MARCH 2009 BAD FAITH CASE THIRD CIRCUIT APPLIES LODESTAR METHOD TO CALCULATING STATUORY ATTORNEYS FEES; UPHOLDS INTEREST FINDING(Third Circuit)
In a non-precedential Third Circuit Opinion, Jurinko v. The Medical Protective Company, the case involved the assignment of a bad faith claims to the patients of the insured doctor. The case had gone to trial, and the insureds had obtained an excess verdict against the doctor for medical malpractice, and he assigned his claims against the carrier in lieu of making the excess payment. On the assigned claims against the insurer, the patients received a jury verdict of $1,658, 345 and punitive damages of $6,250,000. The trial court upheld the jury award, and then molded the verdict concerning attorney’s fees, costs and interest.
The case’s factual history reveals a story of settlement recommendations by judges, and the doctor’s own defense counsel (appointed by the carrier), that far exceeded anything the carrier was willing to pay toward settlement; and in fact, throughout the course of settlement discussions and recommendations, the carrier’s offer to contribute toward a settlement never rose above $50,000 (on a $200,000 policy), and where the insured’s potential exposure was evaluated by the judges and/or defense counsel at numbers between $750,000 and $2,000,000. The doctor himself had wanted to settle.
Astonishingly, the carrier’s own adjuster testified that he acted unreasonably and irresponsibly in settlement negotiations” and that he denied the doctor an effective defense by appointing the same lawyer to represent that doctor, and a co-defendant doctor (against whom plaintiffs asserted crossclaims should have been asserted, but could not be because of a conflict). Counsel denied that the purported conflict had any real effect, as there eventually was separate counsel and he could argue reliance on the other doctor at trial.
The bad faith aspect of the claim is discussed elsewhere on this site
The trial court found that there was at least a partial agreement as to any interest award on the jury verdict, which amounted to less than the prime plus 3% permitted under the Bad Faith Statute; but also apportioned part of the interest at that higher rate to make the insured doctor whole. The Third Circuit upheld this finding.
The statute also permits the recovery of attorneys’ fees. The Jurinkos sought $2,372,503.50 in attorneys’ fees — thirty percent of the verdict, i.e., they wanted application of a contingent fee measure of fees, instead of application of the lodestar method of calculating fees. The Court rejected that effort. It looked to Pennsylvania Rule of Civil Procedure 1716 which provides that a court awarding attorneys’ fees must consider (1) the time and effort the attorneys reasonably expended; (2) the quality of the services rendered; (3) the results achieved and benefits conferred on the class or the public; (4) the magnitude, complexity and uniqueness of the litigation and (5) whether the receipt of a fee was contingent on success. The Court found the lodestar method more appropriate than a percentage of recovery method, as the statute is a fee shifting statute. This is consistent with the Pennsylvania intermediate appellate court approach as well.
