Archive for the 'PA – Punitive Damages' Category

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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Sunrise

Photo by M. M. Ginsberg

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.

SpringDays2014(2) SpringDays2014

Pictures by M. M. Ginsberg

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

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WinterSunset2014

 

WintersEnd2014

Pictures by M. M. Ginsberg

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

HAPPY HOLIDAYS AND ALL THE BEST FOR THE NEW YEAR

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We thank you for visiting our Blog, and look forward to seeing you again (and again) in 2014.

May it be a good year for all,

FINEMAN KREKSTEIN & HARRIS

 

Snow and Sky

NOVEMBER 2013 BAD FAITH CASES: SUPERIOR COURT AFFIRMS BAD FAITH FINDING BASED ON ADJUSTER’S FAILURE TO PERFORM INDEPENDENT EVALUATION ON UIM CLAIM; PERMITS EXPERT TESTIMONY ON CLAIMS HANDLING; UPHOLDS PUNITIVE DAMAGE AWARD; AND DOES NOT PERMIT EXPERT FEES, INVESTIGATIVE FEES, ARBITRATION FEES AND TRIAL PREPARATION EXPENSES WITHIN THE TERM “COURT COSTS” (Pennsylvania Superior Court)

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In Grossi v. Travelers Personal Ins. Co., plaintiff brought suit against his insurer for bad faith handling of his UIM claim after he was awarded $4M at arbitration despite the insurer’s refusal to settle for more than its $1,000 reserve.  Plaintiff won at the trial level on his bad faith claim, and the insurer appealed to the Superior Court.  The Superior Court affirmed on most issues, in a divided 2-1 panel decision with a vigorous dissent.

The insurer presented six questions on appeal, including a question as to whether the trial court erred as a matter of law in concluding plaintiff had proven by clear and convincing evidence the insurer acted in bad faith in its handling of the underinsured claim. The insurer argued the trial court should have granted its post-verdict motion for judgment notwithstanding the verdict or a new trial. The Superior Court, however, concluded the trial court did not abuse its discretion in finding the insurer had breached its good faith duty. The trial court based its decision on the adjuster’s affidavit, as well as plaintiff’s expert’s testimony.

Much of the majority’s opinion is focused on setting and never changing a loss reserve, and failures to follow the carrier’s manual in evaluating the loss reserve.  As found in the majority opinion, in her affidavit, the original adjuster admitted she conducted no individual assessment of the future earnings loss before setting a $1,000 reserve on the claim, despite plaintiff submitting evidence that his loss far exceeded the $300,000 policy limit. Plaintiff’s expert testified this was an unreasonable practice, particularly given the $4M arbitration award so far exceeded the policy limits. The insurer argued it is not required to pay out claims without the opportunity to fully investigate the same.  However, the court found that the investigation was unduly delayed and or carried out in connection with defending an arbitration rather than making an evaluation of the claim, and distinguished the case law on which the carrier relied.

As to the evaluation, the majority characterized the carrier’s positionas being that the insured’s expert’s number was speculative, and could be rejected on that basis alone.  The found that such an argument would justify rejection of any UIM claim on the basis of an inherent uncertainty in estimating damages, and would take away any responsibility for a carrier’s doing its own analysis and evaluation.  This could not fulfill an insurer’s duty of good faith and fair dealing.

The insurer also appealed the trial court’s finding that its delay in investigating and processing the claim constituted bad faith, however, the appellate court found the trial court’s determinations to be factual in nature and therefore subject to the trial court’s determination of credibility, and did not disturb the findings.  Of note were the majority’s looking to standards in the Unfair Insurance Practices Act governing the time for investigation and reporting.  The court recognized that length of time alone cannot create a per se bad faith case, but time in the context of other conduct is to be considered.

It is further noteworthy that the trial and appellate court placed great reliance on plaintiff’s expert in reaching the bad faith decision concerning the claims handling process.

Next, the insurer argued the trial court erred in awarding punitive damages in the case because the insurer did not act with malice or dishonest purpose. Pennsylvania law, however, requires no showing beyond establishing bad faith conduct under the statute to permit an award of punitive damages. Therefore, despite the insurer’s secondary argument, that the award was too high, the court found no error in awarding the damages or any constitutional impropriety in the amount of the award.  As the punitive damages award was 5-6 times the compensatory damages award, and over $1.2 Million by itself, the court’s lengthiest analysis is on the punitive damages award; looking at its own prior decision in Hollock, and the U.S. Supreme Court case law focusing around State Farm v. Campbell.

Finally, the insurer argued the trial court improperly included expert witness fees, arbitration fees, investigation fees, and other trial preparation expenses and fees in its award of court costs under the statute. The appellate court found in the insurer’s favor on this issue, as court costs is commonly defined, and supported by Pennsylvania case law, as only including ‘docket costs.’

Date of Decision: November 1, 2013

Grossi v. Travelers Personal Ins. Co., Civil Action Nos. 769 WDA 2012, 828 WDA 2012, 2013 Pa. Super. LEXIS 3144 (Pa. Super. Ct. Nov. 1, 2013) (Mundy, J.).

NOVEMBER 2013 BAD FAITH CASES: COURT HOLDS “EXTREME DELAY” IN PROCESSING OF CLAIM AND TENDER OF PAYMENT CAN CONSTITUTE BAD FAITH UNDER THE STATUTE; ENTERS $2M JUDGMENT AGAINST INSURER, INCLUDING PUNITIVE DAMAGES AND ATTORNEYS’ FEES (Lackawanna County)

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In Davis v. Fidelity Nat’l Ins. Co., plaintiffs brought suit against the insurer alleging breach of contract and bad faith for the insurer’s failure to settle its claim under a title insurance policy for five years. Plaintiffs owned a parcel of land on which they intended to build townhomes. When they applied for the appropriate zoning and construction permits, it became obvious that the parcel of land was actually part of a neighboring title due to service defect in an earlier quiet title action. The insurer took two years to investigate the claim and accept coverage, despite the plaintiffs’ consistent inquiries as to the status of their claim. After an additional year, plaintiffs filed suit, but a settlement was not reached for two more years, resulting in a total of five years from the date of filing of the claim and the settlement.

The court found that the insurer had consistently delayed the claims review and adjustment process, and found no reasonable basis for resolution of the claim to require five years. First, the insurer took 20 months to complete its investigation and notify plaintiffs the claim was covered. Then, it took another three years for the insurer to tender what the court viewed as an inadequate offer, and such a tender was only made after suit was filed. Furthermore, the insurer was unresponsive to plaintiffs’ consistent inquiries regarding the status of their claim.

The court found the insurer knew of and was recklessly indifferent to its lack of a reasonable basis for failing to resolve plaintiffs’ claim. Although the insurer argued a lack of ill will as required by the bad faith statute, the court found the insurer’s inquiry into the true landowner’s finances and ability to defend against a meritless quiet title action, rather than settling the claim with plaintiffs, sufficient to establish ill will, improper motive, dishonesty, and self-interest. Therefore, the court held “such an extreme delay” constituted bad faith under the statute because the insurer’s actions were outrageous and recklessly indifferent to the rights of its insured. The court also found evidence of bad faith through the insurer’s failure to: make a timely offer of settlement, manage and supervise the handling of plaintiffs’ claim, elevating its own interest above that of its insured and its failure to follow its own internal claims handling guidelines, and through violations of the UIPA.

Plaintiffs were awarded $393,227.21 in compensatory damages for their breach of contract claim, as well as $1,572,909.24 in punitive damages under the bad faith statute. Plaintiff was also awarded $168,467.00 in legal fees and $96,610.04 in interest, both of which are permitted by the bad faith statute. This resulted in a total judgment of $2,062,746.59.

Date of Decision: August 15, 2013

Davis v. Fidelity Nat’l Ins. Co., Civil Action No. 2009-CV-6154 (C.C.P. Lackawanna August 15, 2013) (Minora, J.).