Insurer is now liable for delay damages (pre-verdict interest) calculated on the entire verdict awarded by a jury rather than on the policy limits applicable to the plaintiff's claim.

The Superior Court has recently rendered a decision concerning the calculation of delay damages that insurers and their counsel should now consider in valuing a claim prior to trial. An insurer is liable for delay damages (pre-verdict interest) calculated on the entire verdict awarded by a jury rather than on the policy limits applicable to the plaintiff's claim. In Marlette, this ruling meant that State Farm was liable to pay delay damages on a jury verdict of $550,000 rather than on policy limits of $250,000. In cases with a likelihood of excess exposure, and especially in older cases subject to larger delay damages, the fact that such damages will be calculated on the entire verdict should be considered in determining settlement value. In Marlette, a UM case, the trial court molded the jury's $550,000 verdict to reflect the policy limits of $250,000. In opposition to the plaintiff's request for delay damages, State Farm argued that: (1) in the absence of bad faith or policy language authorizing the payment of delay damages, no delay damages could be imposed because any award of such damages would increase State Farm's liability beyond the policy limits of $250,000; and (2) even if some delay damages were appropriate, such damages must be calculated on the policy limits of $250,000, because such limits were the only amount recoverable, rather than on the entire $550,000 verdict. All three Superior Court judges rejected the first argument and held that State Farm was liable for some delay damages, even if the total award then exceeded policy limits. The court reasoned that the liability section of the policy did authorize payment of delay damages so that authority "arguably" could be read into the UM section as well. The UM section of the policy did not specifically address delay damages, which created an ambiguity that would be construed against State Farm and thus authorize the payment of delay damages. The court then ruled 2-1 that the delay damages must be calculated on the entire verdict, rather than on the policy limits.

Case Law Alert - 2nd Qtr 2011