SEPTEMBER 2006 BAD FAITH CASES COURT AWARDS PRE & POST JUDGMENT INTEREST; CAPS ATTORNEY’S FEES OF $1 MILLION, AFTER NO FINDING OF BAD FAITH WHERE THERE WAS A DUTY TO DEFEND (Middle District)

In Rite Aid Corporation v. Liberty Mutual Fire Insurance Company, Rite Aid’s coverage and bad faith claims were based upon an underlying suit by a former employee.  The United States District Court for the Middle District of Pennsylvania had held that Liberty Mutual did have a duty to defend Plaintiff, but had also previously granted Liberty Mutual’s motion for summary judgment on Rite Aid’s bad faith claim.  See Rite Aid Corp. v. Liberty Mutual Fire Ins. Co., 414 F.Supp.2d 508 (M.D. Pa. 2005) (“Although the Court does not agree with Defendant’s interpretation of the policy language at issue, Plaintiff offers no evidence, and the Court finds none, to indicate that Defendant’s denial was reckless or unreasonable. Moreover, contrary to Plaintiff’s assertions, Defendant’s initiation of the declaratory action in California does not, by itself, indicate bad faith.”)  Thus, the only questions remaining for the Court were (1) the amount of reasonable and necessary defense costs for which Liberty Mutual was required to reimburse Rite Aid, not to exceed $1 million; and (2) whether Rite Aid was entitled to pre- and/or post-judgment interest.  As Liberty Mutual’s obligation to reimburse Rite Aid’s legal expenses was capped at $1 million, the Court awarded that amount.  The Court also accepted Plaintiff’s pre-judgment calculations and awarded Rite Aid $284,494.02 in pre-judgment interest, while awarding all of the undisputed post-judgment interest.

Date of Decision:  August 14, 2006

Rite Aid Corporation v. Liberty Mutual Fire Insurance Company, U.S. District Court for the Middle District of Pennsylvania, No. CV-03-1801, 2006 U.S. Dist. LEXIS 57094 (M.D. Pa. 2006) (Kane, J.)