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Significant Reported Cases

August 19, 2014

The PA Supreme Court has decided to review the appellate court decisions in the following cases.

Political Subdivision Tort Claims Act Statutory Cap On Damages Upheld

Zauflik v. Pennsboro School District - This case involves the driver of a Pennsboro School District bus who ran over 17-year-old high school student Ashley Zauflik, crushing her pelvis and leg and resulting in an above-the-knee amputation. The school district admitted liability. The Bucks County jury awarded Zauflik $14 million, including $11.1 million for noneconomic damages. The Trial Court molded the verdict to $500,000 because of the statutory damages cap imposed by the Political Subdivision Tort Claims Act (PSTCA). Zauflik appealed the decision arguing that the PSTCA’s $500,000 statutory cap on damages should be reevaluated and declared unconstitutional because it violates the Pennsylvania and United States Constitution. The Commonwealth Court of Pennsylvania held that the PSTCA cap of $500,000 did not violate the Pennsylvania Constitution or the United States Constitution.

Insured Allowed To Treat Insurer’s Reservation of Rights As A Breach of Contract and Settle Case and Still Seek Reimbursement From Carrier

Babcock & Wilcox v. American Nuclear Insurers – This case involved insurance coverage for two nuclear facilities owned by Babcock and Wilcox (B&W) who were sued by multiple plaintiffs alleging bodily damage from radioactive emissions from their nuclear plants. B & W’s liability insurer American Nuclear Insurers (ANI) provided a defense to the law suit under a reservation of rights. B&W proceeded to settle the claims against it, over ANI’s objections, and now seeks reimbursement for the settlement. At issue was whether an insured can settle a claim, over the insurer’s objections, and obtain reimbursement for that settlement from the insurer where the insurer defended under a reservation of rights. In this case, The Superior Court of Pennsylvania held that when an insurer tenders a defense subject to reservation, the insured has two options. The first is to accept the defense in which event it remains unqualifiedly bound to the terms of the consent to settlement provision of the underlying policy. Alternatively, the insured may decline the insurer’s tender of qualified defense and furnish its own defense. In this event the insured retains full control of its own defense including settlement of claims. In this option the insured may recover from the insurer the insured’s defense costs and the cost of settlement, to the extent that these costs are deemed fair, reasonable, and non-collusive.

Commonwealth Court States Police During Pursuit Does Not Owe Same Duty Of Care To Passengers In Fleeing Vehicle As To Innocent Bystanders

Sellers v. Abington Township – Mr. Sellers, a passenger in a car that was being chased by police, was killed in an automobile accident. After seeing a police vehicle turning to pull him over the driver began speeding recklessly for fear of a DUI and hit a tree, killing the passenger Mr. Sellers. Mr. Sellers Estate sued the police arguing that they owed the passenger of a car the same duty of care owed to innocent bystanders. This case involved the question of whether a passenger in a vehicle being pursued by police should be considered an innocent bystander to whom the police owe a duty of care. The Commonwealth Court of Pennsylvania held that there is no duty of care to passengers whose existence, or whose connection to the driver and the conduct for which they are being pursued, is unknown to the officer.

Bad Faith Claims and Violations Of Unfair Practices Act Are Assignable

Allstate v. Wolfe –The United States District Court was presented with the issue of whether a bad faith claim and a violation of the Pennsylvania’s Unfair Trade Practices and Consumer Protection Law claim are assignable. Here, defendant who was insured by Allstate hit and injured plaintiff in a car accident. After Allstate refused a settlement offer over the objection of the defendant that would have indemnified the defendant, a jury verdict returned with an award of compensatory and punitive damages. Although the Allstate policy indemnified the defendant from compensatory damages, the policy did not indemnify the defendant from punitive damages. The United States District Court held that a bad faith claim and a violation of the Pennsylvania’s Unfair Trade Practices and Consumer Protection claim are assignable.

On appeal the 3rd Circuit requested that the Pennsylvania Supreme Court decide the issue of assignability due to a split in how the State and Federal Courts have decided the issue.

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