Monthly Archive for March, 2006

MARCH 2006 BAD FAITH CASES
EXPERT TESTIMONY ON LEGAL MAL PERMITTED WHERE CARRIER KNOWINGLY APPOINTED SINGLE COUNSEL TO REPRESENT TWO INSUREDS DESPITE CONFLICT OF INTEREST (Philadelphia Federal)

A dermatologist and pathologist had failed to diagnose Jurinko’s skin cancer.  Jurinko brought suit in the Philadelphia Court of Common Pleas.  The same carrier provided a single lawyer to represent both doctors in the early part of the case, even though there were potential cross claims and a conflict of interest.  One doctor had no liability, but the other was found liable for $2.5 Million by the jury, far in excess of his available insurance.

He assigned his bad faith claim to Jurinko, and the bad faith suit proceeded to trial in federal court.  The federal jury awarded $1.6 Million in compensatory damages and $6.25 Million in punitive damages.

The trial judge refused to grant the carrier’s post trial motions.  The Federal Judge found there was sufficient evidence for the jury to have found bad faith because of appointing a lawyer with a conflict of interest. Among other things, the carrier’s employee testified that the carrier was “fully aware that it was unethical [to assign one lawyer] and would create a conflict of interest, and that it did so to save money.”

Plaintiffs were permitted to put on expert testimony relating to defense counsel’s malpractice.  The malpractice was not per se evidence of bad faith, but the point of the evidence was to establish there was an irreconcilable conflict and the carrier had a duty to provide separate counsel, knowing that it was unethical for counsel to represent both of its insureds.

The expert “testified that this breach of [the carrier’s] duty to provide an adequate defense for its insureds was an act of bad faith,” which the court found central to the case.

Date of decision:  March 29, 2006

Jurinko v. Medical Protective Co., United States District Court for the Eastern District of PA, No. 03-CV-4053, 2006 U.S. Dist. LEXIS 13601 (E.D. Pa. Mar. 24, 2006) (Rufe, J.)

 

MARCH 2006 BAD FAITH CASES
EVIDENCE SUFFICIENT TO SUPPORT JURY’S BAD FAITH VERDICT BECAUSE OF FAILURE TO SETTLE AND APPOINTMENT OF SINGLE COUNSEL WITH CONFLICT OF INTEREST (Philadelphia Federal)

A dermatologist and pathologist had failed to diagnose Jurinko’s skin cancer.  Jurinko brought suit in the Philadelphia Court of Common Pleas.  The same carrier provided a single lawyer to represent both doctors, even though there were potential cross claims and a conflict of interest in that representation.  The pathologist had no liability, but the dermatologist was found liable for $2.5 Million by the jury, far in excess of his available insurance.  He assigned his bad faith claim to Jurinko, and the bad faith suit proceeded to trial in federal court.

The federal jury awarded over $1.6 Million in compensatory damages and $6.25 Million in punitive damages.

The trial judge refused to grant the carrier’s post trial motions.  The court found there was sufficient evidence for the  jury to have found bad faith because (1) of a failure to offer any more than $50,000 to settle, where the policy limit was $200,000 and where two experienced judges had put 7 figure sums on the settlement value of the case; and (2) where the carrier knowingly appointed a lawyer with a conflict of interest.

Among other things, the carrier’s employee testified that the carrier was “fully aware that it was unethical [to assign one lawyer] and [that] would create a conflict of interest, [but] that it did so to save money.”

Date of decision:  March 29, 2006

Jurinko v. Medical Protective Co., United States District Court for the Eastern District of PA, No. 03-CV-4053, 2006 U.S. Dist. LEXIS 13601 (E.D. Pa. Mar. 24, 2006) (Rufe, J.)

 

MARCH 2006 BAD FAITH CASES

CARRIER COULD NOT RECOVER DEFENSE COSTS UNDER RESERVATION OF RIGHTS LETTER, AS NO SUCH RECOUPMENT RIGHT EXPLICITLY SET FORTH IN THE POLICY (Philadelphia Commerce)

The Philadelphia Commerce Court strictly construed the language of a “claims made” insurance policy in denying coverage. The carrier had issued a reservation of rights letter, asserting the right to recoup defense costs in the event there was no coverage, but there was no provision in the insurance contract itself providing that right.

The Commerce Court Judge found no Pennsylvania appellate precedent on the issue of whether recoupment could be permitted on these facts, and surveyed the law nationally.

The Court chose to go with the minority view and would not allow recoupment of defense costs, purely on such a right being asserted in the reservation of rights letter, without an express underlying contractual right in the insurance agreement.

On the underlying claim, the Court noted that “claims made” policies only protect against claims made during the life of a policy, and the reporting requirements are strictly construed. After looking to extrinsic evidence, the Court determined that written notice qualified as making a claim; however, since the claim was first made outside the policy period, the Court held that coverage for the underlying class action did not exist.

Date of Decision:  March 1, 2006

LA Weight Loss Ctrs., Inc. v. Lexington Ins. Co., Court of Common Pleas, Philadelphia, December Term 2003, No. 1560, 2006 Phila. Ct. Com. Pl. LEXIS 127 (C.C.P. Philadelphia  March 1, 2006) (Jones, J.)

 

MARCH 2006 BAD FAITH CASES
BAD FAITH CLAIM PERMITTED WHERE PEER REVIEW PHYSICIAN ALLEGEDLY ENGAGED TO CHALLENGE CAUSATION BETWEEN AUTO ACCIDENT AND INJURY (Cumberland)

The Court of Common Pleas of Cumberland County was faced with the issue of whether plaintiff stated a bad faith claim by alleging that the carrier contracted with a PRO physician to manufacture grounds to avoid paying medical expense benefits.  That court found that a claim had been stated, and overruled the motion to dismiss.

The insured alleged that the peer review doctor was engaged to negate the causal connection between an automobile accident and the plaintiff’s injuries.  The Pennsylvania trial judge rejected the idea that a PRO doctor could use the peer review functions of making a determination of medical necessity or whether there was an accommodation to professional standards to get to causation.

Thus, “whether treatment is medically necessary for a specified injury is an entirely different issue form whether that injury is causally related to the accident and therefore covered under the applicable policy of insurance.”

Date of decision:  March 24, 2006

Krol-Knight v. Peerless Insurance, Court of Common Pleas of Cumberland County, No. 2005-3844 Civil Term (C.C.P. Cumb. March 24, 2006) (Guido, J.)

MARCH 2006 BAD FAITH CASES
COURT REDUCES PUNITIVES FROM $20MILLION TO $4.5MILLION, BUT REJECTS REQUEST FOR DUE PROCESS HEARING AND FOR SPECIFICATION OF JURY’S FACTUAL FINDINGS (Western District)

In Gallatin Fuels, Inc. v. Westchester Fire Insurance Company, the U.S. District Court for the Western District of Pennsylvania granted in part and denied in part defendant’s motion for review of the jury’s punitive damages award, which included a request for a due process hearing and specification of the jury’s factual findings on which the court’s legal finding on fortuitous loss was based.

Because the carrier cited no authority suggesting the court was required to conduct a due process hearing in connection with its punitive damages review, the court found it unnecessary and decided it would only further delay resolution.

Defendant’s request for additional briefing on the punitive damages issue was likewise denied, as such request directly contravened the timely objectives of a previous order.

However, the court determined, considering the totality of the circumstances, that the jury’s punitive damages award of $20 Million was out of proportion to the reprehensibility of defendant’s conduct.  Instead, the court found that a more modest punishment, in the amount of $4.5 million, would have satisfied the State’s legitimate objectives.  The court reasoned (1) that the jury’s award of $20 million was much higher than the ratio that the United States Supreme Court cites as typically appropriate, and (2) was also disproportionate under the facts and circumstances in the case.

Date of Decision:  March 28, 2006

Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., United States District Court for the Western District of PA, Civil Action No. 02-2116, 2006 U.S. Dist. LEXIS 13577 (W.D. Pa. Mar. 28, 2006) (Ambrose, C.J.)

This case was affirmed in part and reversed in part by the Third Circuit.

MARCH 2006 BAD FAITH CASESPUNITIVE DAMAGE AWARD OF $6.25 MILLION WITHSTANDS DUE PROCESS ANALYSIS WHERE RATIO WITH COMPENSATORY DAMAGES IS LESS THAN 4 TO 1 (Philadelphia Federal)

A dermatologist and pathologist had failed to diagnose Jurinko’s skin cancer.  Jurinko brought suit in the Philadelphia Court of Common Pleas.  The same carrier provided a single lawyer to represent both doctors in the early part of the case, even though there were potential cross claims and a conflict of interest.  One doctor had no liability, but the other was found liable for $2.5 Million by the jury, far in excess of his available insurance.

He assigned his bad faith claim to Jurinko, and the bad faith suit proceeded to trial in federal court.

The federal jury awarded $1.6 Million in compensatory damages and $6.25 Million in punitive damages.  The trial judge refused to grant the carrier’s post trial motions.  The court found there was sufficient evidence for the jury to have found bad faith because of failure to settle and/or by knowingly appointing a lawyer with a conflict of interest to represent two insureds. Among other things, the carrier’s employee testified that the carrier was “fully aware that it was unethical [to assign one lawyer] and would create a conflict of interest, and that it did so to save money.”

The court applied the Supreme Court of the United State’s punitive damages due process analysis, and concluded that the conduct was reprehensible because of the known effect the failure to settle would have on the doctors vulnerable finances, the repeated failure to make good faith efforts to settle, and the intentional nature of the conduct.

Further, under the circumstances, a punitive damages award of less than a 4 to 1 ratio to compensatory damages did not violate due process.

Date of decision:  March 29, 2006

Jurinko v. Medical Protective Co., United States District Court for the Eastern District of PA, No. 03-CV-4053, 2006 U.S. Dist. LEXIS 13601 (E.D. Pa. Mar. 24, 2006) (Rufe, J.)