second prong.

D. Remedies Available Under § 8371

Upon a finding of bad faith, the court may award any of the following under § 8371:

Potential Interest Exposure (if awarded): At a prime rate of [____]% + 3% = [____]% per annum, interest on $[________________________________] would be approximately $[________________________________] per day from the claim date, [__/__/____].

E. Statute of Limitations

The general period for an action on a written insurance contract is four years under 42 Pa.C.S. § 5525(a)(8), but the policy may require suit sooner. The standard fire policy text in 40 P.S. § 636 includes a twelve-month suit provision measured from inception of the loss; check whether that provision applies to this policy and whether the policy contains a different enforceable suit deadline. A separate § 8371 bad-faith claim is subject to a two-year limitations period (Ash v. Continental Insurance Co., 932 A.2d 877, 885 (Pa. 2007)). The accrual date for each claim must be determined from the actual claim history, not assumed to be the date of loss.

Deadline check: Date of loss [__/__/____]; policy suit clause and trigger [________________________________]; contract suit deadline [__/__/____]; alleged bad-faith act and date [________________________________]; bad-faith suit deadline [__/__/____]. Counsel should confirm these dates before sending this demand.

F. Appraisal

For a policy governed by the standard fire policy provisions in 40 P.S. § 636, the statutory policy form includes an appraisal procedure for disputes over actual cash value or amount of loss. Check the issued policy and applicable form. [________________________________]'s policy ☐ contains / ☐ does not contain an appraisal provision at page/section [________________________________].

III. POLICY INFORMATION

A. Policy Details

B. Applicable Coverages and Limits

C. Coverage Basis

☐ Replacement Cost Value (RCV): Policy covers full replacement cost without depreciation deduction
☐ Actual Cash Value (ACV): Policy provides actual cash value; depreciation applies

Replacement Cost Holdback (if RCV policy): $[________________________________] — withheld pending completion of repairs. Repairs ☐ have been / ☐ have not been completed. Proof of completion tendered: ☐ Yes ☐ No.

D. Coverage Analysis

The loss is covered under the policy because:

1. The cause of loss — [________________________________] — is a covered peril under the policy's insuring agreement
2. The damage occurred during the policy period ([__/__/____] to [__/__/____])
3. The damaged property constitutes covered property under the policy
4. No exclusion bars coverage: [________________________________]'s reliance on [________________________________] as an exclusion is improper because [________________________________]
5. All policy conditions — notice, cooperation, proof of loss — have been fully satisfied

IV. THE LOSS EVENT

A. Description of Loss

On [__/__/____], the insured property at [________________________________], Pennsylvania sustained significant damage due to [________________________________].

[DETAILED NARRATIVE OF LOSS EVENT — include date, time, circumstances, sequence of events, weather conditions, cause and origin findings if any]

[________________________________]
[________________________________]
[________________________________]

B. Cause of Loss

☐ Fire — ☐ accidental / ☐ electrical / ☐ HVAC / ☐ other: [________________]
☐ Water Damage — ☐ burst pipe / ☐ appliance failure / ☐ roof leak / ☐ storm/flooding
☐ Windstorm/Hail
☐ Lightning
☐ Theft/Vandalism
☐ Weight of Ice/Snow/Sleet
☐ Collapse
☐ [________________________________]

Cause and Origin Investigation:
☐ [________________________________]'s adjuster inspected the property on [__/__/____]
☐ Our expert, [________________________________], inspected the property on [__/__/____] and concluded: [________________________________]
☐ No independent cause and origin investigation has been conducted by [________________________________]

C. Mitigation Efforts

Our client fulfilled the duty to mitigate under the policy and Pennsylvania law, undertaking the following steps immediately following the loss:

V. CLAIM HISTORY AND INSURER'S CONDUCT

A. Chronological Claim Timeline

B. Insurer's Position

[________________________________] has [DESCRIBE INSURER'S POSITION — denial, underpayment, delay, exclusion asserted, depreciation dispute, scope dispute, etc.]

[________________________________]
[________________________________]

C. Why the Insurer's Position is Wrong

[________________________________]'s position is unreasonable under Pennsylvania law because:

1. [________________________________]
2. [________________________________]
3. [________________________________]

VI. DAMAGES AND CLAIMED AMOUNTS

A. Dwelling Damage — Coverage A

Supporting Estimate: [________________________________] of [________________________________], a licensed Pennsylvania contractor, prepared a detailed scope and estimate dated [__/__/____], totaling $[________________________________] (attached).

B. Other Structures — Coverage B

Claimed: $[________________________________]
Paid: $[________________________________]
Balance Due: $[________________________________]

[DESCRIBE OTHER STRUCTURES DAMAGE]

C. Personal Property — Coverage C

A complete itemized personal property inventory is attached.

D. Loss of Use / Additional Living Expenses — Coverage D

Our client was displaced from [__/__/____] to [__/__/____] ([____] days/months). Additional living expenses include:

E. Overhead and Profit

We request contractor overhead and profit only to the extent supported by the issued policy, the attached contractor estimate, and the documented repair plan. The estimate lists overhead of $[OVERHEAD_AMOUNT] and profit of $[PROFIT_AMOUNT] for [PROJECT-SPECIFIC SCOPE]. Please identify the policy term or estimate item disputed.

F. Code Upgrade Costs (Ordinance or Law Coverage)

☐ The insured property was built in [____] and must comply with current Pennsylvania building codes upon repair/rebuild.
☐ Code compliance upgrades required: [DESCRIBE — electrical panel upgrade, egress windows, fire suppression, etc.]
☐ Code upgrade coverage: ☐ Available under policy at $[________________________________] / ☐ Not included — additional damages asserted

G. Total Claim Summary

VII. STATUTORY VIOLATIONS — UNFAIR INSURANCE PRACTICES

A. Violations of 40 P.S. § 1171.5 and 31 Pa. Code Chapter 146

[________________________________]'s conduct violates the Pennsylvania Unfair Insurance Practices Act and Insurance Department regulations in the following specific respects:

☐ Failure to acknowledge claim within 10 working days — Claim reported [__/__/____]; acknowledgment not received until [__/__/____] (or still not received) — 31 Pa. Code § 146.5(a)

☐ Failure to complete investigation within 30 days — Claim reported [__/__/____]; investigation still not complete as of [__/__/____] ([____] days elapsed); no written justification for delay provided — 31 Pa. Code § 146.6

☐ Misrepresentation of policy provisions — [________________________________] misrepresented [DESCRIBE] in violation of 40 P.S. § 1171.5(a)(10)(i)

☐ Refusal to pay without a reasonable investigation — [________________________________] refused payment of [IDENTIFY CLAIM OR LOSS] without: [DESCRIBE OMITTED INVESTIGATION, e.g., inspection of damaged areas or consideration of the insured's documentation] — 40 P.S. § 1171.5(a)(10)(iv)

☐ Failure to affirm or deny coverage — [________________________________] received a complete proof of loss on [__/__/____] but has not affirmed or denied coverage as of [__/__/____] — 40 P.S. § 1171.5(a)(10)(v)

☐ Unreasonable settlement offer — [________________________________] offered $[________________________________] against documented covered loss of $[________________________________], despite facts showing its policy liability was reasonably clear: [DESCRIBE] — evaluate under 40 P.S. § 1171.5(a)(10)(vi); subsection (viii) applies only when the qualifying application advertising material supports the insured's expectation

☐ Failure to explain denial — [________________________________] has not provided a reasonable, specific explanation of the basis for its denial/underpayment — 40 P.S. § 1171.5(a)(10)(xiv)

☐ Unpaid covered loss — [________________________________] has declined to pay $[________________________________] despite [DESCRIBE COVERAGE AND PROOF]. Section 1171.5(a)(10)(vii) concerns offers substantially below amounts ultimately recovered in litigation; assess it if litigation occurs.

B. Bad Faith Under 42 Pa.C.S. § 8371

[________________________________]'s conduct constitutes bad faith under 42 Pa.C.S. § 8371 and Rancosky v. Washington National Insurance Co., 170 A.3d 364 (Pa. 2017), because:

1. No Reasonable Basis: [________________________________] has denied or underpaid this claim without a reasonable basis, as demonstrated by: [________________________________]

2. Knowledge or Reckless Disregard: [________________________________] knew or recklessly disregarded its lack of a reasonable basis because: [________________________________]

If litigation is filed, our client will seek all remedies under § 8371, including:

• Interest at the prime rate plus 3% from [__/__/____] (date of claim)
• Punitive damages
• Court costs
• Attorney fees

VIII. APPRAISAL DEMAND (IF POLICY PROVIDES APPRAISAL)

A. Invoking Appraisal

Note: The standard fire policy provisions in 40 P.S. § 636(2) include an appraisal procedure for covered fire policies, subject to that section's exceptions and permitted variations. Confirm whether this policy is governed by those provisions and identify its issued appraisal clause before invoking appraisal.

Pursuant to the appraisal clause at [POLICY SECTION/PAGE], we hereby invoke the appraisal process to resolve the dispute over the amount of loss (not coverage).

Our client's designated appraiser:
[________________________________]
[________________________________], PA [________]
Phone: [________________________________]

Please identify [________________________________]'s designated appraiser within [____] days of this letter.

B. Scope of Appraisal Dispute

The following items are submitted to appraisal:

☐ Scope of dwelling damage (Coverage A) — disputed items: [________________________________]
☐ Amount of personal property loss (Coverage C)
☐ Overhead and profit
☐ Depreciation methodology
☐ [________________________________]

Note: Coverage questions — including whether the cause of loss is covered and whether exclusions apply — are not subject to appraisal and are reserved for litigation if necessary.

IX. MONETARY DEMAND

Based on the foregoing, we demand payment of $[________________________________] as follows:

X. RESPONSE DEADLINE AND CONSEQUENCES

THIS DEMAND MUST BE ACCEPTED BY 5:00 P.M. EASTERN TIME ON [__/__/____].

Failure to respond appropriately by the deadline will result in the following:

1. Litigation will be filed in the Court of Common Pleas of [________________________________] County, Pennsylvania, seeking:

   • All unpaid policy benefits
   • Bad faith damages under 42 Pa.C.S. § 8371 — interest at prime + 3%, punitive damages, attorney fees, court costs
   • All consequential damages caused by the delay

2. Regulatory Complaint will be filed with the Pennsylvania Insurance Department:
   Pennsylvania Insurance Department
   Bureau of Consumer Services
   1209 Strawberry Square
   Harrisburg, PA 17120
   Phone: 1-877-881-6388
   www.insurance.pa.gov

3. Appraisal will be invoked pursuant to policy terms (if not already)

XI. DOCUMENT PRESERVATION NOTICE

This letter constitutes a formal litigation hold notice. [________________________________] must immediately preserve all documents, records, and electronically stored information (ESI) relating to this claim, including:

• The complete claim file, all drafts, and all versions
• All adjuster notes, diary entries, and activity logs
• All internal communications (email, text, instant message) regarding this claim
• Reserve setting documentation and all reserve change records
• All photographs, drone footage, inspection reports, and scope worksheets
• All estimates, counter-estimates, and expert reports
• Claim handling guidelines, procedures, and training materials applicable to this claim type
• Supervisor approvals and escalation records
• Quality assurance and file review records
• Vendor assignments and vendor communications
• Communications with any independent adjusters, engineers, or cause-and-origin experts

Destruction or alteration of any such materials after receipt of this notice may result in spoliation sanctions.

XII. CONCLUSION

[________________________________] issued our client a property insurance policy in exchange for premium payments. Our client suffered a covered loss, provided timely notice, cooperated fully, and submitted a complete proof of loss. Pennsylvania law entitles our client to payment of the covered loss in full and in good faith.

[________________________________] has one final opportunity to fulfill its contractual obligations and avoid significant bad faith exposure under 42 Pa.C.S. § 8371. We urge [________________________________] to respond promptly and pay the full amount owed.

Respectfully submitted,

[________________________________]

By: ___________________________________
[________________________________]
Pennsylvania Bar No. [________]
[________________________________]
[________________________________], PA [________]
Phone: [________________________________]
Fax: [________________________________]
Email: [________________________________]

Counsel for [________________________________]

ENCLOSURES:

☐ Policy declarations page and relevant policy provisions
☐ Contractor estimate — [________________________________] ($[________________________________])
☐ Public adjuster estimate — [________________________________] ($[________________________________])
☐ Photographs of all damaged areas (digital index provided)
☐ Itemized personal property inventory with supporting documentation
☐ Receipts for mitigation and emergency services
☐ Additional living expense documentation
☐ Proof of loss (submitted [__/__/____])
☐ Examination under oath transcript ([__/__/____])
☐ Expert reports: [________________________________]
☐ Correspondence log

CC:

• [________________________________] (Client)
• [________________________________] (Mortgagee/Lienholder, if applicable)
• Pennsylvania Insurance Department — Bureau of Consumer Services (if complaint filed)
• File

PENNSYLVANIA PROPERTY INSURANCE LAW — QUICK REFERENCE

SOURCES AND REFERENCES

• 40 P.S. § 1171.5 — Pennsylvania Unfair Insurance Practices Act: https://codes.findlaw.com/pa/title-40-ps-insurance/pa-st-sect-40-1171-5/
• 31 Pa. Code §§ 146.5–146.7 — Claims handling standards: see the Pennsylvania Insurance Department reports cited above
• 31 Pa. Code Chapter 146 — Unfair Insurance Practices Regulations: https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/031/chapter146/chap146toc.html
• 42 Pa.C.S. § 8371 — Bad faith statute: https://www.legis.state.pa.us/WU01/LI/LI/CT/HTM/42/00.083.071.000..HTM
• 42 Pa.C.S. § 5525 — General written-contract limit: https://www.legis.state.pa.us/WU01/LI/LI/CT/HTM/42/00.055.025.000..HTM
• 40 P.S. § 636 — Standard fire policy suit clause: https://www.legis.state.pa.us/WU01/LI/LI/US/HTM/1921/0/0284..HTM
• Terletsky v. Prudential Property & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. 1994)
• Rancosky v. Washington National Ins. Co., 170 A.3d 364 (Pa. 2017): https://law.justia.com/cases/pennsylvania/supreme-court/2017/28-wap-2016.html
• Pennsylvania Unfair Insurance Practices Act — Overview: https://www.propertyinsurancecoveragelaw.com/2019/07/articles/consumer-protection/pennsylvania-unfair-insurance-practices-act/
• Insurance Consumer Rights in Pennsylvania (United Policyholders): https://uphelp.org/claim-guidance-publications/insurance-consumer-rights-in-pennsylvania-2022/
• Pennsylvania Insurance Department: https://www.insurance.pa.gov