First-Party Property Damage Demand Letter - Pennsylvania

FIRST-PARTY PROPERTY DAMAGE DEMAND LETTER

Commonwealth of Pennsylvania

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION — FOR RESOLUTION PURPOSES ONLY
PROTECTED UNDER Pa.R.E. 408 AND F.R.E. 408

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., prohibits specific unfair claims settlement and claims-handling practices. Section 1171.5(a)(10) enumerates prohibited unfair claims settlement or compromise practices, 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 a claim for less than the amount to which a reasonable person would have believed he or she was entitled
• § 1171.5(a)(10)(xi): 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 § 146.7

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 shall award all of the following:

Current Interest Exposure: At a prime rate of [____]% + 3% = [____]% per annum, interest on $[________________________________] accrues at approximately $[________________________________] per day from [__/__/____].

E. Statute of Limitations

Pennsylvania's statute of limitations for first-party breach of insurance contract claims is four (4) years under 42 Pa.C.S. § 5525 (written contract). The date of loss was [__/__/____]; the limitations period expires on or about [__/__/____]. This demand is made well within the limitations period.

F. Appraisal

Pennsylvania has no mandatory statutory appraisal process for property damage claims — unlike Florida or Texas. Appraisal rights in Pennsylvania are governed exclusively by the policy's appraisal clause, if any. [________________________________]'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

Our client is entitled to general contractor overhead and profit (typically 10% overhead / 10% profit, or "10 and 10") because:

☐ The scope of repairs requires coordination of multiple trades (roofing, electrical, plumbing, drywall, painting)
☐ The complexity and scope require general contractor supervision
☐ A general contractor is reasonably necessary to complete the repairs
☐ Industry-standard estimating platforms (Xactimate, Symbility) include O&P for projects of this scope

[________________________________]'s refusal to include overhead and profit is contrary to Pennsylvania law, industry standards, and the reasonable expectations of the insured. See Romano v. Nationwide Mut. Fire Ins. Co., 435 Pa. Super. 545 (1994).

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 § 146.7(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 § 146.7(b)

☐ Misrepresentation of policy provisions — [________________________________] misrepresented [DESCRIBE] in violation of 40 P.S. § 1171.5(a)(10)(i) and 31 Pa. Code § 146.5

☐ Inadequate investigation — [________________________________] failed to: [DESCRIBE — e.g., inspect all damaged areas, obtain independent contractor estimate, consider insured's documentation] — 40 P.S. § 1171.5(a)(10)(iii)

☐ 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)

☐ Grossly inadequate offer — [________________________________]'s offer of $[________________________________] on a claim with documented damages of $[________________________________] constitutes an attempt to settle for substantially less than the amount owed — 40 P.S. § 1171.5(a)(10)(vii)-(viii)

☐ 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)(xi)

☐ Compelling litigation — By refusing to pay what is clearly owed, [________________________________] is compelling our client to institute litigation — 40 P.S. § 1171.5(a)(10)(vii)

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: Pennsylvania has no mandatory appraisal statute. The following applies only if the policy contains an appraisal provision.

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
   1326 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 § 146.7 — Standards for prompt, fair and equitable settlements: https://www.law.cornell.edu/regulations/pennsylvania/31-Pa-Code-SS-146-7
• 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://codes.findlaw.com/pa/title-42-pacsa-judiciary-and-judicial-procedure/pa-csa-sect-42-8371/
• 42 Pa.C.S. § 5525 — Four-year statute of limitations for contract: https://law.justia.com/codes/pennsylvania/title-42/chapter-55/section-5525/
• 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