View this article online: https://www.claimsjournal.com/news/east/2006/03/31/66940.htm
A Pennsylvania federal court has upheld a $7.9 million award against an insurer for its bad faith in failing to offer plaintiffs the full limits of the policy and for assigning one lawyer to represent two of its insureds in the same medical malpractice case.
The award, considered one of the biggest in Pennsylvania history, included $1.6 in compensatory damages and $6.6 million in punitive damages. The case is Jurinko v. The Medical Protective Co., which was handed down on March 29 in the U.S. District Court for the Eastern District of Pennsylvania by Justice Cynthia Rufe.
The Medical Protective Co. was found to have acted in bad faith when it failed to tender its primary policy limits ($200,000) to settle a medical malpractice claim against its insured, Dr. Paul Marcincin, a dermatologist. Dr. Marcincin also maintained $1 million in excess coverage through the CAT/MCARE fund, but the insured could not tap that policy without a complete tender of the $200,000 primary policy first.
The insurer was also accused by its own insured doctor of acting in bad faith when it assigned him a defense lawyer who it also assigned to represent another MedPro insured, Dr. Edelman, in the same case.
Plaintiffs’ medical malpractice lawsuit went to trial, resulting in a jury verdict of $2.5 million against Dr. Marcincin in April 2002. The verdict was $1.3 million in excess of Dr.Marcincin’s total malpractice insurance coverage. In lieu of paying the excess verdict from his personal assets, Dr. Marcincin assigned the Jurinkos his right to bring the bad faith lawsuit involving his representation against MedPro.
By Medical Protective’s own admission, the case was likely to result in damages exceeding the $200,000 policy limits. But Medical Protective never offered more than $50,000 from Dr. Marcincin’s $200,000 line of coverage. This failure to tender meant that the CAT/MCARE fund could not draw any money from Dr.Marcincin’s $1 million line of malpractice insurance coverage to settle the case.
The Medical Protective employee who assigned the same lawyer to the two doctors testified that he did so despite knowing that appointing them the same lawyer created a conflict of interest for the lawyer in violation of legal rules of ethics.
After a six day trial, a jury returned a verdict in favor of the Jurinkos, finding that Medical Protective acted in bad faith, and that its bad faith conduct was a substantial factor in Dr. Marcincin suffering an excess verdict. The jury awarded $1.6 million in compensatory damages and $6.25 million in punitive damages.
MedPro appealed, arguing among other issues that that evidence did not support the verdict, that the matter of lawyer malpractice never should have been admitted in the case, and that the damages were inappropriate and excessive.
But Justice Rufe rejected each objection.
She also maintained that the issue of the dual counsel might have been sufficient on its own to justify a bad faith finding by the jury, although it appears the jury based its finding on both the medical malpractice and the legal counsel issue:
“There was {also} sufficient evidence for the jury to find that this bad faith action deprived Dr. Marcincin of his ability to vigorously assert his best defense (the liability of Dr. Edelman) and thereby caused the excess jury verdict against Dr. Marcincin alone in the underlying litigation.”
She noted that Pennsylvania’s bad faith statute “authorizes punitive damages on an insurance company found to have acted in bad faith. The jury in this case found that Medical Protective acted in bad faith, and caused an injury to its insured. Therefore, as the Court instructed, it was proper for the jury to award punitive damages to punish and deter such conduct if the jury also found that Medical Protective’s behavior was ‘outrageous,'” which the jury did.
Medical Protective attempted to defend itself by arguing that the punitive damages — almost quadruple the compensatory damages, minus attorney’s fees and costs — were grossly excessive and therefore unconstitutional. The U.S. Supreme Court has held that punitive damages which are grossly excessive violate the Due Process Clause, as an arbitrary deprivation of property.
However, Rufe noted that the Supreme Court has twice declined to impose a “bright-line ratio” which a punitive damages award cannot exceed. The high court has said that an award of more than four times the amount of compensatory damages “might be close to the line of constitutional propriety, especially when the compensatory damages are substantial.”
In this case, the award of punitive damages ($6.25 million) was less than four times the award of compensatory damages (approximately $1.66 million, excluding attorney’s fees and costs). Rufe found the ratio was not excessive in this case, and upheld the jury’s award of punitive damages.