Archive for the 'PA – Punitive Damages' Category

Happy Thanksgiving to All

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UPDATE ON INDALEX: SUPREME COURT DENIES PETITION FOR ALLOWANCE OF APPEAL

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For those who have been following the fate of the Superior Court’s Indalex Opinion, and its discussion of “occurrence” under Kvaerner, as well as the gist of the action doctrine, on September 18, 2014, the Supreme Court denied the Petition for Allowance of Appeal.

AUGUST 2014 BAD FAITH CASES: COURT DENIES INSURERS MOTIONS TO PRECLUDE EXPERT TESTIMONY, BIFURCATE THE TRIAL AND FOR SUMMARY JUDGMENT WHERE INSURER REQUIRED 3 IMES WHICH REACHED INCONSISTENT RESULTS (Middle District)

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In Monaghan v. Travelers Prop. Cas. Co. of Am., the Court, in three separate opinions, addressed the issues of the adequate burden of proof in bad faith claims, admissibility of expert testimony, and proper bifurcation of trial. The Court found that the pleading standards were met, that expert testimony should not be precluded, although the scope must be limited, and that defendants failed to meet their burden to establish that bifurcation was appropriate.

In the instant case, Plaintiff was injured in a motor vehicle accident and had an insurance policy with Defendant which included medical benefits up to $100,000 and wage loss benefits up to $15,000. The insurer required Plaintiff to undergo three separate independent medical examinations (IMEs) due to her physical injury claims. The first and second IMEs concluded that Plaintiff’s injuries were due to the accident, while only the third found that the injuries were unrelated. After the third IME, the Defendants stopped providing further benefits and, in response, Plaintiff filed a complaint alleging Breach of Contract, Bad Faith, and violation of the Unfair Trade Practice and Consumer Protection law.

In the Court’s first opinion, on a motion for summary judgment, it addressed Defendant’s claim that Plaintiff failed to provide evidence to support her contention that the discontinuance of benefits was due to self-interest or ill-will. According to Third Circuit precedent, a plaintiff must prevent clear and convincing evidence which shows that both 1) the insurer lacked a reasonable basis for denying benefits, and 2) the insurer knew or recklessly disregarded the lack of a reasonable basis. The Court held that Plaintiff had presented evidence that the third IME resulted in an opinion adverse to the first two, and that it was for a jury to determine whether the defendants engaged in bad faith by repeatedly sending Plaintiff to different doctors until one found that her injuries were unrelated to the accident.

The Court’s second opinion addressed the Defendant’s motion in limine seeking to preclude the testimony of Plaintiff’s insurance expert witness. Defendants argued that 1) the finder of fact does not need the assistance of expert testimony to comprehend the plaintiffs’ bad faith allegations, 2) that some of the expert’s opinions related to the ultimate issues of fact, and 3) the remainder of the expert’s opinions are not based on recognized insurance industry standards. The court first asked whether the factfinder would benefit from hearing the additional expert testimony and concluded that the case before it involved complicated issues of law under the insurance policy and Pennsylvania law which could potentially confuse a jury.

Specifically: “The issue of whether an expert is warranted in a bad faith action is very fact specific to each case and dependent on the complexity of the issues. Not all bad faith claims are equally complex. This case, however, appears to be one which is somewhat complex and in which the factfinder may find an expert useful. The allegations of bad faith involve medical professionals employed by defendant and their use of independent medical examiners’ opinions. It will be important for the factfinder to understand the obligations of first party medical benefit claims handlers in such situations. Moreover, plaintiff’s bad faith allegations include not only the defendants’ legal obligations under the policy, but also under Pennsylvania law.”

Next, the Court held that Defendants could object at trial to any testimony addressing the ultimate issue of fact, but refused to preclude the testimony before it was heard. Finally, in addressing the argument that Plaintiff’s expert’s opinion was not based on “insurance standards”, the Court observed the expert’s level of experience with automobile insurance, and stated that Defendants would have ample opportunity to attack the validity of the witness’s findings through cross-examination and argument at trial, and therefore, the motion in limine should be denied.

In its third opinion, the Court addressed the issue of bifurcation raised by Defendants, who sought to separate the bad faith liability trial from a trial on determining punitive damages if liability were to be found. The Defendants argued that there was significant danger of unfair prejudice once the jury heard the size of their net worth, and so bifurcation would be appropriate. Evidence presented in support of Plaintiff’s punitive damages claim included an estimate of Defendant’s net worth — $113.459 million in surplus and $412.275 million in total assets. Defendant claimed that the estimate of net worth could improperly induce the jury to find that bad faith existed, while Plaintiff contended that it was common knowledge that insurance carriers, as large corporations, had high net worth. The Court agreed with Plaintiff finding that the Court could construct a jury charge and verdict slip to eliminate prejudice such that the benefit derived from bifurcating the trial would be “vastly outweighed by the waste of time and resources inherent to holding two trials.” Therefore, Defendants’ motion to bifurcate was denied.

In sum, the Court found for plaintiff in all three opinions, denying Defendants’ motions for summary judgment, motion in limine to preclude expert testimony, and motion to bifurcate the trial.

Dates of Decision: June 16, 2014 (Opinion 1) and July 16, 2014 (Opinions 2 and 3)

Monaghan v. Travelers Prop. Cas. Co. of Am., No. 3:12cv1285, 2014 U.S. Dist. LEXIS 82368, (M.D. Pa. June 16, 2014) (Munley, J.)

Monaghan v. Travelers Prop. Cas. Co. of Am., No. 3:12cv1285, 2014 U.S. Dist. LEXIS 96524, (M.D. Pa. July 16, 2014) (Munley, J.)

Monaghan v. Travelers Prop. Cas. Co. of Am., No. 3:12cv1285, 2014 U.S. Dist. LEXIS 96525, (M.D. Pa. July 16, 2014) (Munley, J.)

JULY 2014 BAD FAITH CASES: BERKS COUNTY TRIAL JUDGE AWARDS $18,000,000 IN PUNITIVE DAMAGES AND $3,000,000 IN ATTORNEY’S FEES AND COSTS (Berks County Court of Common Pleas)

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Following in temper the trial court judges’ decisions in Hollock v. Erie Insurance Exchange, 54 Pa. D.&C. 4th 449 (C.C.P. Luzerne 2002), and Corch Construction Company v. Assurance Company of America, 64 Pa. D.&C. 4th 496 (C.C.P. Luzerne 2003), a Berks County Judge has issued a decision imposing $18,000,000 in punitive damages, and $3,000,000 in attorney’s fees and costs, against an insurer for section 8371 bad faith.

In Berg v. Nationwide Mutual Insurance Company, after reversal and remand from a broad bad faith opinion in the Superior Court, Judge Sprecher’s finding of facts and discussion describe an auto damage property claim that could have been resolved for a $25,000 payment for the vehicle’s total loss.  Instead, the carrier was found to have paid $3,000,000 in legal fees to support the propriety of its decision that the car could have been repaired for half that sum. The litigation is over 15 years old, with the dispute starting earlier, and the plaintiff died of cancer prior to this judgment being entered, a fact mentioned to close the Court’s decision.

The Court found as fact numerous examples of bad faith conduct, beginning with the reversal of the appraiser’s initial position to pay the damages as a total loss, subsequent failures to disclose information about the vehicle’s repair and safety condition (including life threatening information), abusing the discovery and litigation process, failing to negotiate in good faith, violating the Unfair Insurance Practices Act, and paying a disproportionate sum in defending the case. The Court looked closely at the experts who examined the vehicle, and those who testified about claims handling practices in evaluating bad faith.  At its essence, however, was the Court’s finding that that the carrier did not go to these lengths simply to defeat Ms. Berg’s claim in this single dispute. Rather, the Court found, that the carrier’s conduct was part of an overall strategy regarding all of its insureds’ claims for $25,000 or less; a strategy expressly condemned by the Superior Court in Boneberger.

The Court found that this strategy was intended to send a message to insureds and the plaintiffs’ bar that it was not worth their while to bring suit against the carrier in cases worth $25,000 or less.  To quote the Court:

“What Defendant managed to do was send the ultimate message to Plaintiffs, their attorney, and the Plaintiffs’ bar in smaller cases of $25,000 or less. It screamed to the litigation world that it is “a defense minded carrier in the minds of the plaintiff legal community.” It fully accomplished its goal of broadcasting its litigation avoidance strategy. Simply put, what Plaintiff, and more importantly, what lawyer in his right mind, will compete with a conglomerate insurance company if the insurance company can drag the case out 18 years and is willing to spend $3 million in defense expenses to keep the policyholder from getting just compensation under the contract. Its message is 1) that it is a defense minded carrier, 2) do not mess with us if you know what is good for you, 3) you cannot run with the big dogs, 4) there is no level playing field to be had in your case, 5) you cannot afford it and what client will pay thousands of dollars to fight the battle, 6) so we can get away with anything we want to, and 7) you cannot stop us.”

In making its $18,000,000 punitive damages award, the court considered Pennsylvania’s criteria for evaluating a punitive damages claim: the character of the act; the nature and extent of the harm; and the wealth of the defendant.  The Court found that these factors mirrored the U.S. Supreme Court’s “guideposts” on punitive damages: the degree of reprehensibility of the defendant’s conduct; the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.

On the issue of reprehensibility, the court was most troubled by its finding of the life and safety risks to the insured’s in continuing to drive the vehicle, and that the defendant “knew that the vehicle was returned to Plaintiffs with hidden structural repair failures or in the alternative, … [but] Defendant did not care if the frame and all other repairs it required were done properly, by [the] body shop. Both scenarios equate to acts of omission or commission in bad faith against the Plaintiffs.” The court also focused on the scorched earth litigation policy, as an institutional policy.  It found the $18,000,000 represented no financial jeopardy to the insurer, constituting only 0.2% of the $9 billion in its excess Statutory Surplus.

The $3,000,000 in attorney’s fees awarded to plaintiff’s contingent fee counsel approximated the fees paid to defense counsel over the life of the litigation. The Court looked at the hours counsel had spent in over a decade on the complex litigation, that counsel themselves had advanced all legal fees and costs with no compensation over that time, and that counsel persevered while being “led through a murky, tumultuous sea of litigation facing deadly obstacles every stroke of the way,” but stayed with the case and its risks, even “when hit between the eyes by Defendant’s insurmountable defense strategy….” Given all of the facts recited in the Court’s ruling, as well as the foregoing, Judge Sprecher stated that: “in the interest of fundamental fairness this court is reluctant to award counsel fees to the Plaintiffs in any amount less than Defendant paid its own attorneys who were paid timely and without risk.”

Date of Decision:  June 12, 2014

Berg v. Nationwide Mutual Insurance Company, No 98-813 (C.C.P. Berks June 12, 2014) (Sprecher, J.)

Our thanks to the Tort Talk Blog for bringing this case to our attention, and for posting a copy of the Opinion.

We would also like to congratulate Daniel E. Cummins of Tort Talk for being awarded PDI’s annual award as Distinguished Defense Counsel.  Well done!

 

All The Best for the Fourth of July

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MEMORIAL DAY: "But in a larger sense, we cannot dedicate, we cannot consecrate, we cannot hallow this ground. The brave men, living and dead who struggled here have consecrated it far above our poor power to add or detract."

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Fourscore and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty and dedicated to the proposition that all men are created equal. Now we are engaged in a great civil war, testing whether that nation or any nation so conceived and so dedicated can long endure. We are met on a great battlefield of that war. We have come to dedicate a portion of that field as a final resting-place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this. But in a larger sense, we cannot dedicate, we cannot consecrate, we cannot hallow this ground. The brave men, living and dead who struggled here have consecrated it far above our poor power to add or detract. The world will little note nor long remember what we say here, but it can never forget what they did here. It is for us the living rather to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us–that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion–that we here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth.

 

 

MAY 2014 BAD FAITH CASES: THERE IS NO BAD FAITH WHERE AUTO INSURER HAD NO DUTY TO INDEMNIFY INSURED FOR DAMAGES CAUSED BY FAULTY REPAIR WORK IN BODY SHOP (Philadelphia Common Pleas)

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In Rogers v. Allstate Property and Casualty Ins. Co., plaintiff brought an action against a body shop for damages to her car, and also named her auto insurer, bringing claims against it for Fraud, Bad Faith, Negligence, UTPCPL violations, and for Breach of contract, and alleging a general count of “Pattern and Practice.”

The breach of contract claim failed as nowhere in the policy was the carrier required to pay for faulty repairs or poor workmanship by a third party repair shop, as faulty repairs or poor workmanship by a third-party repair shop clearly does not involve a collision with another object. The court also rejected the argument that the faulty repairs amounted to theft, vandalism or malicious mischief. As to the bad faith count, the plaintiff’s Bad Faith claim was premised upon an alleged failure to pay to fix the faulty repairs or poor workmanship by a third party repair shop. Again, it was clear the policy of insurance did not provide coverage in these circumstances. Therefore, the insurer could not have acted in Bad Faith as a matter of law by not paying to fix the alleged faulty repair or poor workmanship by a third party repair shop.

As to the UTPCPL and fraud claims, plaintiff alleged it was misled into believing that such damages from faulty repair work would be covered under the policy. However, neither the complaint nor the record attached thereto set forth an actionable claim on these counts. There was no averment that the insurer itself, or the policy of insurance, actually deceived or had a tendency to deceive. There was no averment that any alleged misrepresentation made a difference in the Plaintiff’s purchasing decision. Finally, the claims arise from unsatisfactory nonpayment of alleged faulty repairs or poor workmanship by a third party repair shop, amounting to nonfeasance, rather than misfeasance under the UTPCPL.

Date of Decision: March 11, 2014

Rogers v. Allstate Property and Casualty Ins. Co., July Term 2008, No. 4114, Court of Common Pleas of Philadelphia, 2014 Phila. Ct. Com. Pl. LEXIS 72, (C.C.P. Phila. March 11, 2014) (Fox, J.)

 

Welcome Spring 2014

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Our first post of the Spring finds a rainy day, but it all looks like bright sunshine now that the snow has gone.  We at the Pennsylvania and New Jersey Insurance Bad Faith Insurance Blog wish you bright days ahead.

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HAPPY ST. PATRICK'S DAY, AND MAY WE HAVE SEEN THE END OF WINTER SNOWS IN 2014

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Back from Winter Break

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We are back from a brief winter hiatus, and hope you are finding some sun and warmth on these cold winter days.Sun and Sky