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LAROCCA v. STATE FARM MUT. AUTO. INS. CO.

July 29, 1971

Charles LaROCCA, Plaintiff,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant


Weber, District Judge.


The opinion of the court was delivered by: WEBER

WEBER, District Judge.

 This is a diversity action between plaintiff LaRocca, a Pennsylvania citizen, and State Farm Mutual Automobile Insurance Company (herein called State Farm), an Illinois corporation. During the relevant period State Farm insured LaRocca under an automobile liability insurance policy with maximum limits of $50,000 for one person and $100,000 for one accident. LaRocca seeks in this action to recover from State Farm the liability in excess of $50,000 imposed upon him by a judgment for damages entered in this court under the following circumstances.

 On October 16, 1966, LaRocca was driving south on Pa. Route 89, a through highway, and Richard Lewkowicz was driving eastwardly on a public road which intersects Route 89 at a point where a "Stop" sign controls traffic entering Route 89. The two automobiles collided in Route 89 near the intersection and Lewkowicz received injuries resulting in death. The Lewkowicz estate engaged counsel within a few days.

 LaRocca promptly reported the accident to State Farm, denying liability, and it undertook its obligation of defense. At all times during the investigation of the case, the criminal trial and civil trial and in this proceeding, LaRocca has denied negligence, excess speed or other grounds of liability.

 On January 1, 1967, LaRocca was charged by state authorities with involuntary manslaughter as a result of the accident. In the defense of that charge he retained the same personal counsel as represented his excess liability exposure in the civil suit. After a jury trial in September 1967 he was found not guilty of the charge.

 On February 16, 1967, a civil law suit was instituted in this court at No. 9-67 Erie seeking damages under the Pennsylvania Wrongful Death Act and the Pennsylvania Survival Act for the death of Richard Lewkowicz. The ad damnum clause on each count demanded damages of $450,000 (a practice now prohibited in this District Court). At about the time of filing the complaint the attorney for the estate was told by the adjuster for State Farm that the company couldn't give him a "dime" for the claim.

 State Farm employed able and experienced counsel to defend LaRocca in this suit and an appearance and answer were filed and LaRocca was defended by said counsel at all stages of the proceedings.

 On March 6, 1967, LaRocca was informed by a letter from State Farm that they had forwarded the file to their counsel who would give the case all the necessary preparation. The letter, known in the insurance industry as an "excess letter", informed LaRocca that the amount claimed was in excess of the limits of protection afforded by the policy and in view of his possible personal liability LaRocca was free to secure counsel of his own choosing to represent himself personally in addition to the counsel engaged by the insurance company.

 LaRocca engaged as his personal counsel the same counsel that was representing him in the pending criminal case. LaRocca's counsel's representation in the civil claim was separate from and over and above his activities in the defense of the criminal charge, and continued after LaRocca was acquitted of the criminal charge, by attendance at depositions, arguments, as well at attending and participating in the trial of the civil case, although he did not enter a separate appearance for LaRocca. The trial judge was aware that LaRocca's personal counsel was representing him with regard to his excess liability exposure.

 About three and one-half months after filing the complaint in the death action, the attorney for the Lewkowicz estate amended the complaint to add several new parties-defendant, these being business entities in which LaRocca was employed or interested as a partner alleging their liability because of his agency for them. He told his clients that this increased the insurance available for payment of damages. LaRocca's private counsel entered an appearance for all partners in two partnership entities which had been joined as defendants and represented them during trial.

 LaRocca's personal counsel worked closely with the State Farm counsel and the State Farm investigator in investigations and discovery depositions, both before and after the criminal trial. By the time of the pretrial conference on February 7, 1968, all witnesses and evidence that were later produced at trial were known to both counsel.

 When the case was scheduled for trial by the trial judge, a motion for continuance was filed and, at the request of the trial judge, it was heard by the writer of this Opinion on January 29, 1968. At the conclusion of the argument the writer asked if there were any possibilities of settlement. Counsel for State Farm stated that he had never received a settlement demand. Counsel for the Lewkowicz estate stated that he had never been asked for a settlement demand but if a demand was being requested, it was $150,000. State Farm's counsel said that this was too high. LaRocca's personal counsel as well as the State Farm counsel was present. The Lewkowicz counsel did not know the policy limits at that time, and this was prior to the amendment to the Fed. R. of Civ. P. discovery rules making such information clearly discoverable, although at the time members of this court had often ordered disclosure of policy limits in aid of settlement. However, discussion at the Pretrial Conference of February 7, 1968, at the inquiry of the trial judge, revealed policy limits of $50,000 by LaRocca's personal counsel, which the State Farm counsel was unable to confirm at that time. At no time did the Lewkowicz counsel demand to have coverage revealed or confirmed, or make any suggestion that disclosure of policy limits would reduce his demand.

 At about the time of beginning of trial counsel for the Lewkowicz estate stated that he reduced his settlement demand to $125,000. There was no offer from either State Farm counsel or LaRocca's personal counsel.

 At the Pretrial Conference counsel for the Lewkowicz estate stated his intention of offering expert actuarial testimony to support a claim for damages in excess of $500,000 and other evidence of loss of support and loss of future earning power to support an award of $200,000. His demand was supported by the prospects of holding the additional defendants also liable on agency theories, and discounted by his inability to use a favorable witness on the agency issue. It was in his opinion a reasonable settlement demand. His demand was not stated in terms of absolute finality or non-negotiability. There was no responsive offer from State Farm or LaRocca's personal attorney up to the opening of trial.

 The civil trial began April 2, 1968 before the trial judge non-jury. It lasted two days. On the second day of trial LaRocca's personal attorney requested the State Farm attorney to offer policy limits. State Farm counsel replied that he had no authority to do so. This was the first time such a request was made to State Farm counsel. Toward the close of trial on the second day, while the other defendants were still involved, an inquiry was made by the State Farm counsel to Lewkowicz's counsel as to whether the Lewkowicz estate would settle for $100,000 if that amount could be raised by contributions from the various parties-defendant in the case. The Lewkowicz counsel said that he would discuss the matter at the end of the day's session. The testimony concluded shortly thereafter, the other parties-defendant were granted their motions for directed verdicts and LaRocca remained the sole defendant. The trial judge indicated his tentative conclusion on liability but set final argument on liability and damages for a later date. No response to the suggestion of settlement was made.

 Before the trial of the case LaRocca had asked the State Farm counsel if the case could be settled. State Farm counsel asked LaRocca how they could do this when the Lewkowicz demand was $150,000 and we have only $50,000 coverage. LaRocca made no offer to contribute to an excess settlement. Although LaRocca's personal counsel had discussed with LaRocca the possibility of LaRocca contributing some amount to a settlement above the policy limits prior to the trial, and had discussed the possibility with Lewkowicz's counsel, he did not inform State Farm counsel of this prior to trial or at the time he requested State Farm to offer policy limits on the second day. No offer to contribute by LaRocca was made to State Farm counsel until shortly before final arguments on May 10, 1968 when LaRocca agreed to contribute $10,000 over the coverage to a settlement. LaRocca's counsel consulted with State Farm counsel and then approached the Lewkowicz counsel to see if the case could be settled for $60,000 which suggestion was rejected.

 On May 10, 1968, after hearing arguments on liability and damages, the trial judge announced a tentative conclusion that damages would be in excess of $100,000. Settlement talks were held in chambers before the trial judge, LaRocca's counsel stated that he would contribute $10,000 and the trial judge observed that he would probably not now approve a settlement of $60,000.

 By letter of May 13, 1968, to plaintiff's counsel State Farm counsel formally offered to pay the policy limits of $50,000 along with assured's contribution of $10,000. This was refused.

 At no time did the counsel for the Lewkowicz estate make any demand or offer of settlement for the policy limits of $50,000 or less. The lowest figure demanded was $125,000. There was no suggestion that he would reduce his demand if policy limits were offered. There was no change in his demand after the co-defendants were dismissed.

 On June 6, 1968 the court entered judgment against LaRocca in the sum of $198,210.50.

 Liability in this case was always a contested issue. Both the State Farm counsel and LaRocca's personal counsel believed there was a substantial chance for a successful defense. The decedent had entered a through highway in face of a stop sign. Despite LaRocca's acquittal of involuntary manslaughter the higher standard of burden of proof and the higher degree of negligent conduct required nevertheless indicated a contested issue. At the criminal trial there had been an effective refutation of the testimony of the investigating state police officer and an exclusion of certain unfavorable evidence concerning skid marks allegedly left by LaRocca's car. There was a statement from Lewkowicz's widow, a passenger in his car who survived the accident, that corroborated LaRocca's denial of excess speed. A weighty element in the trial judge's verdict was his view of the accident scene during the trial which gave him a different view than that produced by testimony and photographs. The presumption of due care in favor of a decedent plus the corroborating testimony of the wife passenger that he had stopped before entering the intersection eliminated the issue of deceased's contributory negligence, in the absence of any other evidence leading to this conclusion, when the view established that one stopping at the intersection would not see any one approaching from the north in time to avoid a collision if that vehicle were approaching at an excessive rate of speed because of the intervention of the crest of a hill in that direction.

 This is a diversity action in which the law of Pennsylvania applies. The controlling Pennsylvania law on the question has been extensively reviewed in Cowden v. Aetna Casualty and ...


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