Bad Faith Damages Against an Insurer Unsettled Law (PA)

In Grossi v. Travelers Personal Insurance, the three-panel Superior Court voted 2-1 to uphold a $1,300,000 verdict that included punitive damages in a case involving a claim for UIM coverage.

The plaintiff passenger was injured in a December 2006 automobile accident.  After the accident Grossi sought his full UIM policy limit of $300,000 from Travelers, based on estimated damages of over three million dollars.  Travelers set the reserve for only $1,000 and eventually denied the claim, calling the plaintiff’s damages “highly speculative”.

Grossi then requested arbitration in 2008.  Although Travelers failed to obtain an IME prior to arbitration, it did obtain a vocational rehabilitation report.  That report never made its way into into Grossi’s file, and the adjuster failed to review it prior to arbitration.  At the arbitration, the panel awarded $4 million to Grossi.  Travelers subsequently paid its $300,000 policy limits.  On this basis, Grossi instituted a bad faith suit, and, in 2012, he was awarded almost $1.3 million in damages including punitives.

Travelers appealed.  Judge Mundy, writing for the majority, upheld the verdict, on the basis that Travelers acted recklessly in preparing for the arbitration.  Travelers’ recklessness consisted of arbitrarily disregarding plaintiff’s damages, setting a low reserve without a rational basis, and taking too long a time to investigate plaintiff’s claim.  Judge Mundy relied on precedential case of Hollock v. Erie Insurance Exchange, finding that Travelers blindly rejected Grossi’s claim.

The dissenting Judge Bowes disagreed, arguing that in Hollock, the insurer contested evidence submitted by its insured without any basis.  Judge Bowes felt that Grossi was more analogous to Brown v. Progressive Insurance, a 2004 case in which the Superior Court reversed a finding of bad faith. Judge Bowes was persuaded that Travelers evaluated the extent of Grossi’s damages and made a reasoned conclusion.

This case serves as further confirmation that “bad faith” is far from defined in Pennsylvania and that each case must be evaluated on its on merits.

Special thanks to Remy Cahn for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.