|
|
|
IN A PENNSYLVANIA BAD FAITH CASE, PLAINTIFF MAY BE ENTITLED TO LEGAL COSTS IN ADDITION TO ACTUAL AND PUNITIVE DAMAGES
Christopher J. Poulos, Esquire and Lawrence M. Kelly, Esquire
In Gallatin Fuels, Inc. v. Westchester Fire Insurance Co., Chief U.S. District Judge for Pennsylvania's Western District, Donetta Ambrose agreed with plaintiff in two published opinions that it was entitled to legal costs and interest in the amount of $1.5 million in addition to actual and punitive damages. In Gallatin, plaintiff sued Westchester seeking payment under an insurance policy issued to a company which had leased mining equipment from it. The equipment was destroyed when the coal mine it was being used in became flooded.
During a two week trial in February, 2006, a jury awarded plaintiff a net total of $1.3 million on its insurance claim and $20 million in punitive damages. Judge Ambrose later reduced the punitive damages award to $4.5 million finding that the original award was unconstitutionally excessive. In awarding attorney's fees, Judge Ambrose rejected the defendant's argument that the award of compensatory and punitive damages made plaintiff "more than completely whole" and that plaintiff was not entitled to attorney's fees as its attorneys were retained pursuant to a contingency fee agreement. Lastly, Judge Ambrose supported her award of attorney's fees by noting that the jury gave no indication that it intended any portion of the punitive damages award to cover plaintiff's costs.
The Gallatin case is not the first case to discuss attorney's fees after a finding of bad faith. For example, in Birth Center v. St. Paul Companies, Inc.,, the Pennsylvania Superior Court held that after a finding of bad faith, it was for the trial court to determine whether the policyholder is entitled to interest, reasonable attorney's fees and costs. The Birth Center Court further noted that an award of attorney's fees in a bad faith case is discretionary and that such fees must be reasonable. The Court also held that it is for the trial court, not the jury to determine attorney's fees, interest and costs. To give guidance to the trial court for determining how to calculate reasonable attorney's fees, it instructed that the trial court should consider: (1) the time and effort reasonably expended by the attorney; (2) the quality of services rendered; (3) the results achieve and benefits conferred; (4) the magnitude and complexity of the litigation; and (5) whether the receipt of a fee was contingent upon success.
|
|
