In Davis v. Fidelity National Title Insurance Company, a non-precedential decision of the Superior Court, the insured brought breach of contract and bad faith claims against its title insurer. After a lengthy process from the time the claim was made to the time the insurer paid another party claiming an ownership interest to clear title, the insured alleged it suffered lost profits, and that the insured acted in bad faith by not addressing the claim promptly. It was almost 5 years between the date the claim was made to the carrier, and the date payment was made to the third party to clear title.
The trial court awarded $224,760 in compensatory damages (combining increased buildings costs on the project and lost profits), which the Superior Court affirmed, agreeing that the future damages were not so speculative as to preclude recovery. On the bad faith claim, the trial court further awarded $158,450 in attorney’s fees and $1,572,909.24 in punitive damages. The insurer did not challenge the bad faith claim as such, but challenged the amount of the punitive damages award based upon (1) that it was excessive under U.S. Supreme Court standards as set forth in State Farm Mutual Automobile Insurance Company v. Campbell and its progeny; and (2) that the attorney’s fee award should not have been included in the compensatory damage base number on which to calculate punitive damages. The Superior Court rejected both arguments.
The court cited a number of cases that included attorney’s fees in the compensatory damage base upon which punitive damages could be determined, rejecting the insurer’s argument on that point. Further, including the attorney’s fees with the compensatory damages, the punitive damages award was a 4:1 ratio with the compensatory damages, well within Campbell’s constitutional parameters. Moreover, the court reviewed the factors Campbell considered in determining punitive damages, focusing on the time delays as falling within the degree of reprehensibility factor (the most important factor to consider), and citing Pennsylvania’s Unfair Insurance Practices Act and Unfair Claims Settlement Practices Act regulatory standards in evaluating this factor. The court stated that “it is difficult to find an area in which [the insurer] acted in conformance with accepted statutory, regulatory or internal standards.” It affirmed the bad faith award of punitive damages given by the trial court.
Date of Decision: March 18, 2015
Davis v. Fidelity National Title Insurance Company, Superior Court of Pennsylvania, No. 672 MDA 2014 (Pa. Super. Ct. March 18, 2015) (Ott, Bowes, Stabile, JJ).
The trial court decision is Davis v. Fid. Nat’l Ins. Co., 2010-CV-8868, COMMON PLEAS COURT OF LACKAWANNA COUNTY, PENNSYLVANIA, 2014 Pa. Dist. & Cnty. Dec. LEXIS 225 (C.C.P. Lacka. March 28, 2014) (Minora, J.)