DECEMBER 2010 BAD FAITH CASES EVEN ABSENT BAD FAITH, DELAY DAMAGES PERMITTED BEYOND POLICY LIMITS, AND ARE TO BE BASED ON JURY VERDICT EVEN IF GREATER THAN THE POLICY LIMITS (Superior Court)
In Marlette v. State Farm Mutual Auto Insurance Company, the insured was injured in an automobile accident. He had stopped in traffic when another car hit his car, causing serious physical injuries as well as lost wages and impairment of his earning capacity. The driver at fault was not insured, and the insured was covered by the insurer under a policy that provided stacked uninsured motorist coverage of $250,000. The insured and his wife filed a suit against the uninsured driver and their insurer, and while the jury returned a verdict awarding the insureds $700,000 ($550,000 for the insured driver and $150,000 for his wife), the court molded the verdict to reflect the insureds’ uninsured motorist policy limits of $250,000.
The insureds’ then successfully appealed in an attempt to recover delay damages on the verdict. The court awarded delay damages in the amount of $28,223.76, which was calculated based on the molded verdict of $250,000. Both sides appealed this award: the insureds claimed that the award was not enough, as the court should have awarded damages based on the $700,000 verdict instead of the $250,000 molded verdict, and the insurer claimed that it should not have to pay any amount greater than the $250,000 it already was required to pay.
The court did acknowledge that under Pennsylvania law, an insurer cannot be held liable for damages in excess of its policy limits absent a finding of bad faith. However, the court noted that the policy imposed a limit on damages for bodily injury only. Pre-award interest or delay damages were “not specifically mentioned in the uninsured motorist context; however, the Policy provide[d] that they [we]re recoverable in the liability context.” Therefore, the court upheld the trial court’s awarding of delay damages to the insured.
In addition to upholding the validity of the delay damages, the court determined that, in the absence of bad faith, a determination of delay damages against an insurer should be calculated based upon the award of the jury before the amount is adjusted to the policy limits. The court therefore held that the amount of damages should be increased to reflect the jury’s award of $700,000 compensatory damages, even if the policy limits dictated that the insureds only actually recover $250,000.