ARTICLE: Calculating Delay Damages in Post-Koken Cases

The following article of mine recently appeared in the January 8, 2013 Pennsylvania Law Weekly and is republished here with permission:

Calculating Delay Damages in Post-Koken Cases


By

Daniel E. Cummins

Pennsylvania Law Weekly (January 8, 2013)

As the post-Koken auto law cases begin to proceed through trial and up the appellate ladder, more and more novel issues are being clarified by the courts. One such issue is how to handle the issue of assessing delay damages in cases where there is a tortfeasor defendant and an insurance company defendant, whether it be an uninsured motorist (UM) carrier or an underinsured (UIM) motorist carrier.

A Novel Issue

In its December 28, 2012, decision in the case of Marlette v. State Farm, (Pa. Dec. 28, 2012) (opinion by Todd, J.) (McCaffery, J., dissenting) (Orie Melvin, J., not participating), the Pennsylvania Supreme Court squarely addressed that very issue of whether, after a jury trial in a UM benefits matter, a plaintiff is entitled to delay damages on the full amount of the jury's verdict or only on the reduced verdict after the verdict had been molded downward to the amount of the uninsured motorist's policy limits available under the automobile insurance policy at issue.

After reviewing the law surrounding Pa.R.C.P. 238 delay damages, the court ruled that a plaintiff is not entitled in these types of cases to delay damages against a UM carrier on the full verdict of the jury, but rather only upon that amount that the plaintiff is legally entitled to recover from that defendant. More specifically, the court ruled that in UM cases, a plaintiff may only recover delay damages against the UM carrier under a calculation completed after the verdict is first, where necessary by an excess verdict, molded downward to the amount of the available UM limits under the policy. The court remanded the case back to the trial court for the correct calculation of the delay damages.

Excess Verdict Gives Rise to Issue

In Marlette, the plaintiffs had sued an uninsured tortfeasor and the plaintiffs' own uninsured motorist benefits carrier. The plaintiffs were covered by an uninsured motorist policy that provided total stacked UM limits of $250,000.

The jury in Marlette entered an excess verdict of $550,000 in favor of the injured party plaintiff and $150,000 in favor of the plaintiff's spouse on the loss of consortium claim. In a post-verdict ruling, the trial court molded the verdict against the UM carrier downward to the available UM policy limits of $250,000.

The Allegheny County trial court also molded the verdict downward even further to $233,306, reflecting a credit due to State Farm by virtue of a previous payment made by the carrier in the amount of $16,693.

In a post-trial motion, the plaintiffs requested that their delay damages be calculated based upon the $550,000 portion of the jury's verdict. The parties were in agreement that delay damages were not permitted with respect to a spouse's loss of consortium claim under Pennsylvania law.

The uninsured motorist carrier defendant, State Farm, asserted that the plaintiffs were not entitled to delay damages because State Farm was only legally responsible to pay up to the amounts of its UIM limits under the provisions of that policy or contract of insurance and that to award delay damages that pushed the total amount over and above the policy limits would be in violation of the applicable law.

The trial court disagreed with both parties and awarded delay damages on the reduced figure of $233,306. The delay damages that were awarded did indeed push the final verdict amount up to a number that was above the $250,000 UIM policy limits number.

On appeal, the Pennsylvania Superior Court held that the delay damages should have instead been calculated on the jury's gross verdict amount, i.e., $550,000 (excluding the loss of consortium award). The appellate court also generally ruled that the plaintiffs could recover money from the carrier over and above the UIM policy limits number.

Marlette's Rationale

As noted above, the Pennsylvania Supreme Court has reversed the lower courts' decisions in Marlette and sent the matter back to the trial court for a delay damages calculation consistent with its decision, i.e., on the reduced, molded amount and with the UM carrier being responsible for any award amounts only up to the amount of the policy limits.

The rationale for the Supreme Court's decision in Marlette was based, in part, on its reasoning set forth in its previous decision in the case of Allen v. Mellinger, 784 A.2d 762 (Pa. 2001). In Allen, the court limited the delay damages calculation to the statutory cap amount ($250,000) against a Commonwealth defendant, i.e., the amount legally recoverable from that party, as opposed to the calculation being based upon the verdict, which totaled $2.9 million.

Both the Allen court and the Marlette court emphasized that the obvious and stated purpose of Rule 238 is to compensate a plaintiff for the delays attendant in his recovery in a civil litigation matter. Rule 238 provides, in relevant part, that "damages for delay shall be added to the amount of compensatory damages awarded against each defendant or additional defendant found to be liable to the plaintiff in the verdict of a jury ... and shall become part of the verdict, decision or award."

In its opinion, the Marlette court quoted the Allen case in stating that it "defies reason" to suggest that the basis for calculating compensation for delay could be based upon anything other than that amount of a verdict that a defendant was actually responsible to pay to the plaintiff.

The court in Marlette further stated that, because the law of Pennsylvania limited a plaintiff's recovery in a UM case to the amount of the UM limits agreed to under the applicable contract of insurance, there could be no valid complaint of a delay for the plaintiff related to receiving amounts in excess of those limits, as the plaintiff was not entitled to receive those excess amounts in this litigation in any event.

According to Marlette, it therefore followed that if there is no valid claim for a delay in receiving those excess amounts above the policy limits under the applicable law, then there is no basis to include those excess amounts in the calculation of delay damages under the terms of Rule 238.

In other words, if there was only $1,000 in a bank account, would there be any reason for a bank to pay interest to the account holder for any amounts above that? More simply put, justice delayed is justice denied only to the extent that justice must be paid.

Open Questions Remain

Given the courts' practice of generally deciding UIM and UM issues hand-in-hand, it is anticipated that UIM cases will be handled in a similar fashion, i.e., delay damages will be calculated based upon a reduced verdict molded down to the amount of the available UIM limits in a given case.

In a post-Koken case, the issue may become whether there should be two separate amounts of delay damages depending upon which defendant is paying those damages.

In other words, an open issue remains as to whether there should be delay damages assessed on the full verdict against the third-party tortfeasor defendant and a separate delay damages assessment against the UIM carrier based only upon a downward-molded verdict against the UIM carrier to the amount of the UIM limits. It would appear that separate calculations may be warranted under Marlette's rationale that delay damages to be paid by a particular party should be based upon the amount that party is legally responsible to pay.

Also, under that same rationale, it appears that the credit due to the UIM carrier in the amount of the tortfeasor's liability limits should also be applied as a further reduction, or downward molding, of the verdict before the delay damages calculation is begun. In other words, another open issue remains as to whether a UIM carrier's delay damages assessment only be applied to those damages left against that carrier after the verdict is molded down to the available policy limits amount and after the third-party credit in the amount of the liability limits due to the UIM carrier is applied.

Yet another issue that may come to light in the future is that where the new Fair Share Act (applicable to claims arising on or after June 28, 2011) comes into play, there are multiple tortfeasor defendants involved in the auto accident trial, and each tortfeasor defendant is assigned a proportionate share of the percentage of liability.

In such a scenario, will each tortfeasor defendant's delay damages be assessed against only that percentage of the liability assigned to each tortfeasor as that percentage is the only portion of the verdict that is legally recoverable by the plaintiff against that tortfeasor? Also, once the calculation against the tortfeasors is somehow figured out, what would be the appropriate process of separately calculating the delay damages against the UIM carrier defendant?

Sometimes it seems that the more issues are resolved, the more others are created. That, my friends, is the beauty of the law (and what keeps us relevant).

Daniel E. Cummins is a partner and civil litigator with the Scranton law firm of Foley Comerford & Cummins. His civil litigation blog, Tort Talk, may be viewed at www.torttalk.com.