Pennsylvania Superior Court Vacates $21 Million Verdict
In Berg v. Nationwide Mutual Insurance Company (NMIC), a Pennsylvania Superior Court panel that agreed to reconsider its decision to vacate a high-profile $21 million verdict has largely reinstated the result in a new, only slightly revised, opinion.
On September 4, 1996, Plaintiff, Sheryl Berg was driving her “leased” 1996 Jeep Grand Cherokee when she was hit by another vehicle. NMIC’s first damage estimate concluded that Berg’s vehicle should be “totaled” at a value of $25,000. NMIC sought a second estimate, which concluded that the vehicle could be repaired with a cost saving of half the expense. The repair process took four months to complete. Berg drove the vehicle under protest for almost two years claiming that it was not crashworthy. When Berg satisfied her lease payments, NMIC determined that the vehicle was “totaled” and paid the bank $18,000.00 to settle the claim and obtain ownership of the vehicle.
Berg sued NMIC and the dealership (Lindgren) for violations of the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), and insurance bad faith. The jury awarded Berg $1,925.00 in compensatory damages from Lindgren and $295.00 from appellant for the UTPCPL violation. The second phase, a bench trial on UTPCPL treble damages and bad faith, resulted no treble damage award, and a directed verdict in favor of NMIC on the bad faith claim.
Berg appealed, the Superior Court then dismissed the appeal on a procedural issue, but the Supreme Court reversed the Superior Court’s decision and remanded the case back to the Superior Court for disposition. After remand, the Superior Court concluded that the trial court erred in directing a verdict on plaintiffs’ bad faith claim. Berg v. Nationwide Mut. Ins. Co., Inc., 44 A.3d 1164 (Pa. Super. 2012) (“Berg II”) and remanded the case for a new trial on the bad faith claim.
During the second trial, Berg argued, and the trial court found, that NMIC acted in bad faith by repairing the Jeep rather than declaring the Jeep a total loss and compensating Berg for its value at the time of the loss. While the parties agreed that Lindgren did poor repair work, they disputed NMIC’s role in and knowledge of the faulty repair job. In summary, the parties disputed (1) whether NMIC overrode Lindgren’s initial total loss appraisal in order to save money; (2) whether NMIC forced Lindgren to repair the Jeep knowing the Jeep could not be restored to its pre-accident condition; (3) whether NMIC allowed Lindgren to return the Jeep to Berg knowing the Jeep was not crashworthy and therefore not safe to drive; and (4) whether NMIC’s subsequent conduct—including its conduct of this litigation—was an elaborate cover-up of its prior bad faith conduct. Ultimately, the court ordered NMIC to pay $18 million in punitive damages and $3 million in attorney’s fees.
Relative to the first issue, the Superior court concluded that the evidence did not support the trial court’s finding that NMIC vetoed the total loss appraisal. Industry standards provided for second opinions following total loss estimates. Addressing the second issue, the Superior Court determined that the record, viewed in a light most favorable to Berg did not support a finding by clear and convincing evidence, that the Jeep was beyond repair. In fact, the majority of the evidence showed that the Jeep was repairable. With respect to the third issue, while the Superior Court determined that the record supported the trial court’s finding that the vehicle was not crashworthy, it did not support the finding that NMIC knew this fact and acted with reckless disregard of its obligations to its insured in permitting Lindgren to return the Jeep to Plaintiffs. More specifically, the Court found that the record contained no evidence that the extent of the faulty repairs would have been evident during a visual inspection when the repairs were nearly complete, much less that NMIC knew or should have known about the faulty repairs. Finally, the Court concluded that the record did not support a finding that NMIC failed to attempt to resolve the dispute in the early stages of litigation, or that it refused to have the Jeep repaired or purchased. The facts were that NMIC offered to repair the Jeep to make it crashworthy, or they would purchase it.
In addition to reversing the trial court, the Superior Court took exception to the trial court’s dissertation, which provides:
[W]hat [p]laintiff, and more importantly, what lawyer in his right mind will compete with a conglomerate insurance company if the insurance company can drag the case out 18 years and is willing to spend $3 million in defense expenses to keep the policyholder from getting just compensation under the contract. Its message is 1) that it is a defense minded carrier, 2) do not mess with us if you know what is good for you, 3) you cannot run with the big dogs, 4) there is no level playing field to be had in your case, 5) you cannot afford it and what client will pay thousands of dollars to fight the battle, 6) so we can get away with anything we want to, and 7) you cannot stop us.
The Superior Court reaffirmed that the question before the trial court was whether Berg proved, by clear and convincing evidence that NMIC acted in bad faith in this case. Cost containment measures employed by the insurance industry in general have no bearing on whether NMIC committed bad faith in this case.
The dissent highlighted that the Superior Court is required to affirm the trial court as the finder of fact if there is sufficient evidence in the record to support its findings. The dissent determined that the trial court provided citation to ample evidence from the record to support its verdict and damage award in favor of the Bergs. Thus, the dissent declined to vacate the verdict because it believed the majority usurped the fact-finding power of the trial court by its own interpretation of the factual and testimonial evidence.
Today's blog: Ty Smith breaks down Berg v. Nationwide Mutual Insurance Company (NMIC), where a Pennsylvania Superior Court panel that agreed to reconsider its decision to vacate a high-profile $21 million verdict has largely reinstated the result in a new, only slightly revised, opinion.