In Gallatin Fuels, Inc. v. Westchester Fire Insurance Company, the U.S. District Court for the Western District of Pennsylvania granted in part and denied in part defendant’s motion for review of the jury’s punitive damages award, which included a request for a due process hearing and specification of the jury’s factual findings on which the court’s legal finding on fortuitous loss was based.  Because the carrier cited no authority suggesting the court was required to conduct a due process hearing in connection with its punitive damages review, the court found it unnecessary and decided it would only further delay resolution.  Defendant’s request for additional briefing on the punitive damages issue was likewise denied, as such request directly contravened the timely objectives of a previous order.  However, the court determined, considering the totality of the circumstances, that the jury’s punitive damages award of $20 Million was out of proportion to the reprehensibility of defendant’s conduct.  Instead, the court found that a more modest punishment, in the amount of $4.5 million, would have satisfied the State’s legitimate objectives.  The court reasoned (1) that the jury’s award of $20 million was much higher than the ratio that the United States Supreme Court cites as typically appropriate, and (2) was also disproportionate under the facts and circumstances in the case.

Date of Decision:  March 28, 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 13577 (W.D. Pa. Mar. 28, 2006) (Ambrose, C.J.) 

In Jurinko v. Medical Protective Company, a dermatologist and pathologist had failed to diagnose Jurinko’s skin cancer.  Jurinko brought suit in the Philadelphia Court of Common Pleas.  The same carrier provided a single lawyer to represent both doctors in the early part of the case, even though there were potential cross claims and a conflict of interest.  One doctor had no liability, but the other was found liable for $2.5 Million by the jury, far in excess of his available insurance.  He assigned his bad faith claim to Jurinko, and the bad faith suit proceeded to trial in federal court.  The federal jury awarded $1.6 Million in compensatory damages and $6.25 Million in punitive damages.  The trial judge refused to grant the carrier’s post trial motions.  The Federal Judge found there was sufficient evidence for the jury to have found bad faith because of failure to settle and/or by knowingly appointing a lawyer with a conflict of interest to represent two insureds. Among other things, the carrier’s employee testified that the carrier was “fully aware that it was unethical [to assign one lawyer] and would create a conflict of interest, and that it did so to save money.” The Federal Court applied the Supreme Court of the United State’s punitive damages due process analysis, and concluded that the conduct was reprehensible because of the known effect the failure to settle would have on the doctors vulnerable finances, the repeated failure to make good faith efforts to settle, and the intentional nature of the conduct.  Further, under the circumstances, a punitive damages award of less than a 4 to 1 ratio to compensatory damages did not violate due process.

Date of decision:  March 29, 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 13601 (E.D. Pa. Mar. 24, 2006) (Rufe, J.)

In Jurinko v. Medical Protective Company, a dermatologist and pathologist had failed to diagnose Jurinko’s skin cancer.  Jurinko brought suit in the Philadelphia Court of Common Pleas.  The same carrier provided a single lawyer to represent both doctors in the early part of the case, even though there were potential cross claims and a conflict of interest.  One doctor had no liability, but the other was found liable for $2.5 Million by the jury, far in excess of his available insurance.  He assigned his bad faith claim to Jurinko, and the bad faith suit proceeded to trial in federal court.  The federal jury awarded $1.6 Million in compensatory damages and $6.25 Million in punitive damages.  The trial judge refused to grant the carrier’s post trial motions.  The Federal Judge found there was sufficient evidence for the jury to have found bad faith because of appointing a lawyer with a conflict of interest. Among other things, the carrier’s employee testified that the carrier was “fully aware that it was unethical [to assign one lawyer] and would create a conflict of interest, and that it did so to save money.” Plaintiffs were permitted to put on expert testimony relating to defense counsel’s malpractice.  The malpractice was not per se evidence of bad faith, but the point of the evidence was to establish there was an irreconcilable conflict and the carrier had a duty to provide separate counsel, knowing that it was unethical for counsel to represent both of its insureds.  The expert “testified that this breach of [the carrier’s] duty to provide an adequate defense for its insureds was an act of bad faith,” which the court found central to the case.

Date of decision:  March 29, 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 13601 (E.D. Pa. Mar. 24, 2006) (Rufe, J.)