- Uninsured Motorist Benefits Policy Limits-They Ain't What They Used To Be
- March 23, 2011 | Author: Edward J. Tuite
- Law Firm: Marshall, Dennehey, Warner, Coleman & Goggin - Philadelphia Office
- An insurer can be held liable for delay damages in an Uninsured Motorist claim in excess of its policy limits.
- Delay damages are to be calculated on the gross jury verdict award and not on the molded verdict reflecting the insurance policy's policy limit.
The Pennsylvania Superior Court in Marlette v. State Farm Mutual Automobile Ins. Co., 2010 Pa.Super. 227; 2010 Pa.Super. LEXIS 4606, in an opinion filed December 10, 2010, extended a Christmas gift to plaintiffs' attorneys and their clients. The case arose from an automobile accident which occurred in 2002 in the city of Pittsburgh. The plaintiff, Marlette, who was a Florida resident, was stopped in traffic when a vehicle operated by an uninsured motorist impacted with his vehicle and caused him considerable injuries. Marlette's policy with State Farm provided stacked Uninsured Motorist coverage totaling $250,000.
Since the policy was silent as to arbitration, the plaintiffs filed an action in Allegheny County pursuant to the policy seeking Uninsured Motorist coverage. Liability was uncontested, and the case proceeded to trial on the issue of damages only. After a two-day trial, the jury returned a verdict in favor of the Marlettes, awarding them a total of $700,000. Upon motion of the defendant insurance carrier, the trial court molded the verdict to reflect the Uninsured Motorist policy limits of $250,000 and also credited an earlier payment made by State Farm Insurance, resulting in a net verdict of approximately $233,000. Subsequent to that verdict and reduction, the plaintiffs filed a motion seeking delay damages under the Pennsylvania Rule of Civil Procedure 238. State Farm obviously opposed this motion, arguing that the plaintiffs were not legally entitled to delay damages in excess of the $250,000 policy limit. The trial court eventually awarded delay damages in the approximate amount of $28,000 and based its award on the amount of the molded verdict of $233,000.
As a result, appeals were taken, and the matter was argued before the Pennsylvania Superior Court.
State Farm, in its appeal to the Superior Court, argued that under Pennsylvania law, it could not be held liable for delay damages in excess of its policy limits absent a finding of bad faith or policy language to the contrary. The Superior Court reviewed and analyzed various cases concerning high/low agreements and other settlements related to delay damages but ultimately held that, contrary to State Farm's argument, case law supported the determination that State Farm could be held liable for delay damages in excess of the Uninsured Motorist policy limits.
The court analyzed the language of the applicable policy of insurance and noted that the policy itself imposed a limit on damages for bodily injury only. Pre-award interest or delay damages were not specifically mentioned in the uninsured motorist context, and the court pointed out that the policy provided that delay damages were recoverable in the liability context. The court went on to discern that no language existed in the policy that could be construed as limiting liability for delay damages or pre-award interest in the uninsured motorist context. The court pointed out that State Farm failed to specifically mention interest or delay damages in the policy in question when it drafted the policy. The court relied on the old standard that, when a contract is drafted by one party and it contains an ambiguity, that ambiguity, therefore, must be construed as against the drafter of the contract.
As a result of this portion of the decision, it would be wise for carriers providing insurance policies with Uninsured and Underinsured Motorist benefits to review their language with a view towards specifically limiting their exposure for Uninsured and Underinsured Motorist coverage to the policy limit, specifically mentioning that the policy cannot be expanded by interest or delay damages.
The Superior Court then discussed the various provisions of Rule 238 and ultimately found that delay damages should be calculated not on the policy limit reduced verdict of $233,000, but upon the gross verdict of $550,000, which was the amount awarded as a gross figure to the plaintiff Marlette. Part of the $700,000 award included $150,000 for Marlette's wife on a loss of consortium claim, for which there is no contemplation of Rule 238 damages. As such, the court held that the delay damages should be calculated on the gross verdict of $550,000 and that the reduced policy limit number should not be considered by the lower court. It ordered that the matter be remanded to the lower court in order to recalculate the delay damages to be awarded to the plaintiff and against State Farm.