INSURANCE – FIDELITY BOND – INSURITY BOND – BAD FAITH – ATTORNEYS FEES – INSURANCE DISPUTE – ARBITRATION

E. Steel Constructors, Inc. v. Int’l Fid. Ins. Co., 2026 Pa. LEXIS 274 (February 18, 2026) Opinion by Wecht, J.
Judges: TODD, C.J., DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, McCAFFERY, JJ. Chief Justice Todd and Justices Dougherty, Mundy and McCaffery join the opinion. Justice Brobson files a concurring and dissenting opinion in which Justice Donohue joins.
This appeal is the culmination of long and protracted litigation between Eastern Steel Constructors, Inc. (“Eastern”), and International Fidelity Insurance Company (“Fidelity”) regarding Fidelity’s obligations under a surety payment bond. Eastern asks us to decide whether Pennsylvania’s insurance bad faith statute2 applies to surety contracts issued by insurance companies. We conclude that it does not, based upon that statute’s plain language. Section 8371 plainly does not apply to Eastern’s suit against Fidelity because that statute applies only to “insurance policies” and actions of an “insurer.” It does not apply to surety bonds or actions of a surety.
In its cross-appeal, Fidelity asks us to determine the extent to which Fidelity, as surety, is bound by an arbitration award against Ionadi Corporation, its principal, and the extent to which Fidelity is liable for certain attorneys’ fees and prejudgment interest. We conclude that the arbitration award against Ionadi as principal is conclusive and binding upon Fidelity as surety. Fidelity agreed to be jointly and severally liable with Ionadi for all sums due to Eastern and had notice and opportunity to participate in the arbitration proceedings. We further conclude that Eastern may recover, as part of all sums due, attorneys’ fees incurred in connection with pursuing Ionadi in arbitration, as well as prejudgment interest at the statutory rate of 6% per annum. We affirm the Superior Court’s decision in all respects.
• Section 8371, dealing with bad faith of insurance companies does not define insurance company.
• Neither judicial code nor statutory construction act defines insurance policy, insurer, or insured.
• Section 8371 applies to “insurance policies” it does not apply to suretyship.
• If a surety had noticed and declined the opportunity to participate in the arbitration proceedings in order to defend its interests, it cannot complain when an award is entered against its principal.
• The arbitration award ended against lonadi is conclusive in binding upon Fidelity which had every opportunity to defend against Eastern’s claims, as a surety jointly and severally liable with lonadi.
• As to attorney’s fees, Eastern contracted with lonadi for the installation of steel reinforcing materials for the construction project. This was a contract for labor, materials and equipment. Lonadi did not pay Eastern in full.
• Fidelity is jointly and severally liable for the debt.
• Eastern may recover as part of all sums due, attorney’s fees incurred in connection with its action against lonadi.
• Eastern is also entitled to prejudgment interest on the arbitration award at the statutory rate of 6% per year.