Source: http://pa.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20141215_0008864.PA.htm/qx
Timestamp: 2016-10-20 19:53:11
Document Index: 60846002

Matched Legal Cases: ['§ 8371', '§ 8731', '§ 8371', '§ 8', '§ 8371', '§ 8371', '§ 8371', '§ 8371', '§ 8371', '§ 1921', '§ 1921']

ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY, Appellantv.JARED WOLFE, Appellee
Appeal from the U.S. Court of Appeals, Third Circuit No. 12-4450. Appeal allowed April 24, 2014 at 23 MM 2014.
Certified question answered and matter returned.
For Allstate Property and Casualty Ins. Co., APPELLANT: Sara Beth Richman, Esq., John Lawrence Schweder II, Esq., Marshal Walthew, Esq, Pepper Hamilton, LLP.
For Jared Wolfe, APPELLEE: William Philip Carlucci, Esq., Robert B. Elion, Esq., Elion, Wayne, Grieco, Carlucci & Shipman & Irwin, P.C.; Michael Anthony Dinges, Esq., Dinges, Dinges & Waltz, LLC.
For Insurance Commissioner, AMICUS CURIAE: Yen Tan Lucas, Esq., Pennsylvania Insurance Dept.
For Pennsylvania Defense Institute, AMICUS CURIAE: Richard Bruce Morrison, Esq., Marshall, Dennehey, Warner, Coleman & Goggin, P.C.; Charles Scott Rybny, Esq., Curtin & Heefner, LLP.
For Philadelphia Association of Defense Counsel, AMICUS CURIAE: Richard Bruce Morrison, Esq., Marshall, Dennehey, Warner, Coleman & Goggin, P.C.; Charles Scott Rybny, Esq., Curtin & Heefner, LLP.
For Insurance Federation of Pennsylvania, Inc., AMICUS CURIAE: Richard Bruce Morrison, Esq., Marshall, Dennehey, Warner, Coleman & Goggin, P.C.; Charles Scott Rybny, Esq., Curtin & Heefner, LLP.
For American Insurance Association, AMICUS CURIAE: Richard Bruce Morrison, Esq., Marshall, Dennehey, Warner, Coleman & Goggin, P.C.; Charles Scott Rybny, Esq., Curtin & Heefner, LLP.
For Property Casualty Insurers Association of America, AMICUS CURIAE: Richard Bruce Morrison, Esq., Marshall, Dennehey, Warner, Coleman & Goggin, P.C.; Charles Scott Rybny, Esq., Curtin & Heefner, LLP.
For Pennsylvania Association of Mutual Insurance Companies, AMICUS CURIAE: Richard Bruce Morrison, Esq., Marshall, Dennehey, Warner, Coleman & Goggin, P.C.; Charles Scott Rybny, Esq., Curtin & Heefner, LLP.
For Association of America, AMICUS CURIAE: Richard Bruce Morrison, Esq., Marshall, Dennehey, Warner, Coleman & Goggin, P.C.; Charles Scott Rybny, Esq., Curtin & Heefner, LLP.
For Pennsylvania Association for Justice, APPELLEE AMICUS CURIAE: Scott B. Cooper, Esq., Schmidt Kramer, P.C.; James C. Haggerty, Esq., Haggerty, Goldberg, Schleifer & Kupersmith, P.C.
For United Policyholders, APPELLEE AMICUS CURIAE: Luke E. Debevec, Esq., John Norig Ellison, Esq., Reed Smith, LLP; Andrew J. Kennedy Esq., Colkitt Law Firm, P.C.
For United States Court of Appeals for the Third Circuit, PARTICIPANTS: Marcia Mary Waldron, Esq., U.S. Court of Appeals, 3rd Circuit.
For Kent Jordan, PARTICIPANTS: The Honorable Kent Jordan, Pro Se.
CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, STEVENS, JJ. MR. JUSTICE SAYLOR. Messrs. Justice Eakin and Baer, Madame Justice Todd and Mr. Justice Stevens join the opinion. Mr. Chief Justice Castille dissents.
Wolfe then instituted a personal injury action against Zierle seeking compensatory damages grounded in negligence. Allstate assumed Zierle's defense while maintaining its additional right, under the policy, to effectuate a settlement. See Allstate Prop. & Cas. Ins. Co. Auto Policy, R.R. at 442a (" We may settle any claim or suit if we believe it is proper." ).
Relying upon this assignment, Wolfe proceeded to commence a civil action against Allstate in a Pennsylvania common pleas court, alleging that Allstate's refusal to settle reflected bad faith on the carrier's part. Wolfe sought damages under common-law contract theory, see Cowden v. Aetna Cas. & Sur. Co., 389 Pa. 459, 468, 134 A.2d 223, 227 (1957) (recognizing a cause of action grounded in contract theory for bad-faith refusal by an insurer to settle a third-party action),[1] and per Section 8371 of the Judicial Code, 42 Pa.C.S. § 8371, which served to supplement the remedies previously available to insureds in certain scenarios involving bad-faith conduct by their insurers, inter alia, by authorizing punitive-damages awards. See generally Birth Center v. St. Paul Cos. Inc., 567 Pa. 386, 402, 787 A.2d 376, 386 (2001).[2] Allstate removed the litigation to a federal district court.
During pretrial proceedings, Wolfe filed an amended complaint and Allstate pursued summary relief, asserting that, as a third party to the Allstate/Zierle insurance policy, Wolfe lacked standing to pursue damages under Section 8371. This position was grounded on two main premises. First, Allstate explained, under Ash v. Continental Insurance Co., 593 Pa. 523, 932 A.2d 877 (2007), Section 8371 created a form of an unliquidated tort claim. See id. at 536, 932 A.2d at 885 (holding, in determining the appropriate limitations period, that " an action under § 8731 is a statutorily-created tort action" ). Second, per longstanding Pennsylvania law, unliquidated tort claims generally are personal and cannot be assigned to third parties. See, e.g., Sensenig v. Pa. R.R. Co., 229 Pa. 168, 172, 78 A. 91, 91, 27 Lanc. L. Rev. 305 (1910) (" A right of action strictly personal is not assignable and the general doctrine is, both in law and equity, that a right of action for pure tort is not the subject of assignment[.]" ). Indeed, Allstate emphasized, two federal district judges in the Eastern District of Pennsylvania recently had applied these precepts in determining that claims for damages under Section 8371 are unassignable. See Feingold v. State Farm Mut. Auto. Ins. Co., Civ. No. 11-6309, *8, 2012 WL 1106653 (E.D. Pa. Apr. 3, 2012), aff'd, 517 F.App'x 87 (3d Cir. 2013); Feingold v. Liberty Mut. Grp., 847 F.Supp.2d 772 (E.D. Pa. 2012), aff'd, 562 F.App'x 142 (3d Cir. 2014); accord Canale v. Allstate Ins. Co., No. 13-4398, slip op., (E.D. Pa. Nov. 21, 2013) .
The district court rejected Allstate's contentions, however, relying upon a contrary pronouncement by the Superior Court in Brown v. Candelora, 708 A.2d 104 (Pa. Super. 1998). See Wolfe v. Allstate Prop. & Cas. Ins. Co., 877 F.Supp.2d 228, 231 (M.D. Pa. 2012) (citing Brown, 708 A.2d at 110). The district court did not discuss Brown's reasoning or compare it with that of the Feingold courts. Rather, the district court merely observed that, in Haugh v. Allstate Insurance Co., 322 F.3d 227 (3d Cir. 2003), the United States Court of Appeals for the Third Circuit had cited Brown with approval. See id. at 239 (" Under Pennsylvania law an insured's claims . . . under section 8371 for punitive damages . . . are assignable." (citing Brown, 708 A.2d at 112)). This, the district court concluded, " rebuts [Allstate's] contention that a finding that § 8371 claims sound in tort necessarily prohibits the assignment thereof." Wolfe, 877 F.Supp.2d at 231.
Allstate commenced an appeal in the Third Circuit, in which the insurer maintained its position that Wolfe lacked standing. In light of the conflicting decisions in Pennsylvania and federal courts concerning the assignability of a right to damages under Section 8371, the Third Circuit lodged a certification petition in this Court, see Internal Operating Procedures of the Supreme Court § 8, which we granted. See Allstate Prop. & Cas. Ins. Co. v. Wolfe, Pa., 90 A.3d 699 (2014) (per curiam).
Presently, Allstate maintains that the two, undisputed premises which it raised in the district court (resting upon Section 8371's grounding in tort theory and the personal character of unliquidated tort claims) dictate the outcome of our review. Allstate explains that the prohibition against assignment of tort claims has been interposed to preclude champerty, or the Page 1184
involvement of intermeddlers pursuing litigation for profit-making purposes. See, e.g., Marsh v. W. N.Y. & Pa. Ry. Co., 204 Pa. 229, 231, 53 A. 1001, 1002 (1903) (" '[N]o encouragement should be given to litigation by the introduction of parties to enforce those rights which others are not disposed to enforce.'" (quoting Prosser v. Edmonds, (1835) 160 Eng. Rep. 196, 203 (K.B.))). In this regard, Allstate categorizes assignees who have received judgments in third-party tort actions as such intermeddlers, since, according to the carrier at least, their only legitimate expectation is to be compensated for their own injuries. Observing that such singular interest can be wholly vindicated in an assignable contract-based action against the tortfeasor's insurer where there has been a bad-faith refusal to settle resulting in an excess verdict, see Cowden, 389 Pa. at 468, 134 A.2d at 227; Gray v. Nationwide Mut. Ins. Co., 422 Pa. 500, 511, 223 A.2d 8, 13 (1966), Allstate denominates attempts to assign exemplary entitlements under Section 8371 as champertous. In this line of argument, Allstate highlights that Pennsylvania courts have manifested a particular aversion to assignment of personal causes of action seeking penalties. See, e.g., Sensenig, 229 Pa. at 173, 78 A. at 92 (" Counsel for appellant practically admit that the treble damages imposed by the act of 1883 are to be regarded as a penalty, and that the right to such damages is not assignable." ); Osborn v. First Nat'l Bank of Athens, 175 Pa. 494, 498-99, 34 A. 858, 859, 38 Week. Notes Cas. 341 (1896) (holding that the right to pursue a statutory penalty for charging usurious interest was unassignable).
In terms of public policy, Allstate believes that sanctioning assignments of punitive-damages claims under Section 8371 would foster mischief by encouraging plaintiffs to pursue unreasonable settlement demands and advance bad-faith claims which otherwise never would have been initiated. See, e.g., Reply Brief for Allstate at 3 (" [T]he inevitable consequence of allowing assignment of § 8371 claims will be that persons bringing suits for injuries covered by a third party's insurance will have powerful incentives to be unreasonable in pretrial settlement negotiations." ). According to Allstate:
Prohibiting assignment of § 8371 claims preserves a much better equilibrium among the interests of the various parties. The insured's right . . . to assign a common law contractual bad faith claim provides the insured with the bargaining chip to protect his personal assets from execution by the plaintiff. At the same time, assignment of the common law claim provides the plaintiff with a means to obtain the amount of the verdict -- the only monies to which they the injured plaintiff has any legitimate claim. And, if the insured -- the person § 8371 is meant to protect -- feels aggrieved by the insurer's actions, the insured can bring a claim under § 8371. This is the truly fair result.
Id. at 6; accord id. at 8 (" Allowing the injured claimants to pursue the tort based claims under § 8371 unreasonably tips [the] long established balance in favor of a party who needs no further protection." ). Allstate's position, in these regards, is supported by its amici, including various insurance-industry organizations, which also view the assignment of claims for damages under Section 8371 as creating windfalls Page 1185
and perverse incentives.[3] Further, according to amici, by insulating the judicial proceedings from the presence of an insured bearing personal culpability (which, as in Zierle's case, can be substantial), assignments " will likely distort the factfinder's perception . . . by the inherent sympathies created by the innocent claimant's injuries." Brief for Amici at 7.
Wolfe and his amici, on the other hand, eschew a " mechanistic rule" based purely on the tort label affixed to claims for damages under Section 8371. Brief for Amicus United Policyholders at 17. Rather, their arguments center on the public policies supporting this Court's determination that bad-faith claims grounded in contract theory are assignable. See, e.g., Gray, 422 Pa. at 511, 223 A.2d at 13 (reasoning that assignability " would put the claimant on more of an equal footing with the insured's insurance company in settlement negotiations without tipping the balance against the insurer who can still refuse to settle in good faith" ); Brown, 708 A.2d at 113 (positing that assignments " equalize[] the strategic advantages between the insured and the insurer," where the insurer's bad faith " exposes its policyholder to the sharp thrust of personal liability" (quoting Smith v. State Farm Mut. Auto. Ins. Co., 5 Cal.App.4th 1104, 7 Cal.Rptr.2d 131, 136 (Cal. Ct. App. 1992))).[4] Along these lines, Wolfe and his amici contend that permitting assignment of the totality of an insured's rights against its insurer to an injured third-party plaintiff facilitates the orderly and complete determination of bad-faith claims in a more unitary fashion.[5] The amici, in particular, also note that this Court maintains an emphasis on the public policy favoring litigation settlements. See, e.g., Brief for Amicus United Policyholders at 25 (citing Gray, 422 Pa. at 511, 223 A.2d at 13).
Furthermore, Wolfe contends, assignments serve Section 8371's aim of deterrence. Cf. Brief for Amicus United Policyholders at 22 (" Punitive damages are intended to deter and punish bad faith, and those goals are served regardless of what party presses the claim against the insurance company." ). In this regard, Wolfe explains that many tortfeasors are essentially Page 1186
judgment-proof and, thus, lack the incentive to pursue damages under Section 8371 (since any resulting award would be vulnerable to seizure by the injured plaintiff in his capacity as judgment creditor). Even though they may be judgment proof, the argument continues, insureds nonetheless suffer substantial harm by virtue of insurer bad faith, in the form of impaired credit ratings and, in some instances, downsides associated with insolvency proceedings. See Gray, 422 Pa. at 506, 510, 223 A.2d at 10, 12 (discussing such considerations in determining that bad-faith claims grounded in contract theory are assignable). Moreover, as Wolfe and his amici see it, the General Assembly already has rejected Allstate's position that compensatory damages for bad faith are sufficient to effectively combat bad faith on the part of insurance carriers. See, e.g., supra note 4.
According to Wolfe, " putting [the] claim into the hands of an injur[ed] plaintiff, already represented by counsel on the underlying claim, will . . . serve the [salutary] purposes of encouraging good faith settlement negotiations, and punishing insurance carrier abuse." Brief for Wolfe at 15.[6] Wolfe and his amici also dismiss Allstate's charge that a plaintiff taking an assignment engages in champerty, where it is the plaintiff's own personal injury action giving rise to an insured's bad-faith refusal to settle, and the plaintiff foregoes execution in exchange for the right to pursue the panoply of remedies available to redress such wrongful conduct.[7]
Finally, in discussing the legislative intent underlying Section 8371, amicus United Policyholders observes that, when the statute was enacted in 1990, the General Assembly was aware that, per the 1966 Gray decision, this Court had approved of the assignment of bad-faith claims for almost twenty-five years. See generally Birth Center, 567 Pa. at 403-04, 787 A.2d at 387 (applying a conventional principle of statutory construction in presuming that the legislative branch was familiar with the judicial decisions arising in the bad-faith context at the time Section 8371 was enacted). Thus, amicus asserts, if the Assembly had any concerns that statutory bad faith claims should not be assignable along with the common-law claims, it would have so indicated in the statute itself.
Upon consideration of the arguments presented, we agree with the proposition that the most appropriate way to approach the assignability issue is as a matter of statutory construction. Thus, the essential undertaking is to determine the intent of Page 1187
the Legislature through the language of its prescriptions, where possible. See 1 Pa.C.S. § 1921(a), (b). Where the words of a statute are not explicit, we employ principles of statutory construction, including, among other considerations: evaluation of the occasion and necessity for the statute under review, contemplation of the object to be attained, review of the previous legal landscape, and appreciation of the consequences of the particular interpretation. See id. § 1921(c)(1), (4)-(6). In terms of the former law, this Court continues to highlight the importance of considering the extant common law at the time of a statute's enactment. See, e.g., In re Rodriguez, 587 Pa. 408, 414-15, 900 A.2d 341, 344-45 (2003).
In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may . . . [a]ward punitive damages against the insurer.
The suggestion on Allstate's side, particularly from its amici, is that statutory causes of action, by their nature, are allocated to particular interests by the Legislature, and, thus, transfers should not be sanctioned by the courts in the absence of express legislative approval. A countervailing circumstance here, however, is that the opening passage of Section 8371 -- " [i]n an action arising under an insurance policy" -- interweaves the statutory remedial scheme into the array of contract-based actions which already were assignable under the extant common law as of Section 8371's enactment. See Gray, 422 Pa. at 511, 223 A.2d at 13. As such, to the degree that Section 8371 is regarded as " merely provid[ing] an additional remedy and authoriz[ing] the award of additional damages," Birth Center, 567 Pa. at 402, 787 A.2d at 386, this would seem to be a simple case. Per this line of reasoning, the Legislature's mere supplementation of remedies should not be deemed to evince an unstated desire to disrupt the pre-existing degree of latitude in the assignment of underlying actions or to require the splitting of causes of action (a practice which is strongly disfavored, see Pa.R.C.P. No. 1020(d)).
The complexity arises, however, on account of the character of the statutory supplemental remedies involved. In designing Section 8371, the Legislature apparently was satisfied to leave in place the contract overlay which this Court had imposed on insurance bad-faith litigation, see Gray, 422 Pa. at 508, 223 A.2d at 11,[8] but it chose to interpose additional conventions typically associated with tort law, see Ash, 593 Pa. at 536, 932 A.2d at 885. This aspect obviously puts into play the axioms upon which Allstate quite reasonably relies.
We recognize that the policy considerations (which are ably developed in the arguments of the litigants and their amici) Page 1188
are mixed in character. On balance, however, we find that consideration of the occasion and necessity for Section 8371, the object to be attained, the previous legal landscape, as well as the consequences of our interpretation, favor Wolfe's position. Centrally, we simply do not believe the General Assembly contemplated that the supplementation of the redress available for bad faith on the part of insurance carriers in relation to their insureds would result either in a curtailment of assignments of pre-existing causes of action in connection with settlements or the splitting of actions. Certainly, if we are incorrect in our assessment in this regard, the General Assembly may seek to implement curative measures pertaining to future cases, subject to constitutional limitations.[9]
Mr. Chief Justice Castille dissents.