Archive for the 'Lawyer’s – Attorney’s Fees' Category

MAY 2012 BAD FAITH CASES: COURT CAN CONSIDER OTHER STATUTES IN FINDING BAD FAITH, CLAIMS HANDLING DELAYS IN BENEFIT CANNOT BE OBVIATED BY LATER PAYMENT, MANUAL ON LITIGATION AND LEGAL FEES ADMISSIBLE AND COURT NEEDS TO CONDUCT IN CAMERA REVIEW (Superior Court)

Published on May 16, 2012 in Claims Handling Procedures, Discovery and Evidence, Lawyer's - Attorney's Fees and Procedural Issues. Closed
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In Berg v. Nationwide Mut. Ins. Co., the Superior Court reversed the trial court’s grant of a directed verdict to the carrier on the insured’s bad faith claim. This was a first party claim against an insurer under Pennsylvania’s bad faith statute, among other claims.
The suit stemmed from faulty repairs to the insured automobile conducted by the carrier’s preferred repair facility. There was a bifurcated trial, the first part being Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) claims before a jury, and the second the issue of treble damages under the UTPCPL and statutory bad (42 Pa.C.S. § 8371) before the judge. The jury found for the insured on the UTPCPL claims, and for the auto repairer and the carrier on the fraud claims and conspiracy claims. The jury awarded $1,925 against the car repair shop and $295 against the insurer.
In the second phase, after a 4 day trial, the trial judge granted a directed verdict to the carrier on statutory bad faith claim and the insured appealed. The crux of the insured’s claim was that the carrier acted in bad faith by “interfering with a total loss appraisal on their vehicle and later returning it to them despite known structural deficiencies that left it in a potentially dangerous condition.” Part of the trial court’s rationale for declining to find for the insured was that such a claim does not “arise under an insurance policy.” The lower court also found that there was no ultimate denial of a benefit. The Superior Court specifically found that such a claim does in fact arise under the insured’s policy with respect to its contractual duties, including good fair and fair dealing, and the carrier’s failure to effectuate a “prompt, fair, and equitable” settlement in the face of a clear statutory and contractual duty.
The Superior Court also found that the violation of other statutes can be used as evidence of violation of the bad faith statute because bad faith conduct may be “defined by reference to violations of statutes related to insurance practices.” Thus, in this case, the jury’s finding that the carrier violated Pennsylvania’s UTPCPL should have been considered as evidence of bad faith, and weighed under the clear and convincing evidence standard applicable to the bad faith statute, rather than the judge ruling on the issue as a matter of law.
The Superior Court also cited additional factors to consider. The carrier had the insured’s car sent to a different repair shop after the initial choice found that the insured’s car could not be repaired. Further, the manner in which the carrier discharged its duty of good faith during the pendency of the carrier’s insurance claim was subject to a bad faith analysis because of allegations that it was the carrier’s practice to vigorously defend small claims regardless of merits to discourage others from bringing suit. The appellate court would have permitted evidence in connection with carrier’s manual concerning that strategy and legal billing.
Further, the appellate court found that the lower court erred in not doing an in camera review on documents that were alleged to be privileged and had been redacted.
Date of Decision: April 17, 2012
Berg v. Nationwide Mut. Ins. Co., No. 12-MDA-2008, 2012 PA Super 88, Superior Court of Pennsylvania (Pa. Super. Ct. Apr. 17, 2012) (Donohue, J.)

MAY 2012 BAD FAITH CASES: BAD FAITH CLAIM CANNOT BE ASSGINED, CONTINGENT FEE ATTORNEY NOT THIRD PARTY BENEFICIARY, CONTRACT CLAIM ASSIGNABLE BUT AGAINST PUBLIC POLICY TO DO SO (Philadelphia Federal)

Published on May 1, 2012 in General Bad Faith and Litigation Issues and Lawyer's - Attorney's Fees. Closed
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In Feingold v. State Farm Mutual Auto Insurance Company, the court partially granted the carrier’s motion to dismiss a breach of contract and bad faith suit brought by the insured and his alleged assignee, who was his prior case but had been subsequently disbarred. The case stems from a motor vehicle accident that occurred in 1998, where the insured was injured by an uninsured or underinsured motorist. The insured retained the assignee at that point prior to his disbarment.
After filing a motor for arbitration, the carrier never followed through with arrangements to schedule a medical exam. In 2010, the insured sought to schedule the arbitration but the carrier maintained that the statute of limitations on the insured’s claim had expired. The insured and his assignee then filed suit for breach of contract and bad faith. The carrier moved to dismiss the suit.
Turning to the plaintiff’s claims, the court partially granted the carrier’s motion to dismiss, ruling that the assignee had no standing to assert claims against the carrier. The court reasoned that “[a]n insured’s disbarred former attorney surely does not fall within the narrow class of individuals who may pursue a statutory bad faith claim.” The court also ruled that the former counsel’s claim that he was a “beneficiary” of the insured’s contract did not meet the standards for establishing third party beneficiary status.
Next, the court ruled, following an earlier decision against the same plaintiff, that statutory bad faith claims are in the nature of unliquidated tort claims which are un-assignable under Pennsylvania law. While breach of contract claims may be assignable, the court ruled that the assignment in this case, which permitted the disbarred assignee to function as the insured’s attorney, is contrary to public policy. As such, the court ruled that the assignee had no standing to bring these claims.
With respect to the insured’s claims, the court first ruled that the parties’ forum selection clause is ineffective, preventing the carrier’s claim of improper venue. The court also held that the pendency of arbitration in Delaware is not the proper ground for dismissal. Lastly, the court reasoned that the carrier was incorrect that the case should be dismissed because Delaware law, not Pennsylvania law, should apply.
Date of Decision: April 3, 2012
Feingold v. State Farm Mut. Auto. Ins. Co., NO. 11-6309, 2012 U.S. Dist. LEXIS 46696, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Apr. 3, 2012) (O’Neill, J.)

AUGUST 2009 BAD FAITH CASES
NO AWARD OF ATTORNEYS’ FEES FOR POST-TRIAL AND APPELLATE WORK BASED ON PROCEDURAL RULES; NO REDUCTION OF FEES BASED ON REDUCED PUNITIVES (Philadelphia Federal)

Published on August 18, 2009 in Lawyer's - Attorney's Fees. Closed
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In Jurinko v. Medical Protective Company, the U. S. District Court for the Eastern District of Pennsylvania was faced with yet another issue in this case which has yielded significant address of bad faith issues, both in the trial court an on appeal.  See below.

This Opinion, issued after a partial reversal by the Third Circuit on punitive damages, addressed attorneys’ fees.  The plaintiffs sought over $100,000 in fees incurred on post-trial motions, on appeal and in preparing the instant motion for supplemental attorney’s fees.  The  Court went over the issue of whether it even had jurisdiction to hear the motion, where the case had not be clearly remanded by the Third Circuit.  It did not answer this questions, denying the motion on other jurisdictional/procedural grounds. 

First, as to fees for post-trial motions, under F.R.C.P. 54(d)(2), the plaintiffs did not meet the mandatory 14 day requirement from the entry of judgment to seek attorneys’ fees for work done to date, and so any post-trial, pre-appeal, fee claim was waived.

Second, under the Third Circuit’s Local Appellate Rules, attorney fee requests for work done on the appeal had to be made in the Third Circuit, not in the District Court.

Third, in light of the prior two rulings, it would be improper to award attorney’s fees for those two requests.

Finally, the Court rejected the Defendant’s motion to reduce the previously awarded attorney’s fees in an amount commensurate to the Third Circuit’s reduction of the punitive damage award (from 4:1 to 1:1).  The Court rejected this effort because its earlier, affirmed, basis for the attorney’s fee award – the lodestar method under Pennsylvania Rule of Civil Procedure 1716— was not based on the amount of punitive damages.

Date of Decision: July 30, 2009

Jurinko v. Medical Protective Co.,  NO. 03-CV-4053, UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, 2009 U.S. Dist. LEXIS 66324 (E.D.Pa. July 30, 2009) (Rufe, J.) 

 

The prior Jurinko opinions in the Third Circuit and District Court are summarized on this blog:  THIRD CIRCUIT APPLIES LODESTAR METHOD TO CALCULATING STATUORY ATTORNEYS FEES; UPHOLDS INTEREST FINDING, THIRD CIRCUIT REDUCES PUNITIVE DAMAGES AWARD TO 1:1 RATIO, THIRD CIRCUIT UPHOLDS BAD FAITH FAILURE TO SETTLE CLAIMS BASED ON ADJUSTER’S OWN ADMISSION OF UNREASONABLE CONDUCT IN NEGOTIATIONS, CONTINGENT FEE AGREEMENT CANNOT BE USED TO FIX AN ATTORNEY FEE AWARD UNDER THE BAD FAITH STATUTE, RATHER THE LODESTAR AMOUNT SHOULD BE USED, EXPERT TESTIMONY ON LEGAL MAL PERMITTED WHERE CARRIER KNOWINGLY APPOINTED SINGLE COUNSEL TO REPRESENT TWO INSUREDS DESPITE CONFLICT OF INTEREST, MARCH 2006 BAD FAITH CASES PUNITIVE DAMAGE AWARD OF $6.25 MILLION WITHSTANDS DUE PROCESS ANALYSIS WHERE RATIO WITH COMPENSATORY DAMAGES IS LESS THAN 4 TO 1, EVIDENCE SUFFICIENT TO SUPPORT JURY’S BAD FAITH VERDICT BECAUSE OF FAILURE TO SETTLE AND APPOINTMENT OF SINGLE COUNSEL WITH CONFLICT OF INTEREST.   

 

MARCH 2009 BAD FAITH CASE
THIRD CIRCUIT APPLIES LODESTAR METHOD TO CALCULATING STATUORY ATTORNEYS FEES; UPHOLDS INTEREST FINDING (Third Circuit)

Published on March 17, 2009 in Lawyer's - Attorney's Fees. Closed
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In a non-precedential Third Circuit Opinion, Jurinko v. The Medical Protective Company, the case involved the assignment of a bad faith claims to the patients of the insured doctor.  The case had gone to trial, and the insureds had obtained an excess verdict against the doctor for medical malpractice, and he assigned his claims against the carrier in lieu of making the excess payment.  On the assigned claims against the insurer, the patients received a jury verdict of $1,658, 345 and punitive damages of $6,250,000.  The trial court upheld the jury award, and then molded the verdict concerning attorney’s fees, costs and interest.

The case’s factual history reveals a story of settlement recommendations by judges, and the doctor’s own defense counsel (appointed by the carrier), that far exceeded anything the carrier was willing to pay toward settlement; and in fact, throughout the course of settlement discussions and recommendations, the carrier’s offer to contribute toward a settlement never rose above $50,000 (on a $200,000 policy), and where the insured’s potential exposure was evaluated by the judges and/or defense counsel at numbers between $750,000 and $2,000,000.  The doctor himself had wanted to settle.

Astonishingly, the carrier’s own adjuster testified that he acted unreasonably and irresponsibly in settlement negotiations” and that he denied the doctor an effective defense by appointing the same lawyer to represent that doctor, and a co-defendant doctor (against whom plaintiffs asserted crossclaims should have been asserted, but could not be because of a conflict).  Counsel denied that the purported conflict had any real effect, as there eventually was separate counsel and he could argue reliance on the other doctor at trial.

The bad faith aspect of the claim is discussed elsewhere on this site

The trial court found that there was at least a partial agreement as to any interest award on the jury verdict, which amounted to less than the prime plus 3% permitted under the Bad Faith Statute; but also apportioned part of the interest at that higher rate to make the insured doctor whole.  The Third Circuit upheld this finding.

The statute also permits the recovery of attorneys’ fees.  The Jurinkos sought $2,372,503.50 in attorneys’ fees — thirty  percent of the verdict, i.e., they wanted application of a contingent fee measure of fees, instead of application of the lodestar method of calculating fees.  The Court rejected that effort.  It looked to Pennsylvania Rule of Civil Procedure 1716 which provides that a court awarding attorneys’ fees must consider (1)  the time and effort the attorneys reasonably expended; (2) the quality of the services rendered; (3) the results achieved and benefits conferred on the class or the public; (4) the magnitude, complexity and uniqueness of the litigation and (5) whether the receipt of a fee was contingent on success.  The Court found the lodestar method more appropriate than a percentage of recovery method, as the statute is a fee shifting statute.  This is consistent with the Pennsylvania intermediate appellate court approach as well.

Date of Decision:  December 24, 2008

Jurinko v. The Medical Protective Company, Nos. 06-3519 & 06-3666, 2008 U.S. App. LEXIS 26263 (3d Cir. December 24, 2008) (Scirica, J.)

 

NOVEMBER 2007 BAD FAITH CASES
ON REMAIND, TRIAL COURT UPHOLDS ORIGINAL ATTORNEY'S FEE AWARD, AND ADDS FEES FOR PORTIONS OF APPEAL AFFIRMED(Third Circuit)

Published on November 26, 2007 in Lawyer's - Attorney's Fees. Closed
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In Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., the district court heard a motion under Rule 60(b) to reconsider its earlier award of attorneys’ fees, costs and prejudgment interest, in light of the Third Circuit’s decision in Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., 2007 U.S. App. LEXIS 19069 (3d Cir. Aug. 9, 2007) (Fisher, J) http://www.ca3.uscourts.gov/opinarch/063133np.pdf (see September 2007 Bad Faith Cases on this blog), that had reversed in part and affirmed in part.  Specifically, the Third Circuit had found there was no breach of contract, but did find bad faith.  The district court upheld its award of attorneys’ fees under the bad faith statute, but reversed its award of prejudgment interest, which had been based on its now reversed decision on compensatory damages for breach of contract.  The court additionally awarded attorney’s fees (though not costs) in connection with the carrier’s appeal of the bad faith and punitive damages awards only.  Plaintiff could not recover fees associated with its own appeal, the reversed contract claim or those incurred in the instant motion.

Date of Decision:  October 31, 2007

Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., United States District Court for the Western District of Pennsylvania, No. 02-2116, 2007 U.S. Dist. LEXIS 80538 (W. D. Pa. October 31, 2007) (Ambrose, C. J.)

L.A.
    

SEPTEMBER 2006 BAD FAITH CASES
ATTORNEY’S FEES NOT RECOVERABLE IN DECLARATORY JUDGMENT ACTION IF PLAINTIFF HAS NOT ALLEGED INSURER BAD FAITH (Western District)

Published on September 13, 2006 in Lawyer's - Attorney's Fees. Closed
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In E.P. Bender Coal Company v. Chubb Group of Insurance Companies, the carrier asserted that attorney’s fees could not be granted to a plaintiff which had not averred bad faith in the Complaint.  The United States District Court for the Western District of Pennsylvania stated that Pennsylvania case law entitles a party to attorney’s fees in connection with a declaratory judgment action only if two requirements are met:  (1) the party seeking to recover attorney’s fees defended against or prosecuted the insurer in a declaratory judgment action to determine the insurer’s duties to defend and indemnify the insured in an action by a third party; and (2) the insurer failed to indemnify the party seeking to recover attorney’s fees in bad faith.  After reviewing the Complaint, the court found that Plaintiffs had failed to allege any facts that established bad faith on the part of the insurer.  Accordingly, the court granted Defendants’ motion to dismiss as to the issue of attorney’s fees.

Date of Decision:  August 31, 2006

E.P. Bender Coal Co. v. Chubb Group of Ins. Cos., U.S. District Court for the Western District of Pennsylvania,  No. 05-216 J, 2006 U.S. Dist. LEXIS 62607 (W.D. Pa. Aug. 31, 2006) (Gibson, J.)

SEPTEMBER 2006 BAD FAITH CASES
COURT AWARDS PRE & POST JUDGMENT INTEREST; CAPS ATTORNEY’S FEES OF $1 MILLION, AFTER NO FINDING OF BAD FAITH WHERE THERE WAS A DUTY TO DEFEND (Middle District)

Published on September 5, 2006 in Lawyer's - Attorney's Fees. Closed
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In Rite Aid Corporation v. Liberty Mutual Fire Insurance Company, Rite Aid’s coverage and bad faith claims were based upon an underlying suit by a former employee.  The United States District Court for the Middle District of Pennsylvania had held that Liberty Mutual did have a duty to defend Plaintiff, but had also previously granted Liberty Mutual’s motion for summary judgment on Rite Aid’s bad faith claim.  See Rite Aid Corp. v. Liberty Mutual Fire Ins. Co., 414 F.Supp.2d 508 (M.D. Pa. 2005) (“Although the Court does not agree with Defendant’s interpretation of the policy language at issue, Plaintiff offers no evidence, and the Court finds none, to indicate that Defendant’s denial was reckless or unreasonable. Moreover, contrary to Plaintiff’s assertions, Defendant’s initiation of the declaratory action in California does not, by itself, indicate bad faith.”)  Thus, the only questions remaining for the Court were (1) the amount of reasonable and necessary defense costs for which Liberty Mutual was required to reimburse Rite Aid, not to exceed $1 million; and (2) whether Rite Aid was entitled to pre- and/or post-judgment interest.  As Liberty Mutual’s obligation to reimburse Rite Aid’s legal expenses was capped at $1 million, the Court awarded that amount.  The Court also accepted Plaintiff’s pre-judgment calculations and awarded Rite Aid $284,494.02 in pre-judgment interest, while awarding all of the undisputed post-judgment interest.

Date of Decision:  August 14, 2006

Rite Aid Corporation v. Liberty Mutual Fire Insurance Company, U.S. District Court for the Middle District of Pennsylvania, No. CV-03-1801, 2006 U.S. Dist. LEXIS 57094 (M.D. Pa. 2006) (Kane, J.)

JUNE 2006 BAD FAITH CASES
CONTINGENT FEE AGREEMENT CANNOT BE USED TO FIX AN ATTORNEY FEE AWARD UNDER THE BAD FAITH STATUTE, RATHER THE LODESTAR AMOUNT SHOULD BE USED (Philadelphia Federal)

Published on June 30, 2006 in Lawyer's - Attorney's Fees. Closed
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In Jurinko v. Medical Protective Company, 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.)

JUNE 2006 BAD FAITH CASES
COURT AWARDS $1.1 MILLION IN ATTORNEYS' FEES & COSTS, & $403,553.34 IN INTEREST UNDER STATUTE, DESPITE CONTINGENT FEE ARRANGEMENT & PUNITIVE DAMAGES (Western District)

Published on June 30, 2006 in Lawyer's - Attorney's Fees. Closed
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In Gallatin Fuels, Inc. v. Westchester Fire Insurance Company, the United States District Court for the Western District of Pennsylvania awarded Plaintiff attorney’s fees, costs, and interest under Pennsylvania’s bad faith statute, 42 Pa.C.S. § 8371.  Plaintiff’s counsel had the case on a contingent fee agreement, and the parties disagreed as to whether there could be a separate award of attorneys’ fees under section 8371 in contingency fee cases, and whether attorneys’ fees were needed to make Plaintiff whole in light of a multi-million dollar punitive damages award.  The parties stipulated, however, that in the event the Court were to award attorney’s, the sum due would be $1.1 Million.  Noting that the decision to award fees was discretionary, the court considered the purpose and rationale behind different damages, expressly separating punitive damages from other damage components.  The court remarked that punitive damages address only the goal of legal punishment, while attorney’s fees and costs are premised upon compensating a plaintiff for having to pay an attorney to get that to which the plaintiff was contractually entitled.  Thus, the court awarded the $1.1 Million for attorneys’ fees.  The court also determined that awarding interest was similarly appropriate, as Plaintiff was denied its money and the opportunity to accrue interest thereon for over three years, during which time Defendant was able to use the money for its own benefit without interest concerns.  It will be of interest to parties facing these issues to compare the discussion in this case, with the opinion in 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.) [Search "Jurinko" on this site]

Date of Decision:  June 2, 2006

Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., United States District Court for the Western District of Pennsylvania, No. 02-2116, 2006 U.S. Dist. LEXIS 36033 (W. D. Pa. 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.  See also September 2007 cases on this blog.

 

JANUARY 2006 BAD FAITH CASES
COURT DETERMINES AWARD OF ATTORNEYS’ FEES, NOT JURY (Western District)

Published on January 31, 2006 in Lawyer's - Attorney's Fees. Closed
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In Gallatin Fuels, Inc. v. Westchester Fire Insurance Company, plaintiff loss payee sued its insurer, seeking payment under an insurance policy issued to a mining company, and alleging bad faith.  In ruling on various Motions in Limine filed by both parties, the U.S. District Court for the Western District of Pennsylvania held that plaintiff was not entitled to an order that it was up to the jury whether attorney’s fees should be awarded under Pennsylvania’s bad faith statute; this was a question for the court to decide only if the jury found in plaintiff’s favor on its bad faith claim.  Plaintiff also asserted that defendant’s retention of a valuation expert was evidence of bad faith; however, the court found that though an insurer’s conduct during the pendency of litigation may be considered as evidence of bad faith under Pennsylvania’s bad faith statute, it is only relevant where the conduct shows the insurer’s intent to evade its obligations under a policy.

Date of Decision:  January 13, 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 1327 (W.D. Pa. Jan. 13, 2006) (Ambrose, C.J.)