Appeal from the Order Entered August 3, 1994, in the Court of Common Pleas of Allegheny County, Civil Division, No. GD92-10953. Before WETTICK, J.
Before: Popovich, Ford Elliott, And Hester, JJ. Opinion BY Ford Elliott, J.
The opinion of the court was delivered by: Elliott
OPINION BY FORD ELLIOTT, J.
Appellant Stowe Township ("Stowe") claims trial court error in refusing to enter judgment notwithstanding the verdict or to order a new trial following a jury's determination that Stowe acted in bad faith when it falsely answered questions on an insurance application. Finding that the trial court erred in its charge to the jury on Tudor's burden of proof, we are constrained to remand for a new trial.
We are aware of our deferential standard when reviewing a trial court's decision to grant or deny a new trial: the power to grant or deny a new trial lies inherently with the trial court, and we will not reverse its decision absent a clear abuse of discretion or error of law which controlled the outcome of the case. Ferguson v. Panzarella, 445 Pa. Super. 23, 27, 664 A.2d 989, 991 (1995), allocatur granted, 544 Pa. 609, 674 A.2d 1072 (1996). We thus begin our review with that standard before us.
Appellee Tudor Insurance Company ("Tudor") brought a declaratory judgment action to determine whether a policy of insurance it had issued to Stowe was void as a result of misrepresentations and omissions on the application for insurance. The Public Officials Liability Insurance Policy issued by Tudor required Tudor both to defend and indemnify Stowe on a "claims-made" basis *fn1 for any alleged wrongful act committed by Stowe, its elected or appointed officials, or its employees (R.R. at 134a). The policy request was for $1 million in coverage, to become effective January 18, 1992. The application had been signed on November 11, 1991 by the Township secretary, Marie Incorvati, who attested that the information provided was true and correct to the best of her knowledge. Tudor claimed the policy was void because Ms. Incorvati had answered "none" to the following questions:
16. During the past five years, there has been no incident, claim, litigation, or threat of litigation (including Federal, State or Local actions against the Public Entity and/or its officials) which would have fallen within the scope of this insurance had it been in effect except as follows: (if answer is none, so state)
17. No fact, circumstance or situation indicating the probability of a claim or action against which indemnification is or would be afforded by the proposed insurance is now known to any official or member of this entity except as follows: (if answer is none, so state)[.]
In March of 1994, a jury trial was held. Tudor introduced into evidence tape recordings of Township meetings and testimony of witnesses indicating that almost every Township meeting between January 10, 1991 and November 11, 1991, involved heated Discussion among outraged citizens and Township commissioners over alleged misuse or misappropriation of $1.9 million in bond revenues. (R.R. at 123.) In addition, Stowe admitted that in late 1990, two of the commissioners were indicted on federal "RICO" *fn2 charges. (R.R. at 117-118.) These indictments were indicated on the application for insurance in answer to question 15(g). (R.R. at 29a, 31a.) Township citizens were further outraged by evidence that came to the public's attention during the federal RICO trial. (Id. at 136-37.) Newspaper articles announcing meetings to discuss proposed legal action appeared in the local paper, which was sent free to the Township office and to each of the Township commissioners. (R.R. at 137-50, 346, 536-37; S.R.R. 101a-105a.) Ms. Incorvati, the Township secretary who completed the insurance application, was responsible for reading the local paper to check for placement of legal advertisements. (R.R. at 346, 536-37.) She testified, however, that she did not remember seeing any of the announcements introduced into evidence prior to her deposition. (R.R. at 538, 569-571.) Ms. Incorvati also testified that she did not remember receiving a flyer, announcing a citizens' meeting, that had been sent to the homes of all Stowe Township residents. (R.R. at 571.)
Eventually, the Township retained an independent solicitor to stave off citizen outrage by working with a citizens' group to uncover evidence of wrongdoing. (R.R. at 266-71, 353, 545.) Ms. Incorvati attended and made tape recordings of all the Township meetings and compiled minutes of those meetings. (R.R. at 535-36.) Additionally, Ms. Incorvati received a letter on October 1, 1991, from the independent solicitor's law firm indicating the solicitor would be filing "periodic reports with you which will contain information which is not sensitive to the furtherance of our information [sic] and possible legal proceedings brought in Ultimately, the independent solicitor filed a second federal RICO action in February of 1992; however, that complaint was dismissed on June 8, 1993, due to the solicitor's lack of authority to file such a complaint without Board approval. (R.R. at 39a; appellant's brief at 29 and exhibit "B-1" and "B-2" thereto.) *fn3 A complaint was also prepared by the citizens' group with the help of counsel. (S.R.R. at 107a-192a.) This complaint was forwarded to the independent solicitor on February 4, 1992. (R.R. at 193a.)
While Ms. Incorvati admitted to attending and tape recording the Township meetings, she testified she did not believe the swirling controversy and threatened legal action rose to the level of a "threat of litigation" or the "probability of a claim" for purposes of questions 16 and 17 on the application for insurance because she had received no formal notice of a lawsuit. (R.R. at 554-555.) She also testified that she did not verify the correctness of her answers with the Township solicitor or any of the Township commissioners. (R.R. at 550, 580-583.)
At the Conclusion of testimony, the trial court, the Honorable Joseph James, submitted the following four special interrogatories to the jury:
1. Were the statements made by the Township of Stowe in the Application for Insurance false?
2. Were the statements material to the risk?
3. Did the Township of Stowe know the statements to be false?
4. Were the statements made in bad faith?
R. at 48. The trial court then charged the jury that it was Tudor's burden to prove each of these propositions by a preponderance of the evidence, and directed the jury to answer "Yes" to question number 2. (R.R. at 760-62.)
Following deliberation, the jury answered "Yes" to the remaining questions and returned a verdict for Tudor and against Stowe on March 15, 1994. (R. at 49.) Post-trial motions were untimely filed on March 29, 1994; however, the trial court denied Tudor's motion to strike, instead denying Stowe's post-trial motions by order dated April 25, 1994 and filed April 26, 1994. (R.R. at 4a, 145a, 146a.) Then, on May 13, 1994, the trial court entered an order molding the verdict to reflect that the policy of insurance was void ab initio. (R.R. at 147a.)
Stowe claimed it had not received notice of the denial of its post-trial motions, and also that the order denying post-trial motions had not been docketed at the time the May 13, 1994 order was entered. *fn4 As a result, a hearing was held on August 3, 1994, following which the trial court entered a second order denying Stowe's post-trial motions and molding the verdict. (Notes of testimony, 8/3/94 at 2-19, R. at 65; R.R. at 148a.) Stowe timely filed an appeal to this court on August 11, 1994; however, by per curiam order, the appeal was quashed on January 4, 1995.
On December 13, 1995, the Honorable Stanton R. Wettick entered an order disposing of outstanding claims for attorneys' fees and dismissing the remaining claims, thus ending the litigation. Stowe then timely filed a notice of appeal on January 12, 1996, and an amended notice of appeal on March 13, 1996. (R.R. at 140a, 142a.) Tudor filed a motion to quash the amended appeal on March 26, 1996, which motion was denied by this court in a per curiam order entered May 23, 1996. Following oral argument, we remanded to the trial court, the Honorable Joseph M. James, to file a Rule 1925(a) opinion, but retained jurisdiction. Judge James' opinion having been filed, we are prepared ...