Contingent Fee Award Not Permitted Under Bad Faith Statute

Contingent Fee Award Not Permitted Under Bad Faith Statute

July 2006

In Jurinko v. Medical Protective Company, a federal judge in Philadelphia has ruled that Pennsylvania’s Insurance Bad Faith Statute, which permits an award of attorneys’ fees to successful plaintiffs, does not permit the Court to calculate those fees based on a contingent fee agreement. In that case, the plaintiffs sought to recover attorney’s fees over and above the jury’s award of $6.25 million in punitive damages against the carrier for a bad faith. There was a 30% contingent fee agreement, based upon which plaintiffs sought $2,372,503.50. Plaintiffs argued that the object of the attorney fee award is to make the successful plaintiff whole. The Court rejected this position, and held that the lodestar method was generally used in cases involving statutory fee shifting, and limited the attorneys’ fees to $323,167.50. This sum represented a reasonable award of attorneys’ fees. The court characterized the contingency fee arrangement as a separate bargain that plaintiffs made with their attorneys, which had no relationship to the loss the insurer inflicted upon the plaintiffs. This result was in no way the reflection of any animus toward counsel, whom the Court praised. However, no enhancement of the lodestar award was warranted since the quality of the work performed was already represented in the hourly rate charged by the attorneys.

For further information please contact Jay Barry Harris, Esq., Lee Applebaum, Esq., or Jason T. LaRocco, Esq. Also, see our Pennsylvania Insurance Bad Faith Blog, www.pabadfaithlaw.com.