Your own insurance company is supposed to be in your corner. In Devincenzo-Gambone v. Erie Insurance Exchange, it wasn’t — Erie shorted its own insureds $50,000 on an arbitration award it had agreed to, and never told them it was keeping its options open. The Pennsylvania Superior Court’s October 17, 2025 decision affirmed that this was bad faith, and just as importantly, it explained exactly how the money in a bad-faith case gets calculated.
What Erie Did
The case started as an underinsured motorist (UIM) claim. Erie agreed to resolve it through binding arbitration — a process both sides accept as final. The arbitrator awarded the insureds $300,000, with stacking. Erie then paid only $250,000 and challenged the award.
Here’s the part that sank them: while Erie was disputing the award, it never told its insureds that it was reserving its rights — never said, in plain terms, “we’re paying part of this but contesting the rest.” The insureds learned where they stood the hard way. They sued under Pennsylvania’s bad-faith statute, 42 Pa.C.S. § 8371, and won. The judgment that followed totaled $1,754,188.24 once the § 8371 remedies were added on top of the unpaid award — a vivid illustration of how expensive bad faith can be for an insurer that plays games.
What the Superior Court Decided
On appeal, the Superior Court split its ruling down the middle, and both halves matter. The bad-faith finding itself was affirmed. Erie’s conduct — agreeing to binding arbitration, paying less than the award, and contesting the balance without ever reserving its rights to the people it owed — supported the conclusion that it had acted in bad faith.
But the court vacated and remanded the money, because two parts of the calculation were done wrong:
Attorney’s fees. Under § 8371, fees must be calculated by the lodestar method — reasonable hours worked multiplied by a reasonable hourly rate. They cannot be set as a percentage of the recovery, the way a contingency fee works. A percentage-based fee award, however tidy, is legally wrong under the statute.
Interest. Section 8371 interest is simple interest only, not compound, and it runs from the date the claim was made — a specific start date that changes the total considerably over a long case.
So the insureds kept their win on liability, but the judgment amount had to be rebuilt using the correct formulas. That’s not a technicality; on a seven-figure judgment, the difference between compound and simple interest, or between a percentage fee and a lodestar fee, is real money in someone’s pocket — and the court insisted it be counted correctly.
What § 8371 Gives You — and What It Doesn’t
Pennsylvania’s bad-faith statute is one of the stronger consumer protections in insurance law. When an insurer acts in bad faith toward its own policyholder, a court can award punitive damages, interest, and attorney’s fees on top of what the policy owed in the first place. It’s the legislature’s way of making sure “deny and delay” isn’t a profitable business strategy.
The honest caveat: bad faith is not the same as a disagreement. Insurers are allowed to investigate claims and contest amounts they genuinely dispute. What they can’t do is act without a reasonable basis, hide their position from their insureds, or put their own interests first while pretending to protect yours. Devincenzo-Gambone shows both the teeth of the statute and its limits — even a winning bad-faith case gets its damages measured carefully, rule by rule.
What This Means for You
If your own insurer is lowballing your UIM claim, stalling, or paying part and going silent on the rest, document everything from day one. Save every letter, email, and voicemail. Note dates, names, and what was promised. Ask, in writing, whether the company is reserving its rights on any part of your claim. In Devincenzo-Gambone, the paper trail — and Erie’s silence on it — made the case. Vague memories of phone calls are much harder to build on.
Your Insurer Isn’t Playing Fair? We Can Review It
Call the Law Offices of Jason P. Provinzano, LLC at 570-822-5771 for a free consultation at 16 W. Northampton Street in Wilkes-Barre. If your own insurance company has underpaid or stonewalled your claim, bring the correspondence with you — we’ll assess whether its conduct crosses the line into bad faith under § 8371.
This article is general information about Pennsylvania personal injury law, not legal advice about your specific situation.
