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Recent Decisions - Case Summaries
Zelenak v. Mikula
2006 PA Super 317
Decided November 8, 2006
County courts have no authority to promulgate local rules allowing for the payment of actual costs to a prevailing party. Only record costs may be recovered.
Background and Holding: Defendant in a negligence action appealed from an Erie County Court of Common Pleas Order granting costs, which included the costs of two deposition transcripts. The county court had awarded the costs of the transcripts pursuant to a local rule of court. The Superior Court stated that the local rule allowed a party to be taxed for the costs of depositions transcripts for no reason other than it lost in court. The Superior Court held that 42 Pa.C.S. §1726, vesting the Pennsylvania Supreme Court with the power to set the standard governing awards of costs, does not permit deposition costs to be assessed. The Court further held that the trial court overstepped the boundaries of 42 Pa.C.S. §323, which allows county courts to promulgate local rules of practice and procedure. The Superior Court thus held invalid the local rule of the Erie County Court of Common Pleas allowing deposition costs to be taxed to the losing party. The Court also noted the difference between record costs (such as filing fees), which are the costs of proceeding in court and are recoverable, and actual costs (such as transcript costs and witness fees), which are not recoverable absent a violation of the rules of court.
Any questions about this case may be directed to Corey J. Adamson at 717-232-7678 or cadamson@tthlaw.com.
Javorski v. Nationwide Mut. Ins. Co.,
3:06-CV-1071
(M.D. Pa., Nov. 30, 2006)
(Richard P. Conaboy, U.S.D.J.)
Judge rules that insurer may assert defense of reverse bad faith against its insured.
Facts and Disposition of Case: Plaintiff commenced an action in state court against Nationwide for breaching its duty of good faith in handling Plaintiff's underinsured motorists (UIM) claim. Nationwide removed the case to federal court and filed an Answer and Affirmative Defenses to Plaintiff's Complaint. As its Ninth Affirmative Defense, Nationwide asserted a claim of "reverse bad faith" against Plaintiff -- purportedly because of Plaintiff's alleged failure to cooperate with Nationwide in Nationwide's investigation and evaluation of Plaintiff's UIM claim.
Plaintiff moved to strike the claim, contending that Pennsylvania law does not recognize a claim by an insurer against an insured for reverse bad faith. The Honorable Richard P. Conaboy denied Plaintiff's motion to strike, holding that factual and legal issues exist with respect to Nationwide's "defense" of reverse bad faith which may certainly be borne out in discovery.
Practice Pointers: Pennsylvania's bad faith statute, 42 Pa.C.S.A. sec. 8371, speaks only to the bad faith conduct of an insurer. But previous federal courts have recognized the mutual obligations of good faith which run between and insurer and its insured. The late District Judge Robert S. Gawthrop, affirmed by the Third Circuit Court of Appeals, ruled that while a reverse bad faith claim could not be premised on Pennsylvania's bad faith statute, it may be asserted under a common law breach of contract theory. Keefe v. Prudential Prop. & Cas. Ins. Co. , 203 F.3d 218 (3d. Cir. 2000). In Jung v. Nationwide Mut. Fire Ins. Co. , 949 F. Supp. 353 (E.D. Pa. 1997), the District Court held that an insured's conduct could be considered to allay a finding of bad faith on the part of an insurer. Judge Conaboy's recent ruling seems in line with these decisions.
The courts thus far have left for another day the question of whether an insurer may use a claim of reverse bad faith against an insured as a sword (to be raised in a counterclaim) rather than simply as a shield (as an affirmative defense to a bad faith claim). In any event, careful consideration must be given in each case before such a claim or defense is asserted.
Any questions about this case may be directed to Brooks Foland at 717-255-7626 or bfoland@tthlaw.com
Budtel Associates v. Continental Cas. Co.
2006 PA Super 370
Decided: December 19, 2006
Superior Court Adopts "Most Significant Contacts" Choice of Law Test for Insurance Policies, Rejecting Automatic Application of Law of State Where Policy Issued
The Pennsylvania Superior Court adopts a choice of law analysis for insurance policy disputes which first determines whether there is a conflict between the two states’ laws. If there is no conflict, further analysis is unnecessary. If a conflict is found, which state has the most significant contacts or relationships with the insurance contract is considered. The court rejects an approach analyzing whether the insurance contract was formed or delivered in a state. The court then holds that the insured did not acquire the damaged property which was the subject of a first party property damage claim – a separate joint venture entity did, and that entity was not insured under the policy.
Background: Comptel was a New Jersey corporation insured by Continental. Comptel entered into a joint venture agreement with Budtel, a limited partnership, in which a new entity, Budtel-Comptel was created. The agreement provided that each contracting entity would retain its individual identity but that Budtel-Comptel would be able to use the assets of both. A pipe burst at a warehouse owned by Budtel, and Comptel made a claim under its Continental policy (under a “newly acquired property” provision) which was denied. All three entities sued Continental and filed a motion for summary judgment, which the trial court granted. Continental appealed.
Holding: The court initially addresses the choice of law involving a policy dispute. The trial court relied on the Griffith line of cases which first analyzes whether there is a conflict between the two states’ laws. If there is no conflict, further analysis is unnecessary. If a conflict is found, then which state has the most significant contacts or relationships with the policy is considered. Continental argued that the law of the state where the insurance policy is delivered controls (the Crawford rule). The Crawford rule is followed by the Third Circuit, based on reasoning that the Pennsylvania Supreme Court has not spoken on the issue. However, the Superior Court adopts the Griffith rule as controlling (rejecting its own 2003 decision following Crawford as an anomaly). The court then turns to the coverage issues, holding that Comptel did not acquire the right to use the warehouse, and Comptel had no ownership interest in that right – only Budtel-Comptel, a separate entity, did.
Any questions regarding this case can be directed to Paul Walker at 717-441-7061 or pwalker@tthlaw.com
Newspaper Holdings, Inc. v New Castle Area School District
2006 Pa. Commw. LEXIS 625
(November 22, 2006)
Failure to Disclose Terms of Settlement by Governmental Entity under Right to Know Law Results in Award of Attorneys Fees and Litigation Costs
Governmental entities are often hesitant to disclose settlements that they enter into as a result of litigation because of the often undeserved adverse publicity that it may create or the potential of encouraging additional frivolous litigation. As a result, some governmental entities may attempt to circumvent the disclosure requirements of the Right to Know Law. The Commonwealth Court took a dim view of this School District’s efforts to keep its settlement confidential and affirmed the award of reasonable attorneys fees and litigation costs of $8,820.10 incurred by the newspaper to compel disclosure of the settlement under the Right to Know Law.
In this case, the School District entered into a settlement with various students who had filed a civil rights action against it arising out of the school’s dress apparel policy. The Court noted that the School District was insistent that the terms of the Settlement Agreement include a confidentiality clause and an agreement that the record would be sealed. Subsequently, the newspaper filed an action to require disclosure of the settlement and a motion to unseal the documents. These proceedings resulted in the Agreement being disclosed. The School District, however, argued that is should not be compelled to pay attorneys fees and litigation costs to the newspaper because it promptly disclosed the Settlement Agreement when the sealing of the records was lifted. The Commonwealth Court rejected that argument. The Court specifically declared that “a school district may not contract away the public’s right to access to public records because the purpose of access is to keep open the doors of government, to prohibit secrets, to scrutinize the actions of public officials and to make public officials accountable in their use of public funds.” Based on the language of this decision, the Court clearly was critical of the School District’s role in requesting the confidentiality clause and the sealing of the record.
Accordingly, other governmental entities should also be hesitant to take actions that might deny the public access to settlement records and agreements under the Right to Know Law.
Any questions regarding this case can be directed to Dave Schwalm at 717‑255‑7643 or dschwalm@tthlaw.com
American International Ins. Co. v. Vaxmonsky
2006 PA Super 373
Decided: December 21, 2006
Superior Court voids UIM rejection form which omits the word "all" from statutorily proscribed language.
Background: Vaxmonsky signed a UIM rejection form in 1993 and did not pay premiums for UIM coverage for successive policy years. Vaxmonsky was injured in an auto accident in 2001, and American denied the claim, citing the signature on the UIM rejection form. In the subsequent declaratory judgment action, the trial court found the UIM form to be invalid because it did not match the language of section 1731(c) of the MVFRL exactly, thus entitling Vaxmonsky $400,000 of coverage.
Holding: American appealed, arguing that the omission of a single word (“all”) from the phrase “all losses and damages” does not invalidate the rejection if the insuring knowingly waived his right to coverage. American contended that the 1731(c) form is irrelevant to 1731(c.1)’s requirement of specific compliance. The Superior Court rejected this argument and also rejected American’s reliance on cases involving declining stacking coverage. The court noted that the Pennsylvania Supreme Court has emphasized that valid rejections of UIM coverage (as opposed to reduction of coverage) must use the specific statutory language. The court held that American made the UIM form more ambiguous, however slightly, by restricting the scope of coverage from “all underinsured losses and damages”, to simply “underinsured losses and damages.” By deleting this “expansionary and clarifying” word, American failed to include all of the required statutory language. The court also gave deference to the Insurance Department’s own interpretation, which requires the exact statutory language. The court reached their holding even though Vaxmonsky did not allege unawareness, paid lower premiums, and despite the UIM rejection form stating “NO UNDERINSURED MOTORISTS BODILY INJURY COVERAGE IS PROVIDED BY THIS POLICY.”
Any questions regarding this case can be directed to Paul Walker at 717-441-7061 or pwalker@tthlaw.com and Brooks Foland at 717-255-7626 or bfoland@tthlaw.com
Jenkins v. Wolf
2006 Pa.Super. 321
Decided: November 9, 2006
Superior Court holds that a pedestrian in a crosswalk had a “superior right of way” to a motorist turning on a green light.
Background: Rochelle Jenkins was struck by a passing automobile driven by Robert Wolf. The accident occurred while Jenkins was attempting to cross a street at an intersection. The evidence was in conflict as to whether Jenkins was within a crosswalk when she was struck. The case proceeded to trial and the questions of negligence and comparative negligence were submitted to the jury which returned a verdict finding that the negligence of Ms. Jenkins significantly outweighed that of Mr. Wolf. Judgment on the verdict was entered for the defendant. On appeal, the issue centered upon the trial court’s refusal to charge the jury on negligence per se. At trial, such a charge was requested by the Plaintiff based upon 75 Pa.C.S.A. § 3112 which requires motorists to yield the right of way to pedestrians lawfully in an intersection or an adjacent crosswalk. The trial judge refused to give a negligence per se charge on the grounds that the allocation of negligence was a jury question.
Holding: The Superior Court held that it was fundamental error for the trial judge to refuse to charge on negligence per se because the absence of this instruction left the jury with the impression that each party had the same obligation to look for the other - which is not true where a pedestrian is in a crosswalk. The Court stated that the pedestrian in such cases has a “superior right of way.” Because the jury may have allocated liability differently had the per se charge been given, the case had to be remanded for a new trial.
Note: The most significant item in the opinion, for which it is certain to be cited by plaintiffs, pertains to the so-called “superior right of way” of a pedestrian. However, the statute cited in the Jenkins opinion for this proposition, 75 Pa.C.S. § 3742, does not appear to apply to this factual situation (traffic signals not in place or not operational) and this statute has a reciprocal obligation on the pedestrian not to leave a position of safety and walk into the path of a vehicle.
Any questions regarding this case can be directed to Kevin McNamara at 717-237-7132 or kmcnamara@tthlaw.com
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