Monthly Archive for January, 2008
The Pennsylvania Supreme Court was asked to decide whether the Commonwealth Court abused its discretion in awarding fees to Highmark for the alleged “vexatious” conduct of the Plaintiffs/Appellants, instituting litigation challenging Highmark’s insurance rates and reserves.
Appellants, policyholders, filed petitions with the Commonwealth Court seeking review of the Insurance Commissioner’s refusal to provide retroactive insurance rate relief. Appellees Highmark and Hospital Service Association of Northeastern Pennsylvania (“NEPA”) each filed preliminary objections on the basis that the Court lacked subject matter jurisdiction and the Appellants failed to exhaust their statutory remedies.
In addition, NEPA filed a Motion for attorneys fees against all Appellants, except Old Forge School District, on the basis that the litigation constituted “vexatious” conduct (the “Motion”). The Commonwealth Court granted NEPA’s Motion. NEPA ultimately agreed to withdraw the Motion as part of a settlement agreement. Soon thereafter, however, Highmark moved for attorneys’ fees. The Commonwealth Court granted Hallmark’s motion for the same reasons it had granted NEPA’s Motion.
The Court stated that the awarding of fees was appropriate because Appellants had been told, repeatedly, that insurance rates and the amount of reserves are a part of the regulatory process under the Insurance Commissioner’s discretion and are not the proper subject of adversary litigation.
On appeal, Appellants argued that pursuant to the “Thunberg” test, a lawsuit is filed for vexatious reasons if: “(1) the suit was filed without sufficient ground in either law or in fact; and (2) the suit served the sole purpose of causing annoyance.” Also, Appellant policy holders argued that the suit was not vexatious as they had asserted legitimate legal theories.
The Supreme Court held that the Commonwealth Court’s decision to impose attorneys’ fees was untenable because the Court did not articulate its reasoning according to the Thunberg test. Further, the Supreme Court remanded case and directed the Commonwealth Court to reevaluate the issues based upon one of its recent decisions whereby the Supreme Court held that the courts, and not the Insurance Department, were empowered to adjudicate claims challenging insurers’ excess reserves.
Date of Decision: June 27, 2007
Old Forge School District v. Highmark, 592 Pa. 307, 924 A.2d 1205 (2007) (Saylor, J.)
J.T.L.
In Ace American Insurance Company v. Underwriters at Lloyds and Companies, Ace reported a claim under its E&O policy to its insurers, Lloyds and Columbia (“Lloyds”), which Lloyds denied due to untimely notice. Ace brought suit seeking coverage of the claim and a determination that Lloyds had acted in bad faith. The coverage and bad faith claims were bifurcated at trial. After a jury rendered a verdict in favor of Lloyds on coverage, Ace appealed.
Ace made several arguments on appeal including arguments related to a discovery order (the “Order”) issued prior to trial. The Order required Lloyds to produce specific documents which Lloyds had characterized as privileged. Ace argued that the trial court erred in refusing to enforce the Order and thereby prejudiced Ace’s ability to prosecute the coverage claim. In response, Lloyds argued that the trial court did not err because the documents encompassed by the Order were not relevant to coverage. The trial court ruled that Ace was not entitled to the documents because the Order was limited to bad faith issues which had been stayed pending the outcome of the trial of the coverage claim.
The Appellate Court agreed with the trial court and held that Ace had failed to demonstrate that: (1) it would have been entitled to the documents; (2) the documents would have been admissible at the trial of the coverage issues and; (3) the absence of the documents prejudiced Ace’s ability to pursue its case as to the coverage issues. Therefore, the Appellate Court affirmed the trial court’s decision.
Date of Decision: December 20, 2007)
Ace American Ins. Co. v. Underwriters at Lloyds, Superior Court of Pennsylvania, No. 2847 EDA 2006, 2007 Pa. Super. LEXIS 4415 (Pa. Super. Ct., Dec. 20, 2007) (Daniels, J.)
J.T.L.