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.)

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.

 

In Kraut v. Farmers New Century Insurance Company, the U.S. District Court for the Eastern District of Pennsylvania rejected the insurer’s argument that Plaintiff’s insurance claims were excluded.  Specifically, Plaintiff purchased two separate insurance policies after being advised he could not obtain coverage for both of his cars under the same policy.  Plaintiff also elected to retain “stacking of his underinsured motorist coverage,” which included $100,000 in each policy.  After Plaintiff made a claim for underinsured benefits, the carrier argued that the coverages of the two policies could not be stacked, and that the maximum coverage was $100,000.  This argument was based upon a “household exclusion” precluding stacking of coverages; however, the court determined that this provision had no application, since plaintiff was the injured party, and plaintiff was the owner of both of the vehicles insured under the respective policies.  The court accordingly found the above allegations clearly sufficed to allege a basis for bad faith damages, thus denying Defendant’s Motion to Dismiss.

Date of Decision:  June 21, 2006

Kraut v. Farmers New Century Ins. Co., United States District Court for the Eastern District of Pa, No. 06-CV-01086-JF, 2006 U.S. Dist. LEXIS 41944 (E.D. Pa. June 21, 2006) (Fullam, S. J.)