In Pennsylvania, an injured party can recover “delay damages”, i.e. interest that runs from the date suit is filed until the date of a favorable judgment for the plaintiff.  The question that Pennsylvania’s Supreme Court, the state’s highest court, was recently called to address is whether an insurer can be forced to pay delay damages on an award that exceed the policy limits.

In the case of Marlette v. State Farm Mutual Automobile Insurance Company, the controversy stemmed from a car accident in Pittsburgh between Richard Marlette (who was accompanied by his wife, Marleen Marlette) and an uninsured motorist, Herman Jordan. Jordan crossed the centerline and sideswiped the Marlette’s car, leaving Mr. Marlette seriously injured and impairing his future earning capacity.

After trial, the jury awarded damages of $550,000 to Mr. Marlette for bodily injuries and $150,000 to Mrs. Marlette for loss of consortium. The trial court molded the $700,000 verdict to fit the Marlette’s uninsured motorist policy with State Farm, which was capped at $250,000. The Marlettes then filed a motion for delay damages on the jury verdict, which was granted. Although the delay damages granted were calculated based on the molded jury verdict, they still caused the total amount of damages collected by the Marlette’s to exceed the insurance cap of $250,000.

Thereafter, both the Marlettes and State Farm filed appeals and the case ultimately ended up before the Supreme Court of Pennsylvania.  The Supreme Court limited its review to the question of whether delay damages should be awarded on the jury verdict or the policy limit. Ultimately the Supreme Court ruled that delay damages can only be awarded on the policy’s limits and not the jury verdict.  One questions whether the result would have been the same if the Supreme Court had been faced with a commercial general liability policy affording third-party coverage.  It appears to us that the answer would be “no” so the potential for significant extra contractual exposure remains.

Special thanks to Thalia Staikos for her contributions to this post.  For more information, please contact Bob Cosgrove at .