The opinion of the court was delivered by: THOMAS N. O'NEILL, JR.
On October 30, 1991, plaintiff Younis, a Liberian corporation, filed its complaint against defendant CIGNA. This Court has jurisdiction pursuant to 28 U.S.C. § 1332.
Plaintiff alleged that defendant breached a pair of fire insurance policies which defendant issued to plaintiff. Counts I through III sought compensatory damages for breach of the policies, which concerned three locations in Liberia. In Count IV, plaintiff alleged:
64. As of the commencement of this action, CIGNA has made no offer to Younis Bros. for any of the losses it suffered in Liberia in August of 1990.
65. CIGNA has acted in bad faith in its adjustment of Younis Bros.'s claim.
66. CIGNA has acted in bad faith in its investigation of Younis Bros.'s claim.
68. Because of CIGNA's bad faith, Younis Bros. is entitled to an award of interest, counsel fees, punitive damages in accordance with Pennsylvania law, 42 Pa. C.S.A. § 8371.
In its answer, defendant denied plaintiff's allegations of bad faith and asserted affirmative defenses against plaintiff's bad faith claim.
Defendant contended that Count IV failed to state a claim "because application of the statute would be a constitutionally impermissible extraterritorial application of Pennsylvania law" violating the Commerce Clause of and due process rights guaranteed by the United States Constitution;
"because the statute violates guarantees of due process . . . by failing to adequately to inform those against whom it may be applied of the conduct or actions it prohibits and/or penalizes;"
because the statute allows "the imposition of punitive damages without adequate substantive and procedural guidelines and protections;"
and because the statute violates "rights of trial by jury afforded by the United States Constitution and Pennsylvania Constitution."
Plaintiff subsequently filed an amended complaint setting forth additional factual allegations and repeating its assertion that defendant acted in bad faith in its investigation and adjustment of plaintiff's losses. In its answer, defendant denied those allegations, incorporated by reference the affirmative defenses asserted in its earlier answer.
During the pretrial phase, the Court consolidated this case with a related case, The Abi Jaoudi and Azar Trading Corporation v. Cigna Worldwide Insurance Company, Civil Action No. 91-6785.
Trial in both cases began on February 7, 1994. The Court divided the cases into phases. In phase one, the jury found that plaintiffs' suits were not barred by the war risk exclusion clauses in the various insurance policies.
In phase two, which concerned a number of affirmative defenses arising out of provisions in the insurance policies, the jury found in favor of plaintiffs on all questions except that it could not reach a decision with respect to the affirmative defense of fraud asserted against plaintiff Abi Jaoudi and Azar Trading Corporation ("AJA").
The Court therefore discontinued proceedings in the AJA case and resumed proceedings in the Younis case. Because the parties did not dispute the amount of compensatory damages claimed by Younis, the Court did not hear any evidence relevant to phase three.
With respect to phase four, the parties disputed the definition of the term "court" in section 8371. Defendant asserted that the term "court" referred only to the trial judge while plaintiff argued that the term meant "judge and jury." I did not resolve this dispute but felt constrained by the Seventh Amendment to submit to the jury the questions whether defendant acted in bad faith, whether its conduct was outrageous and whether plaintiff was entitled to an award of punitive damages. See Transcript, April 6, 1994, at 112-116.
The jury determined that defendant acted in bad faith towards plaintiff. This required phase five, in which the jury found that defendant's conduct was not outrageous. Accordingly, the jury was not required to ...