Insurer’s Delight: A Reduction In Delay Damages for UM Cases

By Leo A. Bohanski, Esq.*

Key Points:

• Delay damages on UM dispute are calculated on the molded-down verdict rather than the full verdict.
• Recovery of delay damages is limited to the amount of the “legally recoverable” molded verdict as reflected by the insurance policy limits.

In Marlette v. State Farm, 2012 Pa. LEXIS 3009 (Dec. 28, 2012), the Pennsylvania Supreme Court squarely addressed the issue of whether a plaintiff in an uninsured motorist (UM) dispute is entitled to delay damages for the full amount of the jury’s verdict or only on the verdict molded to the available uninsured motorist limits under to the applicable insurance policy. The Court held that a plaintiff's recovery of delay damages under Pa. R.C.P. 238 was limited to the amount of the legally recoverable molded verdict.

At the trial level of the UM dispute, a jury entered an award of $550,000 in favor of the insured for his bodily injuries and $150,000 in favor of the insured’s spouse on her derivative claim for loss of consortium. The trial court made a post-trial ruling that the award of $700,000 would be molded down to the available UM policy limits of $250,000. Additionally, the trial court credited an earlier payment by the defendant insurer of $16,693.02, resulting in a final molded down verdict of $233,206.98.

Pursuant to Rule 238 of the Pennsylvania Rules of Civil Procedure, the plaintiffs requested the delay damages calculation on the jury verdict of $550,000. As delay damages are not available for awards based on loss of consortium, there was no need to calculate a figure for the $150,000 verdict. Ultimately, the trial court refused to award delay damages on the jury verdict of $550,000 and awarded delay damages on the reduced figure of $233,206.98.

Both parties filed cross-appeals to the Superior Court. In a divided opinion, the Superior Court vacated the trial court’s judgment on delay damages and determined that the delay damages should have been calculated on the jury’s verdict amount of $550,000.

On further appeal, the Supreme Court reviewed and analyzed the law surrounding delay damages pursuant to Rule 238. The Court found guidance from its prior decision in Allen v. Mellinger, 784 A.2d 762 (Pa. 2001), where it held that delay damages against a Commonwealth defendant were limited to those calculated based on the statutory cap of $250,000 rather than the jury verdict of $2.9 million. It is noted that the plaintiffs voluntarily elected and paid for a UM policy with a $250,000 coverage limit. It found that the plaintiffs' self-imposed limitation on compensatory damages was sufficiently analogous to the statutory cap in the Allen decision, indicating that, in every insurance coverage dispute, the insurer’s liability, absent a bad faith claim, is limited by the applicable insurance policy limits.

Applying the Allen rationale to Marlette, the Court affirmatively established that a plaintiff may recover delay damages calculated only on the amount of legally recoverable damages that he/she is entitled to receive. The Court determined that the legally recoverable amount of damages would be as the molded-down amount of the available uninsured motorists limits under the applicable insurance policy. Thus, the Court vacated the Superior Court's decision and remanded the matter to the Superior Court to remand to the trial court for reinstatement of the original award of delay damages consistent with its decision.

As courts typically handle uninsured and underinsured motorist issues similarly, it is expected that delay damages will also be calculated based upon the reduced molded down amount of UIM coverage. The interesting issue may arise in post-Koken cases where the third-party tortfeasor is sued along with the UIM carrier. Does this decision justify the implementation of two separate amounts of delay damages? Seemingly, there appears to be an issue where one delay damages assessment would be applied to the full verdict against the third-party tortfeasor and another delay damages assessment against the UIM carrier on the molded down verdict.

Defense Digest, Vol. 19, No. 1, March 2013