Tuesday, November 5, 2013

Pennsylvania Superior Court's Latest Take on Insurance Bad Faith Statute (42 Pa.C.S.A. Section 8731)

In its recent November 1, 2013 Opinion and Order in the case of Grossi v. Travelers Personal Insurance Company, 2013 Pa. Super. 284, No. 769 WDA 2012 (Pa. Super. Nov. 1, 2013 Bowes, Donohue, and Mundy, JJ) (Opinion by Mundy, J.), the Pennsylvania Superior Court affirmed in part, vacated in part, and remanded the case for entry of a corrected verdict in accordance with its Opinion in this bad faith litigation.  

Among the issues reviewed by the Pennsylvania Superior Court were whether or not the Plaintiffs have met their burden of proving by clear and convincing evidence that Travelers had allegedly acted in bad faith under 42 Pa. C.S.A. §8371 in its handling of this underinsured motorist claim.  The Court also addressed the validity of the entry of punitive damages against the carrier as well as the award of expert witness fees and costs of litigation under the bad faith statute.  

In this Grossi opinion, the Superior Court again reviewed the principals of law pertaining to its review of a verdict in an insurance bad faith claim under 42 Pa. C.S.A. §8371.   As such, this case represents this appellate court’s latest pronouncement of the standard of review for a recovery in an insurance bad faith claim.  

Applying the applicable standard of review to the case before it, the Pennsylvania Superior Court agreed with the trial court’s findings that the carrier’s establishment of a reserved amount of only $1,000.00 under the case presented was without any basis, thereby supporting the bad faith claims presented.  

The Superior Court also faulted the carrier in its rejection of the Claimant’s loss of future earnings claim given the record presented.   The carrier is also faulted for delaying or postponing an independent medical evaluation of the Claimant while the carrier monitored the Claimant’s third party claims.   It is also noted that the carrier never secured a report from an economist even after noting a need to do so.  

Overall, the Superior Court noted that, while the length of time the carrier took to investigate the claims presented was not per se bad faith, it was indeed a factor to be considered by the trial court in considering all of the circumstances of the bad faith claim.   The Superior Court found that the factors reviewed by the trial court supported the trial court’s conclusion that the Plaintiff had met their burden of proof of bad faith.  

The court also found that the punitive damages award under 42 Pa. C.S.A. §8371 was not only permissible but was within the discretion of the trial court upon a showing of bad faith.  The Superior Court found that the trial court’s entry of punitive damages award was sufficiently supported by the record and the trial court’s findings of fact.  No abusive discretion of constitutional impropriety was found in this regard.   In this matter, the award of punitive damages by the trial court approximated to a ratio of punitive damages to compensatory damages of 4:1 or 5:1, depending upon the measure of compensatory damages utilized.  

With regard to the final issue raised by the defendant carrier, the Superior Court agreed with the carrier’s position that expert witness fees should not have been awarded under the allowance of an award for "costs" under the bad faith statute.  

With regards to the issues raised by the Plaintiff on appeal, the Pennsylvania Superior Court in Grossi also revisited the issue previously raised in the case of Marlette v. State Farm [click on case name to go to that Tort Talk post and LINK to Marlette decision], as to whether the trial court erred or abused it discretion in calculating interest, or delay damages, based upon the $300,000 underlying UIM policy limits, rather than the $4 million dollar arbitration award entered.  
The Superior Court followed the Marlette decision in this regard and determined that, in accordance with Marlette, the Plaintiff’s recovery of delay damages under Pa. R.C.P.  238 is limited to the amount of the legally recoverable molded verdict as reflected by the amount insurance policy limits.  

The Superior Court also noted that, under the language of the bad faith statute, 42 Pa. C.S.A. §8371, a trial court is permitted (“may”) calculate interest upon an entire verdict as opposed to only the policy limits, but if it is not required to do so.  Ultimately, the Superior Court found that the Plaintiff had not demonstrated that the trial court’s award of interest in this matter on only the $300,000.00 UIM coverage limits constituted an abusive discretion under the case presented.    

Anyone wishing to review of copy of this decision by the Pennsylvania Superior Court in the case of Grossi v. Travelers may click on this LINK. 

I send thanks to Stuart J. Setcavage of Setcavage Consultant & Mediation in Pittsburgh, Pennsylvania for forwarding this interesting case to my attention.  

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