Court splits on $21M bad-faith verdict against Nationwide
The Penn. Supreme Court deadlocked in its decision of the verdict previously deemed an 'an assault on the [insurance] industry.'
After nearly 25 years of litigating, a case that resulted in a twice-vacated $21 million bad-faith verdict against Nationwide has left the Pennsylvania Supreme Court evenly split on whether that award should be reinstated. The ruling, according to one attorney, could lead to still more litigation.
The Pennsylvania Supreme Court deadlocked Aug. 25 in its decision in Berg v. Nationwide, a closely watched bad-faith case that last year resulted in the Superior Court twice vacating the verdict after finding that the trial court’s analysis of the case had strayed out of bounds in broadly criticizing the insurance industry.
The justices’ ruling leaves in place the Superior Court’s decision, which had vacated the verdict and entered a judgment for the defendants.
Justice David Wecht issued a 60-page opinion saying that the Superior Court’s ruling should be reversed. In contrast, Chief Justice Thomas Saylor issued a 24-page opinion contending that the intermediate appellate court’s judgment should be affirmed. Justice Sallie Mundy joined Wecht’s ruling, and Justice Max Baer joined Saylor’s.
In supporting his argument to reverse the Superior Court, Wecht said there was evidence to support that “Nationwide implemented a litigation strategy premised upon a lack of cooperation with its policyholders and the elevation of its needs above those of the insured,” which Wecht said is a strategy the Superior Court previously condemned in another case.
Saylor, however, said any post-litigation conduct should be limited to evidence of the carrier’s bad-faith refusal to settle the underlying claims reasonably.
Origins of the case
The case arose after plaintiffs took their damaged 1996 Jeep Grand Cherokee to a facility participating in the insurer’s “Blue Ribbon Repair Program,” where one appraiser recommended that the vehicle be totaled. The Bergs, however, alleged that Nationwide Mutual Insurance reversed that appraisal without informing them and then ordered the car sent to another repair facility. After allegedly finding problems with the car, the Bergs argued that, despite the attempted repairs, Nationwide knowingly returned them their vehicle with an unsound structural frame to avoid paying for a new vehicle.
After a jury found Nationwide violated the Unfair Trade Practices and Consumer Protection Law, the trial judge granted a directed verdict for Nationwide. Still, the Superior Court eventually reversed, giving the plaintiffs another chance to try their bad-faith claims.
In June 2014, Berks County Court of Common Pleas Judge Jeffrey K. Sprecher issued his $21 million bad-faith verdict, along with a lengthy and scathing opinion, finding that “Nationwide strong-armed its own policyholder rather than negotiating in good faith to compensate the plaintiff for the loss suffered in the automobile collision.”
In April 2018, a split three-judge panel vacated the award, finding Sprecher’s opinion improperly considered issues far outside the bounds of the case. Although the court subsequently agreed to reconsider the issue, it again decided to toss the verdict.
What happens when the court splits
According to attorney Kenneth Behrend, who represented plaintiffs Daniel and Sharon Berg, some procedures allow parties to request reconsideration where there is an even split, although instances, where the court splits evenly without mentioning why two justices neither joined any opinions nor authored their own, could complicate the inquiry.
“We’re at the very beginning of the process of seeing if there’s something further that would be meaningful and a step worth taking,” Behrend said.
In an emailed statement, a spokesman for Nationwide said, “We are reviewing the order issued by the Supreme Court of Pennsylvania. Nationwide has always maintained that it acted in good faith in handling the Berg’s claim.”
Counsel for Nationwide, Dechert’s Robert Heim said, “It was a long protracted litigation, and it was time for it to come to an end.”
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