A [Drunk] Wolfe at the Door (handling covered combined with uncovered claims) Thomas, Thomas &...
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A [Drunk] Wolfe at the Door (handling covered combined with uncovered claims) Thomas, Thomas & Hafer, LLP Peter J. Speaker, Esquire Joshua J. Bovender, Esquire
A [Drunk] Wolfe at the Door (handling covered combined with uncovered claims) Thomas, Thomas & Hafer, LLP Peter J. Speaker, Esquire Joshua J. Bovender,
A [Drunk] Wolfe at the Door (handling covered combined with
uncovered claims) Thomas, Thomas & Hafer, LLP Peter J. Speaker,
Esquire Joshua J. Bovender, Esquire
Slide 2
Overview Wolfe v. Allstate (Pa. 2014) Allstates Argument
Holding and Other Authority How to Avoid Bad Faith
Hypothetical
Slide 3
Lessons on Drunk Driving
Slide 4
Wolfe v. Allstate (Pa. 2014) Facts of Underlying Action: MVA IV
was drunk Punitive Damages $50,000 limits $25,000 Demand $1,200
Offer
Slide 5
Allstate v. Wolfe (Continued) Verdict: $15,000 Compensatory
Damages $50,000 Punitive Damages Bad faith case assigned Assignment
of bad faith claim upheld
Slide 6
Allstate v. Wolfe (Continued) More Important Issue: are the
punitive damages in the underlying case recoverable as
consequential damages in the bad faith case? Most Important Issue:
is it bad faith to refuse to pay extra in order to protect insured
from an uncovered (punitive damages) claim? I.e., should evidence
of an uncovered claim/award be admissible in a bad faith
failure-to-settle case?
Slide 7
Allstate v. Wolfe (Continued) No express Supreme Court holding
on bad faith issues other than assignment But Trial Court Motion in
Limine: Evidence of punitive damages award found admissible to
prove damages on bad faith claim The damages sought to be
reimbursed here represent damages suffered as a result of Allstates
pre-trial failure to evaluate the compensatory claim and make
reasonable attempts to negotiate a settlement of the same.
Plaintiff is not seeking the recovery of punitive damages per se,
but instead the damages stemming from Allstates alleged breach of
contract and bad faith conduct prior to the trial in the Underlying
Action.
Slide 8
Allstate v. Wolfe (Continued) Judge Jones Approach: If an
insurer acts in bad faith, and the bad faith exposes the insured,
or heightens the insureds exposure to personal liability, then
courts should not limit the insureds ability to recover for
consequences resulting from the bad faith
Slide 9
Allstates Argument The punitive award is completely separate
from the compensatory award and the existence of the punitive award
has no bearing on the handling of the compensatory claim. Allstates
Brief in Support of Motion in Limine to Exclude Evidence of
Punitive Damages Award [Doc. 64, p.4].
Slide 10
Judge Jones Ruling Because we have found that the $50,000 award
against Zierle in the Underlying Action is a compensable item of
damages in the case sub judice, we cannot agree with Allstates
contention that evidence related to the same is irrelevant and
inadmissible as such. The Plaintiff will be permitted to present
evidence of the manner in which Zierle was harmed by Allstates
failure to negotiate a settlement of the compensatory portion of
the litigation in good faith, and the damages that he suffered as a
result thereof. Jones Opinion [Doc. 93, p.8].
Slide 11
No Pennsylvania Law Directly on Point, But See When an insurer
owes or undertakes the duty to defend its insured in a suit seeking
both insured and uninsurable damages, it has the duty to conduct
settlement negotiations in good faith as part of that defense. For
one thing, this includes warning the insured of any potential
exposure to him and apprising him of settlement opportunities
within a reasonable time after they are presented. Magnum Foods,
Inc. v. Cont'l Cas. Co., 36 F.3d 1491, 1506 (10th Cir. 1994).
Slide 12
Magnum Foods (Continued) We hold that here, where both
compensatory and uninsurable punitive damages are sought, and CNA
assumed the defense of the entire suit under the obligations of the
policies, the presence of the punitive claim did not absolve CNA
from its obligation of good faith in handling the entire case. That
duty of good faith does not include settlement or a contribution to
settlement by CNA of the uninsurable punitive claim. Magnum, 36
F.3d at 1506.
Slide 13
Magnum Foods (Continued) [However,] the jury should be
instructed... that the jury should not consider Magnum's payment of
$600,000 to settle the... punitive damage judgment in determining
any compensatory award on the bad faith claim, and the jury should
be told that Oklahoma law prohibits shifting such a punitive
liability to an insurance company. The jury should also be told
that CNA's duty of good faith and cooperation with Magnum did not
obligate CNA to make more than a reasonable payment to settle the
covered compensatory damages liability to avoid the uninsurable
punitive exposure of Magnum. Magnum, 36 F.3d at 1506.
Slide 14
Johnson v. Allstate Ins. Co., 262 S.W.3d 655 (Mo. Ct.
App.2008). DUI Johnson had $50K liability limit, which Allstate
failed to offer before demand expired. Consent judgment for $5M +
$1.5M punitive. Johnson assigned 90% of bad faith claim in exchange
for protection from judgment. Bad Faith judgment: $1.63M. = DUI
Driver himself receives $1.63M!
Slide 15
Allstate's failure to... advise Davis of the demand, his likely
exposure for an excess judgment, and his right to retain counsel,
are all circumstances supporting a reasonable inference that
Allstate's refusal to settle was in bad faith. This evidence was
sufficient to support the submitting of the... bad faith refusal to
settle claim to the jury. Johnson, 262 S.W.3d at 665. Paid to DUI
(Johnson)
Slide 16
Free Lessons on Drunk Driving
Slide 17
Avoiding Bad Faith Covered & Uncovered Claims Best defense
is Good Faith ROR & recommend retention of private counsel
Reasonable, thorough evaluation of covered and uncovered claims by
defense counsel communicated to insured and insurer
Slide 18
Avoiding Bad Faith (Continued) Provide insured with opportunity
to participate in settlement
Slide 19
Hypothetical $50,000 Policy Limits DC evaluation of $30-40,000
in compensatory damages DC evaluation of $50-100,000 in punitive
damages $50,000 Demand How do you handle?