JUNE 2006 BAD FAITH CASES CONTINGENT FEE AGREEMENT CANNOT BE USED TO FIX AN ATTORNEY FEE AWARD UNDER THE BAD FAITH STATUTE, RATHER THE LODESTAR AMOUNT SHOULD BE USED (Philadelphia Federal)

In Jurinko v. Medical Protective Company, plaintiffs sought recovery of attorney’s fees following a jury award of $6.25 million in punitive damages against the carrier for a bad faith failure to tender policy limits to settle an underlying medical malpractice claim, and for its failure to assign separate counsel to two insureds despite a conflict of interest.  Plaintiffs petitioned the court to award attorneys’ fees in the amount of $2,372,503.50 based upon the thirty percent contingency fee agreement plaintiffs had entered with their counsel.  Plaintiffs argued that pursuant to 42 Pa.C.S. § 8371, 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. Therefore attorneys’ fees were limited to $323,167.50, the lodestar amount. This sum represented a reasonable award of attorneys’ fees. The contingency fee arrangement was a direct result of the bargain plaintiffs made with their attorneys, and such an arrangement bears no relationship to the loss the insurer inflicted upon the plaintiff.  In addition, while the Court was very complimentary of the work performed by plaintiffs’ attorneys, the Court concluded that 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.

Date of decision: June 23, 2006

Jurinko v. Medical Protective Co., United States District Court for the Eastern District of PA, No. 03-CV-4053, 2006 U.S. Dist. LEXIS 42923 (E.D. Pa. June 23, 2006) (Rufe, J.)