Monthly Archive for June, 2006
Plaintiffs sought recovery of attorney’s fees following a jury award of $6.25 million in punitive damages against the carrier for a bad faith failure to tender policy limits to settle an underlying medical malpractice claim, and for its failure to assign separate counsel to two insureds despite a conflict of interest. Plaintiffs petitioned the court to award attorneys’ fees in the amount of $2,372,503.50 based upon the thirty percent contingency fee agreement plaintiffs had entered with their counsel.
Plaintiffs argued that pursuant to 42 Pa.C.S. § 8371, the object of the attorney fee award is to make the successful plaintiff whole. The Court rejected this position, and held that the lodestar method was generally used in cases involving statutory fee shifting. Therefore attorneys’ fees were limited to $323,167.50, the lodestar amount. This sum represented a reasonable award of attorneys’ fees.
The contingency fee arrangement was a direct result of the bargain plaintiffs made with their attorneys, and such an arrangement bears no relationship to the loss the insurer inflicted upon the plaintiff.
In addition, while the Court was very complimentary of the work performed by plaintiffs’ attorneys, the Court concluded that no enhancement of the lodestar award was warranted since the quality of the work performed was already represented in the hourly rate charged by the attorneys.
Date of decision: June 23, 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 42923 (E.D. Pa. June 23, 2006) (Rufe, J.)
The court rejected the insurer’s argument that Plaintiff’s insurance claims were excluded. Specifically, Plaintiff purchased two separate insurance policies after being advised he could not obtain coverage for both of his cars under the same policy. Plaintiff also elected to retain “stacking of his underinsured motorist coverage,” which included $100,000 in each policy.
After Plaintiff made a claim for underinsured benefits, the carrier argued that the coverages of the two policies could not be stacked, and that the maximum coverage was $100,000.
This argument was based upon a “household exclusion” precluding stacking of coverages; however, the court determined that this provision had no application, since plaintiff was the injured party, and plaintiff was the owner of both of the vehicles insured under the respective policies.
The court accordingly found the above allegations clearly sufficed to allege a basis for bad faith damages, thus denying Defendant’s Motion to Dismiss.
Date of Decision: June 21, 2006
Kraut v. Farmers New Century Ins. Co., United States District Court for the Eastern District of Pa, No. 06-CV-01086-JF, 2006 U.S. Dist. LEXIS 41944 (E.D. Pa. June 21, 2006) (Fullam, S. J.)
In Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., the defendant insurance company filed post-trial motions after the jury returned a verdict in favor of plaintiff on both counts, breach of contract and bad faith. Plaintiff, who was named as a loss payee under the insurance policy issued by defendant insurance company, filed suit seeking payment under the policy for mining equipment that was destroyed or rendered unrecoverable.
The jury found that the defendant insurance company had lacked a reasonable basis for denying benefits to plaintiff and awarded $20 million in punitive damages on the bad faith claim, which the court reduced to $4.5 million.
Challenging the bad faith award, the insurer asserted that (1) the evidence was not sufficient to find that the loss was caused by an accident; (2) the policy had been cancelled before the date of loss, and (3) the plaintiff had made misrepresentations.
The court concluded that the jury expressly considered and rejected these arguments. The court further found that a loss payee did have standing to bring a bad faith action, having rights independent of the insured.
Next, the carrier argued that bad faith cannot exist when the claim amount is in dispute. The trial court found that the evidence introduced at trial established that the insurer knew that the value of the claim was in excess of the policy limits, that it did not offer to pay any portion of the claim, and that it failed to properly handle the claim.
The company then argued that the punitive damage award violated federal due process. The trial court disagreed, finding that the jury relied on the jury questions that the defendant insurance company proposed, and that the jury was appropriately instructed on the issue of punitive damages.
Lastly, the insurer argued that since bad faith and punitive damages are statutorily reserved for the court, the trial court erred by submitting these issues to the jury. The trial court concluded that because the court had rejected a similar issue at trial, and the issue was not adequately addressed in the post-trial motions, it would not reverse its previous ruling.
Date of decision: June 2, 2006
Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., United Stated District Court for the Western District of PA, No. 02-2116, 2006 U.S. Dist. LEXIS 36027 (W.D. Pa. June 2, 2006) (Ambrose, C. J.)
This case was affirmed in part and reversed in part on appeal by the U. S. Court of Appeal for the Third Circuit.
Defendant insurance company filed a motion to stay execution of judgment pending appeal, after the jury found that the company lacked a reasonable basis for denying benefits to plaintiff and awarded $20 million in punitive damages on the bad faith claim. This award was thereafter reduced by the trial court to $4.5 Million.
The company sought to stay execution of the judgment without posting a bond for the entire judgment. The company argued that the bond it posted during the post-trial motions was sufficient. The trial court disagreed, and held that the company must post a bond representing the full amount of the judgment. The trial court concluded that the stay would become effective when the entire judgment was posted.
Date of decision: June 13, 2006
Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., United Stated District Court for the Western District of PA, No. 02-2116, 2006 U.S. Dist. LEXIS 38990 (W.D. Pa. June 13, 2006) (Ambrose, C. J.)
This case was affirmed in part and reversed in part on appeal by the U. S. Court of Appeal for the Third Circuit.