Petition for Writ of Certiorari — Syracuse Exploration Co. v. Northbrook Property & Casualty Insurance
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‘Supreme Court, U.&
(i) FILED
00 309 auc 23 2008
Ueokwn Ur ate GLERK
NO.
Iu the Supreme Court of the
United States
October Term 2000
SYRACUSE EXPLORATION COMPANY,
Petitioner
VS.
NORTHBROOK PROPERTY AND CASUALTY
INSURANCE COMPANY,
Respondent
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
THIRD CIRCUIT
ANGINO & ROVNER, P.C.
RICHARD C. ANGINO
I.D. No. 07140
Attorneys for Petitioner
Syracuse Exploration Company
4503 North Front Street
Harrisburg, PA 17110
(717) 238-6791
Clare Printing, Box 100, Sayre, PA 18840—(570) 888-2244
os
Statement of Questions Presented for Review
STATEMENT OF THE QUESTIONS
PRESENTED FOR REVIEW
I. Is it reversible error for a trial judge to permit an
attorney expert to express legal opinions over opposing coun-
sel’s objections?
II. Does a party waive his right to object by failing to
except or object to the trial judge’s charge under the circum-
stances where the trial judge refused to hold a pre-charge
conference, failed to rule on submitted points for charge, and
failed to instruct the jury with respect to points for charge
submitted by counsel?
III. Is it reversible error for the trial court to sanction
counsel by precluding expert testimony because of the belated
filing of an expert report under circumstances where the
Circuit required “prejudice” and no “prejudice” was shown?
IV. Is it reversible error for a trial court to preclude
reference to an insurance carrier's cancellation/refusal to re-
new as a possible act of “bad faith” in an insurance “bad faith”
case?
V. Is it reversible, prejudicial error to grant partial sum-
mary judgment and a motion in limine removing from the
jury's consideration contractual issues and evidence of conse-
quential damages and/or lost profit based upon contract issues
when the complaint seeks both contractual and bad faith
damages and where the state law provides for different bur-
dens of proof with respect to contract and “bad faith” issues?
l
Corporate Disclosure Statement
CORPORATE DISCLOSURE STATEMENT
Petitioner discloses that there is no parent or publicly
held company owning 10% or more of the corporation's stock.
TABLE OF CONTENTS
Statement of the Questions Presented for Review... . .
Corporate Disclosure Statement...................
EE EE
Tanee OF Citetions...........+... RES Pe TO
ee ee
Statutory Provisions Involved .....................
eo ST TEETER Cee
I. It Is Reversible Legal Error For A Trial Judge
To Permit An Attorney Expert To Express
Legal Opinions Over Opposing Counsel's
eer Lee wa teas
II. A Party Does Not Waive His Right To Object
By Failing To Except Or Object To The Trial
Judge’s Charge Under The Circumstances
Where The Trial Judge Refused To Hold A
Pre-Charge Conference, Failed To Rule On
Submitted Points For Charge, And Failed To
Instruct The Jury With Respect To Points
For Charge Submitted By Counsel........ .
III. It Is Reversible Error For The Trial Court To
Sanction Counsel By Precluding Expert
Testimony Because Of The Belated Filing Of
An Expert Report Under Circumstances
Where The Circuit Required “Prejudice”
And No “Prejudice” Was Shown ...........
ill
11
12
15
IV. It Is Reversible Error For A Trial Court To
Preclude Reference To An Insurance
Carrier’s Cancellation/Refusal To Renew As
A Possible Act Of “Bad Faith” In An
Insurance “Bad Faith” Case............... 16
V. It Is Reversible, Prejudicial Error To Grant
Partial Summary Judgment And A Motion In
Limine Removing From The Jury's
Consideration Contractual Issues And
Evidence Of Consequential Damages
And/Or Lost Profit Based Upon Contract
Issues When The Complaint Seeks Both
Contractual And Bad Faith Damages And
Where The State Law Provides For Different
Burdens Of Proof With Respect To Contract
At Te Pe NN ks So oes 17
Comte ks sk a chee a Se ee eek 18
APPENDIX:
Order of the United States Court of Appeals for the
Third Circuit Sur Petition for Rehearing dated
Sling TD, TOO ss ckcac cue bean eben ceaabeeae es la
Panel Opinion of the United States Court of Appeals
for the Third Circuit dated May 26, 2000........ 2a
Trial Court Memorandum Opinion for the Middle
District of Pennsylvania dated September 28,
SO ns ex eee wk WAR eS ee Oe eee ie l6a
Trial Court’s Order for the Middle District of
Pennsylvania dated June 3, 1999............... 26a
Trial Court’s Order for the Middle District of
Pennsylvania dated December 31, 1998......... 27a
Trial Court’s Order for the Middle District of
Pennsylvania dated April 29, 1998.............. 29a
iv
Relevant portion of trial transcript dealing with
testimony of lawyer/expert.................5.. 30a
Relevant portion of trial transcript dealing with the trial
court’s failure to hold a pre-charge conference
regarding plaintiff's points for charge and the trial
TERI ss os 5s:6s nds ae CreaseaWeokwenes 75a
TABLE OF CITATIONS
CASES:
A & E Supply Co. v. Nationwide Mut. Fire Ins. Co.,
612 F, Supp. 760 (W.D. Va. 1985)....... 12, 13, 14, 17
Adalman v. Baker, Watts & Co., 807 F.2d 359 (4th Cir.
SE SI ux eis hire ak eine Cand en keer ak 8
Askanase v. Fatjo, 130 F.3d 657 (Sth C Cir. (Tex.) 1997). . 8
Ballow v. PHICO Ins. Co., 875 P.2d 1354 (S.Ct.
CCID FSI x id Vw x 49 Ag Rae's tons 16
Bergman v. United Services Automobile Association,
742 A.2d 1101 (Pa. Super. 1999)............... 8.
Burkhart v. Washington Metropolitan Area Transit
Auth., 112 F.3d 1207 (D.C. Cir. 1997) .......... 8
Doylestown Electrical Supply Co. v. Maryland Cas.
Ins. Co., 942 F. Supp. 1018 (E.D. Pa. 1996)...... 10
Endress + Hauser, Inc. v. Hawk Measurement Systems
Pty. Ltd., 122 F.3d 1040 (C.A.Fed. (Ind.) 1997) .. 8
Harbor Ins. Co. and Allstate Ins. Co. v. Continental
Bank Corp., 922 F.2d 357 (7th Cir. (Ill.) 1990)... 8
Helfand v. National Union Fire Ins. Co. of Pittsburgh,
Pa., 10 Cal. App. 4th 869, 13 Cal. Rptr.2d 295
FR ct abe See Ce. eer iu eae ke i ok en 16
Hindman Transfer & Storage Inc. v. PMA Group, 31
D.& C. 4th 55 (G.P. Butler 1906) .............. 17
Jung v. Nationwide Mut. Fire Ins. Co., 949 F. Supp.
Eh RR ere eee ey oe 17
Marx & Co. v. Diners’ Club, Inc., 550 F.2d 505 (2d
SE cick onde wk eek ae eae ees 7
Meyers v. Pennypack Woods Home Ownership Assn.,
SSD F905 G6 Cee Cie: MOTT) ¢ ss sc sk co nko eae 9, 10, 16
Nealy v. State Farm Mut. Auto. Ins. Co., 695 A.2d 790
(Pa. Sapna, BI) 6 cic cans hike hae aowewes dees 10
Nieves-Villanueva v. Soto-Rivera, 133 F.3d 92 (1st Cir.
Pusrto Fite Tee as cvs cacee vbb eo eaters ss 7
O’Donnell v. Allstate Ins. Co., 734 A.2d 901 (Pa.
Supee. TIGR) «ccs sins du csne ch cape aeeees wan 12
Ohio Cas. Ins. Co. v. Travelers Ins. Co., 667 F. Supp.
993 CWB. Pi Ss on hc i. Se 16
Parsaie v. United Olympic Life Ins. Co., 29 F.3d 219
(Sats Cie. CU TT o's hee ee ae 17
PepsiCo, Inc. v. Continental Cas. Co., 640 F. Supp.
O56 (5. TD.T.. Beets do onkka ne we 17
Polselli v. Nationwide Mut. Fire Ins. Co., 126 F.3d 524
(Se Ge: BG) ck ee cn eee Re 10
Specht v. Jensen, 853 F.2d 805 (10th Cir. (Colo.) 1988) .. 8
Spindle v. Travelers Ins. Co., 66 Cal. App. 3d 951, 136
Cal. Rote. G00 (IRIE) «snk citer wtais cin eee 16
Timmons v. Royal Globe Ins. Co., 653 P.2d 907 (Okla.
ROE 5.s ki oko ocean ee 17
U.S. v. Zipkin, 729 F .2d 384 (6th Cir. (Ohio) 1984)... . 8
United States v. Newman, 49 F.3d 1 (Ist Cir. 1995)... 7
Waldon v. Cotton States Mut. Ins. Co., 481 So.2d 340
(Ale: POG. is oc nd 0e 4583 xe ee ee 16
Wilson v. Garcia, 471 U.S. 261, 105 S.Ct. 1938 (1985). . Y
STATUTES:
eas RE 6s Kiva oh is Nase wh eR ee hie LS LON 3
pe eR ERRNGR Ga SN Re ee en ee 4,5
Pennsylvania Automobile Insurance Cancellation Law:
40 P.S. §1008.1, et seq. (repealed); now 40 P.S.
oe re er eee ee eee 4,16
Pennsylvania Unfair Insurance Practices Act:
MMs oe 4,12, 16
RULES: ;
PU Ske cea, 85a casks <xan eres 9
Pee, DS oi ove 5 ks bas wean as 4,9
OTHER AUTHORITIES: aan
Se PO PUG. Date FCI 6 oss cee wicca de ekiadas tere 9
en Ra PP vv coe bi Aa cd es wee eas 9
vii
CU ee. Pe a ee em ee ee Oe ee? Oe ee ee ee
l
Petition
Petition
IN THE SUPREME COURT OF THE UNITED STATES
SYRACUSE EXPLORATION COMPANY,
Petitioner,
V.
NORTHBROOK PROPERTY AND CASUALTY
INSURANCE COMPANY,
Respondent
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
To the Honorable, the Chief Justice and the Associate
Justices of the Supreme Court of the United States
2
Reference to the Opinions Below
REFERENCE TO THE OPINIONS DELIVERED
IN THE COURTS BELOW
Reference is made to the June 20, 2000, Order of the
United States Court of Appeals for the Third Circuit denying
the Sur Petition for Reheari: ; (App. la), the Panel Opinion
of the United States Court of Appeals for the Third Circuit
filed May 26, 2000 (App. 2a), affirming the \femorandum
Opinion of the United States District Court for the Middle
District of Pennsylvania dated September 28, 1999 (App. 16a).
Reference is further made to the Trial Court's Order of June
3, 1999, excluding evidence related to defendant's non-re-
newal of plaintiff's insurance policy (App. 26a), the Trial
Court's Order of December 31, 1998, sanctioning counsel by
excluding the use of an expert because of the belated filing of
an expert report (App. 27a), the Trial Court’s Opinion and
Order of April 29, 1998, first denying the Motion for Partial
Summary Judgment and then granting Partial Summary Judg-
ment on December 31, 1998 (App. 29a and 27a, respectively).
3
Statement of Jurisdiction
STATEMENT OF JURISDICTION
The judgment of the United States Court of Appeals for
the Third Circuit denying Syracuse Exploration Company's
Petition for Rehearing En Banc was entered on June 20, 2000.
Jurisdiction in this Court is invoked under 28 U.S.C. 1254(1).
4
Statutory Provisions Involved
STATUTORY PROVISIONS INVOLVED
This diversity “bad faith” case arises under the Pennsyl-
vania Bad Faith Statute, 42 Pa. C.S.A. §8371. Also relevant are
the Pennsylvania Automobile Insurance Cancellation Law, 40
~ PS. §1008.1, et seg. (repealed) now 40 P.S. 991.2001, et seq.;
The Pennsylvania Unfair Insurance Practices Act, 40 PS.
§1171.1; and Fed.R.Civ.P. 51 and 59(c).
5
Statement of the Case
STATEMENT OF THE CASE
This case involves Plaintiff Syracuse Exploration Com-
pany (“Syracuse”) which insured a specialty piece of equip-
ment, a “drill rig”, which was not easily replaced, important to
Syracuse's business, and particularly important in bidding on
contracts. Insurance on the drill rig was provided through
Respondent Northbrook Property and Casualty Insurance
Company.
The drill rig was damaged by fire on December 13, 1996.
A loss claim was filed within three days on December 17, 1996,
but despite numerous faxes, telephone calls, correspondence,
etc., Syracuse was unable to get Northbrook to make a decision
to repair or replace the damaged rig until March 26, 1997. The
decision to repair rather than replace was made solely to save
Northbrook a few dollars. In the meantime, Northbrook can-
celed or refused to renew Syracuse's insurance policy.
In June of 1997, Northbrook sought to deduct deprecia-
tion. The propriety of deducting depreciation and the insis-
tence upon a general release that would have released
Syracuse’s bad faith claim resulted in an additional delay until
September 3, 1997, when Syracuse finally received its repaired
rig.
Syracuse’s complaint alleged contractual damages, in-
cluding depreciation, deduction for partial loss, losses for
business interruption, loss of profits, and storage fees. Plaintiff
also claimed bad faith damages under 42 Pa. C.S.A. §8371.
Although Plaintiff's complaint sought both contractual
and bad faith damages and sought recovery based upon con-
tractual and bad faith legal principles, the trial court first
denied and then granted summary judgment as to the contrac-
tual claims. The trial court then sanctioned Syracuse's counsel's
6
Statement of the Case
belated filing of an expert report by precluding expert testi-
mony. On the eve of trial, the trial court granted Northbrook’s
motion in limine to preclude reference to Northbrook’s can-
cellation/non-renewal as a potential act of bad faith. During
the trial, the trial court, over Plaintiff's objections, permitted
Northbrook’s legal/scholar expert to express opinions as to
what is or is not bad faith.
Finally, at the end of the trial, the trial court refused to
hold a pre-charge conference, failed to rule on the parties’
points for charge, and failed to instruct the jury in accordance
with Syracuse's suggested points for charge.
7
Reasons for Allowance of the Writ
REASONS FOR ALLOWANCE OF THE WRIT
Like products liability law in the 1960s, no-fault law in the
1970s and 1980s, motor vehicle financial responsibility law in
the 1980s, bad faith law is the developing law in the 1990s and
the beginning of the new millennium.
Since bad faith law involves an insured and an insurer,
and since the vast majority of insurance companies are citizens
of states other than the locus state, and since for a variety of
reasons insurance companies have been removing state-insti-
tuted actions to federal courts, bad faith law has been devel-
oping in the federal courts rather than the state system. Dis-
trict courts and the Third Circuit have had to predict on
numerous occasions what the Supreme Court of Pennsylvania
would do with numerous issues that have not as yet been
addressed.
The instant case involves a variety of issues common to
bad faith actions, which either have not as yet been addressed
by Pennsylvania appellate courts or, if addressed, the district
court and the Third Circuit Panel in this case have decided the
issues differently from the state appellate courts and/or appel-
late courts from other states and Circuits.
In the instant case, a panel of the Third Circuit decided
the issue of the admissibility of lawyer/expert testimony con-
trary to eight Circuits (App. 10a). In the other eight Circuits,
lawyers cannot be called to testify as to the “law.” The trial
judge in the other eight Circuits is the only expert on the law
to whom the jury should receive instructions as to the “law.” —
Nieves-Villanueva v. Soto-Rivera, 133 F.3d 92 (1st Cir. Puerto
Rico 1997); United States v. Newman, 49 F.3d 1, 7 (1st Cir.
1995) (quoting Marx & Co. v. Diners’ Club, Inc. ,550 F. 2d 505,
512 (2d Cir. 1977); See cases particularly referenced in 133
8
Reasons for Allowance of the Writ
F.3d 92, Burkhart v. Washington Metropolitan Area Transit
Auth., 112 F.3d 1207 (D.C. Cir. 1997). Also see, Harbor Ins.
Co. and Allstate Ins. Co. v. Continental Bank Corp., 922 F.2d
357 (7th Cir. (Ill.) 1990); Askanase v. Fatjo, 130 F.3d 657 (5th
Cir. (Tex.) 1997); Adalman v. Baker, Watts & Co., 807 F.2d 359
(4th Cir. (Md.) 1986); Specht v. Jensen, 853 F.2d 805 (10th Cir.
(Colo.) 1988); U.S. v. Zipkin, 729 F.2d 384 (6th Cir. (Ohio)
1984); Endress + Hauser, Inc. v. Hawk Measurement Systems
Pty. Ltd., 122 F.3d 1040 (C.A. Fed. (Ind.) 1997); Bergman v.
United Services Automobile Association, 742 A.2d 1101 (Pa.
Super. 1999).
In its Memorandum Opinion, the panel fails to reference
or distinguish the numerous cases from the eight other Cir-
cuits (App. 10a). See discussion at page 12 of this Petition.
The Third Circuit Panel decision affirming the trial
court's failure to hold a pre-charge conference, failing to rule
. on submitted points for charge prior to summation; and failing
to instruct the jury with respect to points for charge submitted
by Syracuse's counsel on the basis that Syracuse's counsel failed
to except or object at the end of the trial court's charge is clear
error requiring reversal.
Syracuse failed to bring any of these alleged errors
to the attention of the District Court. As a result, our
review is limited by the plain error standard. ‘(W]e will
reverse only if the trial court committed plain error that
was fundamentally and highly prejudicial. ...’ Alexander
v. Riga, _ F.3d ___, 2000 WL 295288°4 (3d Cir. 2000).
(App. 13a)
In effect, the Third Circuit Panel held that supplying
points for charge to a trial court and the court's refusal to give
the points supplied by counsel requires in addition that trial
covasel take an exception to the failure of the trial court to give
the points for charge supplied to him.
9
Reasons for Allowance of the Writ
Fed.R.Civ.P. 51 requires the court to inform counsel of
_ its proposed actions upon the request for instructions prior to
the arguments to the jury. The requirement of Fed.R.Civ.P. 51
that the court inform counsel is mandatory. Fed.R.Civ.P. 51
regarding objections to jury instructions must be read in
conjunction with Fed.R.Civ.P. 46 which eliminates the neces-
sity for formal exception:
Section 77:228 Formal exceptions abolished; necessity of
objections
a failure to object to jury instructions may be disregarded
if the party's position has previously been made clear to
the court and it is plain that further objection would be
unavailing.
33 Fed. Proc., L.Ed §77:228 at p. 238.
Section 77:230 When objection is unnecessary.
Normally, the purpose of FRCP 46 can be ade-
quately served only by the making of an objection on the
record, but if the court and other litigants know what
action a party desires the court to take, the purpose of the
rule is served. In such circumstances, a formal objection
is not required, and the failure of the court to take the
desired action may be asserted as error on appeal.
33 Fed. Proc., L.Ed. §77:230 at 239. See discussion at page 13
of this Petition.
The trial court admitted that before excluding a witness
from testifying at trial, he must follow Meyers v. Pennypack
Woods Home Ownership Assn. , 559 F.2d 894, 904-905 (3d Cir.
1977), overruled on other grounds, Wilson v. Garcia, 471 U.S.
261, 105 S.Ct. 1938 (1985). He admitted that he did not follow
the mandates of the Third Circuit in Meyers. Nevertheless, a
panel of the Third Circuit affirmed holding:
10
Reasons for Allowance of the Writ
On the facts of this case, we will not disturb the
District Court's ruling.
(App. 9a)
The panel also erroneously states “No one of the Meyers
factors is dispositive and we do not find that the Court's
application of those factors supports Syracuse's argument that
the sanctions imposed were based on a clear abuse of discre-
tion.” (App. 9a-10a) In effect, a panel of the Third Circuit has
overruled Meyers in a Memorandum Opinion. See, discussion
at pages 15-16 of this Petition.
The panel summarily dismissed in its Memorandum
Opinion a matter of first impression dealing with the admissi-
bility of an insurance carrier's cancellation/refusal to renew as
a potential act of bad faith (App. 12a). The trial court refused
to permit such evidence. Appellate courts in other states and
another district court in Pennsylvania have permitted such
evidence. The panel fails to reference or distinguish the nu-
merous cases cited by Plaintiff. See, discussion at page 17 of
this Petition.
A panel of the Third Circuit failed to consider that the
complaint in the instant case sought both contractual and bad
faith damages and/or sought recovery based upon contractual
and bad faith legal principles. The trial court ignored Plaintiff's
contractual claims, and a panel of the Third Circuit affirmed
the error.
The panel's decision is contrary to Nealy v. State Farm
Mut. Auto. Ins. Co., 695 A.2d 790, 792-793 (Pa. Super. 1997);
Doylestown Electrical Supply Co. v. Maryland Cas. Ins. Co.,
942 F. Supp. 1018, 1019, 1020 (E.D. Pa. 1996); and Polselli v.
Nationwide Mut. Fire Ins. Co., 126 F.3d 524, 529 (3d Cir.
1997) which have all held that a bad faith claim is separate and
distinct from the underlying contractual claims from which
the dispute arises.
———— reer
1]
Reasons for Allowance of the Writ
Bringing a combination bad faith/contract action requires
the consideration of separate legal principles, different bur-
dens of proof, different charges to the jury, and separate
consideration following post-trial motions (App. 6a).
Again, the panel fails to reference and/or distinguish the
numerous cases cited by Plaintiff and discussed at page 17 of
this Petition.
I. It Is Reversible Legal Error For A Trial Judge To
Permit An Attorney Expert To Express Legal
Opinions Over Opposing Counsel’s Objections
When Defendant's legal expert was called, Plaintiff's
counsel immediately objected:
MR. ANGINO: Your Honor, I would like an offer of
proof with regard to this.
THE COURT: I think you know what he is going to
testify to.
MR. ANGINO: I am going to object to the legal
aspect of it, Your Honor.
(App. 31a)
Defense counsel qualified his legal expert, Mr. Windt, as
being the author of a two-volume set of insurance law, who
gives lectures to lawyers as to insurance law.
Q. Mr. Windt, I have seen your advertising brochure
and this book has been hailed as the Bible of insurance
law?
MR. ANGINO: I object, Your Honor.
oes
12
Reasons for Allowance of the Writ
Q. I want to ask you the question do you know why
it is your book is so highly regarded?
A. It has gotten some good book reviews over the
years.
Q. Your book has been cited by hundreds of Courts;
is that right?
A. Around the country, yes.
(App. 36a)
Defendant's expert was presented to the jury as a lawyer
who is consulted by insurance companies and by other lawyers
and cited by courts because of his knowledge of the law of bad
faith. This is error in eight Circuits and should be error in the
Third Circuit.
II. A Party Does Not Waive His Right To Object By
Failing To Except Or Object To The Trial Judge’s
Charge Under The Circumstances Where The Trial
Judge Refused To Hold A Pre-Charge Conference,
Failed To Rule On Submitted Points For Charge, And
Failed To Instruct The Jury With Respect To Points
For Charge Submitted By Counsel
This issue was addressed in Plaintiff's discussion in the
first section of this Petition.
Last summer, the Pennsylvania Superior Court decided
O'Donnell v. Allstate Ins. Co., 734 A.2d 901 (Pa. Super. 1999).
The Superior Court addressed the issues of adequacy of jury
instructions and the relevance of Pennsylvania's Unfair Insur-
ance Practices Act (UIPA) and pertinent regulations in in-
structing jurors on “bad faith.” Also see, A & E Supply Co. v.
13
Reasons for Allowance of the Writ
Nationwide Mut. Fire Ins. Co., 612 F. Supp. 760 (W.D. Va.
1985).
Plaintiff's Points for Charge submitted to the Court have
lines for the Court to acknowledge whether it affirms or denies
the point for charge or, as often occurs, the Court states that
the proposition will be covered in the Court's general charge.
In the thirty-five year experience of Plaintiff's counsel,
trial judges usually have pre-charge conferences to review
points for charge to determine which points for charge will be
given, which ones will be denied, and which ones will be
incorporated in the general charge. Sometimes the trial judges
merely advise counsel of their rulings by noting their decision
on the points submitted or by dictating their rulings on the
record before the commencement of summations. In either
event, counsel need not specifically object or take exceptions to
the Court's rulings.
Plaintiff's counsel in the instant case asked for a pre-
charge conference. The following colloquy took place:
MR. ANGINO: Sure. What is the time we are going
to start tomorrow, Your Honor?
THE COURT: Nine.
MR. ANGINO: Thank you. Do you want to start
with the jury charge conference tomorrow morning or
closing arguments?
THE COURT: I don’t plan to hold a charge confer-
ence. I don’t usually do that. The law is very clear here.
MR. ZELLE: That is fine. I would like to know when
if | have any objection to the jury charge—I don’t want
to do it in front of the jury obviously.
THE COURT: I think after I deliver my charge if
vou have any objections, you can come to sidebar, and we
will put them on the record.
| 14
Reasons for Allowance of the Writ '
MR. ZELLE: That is fine. Thank you.
THE COURT: I will correct anything that I mis-
quoted to the jury. But I have charged jurors on this exact
thing, and I think my charge is within the limits of the
law. (emphasis added)
(App. 76a)
The Trial Judge did not rule in advance on the parties’
Points for Charge, did not advise the attorneys as to how he
would charge, and did not make a record of his rulings prior
to the giving of their summations.
After the summations, the Trial Judge proceeded to give
his general charge which failed to include virtually all of the
specific points presented by the Plaintiff in the Plaintiff's Points
for Charge, particularly the points dealing with the Unfair
Insurance Practices Act, the regulations, and the various defi-
nitions of bad faith.
Compare the Trial Judge’s charge in the instant case with
the charge given in A & E Supply Co., Inc. v. Nationwide Mut.
Fire Ins. Co., supra, 612 F. Supp. at 777.
Defense counsel and the Trial Court eontend that Plain-
tiff did not preserve its objections to the Trial Court's failure
to give Plaintiff's Points for Charge because Plaintiff did not
object or file exceptions following the Court's charge.
As pointed out at the outsef, the panel of Your Court erred
in affirming the District Court's actions in this case.
15
Reasons for Allowance of the Writ
III. It Is Reversible Error For The Trial Court To
Sanction Counsel By Precluding Expert Testimony
Because Of The Belated Filing Of An Expert Report
Under Circumstances Where The Circuit Required
“Prejudice” And No “Prejudice” Was Shown
The Trial Court admitted in its Memorandum Opinion:
Plaintiff correctly points out that before imposing
the sanction of striking proposed testimony by a witness
we must consider:
(1) the prejudice or surprise in fact of the party against
whom the excluded witnesses would have testified,
(2) the ability of that party to cure the prejudice,
(3) the extent to which waiver of the rule against calling
unlisted witnesses would disrupt the orderly and efficient
trial of the case or of other cases in the court, and
(4) bad faith or willfulness in failing to comply with the
court's order.
Meyers v. Pennypack Woods Home Ownership
Assn. , 559 F.2d 894, 904-905 (3d Cir. 1977), overruled on
other grounds, Goodman v. Lukens Steel, 777 F.2d 113
(3d Cir. 1985), aff'd, 482 U.S. 656, 107 S.Ct. 2617, 96
L.Ed. 2d 572 (1987); see also Elf Atochem N. Am., Inc. v.
United States, 882 F. Supp. 1497, 1498 (E.D. Pa. 1995).
Although we did not require Defendant to establish that
admitting the expert’s proposed testimony would cause
prejudice, nor whether such prejudice could be cured, we
did determine that Plaintiff's behavior was in disregard
of the rules of civil procedure and the case management
plan for this case. Furthermore, although Plaintiff char-
acterized the expert as a “rebuttal expert,” his report
16
Reasons for Allowance of the Writ
contained an analysis of Defendant's handling of Plain-
tiffs insurance claim. There was no excuse for Plaintiff
awaiting the report by Defendant's expert before present-
ing its own witness. To allow the Plaintiff to introduce
opinion evidence which could have (and should have)
been produced initially would have affected the orderly
prosecution of the case. Following the Plaintiff's disregard
of the discovery deadline (through a request for produc-
tion of documents), we conclude that the sanction im-
posed was a valid exercise of our authority under
Fed. R.Civ.P. 27. Slip op. at 6. (emphasis supplied)
The trial court and a panel of the Third Circuit Court
nevertheless disregarded the four requirements of Meyers.
IV. It Is Reversible Error For A Trial Court To
Preclude Reference To An Insurance Carrier’s
Cancellation/Refusal To Renew As A Possible Act Of
“Bad Faith” In An Insurance “Bad Faith” Case
Pennsylvania prohibits “wrongful” cancellation or refusal
to renew, é.g., Pennsylvania Automobile Insurance Cancella-
tion Law, 40 P. S. $1008, et seq., and/or the Pennsylvania Unfair
Insurance Practices Act (UIPA), 40 P.S. §1171.1, et seg. See
Ohio Cas. Ins. Co. v. Travelers Ins. Co., 667 F. Supp. 222 (W.D.
Pa. 1987).
A “wrongful” cancellation or refusal to renew can consti-
tute “bad faith.” Spindle v. Travelers Ins. Co., 66 Cal. App. 3d
951, 136 Cal. Rptr. 404 (1977) is the seminal case in this area.
Also see, Ballow v. PHICO Ins. Co. , 875 P.2d 1354 (S.Ct. Colo.
1993); Waldon v. Cotton States Mut. Ins. Co., 481 So.2d 340
(Ala. 1985); Helfand v. National Union Fire Ins. Co. of Pitts-
burgh, Pa., 10 Cal. App. 4th 869, 13 Cal. Rptr.2d 295 (1992);
17
Reasons for Allowance of the Writ
PepsiCo, Inc. v. Continental Cas. Co., 640 F. Supp. 656
(S.D.N.Y. 1986); Timmons v. Royal Globe Ins. Co., 653 P.2d
907, 917 (Okla. 1982); Parsaie v. United Olympic Life Ins. Co.,
29 F.3d 219 (5th Cir. (Tex.) 1994); A & E Supply Co., Inc. v.
Nationwide Mut. Fire Ins. Co., supra, rev'd on other grounds,
798 F.2d 669 (4th Cir. 1986).
In Pennsyivania, see Jung v. Nationwide Mut. Fire Ins.
Co., 949 F. Supp. 353 (E.D. Pa. 1997) where Judge Cahn held
that the act of rescission can constitute bad faith.
V. It Is Reversible, Prejudicial Error To Grant Partial
Summary Judgment And A Motion In Limine
Removing From The Jury’s Consideration Contractual
Issues Ar: idence Of Consequential Damages
And/Or Lost Profit Based Upon Contract Issues When
The Complaint Seeks Both Contractual And Bad
Faith Damages And Where The State Law Provides
For Different Burdens Of Proof With Respect To
Contract And “Bad Faith” Issues
Where a plaintiff's business is to provide drilling services
which often involve bidding for contracts and Plaintiff's CEO
and General Manager have testified that they lost contracts
and profits and provide documentary information pertaining
to the loss of contracts and profits, the issue of lost contracts
and profits should be an issue for the jury, e.g., Hindman
Transfer & Storage Inc. v. PMA Group, 31 D. & C. 4th 55 (C.P.
Butler 1996). Not so said the district court and a panel of the
Third Circuit.
18
Conclusion
CONCLUSION
For the foregoing reasons, Petitioner's Petition for Writ
of Certiorari should be granted.
Respectfully submitted,
ANGINO & ROVNER, P.C.
RICHARD C. ANGINO
I.D. No. 07140
Attorneys for Petitioners
19
Proof of Service
PROOF OF SERVICE
I, Richard C. Angino, Esquire, hereby certify that I have
this 24th day of August, 2000, served three true and correct
copies of Petition for Writ of Certiorari to the Third Circuit
Court of Appeals by sending same by United States first-class
mail, postage prepaid, to the following.
Robert E. Kelly, Jr., Esquire
Duane Morris & Heckscher LLP
305 North Front Street
P.O. Box 1003
Harrisburg, PA 17108-1003
(717) 237-5533
Anthony R. Zelle, Esquire
Robinson & Cole
1 Boston Place
Boston, MA 02108
(617) 557-5900
I further certify that all parties required to be served have ~
been served.
RICHARD C. ANGINO, ESQUIRE
I.D. No. 07140
4503 North Front Street
Harrisburg, PA 17110
(717) 238-6791
Counsel for Appellants
la
Appendix
UNITED STATES COURT OF APPEALS
FOR THE THIRD-CIRCUIT
No. 99-3811
SYRACUSE EXPLORATION
VS.
NORTHBROOK PROPERTY
SUR PETITION FOR REHEARING
Present: BECKER, Chief Judge,
SLOVITER, MANSMANN, GREENBERG, SCIRICA,
NYGAARD, ALITO, ROTH, McKEE, RENDELL,
BARRY, FUENTES, Circuit Judges, and WARD,
District Judge. °
The petition for rehearing filed by appellant in the above
entitled case having been submitted to the judges who partici-
pated in the decision of this court and to all other available
circuit judges of the circuit in regular active service, and nc
judge who concurred in the decision having asked for rehear-
ing, and a majority of the circuit judges of the circuit in regular
active service not having voted for rehearing by the court in
banc, the petition for rehearing is denied.
BY THE COURT,
/s/Carol Los Mansmann
Circuit Judge
* Judge Ward voted only as to panel rehearing.
2a
Appendix
UNREPORTED—NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-3811
SYRACUSE EXPLORATION COMPANY,
Appellant
v.
NORTHBROOK PROPERTY & CASUALTY
INSURANCE COMPANY
Appeal from the United States District Court for the
Middle District of Pennsylvania
(D.C. Civ. No. 97-cv-01405)
District Judge: Honorable William W. Caldwell
Submitted Under Third Circuit LAR 34.1(a)
May 23, 2000
Before: SLOVITER and MANSMANN, Circuit Judges
and WARD, District Judge
(Filed: May 26, 2000)
MEMORANDUM OPINION OF THE COURT
* Honorable Robert J. Ward, of the United States District
Court for the Southern District of New York, sitting by desig-
nation.
| 3a
Appendix
MANSMANN, Circuit Judge.
Syracuse Exploration Corporation, the plaintiff in a diver-
sity action alleging bad faith on the part of its insurers under
42 Pa. Cons. Stat. Ann. §8371, appeals from an order of the
District Court granting partial summary judgment in favor of
the insurer, Northbrook Property & Casualty Insurance Cor-
poration. Syracuse also appeals from an order of the District
Court denying Syracuse's motion for a new trial. Syracuse
raises multiple allegations of error with respect to the grant of
partial summary judgment, contending that the District Court
erred in: (1) concluding that Syracuse failed to produce evi-
dence in support of its bad faith claim based on Northbrook’s
depreciation and lost profits calculations; and (2) striking the
report of Syracuse's expert as untimely. Syracuse raises addi-
tional allegations of error with respect to the District Court's
denial of its motion for a new trial. Specifically, Syracuse
contends that the District Court erred in: (1) precluding the
introduction of evidence relating to Northbrook’s failure to
renew the insurance policy held by Syracuse; (2) permitting
Northbrook’s expert to express a legal opinion; (3) ruling that
Syracuse's owner could not be questioned regarding the finan-
cial status of the company; (4) failing to hold a pre-charge
conference and to deliver certain instructions requested by
Syracuse; (5) formulating inadequate responses to questions
posed by the jury during the course of deliberation; and (6)
tolerating alleged misconduct on the part of counsel for North-
brook. We are convinced that each of the allegations of error
lacks merit and will affirm the orders of the District Court.
1.
The parties are well familiar with the facts underlying this
appeal and have referred to those facts in detail in the course
of setting forth their respective positions. As a result, we refer
to the facts only to provide context for our conclusions of law.
4a
Appendix
In September 1997 Syracuse filed a diversity action in the
Middie District of Pennsylvania, alleging that Northbrook
acted in bad faith in violation of Pennsylvania law when it
processed an insurance claim for fire damage to a drilling rig
owned by Syracuse. Syracuse sought lost profits, compensa-
tory and punitive damages, and attorney's fees.
In January 1998 Northbrook filed a motion for partial
summary judgment with respect to that portion of Syracuse's
claim based on the deduction of depreciation from the amount
owed. This motion was denied, as was Northbrook’s motion
for reconsideration.
At the close of discovery in August 1998, Northbrook filed
a second motion for partial summary judgment on the depre-
ciation and lost profits elements of Syracuse’s bad faith claim.
Following oral argument, the Magistrate Judge concluded that
Syracuse failed to meet its burden of “point[ing] to some
evidence of an unreasonable calculation of depreciation and
of lost profits.” Syracuse Exploration Corp. v. Northbrook
Property & Casualty Ins. Co., Civ. No. 1:CV-97-14-5, report
and recommendation at 5 (M.D. Pa. October 22, 1998). Ac-
cordingly, the Magistrate Judge recommended that North-
brook’s motion for partial summary judgment be granted. In
an order dated December 31, 1998, the District Court
adopted the report and recommendation of the Magistrate
Judge, granting partial summary judgment in favor of North-
brook. In the same order the District Court granted North-
brook’s motion to strike a report prepared by Syracuse's expert
witness, finding that the report was untimely.
In May 1999 Northbrook filed motions in limine seeking
to exclude at trial evidence relating to Syracuse’s alleged lost
profits and financial status, Northbrook’s failure to renew its
insurance contract with Syracuse, and the method used by
Northbrook to calculate depreciation. In an order dated June
oa
Appendix
3, 1999, these motions were granted. Trial began on June 7,
1999, and concluded on June 8th with a jury verdict in favor
of Northbrook.
On June 11, 1999, Syracuse filed a motion for a new trial
alleging that the District Court erred in admitting and exclud-
ing certain items of evidence at trial, instructing the jury, and
tolerating prejudicial misconduct on the part of Northbrook’s
counsel. The motion was denied on September 28, 1999. A
timely appeal followed. We have jurisdiction pursuant to 28
U.S.C. §1291.
II.
We address first Syracuse’s appeal from the District Court
order granting partial summary judgment in favor of North-
brook. Syracuse challenges first those portions of the order
directing that judgment be entered in favor of Northbrook on
Syracuse's claim that Northbrook exhibited bad faith in calcu-
lating a depreciation deduction and on the claim for lost
profits.’
A.
The deduction for depreciation and calculation of lost
profits.
Pennsylvania law provides a statutory remedy for insur-
ers’ bad faith conduct. 42 Pa. Cons. Stat. Ann. §8371 reads:
In an action arising under an insurance policy, if the court
finds that the insurer has acted in bad faith toward the
insured, a court may take all of the following actions:
(1) Award interest on the amount of the claim from the
! In a parallel argument, Syracuse contends that the District Court erred in
granting Northbrook’s motions in limine precluding the introduction at trial of
evidence relating to the method by which depreciation and lost profits were
calculated. Our finding that the District Court did not err in granting summary
judgment with respect to these claims is dispositive of Syracuse's challenge to the
District Court's grant of the motions in limine.
6a
Appendix
date the claim was made by the insured, in an amount
equal to the prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney's fees against the
insurer.
Although the statute does not define the term “bad faith,” we
have found that: “in the insurance context the term ... has
acquired a peculiar and universally acknowledged meaning.”
Polselli v. Nationwide Mutual First Insurance Co., 23 F.3d 747,
751 (3d Cri. 1994). “ ‘Bad faith’” on [the] part of (an] insurer
is any frivolous or unfounded refusal to pay proceeds of a policy
.... [S]uch conduct imports a dishonest purpose and means a
breach of a known duty ... through some motive of self-interest
or ill-will; mere negligence or bad judgment is not bad faith.”
Id. Based on this definition, we concluded that reckless behav-
ior may constitute bad faith and clarified that a plaintiff bears
the burden of proving bad faith by clear and convincing
evidence. Id. at 750, 751.
In granting Northbrook’s motion for partial summary
judgment, the District Court adopted the report and recom-
mendation of the Magistrate Judge in which the Magistrate
Judge found, on the two relevant elements of its bad faith
claim, that Syracuse failed to meet its burden of proof:
Syracuse, who has the burden of proof, must point to
some evidence of an unreasonable calculation of depre-
ciation and of lost profits to avoid an entry of summary
judgment in favor of defendant Northbrook as to these
portions of (Syracuse’s} claim.
Report and Recommendation at 5. Addressing the calculation
of depreciation, the District Court noted that Syracuse con-
ced{ed] in its brief that Northbrook may have had a reasonable
- basis for its depreciation calculation.” Id. at 6. The District
7a
Appendix
Court then stated:
[A]fter the completion of discovery, Syracuse does not
even present a single argument that the depreciation
calculation of $4,288.16 as applied against a total claim of
$51,718.67 was unreasonable. In the absence of a color-
able argument of unreasonableness in the calculation,
evidence concerning the method of calculation of depre-
ciation would not be relevant and admissible at trial to
support an inference of a combination of factors that
added together comprise bad faith.
Id. at 7. at
The District Court’s conclusion with respect to that por-
tion of the bad faith claim based on lost profits was similar:
[Syracuse] again does not present any factual interpreta-
tion or theory supporting a claim of bad faith or unrea-
sonableness in connection with the handling of the lost
profits portion ... of the claim. ...
Id. at 9.
We have reviewed the record in this matter and are
convinced that the grant of partial summary judgment on the
depreciation and lost profits elements of the bad faith claim
was appropriate. We agree with the District Court that where
Syracuse failed to establish even an inference of bad faith in
calculating depreciation or lost profits, evidence relating to
those calculations was irrelevant to the overall claim of bad
faith.”
2 On appeal, Syracuse's sole argument regarding the grant of summary
judgment as to the calculation of ee is one never advanced in the District
Court. Syracuse contends that under Pennsylvania law depreciation may not be
deducted where there has been a partial loss that does not exceed the depreciated
value of the whole property. Assuming, arguendo, that this is a correct statement
of the law applicable to the facts of this case, Syracuse still has failed to meet its
burden of proof on the depreciation element of its claim. Syracuse was required to
8a
Appendix
B.
Sanctions imposed for untimely filing of expert's report.
Syracuse’s remaining challenge to the grant of partial
summary judgment in favor of Northbrook focuses on that
portion of the order striking the report of Syracuse’s expert as
untimely and directing that Syracuse reimburse Northbrook
for costs and attorney's fees associated with the motion to strike
the report.
A District Court's ruling excluding evidence because of
counsel's failure to adhere to a pretrial order will not be
disturbed on appeal absent a clear abuse of discretion. De-
Laval Turbine, Inc. v. West India Indus. Inc., 502 F.2d 259 (3d
Cir. 1974). In determining whether there has been an abuse
of discretion, we consider four factors: “(1) the prejudice or
surprise in fact to the party against whom the excluded witness
would have testified; (2) the ability of that party to cure the
prejudice; (3) the extent to which waiver of the rule against
calling unlisted witnesses would disrupt the orderly and effi-
cient trial of the case or of other cases in the court; and (4) bad
faith or wilfulness in failing to comply with the court's order.”
Meyers v. Pennypack Woods Home Ownership Assn., 559 F.2d
894, 904-05 (3d Cir. 1977).
The record in this matter establishes that the District
Court was aware of the Meyers factors and referenced them
in its decision to exclude the testimony of Northbrook’s expert:
show that Northbrook did not have a reasonable basis under the law for calculating
deprecation and that Northbrook “knew or recklessly disregarded its lack of
reasonable basis” in making that calculation. Terletsky v. Prudential Property and
Casualty Ins. Co., 437 Pa. Super. 108, 649 A.2d 680, 688 (1994). Syracuse does not
point to anything in the record that would support even an inference that North-
brook lacked a reasonable basis for its calculation. In fact, as we have noted,
Syracuse, in its brief filed in opposition to Northbrook’s motion for summary
judgment, clarified that Northbrook was not guilty of bad faith or reckless conduct
for asserting that it had a legal right to subtract depreciation.
9a
Appendix
Although we did not require [Northbrook] to establish
that admitting the expert's proposed testimony would
cause prejudice, nor whether such prejudice could be
cured, we did determine that [Syracuse's] behavior was
in disregard of the rule of civil procedure and the case
management plan for this case. ... There was no excuse
for Syracuse awaiting the report by Northbrook’s expert
before presenting its own witness. To allow [Syracuse] to
introduce opinion evidence which could have (and should
have) been produced initially would have affected the
orderly prosecution of the case. Following [Syracuse's]
disregard of the discovery deadline (through a request for
production of documents) we conclude that the sanction
imposed was a valid exercise of our authority under Fed.
R. Civ. P. 37.
Syracuse Exploration Co. v. Northbrook Prop. & Cas. Ins.,
Co., No. 1:CV-97-1405, memorandum at 5-6, (M.D. Pa. Sept.
28, 1999). We do not find reason in the record to disagree with
the District Court's finding that Syracuse was responsible for
the position in which it found itself with regard to its expert’s
report: The report was filed nearly four months after the date
established by the case management plan and “there was no
excuse” for this late filing. It is also clear that this late filing was
not Syracuse’s first infraction of the case management plan and
that consideration of the report at the time of its proffer would
have had a significant impact on “orderly prosecution of the
case.” In these circumstances, the District Court did not
require that Northbrook make a showing of prejudice. As the
District Court explained, the other Meyers factors so heavily
weighed in favor of striking the expert's report that the showing
of prejudice “was not required.” On the facts of this case, we
will not disturb the District Court’s ruling. No one of the
Meyers factors is dispositive and we do not find that the Court's
10a
Appendix
application of those factors supports Syracuse's argument that
the sanctions imposed were based on a clear abuse of discre-
tion.
III.
We address next Syracuse's contention that the District
Court erred in failing to grant its motion for a new trial. Our
decision in Bhaya v. Westinghouse Electric Corp., 922 F.2d
184 (3d Cir. 1990) establishes that when we review a District
Court's decision to grant or deny a motion for a new trial, we
must accord substantial deference to the decision of the Dis-
trict Court which “saw and heard the witnesses and has the
feel of the case which no appellate transcript can impart.” Id.
at 187 (quoting Cone v. West Virginia Pulp & Paper Co., 330
U.S. 212, 216 (1947). With this standard in mind, we turn to
the grounds supporting Syracuse's motion for a new trial. —
A.
Allegations of error related to evidential issues.
Three of the allegations of error made by Syracuse in
connection with the District Court’s denial of its motion for a
new trial relate to the admission or exclusion of evidence. Our
standard of review with respect to evidentiary issues is espe-
cially narrow. A finding that a new trial is required “may not
be predicated upon a ruling which admits or excludes evidence
unless a substantial right of the party is affected.” Glass v.
Philadelphia Elec. Co., 34 F.3d 188, 191 (3d Cir. 1994) (quot-
ing Linkstrom v. Golden T. Farms, 883 F.2d 269 (3d Cir.
1989)). Nonconstitutional evidentiary error in a civil suit war-
rants reversal only where it is highly probable that the error
affected the outcome of the case. Glass, 34 F.3d at 91.
Syracuse alleges that it was entitled to a new trial based
on the District Court's: (1) admission of the testimony of
Northbrook’s expert witness; and (2) exclusion of evidence
relating to Northbrook’s non-renewal of Syracuse's insurance
lla
Appendix
policy and testimony concerning Syracuse's financial status.
We address these allegations of evidentiary error seriatim,
considering first the testimony of Northbrook’s expert witness.
Syracuse contends that this expert, an attorney, was permitted
to testify, over objection, “to legal issues which are reserved
for the court.” Northbrook’s expert was called to testify in this
bad faith action based on his familiarity with acceptable claims-
handling standards and practices in the insurance industry. We
have reviewed the transcript of the expert testimony chal-
lenged by Northbrook and are convinced that the District
Court was careful to guard against allowing the expert to testify
to matters reserved to the Court. We agree with the substance
of Northbrook’s characterization of the expert testimony:
Noticeably absent from [the expert] testimony is any
discussion of (or even reference to) the Pennsylvania bad
faith statute, the legal standards governing the determi-
nation of liability under the statute, a definition of “bad
faith,” or any other matter exclusively within the province
of the district court. Indeed, on the one occasion when
questioning by Northbrook’s counsel arguably invited an
opinion regarding the law of bad faith, the district court
sustained the objection of Syracuse's counsel and appro-
priately limited the scope of Northbrook’s counsel's in-
quiry.
We do not find any abuse of discretion in the District Court's
admission of this evidence.
Our conclusion is similar with respect to the other evi-
dentiary rulings challenged by Syracuse in its motion for anew
trial. Syracuse contends that the District Court erred in ex-
cluding evidence of Northbrook’s failure to renew Syracuse's
insurance policy and in precluding Syracuse's owner from
testifying about the financial status of the company. We evalu-
ate exclusion of these items of evidence in the context of what
12a
Appendix
was at issue. As the District Court observed, “The only ques-
tion at trial was whether Syracuse proved by clear and convinc-
ing evidence that Northbrook's handling of Syracuse's claim
was done in bad faith.” Memorandum (September 28, 1999)
at 2.
| The District Court concluded first that the excluded
evidence relating to non-renewal of the insurance policy was
not relevant in determining whether Syracuse had operated in
bad faith. The court also concluded that Syracuse’s argument
that the non-renewal was itself evidence of bad faith was “not
supported by decisions interpreting the Pennsylvania bad faith
statute.” Id. at 4. We agree with both of these conclusions and,
accordingly, find that the District Court’s exclusion of evi-
dence relatin to non-renewal was consistent with the sound
exercise of judlicial discretion.
The District Court’s decision to exclude evidence bearing
on Syracuse’s financial status was also consistent with the
sound exercise of judicial discretion. We agree with the Dis-
trict Court’s analysis of the evidence:
[Syracuse] never offered to show that [Northbrook] knew
of [Syracuse's] financial status. Because an insured’s fi-
nancial condition, standing alone, cannot establish bad
faith on the part of the insurer, there was no error in
excluding this evidence.
Id. at 7.
B.
The charge to and questions from the jury
Syracuse next argues that it is entitled to a new trial based
on the District Court's: (1) decision not to hold a charge
conference; (2) failure to rule on the parties’ proposed jury
instructions prior to closing argument; (3) failure to deliver
certain instructions requested by Syracuse, particularly those
relating to the Unfair Insurance Practices Act; and (4) formu-
13a
Appendix
lation of answers to questions posed by the jury during the
course of deliberation.
Syracuse failed to bring any of these alleged errors to the
attention of the District Court. As a result, our review is limited
by the plain error standard. “[W]e will reverse only if the trial
court committed plain error that was fundamental and highly
prejudicial ....” deme v. Riga, __ F.3d __, 2000 WL
295288 °4 (3d Cir. 2000).
Applying this standard to the allegations of error raised
by Syracuse, we do not find any ground upon which to reverse.
A charging conference is not required by the governing rule,
Fed. R. Civ. P. 51. Syracuse did not object to the District
Court's failure to rule on the parties’ request for jury instruc-
tions and does not explain here how it was prejudiced by this
failure. This would, indeed, be a difficult argument to make
given that Syracuse failed to object to the instructions given at
any point prior to the jury’s retiring to deliberate, despite
having been invited by the court to do so.
Likewise, we do not find error, plain or otherwise, in the
District Court’s charge to the jury. We agree with Northbrook
that the instructions given fairly and adequately identified the
issues in the case. The District Court thoroughly explained its
decision not to instruct the jury regarding the Unfair Insurance
Practices Act (UIPA):
The UIPA is concerned with improper conduct that oc-
curs so frequently as to rise to the level of a “business
practice.” The bad faith statute, on the other hand, is
concerned only with an insurer's actions in a specific
case.... Instructing the jury on the UIPA might lead to
confusion. We believe the better approach is to permit
the instruction of evidence showing non-compliance with
the UIPA, as Syracuse did here, but to allow the jury to
decide whether this is evidence of bad faith as that term
l4a
Appendix
is defined in the law.
Memorandum (September 28, 199) at 11.
We have reviewed, too, the District Court's answers to
questions posed by the jury during the course of deliberation.
The record establishes that the District Court discussed its
proposed answers to these queries with counsel for both
parties and that Syracuse did not register any objection. We
find nothing in the District Court's communication with the
jury to suggest that Syracuse suffered any prejudice at all, let
alone the degree of prejudice necessary to support a finding
of plain error.
We are convinced that the allegations of error in the
District Court's admission and exclusion of evidence lack merit
and do not warrant the grant of a new trial.
C.
Alleged misconduct on the part of counsel for Northbrook
Syracuse contends that the District Court erred in deny-
ing its motion for a new trial where counsel for Northbrook
engaged in unprofessional conduct by instructing a witness not
to bring an allegedly relevant file to court. We have reviewed
the record as it relates to this claim and are convinced that the
District Court's refusal to grant a new trial based on the alleged
misconduct was consistent with the sound exercise of judicial
discretion. The District Court’s analysis of this issue was sound
and we adopt it here:
In its initial disclosures in December 1997, [ Northbrook]
informed [Syracuse] that [the witness] was involved in
handling [Syracuse's] claim. [Northbrook] also indicated
in its pretrial memorandum that [the witness] would
testify at trial. Because (the witness] is not an employee
of [Northbrook], his files were not in possession or control
of [Northbrook] and they were not produced in response
15a
Appendix
to a request for documents. However, [Syracuse] had
ample opportunity to subpoena the ... files. The failure to
do so cannot be blamed on [Northbrook] nor provide a
basis for a new trial... Furthermore, [Syracuse] has not
shown that the failure to produce [the] ... files was preju-
dicial.
Memorandum (September 28, 1999) at 9 (citations omitted).
IV.
Because Syracuse’s allegations of error with respect to the
grant of Northbrook’s motion for partial summary judgment
and the denial of Syracuse’s motion for a new trial lack merit,
we will affirm the orders of the District Court.
TO THE CLERK:
Please file the foregoing opinion.
/s/ Carol L. Mansmann
Circuit Judge
16a
Appendix
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CIVIL ACTION NO. 1:CV-97-1405
SYRACUSE EXPLORATION COMPANY,
Plaintiff
VS.
NORTHBROOK PROPERTY & CASUALTY
INSURANCE COMPANY,
Defendant
MEMORANDUM
I. Introduction
Plaintiff, Syracuse Exploration Company (“Syracuse”),
has filed a motion for new trial. This was a bad faith claim in
which the jury exonerated Defendant's (“Northbrook”) han-
dling of Plaintiff's insurance claim. See 42 Pa. Cons. Stat. Ann.
§ 8371 (West 1998). Plaintiff alleges that the court made errors
in ruling on motions in limine, admitting or excluding evidence
at trial, and in instructing the jury. As discussed below, we
conclude that these claims of error do not warrant the relief
sought.
In addition, Defendant has filed a motion to strike certain
post-trial affidavits submitted by the Plaintiff concerning sev-
eral occurrences during the trial. We well deny that motion
because those filings are authorized by Fed. R. Civ. P. 59.
II. Background
Syracuse was insured by Northbrook for damage to its
construction equipment. On September 16, 1997, S
commenced this action claiming that Northbrook acted in bad
faith in handling a claim involving damage to a drill rig.
Syracuse alleged that Northbrook unreasonably delayed pay-
ing its claim for damage to the rig; canceled the policy follow-
17a
Appendix
ing submission of the claim; took an improper deduction for
depreciation; and that the handling of the claim caused
Syracuse to sustain lost profits. The only question at trial was
whether Syracuse proved by clear and convincing evidence
that Northbrook’s handling of Syracuse's claim was done in bad
faith. The jury returned a verdict in favor of the Defendant on
June 9, 1999.
III. Standard of Review
A motion for a new trial under Fed. R. Civ. P. 59 may be
granted “if required to prevent injustice or to correct a verdict
that was against the weight of the evidence.” American Bearing
Co., Inc. v. Litton Indus., 729 F.2d 943, 948 (3d Cir. 1984);
Alexander v. Morning Pride Mfg., Inc., 913 F. Supp. 362, 372
(E.D. Pa. 1995). A new trial may be necessary where the
verdict is so contrary to the weight of the evidence that it
represents “a miscarriage of justice” or “cries out to be over-
turned or shocks our conscience.” Williamson v. Consolidated
Rail Corp., 926 F.2d 1344, 1353 (3d Cir. 1991); De"li Santi v.
CNA Ins. Co., 88 F.3d 192, 201 (3d Cir. 1996) “Injustice”
requiring a new trial may include the improper exclusion of
evidence, or a jury instruction that misstates the law, so long
as the error “appears to the court inconsistent with substantial
justice. Fed. R. Civ. P. 61; Bailey v. Atlas Powder Co., 602 F.2d
585, 588 (3d Cir. 1979)
IV. Discussion
A. Evidentiary Rulings Before Trial
Prior to trial Defendant submitted several motions in
limine, all of which were granted. Two of these motions
stemmed from a partial summary judgment that was granted
to the Defendant. The court determined that Plaintiff had
failed to produce evidence, first, that the depreciation calcu-
lation used by Defendant was unreasonable or was reached in
bad faith and, second, that Plaintiff had sustained lost profits
18a
Appendix
due to Defendant's handling of its claim. Accordingly, we
granted Defendant's motion in limine to exclude evidence as
to lost profits or the method it used to determine depreciation.
Plaintiff argues that the jury should have been permitted
to consider evidence of lost profits and Defendant’s handling
of the depreciation item. However, because Plaintiff failed to
produce evidence, in response to Defendant's summary judg-
ment motion of any losses it sustained, or that Defendant's
calculation of depreciation was done in bad faith, Plaintiff
forfeited these claims. Inasmuch as these allegations could no
longer serve as a basis for Plaintiff's bad faith claim, we find no
error in excluding this evidence at trial.
In response to a third motion in limine by Defendant, we
excluded evidence of Defendant's decision not to renew Plain-
tiff’s insurance policy based on Plaintiff's loss history. Renewal
of the policy was not relevant to the issue of the Defendant's
handling of Plaintiff's claim. Plaintiff now argues that the
nonrenewal was itself evidence of bad faith.
Plaintiff's argument is not supported by decisions inter-
preting the Pennsylvania bad faith statute. See Perschau v. USF
Ins. Co., i999 WL 162969, at °4 n.6 (E.D. Pa. Mar. 22, 1999)
(sending notice of non-renewal to insured not evidence of bad
faith); Belmont Holdings Corp. v. Unicare Life & Health Ins.
Co., 1999 WL 124389, at °3 (E.D. Pa. Feb. 5, 1999) (holding
that bad faith statute applies to handling of insurance claims
and not to contract disputes, including threats not to renew
policy); Kurtz v. American Motorists Ins. Co., 1997 WL
117008, at °2-3 (E.D. Pa. Mar. 12, 1997) (reviewing case law
and holding that bad faith statute does not apply to non-re-
newal of automobile policy); see also U.S. Metal & Coin Jew-
elry, Inc. v. Jewelers Mut. Ins. Co., 1996 WL 494149 (E.D. Pa.
Aug. 26, 1996) (allowing claim of bad faith based on the
non-renewal of a policy, but finding none where decision was
19a
Appendix
legitimately based on insured’s loss history). The cases cited by
Plaintiff are not persuasive because they do not relate to the
Pennsylvania bad faith statute or to non-renewal of insurance
based on loss history. Accordingly, we conclude there was no
error, and certainly no prejudice, in excluding this evidence.
A final pre-trial ruling challenged by the Plaintiff is our
order of December 31, 1998, sanctioning Plaintiff for submit-
ting an expert report three and one-half months after the
deadline for submitting such reports. We ordered that the
expert's report be stricken from the record. Plaintiff correctly
points out that before imposing the sanction of striking pro-
posed testimony by a witness we must consider:
(1) the prejudice or surprise in fact of the party against
whom the excluded witnesses would have testified,
(2) the ability of that party to cure the prejudice,
(3) the extent to which waiver of the rule against calling
unlisted witnesses would disrupt the orderly and efficient
trial of the case or of other cases in the court, and
(4) bad faith or willfulness in failing to comply with the
court’s order.
Meyers v. Pennypack Woods Home Ownership Assn., 559 F.2d
894, 904-05 (3d Cir. 1977), overruled on other grounds, Good-
man v. Lukens Steel, 777 F.2d 113 (3d Cir. 1985), aff'd, 482 U.
S. 656, 107 S.Ct. 2617, 96 L. Ed. 2d 572 (1987); see also Elf
Atochem N. Am., Inc. v. United States, 882 F. Supp. 1497, 1498
(E.D. Pa. 1995). Although we did not require Defendant to
establish that admitting the expert’s proposed testimony would
cause prejudice, nor whether such prejudice could be cured,
we did determine that Plaintiff's behavior was in disregard of
the rules of civil procedure and the case management plan for
this case. Furthermore, although Plaintiff characterized the
expert as a “rebuttal expert,” his report contained an analysis
20a
Appendix
of Defendant's handling of Plaintiff's insurance claim. There
was no excuse for Plaintiff awaiting the report by Defendant's
expert before presenting its own witness. To allow the Plaintiff
to introduce opinion evidence which could have (and should
have) been produced initially would have affected the orderly
prosecution of the case. Following the Plaintiff's disregard of
the discovery deadline (through a request for production of
documents), we conclude that the sanction imposed was a valid
exercise of our authority under Fed. R. Civ. P. 37.
B. Evidentiary Rulings During Trial
When the president of Syracuse began to testify about the
company’s debts we sustained Defendant’s objection that this
testimony was not relevant to the bad faith issue. In arguing
that this testimony was admissible to establish bad faith, Plain-
tiff cites two cases where the insurer's knowledge of its in-
sured’s difficult financial condition may have been a factor in
proving bad faith. See Polselli v. Nationwide Mut. Fire Ins. Co.,
1995 WL 430571 (E.D. Pa. July 20, 1995) (holding that insurer
acted in bad faith in delaying payment of living expenses when
insurer knew that wee had no place to live after fire
destroyed home); South Park Aggregates v. Northwestern
Nat'l Ins. Co. of Milwaukee, 847 P.2d 218, 225 (Colo. App.
1992) (holding that insurer’s awareness of financial conse-
quences to insured in denying claim was evidence of bad faith).
However, Plaintiff never offered to show that Defendant knew
of the Plaintiff's financial status. Because an insured’s financial
: condition, standing alone cannot establish bad faith on the part
of the insurer, there was no error in excluding this evidence.
| Plaintiff contends that admitting testimony by the Defen-
| dant’s expert, a lawyer who handles insurance a was error
) because the testimony included an opinion concerning the
—_ for the jury, i.e., whether Defendant acted in bad
aith. We find no error. First, Federal Rule of Evidence 704
permits testimony as to the ultimate issue. Second, the expert
PAP ITIL?
2la
Appendix
testified primarily about the facts of the case and whether
particular actions were acceptable practice within the insur-
ance industry. Defendant's expert did not testify regarding
decisions or interpretations of the law as did the attorne
expert in Nieves-Villanueva v. Soto-Rivera, 133 F.3d 92 (1st
Cir. 1997), on which the Plaintiff relies. On those few occa-
sions where the expert’s testimony appeared to veer in the
direction of offering a legal opinion, the court sustained Plain-
tiffs objections. For example, the expert was not permitted to
testify as to the difference between bad faith and a mistake.
(Tr. at 412.) Accordingly, we believe the expert's testimony
was properly admitted.
During trial, Defendant called as a witness an inde-
pendent appraiser, Charles Stanford, who adjusted the claim
on its behalf. Stanford testified from memory about his han-
dling of the Plaintiff's claim, and on cross-examination Plain-
tiffs counsel asked to see Stanford’s files. Stanford stated that
he did not have them because counsel for the Defendant told
him it was not necessary to bring them to court. (See Stanford
Aff. 5; Zelle Aff. 8.)! Plaintiff contends that defense counsel
violated Rule 3.4 of the Rules of Professional Conduct? and
that this behavior is grounds for granting a new trial.
This argument lacks merit. In its initial disclosures in
December 1997, the Defendant informed Plaintiff that Stan-
! The court allowed Defendant additional time to submit affidavits in
response to Plaintiff's arguments concerning Stanford's testimony. Plaintiff argues
that we lacked the authority to grant an extension. Contrary to Plaintiff's position,
the court did have discretion under Fed. R. Civ. P. 6(b) to extend Defendant's time
for filing affidavits under Fed. R. Civ. P. 5c). Although Rule 6(b) lists specific rules
for which the time periods may not be extended, Rule 59(c) does not appear in this
list.
2 Rule 3.4(a) provides that “[a] lawyer shall not:
(a) unlawfully obstruct another party's access to evidence or unlawfully alter,
destroy or conceal a document or other material having potential evidentiary
value or assist another person to do any such act.
Pennsylvania Rules of Professional Conduct Rule 3.4(a).
22a
Appendix
ford was involved in handling the Plaintiff's claim. (Zelle Aff.
q3.) Defendant also indicated in its pre-trial memorandum
that Stanford would testify at trial. Because Stanford is not an
employee of the Defendant, his files were not in the possession
or control of Defendant and they were not produced in re-
sponse-to a request for documents. See Fed. R. Civ. P. 34.
However, Plaintiff had ample opportunity to subpoena Stan-
ford’s files. The failure to do so cannot be blamed on the
Defendant nor provide a basis for a new trial. See Buchholz v.
Rockwell Int'l Corp., 120 F.3d 146 (8th Cir. 1997) (denying
motion for new trial for failure to produce documents where
opposing party was aware of their existence one year before
trial). Furthermore, Plaintiff has not shown that the failure to
produce Stanford's files was prejudicial.
C. Jury Charge
Plaintiff maintains that a new trial should be granted
because the court did not hold a charge conference and
because certain instructions he proposed were not given to the
jury. A jury charge conference is not required by the federal
rules of civil procedure. See Fed. R. Civ. P. 51. Furthermore,
a new trial will not be granted due to an incorrect jury instruc-
tion, “unless the moving party brought the erroneous instruc-
tion to the court's attention at trial.” Younis Bros. & Co. v.
CIGNA Worldwide Ins. Co., 899 F.Supp. 1385, 1398 (E.D. Pa.
1995), aff'd, 91 F.3d 13 (3d Cir. 1996) (citing Fed. R. Civ. P.
51). This can be accomplished either by seeking a ruling on
the proposed instruction or by objectiag after the jury is
charged. Smith v. Borough of Wilkinsburg, 147 F.3d 272,
275-77 (3d Cir. 1998) In Saas case, the party must clearly
state what portion of the charge is objected to and why it is
objectionable. Id at 277; Fed. R. Civ. P. 51. Despite being
provided with an opportunity to object, Plaintiff did not do so,
and thus failed to preserve this issue as a basis for obtaining a
new trial.
23a
Appendix
Although we need not consider Plaintiffs arguments
regarding the jury instructions, we will nonetheless explain our
decision not to include Plaintiff's proposed charges concerning
the Unfair Insurance Practices Act (“UIPA”). See Pa. Stat.
Ann. tit. 40, §§1171.1-.15 (West 1997 & Supp. 1999). Plaintiff's
proposed Points for Charge Numbers 5 and 6 licted specific
provisions of the UIPA and the companion regulations. Plain-
tiffs suggested charge would. allow a jury to conclude that
committing any act prohibited by the UIPA establishes bad
faith on the part of the insurer. We do recognize that estab-
lishing that an insurer committed acts mentioned in the UIPA
may provide support for a bad faith claim. See Romano v.
Nationwide Ins. Co., 435 Pa. Super. 545, 554, 646 A.2d 1228,
1233 (1994). Indeed, Plaintiff did introduce evidence that
Defendant may not have complied with certain regulations,
for example, in the timeliness of its response to Plaintiff's initial
claim. We believe, however, that instructing a jury on these
regulations is inappropriate. The UIPA is concemed with
improper conduct that occurs so frequently as to rise to the
level of a “business practice.” Pa. Stat. Ann. tit. 40, §1171.5.
The bad faith statute, on the other hand, is concerned only
with an insurer's actions in a specific case. See Hyde Athletic
Indus. v. Continental Cas. Co., 969 F. Supp. 289, 307 (E.D.
Pa. 1997) (observing that “[w]hat constitutes a reasonable set
of business practices for the investigation and evaluation of
claims is a question properly left to the Pennsylvania Insurance
Commissioner, not a judge or a jury”). Instructing the jury on
the UIPA might lead to confusion. We believe the better
approach is to permit the introduction of evidence showing
non-compliance with the UIPA, as the Plaintiff did here, but
to allow the jury to decide whether this is evidence of bad faith
as that term is defined in the law.
Plaintiff's remaining two grounds center on questions
asked by the jury during the course of deliberations. We
24a
Appendix
nded to those questions as we thought appropriate. The
Plaintiff did not note any objections to the statements made to
the jury and thus failed to preserve these matters for review.
We will issue an appropriate order denying Plaintiff's
motion for a new trial.
/s/William W. Caldwell
United States District Judge
Date: September 28, 1999
25a
Appendix
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CIVIL ACTION NO. 1:CV-97-1405
SYRACUSE EXPLORATION COMPANY,
Plaintiff
; VS.
NORTHBROOK PROPERTY & CASUALTY
INSURANCE COMPANY,
Defendant
ORDER
AND NOW, this 28th day of September, 1999, upon
consideration of Plaintiff's motion for a new trial, filed June
11, 1999 (Doc. No. 113), and Defendant's motion to strike
post-trial affidavits, filed June 22, 1999 (Doc. No. 117), it is
ordered that the motions are denied.
/s/William W. Caldwell
United States District Judge
26a
Appendix
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CIVIL ACTION NO. 1:CV-97-1405
SYRACUSE EXPLORATION COMPANY,
Plaintiff
VS.
NORTHBROOK PROPERTY & CASUALTY
INSURANCE COMPANY,
Defendant
ORDER
AND NOW, this 3rd day of June, 1999, upon considera-
tion of four motions in limine filed by defendant, and plaintiff's
responses thereto, it is ordered as follows:
1) Defendant's motion to exclude evidence relating
to defendant's non-renewal of plaintiff's insurance policy
is granted.
2) Defendant's motion to exclude evidence relating
to defendant's method of calculating a depreciation de-
duction is granted. A ruling on whether plaintiff may refer
in its case to the fact that a depreciation deduction was
taken by defendant is deferred to trial.
3) Defendant’s motion to exclude evidence relating
to defendant's handling of lost profits is granted.
4) Defendant's motion in limine to exclude evidence
as to defendant's financial status is granted. In the event
of an award of punitive damages, such evidence will then
be admissible.
/s/William W. Caldwell
United States District Judge
27a
Appendix
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CIVIL ACTION NO. 1:CV-97-1405
SYRACUSE EXPLORATION COMPANY,
Plaintiff
VS.
NORTHBROOK PROPERTY & CASUALTY
INSURANCE COMPANY,
Defendant
ORDER
THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:
Pending at his point are objections filed by plaintiff to a
report and recommendation authored by the Magistrate Judge
J. Andrew Smyser, and filed on October 22, 1998. Also pending
is defendant's motion to strike and for sanctions, filed Novem-
ber 9, 1998.
The Magistrate Judge's report recommends that we grant
defendant's motion for partial summary judgment on plaintiff's
bad faith claims, as follows:
1) that defendant was guilty of bad faith in handling the
depreciation aspect of plaintiff's drilling insurance claims,
and
2) that defendant was guilty of bad faith in handling the
lost profit element of plaintiff's insurance claim.
We have carefully reviewed the report and recommenda-
tion of Judge Smyser, the plaintiff's objections thereto, and the
respective briefs of the litigants. We adopt the report of Judge
Smyser as our own memorandum, as it succinctly and clearly
analyzes the merit of plaintiff's bad faith claims. As noted by
Judge Smyser, the plaintiff failed to submit evidence to sup-
28a
Appendix
port its bad faith claim and avoid partial summary judgment.
We will adopt the report, dismiss plaintiff's objections, and
grant partial summary judgment to the defendant.
The defendant's motion to strike will also be granted and
an appropriate sanction will be levied.
The motion to strike involves an expert report filed by
plaintiff over three and one-half months after the deadline for
filing expert reports. Plaintiff argues that this report is from a
“rebuttal” expert, and was necessitated by defendant's motion
for partial summary judgment. We consider this a somewhat
disingenuous argument since the expert report is one which
should have been prepared and produced initially in support
of plaintiff's theory of defendant's liability for bad faith.
It is ordered as follows:
1) The report and recommendation of Magistrate
Judge Smyser, filed October 22, 1998, is adopted.
2) The Clerk of Court is directed to enter a judgment
in favor of defendant on plaintiff's claim of defendant's
bad faith in handling a depreciation deduction and a lost
profit claim in connection with plaintiff's insurance claim.
3) The report of Emil F. Toften and Associates, dated
October 16, 1998, is stricken from the record.
4) Plaintiff shall pay defendant the reasonable cost
incurred by defendant in moving to strike the Toften
report.
5) This case is placed on the June, 1999, trial term,
scheduling order to follow.
/s/William W. Caldwell
United States District Judge
Date: December 31, 1998
a
29a
Appendix
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA >
CIVIL ACTION NO. 1:CV-97-1405
SYRACUSE EXPLORATION COMPANY,
Plaintiff
vs.
NORTHBROOK PROPERTY & CASUALTY
_ INSURANCE COMPANY,
Defendant
ORDER
AND NOW. this 29th day of April, 1998, upon considera-
tion of the Report of the United States Magistrate Judge, dated
April 8, 1998, to which no exceptions have been filed, and upon
independent review of the record and the controlling law, it is
ordered that the Magistrate Judge’s Report is adopted. It is
further ordered, pursuant to the Magistrate Judge’s recom-
mendation, that: _
1. Defendant's motion for partial summary judg-
ment, filed January 30, 1998 (Doc. No. 14), is denied.
2. Defendant's motion for the return of funds, filed
January 30 (Doc. No. 13), is denied.
3. This matter is remanded to the Magistrate Judge
for further proceedings.
/s/William W. Caldwell
United States District Judge
30a
Appendix
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
| 97-CV-1405
SYRACUSE EXPORATION COMPANY,
Plaintiff
V.
NORTHBROOK PROPERTY AND CASUALTY
INSURANCE COMPANY,
Defendant
TRANSCRIPT OF PROCEEDINGS
VOLUME 2
BEFORE: HON. WILLIAM W. CALDWELL, Judge
DATES: June 8 and 9, 1999
PLACE: Courtroom Number Three
Federal Building
Harrisburg, Pennsylvania
COUNSEL PRESENT:
RICHARD C. ANGINO, Esquire
For—Plaintiff
ANTHONY ROBERT ZELLE, Esquire
For—Defendant
Vicki L. Fox, RMR
Official Reporter
gla
Appendix
Windt—Direct as to Qualifications 395
Mr. Allan Windt.
MR. ANGINO: Your Honor, I would like an offer of proof
with regard to this.
THE COURT: I think you know what he is going to testify
to.
MR. ANGINO: I am going to object to the legal aspect
of it, Your Honor. |
MR. WINDT: Good afternoon, Your Honor.
ALLAN WINDT, called as a witness, being duly sworn,
testified as follows:
THE CLERK: Would you state for the record your full
name, please?
A Allan Windt.
THE CLERK: Thank you very much.
DIRECT EXAMINATION AS TO QUALIFICATIONS
BY MR. ZELLE:
Q Mr. Windt, where do you live?
A The western suburbs of Philadelphia.
Q Will you tell the jury what you do for a living?
A I handle insurance claims for a living, primarily for
insurance companies, also for some insureds.
Q Try to keep your voice up. How many insurance com-
panies have you worked for over the past ten years?
32a
Appendix
Windt—Direct as to Qualifications 396
A Probably more than 70.
Q How long have you been doing what you are doing?
A About 23 years.
Q In your work for insurance companies, describe for the
jury what it is you do.
A Well, if a claim is particularly complicated, kind of out
of the ordinary, an insured or an insurance company might
- come to me to help them figure out what to do, what is the
correct result, is money owed, how should a claim be handled.
It is really the best way I can summarize it.
Q Do you limit your practice to Philadelphia or—I am
sorry—to the Pennsylvania area?
ANo.
Q In what area do you provide services?
A I have done this in really every state. I can’t remember.
Maybe North Dakota, I don’t remember. But I have done
Hawaii, Alaska, pretty much everywhere.
Q If there is—
A Outside of the country, too.
Q If there is a dispute in Alaska about insurance, why
would someone come to you in the outskirts of Philadelphia?
A It is an unusual expertise. There really aren’t that many
people that do what I do, that just limit their work to the type
of thing that I do.
Q How did you develop this expertise?
33a
Appendix
Windt—Direct as to Qualifications 397
A One learns by doing. I think it is the best way. It took
a lot of work, also. I mean I devote a lot of time to developing
the expertise pretty much on a weekly basis for the last 23
years.
I mean in addition to my work, I spend at least on average
a portion of every week just continuing to develop my exper-
tise.
Q What do you do on a weekly basis to continue to
develop your expertise?
A Well, I read every insurance case that is reported that
comes out nationwide in all 50 states.
Q When you say reported case, can you tell the jury what
you mean?
A After this case is over, whoever loses will likely file an
appeal. It doesn’t always happen, but more likely than not, to
a Court of Appeals. The Court of Appeals will issue a decision.
In fact, this Court might issue a decision that is significant
enough that it gets reported in a way that people like me can
read it and find out how policies have been interpreted, how
duties have been interpreted. So that the next claim I handle,
I have increased my expertise because I know more about what
the industry does, what Courts find acceptable, how Courts or
other people have interpreted policy provisions.
34a
Appendix
Windt—Direct as to Qualifications 398
It is actually a lot more complicated than it sounds. Also
probably a lot more boring than it sounds. But that is basically
what I do.
Q Can you tell this jury examples of some cases they may
have heard of that you have been involved with?
A Well, when Paula Jones sued Bill Clinton and Bill
Clinton made a claim under his insurance policy for benefits,
he had a home owner’s policy when he lived Arkansas, that’s
where the alleged wrongdoing took place, because it was kind
of an offbeat case and high visibility, the insurance company
came to me and said what should we do, how should we handle
this claim. So that is an example of a case that I am sure people
will be familiar with.
Q Can you give another example?
A The movie and the book “A Civil Action,” which some
of you may be familiar with, years ago when the litigation was
ongoing and the defendants went to their insurance company
for coverage, the insurance company came to me and said this °
is a pretty complex, fairly big dollar case. What benefits do we
owe? How should we handle this claim? What should we do?
I would handle that claim—or did handle that claim.
Q Do you ever work for insurance companies in putting
together and writing the insurance policy?
A Yes, occasionally.
Q Do you do any lecturing or present any educational
35a
Appendix
Windt—Direct as to Qualifications © 399
seminars for people who are trying to learn about handling
insurance claims?
A Yes.
Q How often do you do that?
A On average, twice a year. Maybe a little more.
Q Who do you do that for typically?
A Sometimes it will be to groups of lawyers. Like one
time, I went to Texas and traveled teach at the major cities to
lecture to the lawyers in Texas that specialize in insurance,
lawyers that might be trying a case like this.
Another example would be insurance companies may be
having meetings where they may be having representatives
come in from all 50 states, representatives of branch offices.
And they would ask me to come and lecture and speak to this
gathering about how they should handle claims, what they
should and shouldn't do, that sort of thing.
Q Has the product of your work ever been published, Mr.
Windt?
A Yes.
Q Am I holding up the two volume set of your work?
A Yes.
Q Can you tell the jury what this is?
A It is my life’s work. What can I say?
Q Can you describe what the books are about?
A They were about handling insurance claims, good
36a
Appendix
Windt—Direct as to Qualifications 400
faith/bad faith, how to handle claims, what policies certain
policy provisions mean. Just to provide help to lawyers, Courts.
Not so much insureds because it is really not written for
someone who doesn’t have an existing knowledge in the area.
Q Mr. Windt, I have seen your advertising brochure and
this book has been hailed as the Bible of insurance law?
MR. ANGINO: I object, Your Honor.
THE COURT: That is a little testimony there, isn’t it?
MR. ANGINO: That doesn’t sound like a question to me.
BY MR. ZELLE:
Q I want to ask you the question do you know why it is
your book is so highly regarded?
A It has gotten some good book reviews over the years.
Q Your book has been cited by hundreds of Courts; is that
right?
A Around the country, yes.
Q What does cited mean?
A Well, as I was saying before, sometimes a Judge or a
Court of Appeals may issue—write an opinion saying here is
who we think should win this case, here is what we think the
policy means, and here is why. And they say in support of
their conclusion we are reaching, see Windt on insurance,
37a
Appendix
Windt—Direct as to Qualifications 401
page 423, which then they may quote me or whatever discusses
the issue.
Q Do you receive a lot of calls from people asking you to
work for them in cases as an expert witness?
A Yes.
Q How often?
A Well, I mean it can be a week goes by when I don’t get
any calls and a week where I get eight calls. I would say on
average in the last couple of years, three times a week, some-
thing like that.
Q Just doing the multiplication, that is 150 times a year.
Of those 150 calls, how many cases would you actually take?
How many clients would you actually accept?
A Again, this is just the expert work, which again is kind
of like a sideline for me. I take in an average year maybe ten,
one in ten, one in fifteen, something like that.
Q You have been retained by Northbrook in this case; is
that right?
A Yes.
Q And Northbrook is paying you; is that right?
A Yes. |
Q How much are you charging Northbrook?
A I charge $300.00 an hour for my time.
Q Focusing in now on this case, what did you do in
preparation for testifying here today?
38a
Appendix
Windt—Direct as to Qualifications 402
A I read the file. I read some of the papers that were filed
by the Court, by you and Mr. Angino. Am I saying it right,
Angino?
MR. ANGINO: Your Honor, am I going to be permitted
to ask some questions before he gets to the substance?
MR. ZELLE: I am not finished laying the foundation.
THE COURT: The qualifications?
A And some depositions, transcripts.
THE COURT: Just a second.
A I am sorry, Your Honor.
MR. ZELLE: Your Honor, let me—
THE COURT: It sounded like you had finished.
MR. ZELLE: You are right.
BY MR. ZELLE:
Q In connection with bad faith claims, can you describe
for the jury the expertise you have in that area?
A Well, I am involved—I have been in involved in hun-
dreds of bad faith claims over the years. Frequently what will
happen in my practice is that an insurance company might
send me a file after they have handled it themselves for a
while and they think maybe they have done it wrong and
maybe they have a bad faith problem, they send me a file. And
I will analyze it and tell them whether they are guilty of bad
39a
Appendix
Windt—Direct as to Qualifications 403
faith or not. That is one way I get involved.
Another way I get involved is lots of law firms around the
country will call me with what they think are good bad faith
claims. And I will give them my analysis of it.
If they really have a good bad faith claim as a plaintiff,
sometimes I am willing to testify as an expert against the
insurance company.
Q Are you familiar with insurance industry standards for
handling insurance, specifically property insurance claims, and
particularly the timeliness with which those types of claims
should be handled?
A Yes. That is what I do for a living. The expert work is
maybe ten percent of my time. What I do for a living is I handle
claims.
Q And you are familiar with the industry standards for
handling claims for adjusting damage to physical property; are
you not?
A Yes.
Q And you are familiar more generally with claims han-
dling practices and their compliance with the rules of good
faith; is that right?
A Yes.
Q And you, in fact, are often retained by insurance
companies to insure that they comply with regulations apply-
ing to good faith; isn’t that right?
40a
Appendix
Windt—Cross as to Qualifications 404
A I wouldn’t phrase it quite that way.
Q How would you phrase it?
A Sometimes insurance companies will ask me to handle
a claim for them. I mean I don’t think the motivation is so they
don’t act in bad faith, just to help handle the claims appropri-
ately. |
Q And that is based on your familiarity with good faith
claim handling practices?
A I guess yes. I wouldn’t word it that way, but I suppose
it is not inaccurate to put it that way.
MR. ZELLE: Your Honor, we would submit that Mr.
Windt is qualified to testify as an expert.
THE COURT: Do you wish to cross-examine?
MR. ANGINO: Yes, I would like a few questions.
CROSS EXAMINATION AS TO QUALIFICATIONS
BY MR. ANGINO:
Q Part of the qualification questions dealt with what you
do in terms of lecturing, and I think you testified that you tell
lawyers and you tell insurance companies what the state of the
law is with regard to good faith/bad faith; is that something that
you discuss?
A It is just a tiny part of what I do. It is not really what I
do. I mean I handle claims is what I do. In other words, the
claim comes in, and I handle it. I draft the letters to the insured
if I am working for the insurance company.
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If I am working for the insured, I draft the letters to the
insurance company. I do the analysis. I make the calls, the
factual investigation as appropriate. I hire people to do the
factual investigation as appropriate. That is what I do.
Q Maybe I misunderstood. I thought that the reason that
you are called to be a witness or to give advice in all of the
states of the union except perhaps for North Dakota is because
of your expertise in this area?
A Wait a second. With regard to expert witness work, the
question is question why would people call me as an expert
witness, and I said suppose it is cause because of the notoriety
of the book. People know who I am.
With regard to the 90 percent of my practice, which is
what I do for a living handle claims, why do they come to me?
Because I have a good track record of appropriately handling
claims. That is what I do.
Q You are a lawyer; right?
A Yes.
Q And I am a lawyer. Mr. Zelle is a lawyer. His Honor is
a lawyer. Is that right?
A Yes.
Q And you are familiar that in a courtroom, there is a
lawyer representing a plaintiff, there is a lawyer representing
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a defendant, and then there is a Judge who gives instructions
to the jury; you understand?
A Yes.
Q In terms of appearing as an expert, is your background
such that people hire you so that you can tell this jury that what
was done here was good faith or bad faith; is that the reason
you are hired?
A I am hired to give my opinion from analyzing a case. I
don’t take a lot of them because a lot of times, I disagree. But
if I agree, I will get in the stand and tell what my opinion is.
Q So basically, you are here to tell this jury that what
Northbrook did was okay; is that right?
A I am certainly prepared to say that, yes.
Q That is what I am saying.
A I wouldn't say okay. No, they didn’t handle it perfectly.
You and I spoke at length, what, six months ago, and I told you
certain mistakes were made. No question about that.
Q You are going to say they handled it in good faith; is
that right?
A Yes.
Q That is what you have been hired to do?
A That is clearly the bottom line that I am going to try to
convey and explain how I reached that conclusion, yes.
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Q And in those approximately ten or twelve cases you
have given hourly, what do you usually make on an average on
one of those ten or twelve cases that you take a year?
A As an expert witness?
Q Yes. From beginning to end.
A I couldn’t give you an average. I could say in some cases
where I do a report and it doesn’t get as far as a deposition or
trial, my bill may be less than a thousand dollars.
Q I am talking about a case that goes to trial, and you
appear before a jury, and you testify. Would an average bill
there be $5,000.00 or $10,000.00?
A If there has been no deposition, it should normally
would be less than $5,000.00 total. Part of it is the travel time.
I went to Alaska once on a case. The travel time which I billed -
for was like 20 hours each way. Do the math. It was a very
significant bill.
Q You might have had a $20,000.00 bill in that case?
A Right. I had a case in Texas fifteen years ago, I think
my bill even in dollars from fifteen years ago was like
$70,000.00.
Q $70,000.00?
A I think so. My recollection—maybe it’s $50,000.00. But
I remember it being at the time like a real lot of money.
Q So insurance companies are willing to pay $50,000.00
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to $70,000.00 to have you come into a courtroom?
A Or insureds.
MR. ANGINO: No further questions.
BY THE COURT:
Q Mr. Windt, from hearing your testimony, are you an
independent insurance adjuster or do you work for somebody?
A No. I just have just me and a secretary, Your Honor.
Q You are an independent adjuster? You will adjust
claims?
A Yes. It depends on what you define as an adjuster, but
I mean I work on my own. I handle claims for a living. It’s just
me and a secretary.
Q Are you engaged in the practice of law as such?
A I would say yes in the sense that the reports that I will
issue to my client will be subject to the attorney/client privi-
lege.
Q Okay. But you are mainly concerned with the proper
handling of insurance claims?
A I am not concerned with the properly handling. I just
handle claims. That is what I do.
Q You are here to comment on whether Northbrook
handled this claim—
A Here as an expert.
Q —in an acceptable annual proper manner?
A Yes, Your Honor. As an expert is different than from I
——
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do really for a living.
MR. ANGINO: Can I ask one more question, Your
Honor?
BY MR. ANGINO:
Q You mentioned Clinton and the Paula Jones matter.
Now that was a case where Clinton, from what we have read
in the paper anyway, did certain things with regard to Paula
Jones at least as the complaint went.
Did you recommend to the insurance company that they
provide coverage to President Clinton?
A No. I think that would be privileged what advice I gave
them.
Q It turned out that they paid Paula Jones, the insurance
company paid Paula Jones; is that correct?
A There were two insurance companies involved.
Q And did an insurance company pay Paula Jones?
A I don’t believe the insurance company I worked for paid
Paula Jones.
Q Did an insurance company pay Paula Jones?
A I don’t recall that an insurance company paid Paula
Jones.
THE COURT: I don’t think that is relevant information.
THE COURT: We will accept Mr. Windt and let him
testify subject to, of course, Mr. Angino’s objection.
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Zelle—Direct 410
MR. ZELLE: Thank you, Your Honor.
DIRECT EXAMINATION
BY MR. ZELLE:
Q Can you please tell the jury what you have done in
connection, what you have looked at, what you have heard in
connection with forming the opinions that you have reached
in this case?
A Well, I read the insurance company’s file. I read I
believe all of the depositions that were taken. That is sworn
testimony that is taken by the lawyers of people that have some
knowledge about the case. And that is done long before the
trial starts.
And then I read some of the pleadings that were filed,
documents filed with the Court, that Mr. Angino filed with the
Court and that counsel for Northbrook filed with the Court.
And other than that, I was here this morning. I listened
to the testimony of the people that testified today.
Q You in response to a question by Mr. Angino said that
this wasn’t a perfect claim handling. Can you tell the jury what
mistakes were made here?
A You know, it would be easier if I could divide my analysis
of this case into time frames—various time frames, and I will
tell you within each time frame what was done right and what
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was done wrong.
Q Sure. Would it help you to use the board?
THE COURT: Let's try it without.
BY MR. ZELLE:
Q Let's just use some dates then. Using the first time
period, what are you using?
A The first relevant time period would be December 17th
through January 2nd.
Q And what is the facts as you determined them during
that time period?
A December 17th, you have the insured through its agent
providing notice to the New York branch, the New York office
of Northbrook. And then January 2nd, Northbrook finally
finds out that the equipment is in Pennsylvania, and therefore
the file should be handled in Pennsylvania. So that is to me the
first relevant time period.
And despite the fact that Christmas is there, New Year's,
I think that is longer than it should have been. And in all—I
know the position of Northbrook is, well, the insured didn’t
tell us where the equipment was, but I think the insurance
company should have called if you don’t know where the
equipment 1S.
I know it is Christmas, and I know it is New Year’s,
but nothing was done between December 17th and Janu-
ary 2nd, and I would say that is an error. That is a mistake.
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I think they should have even within the holiday period done
something.
Q Do you understand, Mr. Windt, the difference between
a mistake or why don’t you explain to the jury the difference
between a mistake and bad faith?
A Right. Clearly in my opinion—
MR. ANGINO: Your Honor, I object because—
THE COURT: I sustain the objection.
MR. ANGINO:—that is an instruction.
BY MR. ZELLE:
Q Why don’t you answer the question?
THE COURT: I sustained the objection. I don’t think that
Mr. Windt is going to be allowed to testify to the difference
between a mistake and bad faith. That is something that I will
charge the jury on.
But he has indicated that he thought a mistake was made
with not jumping on this claim sooner in the first time period.
BY MR. ZELLE:
Q In making that distinction following the Judge's instruc-
tion, can you tell us whether the initial time frame of Decem-
ber 17th to January 2nd, is there anything that you looked at
that led you to believe that there was any reckless disregard on
the part of the—
A It is just a simple mistake. It happens.
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MR. ANGINO: I object and continue to object to his
testifying as to things that you are going to give instructions on
because he is usurping the position of the Judge in this.
THE COURT: I think that is right. Gentlemen, come to
sidebar for just a moment, please.
(An off-the-record discussion was had at sidebar.)
BY MR. ZELLE: |
Q What was the next time frame after the 2nd of January?
A January 2nd to January 7th would be the next logical
time frame to look at.
Q Describe what happened for the jury during that time
frame.
A On January 2nd, Northbrook learns that the equipment
is in Pennsylvania. So they send the file to the correct office.
And the file is opened in the correct office on January 7th.
There is an intervening weekend. It seems fine to me.
Q Do you have an opinion, sir, as to whether there was
any delay during that time period?
A It seems fine to me.
Q What was the next time period?
A January 7th to January 13th. January 7th being when
the file is opened up in Pennsylvania, and January 13th when
the adjuster Stanford is hired to go out to do the investigation,
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determine how the claim should be handled.
And the file reflects that the person who was handling the
assigned claim was out sick three days. It was a two day
weekend. I don’t have any problem with that time frame.
Q Do you have any opinion, sir, as to whether the insur-
ance company did anything wrong during that time period?
MR. ANGINO: Objection, Your Honor. Doing wrong?
THE COURT: I think the question is was that period of
time an acceptable period of time for performing the appoint-
ment of an appraiser in this case?
A I think the facts are that it was—since the person was
sick and out three days and there is the weekend, it seems
perfectly appropriate and perfectly fine to me that time frame.
BY MR. ZELLE:
Q What is your next time period?
A January 13th to February 7th.
Q What happened?
A That is the dates that the investigation was done by
Stanford on behalf of Northbrook. Stanford is Northbrook as
a practical matter for the purpose of handling the claim. That
is who they hired to do the work.
And I think that was done more than good faith. I
think that Stanford did an expeditious—they did a very
5la
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Zelle—Direct 415
good job, and they did it in a very reasonable amount of time.
February 7th was when the investigation terminated.
They didn’t need to do anything else in terms of the investiga-
tion knowing what to do because by that date, it is clear from
the file that they concluded that the way to handle this claim
was to have the equipment repaired.
Can I go on with the answer to say—explain something?
Q Let me ask you a question, Mr. Windt. If you now look
at the time frame from December 17th until February 7th,
that is just a week short of two months, is that an acceptable
period of time for an insurance company to complete an
investigation into the adjustment of a piece of property, in this
case a big drill?
A Sure, that would be reasonable, two months. But that
doesn’t change the fact that Stanford did a pretty quick job,
and they were able to do it within less than a month.
So I am saying it doesn’t change the fact that when the
initial notice was sent to Northbrook, they were sloppy.
Anyway, what I wanted to explain is what you are
trying to accomplish in this investigation is to figure out
how to handle the claim because you have a few options.
One option which is available is if this property is not worth
52a
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Zelle—Direct 416
repairing, it is what you call a total loss, then you would handle
a claim a certain way and owe a good deal of money to the
insured.
If in fact the property is repairable for a reasonable
amount of money, then you would move forward with the
repairs. So a fundamental decision you have to make is is this
a case where I am going to repair it—ie. the insurance com-
pany. Not that you repair it, you pay for the repairs—the
insurance company pays for repairs—or is this a case where
the insurance company is going to pay for the equipment as if
it is a total loss? It is a fundamental decision that has to be
made.
You don’t just sit back and think here is what I am going
to do. You have to do a lot of work. You have to get a lot of
input from people you call from the outside world. You have
to call people to find out what they view the actual cash value
to be. Because if the actual cash value is $50,000.00 and it costs
$50,000.00 to repair, you are not going to repair it.
You have got to know what the actual cash value is. You
don’t just call one person; you call a series of people. Espe-
cially—I don’t want to belabor it. Now find out actual cash
value.
You would want to find out whac the salvage is if you don’t
repair it. Because let’s say that the actual cash value was
53a
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$150,000.00 and the salvage value—what someone would be
willing to pay even if it is in a damaged state—is $140,000.00.
So if it is $150,000.00 to repair and salvage value is
$140,000.00, and it costs $50,000.00 to repair, you are not
going to repair it.
Q Mr. Windt, let me just—
A You have to make those kinds of—I don’t want to
belabor this. I thought it was needed to be explained some of
what you need to do, what takes you a month or two to figure
out what to do.
Q The jury has heard evidence about what had to be done.
The question I would like you to address, Mr. Windt, is
whether a period of time from the 17th of December through
February 7th was a reasonable period of time to get the claim
investigation completed?
A Yes. The same answer I had before, yes.
Q What is the next period of time that you feel—
A February 7th through the time the repairs were com-
pleted, which I think was June 23rd or thereabouts, June 24th.
Q Can you tell us what transpired during that time period
on which you base your opinion?
A I don’t see how you can possibly fault the insurance
company for anything during that period of time. The insur-
ance company had made the decision as of February 7th that
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it pays to repair the property. It will pay for the cost of the
repairs, less depreciation.
Now it’s up to the insured to get the property repaired,
and it is up to the insurance company to then timely pay the
amount of the repair bill when the repair bill comes in.
Well, to the extent that the repairs take longer than
expected because the repair company that the insured selected
has problems finishing the repairs, that is not a reflection on
the insurance company.
The only thing that would be a bad reflection on the
insurance company is after the repairs were done, the insur-
ance company then sat back and didn’t pay the bill, which is
not the case here.
Q Are you aware-—did you hear the testimony that on
June 30th, Northbrook did issue a check?
A They had issued checks prior to that, and then they
issued their final payment I think the check was dated June
30th as I recall.
Q What is your next time period after June 23rd, the end
of June when the drill repairs were completed?
A The final time period is June 23rd through October,
June 23rd or 24th when the repairs are finished and then
October, early October when the insured picks up the equip-
ment.
55a
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Zelle—Direct 419
And again, it is—I think it is impossible to fault the
insurance company there. The repairs are done. The insurance
company did what it said it would do. It paid for the repairs in
full.
If the insured doesn’t pick up the equipment, it is not bad
faith by the insurance company. The insurance company’s
obligation is to figure out in a timely fashion what to do with
the equipment, repair it or not.
The insurance company does that. The equipment is
repaired. Then it is the insurance company’s obligation to pay
in a reasonable amount of time. Clearly, they did that. That is
it.
Q You are talking about reasonable amount of time. You
have heard all of the testimony this morning and this after-
noon. In your opinion, sir, did Northbrook adjust the claim in
a reasonable amount of time?
A I don’t think that is a fair question because I think no
matter how you try to lump it together, there was still the
mistake made by Northbrook where—or the sloppiness by
Northbrook in the early period.
Q I understand that. I am asking you if you can’t look at
it as a whole, then that is fine. But I am asking you if you look
at the—
MR. ANGINO: Your Honor, this is his witness.
THE COURT: I don’t think he is leading him.
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Windt—Cross 420
BY MR. ZELLE:
Q If you look at the process as a whole, do you have an
opinion as to whether Northbrook accomplished what it was
supposed to accomplish in terms of getting the drill adjusted
within a reasonable amount of time?
A Yes. That is the answer I gave you twice before. Yes,
that is true.
MR. ANGINO: That is all I have.
THE COURT: Cross-examine.
CROSS EXAMINATION
BY MR. ZELLE:
Q Your decision and the opinions that you have expressed
are based upon the fact that Northbrook made a decision on
February 7th, 1997 to have this drill repaired; is that right?
A That is when Northbrook finished its investigation of
getting estimates on repairs on actual cash value, on salvage
value. At which time based on the numbers that it received, it
could decide on a course of action. So in other words, you need
to do that investigation, that analysis within a reasonable
amount of time.
We know because of the file. There is no question about
it. We know they finished that process by February 7th. .
Q Did they make a decision—did Northbrook make a
/
57a
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Windt—Cross 421
decision on February 7th to have that drill repaired?
A They made a decision to go forward on the assumption
it was going to be repaired. And I suppose anything is possible.
If they opened up that machinery and found out that it had
the plague, then maybe they would change their mind.
But first, you have to decide on a course of action. And
you can’t be a knucklehead about it. To the extent that despite
getting six estimates from six different companies if based on
what expertise everybody had in making their estimates and
analysis, if it all turns out to be wrong, you don’t just say I don’t
care if it is wrong, this is what I am doing. That would be silly.
Q Would you look at Plaintiff Exhibit 7, please?
THE COURT: That is in this folder.
A Yes, I have it.
BY MR. ANGINO:
Q It is set up in a chronological order. Would you turn to
what appears to be 2/13. Do you see that?
A Yes.
Q Would you turn to the next page, please?
A (Witness complies.) Yes.
Q Are you familiar with that particular page?
A I have looked at it before, yes.
Q And you had explained to the jury that there are various
58a
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Windt—Cross 422,
things that an insurance company can do; is that right?
A In essence, in other words, the insurance company
under the policy is obligated to pay the lowest amount of
certain options.
Q They are not obligated?
A Have the right.
Q They can?
A I could give you money. Even though we don’t ave any
relationship, you are always free to give money away. The
question is you have a certain right. I have a right not to give
you money. And they have a right to pay just repairs rather
than total loss value.
Q What I am saying to you is that you have givem advice
and you are called in by various insurance companies to do
certain things with regard to potentially large claims; is that
right?
A I work for insureds, too. And not every claim I handle
is a large claim, but usually they are.
Q There are factors—individual factors in each sittuation;
is that right?
A No two cases are the same.
Q So this particular case involves a company that has a
particular type of drill; is that right?
A Yes.
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Windt—Cross 423
Q And that particular type of drill is important to that
particular company to pursue its business; is that right?
A That is my understanding, yes.
Q Is that a factor to consider?
A Possibly.
Q The next thing we know is that you can go out and
conduct an investigation, but until you tear that drill apart, you
don’t know what it is going to cost to repair it; is that right?
A Well, as evidenced by this case, they knew almost to the
dollar. But there is no sure thing in life I have found. I don’t
mean to pontificate.
As I told you before, you got to keep your eyes and ears
open if. Because if something unforeseen develops, you have
to be able to react to it. Nothing unforeseen developed here.
Stanford did a great job.
Q You are familiar with this particular case, and you are
familiar with Stanford's appraisals of what it was going to cost
to repair; is that right?
A Yes.
Q The appraisals that he got—and he got six of them he
said?
A Yes.
Q How much did—what was the range of them?
A He only wrote up as I recall three of them because I
60a
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Windt—Cross 424
think the insured wouldn't look at the other three. You know,
the report that was marked and not admitted into evidence, I
obviously read that.
On that report, I won't say what it says, but it does I am
pretty sure mention at least one or two more beyond the three
that were written up.
Q That's right. The three that you have been privy to, what
were the amounts?
A I think the estimate from Stanford, which is the only
one I remember off the top of my head—
Q You don’t mean Stanford.
A No, I mean Stockdale.
Q How much was the one from Stockdale?
A I think it said $40,000.00, but it was subject to certain
things they didn’t know which could make it as much as 50.
Q Right.
A Or a little under 40.
Q So you had at that time an appraisal from Stockdale
that was about $40,500.00, but if certain things happened it
could be $50,000.00; is that what it said?
A I don’t think it said that, but that is my understanding
that it could go as high as 50. Not that anyone expected it too,
but that was within the realm of possibility.
6la
Appendix
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Q And on the down side, there just seemed to be a little
down side; is that right? -
A It is not something I really focused on. I don’t recall
there being a significant potential for it being a lot less than
$40,000.00.
Q Forty to fifty would be the range from the company
that Syracuse wanted to have it done; is that right?
A No. I think the range was—it depends what you call
range. The range could be 40 to a million. I mean that is silly
to say a million, but you don’t know. They thought it would be
about $40,000.00.
Q 40 to 50?
A No. They thought it would be about $40,000.00.
Q Now we know that if you are going to repair something,
you are going to have to take that machine first to a shop to
look at it to find out how much it is going to cost to repair; is
that right?
A Well, you have an estimate, but the estimate is not
binding on Stockdale because they haven’t seen the equip-
ment yet. So, again, you are dealing with professional people,
Stanford, Stockdale. They have analyzed the problem.
Stanford has explained it to Stockdale and gone through
it piece by piece it is my understanding. I wasn’t there, but that
is my understanding. They have come up with the belief that
this can be repaired for approximately $40,000.00.
62a
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Does that answer your question?
Q No.
A Sorry. I forgot the question.
Q Do you know there were two moves involved here?
This particular drill was first moved to find out how much it is
going to cost to repair. Do you know that?
A No. My recollection is there was one move from the
site where it was damaged to Stanford—Stockdale. Too many
S’s in this case.
Q You are saying there was only one move?
A I only remember one move for $5100.00. When it was
finished, it had to be moved not back to the site it was, but
back to Maryland. And that was another 21, 22 hundred
dollars.
Q So you knew it had to be moved, and it had to come
back. So you have—
A It didn’t go back. It went to Maryland as I said.
Q Whatever. So that is a figure of $7200.00; is that right?
A Something sticks in my mind that $7300.00 is the right
number, but maybe your right.
Q Whatever. When you are going to make a decision as
to whether you repair or replace, you obviously with this type
of a piece of equipment have to factor in there is going to be
63a
Appendix
Windt—Cross 427
a cost to get it to where it is?
A Absolutely.
Q So in this case when we had $40,500.00 to $50,000.00
depending on what it is, we basically had something that would
be—nobody knew exactly what it was going to cost to move at
the time anywhere from $47,000.00 to $57,000.00; is that
right?
A That is not @ correct way to analyze it. From the
insurance company’s point of view, they expected to spend
about $36,000.00 for repairs, $40,000.00 less depreciation of
about $4,000.00. They expected to pay about $36,000.00 for
repairs. And we will use the $7300.00 number for a move.
So if I were handling the claim for the insurance company,
I would say if we repair this, I expect it is going to cost the
company $43,300.00.
Q But—?
A So that is the first part of the equation. One can’t know
the answer to that equation until one does the work that
Stanford did.
Q Stockdale?
A Stanford did. At that time, actually I was right. That
Stanford did between January 15th and February 7th.
Q So with the best knowledge that the insurance company
had at that time, they were looking at $43,300.00; is that right?
64a
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Windt—Cross __. 428
A That is what they would expect to spend.
Q Now if you are going to spend $43,300.00, you know it
is going to take time; is that right?
A Yes.
Q And were there calculations done on the basis of
salvage that is in Exhibit 7 that I have addressed here?
A I don’t knowif it is Exhibit 7, but I have seen the salvage
estimates. I think there were six of them.
Q Was there one between 80 and 90?
A Yes.
Q Is there an actual calculation in the diary of Northbrook
that starts out with $140,000.00?
A Yes. That is an incorrect calculation, but there is a
calculation there.
Q There is a calculation?
A Yes.
Q It says ACV $140,000.00. That is the policy limit; is that
right?
A You wouldn’t use 140. You would use the actual ACV.
It also says policy limit. The relevant number would be ACV.
Q What is the ACV?
A The insured said 160. He said it in his deposition. He
testified again today on the stand because I heard him that he
thought it was 160.
Q But he can’t get more—
65a
Appendix
Windt—Cross 429
A He wouldn’t get more than 140. The question is you
start with ACV. According to the insured, it is 160. That is what
they are insisting on. If you subtract out the maximum possible
salvage value of 90, then you are left with $70,000.00 cost to
the insurance company.
Q So what I am saying to you though is were there—was .
there actually an exhibit supplied by the plaintiff from a
company that gave the value of that particular drill at or about
that time?
A There were I think six estimates that Stanford got on
actual cash value. I am just saying that if you wanted to settle
with the insured, which is what you are suggesting, the insured
Says you start with 160 as actual cash value. Who knows what
you are actually going to get for salvage because the insured
hasn't let people get on the site to look at it.
Let's say you get 90, which is far more than the average.
The average salvage value that he obtained was 60. Let's say
you use 90. 160 minus 90 is $70,000.00 to satisfy the insured.
(1/30/97 letter from D&L Thomas Equipment Corp. Re:
value of drill before 12/13/96 was introduced as Plaintiff Ex-
hibit 16.)
BY MR. ANGINO:
Q Would you look at Plaintiff Exhibit 16, please?
Windt—Cross 430
A Sure.
Q Is this a letter from Nicholas B. Goulas to Jay DeLine
of Syracuse Exploration?
MR. ZELLE: Objection. This hasn’t been offered into
evidence.
MR. ANGINO: I am introducing it now.
MR. ZELLE: I will object because he can’t authenticate
THE COURT: I think we have to let the question go on
a little further here.
BY MR. ANGINO:
Q Are you familiar with this particular document? |
A Yes, it was in the file that I saw.
Q It's in the file you looked at and referred to in appearing
here in court; is that right?
A Yes.
Q And as of January 30th, 1997, which is during this
period of time when you said this investigation was being
conducted during which time there has to be a decision made
with respect to do you go the salvage route or do you go the
repair route, a letter is from Nicholas Goulas to Jay DeLine;
is that right?
A Yes.
Q And it gives a price range for that particular piece of
equipment as $130,000.00 to $145,000.00; is that right?
Windt—Cross 431
A Yes.
Q So whatever the—Syracuse supplied that to North-
brook; did they not?
MR. ZELLE: Objection.
A I don’t know.
BY MR. ANGINO:
Q You don’t know?
A How would I know?
Q In terms—do you see the claim number on it? It says
claim 3771001982?
A Yes.
Q Is that the claim for Northbrook?
A I presume. I saw this in Northbrook’s file.
Q You saw it in Northbrook’s file?
A Yes. I don’t know how they got it. You asked me how
they got it. I don’t know.
Q How do you expect a letter to Syracuse Exploration
would get in the Northbrook file? |
A Either they got it—Mr. Stanford got it from D&L
Equipment because it was one of the six people he called, or
he got it from Syracuse. How would I know?
Q If Mr. DeLine is going to give a price to Northbrook
for the value, the ACV, he has gotten a written document that
says 130 to 145?
A And his position is it is wrong. His position is as he
68a
Appendix
Windt—Cross 432,
testified today it was 160. So what do you want from me? I am
not going to impeach your guy.
Q You are in the insurance business. If you are adjusting
a claim, do you want something in writing from somebody
telling you what the value of something is?
MR. ZELLE: Objection, Your Honor. I think we have got
that there was a letter that said one thing, and we have Mr.
DeLine's testimony. We can move on.
THE COURT: The question was on a different tack.
BY MR. ANGINO:
Q If tack is in order for an insurance company—and you
have been dealing with them for years?
THE COURT: Don't intersperse the question with edi-
torializing, Mr. Angino. Just ask the question.
BY MR. ANGINO:
Q Do you need to have something in writing as to the
value of that piece of equipment?
A You don’t need to. It is good practice because some-
times, believe it or not—never mind. I was just trying to be
cute, but that is not appropriate.
Q You know what Mr. DeLine paid for it?
A 140.
Q He paid 140?
A $140,000.00.
Q Insured it for $140,000.00?
69a
Appendix
Windt—Cross 433
A The maximum coverage on it was $140,000.00.
Q And submitted a document for 130 to 145 as far as its
value; is that right?
A Again, I don’t know who submitted it. I know he got
the letter. It is addressed to him. And I know his position all
along has been that this letter is wrong. It is worth 160.
Q Where do you get that?
~ A Because I read his deposition. I heard his testimony
_ today. I read the file. I mean what do you want me to say?
Q Did he say this was wrong?
A He said it is worth 160. He gave his testimony under
oath both at his deposition and today. If you are calling him a
liar, call him a liar. I am not. ,
I am just saying the insurance company, if you are going
to say—never mind. I don’t know what you are trying to—if
you want me to make your client look bad. I just want to tell
you my opinions based on what I understand the facts to be.
Q The facts are that Northbrook used 140, did they not,
to calculate salvage and to calculate replacement; did they not?
A The person that did that—
THE COURT: Can you answer that question?
A No. It looks like they used 140 because that was the
70a
Appendix
Windt—Cross 434
policy limit which is not how you do the equation.
BY MR. ANGINO:
Q Do they have ACV before it?
A And then a policy limit written after it.
Q But they have ACV before it?
A I said before they have ACV before it, and it says
$140,000.00 policy limit. And ae wouldn’t use the policy limit
in the equation.
THE COURT: I think we are getting into more argument
than we need to, gentlemen. Do you have any more questions
you want to ask this witness?
MR. ANGINO: I would like to finish this. I would like
toe
THE COURT: I don’t know what you are driving at at
this point.
MR. ANGINO: What I am driving at is—
THE COURT: You don’t have to explain to me. Go ahead
with your questions.
BY MR. ANGINO:
Q Does that start with ACV of 140?
A The letters ACV are on there, and then after the
number it says policy limit. I can’t tell you anything more than
what it says.
Q But it has—
THE COURT: We will let the jury interpret what the
SE
Tla
Appendix
Windt—Cross 435
meaning of those letters are and the numbers.
BY MR. ANGINO:
Q Does it have the word sal with $90,000.00?
A Yes.
Q Does it have $50,000.00 after that?
A Yes.
Q Does it have $1,000.00 after that?
A Yes.
Q So that at this point in time, you have indicated the
repair cost as estimated from the insurance company was
$43,300.00; is that right?
A Correct.
Q And the figure here is $49,000.00; is that right?
A The incorrect figure on that piece of paper is
$49,000.00.
Q So that at this point in time, the insurance company
opted to go with the repair; is that right?
A Obviously, it opted to go with the repair, yes.
Q And that repair therefore meant that this machine was
not done until June 25th; is that right?
A Correct. That is how long the repair took.
Q So that the decision that was made then to save
$5700.00 meant the machine would not be getting to Syracuse
for another March, April, May, June, four months; is that right?
72a
Appendix
Windt—Redirect, Recross 436
A I disagree with your question for the reasons I have
already explained. The correct number would be $70,000.00
as opposed to $43,000.00.
MR. ANGINO: No further questions.
MR. ZELLE: Brief redirect, Your Honor.
REDIRECT EXAMINATION
BY MR. ZELLE:
Q If Northbrook had decided to simply pay the
$50,000.00, would Mr. DeLine have had his drill back any
faster?
A Not as far as I know.
Q He would have had $50,000.00, but he still wouldn’t
have his drill, and his drill couldn’t have been repaired any
faster based on what you have looked at; could it?
A All I know is from what Mr. Stanford testified that if he
had taken Mr. Stanford's recommendation of using Carbough,
that he would have had it quicker.
Q But—
A That is all I know.
MR. ANGINO: I have to ask one question.
A Sure.
RECROSS EXAMINATION
BY MR. ANGINO:
Q Mr. DeLine wouldn't have gotten—he would have
gotten $140,000.00 to go out and by a drill; is that right? Under
the salvage basis, the company keeps the salvage for the 90, he
73a
Appendix
Windt—Recross 437
gets $140,000.00. He can go out and buy a drill?
A Right. If this was a total lose, if the insurance company
determined it was a total loss, they would pay $140,000.00 and
typically keep the rest as salvage value under the terms of the
policy.
Obviously, they opted the much cheaper route which
they had the perfect right to do legally, which was to end up
paying $43,000.00 and change.
Q What I am saying in response to Mr. Zelle’s question
is the calculations that are done here give Syracuse 140, and
they can go out and then buy a drill; right? That is the
calculation?
A That is not what they did with the money. The idea is
should the insurance—was the insurance company obligated
to give your client $140,000.00 rather than having it repaired
which they expected would cost them $43,000.00?
And the answer is obviously since they had the right under
the policy—it is not unusual; it is a standard policy—to only
pay $40,000.00, who in their right mind would pay $140,000.00
and then supposedly be guilty of bad faith because they elected
to pay what they had the right to limit their obligation to, which
is $43,000.00?
Q Did the repairs come out to be $50,000.00?
A Tam talking about what their obligation to pay was.
Q Didn't it come out to be fifty some thousand?
74a
Appendix
Windt—Recross 438
A It was another 2500 more than what they expected to
psy:
Q What was the final repair bill?
MR. ZELLE: Beyond the scope, Your Honor.
A The final repair bill was $44,000.00 and change less the
$4,000.00 in depreciation. My recollection is it ended up
costing $40,000.00 to the insurance company. But I could be
off slightly.
THE COURT: All right. Is that all?
MR. ANGINO: Yes.
THE COURT: Thank you.
A Thank you, Your Honor.
MR. ZELLE: Is defense rests, Your Honor.
THE COURT: Very well. Any rebuttal testimony, Mr.
Angino?
MR. ANGINO: If I could have one minute, Your Honor.
THE COURT: Yes.
MR. ANGINO: Your Honor, Plaintiff Exhibit Number 34
indicates that the final repair bill—
MR. ZELLE: Objection, Your Honor. Is he offering the
exhibit?
MR. ANGINO: Yes.
MR. ZELLE: Let me take a look at it, and I will let you
know if I have any objection. There are two exhibits ... .
ait
Appendix
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
97-CV-1405
SYRACUSE EXPORATION COMPANY,
Plaintiff
V.
NORTHBROOK PROPERTY AND CASUALTY
| INSURANCE COMPANY,
Defendant
TRANSCRIPT OF PROCEEDINGS
VOLUME 2
BEFORE: HON. WILLIAM W. CALDWELL, Judge
DATES: June 8 and 9, 1999
PLACE: Courtroom Number Three
Federal Building
Harrisburg, Pennsylvania
COUNSEL PRESENT:
RICHARD C. AN GINO, Esquire
For—Plaintiff
ANTHONY ROBERT ZELLE, Esquire
For—Defendant
Vicki L. Fox, RMR
Official Reporter
76a
Appendix
447
... this company is certainly good for any punitive award that
it might enter in this case, which is a rather small case when
you compare it to the size of the company.
MR. ANGINO: Sure. What is the time we are going to
start tomorrow, Your Honor?
THE COURT: Nine.
MR. ANGINO: Thank you. Do you want to start with the
jury charge conference tomorrow morning or closing argu-
ments?
THE COURT: I don’t plan to hold a charge conference.
I don’t usually do that: The law is very clear here.
MR. ZELLE: That is fine. I would like to know when if
I have any objection to the jury charge—I don’t want to do it
in front of the jury obviously.
THE COURT: I think after I deliver my charge if you
have any objections, you can come to sidebar, and we will put
them on the record.
MR. ZELLE: That is fine. Thank you.
THE COURT: I will correct anything that I misquoted to
the jury. But I have charged jurors on this exact thing, and I
think my charge is within the limits of the law.
MR. ZELLE: Your Honor, I would certainly never sug-
gest that it wasn't.
77a
Appendix
Charge of the Court 479
AFTER RECESS
THE COURT: Thank you, ladies and gentlemen. I am
sure at this point you don’t need me to tell you the very
important role that you play in the administration of justice
and, of course, in this specific case.
This is because the determination of the facts in this case
is exclusively for you. It’s your duty as jurors to follow the law
that governs the case, and you shouldn't disregard what I tell
you about the law. But as to the facts in the case, you collec-
tively are the exclusive judge.
In arriving at the facts, you must consider only the evi-
dence in the case. But you are, of course, permitted to draw
such reasonable inferences from the testimony and the exhib-
its that you feel are justified in light of common experience.
In other words, you may make deductions and reach
conclusions which reason and common sense lead you to draw
from the facts. If your recollection of the evidence differs from
anything that might have been expressed by counsel or that I
might say, it is your collective recollection of the evidence
which should govern.
If the inferences that vou think should be drawn from the
facts differ from anything that has been suggested again, follow
the inferences that you think should be drawn.
78a
Appendix
Charge of the Court 480
And if your judgment of what the evidence has proved
differs from what might have been argued or suggested by
counsel or anything that I might say, follow your own judg-
ment.
You are not to infer from this that you are to ignore what
counsel have said to you in their closing arguments. It is not
only your right, but it is your duty to consider their arguments
and to view and examine the evidence in light of what they
have said.
However in the final analysis, you have the right to reject
any argument that you don’t think follows from the evidence
because the determination of the facts in this case is exclusively
for you.
Your verdict must be unanimous. All eight of you must
agree in a result before we can accept it as a verdict.
As we well know, this is a civil action brought by Syracuse
Exploration Company against the Northbrook Casualty or
Property and Casualty Insurance Company.
In every civil proceeding, whether it is in a state or a
federal court, a person or a plaintiff who makes a claim against
another has what we call the burden of proof. The burden of
proof sometimes depends upon the type of claim that is being
made.
In this case where the defendant is being accused in
dealing with the plaintiff in bad faith, the law requires the
79a
Appendix
Charge of the Court 481
plaintiff to satisfy you, the fact finders, that it is entitled to
recover by clear and convincing evidence.
Clear and convincing evidence is evidence that is so clear,
direct, weighty and convincing that you can come to a decision
without hesitation.
Most civil cases have a less strict burden of proof. In most
civil litigation, a plaintiff must prove a case by what we call a
fair preponderance of the evidence.
Proof by a preponderance of the evidence is proof that a
‘point being advanced is more likely so than not so. Proving a
case by clear and convincing evidence is a heightened standard
imposed by the law in cases where bad faith is claimed.
As I mentioned at the beginning of the case, one of the
most important functions that you serve as a juror is to judge
the credibility of the witnesses. And by credibility, we mean
the worthiness of belief in what a particular witness says.
You must determine which of the witnesses you believe,
what portion of their testimony you accept, and what weight
you might attach to it.
Credibility is not limited to just truthfulness or the
lack of truthfulness: although, of course, that is obviously
very important. But credibility also includes accuracy of
recollection, accuracy of observation, and whether a wit-
80a
Appendix
Charge of the Court 482
ness is giving dependable testimony that you can use in per-
forming your fact finding function.
It is possible that a witness intends and desires to tell the
truth and yet through faulty memory, poor observation, the
passage of time or for many other reasons is honestly mistaken.
So you must determine how much of the testimony is truthful,
as well as how much is reliable and correct.
In passing upon the credibility of each witness who testi-
fies, you have a right to assess their apparent accuracy of
memory and observation, their appearance and conduct as
they testify, and the manner in which they testify.
Do they seem to be forthright? Did they show any bias?
Are they evasive? Are they candid and fair in what they tell
you? You can consider all the surrounding circumstances in
judging credibility, including the interest that a witness might
have in the outcome of the case.
The parties, themselves have an obvious interest, but it is
possible that other persons who testify have a less direct
interest in the case and for some reason may have cause to
color their testimony.
You must attempt to reconcile conflicting evidence, then
determine what testimony is worthy of reliance and belief and
what is not.
8la
Appendix
Charge of the Court | 483
There was one witness called in this case to testify that
we call an opinion witness. Northbrook called a witness who
expressed opinions about how Northbrook handled the plain-
tiff's claim.
I will tell you just a word or two about evaluating the
testimony of someone who testifies and is permitted to express
an opinion.
Frequently the issues in a case involve matters of special-
ized knowledge or experience that can’t be determined from
deductions or inferences drawn on the basis of our everyday
knowledge, common sense or practical experience.
Issues of this kind create the necessity for the admission
into evidence of the opinions or conclusions of people who are
shown to be qualified and experienced in the particular field
in question.
However, you should also realize, as I am sure you do,
that a witness's opinion is just that. It is an opinion. It creates
no fact. It is what the witness thinks about something. And the
thought may be accurate or inaccurate and yet represent the
honest conviction of the person who expresses it.
The importance of or the weight to be given to
opinion testimony is again exclusively for you to decide.
In determining the weight to be given to that testimony,
consider the qualifications and credibility of the witness
82a
Appendix
Charge of the Court 484
and the reason he gives to support his opinions.
While opinion witnesses may have special knowledge on
a certain subject, their testimony is evaluated in the same way
as other witnesses. So in evaluating the opinion of an expert
witness, as we sometimes call them, you should as in any other
case apply your common sense, your good judgment and your
experience as you weigh the opinion given and the basis for
that opinion.
You are not bound to accept the conclusion of an opinion
witness if your judgment of all of the evidence leads you to
reject the opinions that have been expressed.
Of course, Northbrook is a corporation as is the plaintiff,
and these companies can act only through its employes or
agents. In general, a corporation is liable for the conduct of its
employes or agents who act within the scope of their authority.
And in this case, there is no dispute that the representatives
of the two corporations acted within the scope of their employ-
ment and authority.
Both parties in this case are corporations, and the law
treats them the same as it would treat an individual litigant.
This brings us then to the specific issue in this case, and
that is the issue, of course, of bad faith. The attorneys have
expressed in summary form their own understanding of the
law in the area of bad faith.
83a
Appendix
Charge of the Court 485
In a case like this it is necessary for them to some extent
to refer to the law. But in our system of jurisprudence you, the
jury, must take the law on the subjecc before you from the
Court.
Because of the importance of this law in resolving this
case, I would ask that you listen carefully as I explain the law
concerning bad faith and what a claimant is required to show
in order to prevail.
As we all know, this suit involves the allegation that
Northbrook acted in bad faith in handling the claim presented
to it by its policyholder Syracuse Exploration Company for
damage to a drill that had been insured.
There is a statute in Pennsylvania—and Pennsylvania law
governs this case—that requires an insurer to deal in good faith
in handling the claims of its insureds. And plaintiff contends
that the defendant violated this law.
Your responsibility will be to determine whether bad faith
has been shown by all of the evidence remembering that the
burden of proof requires the plaintiff to prove bad faith by
clear and convincing evidence.
While the Pennsylvania statute does not define bad
faith, it has been given a well defined meaning in the
Pennsylvania Courts that have interpreted this law. Bad
faith is defined as any frivolous or unfounded refusal to pay
84a
Appendix
Charge of the Court 486
what is due an insured.
For the purposes of a claim against an insurer for bad faith
in failing to pay a claim in a timely fashion, negligence or poor
judgment in handling a claim is not bad faith. Even gross
negligence by an insurer is insufficient to support a finding of
bad faith.
Now it is not necessary that the insurance companies be
fraudulent. Rather bad faith can exist where an insurance
company’s evaluation of a claim is less than honest and objec-
tive. That is because an insurer has a duty to act in good faith,
and good faith requires that the insurer act honestly and
objectively in evaluating a claim, that it promptly adjust and
pay a valid claim without unnecessary delay, and that an
insurance company give its insured’s interests the same con-
sideration as it gives its own.
In addition to providing a general definition of bad faith,
Pennsylvania Courts have developed a two part test to deter-
mine whether bad faith exists. This is the test you should apply
in determining whether Syracuse has established by clear and
convincing evidence that Northbrook acted in bad faith.
The first element in this test is whether the insurance
company had a reasonable basis for any delay that resulted in
paying its insured’s claim. If you find that Northbrook did not
~ respond promptly to plaintiff's claim or delayed in issuing a
85a
Appendix
Charge of the Court 487
decision concerning repair or replacement, you must deter-
mine whether Northbrook had a reasonable basis for its ac-
tions.
Remember, however, that whether a person acts reason-
ably is not the same as whether he has acted correctly. A person
can be incorrect in a decision or an action and yet still be
reasonable under the facts as they were known at the time the
decision was made or an action was taken.
The second element of the test for bad faith that must be
shown is whether the insurance company knew that it lacked
a reasonable basis for delaying payment of the claim or reck-
lessly disregarded the question of whether it lacked a reason-
able basis for its action.
Thus if you find that there was no reason for Northbrook
not to promptly authorize repair of plaintiff's equipment and
payment of its claim, you must then determine whether it
knew that it had no reasonable basis to delay or recklessly
disregard the claim.
In this context, to recklessly disregard facts means to
consciously disregard them. An example would be a situation
where Northbrook had no reasonable basis to delay authoriz-
ing the repairs to plaintiff's drill, but did not know it had no
basis to delay because it had not conducted an investigation
and evaluation in a timely fashion.
86a
Appendix
Charge of the Court 488
If you find that Northbrook consciously decided for im-
proper reasons not to investigate or evaluate or consciously
decide to delay plaintiff's claim, then you could find it acted in
bad faith.
However if you find that Northbrook did not consciously
fail to resolve plaintiff's claim in a timely fashion, there would
not be bad faith.
In other words, Northbrook or any other insurance com-
pany is not permitted to bury its head in the sand to avoid
determining whether a claim should be paid. If there was a
delay in evaluating or paying a claim, ask whether there was a
reasonable basis for the delay. If so, there can be no bad faith.
Remember the plaintiff must prove both elements of the
test for bad faith by clear and convincing evidence, not merely
by insinuating that Northbrook acted in bad faith. As I stated
earlier, clear and convincing evidence is evidence that is so
clear, direct, weighty and convincing that it enables you, the
jury, to make a decision without hesitation.
Now this is not a situation where you look back and say
what might have been done better by Northbrook with regard
to plaintiff's claim. In other words, we don’t engage in Monday
morning quarterbacking.
87a
Appendix
Charge of the Court 489
What you must and should do is consider the information
Northbrook had at the time these events transpired. And also
look at what Northbrook and its agent Stanford did in handling
the claim.
You may consider how Northbrook responded to the
initial notice of loss, the process by which it determined that
the drill should be repaired rather than replaced, and the
manner in which it issued payment for the claim.
Remember, however, that the Court has already deter-
mined that Northbrook has paid Syracuse the proper amount
for repairing the drill. So the only issue for you to decide is
whether Northbrook’s handling of that claim was done in bad
faith.
That brings us then to the question of damages that might
be filed—might be applied here in the event of bad faith.
The Pennsylvania bad faith statute allows an award of
punitive damages if you conclude that the insurance company
acted in bad faith. So if you find bad faith, you must then
determine whether plaintiff should receive punitive damages.
These damages are awarded in exceptional cases as a
punishment of a defendant and as a warning to others to keep
them from acting in the same manner.
88a
Appendix
Charge of the Court | 490
Punitive damages are appropriate only where a defen-
dant’s conduct is especially egregious. The burden of proof in
this case—in this part of the case as to the imposition of
punitive damages is by a fair preponderance of the evidence.
As I said earlier, the burden of proof by fair preponder-
ance of evidence means proving that something is more likely
so than not so. Another example is using the scales of justice,
and if the evidence for plaintiff tips the scales even slightly on
a particular point, then he has prevailed as far as proving that
point by a fair preponderance of the evidence.
You may award punitive damages if you determine by a
preponderance of the evidence that the defendant’s conduct
was outrageous, done with an improper motive or with a
reckless indifference to the interests of its policyholder
Syracuse Exploration Company.
In this context, the term reckless means that the defen-
dant knew ofa risk of a harm to the plaintiff, and it deliberately
proceeded to act or failed to act in conscious disregard of or
indifference to that risk.
Punitive damages are not to be lightly imposed and
may not be awarded for misconduct that constitutes such
things as carelessness, negligence, inadvertence, mistakes and
errors of judgment. Nor may they be awarded for conduct that
89a
Appendix
Charge of the Court 491
rises only to the level of gross negligence.
Simply put, before punitive damages are appropriate, it
must be shown that a defendant’s conduct was outrageous.
To summarize, if you determine that the actions of North-
brook’s employes or agents constituted bad faith, you may
impose punitive damages only if the following factors are
present: First, the conduct must be clearly outrageous; and
second, the actions must not have been done to satisfy an
individual’s personal will or malice, but with the intent to
further the interests of the insurance company Northbrook.
If you conclude that the facts justify an award of punitive
damages, you should try to determine a fair, just and reason-
able amount for the plaintiff under all of the circumstances.
As I said, punitive damages are not intended to compen-
sate a plaintiff for injury, but rather are designed to punish a
defendant and to prevent similar conduct in the future.
In considering an appropriate award, you may consider
the character of Northbrook’s actions, the nature and extent
of the harm to Syracuse which Northbrook caused or intended
to cause, the financial condition of the defendant insofar as it
is relevant to fixing an amount which will punish and deter it.
90a
Appendix
Charge of the Court 492
Any award you make must be unanimously agreed upon
and must be reasonable under all of the circumstances.
Now it doesn’t follow that punitive damages must be
awarded if you find that Northbrook acted in bad faith.
Whether punitive damages should be paid is a separate issue,
and plaintiff must prove by a fair preponderance of the evi-
dence that the circumstances in the case warrant the imposi-
tion of imposing a punishment of this nature on the defendant.
In effect, you have the discretion as to whether the
situation calls for an award of punitive damages.
Finally, you should know that in addition to permitting
an award of punitive damages for an insurer's bad faith, the
Pennsylvania Act also provides for certain other categories of
recoverable damages and costs.
However, the Act provides that these items are awarded
by the Court at a later point if you find that the defendant acted
in bad faith. So you will only be dealing with the question of
punitive damages.
Gentlemen, that concludes my charge. I would next in-
tend to go over the verdict form with the jury unless you have
exceptions to what I have said so far or any requests for further
instructions.
MR. ANGINO: Can we take one minute?
THE COURT: Sure. Indulge us for just a moment,
Charge of the Court
ladies and gentlemen.
(There was an off-the-record discussion at sidebar.)
THE COURT: I have asked Mrs. Michael to provide each
of you with a copy of the verdict form as it may be of assistance
to you in deciding the case. All of the exhibits will come over
to you after you retire, and you may look at all those exhibits.
And they are a part of the evidence in the case that you may
consider.
The testimony of the witnesses is something you are going
to have to recall collectively. Because at this point, we really
don’t have any way of telling you what a particular said on a
particular point.
But if you do have a question about anything like that, we
will certainly attempt to assist you. So don’t hesitate to present
it to us.
If you have any questions about my instructions, or the
law, or you want further explanations or clarifications, just send
me a note, and we will certainly accommodate you in that
regard.
Insofar as the verdict form is concerned, I think you will
see that it pretty much tracks what I have said to you in my
charge.
First, has the plaintiff proved by clear and convincing
evidence that defendant acted in bad faith in the handling of
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Charge of the Court 494
plaintiff's insurance claim? And by unanimous agreement, you
simply check the no or the yes line to that question.
If you answer no, then you would sign the form and return
to the courtroom. But if you answer yes, you proceed to
question two, has plaintiff proved by a preponderance of the
evidence that it is entitled to punitive damages? And again, you
indicate an answer to that question.
If you answer no, you sign the form. But if you answer
yes, you go on to the third question and indicate the total
punitive damages to which the plaintiff is entitled.
One of your number should be selected to chair your
deliberations. That person will also sign the form where the
foreman’s signature line is. And we will be prepared to receive
your verdict when you reach it.
As I said to you before, this is an important case. It is
important to the plaintiff because it feels that its claim was
handled improperly and in bad faith. It is equally important to ©
the defendant because it believes that it is being asked to pay
for something for which it is not responsible, and that under
the circumstances, it dealt properly with the plaintiff's claim.
Your decision should be based upon the evidence.
You shouldn’t allow any emotion to enter into your delib-
erations or into your verdict such as sympathy or prejudice
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or anything of that kind.
Treat the parties equally, and base your decision on the
evidence that you have heard as I am sure you will. If there is
nothing further, then we will ask the jury to retire.
(The Courtroom Deputy Clerk was duly sworn.)
THE COURT: Folks, you may retire and we will send the
verdict—the exhibits over to you.
(The jury retires to deliberate at 10:45.)
THE CCURT: Mr. Zelle, I believe you indicated you
wished to put something on the record concerning the charge.
I asked you to wait until the jury retired. So at this time, you
may place that on the record.
MR. ZELLE: For the record, Your Honor, note North-
brook’s objection to the charge specifically on the issue of
punitive damages. The objection is simply not to the wording
at all, but based on the fact there has been no evidence to
support such a charge.
Secondly, as I mentioned and requested an instruction
that it is not bad faith for a lawyer to produce records that were
never requested. And although an argument would clearly be
sought to establish that, I think the charge would be an
appropriate point to make that known as well.
THE COURT: Okay. |
MR. ANGINO: Your Honor, could I put on the record
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Charge of the Court 496
my comment to you that since this was a diversity case, I
thought the five-sixth state rule wouid apply.
THE COURT: Okay. Fine. We will be in recess now. The
jury is going to receive its lunch at 11:30. I don’t think they will
be returning a verdict. However, you should be available in
the event they have a question. Probably, they won't have a
question before lunch, but you never know. If you want to go
back to your office—
MR. ZELLE: It’s your call. Do you want us to hang
around until lunch?
THE COURT: I don’t want to say that. Just be some-
where where we can get you in ten minutes or so. Let Mrs.
Michael know where you are going to be.
(A recess was taken.)
AFTER RECESS
(The following discussion was had in the courtroom at
1:10 PM:)
THE COURT: Ladies and gentlemen, we appreciate
your deliberations and your efforts to resolve this case. We
wish to respond at this time to your two inquiries.
The second one, which I will address first, asks whether
we could clearly define bad faith in layman’s terms and could
you give us a hard copy for reference?
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Charge of the Court 497
It is pretty hard to explain this concept in any way other
than what I did. I tried to make it as understandable as
possible. We will provide you with a written copy of those
instructions, and I am sure with the written copy that you won’t
have any trouble understanding hopefully what is required to
be proved to prove bad faith.
The other question you asked involves Exhibit 34, Plain-
tiff Exhibit 34, specifically whether the—off the record.
MR. ANGINO: It is the second page of 34. It is a proof
of loss. It is not in 34. It would be in 36.
THE FOREMAN: Ft was in 34 that we had.
MR. ANGINO: They tater changed it. 34 is what they first
sent, and then later they changed it.
THE COURT: I think we will have a copy now of what
you are referring to. Yes, in paragraph nine, there is printing
undisputed amount. And your question is does adding that
word mean that the plaintiff gives up the right to future claims?
Let me answer that by saying that paragraph nine pro-
vides that the insured agrees to accept full payment in satis-
faction and compromise of all claims under the policy by
reason of said loss or damage.
What was intended by adding the words undisputed
amount in my mind at least was not particularly clear, and I
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Charge of the Court 498
don’t think that that should be the focus of the inquiry. Does
_ that in any way assist you?
(The jury indicates in the negative.)
THE COURT: The signing of the regular proof of loss
would give up all claims under the policy. A bad faith claim
would not be a claim under the policy.
What they meant by undisputed amount when that was
printed on there, I don’t know. I don’t think anybody—who-
ever put it there, I don’t think testified what it was intended
to mean. I think it is ambiguous. So I would not suggest that
you dwell on it. But, of course, you are free to consider the
facts.
Does anybody else—maybe you can clarify what your
concern is for me.
THE FOREMAN: Our concern was whether or not the
wording even though it was not requested to be worded that
way on the check, whether or not that was an intentional way
to word that.
THE COURT: I think that is a conclusion that the jury is
going to have to consider if you think that it is important on
the issue of bad faith.
But I don’t think anybody—I don’t know that Mrs. Hall
was asked. I don’t know if she put it on there or who put it on
there. Whoever did didn’t testify what it was intended to mean.
I think it’s an ambiguous situation. I don’t know how you can
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Charge of the Court 499
draw too many conclusions about it.
Okay?
A JUROR: My concer was if they cashed the check, does
that mean that that case is done? They can’t go back later and
say that something else was wrong and go back with the
difference.
THE COURT: If they cashed the check and signed this
release, they can’t go back and complain about anything under
the policy. But that doesn’t preclude the claim that they have
brought because I am sure they did sign some sort of a release
to get the check which—they have gotten the check.
MR. ANGINO: Your Honor—
THE COURT: Isn’t that true? I know you were involved
in it.
MR. ZELLE: This should probably be outside the jury—
THE COURT: Yes.
(An off-the-record discussion was had at sidebar.)
THE COURT: I don’t feel that I can say any more about
that exhibit. I think if there was testimony about how that
language was interpreted and why it was interpreted the way
it was, that is just something you have to consider.
Legally I think it is an ambiguous two words that—I
don’t know what it means or what the result of it would be if
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Charge of the Court 500
it came down to it. That is as much help as I think we can give
you. Okay.
THE FOREMAN: Okay.
THE COURT: You have copies of these exhibits, don’t
you?
THE FOREMAN: Thank you, Your Honor.
THE COURT: Perhaps after further deliberations, you
might want to refine the question again if it is really important
to you. I don’t want to cut you off at all. Based on the question
that you have asked, I don’t think I can say any more at this
time.
Okay. You may retire and continue your deliberations.
Thank you very much.
THE CLERK: Court is in recess.
(The jury exits to deliberate in the jury room at 1:18 PM.)
(A recess was taken.)
(The jury has a verdict at 2:05 PM.)
THE COURT: We understand you have arrived at a
verdict, ladies and gentlemen. We would like to have the
verdict form at this time.
(Handed to the Court.)
_ THE COURT: You are the Foreperson of the jury, is that
correct?
THE FOREPERSON: Yes, sir.
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Charge of the Court 501
THE COURT: Would you answer on behalf of the jury,
please? Has plaintiff proved by clear and convincing evidence
that the defendant acted in bad faith in the handling of
plaintiff's insurance claim?
THE FOREMAN: No.
THE COURT: Thank you. You may be seated. Ladies
and gentlemen, your Foreman has indicated that your answer
to the first verdict question is no. Is this your individual
answer?
(The jury indicates in the affirmative.)
THE COURT: Is there anyone who does not agree to that
answer to that question? All right. We accept this then as an
unanimous verdict, and we will enter a judgment in favor of
the defendant on plaintiff's claim.
I want to thank you for serving as a juror in this case. It
was not an easy one I am sure. I hope that the experience of
being with us and serving as a juror has given you alittle insight —
into the operation of the courts on a first hand basis.
I won't ask you whether you en
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