In Sikora v. State Farm Insurance Company, a person injured in a motor vehicle accident sought coverage for an underinsured motorist claim.  A denial letter was sent to his counsel stating that, after review of the policy, he did not “qualify as an insured” and “we will not be extending any underinsured motor vehicle coverage settlement offers to him.”  The letter asked for any other documentation that the counsel wanted to submit on the issue, something that never occurred.  The plaintiff admits that this letter denied coverage; however, it claims that a second letter, sent 20 months later, stating that the carrier had previously advised there was no coverage and again asking for documentation was the “official denial” and thus the date of the bad faith’s claim accrual for statute of limitation purposes. 

Under controlling law, a cause of action for statutory bad faith begins to accrue when the insurer first provides definite notice of a refusal to indemnify or defend.  The Court found that no reasonable jury could find that the second letter was an official denial and that the earlier letter was not the first denial.  It dismissed the claim as untimely.  It rejected the long discredited idea that the second letter somehow made it a continuing denial or was a separate act of bad faith that started the clock anew. 

Date of Decision:  August 4, 2009

Sikora v. State Farm Ins. Co., CIVIL ACTION NO. 08-1366, UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, 2009 U.S. Dist. LEXIS 67621 (W.D. Pa. Aug. 4, 2009) (Conti, J.)

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.   

 

In Young Sook Pak v. Alea London Ltd., the case involved commercial property insurance and a wall collapse on the insured’s grocery store.  There were actually two carriers writing half of the insurance each, their agent who bound the policies, an adjustor hired by their agent to investigate the case and an engineer hired by that adjustor to determine the source of the collapse.  The policy covered wall collapses if the collapse was caused by “decay that is hidden from view”, however, if “the presence of such decay is known to the insured prior to collapse” there would be no coverage. 

The court went through the adjustor’s investigation at length, as well as other investigation into the collapse, including plaintiff’s expert and an engineer sent out by the City of York prior to the parties even sending their own experts. The focus was on the causes and visibility of any deterioration in the wall that could be associated with the collapse.  The experts varied in their theories on the collapse and/or the visibility of the problems associated with the collapse.  The building’s history showed that the insured’s had done maintenance in the past when face with a water leak in their roof, being as much to the point of how they would have reacted if they did have knowledge as to any sort of causation.

The insureds did not speak English well and the investigator did not get an interpreter.  The insurers’ engineer said she spoke to the insureds about their knowledge of the wall’s history, but they denied such a conversation.  Based solely on this engineer’s report as to cause and these communications, coverage was denied.  The denial letter cited various policy exclusions, and stated that the collapse was not a covered peril.  This last point was clearly incorrect as there was additional coverage in the policy for a collapse, as stated above.  In bringing a summary judgment motion, the carriers evidently conceded that this part of the policy governed, rather than the exclusions.

The Court denied summary judgment on the insured’s breach of contract claim.  Although the insureds had the burden to show that the exception to coverage did not apply, the Court found that it could not grant summary judgment as the issue of the insured’s knowledge of the wall’s decay could not be determined conclusively on the record before the Court.  The insureds would be held to an objective test of whether a “reasonable insured under such circumstances would have seen or otherwise been aware of the decay.”

As to the Bad Faith claim, the Court likewise declined to grant summary judgment.  The focus of the bad faith claim was on the investigation.  The Court stated that “bad faith can exist when an insurance company fails to conduct a meaningful investigation of a claim, or where the insurer's evaluation is less than honest, intelligent and objective.” The insureds arguments on investigation boiled down to:  “(1) Defendants conducted an investigation without consideration of the coverage of the insurance policy; (2) they failed to conduct a  meaningful investigation regarding whether decay was visible to Plaintiffs; (3) they made no effort to meaningfully communicate with Plaintiffs; and (4) Defendants blindly relied on a single expert witness.” The Court concluded that “a reasonable jury could decide, on the basis of clear and convincing evidence, that Defendants acted in bad faith by (1) applying the wrong sections of the insurance contract, and (2) failing to conduct a meaningful investigation regarding whether the decay of the collapsed wall was visible to the Paks prior to the collapse.”  This did not mean the insureds would prevail; just that they would have their day in court to adduce evidence that could meet their burden.

Date of Decision:  July 30, 2009

Young Sook Pak v. Alea London Ltd., CIVIL NO. 1:08-CV-0824, UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA, 2009 U.S. Dist. LEXIS 65640  (M.D. Pa. July 30, 2009) (Rambo, J.)