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FAHY v. NATIONWIDE MUT. FIRE INS. CO.

April 13, 1995

JOHN J. FAHY, SANDRA E. CLARKE FAHY, Plaintiffs,
v.
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: THOMAS I. VANASKIE

 This is an action under an insurance policy arising out of a fire that destroyed the home of John J. and Sandra E. Clarke Fahy. In addition to seeking recovery of amounts allegedly due under the fire insurance policy the Fahys had purchased from Defendant Nationwide Mutual Fire Insurance Company ("Nationwide"), the Fahys seek relief under 42 Pa.C.S.A. § 8371, which provides that "if the court finds that the insurer has acted in bad faith toward the insured," it may award prejudgment interest, punitive damages, court costs, and attorneys' fees.

 Nationwide has moved for a determination that the Fahys are not entitled to a jury trial on their "bad faith" claim under 42 Pa.C.S.A. § 8371. (Docket Entry 34.) Because the punitive damages authorized by § 8371 is a form of relief typically within the province of a jury, the Seventh Amendment to the United States Constitution entitles the Fahys to a jury determination of whether Nationwide acted in bad faith and whether punitive damages should be imposed against Nationwide. See Younis Bros. & Co. v. CIGNA Worldwide Ins. Co., 1994 U.S. Dist. LEXIS 16308 (E.D. Pa. Nov. 16, 1994). Accordingly, Nationwide's "Motion for Bench Trial" (Dkt. Entry 34) will be denied.

 BACKGROUND

 The Fahys' home, located in Friendsville, Susquehanna County, Pennsylvania, was destroyed by a fire that occurred on September 13, 1993. Upon receipt of the Fahys' claim for insurance proceeds, Nationwide retained an expert to investigate the cause of the fire. By letter dated February 15, 1994, Nationwide informed the Fahys that it was denying their claim based upon their policy's intentional act exclusion.

 This action was filed on March 10, 1994. Based upon information gathered through discovery, Nationwide reversed its denial of coverage and tendered payment to the Fahys in an amount in excess of $ 110,000.

 The Fahys maintain that Nationwide acted in bad faith in the handling of their claim. They seek relief pursuant to 42 Pa.C.S.A. § 8371, which provides:

 
In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:
 
(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus three percent.
 
(2) Award punitive damages against the insurer.
 
(3) Assess court costs and attorney fees against the insurer.

 DISCUSSION

 Nationwide's Motion for Bench Trial implicates the Seventh Amendment to the United States Constitution, which in pertinent part provides that "in suits at common law, where the value in controversy shall exceed Twenty Dollars, the right of trial by jury shall be preserved. . . ." The Supreme Court has held that "the Seventh Amendment does apply to actions enforcing statutory rights, and requires a jury trial upon demand, if the statute creates legal rights and remedies, enforceable in an action for damages in the ordinary courts of law." Curtis v. Loether, 415 U.S. 189, 194, 39 L. Ed. 2d 260, 94 S. Ct. 1005 (1974). Moreover, the right to a jury trial in federal court on a state statutory claim is determined as a matter of federal law. See Reiner v. New Jersey, 732 F. Supp. 530, 531 (D.N.J. 1990). Thus, it is possible that a plaintiff who may not have a right to a jury trial on a purported violation of state law if he or she were in state court may be entitled to a jury trial on the same claim in federal court. See Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 537-38, 2 L. Ed. 2d 953, 78 S. Ct. 893 (1958); Welcker v. Smithkline Beckman, 746 F. Supp. 576, 582 (E.D. Pa. 1990).

 While the question of whether there is a right to a jury trial in federal court on a claim under 42 Pa.C.S.A. § 8371 has apparently not been addressed in any reported appellate court decision, at least two district court judges have ruled that there is indeed a right to a jury trial on such claims. Judge Joyner of the Eastern District of Pennsylvania addressed the issue in Thomson v. Prudential Property & Casualty Ins. Co., 1992 U.S. Dist. LEXIS 12627 (E.D. Pa. Aug. 24, 1992). Employing the two-part test set forth in Cox v. Keystone Carbon Co., 861 F.2d 390, 393 (3rd Cir. 1988), Judge Joyner concluded that the Pennsylvania General Assembly did not intend to have a jury hear and decide claims under § 8371. Judge Joyner, however, recognized that under applicable Supreme Court precedent a party would still be entitled to a jury trial if the relief afforded by the state legislature was "legal in nature," i.e., the type of remedy that historically had been afforded by a court of law as opposed to a court of equity. See Tull v. United States, 481 U.S. 412, 422, 95 L. Ed. 2d 365, 107 S. Ct. 1831 ...


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