MARCH 2006 BAD FAITH CASES PUNITIVE DAMAGE AWARD OF $6.25 MILLION WITHSTANDS DUE PROCESS ANALYSIS WHERE RATIO WITH COMPENSATORY DAMAGES IS LESS THAN 4 TO 1 (Philadelphia Federal)

In Jurinko v. Medical Protective Company, a dermatologist and pathologist had failed to diagnose Jurinko’s skin cancer.  Jurinko brought suit in the Philadelphia Court of Common Pleas.  The same carrier provided a single lawyer to represent both doctors in the early part of the case, even though there were potential cross claims and a conflict of interest.  One doctor had no liability, but the other was found liable for $2.5 Million by the jury, far in excess of his available insurance.  He assigned his bad faith claim to Jurinko, and the bad faith suit proceeded to trial in federal court.  The federal jury awarded $1.6 Million in compensatory damages and $6.25 Million in punitive damages.  The trial judge refused to grant the carrier’s post trial motions.  The Federal Judge found there was sufficient evidence for the jury to have found bad faith because of failure to settle and/or by knowingly appointing a lawyer with a conflict of interest to represent two insureds. Among other things, the carrier’s employee testified that the carrier was “fully aware that it was unethical [to assign one lawyer] and would create a conflict of interest, and that it did so to save money.” The Federal Court applied the Supreme Court of the United State’s punitive damages due process analysis, and concluded that the conduct was reprehensible because of the known effect the failure to settle would have on the doctors vulnerable finances, the repeated failure to make good faith efforts to settle, and the intentional nature of the conduct.  Further, under the circumstances, a punitive damages award of less than a 4 to 1 ratio to compensatory damages did not violate due process.

Date of decision:  March 29, 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 13601 (E.D. Pa. Mar. 24, 2006) (Rufe, J.)