PA Court Reverses $21 Million Bad Faith Judgment Against Auto Insurer

In Berg v. Nationwide Mutual Insurance Company, plaintiff sought coverage from Nationwide for repairs to their vehicle after an auto accident. Ultimately, the plaintiffs ended up suing Nationwide for bad faith, due to Nationwide’s decision to repair the plaintiffs’ vehicle rather than declaring it a total loss.  Nationwide initially received an estimate that the vehicle should be totaled, but rejected it, repaired the vehicle, and returned what it allegedly knew was a dangerous vehicle back to its insured.

Plaintiffs asserted claims for negligence, fraud, conspiracy and insurance bad faith. After a trial, the jury found in favor of Nationwide on all counts except for the catchall provision of the Unfair Trade Practices and Consumer Protection Law, or UTPCPL. The jury awarded the plaintiffs $295.00.

But in the second phase, the trial court found that Nationwide acted in bad faith by repairing the plaintiffs’ vehicle rather than declaring it a total loss and ordered Nationwide to pay $18 million in punitive damages and $3 million in attorneys fees.

On appeal, the Superior Court noted that a finding of bad faith will be reversed where the trial court’s critical findings are either unsupported by the record or do not rise to the level of bad faith. In this case, the Superior Court reversed the trial court’s finding of bath faith, finding that the evidence of record did not support the trial court’s finding that Nationwide overrode or vetoed a total loss appraisal. Upon review of the record, the Superior Court found that the record indicated that Nationwide and the entity handling repairs had support to determine that plaintiffs’ vehicle was repairable. In support of its reversal, the Superior Court noted that the record did not support a finding that Nationwide had actual knowledge of or recklessly disregarded any knowledge of the vehicle’s allegedly faulty condition when the repairing entity returned it to plaintiffs.

In addition, the Superior Court admonished the trial court for incorporating an irrelevant critique of the insurance industry in its holding, stating that a judge sitting as fact finder should confine his or her analysis to the facts of the case at bar without consideration of the perceived ills of the insurance industry in general.

Thanks to Alexandra Perry for her contribution to this post and please write to Mike Bono for more information.