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The Philadelphia Court of Common Pleas, Commerce Court, issued a written opinion relative to the cross appeals of plaintiff and defendant of the court’s order denying plaintiff’s post trial motions for pre-judgment interest, punitive damages and attorneys fees.  The court had previously granted defendant’s motion for remittitur and ordered plaintiff’s damages reduced from $4 million to $2,049,000.  Plaintiff also appealed that order.

The case arises from plaintiff’s ownership of an office building, which defendant insured.  Plaintiff leased the building to Medic.  Medic made structural changes to  the building to accommodate a CT scanner and MRI unit.  Plaintiff also spent $1.4 million to renovate the building to accommodate this equipment.  Upon termination of the lease, Medic was required to either leave the equipment in working order, replace it with like kind or restore the building to its original conditions.

In November 1998, Tenant took over Medic’s lease with Plaintiff.  In November 2000, Tenant notified Plaintiff it planned to terminate the lease on March 30, 2001.  When a principal of the Plaintiff visited the building on March 15, 2001, Tenant had abandoned the property but did not remove the MRI unit and CT scanner.  Tenant had left the property in a shambles and the building was then vandalized and the equipment stolen.  Tenant ceased paying rent on April 1, 2001.  Plaintiff attempted to re-let the building, but was unsuccessful.

Plaintiff filed suit against Tenant for damages, but before it was able to recover from this suit, the property was foreclosed upon.  At sheriff’s sale, the building sold for $1.8 million.  On May 30, 2003 the jury awarded damages to the Plaintiff, but the amount awarded was well short of  the amount necessary to cover Plaintiff’s losses.  Plaintiff, therefore submitted a claim to Defendant insurance carrier.

Defendant denied coverage and Plaintiff instituted a claim for bad faith and damages.  A jury awarded Plaintiff $4 million dollars in damages.  A bench trial was held regarding Plaintiff’s bad faith claims and the court held that although it felt the Defendant had not acted appropriately, it denied Plaintiff’s bad faith claim.

In post trial motions, the court found that Defendant was not entitled to a new trial based on Plaintiff’s expert’s testimony regarding Defendant’s alleged bad faith.  In addition, the court held that Defendant was not entitled to a new trial based on the jury’s award of $4 million in damages although Plaintiff only asked for $3.3 million.

The court found that in a first-party insurance claim, the insured Plaintiff is not denied the right to obtain consequential damages.  The court relied on the fact that the defendant was so close to acting in bad faith that Plaintiff was entitled to consequential damages.

In addition, the court held that Plaintiff’s claim was not barred for failure to promptly notify Defendant of the loss.  Although the Plaintiff waited over a year to notify Defendant of the loss, the court found that the late notice did not prejudice Defendant.

The court also found that Plaintiff’s claims were not barred for failure to institute suit within the two year time limit specified by the policy as Plaintiff was induced to forbear bringing a lawsuit within the two year period because Defendant was still investigating the claim.

Finally the court found that Plaintiff was not entitled to pre-judgment interest, punitive damages or attorneys fees because the damages were not specific enough to warrant an award of pre-judgment interest and because the court did not make a finding of bad faith.

Date of Decision:  April 26, 2007

Prime Medica Associates v. Valley Forge Insurance Company, November Term 2004, No. 621, No. 0621, 2007 Phila Ct. Com. P. LEXIS 122  (C.C.P. Philadelphia April 26, 2007)(Sheppard, J.) (Commerce Program)