The opinion of the court was delivered by: BECHTLE
Presently before the Court are the motions of defendant Interstate National Corporation ("Interstate") for a new trial and/or for judgment notwithstanding the verdict. For the reasons stated below, the motions will be denied.
This is a diversity action brought against a liability insurance company by its insured and the insured's assignee, who was previously a successful claimant against the insured in related personal injury litigation. On March 20, 1970, plaintiff William G. Clark ("Clark") was injured when his automobile was "rear-ended" by a truck owned by C. W. Bierkamp & Sons, Inc. ("Bierkamp"). At the time, Bierkamp was insured under a $ 25,000 "primary" policy issued by State Automobile Insurance Association. In addition, Bierkamp was the insured under a $ 75,000 "excess" policy issued by Interstate.
Clark sued Bierkamp for damages in the Philadelphia Court of Common Pleas where Interstate voluntarily undertook the defense of the case. On March 4, 1976, the jury returned a verdict in favor of Clark in the amount of $ 212,000, which was $ 112,000 in excess of the combined primary and excess policy coverage. On July 1, 1977, Bierkamp assigned to Clark all of its rights against Interstate and on April 14, 1978, Bierkamp and Clark instituted this action as co-plaintiffs. The theory of this action was that Interstate refused, in bad faith, to settle the underlying action against Bierkamp for the policy limits when, in fact, Clark had offered, numerous times, to settle for that figure. Interstate acknowledged that, under the applicable law, it could be liable for the entire verdict if it had refused in bad faith to settle for the policy limits, Cowden v. Aetna Casualty and Surety Co., 389 Pa. 459, 134 A.2d 223 (1957), but argued that it did not accept the offers to settle because it needed additional information as to Clark's preexisting medical conditions or treatments. Thus, Interstate argued, it was not guilty of bad faith.
This case was submitted to a jury on November 20, 1979, and a verdict was returned in favor of Clark and Bierkamp. After the jury found for the plaintiffs, the parties having agreed that liability, if found, was in the amount of the previous verdict in excess of the policy limits, judgment was entered in the amount of $ 112,000. The instant post-trial motions were timely filed thereafter.
Various grounds for error are alleged concerning the admissibility or sufficiency of evidence. As the Court understands the applicable substantive law, it finds that there was sufficient evidence presented to support the verdict. Plaintiffs produced two expert witnesses, R. H. Griffith, Esquire, and Emil Toften, Esquire, who testified that, in their opinions, Interstate was guilty of bad faith in the manner in which it processed Clark's claim. See N.T. 2-171, 172; 3-100, 103, 104, 105. In addition, substantial factual evidence was adduced, tending to show that numerous offers to settle for the policy limits were made over a period from November 11, 1971 (N.T. 2-99), until just before the running of the statute of limitations on March 20, 1972 (N.T. 2-113). Accordingly, the Court finds that there was sufficient evidence to support the verdict.
Similarly, the Court rejects Interstate's contentions concerning the admissibility of evidence. First, Interstate argues that it was prejudicial error to permit the jury to view photographs of Clark's car taken after the accident. The Court disagrees because the photographs were not, in the Court's opinion, unreasonably inflammatory, violent or misleading. Moreover, the photographs were extremely relevant to the issue of what Interstate knew and perceived about the accident during the investigation. As part of the Interstate file, the photographs were properly sent out with the jury.
The principal argument put forth by Interstate concerns the Court's charge. The parties agree that the substantive law of Pennsylvania is applicable. However, Interstate argues that it was error for the Court to charge that bad faith can be evidenced by negligent as well as intentional behavior. The Court has examined the briefs of counsel, has reexamined the decisional law and concludes that, while the law is not the model of clarity, negligence can support an allegation of bad faith therefore, the Court's charge was correct.
The relevant portions of the Court's charge are as follows:
They also owe good faith to their insured in respect to the insured's interests in respect to possible excess as they consider their own. So when it appears in a case that the claim could exceed the limits, then the company must make a decision as to whether or not to expose their insured to the claim that could result in an excess verdict. That decision must be based upon a bona fide belief by the insurance company based on all the circumstances of the case that it has a good chance of being found correct in its assessment of the amount if any to be found against its insured, whether it is within the limits or not.
That's another way of saying the insurance company doesn't have to guess exactly right. They don't have to be mistake-free. They don't have to be error-free. But they have to use good judgment. They have to have what we call a bona fide belief that means an honest belief, a fair belief, a reasonable belief that their assessment is correct. And if they have that belief and decide not to settle but to go ahead with the trial or a court case, and the ultimate decision shows that they were wrong, that doesn't mean they are liable. They are not liable for being wrong; they are liable for not being fair and honest and proper in the examination of all of the circumstances that caused them to make that decision. And that's what we call good faith.
Now, if in making that decision to proceed it can be said that they have exercised bad faith, then they can be liable in excess of their limits because it's their bad faith that caused the proceeding that resulted in the excess.
Now, bad faith can be evidenced by either intentional conduct, by purposeful conduct, or it can be evidenced by negligent conduct. An insurance company owes its insured the obligation of good faith which carries with it the obligation to ...