Court Opinion

ID: 2787330
Source: CourtListenerOpinion
Date Created: 2015-03-19 00:06:39.945167+00
Date Added: 2024-06-11T11:28:42.290054
License: Public Domain

J-A31019-14

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

RICHARD AND MARIA DAVIS                        IN THE SUPERIOR COURT OF
                                                     PENNSYLVANIA
                         Appellee

                    v.

FIDELITY NATIONAL TITLE INSURANCE
COMPANY D/B/A FIDELITY NATIONAL
TITLE INSURANCE COMPANY OF NEW
YORK

                         Appellant                   No. 672 MDA 2014

              Appeal from the Judgment Entered May 28, 2014
            In the Court of Common Pleas of Lackawanna County
                     Civil Division at No(s): 10-00-8868

BEFORE: BOWES, J., OTT, J., and STABILE, J.

MEMORANDUM BY OTT, J.:                             FILED MARCH 18, 2015

      Fidelity National Title Insurance Company d/b/a Fidelity National Title

Insurance Company of New York (Fidelity) appeals from the judgment

entered on May 28, 2014, in the Court of Common Pleas of Lackawanna

County.    Plaintiffs, Richard and Maria Davis (collectively Davis), filed a

complaint against Fidelity alleging breach of contract and bad faith regarding

a dispute over ownership of a 1.86 acre parcel of land.          The parties

proceeded to a bench trial before the Honorable Carmen D. Minora who

found in favor of Davis on both counts and awarded an aggregate verdict of

$2,062,746.89.    Fidelity raises five issues in this timely appeal.   After a

thorough review of the submissions by the parties, relevant law, and the

certified record, we affirm.
J-A31019-14

      The factual history of this matter is complex and we rely upon the

Final Memorandum and Order on [Fidelity’s] Motion for Past-Trial Relief,

3/28/2014, Memorandum and Order, 8/15/2013 (including findings of fact),

and Stipulated Undisputed Facts, Joint Pre-Trial Order, 12/17/2012.

      For brevity’s sake, we simply recount that this matter concerned Davis’

claim against his Fidelity Title Insurance policy regarding disputed title to

1.86 acres of land Davis sought to develop as part of a housing project.

Davis purchased the property as part of a 15-acre acquisition in 2004. In

2007, as Davis attempted to obtain a zoning exception at a public hearing,

Louis Norella objected, claiming to be the rightful owner.     Davis filed his

claim against the policy in October 2007.           In June 2009, Fidelity

acknowledged a problem with the title and promised resolution of the

matter. Although Norella demanded $40,000.00 for the disputed property in

2010, Fidelity did not resolve the issue until it purchased the property from

Norella for $50,000.00 in August 2012.         Davis claimed the delay in

resolution of the matter caused him to delay his development project,

costing him lost profits.   Additionally, Davis argued the delay represented

unconscionable behavior and bad faith.

      Fidelity’s first three claims address the trial court’s determination of

lost profits. Fidelity argues the award was based upon speculation, lacked

evidentiary support, and lacked proof of causal connection to any Fidelity

action.   The trial court awarded compensatory damages of $224,760.00,

consisting of $89,760.00 for increased building costs and $135,000.00 in lost

                                     -2-
J-A31019-14

profits.   Davis’ claim of lost profits was based on the expert testimony of

Jean Black, a licensed real estate appraiser. She based her calculations on

the relative value of the proposed townhomes in December 2008 as

compared to January 2012. Based upon these dates, Black calculated lost

profits of $272,000.00.1

       Fidelity argues that (1) the housing development was nothing more

than “hypothetical”, (2) the trial judge called Black’s testimony futuristic,

lacking credibility and unpersuasive,2 (3) there was no historic basis of sales

upon which to determine profitability, and (4) the award was lacking in

evidentiary support and speculative. We disagree.

       First, the trial judge clearly rejected Fidelity’s position that the

development project was nothing more than hypothetical.3 The evidentiary

record demonstrated Davis had taken several steps to realize the project.

He had purchased plans, engaged engineers, conducted surveys and was

only stopped when he sought a zoning exception and the problem with the

____________________________________________

1
  Davis did not claim damages from the total inability to proceed with the
development project. Rather, Davis claimed the diminution in value (DIV)
between the ability to proceed with the project in a timely fashion and the
delayed project.
2
    See Memorandum and Order, 8/15/2013, at 20, ¶ 22.
3
  See Appellant’s Brief, Statement of Questions Involved, at 4, Questions 1-
2.

                                           -3-
J-A31019-14

title was discovered. Accordingly, the underlying basis for the award of lost

profits is supported by the record.

      As noted, the actual calculation of lost profits was based upon the

testimony of Jean Black. Black testified that she chose December 2008 as a

starting point for calculating lost profits because it was a little over one year

after Davis filed the claim against Fidelity (October 2007).      This estimate

gave Davis one year to build the townhomes. She further testified, “If we

needed a more specific time, the reason we don’t have it is because they

[Fidelity] didn’t resolve this claim.” See N.T. trial, 1/29/2013, at 230.

Despite accepting Davis’ underlying premise of the existence of damages

and Black’s method of calculation thereof, the trial court rejected Black’s

presumptive starting date.        Fidelity argues this rejection essentially

recognizes the claim for damages was speculative.

      While we agree that selection of a starting date to calculate damages

necessarily includes an estimation, that necessity is largely the result of

Fidelity’s actions. Our Supreme Court has stated:

      [T]here should be no doubt that recovery will not be precluded
      simply because there is some uncertainty as to the precise
      amount of damages incurred. It is well established that mere
      uncertainty as to the amount of damages will not bar recovery
      where it is clear that damages were the certain result of the
      defendant's conduct. ... The basis for this rule is that the
      breaching party should not be allowed to shift the loss to the
      injured party when damages, even if uncertain in amount, were
      certainly the responsibility of the party in breach.

                                      -4-
J-A31019-14

Spang v. United States Steel Corporation, 545 A.2d 861, 866 (Pa.

1988), quoting Pugh v. Holmes, 405 A.2d 897 (Pa. 1979).

        Additionally,

        While damages cannot be based on a mere guess or speculation,
        yet where the amount may be fairly estimated from the
        evidence, a recovery will be sustained even though such amount
        cannot be determined with entire accuracy.[4]

           “Williston on Contracts, Revised Edition, Vol. 5, lays down
           these principles in respect to measuring damages: Section
           1345, p. 3776. ... ‘though there must be evidence of
           substantial damage in order to justify recovery of more
           than a nominal sum, the exact amount need not be shown.
           Where substantial damage has been suffered, the
           impossibility of proving its precise limits is no reason for
           denying substantial damages altogether.’

                                       ***
           The essence of the legal principles above cited is that
           compensation for breach of contract cannot be justly
           refused because proof of the exact amount of loss is not
           produced, for there is judicial recognition of the difficulty
           or even impossibility of the production of such proof. What
           the law does require in cases of this character is that the
           evidence shall with a fair degree of probability establish a
           basis for the assessment of damages.”
477 Pa. at 41-42, 383 A.2d at 812 (Opinion in support of
        affirmance and modification; further citations omitted). See also
        comment (a) to Restatement (Second) of Contracts, § 352
        (“Doubts are generally resolved against the party in breach. A
        party who has, by his breach, forced the injured party to seek
        compensation in damages should not be allowed to profit from
        his breach where it is established that a significant loss has
        occurred.”) and Delahanty v. First Pennsylvania Bank, 318
Pa. Super. 90, 464 A.2d 1243 (1983) (“justice and public policy
____________________________________________

4
    Quoting Osterling v. Frick, 131 A. 205 (Pa. 1925).

                                           -5-
J-A31019-14

       require that the wrongdoer bear the risk of uncertainty which his
       own wrong has created and which prevents the precise
       computation of damages”).

Spang, 545 A.2d at 866-867.

       Accordingly, Pennsylvania law has long recognized that where the

existence of damages is certain and due to defendant’s actions, the

defendant will not be able to benefit from the lack of complete certainty in

assessing those damages.          Here, Black provided adequate methodology to

calculate lost profits and the trial court, acknowledging the uncertainty in

assigning a starting point, used its discretion to move the starting date

forward two years to provide extra time to accomplish the development. 5

The evidence of record, therefore, provides reasonable certainty for the

calculation of damages.

       Fidelity’s final argument regarding compensatory damages is an

allegation that there is no evidentiary causal connection between its actions

and the damages claimed. It is undisputed that Fidelity took approximately

five years to resolve this title claim.          It is also undisputed that Davis

intended to put the townhome portion of the development on the disputed

property.    It cannot be credibly maintained that Davis could have built on

the disputed portion of land prior to the resolution of the title dispute. Davis
____________________________________________

5
  We note that the trial court could have simply accepted Black’s starting
point as reasonable, and such would have been supported by the record. By
exercising his discretion, the trial judge relieved Fidelity of substantial
additional liability to Davis.

                                           -6-
J-A31019-14

faced the choice of going forward with his project without the townhomes,

which would have required new plans to accommodate shifting of roads and

the like, or waiting to resolve the dispute and moving forward as planned.

As will be more fully discussed in the bad faith discussion, Fidelity had two

options in resolving the problem: Fidelity could purchase the disputed

property for Davis or pay Davis the value of the land. Yet, Fidelity dithered

for years, unwilling to make a decision regarding how it was going to

proceed. Fidelity’s delay directly led to Davis’ inability to go forward with the

project.6      Accordingly, the trial court did not err in finding a causal

connection between Fidelity’s actions and Davis’ harm.

       Because the proposed development project was not illusory, Fidelity’s

delays caused Davis to delay the project, and expert testimony provided the

sound basis for the determination of damages, we find no error in the award

of lost profits. Even though precise calculation of damages was not possible

due to the forced estimation of the starting point for those damages, the

uncertainty was caused by Fidelity’s actions.      Accordingly, Fidelity cannot

claim refuge from damages based on the uncertainty it created.          The trial

court’s award of lost profits are based upon reasonable certainty and will not

be disturbed.
____________________________________________

6
  Fidelity’s position on lack of causality would essentially require Davis to
ignore Fidelity’s delays in the resolution of the claim and to proceed with
only a fraction of the original project, to Davis’ detriment, while exonerating
Fidelity from the financial consequences of its actions.

                                           -7-
J-A31019-14

     Next, Fidelity raises two issues regarding the award of punitive

damages.   First, it claims the award is excessive under the due process

clause, and second, attorney’s fees were incorrectly included in the

multiplied compensatory damages award. Neither issue has merit.

     We begin by noting that Fidelity is not challenging the determination it

acted in bad faith toward Davis. Rather, both issues challenge the amount

of punitive damages awarded pursuant to that finding of bad faith.

     In reviewing a challenge to the amount of an award of punitive

damages, we are cognizant that:

        Under Pennsylvania law the size of a punitive damages
        award must be reasonably related to the State's interest in
        punishing and deterring the particular behavior of the
        defendant and not the product of arbitrariness or
        unfettered discretion. In accordance with this limitation,
        [t]he standard under which punitive damages are
        measured in Pennsylvania requires analysis of the
        following factors: (1) the character of the act; (2) the
        nature and extent of the harm; and (3) the wealth of the
        defendant.

     Hollock, supra at 419 (internal quotation marks and citations
     omitted). We review such an award for an abuse of discretion.
     Id. at 420. In addition, in the face of a constitutional challenge,
     we conduct a de novo review “to determine whether it comports
     with the Due Process Clause of the Fourteenth Amendment to
     the United States Constitution.” Id.

        “Because punitive damages pose an acute danger of
        arbitrary deprivation of property, due process requires
        judicial review of the size of punitive damage awards.”
        [Pioneer Commercial Funding Corp. v. American
        Financial Mortg. Corp., 794 A.2d [269] at 292 [(Pa.
        Super. 2002), reversed on other grounds, 855 A.2d 818
        (Pa. 2004)].]

                                    -8-
J-A31019-14

           In State Farm v. Campbell, 538 U.S. 408, 123 S. Ct.
1513, 155 L. Ed. 2d 585 [2003], the United States Supreme
           Court reviewed a $145 million punitive damages award.
           Finding that the award was excessive and disproportionate
           to the wrong committed, the Court ruled it constituted an
           unconstitutional deprivation of the insurer's property. The
           Court noted that, although states possess discretion over
           the imposition of punitive damages, there are procedural
           and substantive constitutional limitations on these awards.
           Id. at 1519. The Court cautioned that the due process
           clause of the Fourteenth Amendment prohibits the
           imposition of grossly excessive or arbitrary punishments.
           Id. at 1520. While finding that punitive damages are
           aimed at deterrence and retribution, id. at 1519, the
           United States Supreme Court advised reviewing courts to
           consider     three   guideposts:   “(1)   the   degree   of
           reprehensibility of the defendant's misconduct; (2) the
           disparity between the actual or potential harm suffered by
           the plaintiff and the punitive damages award; and (3) the
           difference between the punitive damages awarded by the
           jury and the civil penalties authorized or imposed in
           comparable cases.” Id. at 1520, (citing BMW of North
           America, Inc. v. Gore, 517 U.S. 559, 560-61, 116 S. Ct.
1589, 134 L. Ed. 2d 809 (1996)).

           The Court in Campbell reiterated that the “most important
           indicium of the reasonableness of a punitive damages
           award is the degree of reprehensibility of the defendant's
           conduct.” Campbell, 123 S. Ct. at 1521.

Grossi v. Travelers Personal Insurance Company, 79 A.3d 1141, 1157

(Pa. Super. 2013) quoting Hollock v. Erie Ins. Exch., 842 A.2d 409 (Pa.

Super. 2004) (en banc).

      Here, Fidelity does not challenge the application of the Hollock

factors, but rather claims the award is excessive under the Campbell

factors.

                                      -9-
J-A31019-14

      Initially, we note the trial court awarded Davis $393,227.31 in

compensatory damages and $1,572,909.24 in punitive damages.                This

represents a 4:1 ratio of punitive to compensatory damages.        The United

States Supreme Court stated:

      We decline again to impose a bright-line ratio which a punitive
      damages award cannot exceed. Our jurisprudence and the
      principles it has now established demonstrate, however, that, in
      practice, few awards exceeding a single-digit ratio between
      punitive and compensatory damages, to a significant degree, will
      satisfy due process. In [Pacific Mut. Life Ins. Co. v.] Haslip,
      [499 U.S. 1, 111 S. Ct. 1032, 113 L. Ed. 2d 1 (1991)] in upholding
      a punitive damages award, we concluded that an award of more
      than four times the amount of compensatory damages might be
      close to the line of constitutional impropriety. 499 U.S., at 23-
      24. 111 S. Ct. 1032. We cited that 4–to–1 ratio again in Gore,
517 U.S., at 581, 116 S. Ct. 1589. The Court further referenced a
      long legislative history, dating back over 700 years and going
      forward to today, providing for sanctions of double, treble, or
      quadruple damages to deter and punish. Id., at 581, and n. 33,
      116 S. Ct. 1589. While these ratios are not binding, they are
      instructive. They demonstrate what should be obvious: Single-
      digit multipliers are more likely to comport with due process,
      while still achieving the State's goals of deterrence and
      retribution, than awards with ratios in range of 500 to 1, id., at
      582, 116 S. Ct. 1589, or, in this case, of 145 to 1.

State Farm Mutual Automobile Insurance Company v. Campbell, 538
U.S. 408, 425-26, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003). Accordingly, at

4:1, there is nothing facially improper with the ratio between punitive and

compensatory damages.

      The degree of reprehensibility is the most important of the factors in

assessing the appropriateness of punitive damages.      Here, it can fairly be

said, the trial court was appalled by Fidelity’s conduct. The trial court found

                                    - 10 -
J-A31019-14

Fidelity was aware of both the delay it caused Davis and likely consequences

thereof.   Final Memorandum and Order, 3/28/2014, at 11.              In December

2007, shortly after Davis filed the claim, Fidelity notified Davis it was

evaluating the claim and hoped to get back to him shortly.           Memorandum

and Order, 8/15/2013, Finding of Fact 14, at 4. 7          Approximately one year

later, Fidelity notified Davis that Norella may have a valid claim to the 1.86

acres. FF. 15, at 4. Six months later, 20 months after the claim had been

filed, Fidelity accepted Davis’ claim and again stated it would contact Davis

shortly regarding resolution of the claim.          FF. 17, at 4.   Fidelity waited

another three months to hire counsel. FF. 18, at 4. Fidelity investigated the

possibility of filing a quiet title action against Norella, but admitted there was

scant chance of success.         FF. 23, at 5.     Nonetheless, Fidelity threatened

Norella with filing the suit. CL. 22, at 14.

       By August 2010, counsel for Fidelity was warning Fidelity of the

possibility of bad faith. FF. 24, at 5. Davis repeatedly made inquiry about

the status of his claim. CL. 24, at 14. Fidelity breached its own contract by

failing to act diligently, failing to pay the loss within 30 days of fixing the

____________________________________________

7
  All citations to findings of facts (FF) or conclusions of law (CL) are taken
from the August 15, 2013 Memorandum and Order. Additionally, the trial
court did not issue omnibus findings of fact and conclusions of law, rather,
they were broken down into sub-categories, not always specifically labeled
as findings or conclusions. For ease we refer to all citations as either FF or
CL. Rather than clutter this memo with sub-category titles, we will cite to
the FF or CL number and the page on which it is found.

                                          - 11 -
J-A31019-14

amount and failing to act in good faith and fair dealing. FF. 8, at 17. It failed

to follow its own internal claims handling procedures. FF. 13, at 18. Fidelity

violated 31 Pa. Code 146.6 and 146.5(c) regarding prompt investigations of

claims and communications with clients, as well as Pennsylvania Statutes 40

P.S. 1171.5(a)(10)(ii),(v) regarding communications with clients and failure

to affirm or deny claims promptly. FF. 15, 16, 17, at 18-19. Fidelity made

no offer to either Norella or Davis until after Davis filed the instant bad faith

claim. FF. 36, at 7. Indeed, it is difficult to find an area in which Fidelity

acted in conformance with accepted statutory, regulatory or internal

standards.

       As stated, reprehensibility of actions is the “most important indicium”,

Campbell, supra, in determining reasonableness of the punitive damage

award. Degree of reprehensibility is determined by examination of several

factors. See Campbell, supra; Gore, supra.8 Fidelity is correct that some

of the factors to consider in determining reprehensibility are inapplicable

here. The harm was economically rather than physically injurious and there

is no indication that such behavior is part of a greater pattern of indifference

to its policyholders. Although the parties agreed Fidelity did not intentionally

____________________________________________

8
   Factors include: physical or economic harm; indifference or reckless
disregard to health or safety; affirmative acts; financially vulnerable victim;
repeated actions.      Case law provides no instructions regarding the
application of these factors. Therefore, we conclude the weight given to
each factor is case specific and based upon the discretion of the fact-finder.

                                          - 12 -
J-A31019-14

harm Davis, the record clearly demonstrates a reckless indifference to the

rights of Davis, and a five-year pattern of inaction, characterized by

repeatedly ignoring the warnings of counsel and requests by its insured. In

light of the overwhelming evidence against Fidelity, we find the trial court’s

determination of a high degree of reprehensible behavior to be supported by

the record and therefore represents no abuse of discretion.

       We believe the factual scenario of the instant matter is similar to that

found in Grossi v. Travelers, supra, wherein the insurer’s bad faith was

limited to the claim at issue, as opposed to being part of a larger scale

pattern of bad faith behavior toward multiple insureds.         However, the bad

faith consisted of repeated failings in addressing the insured’s underinsured

motorist claim. The reprehensibility of Travelers’ actions outweighed other

considerations and supported a $1,252,325.00 punitive damage award. This

award represented a punitive damage to compensatory damage ratio of

between 4:1 and 5:1.

       Finally, Fidelity argues the trial court improperly included attorney’s

fees in the compensatory damage award that was quadrupled to arrive at

the punitive damages amount.            Fidelity has provided no authority for this

position.9 Additionally, we note that attorney’s fees are specifically included

____________________________________________

9
  Fidelity cited Hollock v. Erie Insurance Exchange, 842 A.2d 409, 421
(Pa. Super. 2004)(en banc). However, all judges in the en banc panel,
(Footnote Continued Next Page)

                                          - 13 -
J-A31019-14

as compensatory damages in the bad faith statute.                 See 42 Pa.C.S. §

8371(3).     Multiple cases have included attorney’s fees in compensatory

damages.     See Hollock, supra; Birth Center v. St. Paul Companies,

Inc., 787 A.2d 376 (Pa. 2001); Willow Inn, Inc. v. Public Service Mut.

Ins. Co., 399 F.3d 224 (CA3 2005).                  Accordingly, we reject Fidelity’s

statement that attorney’s fees must be removed from the punitive damages

calculation. Fidelity has provided no other indication of how the trial court

abused its discretion in including attorney’s fees as compensatory damages,

and our independent review finds no abuse of discretion.

      Because the trial court’s decision is supported by the certified record

and free from abuse of discretion or error of law, we affirm.

      Judgment affirmed.10

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 3/18/2015

                       _______________________
(Footnote Continued)

including the two dissenting judges, agreed that attorney’s fees were
appropriately included in the compensatory award.
10
   In the event of future proceedings, the parties are directed to attach
copies of Final Memorandum and Order on [Fidelity’s] Motion for Post-Trial
Relief, 3/28/2014, Memorandum and Order, 8/15/2013 (including findings of
fact), and Stipulated Undisputed Facts, Joint Pre-Trial Order, 12/17/2012.

                                           - 14 -
                                                                             Circulated 02/27/2015 02:49 PM
                                        586a

             .,-.                                                        •     •

1
    RICHARD DAVIS and                           ;INTHE COURT OF COMMON PLEAS
\   MARIA DAVIS,                                   O' LACKAWANNA COUNTY

                 Platntiff!
                                                       avn.    ACTION - LAW
,
1   FIDELITY NATIONAL TITLE                            JURY TRIAL DEMANDED
I   INSURANCE COMPANY,
t

                 Defendant

                                                                                    ,, .!       ~

                                       lOIHT Pu:t1UAL ORDER

                                                                                   -,
       1. Lacka,Co, R,C.p' 21200 Conference ofCounse\:
                                                                                     -
                                                                                   '.V
              a. Date of Conference: November 30. 2012 Mediation before Thomas
                                      Helbig. Esq. Mediation discussions contintTh'
              b. Names of counsel participating:

                  Attorney for Plaintiff
                  Carl J. Guagliardo. PlainLiffs. Richard and Maria Davis also attended

                  Anomey for DefendantlAdditiona1 Defendant
                   Scott M. Rothman. Defendant teprtSetltative Cyntia Baines
                      a lso attended

       2.   LackA. Co, RC,P. 238 Conti_pn of Settlement Offer and Response
               a. Date and amount ofsett1tmt:m offer(s):
                    N/A ~ Breach ofContTact and Bad Faith Action. Rule 238 does
                        Dotappl)'

               b. Date and substance ofresponse to settlement offer(s)

                  ,
                                                                                            ,
                                                                                         Circulated 02/27/2015 02:49 PM
                                              587a

, ,
      •   •                                                     .     .---
              3. Comprchcnsi'Vc Written StioulationofAll UncOntested Facts:
                 (To be read to th.e jury at the outset of trial).
                                                                   SEE ATTACHED

              4. Wib!esse3 to be C!illed gIrjpl (NOTE: Only those wilDesses identified in the
                 pre-trial order will be Permitted to testify at trial):

                        For th~ Plajnttff(.d: I ! Richard Dayis; 2. Maria Davis' 3 Ben Badek;
                  4. Ray Abrams: 5. Michael Coughlin' 6 David Iom.jnc' 7 Thmie1 p/:ot:lar,
                  8. Keith Weller; 9. William Rebar; 10, Jean Black: II. Owen Girard; 12. Defendant
                  Corporate Designee' 13 E P Mancinelli

                  (Attach additional sheets ifnecess81)'.)

                          For We Defendant(s);

                  (Attach additionaJ sheets if necessary.)

               S. Sched\lle QU...xbibits: (NOTE: Only those exhibits which are identified in the
                  pre-tritl order may be QSed or admitted into evidence at trial):

                          For the PlaintiJJ(s) (Indicate wherh~r the parties' stipulate to its
                  admLufblllty, and fjnot, ltare the grouruhfOT objection):

                  #2:
                  iI3:
                  #4:
                  #5:
                  #6:
                  #1:
                  #8:
                   #9:
                   #10:

                                                                                                      6
                                                                              Circulated 02/27/2015 02:49 PM
                                      58Ba

•                                 •    •                                                             •

      #12: _
      #11:    -==================
             For the Defendtmt(J) (Indic.att whether the parties ' stipulate to iU
      admissibility, and ifnot slate/he grounds for objecJion):
      #1 :
      #2:
      #3:
      #4:
      #5:
      #0:
      #7:
      #8:
      #9:
      #11 :
      #12:

    6. Statement of Facts aod Legal~:
            a. Plaintiff's version of the facts and statement onega! issues
                  On October 15, 2007 Plaintiffs filed a title insurance claim with

                   disbonest. Plaintiffs tiled the subject bad faithlbreach ofoontracr
                   .mil M Dec.emher J 4 20) 0 Defoendant , ,'tjrnttei¥ ~olvcd abc lj~e
                  iilsuraoce claim by securing title to the property Ul the name of the
                  P1aintiffs on A\lKUSt 14.2012, nearly S yean aftertbe clajm was opened.
                  LegaJ issues have been briefed via Motion in Limine and Plaintiff will file trial b 'ef
              b. Defendant's version offacts IIJld statement ortega] issues         (continu,
                                                                                          see atta hed

                                                                                             7
                                                                          Circulated 02/27/2015 02:49 PM
                                589a

           .~.                                                        •       •

7. Trial Deposition
   Name of Witness                 Date of       Length of      Parry offering
                                   DeposiJion    Deposition     DePosition Testimony

8. EstimatedNumber QfTrlal Days (NOTE: The Court will strictly enforce the
   partics' estimated 1riallimcr. nu.e Day(s).
9,   Any   Additional Issues Which Sbould be Considered to Facilitate the Settlement
     or Trial otthis Malter:

                                                        ~.t;;bV'.~
                                                         fU>T1~M"'r"rJ
                                                         Attorney for 1'1 .   !:iife1 /)t,

                                                          Attom.ey for Waldant(s}'
                                                                          pu.NTlI!U

                                                                                             •
                                                                                    Circulated 02/27/2015 02:49 PM
                                            590a

•   •                                                         •

               AND NOW. tbis _          day of _ _ _~' ----J &he ,Parties' jointly

        submitted Pre-Trial Order is hereby approved and shall govern the Trial of this case.

                                                     BY THE COURT:

                                                     ======-==;:-,-J.
                                                     JUDGE CARMEN D. MINORA

                                                                                                ,
                                                                                            Circulated 02/27/2015 02:49 PM
                                                        591a

'.   '
                                                    ,     ,                                                    •   •

         Carl J. Guagliardo, Esq.
         SELINGO GUAGLIARDO, LLC.
         345 Market Street
         Kingston, PA 18704
         (570) 287-2400
         At!Omey I.D. No. 68876
         Counsel for Plaintiff
                                                               IN THE COURT OF COMMON
         RICHARD DAVIS and                                     PLEAS OF LACKAWANNA COUNTY
         MARIA DAVIS,
                         Plaintiffs.
                                                               CIVIL ACTION - LAW
         VS.                                                   JURY TRIAL DEMANDED

         FIDELITY NATIONAL TITLE
         INSURANCE COMPANY, d/b/a
         FIDELITY NATIONAL TITLE
         INSURANCE COMPANY OF
          NEW YORK
                         Defendant.                            No. 10 - CV - 8868

                                      STIPULATED UNDISPUTED FACTS

                  1.    Defendant, through its authorized agent, Daniel Penetar, Esq., issued a title

         insurance policy to Plaintiffs on October 29, 2004. (ComplainlfAnswer    ~4.   5, andpolicy).

                  2.     The policy insured an approximate 15 acre parcel of land in Carbondale Twp.,

          Lackawanna County, Pennsylvania (Poiicy).

                  3.     Plaintiffs plarm~ to develop the 15 acre parcel of land for residential housing, in

          the nature of both one-half acre parcels for individual homes and a "garden section" containing

          three, four-unit townhouses which would be offered for sale to the public. (R. Davis dep. p. J /-

          32).

                  4.     Daniel L. Penetar. Jr., Esquire, counter-signed the policy as the authorized agent

          of Defendant and also served as counsel for Plaintiffs with respect to the subject purchase of

          land.
                                                                                       Circulated 02/27/2015 02:49 PM
                                                 592a

                              ,-,.   .                                                •      •

          5.         The "garden section" containing the townhouses was to be developed on a 1.86

acre portion of the property. (R. Davis dep. p. 13).

          6.         Prior to 2007. Mr. Davis purchased construction plans for the townhouses and

hired an engineering fum to draft plans and drawings for the development (R. Davis dep. p. 38·

40).

          7.         In 2007, Plaintiff, Rick Davis, attended a Carbondale Twp. Zoning board meeting

to request a zoning special exception that would accommodate the townhouse development. (R.

Davis dep. p. 13).

          8.         At the zoning bearing, a neighboring property owner, Louis Norella. objected on

the basis that he was the owner of record of the 1.86 acre parcel. (Jd).

           9.        On October 15. 2007 Mr. Davis filed a title insurance claim with Defendant as

 related to a possible defect in his title to the 1.86 acre parcel of land. (Davis letter dated Ocl. 15,

 2007).

           10.        The handbook for adjustment of claims provided by Defendant to Plaintiffduring

.discovery in this matter applied to adjustment of the Davis claim..

           11.        On June 18, 2009) Defendant completed its coverage investigation of the Davis

 claim. (De! leners dmed Oct. 24, 2007 and June 18, 2009).

               12.    On September 15, 2009, Defendant hired Michael Cougblin, Esquire to evaluate

 the merits of filing a Quiet Title Action. (Discovery docs. 297-298; 220-22 I; 300; and 28IJ.281).

               13.    On January 20, 2010, Defendant obtained a legal research memo related to its

 options to resolve the claim as well as the merits ora quiet title action.   (Dj.~covery   delc. 163·164).

               14.    Defendant obtained DIY appraisals an March 20, 2010. (Djs Court would serve as the fact·finder for both the bad fai th and·contrtlct counts.
                                                                         Circulated 02/27/2015 02:49 PM
                                1777a

The factual findings SCI f0l1h below ha ....e been established by clear and convincing

evidence and are based upon the testimony and evidence, which thi s court has found to

be competent, credible, relevant and admissible in this case.

                          II,     GENERAL FINDrNGS OF FACr

( 1)   'flle Defendant , through its authorized agent, Daniel Penclnr, Esq .• issued 8 title

       insurance policy 10 Plaintiffs on October 29, 200'1. Slip. Faell.

(2)    'n)C   policy insnred aT) Ilpproximate 15 acre parcel ofland in Carbondale Twp.,

       Lackawanna County, PetUlsylvania. Slip. Faer 2.

(3)    Daniel L. Peoelar, Jr., Esquire, counter-signed the policy as tne authorized agent

       of Defendant Il.nd also served as counsel for Plaintiffs with respect to the subject

       purchase of loneL Slip. Facl4.

(4)    Plaintiffs planned to develop the 15 acre parccl of lalld for residential housing,

       in the nature of both aile-half acre parcels for individual homes and 0 "garden

       section" containing lhree, four-unit townhouses all of which would be offered

       for sale to thc public. Slip. Fact 3.

(,5)   l11C "garden section" containing the townhouses \va" to be developed on the

       disputed 1.86 acre ponion of the property. Stip. Fact 5.

(6)    Prior to 2007, Mr. Davis pu rchased non-sea1cd construction plans for Ihe

       townhouses and hired fin engineering linn to draft plans and drawings for the

       subdivision of the dcvelopmcnt. Slip. Facl 6; Plif. Exh. 25 - "HICKORY

       PLANS."

                                               2
                                                                           Circulated 02/27/2015 02:49 PM
                                1778a

(7)     The size of each of the twelve townhOllses v."25 Johns.

                                              3
                                                                        Circulated 02/27/2015 02:49 PM
                                1779a

(14)   By Ictter dated December J 3, 2007, Defendanlllotified Mr. Davis that it was in

       the process of evaluating his claim and hoped to gel back to him "shotti}'." Plif.

       F.xh. 2, eWe. No. 334.

(IS)   On December 10, 2008 , Atoorney Penelar again wrote to Defendant !lnd

       explained that he and the surveyor the Defendant hired concluded thatlhc

       disputed area is, and always has been, included in the Norella tille. The same

       leucr explained that the Uavis' source of title traced back to a 1963 Quiet TWe

       Action, which was defective due to lack of proper service upon the rightful hmd

       owner. PIJf Exh 2, doc. No. 253-254.

(16)   On January 10,2009, Defendant claims representative, Joseph Rejcnt, noted that

       the surveyor concluded that the insured did not own all the land he thought he

       owned and that one of the parcels purchased by the insurc=d "came out of a Quiet

       Title Action \\:hich now appears to be faulty ." PIt! Exh. 2. doc. No OJ 1.

(17)   On June 18.2009, Defendant completed its coverage investigation of the Davis

       claim. Defendant notified Plaintiffthat there were no relevant policy exceptions

       or exclusions; that it was accepting the Davis claim; and that they would contact

       Mr. Davis shOltly about resolution of the claim. N. T. Vol. J, p. 45 and Pltj £Xh.

       2. doc. No. 265. Temporally. this is tlpprox imalcly one yen and eight months

       aftcr Plaintiff originally filed his claim on October 15.2007.

(18)   On Scpt'cmbcr 15,2009, Defendant hired Michael Coughlin, Esquire to evaluate

       the merits of filing a Quiet Title Action. Discovery docs. 297-298; 220-22 i:

       300: and 280-2Si . This was three months after accepling the. claim.

                                             4
                                                                           Circulated 02/27/2015 02:49 PM
                               1780a

(19)    On Janultry 20, 2010, Defendant obtained a legal research memo related to its

        options to resolve the claim fl5 well as the merits ora quiet title action. Slip. Faci

        13.

(20)    From March 20 10 through October 2010, Mr. Davis repeatedly inquired into the

        status of his claim, however he did not receive a response from Defe ndant. N.T

        Vol. T, p. 51-56. This time period ending 011 October 7, 2010 is approximately

        three years after Plaintiff's October 15, 2007 cluim was filed.

(21 )   Defendant obtained dimunition in vahle (mv) appntisals on March 20, 2010.

        Defendant DlV appraisals.

(22)    In July 2010, the Defendant attempted to "negotiate a sculement" with the

        Neighbor for the purchase of the 1.86 acres. Slip. Facl 15.

(23)    Regarding the option to file a quicllitle action to resolve the claim. Defendant

        knew (and documented 011 April 28, 2010) that such an action would likely be

        defeated if defended because there existed a notieelscrviC'.e defect in an earlier

        1963 quiet title action for the subject property. Slip. Faci 16.

(24)    On August 27, 2010 Defendant's retained counsel, Michael Coughlin, Esquire,

        wrote the following to Defendant Claims Attorney Benjamin Bartek:

                 "Ben, any word on this? 11\0 insured called me onceagaill to find out
                 how we intend to proceed. This claim has been hanging IlTOund for an
                 extremelv long time and T pm concerned that the insured may opt to sue
                 us for bad faith j[we don ' t ta.ke some action relatively soon." (emphasis
                 added)

        Stip. 17'oci 18.

(25)    Mr. Davis hired David J. Tomaine, Esquire. and instructed Mr. Tomaine to give

        Defendant a deadline for resolution of the claim. NT Vol. 1., p. 57.

                                               s
                                                                             Circulated 02/27/2015 02:49 PM
                               1781a

(26)    On November 22, 2010, Mr. Tomaine culled Defendant's retained counsel. Mr.

        Coughlin, to discuss statUS of me Davis claim. Slip. Fac122.

(27)    Mr. Coughlin had contact with Defendanl's "Operations" attorney. Keitb

        Weller, on December 9, 2010. Sfip. Fact 23.

(28)    The presenllawsuil \\f8.S commenced on December 14, 20 10. Srip. Fact 20.

(29)    On December 13,2010, the Defendant placed the ftrst payment authorit y for

        settlement or resolution of this claim. Slip. Fact 19. Three years and two months

        after the claim was filed, while tbre..'lt of suit wns pending.

(30)    Mr. Weller contacted Raymond Abra ms of Defendant's Omaha, Nebraska

        claims center on or about December 13, 20 I O. Slip.      raet 24.
(3 1)   Mr. Abrams testified that the litigation that was attempting to be avoided was

        the Quiet Title Action against Mr. Norella. SOp. Fact 25.

(32)    On December 13, 2010 Mr. Abrams g raoted $25,000 settlement authority on this

        claim wHhout a case assessment repor t (CAR) having been done. Slip. Fact 26.

(33)    Generally. though not always, a CAR is required to be done before settlement

        authority may be placed    011   a file. Slip. Fact 27.

(34)    Prior to Decembe r 13, 201 0, no amount of settlement authority had ever been

        placed on the Davis claim. Stip Fact 28.

(35)    Defendant's c laims manual provides the following:

                "Insurer's Response to Tender of Claim; Investigation ... "

                " Response by the insurer to the claimant should be!.i!:nill. 'n le claims
                ndmillislralor should fQllow the requirements ofthe applicable statutes
                a od re gulations regarding acknowledgment of receipt oian insured's
                claim: completion of investigation: and nOlification of the title
                company's decision regarding coverage. Some state re~ulatory schemes

                                                  6
                                                                          Circulated 02/27/2015 02:49 PM
                               1782a

                 provide sped fie limclines. while others simply require that the insurer's
                 response occur in a reasonable time." (emphasis added)

       Slip. Fact 29.

(36)   Defendant's first written settlement o1Ter to Mr. Norel1a (the property owner of

       record)   WBS   made on December 14, 2010. Dec. 11,2010 leller/rom M Coughlin

       to L. Norella. lbis was the same day the lawsuit was filed.

(37)   On December 14. 2010, PlaintiIT'commenced the subject breach of contract and

       bad fai th lawsUit. N.1: Vol. It p. 59 and Complaint

(38)   On January 6, 201 1, Defendant tendered payment 10 Plaintiffs in an amouJlt

       equal to the $20,000 DIV; however, Plaintiffs did not accept the payment as this

       suit had alre.'ldy been filed. Pltf Exh 5; D.T. 59: J2 to 59:21.

(39)   Plaintiffs' claim was resolved willl Defendant agreeing to pay the owner of the

       disputed property S50,OOO.OO (Fifty Thousand Dollars) and transfer title ill

       Plaintiffs' names in August 2012. N.T. Vol.}, p. 64-65. Defendant also hired

       counsel to effectuate a subdivision approval of the Property and 1\ surveyor 10

       prepare the necessary plans. R. T. 153:21 10 154:1,' D.T. 64:181065:3;

       Tej'timony QfGeorge Broseman ("G. T.        'J 102:7 10 102:18: 106:610 106:14.
       This resolution occurred fifty eight (5 8) months afler the original claim was filed

       by Plaintiff; nearly five years!

(40)   On November 7, 2012, the Carbondale Twp. Zoni ng DOflrd granted Plaintiffs'

       I'equest for special exception, in accordance with Carbondale 'fwp. zoning law,

       to construct three, rour-unit townhouses on the parcel of property thai is the

       basis oflh,is lawsuit. Sfip. Fact 35.

                                               7
                                                                            Circulated 02/27/2015 02:49 PM
                              1783a

(41)   N{) appeal of the November 7, 20 12 special cl(ccption has been filed . Slip. Fact

       ]6.

(42)   Defendant's title insurance policy provides that claims are resolved either by

       payi(l&, or otherwise settling with, other parties for or in the name of an insured

       clHimam, o r by paying the loss la, or othe!Wise seHling with, the insured

       claimant. Policy, Plrj Exh. },   16.
(43)   Pursuant 10 the Policy. Defendant therefore had the option      {O   (a) attempt to cure

       the ti tle defect by filing a quiet title action, or negotiate with lhe Norellas to

       convey the 1.86 acre disputed parcel 10 the Plaintiffs, or (b) pay the loss as

       defined by the po licy, which is the lesser oflhc policy limits or the diminution in

       value (DIV) oflhe property as a result oCthe. title derect. Policy, Plif. Exh / , ~

       6.

(44)   Under the Policy, "The liability of the Company shall not exceed the least of: (i)

       The Amount ofln:mrllllCe stated in Schedule A; or, (ii) the difference between

       the value of the insured estate or interest as insured (tnd the value of the insured

       estate or interest subject to the defect, lien or encumbrance insured against by

       [tho Policy];" Policy, PIt[ Exh I,     ~   7(a)

                    HI.     GENERAL CONCLUSIONS OF LAW

                                      CA) LIABILITY

(1)    In the pre sent case, there were several known legal duties and fiduciary

       obligations recklessly disregarded by Fidelity, namely extraordinary delay in

       adjusting and resolving the clai m. repeated violations or the Unfair fnsurance

                                                  8
                                                                       Circulated 02/27/2015 02:49 PM
                             1784a

      Practices Act !lnd Unfair Claims Practices Act, failure to adequately train (lnd

      supervise its employees, failure to follow its own claims handling guidelines,

      failure to make a ti mely offer of settlement, and elevating its own interest above

      the interest of ils' insured, among other dUlies .

(2)   As defined by Black's Law Diclionary, bad failh occurs through an insurance

      CAdamski, 738 A.2d at 1036.

(4)   It is this Court's conclusion of law that the Defendant, insurer, acted in bad faith

      and its chronic dilatory conduct embodied feckless disregard toward its insured

      from lhe time the claim was fil ed on Ocmber 15,2007 until the time Ihat the

      claim was finally resolved in August of2012.

(5)   It is the further conclusion ofl1lw of this Court that punitive damaf;c." arc

      appropriate given the reckless disregard of the rights or the Plaintiffs, its own

      fi rst party insured, by Defendant FidelilY.

(6)   Section 8371 of the Jud icia l Code governs bad faith actions against an insurer by

      its insured, and provides:

                                             9
                                                                       Circulated 02/27/2015 02:49 PM
                             1785a

              "In an action arising under an insurance policy, if the 'court tin~s that the
              insurer has acted in bad faith toward the insured, the COUI1 may (!Ike all
              of the followi nQ, aclions;

                              "( I) Award interest on the amount of the claim from the
                      dale the claim was made by the insured ill an amount equel to the
                      prime rate of interest plus 3 percent."

                              "(2) Award punitive damages a~ait\S\ the insurer."

                              "(3) Assess court costs and attorneys' fees against tlle
                      insurer."

              42 PII.C.S. §83 7 1. (flmphaSIS added)

en     The bad faith statute "authorizes courts, which find tha~ an insurer has acted in

       bad faith toward its insured, to award punitive damages, attorneys' fees, interest

       ~   costs." Birth Center v. St. Palll Companies inc.• 567 Pa. 386, 403 ,787 A.2d

       376,386 (200 1). (emphasis added)

(8)    Section 8371 does nol defme what conduct constitutes bad faith and the

       appellate courts havc cautioned that "the breach of the obl igation to act in good

       faith CRIUlOI be pn:cisely defi ned in all circumstances." Zimmerman v.

       Harleysville MUfua! /n.fllrance Co., 860 A.2d 167 (Pa. Super. 2004).

(9)    Rather, bad faith claims "are fa ct-~l}ecific and depend on the conduct of the

       insurer vis-a-vis its insured." Williams v. Nationwide Mulua/lnsurance Co. , 750

       A.2d 881, 887 (pa. Super. 2000).

(10)   Decisional prccedent has described bad faith conduct by an insurer liS including

       "any frivolous or unfounded refusal to pay proceeds of a policy." Bonenberger

       v. Nationwide Mutua/Insurance Co., 79 1 A.2d 378, 380 (pa. Super. 2002);

       AdanlSki v. Allstate Insurance Co., 738 A.2d 1033, 1036 (Pa. Super. J 999),

       appeaJ denied, 563 Pa. 655, 759 A..2d 381 (2000); Wiiliam.t, supra.

                                            10
                                                                          Circulated 02/27/2015 02:49 PM
                              1786a

(11)   Since the insurer's conduct in failing to pay a c laim must import a di shonest

       purpose in order to be deemed bad faith, the insured is required to prove thai the

       insurer breached its duty of good fai th and fait' dealing through some motive of

       self-interest or ill will. Brown v. Progressive [/lSuranee Co., 2004 WL 2002477,

       ·7. 34 (Pa. Super. 2004); O'Donnell v. Allstate insurance Co., 734 A.2d 901,

       905 (P,. Super. 1999).

(12)   Although lllere negligence or bad jud gment is insufficient to establish bad ftlith,

       it is nol necessary fo r the insurer's refu~al to be fraudu lcm. Bonenberger, .'>Iq)ra;

       Adamski, supra. For that reason, "bad faith encompasses a wide variety of

       objcctionableconducl." Browll, supra at ·6,13 1.

(13)   By way of illustratioll, actions by the insurer which are violatioDs of lhe Unfair

       Tnsurance Practices Act are considered to be bad fai t.h conduct under Sect ion

       837 1. O'Donnell, 734 A.2d at 906. Therefore, an insurer may be liable for bad

       faith if it iails to conduct a good fai th investigation and neglects to communicate

       promptly with the insured. Drown, supra at "'6, ~3 l (quoting Romano v,

       Nationwide Mutual Fire Insurance Co., 435 PH, Supcr. 545. 553·54, 646 A2d

       1228. 1232 (1994».

(14)   As the Superior Court of PelUlsylvania has remarked:

               "lndividuals expect that their insurers will treat them fairly and properly
               evaluate any claim they may make. A claim must be cvaluated on ils
               merits alonc, b)' examining the particular situat ion and the injury for
               which recovery is sought. An insurance company may not look to its
               own economic considerations, seek to limit its potent ial liabil ity. and
               operate in a fashion designed to 'send a message.' Rather, it bas a duty to
               compensate its insureds for the fa ir value of their injuries. rIldividuals
               make payments 10 insurance carriers 10 be insured in Ihe event coverage
               is needed, It is the responsibility of insurers to treat their insureds fairly
               Elnd provide just compensation for covered claims based on (he actual

                                             11
                                                                          Circulated 02/27/2015 02:49 PM
                              1787a

                domages suffered. InS\lrers do a terrible disservice 10 their insureds when
               they fail to evaluate each individual case in tenns of the situation
               presented and the individuall"lffected."

        Honenberger, 791 A.2d at 382.

(\ 5)   When considering the merits ofa bad faith claim, "one must look at the behavior

        of the insurer toward the insured and measure its reasonableness ... to sec

        whether it is perhaps more than lUere negligence or bad j udgment. ... " Ash 1.1,

        Conrinentallnsurance Co. , 593 Pa. 523,932 A.2d 877 (2007).

(16)    With respect to Lhe present case, the evidence clearly shows Ihat Fidelity did nol

        have a reasonable basis fOT laking almost five (5) years to resolve Plaintiffs'

        claim. At virtually every stage of Defendant's claims review and adjustment

        there is a dj~1urbing pattern of extraordinary chron ic delay: Sec, Findings vf

        Fact, , 11·38.

(17)    Derelldant recognizes and readily acknowledges thal it shou ld have resolved

        Plaintiffs' title insurance claim more quickly. However, Defendant argues that

        its delay does not give rise 10 a cl aim for bad faith liability under 42 Po. C.S.

        §8371 because Plaintiffs presented no evidence of any ill will, improper motive,

        or dishonest purpose as tbe cause of fh e delay. Defendant instead assen s that its

        actions merely amount to si mple neglect of the claim and bad judgment, which

        they claim is not. enough to trigger liability under §8371.

(18)    An insurer can, in good faith, delay payment based upon infonnation that ir does

        not yet have. It is only if the delay was due to an evil motive or a reckless

        ind ifference to the rights oftbe insured that had fa ith can be present. Younis

                                              12
                                                                          Circulated 02/27/2015 02:49 PM
                              1788a

       Bros. & Co., Inc. v. eigna Worldwide Ins. Co., 882 F Supp. 1468, 1470 (E.n.

       Pu. 1994), While not bound by this case we fi nd its reasoning most persuasive.

(19)   However, the presenllitle insurance case is factua lly unique because Fidelity did

       not deny coverage, Instead, Fidelity took 20 months to complete its investigation

       and notify Plaintiffs that the claim . . . 'Us covered under their policy. See, Findings

       of Pacl, 111 . 13. Defendant then dele>'ed payment for almost three years, only

       fi nally tendering an inadequate offer once suil was filed Sec, Findings of FaCi, 1

       18,30.

(20)   This Court concludes that such all extreme delay can ccn ainl)' consti tute had

       faith under 421)a.C.S. §S371, and it characteri7.es the inaction oflhe Defendant

       as being outrageous and recklessly indifferent 10 the rights of its insured. our

       Plaintiff. Younis Brothers & Company, supra.

(21)   Fidelity knew of und was recklessly indiffercul due to jls lack ofa reasonable

       basis for failing to resolve the Davis' claim during the nearly fi ve (5) year period

       in question. Such reckless indifference can clearly be seen though Fidelity's

       repeated failure 10 respond to Davis' constant inquiries regarding the Status of

       his claim. This reckless indiff'Crencc is also i1hlstraled in the correspondence

       between (he Defendanl claims attorney, Shawn Grimsley, Esq. , and the Claims

       manager, Malachay Sulli\'an, Oil September 2, 2009, in which Mr. Grimsley

       conveyed his concerns regarding the extreme and UIUlecessary delay involved

       with the handli ng of the Davis' clai m liS well as the possibil ity that the insured

       "may opt   tosue us for bad fa ith if we don' t take some action relatively soon."
       PIt! Exh 2, doc. No. 297~298; Plif. Exh. 2, doc. No. 053. n~is communication

                                              1)
                                                                        Circulated 02/27/2015 02:49 PM
                              1789a

       marks the earliest definitive date, almost two (2) years post claim filing, when

       Defendant knew that it had no reasonable basis 10 continue to deny, by delay,

       the resolution of Plaintiffs' claim. Given this knowledge and their delay and lack

       of action one can only conclude Defendant' s conduct is outrageous.

(22)   Fidelity also displayed improper purpose in its delay such as ill will, improper

       motive, dishonesty or self~intc resl through its dealings with adjoining property

       owner Mr. Norella by knowingly threatening a mcritless quiet title suit. and

       investigating his finances to determine whether he could afford to defend the

       quiet title action instead of settling the claim and making the insured whole. Plif.

       Exh. 14, Bartekdep. P. 43.1n JOwJ8.

(23)   A lengthy delay in payment owed by an insurer does not automatically

       constitute bad faith, since the delay CQuld be due to negligence. £1 80r COIp. v.

       Fireman 's Fund Ins. Co., 787 F. Supp. 2d 34 1, J49 (£.0. Pa. 201 J). In Ef }Jor

       Corp. v. Fireman's Fund Ins. Co., delay in the processing oflhe daim, because

       the elaim had "fallen through the cracks;' did not constitute bad faith beeause

       the delay was not knowing or reckless. ollly negligent. Therefore, a seven-month

       dclay in the processing oflhe insured's claim after receipt of the expert report

       did not constitute bad fai th. Jd.

(24)   The length of Fidelity'S deJay in the present case greatly exceeds the seven-

       month deJay ill El Bor Corp. v. Fir/!.man 's Fund Ins. Co. Further, fidelity was

       repeatedly reminded by Davi s' numerous inquiries thltt his claim continued to

       remain outslanding and unreSQlved.

                                             14
                                                                             Circulated 02/27/2015 02:49 PM
                                  1790a

(25)   There is sufficient credible evidence showing that the insurer's outrngeous

       scheme and reckless indifference in turning a blind eye to Davis' claim hoping

       that it would somehow resolve itsclf backflred. Fidelity's self-serving, self-

       created position in reraining policy proceeds rightfully belonging to their

       insured,   OUT   Plaintiff. presents a gross and reckless indifference to the rights of

       the insured with whom they had a contractual relationship und arguably, a

       fi duciary relationship as well. HoUoek v. Erie Ins. Exchange, 54 Pa.       n. & C. 4lh
       449, S18 (Pa.Com.PI. 2002). Fidelity's delay wttS not only due to negligence, but

       also because of reckless di sregard ofthc PlaintifT.<;' rights, tlU'ough it s repeated

       attempts over nearly five years to fmd a cheaper way of cscll.ping their liability

       to settle the claim, while the Davis' waited and watched their proposed

       subdivision languish.

                        (B) COMPENSATORY DAMAGES TO INSURED

(1)    "Consequential damages are general ly understood to be other damages which

       naturally and proximately flow from the breach and include three types oflost

       profit damages: ( I) los( primary profits ; (2) lost secondary profits; and (3) loss

       of prospective profits, also commonly referred to as good will damages."

       AM/PM F}'[(m:hisc Association v. A tlantic RiChfield Co., 536 Pa. 110, 119,584

       A.2d 915 (Pa. 1990).

(2)    Howevt:r, statutorily, Plain(iffs cannot recover under 42 Pa. C,S, §&371 for Wly

       compensatory or consequential damages. Birth Center, 787 A.2d at 403. Courts

       applying §8371 have uniformly held thaI a successful plaintiITmay oilly recover

                                                15
                                                                         Circulated 02/27/2015 02:49 PM
                            1791 a

      the damages that arc expressly provided by the statute: interest, court costs,

      punitive damages. and attorney's fees. Id. at 402-403.

(3)   Compensatory damages may be awarded,_howcver, under PClUlsyivania

      common law, which has historically recognized the implied covenant of good

      faith and fair dealing in the context of insurance law. Zologa   II,   Provident Life

      and Ace Inc. Co. OfAmerica, 671 F.supp.2d 623, 630 (M.D. Pa. 2009).

(4)   The general mle is that consequential damages are reco\'erable l!l contract nod

      1011 actions where ( 1) there is evidence to est.'lblish them with reasonable

      certainty; (2) there is evidence to show that they were the proximate

      consequence of the wrong; and (3) in contract actions, they were reasonably

      foreseeable. Delahanty v. Firs, I'ennsylvania Bank., ,vA. , 318 Pa. Super. 90, 464

      A.2d 1243, 1257(\983).

(5)   Plaintiffs' claims for compensatory damages are not limited solely to statutory

      bad faith claims under Section 8371. They also include a bad faith claim arising

      from Defendant's breach of the implied covenant or good fai th and fair dealing,

      aud therefore their claim for compensatory damages is proper. Zaloga v.

      Provident Life and Ace. Inc. Co. OfAmerica, at 63 1.

(6)   To prevail on a breach of contract cauSe of action under Pennsylvania law, a

      Plaintiff has the burden of showing the following: the existence of a contract,

      including its essential terms; a breach of a dul)' imposed by the contract; and

      damages (0 the Plaintiff as a result of tile breach. Care-Srales Bank'll. Cutillo,

      723 A.2d 1053 , 1058 (po. SUPCL 1999).

                                            16
                                                                         Circulated 02/27/2015 02:49 PM
                               1792a

(7)    PCIUlsylvania law implies a duly of good faith into an insurance contract and the

       breach of such a dtJt)' constitules 2 breach of the insurance contract. Berg v_

       Nationwide, 2012 Pa.Super. 8R, 44 A .3d 1164, 1170 (2012), citing Gray v.

       Nationwide, 422 Pa, 500, 508, 223 A.2d 8, I I (1966).

(8)    Here, the Plaintiffs assert that the Defendant breached the title insurance

       contract entered into bet\veen the parties in at least three respects: (1) In failing

       to fulfill its contractual obligations in a reasonably diligent mllnner dllC to taking

       almost five years 10 resolve the claim; (2) By failing to pay the loss within 30

       days of fixing the amount thereof. as required by the terms of the contract (PILe

       Exh. J. '~ 12(a)); and, (3) By breaching their implied duty of good faith and faith

       dealing with its insureds, by, among other things: delaying resolution of the

       claim for nearly five years; repeatedly failing to communicate with its insureds

       about the claim, despite repealed requests for information; and by committing

       multiple violations of the Pennsylvania Unfair Insurance Practices Act and

       Unfair Claims Settlement Practices Regulations.

(9)    In addition to violation of Pennsylvania's Uad Faith statute, 42 Pa.C.S. §8371 .

       this Court finds clear and convincing evidencc of bad faith conduct by

       Defendant in the following:

(10)   Through Defendant's failure to make a timely offer of settlement. Hollock v.

       Erie Ins. Exchange, 54 Pa. D&C 4tll (Luzerne 2002), affd' 842 A.2d 409 (pa.

       Super. 2004) (the court held thal bad faiUl conduct by an insurer may include the

       failure to make a reasonable offer of settlement). Sec also, Klinger v. Slate

       Farm, 115 F.3d 230 (3d. Cir. 1997).

                                             J7
                                                                           Circulated 02/27/2015 02:49 PM
                               1793a

(1 1)   Through Derendant's failure to manage and supervise the handling of the Davis

        claim . An insurer's failure to "efficiently, effectively, and professionally

        manage" its insured's claim may serve as a basis for bad fai th. Sec, Liberty

        Mutual Ins. Co. v. Paper Manufacturing Co., 753 F .Supp. 156, 159- 160 (E.n.

        Pa. 1990) and Adamski, supra.

(12)    l 'hrough Derendant'S elevating its own interest above that of its insured. An

        insurer must give the interest s ()fits ifisured the snme faithfu l consideration that

        it gives its own i!llcresls. Hollock, supra.

(13)    Through the Defendant's failure to follow its own internal claims handling

        guidelines (the failure of an insurance company to follow its own internal claims

        handling guidelines may be evidence of not having a reasonable basis for

        denying insurance benefits). Galka v. Harleysville Pennfand Insurance Co. ,

        2005 Pa. D&C 4111 236 (Lacka. 2005.).

(14)    It has also been held that an insurer can be held liable for bad faith where the

        insurer's assessment of a claim is "less than honest, intelligent and objective."

        Puritan Ins. Co. v. Canadian Ins. Ca., 775 F.2d 76 (3d Cir. 1985).

(15)    We must also look to the Hollock trial court 's rendition of what constitutes bad

        fai th \¥here it adopts the guidelines set forth in the Unfair Insurance Practices

        Act, 40 P.S. § J 171 et seq. and the Pennsylvania Code regulations for insurance

        practices, 31 Pa. Code § 146.1 et seq. Those segments that we find most

        applicable are set forth below:

(16)    Defendant violated 31 Pa. Code 146.6 - Standards for prompt invcstigation of

        claims, which requires an lnS\ll'Cr to complete its ilwcstigatioll of a claim within

                                               18
                                                                           Circulated 02/27/2015 02:49 PM
                               1794a

        30 days after notification of claim, unless the investigation cannot reasonably be

        completed within the lime. If the investigation cannOl be completed within 30

        days, and every 45 days thereafter, the insurer shall provide the claimant with a

        reasonable written explanation for the delay and slale when Ii decisiOIl on the

        claim may be expected. HeTC Defendant took 20 months to complete its

        investigation, without the legally required communication and justification for

        such a delay. Despite Plnintiffs' conslun! effOits. Defendant did not

        communicate allY explanation for the delay to its insured.

( 17)   Defendant repeatedly violated 40 P.S. I 171.5(IlXlO)(ii) (faili ng to acknowledge

        and act promplly upon written or oral communication with respect to claims

        arising under insumnce policies), and 31 Pa. Code § 146.5(c) (Failure to

        acknowledge pertinent communications, requiring that Ihal an appropriate rely

        shall be made within 10 working days 011 other pertinent communications from a

        claimaIU which reasonably suggest thaI a response is expected). Here Defendant

        routinely ignored Plaintiffs, who initiated repented communications. wilh his

        insurcr over a period of years.

(18)    Defendant v iohued 40 1>.8. 11 7 1.5(a)( 10)(v) - Failing to affirm or deny

        coverage of claims within a reasonable time after proof ofloss statements have

        been completod and communicated to the company or its representative. In

        support of this conclusion the Court adopts, by reference thereto, those

        conclusions of law related to Defendant's wlrcasonable basis to delay/deny

        Plaintiffs' claim, supra, as it fully set [01111 herein at length . See, Findings of

        Fact, 20, 24, 27, 37, eLc.

                                               19
                                                                        Circulated 02/27/2015 02:49 PM
                              1795a

(19)   Defendant violated 40 P.S. 1 ! 71.5(a)(1 O)(vi) - "Not attempting in good faith to

       effectuate prompt, fair and equitable settlements of claims in which the

       company's liability under the policy has become reasonably clear." III the

       prescnt case, the testimony established thal Defendant's liability under the

       policy was clear within months of tile claim being filed . However, at no lime

       prior to this lawsuit being filed on December 14, 201 0. was a settlement offer

       made to Mr. Nocella, the true owner of the land, 0 1' to the insureds. Mr. and Mrs.

       Davis.

(20)   The unreasonable delay of nearly five years, along with multiple, and often

       repeated, violations ofPcnnsylvania lllw by Defendant leads the Court (0

       conclude that the Defendant's conduct extended well beyoOO mere negligence or

       misjudgment and instead demonstrated bad faith, reckless indifference and

       outrageous conduct towards its insureds. This is especially so when it is noted

       above, that it took the fil ing of this lawsuit to finally motivate Defendant to

       authorize monetary authority on thi s claim and to resolve the dispute.

(21)   The Plaintiffs have provided estimates for the increased costs of construction

       between 2007 and 2013, and the depreciation in market value of the townhouses.

       These numbers amount to $89,760.00 and S272 ,400.00 respectively. N. T. Vol. I.

       p . 163; N. T. Vol. I. p. 232. 239-240 and Plif. Exil. 39.

(22)   However, the Court finds that the futuristic appraisal numbers lack credibility

       aud nrc therefore unpersuasive. The timeline for construction and the rollout and

       readincss of the units for market are not based upon any fixed construction

       schedule, nor is their completion and entry into the marketplace clearly

                                              20
                                                                        Circulated 02/27/2015 02:49 PM
                             1796a

      determined. We therefore exercise our discretion as fact fi nder and allow

      $ 135,000.00 for depreciation as well as $89,760.00 for Plaintiffs' increased

      construction costs.

                             (C) PUNITIVE DAMAGES

(\)   VCIUlsylvania courts have established Ihat a finding of bad faith against an

      insurer toward its insured was the only statutory prerequisite to punitive

      damages award in all aclion arising under an insurance policy pursuant to 42

      Pa.C.S.A . §8371. Hollock, supra at 41 8.

(2)   It is wen recognized Ihat a dctennination of bad fai th does not necessitate an

      award of punilivc damages, but it does allow for lUl awnrd of punitive damages

      without additional proof, subject 10 the trial court's exercise of discretion. Jd.. at

      419.

(3)   For the reasons sct forth above, we lind Ihal Fidelity's bad faith conduct was

      clearly proven to be outrageous and egregious and displayed a reckless disregard

      toward the rights and interests of the Davis'. Therefore, the Davis' are entitled to

      an award of punitive damages under 42 Pa C.S. §8371 (8). Adamski, supra.

(4)   TIle Pennsylvania Superior Court ooncluded "the size of n punitive damages

      award must be reasonably related to the State's int.erest in punishing and

      deterring the particular bcbavior of the defendant and not the product of

      arbitrariness or unfettered discretion." Shiner v. Moriarty. 706 A.2d 1128, 1241

      (Pa. Super. 1998).

                                            21
                                                                        Circulated 02/27/2015 02:49 PM
                             1797a

(5)    Punitive damages are directed towards deterrence and retribution. Slate Farm v.

       Campb,lI, 538 U.S. 408, 419 (2003).

(6)    In assessing punitive damages, the trier affect should consider the character of

       the defclldant's eel, the nature and extent of the hAnn 10 the plaintiff~hat the

       defendant caused or intended to cause, and the wealth of the defendant. SHV

       Coa/Inc. v. Colltjnentai Grain Co., 526 Ila.. 489, 493-94, 587 A.2d 702, 704

       (1991).

(7)    A defendant's nct worth has been recognized "as u vulid measure of its wealth"

       for purposes of punitive damages. See Sprague v. Walfer, 441 Pa . Super. 1,61·

       63,656 A.2d 890, 920 (1995).

(8)    Davis nnd Fidelity have stipulated through the admission of Plainli ffExhib its

       20, 2 J and 22, Ihat the Defendant' s nct worth between 2009 und 201 I ranged

       between $363, 555,922.00 and $528, 567, 433.00.

(9)    However, the Fourteenth Amendment prohibits the imposition of grossly

       excessive 01" arbitrary punishments, and mandates that the proportionality

       between the actual or potential haml suffered Ilnd the si7.e of the punitive

       damages award is relevant. Stale Farm v. Campbell, at 424 ·426.

(10)   Although there is no "bright-line" 1est that a court can apply to ensure that the

       size o rall award ofpunj(jve damages complies with due process, several factors

       afe called into question, the Supreme Court has noted thilt "in practice, few

       awards exceeding a single-digit mIlo win satisfy due process." Id. at 425;

       Hollock, supru at 421.

                                            22
                                                                          Circulated 02/27/2015 02:49 PM
                                1798a

(1 1)   In analyzing the proportionality between the compensatory damages and the

        punitive damages, the amount of counsel fees aIld costs awarded is to be

        included in the compensatory damages fi gure. Jd. at 421·422. 111crelore. the

        lotal compensatory damages figure for the purpose of calculating pllnitive

        damages is:

                                $89,760.00 - Increased Construction Costs

                                $1 35,000.00 - Depreciation
                                $158,450.00 - Attorney' s Fees
                                SIO,OI 7.31   Litigation Costs and Expenses
                                Total Co mpenslltory Damages: $:\93,22 7.31

(12)    Given Fidelity's net worth (averaging $454.557,975.67 from 2009 through

        2011, based on stipulation of tlle parties), u significant punitive damflge award is

        necessary in order to deter Fidelity from engaging in similar misconduct towards

        other policy holders.

(13)    The significant hann caused to Plaintiffs in essentially stopping their business

        investment find development for years while Fidelity refu sed to act must also be

        considered in calctilating punitive damages.

(14)    Taking all oCthe above factors into consideration we find that an appropriate

        multiplier is an award of four times the compensatory damages as rendered by

        this Court as $393,227.3 1. The total punitive damages award equals

        $1,572,909,24.

( J5)   1l1jS approach is significant in terms oCthe insurer's wealth while it accounts fo r

        Defendant ' s C(lutinuing fmaneial stability and wi ll not destroy its operations.

                                              23
                                                                             Circulated 02/27/2015 02:49 PM
                              1799a

       Such an amount also operates as a deterrent to the Defendant, as well         ~s   other

       insurers in the future. Shiner, supra.

                                     (D) I NTERRS'I'

(l )   A separate issue the Court is clIlled to confront is the subject matter of interest as

       applied to compensatory damages as applicable under 42 PII. C.SA. § 8371.

(2)    42 Pa. e.S.A. §8371 prescribes that upon a finding of bad faith, by an insurer, a

       COUl'1 may award interest on the amOtml of lhe claim from the date the claim was

       made by the insured in an amount equal        (0   the prime rate of interest plus 3%.

(3)    The statute plainly states that interest should be applied to the amOUl\l ofthc

       claim from the rla,e the claim was made. See 42 Pa.C.S.A. §8371(1).

(4)    The date we shal l assess as (he dare the claim was made is October 15, 2007

       (See, Findings of Fact "i 11). 1bis date mllrks the day that Richard and Mwia

       Davis had filed a legitimate claim arising from their insurance policy. Therefore, .

       we sha11 apply 3% above the prime mtc of intel'cst to the verdict i1l1ile

       underlying action of $224,760.00 payable by Fidelity National Insurance

       Comp!lIlY pursuant to 42 Pa. C.S.A. §837 1( J).

(5)    Pa. R.C.P. 238 lists the prime roles of interest for each year as set forth in the

       first ed ition oCtile Wall Street Journal for the purpose of assessing damages.

       Under !la. R.C.P. 238, the prime rate of interest for the applicable years was

       8.25% for 2007, 7.25% for 2008. and 3.25% for 2009 ihrough 2013.

                                                24
                                                                        Circulated 02/27/2015 02:49 PM
                               1800a

(6)   Therefore, calculating this interest rAte plus 3%, the amount of interest due is to

      equa l $96,610.04, which represents lhe period ofOclober 15,2007 through

      August 15,2013.

                2007                77 Days at 1I .25%            $5,397.16

                2008               366 Days al 10.25%             $24,326.33

                                                          -
                2009                365 Days 31 6.25%             $14,494.49

                2010                365 Days at 6.25%             $1 4,494.49

                20 11               365 Days at 6.25%             $14.494.49

                2012                366 Days aI6.25%              $14,535.46

                2013                226 Days at 6.25%              $8,867.62

                               (E) ATTORNEY' S FEES

(I)   Pa.C.S. §8371 provides ror the recovery of counsel fees and expenses "to

      compensate the pJaintifffor having to pay an attorney to get that to which they

      were contractually entitled" and punitive damages "to punish the defendant for

      its bad fRith in fu iling to do lhat which it was contractually obligated to do."

      Klinger, supra at 236.

                                           25
                                                                         Circulated 02/27/2015 02:49 PM
                               1801a

(2)    In the present case, attllrncy's fees and costs were admitted through stipulatioIl

       of the patties in Plaintiffs ' Exhibit 17 and Plaintiffs' Exhibit 18 respectively.

       N. T. January 31, 2013, p. 97.

(3)    Pla intiffs' Exhibit 17 indicates that the reasonable value of said legal services is

       SI S8,4S0.00.PIt( Exh. 17.

(4)    Thi s amount includes 633 8 service hours at $250. 00 an hour. Id. The Court

       finds the amount of these legal fees 10 be rcaSOlUl.ble Wld customary for our urea.

(S)    Plaintiffs ' Exhibit 18 indiCf!les that Plaintiffs' litigation costs and expenses from

       trial through die beginning of triai totaled $7, 392.3 I and thaI PlaintitTs'

       Iitigntjon cost and expenses from Irial through the current date totaled an

       add itional·$2,625. Thert:fore Plaintiffs' IOUlllitigation costs and expenses are

       $10, 0 17.31. As they are well documented the court accepts these costs and

      expenses as offered.

(6)                                ,
       This Couri therefore finds the amount assessed for both attorney' s fees to be a

       reasonable and acceptable fee, and the amount measured for litigation costs and

       expenses to be reasonable and acceptable.

(7)   Therefore,   OU(   assessment of attorney's fees and cost will include an award to

       Richard Davis and Marin Davis in the amount of$168,467.31.

An appropriate Order follow

                                             26
                                                                           Circulated 02/27/2015 02:49 PM
                                 1802a

 R1CHARD DAVIS and MARlA                             THE COURT OF COMMON PLEAS
 DAV IS,                                              OF LACKAWANNA COUNTY
           Plaintiffs,

       VS.                                               CIVIL ACTION· LA W

  FIDELITY NATlONAL INSURANCE
. COMPANY, d/b/a FIDELITY
  NATIONAl TITLE1NSURANCE
  COMPANY OFNEW YORK,
                   Defendants.                            NO. 2009-cv-6IS4

                                            onDER
             AND NOW, this 1SIb day of August 2013, upon consideration of the parties'

 verbal and written arguments of counsel and all testimony and evidence presented to the

 COUIt on January 29, 30 and 31. 2013 and in accordanco with the preceding

 Memorandum it is hereby ORDERED AND DECREED as follows:

 (1)         A verdict is entered in favor of the plaintiffs, Richard Davis and Maria Davis,

         and against Ihe defendant, Fidelity National Insurance Co., pursuant to 42

         Pa.e.S. §8371 based upon clear and convincing evidence that the defendant,

         Fidelity National Insurance Co., acted in bad faith toward its insureds, Richard

         Davis and Maria Davis, and pursuant to Plaintiffs' bad fai th claim based upon

         clear and convincing evidence that Defendant breached its implied covenant of

         good faWl and fairdea li ng towards the insured.

 (2)         The Court fmds that the Defendant, Fidelity National Insurance Company is

         liable for the verdict rendered, totaling 5224,760.00 compensatory damages

                                                27
                                                                       Circulated 02/27/2015 02:49 PM
                              1803a

       (increased construction costs plus depreciation). in the underlying action, pillS

       interest at the rate of3% above the prime ratc of interest from the date of

       October 15,2007, the claim was made through August 15, 2013 equal to

       S96,610.04.

(3)     1bc Court awards attorney's fees and costs to Richard Davis and Maria Davis

       in Iheamount 0(S168,467.3l.

(4)     The Court awards punitive dnmagcs against the Defendant , Fidelity National

       Insurance Company, in an amoum or four time.:; the total compensatory damages

       (increased construction costs, depreciation, Iluomey's fccs.litigatioll costs and

       expeuses) awarded by this Court equali ng $1,572,909 .24.

$%,610.04 simple interest 10/15/07 - 8/1 SIl3

$1,572,909.24 punitive award (4 x total compensatory damages verdict)

1224,760.00 compensatory damages

S168,467.3] Davis' atlorney' s fees and costs

$2,062,746.59 Total verdict

(6)     Judgment is entered in the alllount of $2,062.746.59 for the Plaiutiffs.

                                                BY TIlE COURT

CC: Written notice ()fentry ofthejoregoing Memorandum and Order has been

                                           28
                                                                          Circulated 02/27/2015 02:49 PM
                                   1804a

,.

     provided fa each party pursuant to Pa. R. Civ,Pro. 236(a){2) by mailing time stamped
     copies (0 ;

     Attorney for Plaintiffs:
     SeJingo Guagliardo, LLC
     Carl 1. Guagliardo , Esq .
     345 Market Street
     Kingston, PA 18704

     6!1Q..mey fOI" Defendant:
     Durkin and MacDonald, LLC
     Lawrence A. Durkin, Esq.
     108 N. Washington Avenue, Sle. 1000
     Scranton, PA 18503

                                               29
                                                                                            Circulated 02/27/2015 02:49 PM
                                      1988a

RlCHARD DAVIS and                                  THE COURT OF COMMON PLEAS
MARlA DAVIS                                          OF LAC~W~~:<;OUNTY
     Plaintiffs                                                                   -- .
v.                                                   , ::f~~Iif.l[).W
FIDELITY NATIONAL                                                  2~I(),CW8868
INSURANCE COMPANY,                                    ,~.:   .J ', • • •• "-
                                                                               .,'::C:i',
dib/. FIDELITY NATIONAL
TiTLE INSURANCE COMPANY
OF NEW YORK
        Defendants

M1NORA,J.

                                  INTRODUCTION

       Before the Court is Defendant Fidelity National Inswance Company (hereinafter

"Defendant")'s Motion for Post-TrjaJ Reliefseeking reconsideration oflhis Honorable

CoUJ1's August 15.2013 Memorandwn and Order. For the reasons that follow ,

Defendant's Motion is denied and dismissed. and the COW1 'SNon·Jury Decision filed

August 15, 2013 is affirmed in all respects.

                             PROCEDURAL mSTORY

       This Honorable Court's August 15,2013 Memorandwn and Order entered

judgment in favor ofPlainliifs and against Defendant in the amount of $2,062.746.59

pursuant to our finding of Defendant's breach of contract and statutory insurance bad

faith. Both parties filed Motions for Post-TriaJ Relicfto the August 15.2013 Order.

Plaintiff's motion, filed Seplember 12, 2013, was denied and dismissed by this Court on

September 16, 2013.

                                               1
                                                                                 Circulated 02/27/2015 02:49 PM
                                        1989a

         Defendant's MOiion for Post-Trial Relief was filed September 2, 2013 , While

Defendant's Motion was pending in the trial court, Defendant filed a Nolice of Appeal

of the Order on September 12, 2013, the same day that Plaintiffs filed their Motion fot

Post-Trial Relief, On January 17.2014, the Appeal was quashed by the Pennsylvania

Superior Court since Defendant's post-trial motion remained pending before oW' Court.

         Defendant's Brief in Support of its Motion for Post-Trial Reliefand Plaintiffs'

Briefjn Opposition to Defendants' Motion were both filed December 23, 2013.

Argument on Defendant's Motion was held January 14.2014.

                          DEFENDANTS' LEGAL ARGUMENT

         Defendant moves for an Order granting a new trial with respect to all issues

pursuant to Pa.R,C.P. 2227 ,1(a){J), (2), (4), and (5), or in the alternative. for an Order

entering judgment in Defendant's favor, or an Order modifying or changing the August

1S, 2013 Order. Defendant alleges that the court's damages award of$2.062,746.59 is

not supponed by Pennsylvania law. Specifically. Defendantargue~ that the trial court

applied the wrong standard in assessing Plaintiffs' claim of Oefendants' bad faith and

erred   In   awarding lost profits and punitive damages. Defendant's arguments ~ further

described in the LegaJ Analysis section ohhls Opinion betow.

                                    LEGAL STANDARD
Post-Trial MQ\ions Regarding Request for a New Trial

         The filing and disposition of Defendant's Post-Trial Motion is governed by

Pa.R,C ,P. 227, I entitled "Post-Trial Relief." The rule indicates at PaRC.P. 227.1 (a):

                                              2
                                                                                   Circulated 02/27/2015 02:49 PM
                                        1990a

                ..After trial and upon the written motions fOr Post-Trial
                Rel ieffiled by any party. th~ court may:
            ( I) Order I Dew trial as to all or any of the issues; or
            (2) Direct the entry of judgment in favor of any party; or
            (3) Remove a non-suit; or
            (4) Afi"um, modify, or change the decision, or
            (5) Enler any other appropriate order.
        Pa.R.C.P, 227.1 (e) states thai posf.tnal motions shall be filed within ten days

after . . . (2) nOlice of nonsuit or the filing oflhe detision in the case ofa trial without a

jury. See CQvalesky v, Covalesky, 2003-EQ-60069 at 2·3. (Lacka. Co. Jan. 14. 2014).

        Regarding post-trial motions. trial court, possess broad discretion to grant or

deny a new trial. Covaleskv. 2003-EQ-60069 a1 7; Hannan v. Board, 562 Pa. 455, 465,

755 A.2d 1116 (2000). The granting or denial of a new trial can be an effective

instrumentality for seeking and achieving justice in those instances where the original

trial is proven [0 have failed to produceajusl and fai r result. Covalesky. 2003-EQ-

60069 at 7 (citing Doman v. McCanhy. 412 Pa, 595. 195 A.2d 520, 522 (1963);

Hannan, 562 Pa, at 466). Review of a denial of a new trial request requires the same

analysis as a review of a grant of new trial. Covalesky, supra at 13 (citing Luzerne

County Flood Protection Authority, 825 A.2d at 783-84). If support for a tria) coun's

decision is found in the record. its' order must be affinned. Rand!    V.   Abex Corn .. 611

A.2d 228. 448 Pa. 224 (pa Sup", 1996).

        In n:viewing post-trial motions seeking a new trill), a court must begin with an

analysis oflhe alleged underlying conduct or omission by the trial court that fonns the

basis for the request or motion. Th is analysis involves a two-step process. First, the

court must decide whether one or more mistakes that implicate facruaJ, legal, or

discretionary maners may have occurred during trial. Second, if the court detennines

                                               3
                                                                                  Circulated 02/27/2015 02:49 PM
                                        1991a

than an errOT or mistake did occur, it must determine if the alleged mistake Or elTor was

so grievous as to provide a sufficient basis for granting a new trial. ~ CQvalesky,

supra at 8 (citing Harman, 562 Pa, 8t 467; Bey v. Sacks. 789 A.2d 232, 236 (pa. Super.

2001); Luzerne Co, Flood PrQtection Authority v, Reilly. 825 A.2d 779 (pa Cmwtth.

2003).

         A new trial is not warranted simply because an error may have occurred al tria)

or because another judge may have ruled differently. CQvalesky. 2003·EQ..60069 supra,

at 8. The moving party must prove they suffered some prejUdice as a result oflhe error.

M:. (citing.lkt. 789 A,2d at 236). This analysis implicates the harmless error doctrine,
which underlies every docision to grant or deny a new trial. Id. This is so because the

court, being a human institution, cannot ever guarantee a perfect trial. 'd. What It seeks

to do is provide a trial free of reversible error concluding with a fair result. ill

         In our review of Defendant's Motion for Post-Trial Relief, we are guided by the

law we followed in Covalesky, 2003-EQ-60069 (Jan. 14,2014) 819, which states:

                        In performing the first stage of analysis, the court
                is guided by two scopes of review. Where II mistake or
                series ofmistakee are alleged to have occurred, which is
                our case, the coun is to apply a narrow scope of review
                using the applicable standards for factual , legal, or
                discretionary matter! alleged to be in enor.
                         Conversely, if allegations are made that a new trial
                is appropriate "in the interests of justice" or in the name
                ofjustice then a broad scope of review implicating the
                entire trial record is in ordO'_ Hannan. 562 Pa.. at 467-68;
                DjviJIy v. Pan Authority ofAlleghenv County. 810 A.2d
                755 (pa.. Cmwlth. 2000), appeal denied, 829 A.2d 1158,
                574 Pa, 749.
                         Using the narrow scope of review, we look to the
                type of error alleged . If the error alleged is factual, then
                factual errOr analysis of a narrow scope must be
                conducted. ~ In our case, the Court acted as the finder of
                 fact. Ajury, like any other fact finder, ....... may accept

                                               4
                                                                                     Circulated 02/27/2015 02:49 PM
                                        1992a

                all, none, or part cfany expert's testimony .. ," (emphasis
                added) (citing Donollghc v, Lincoln Electric Co., 936
                A.2d 52 (pa. Super. 2007» . Even un-contradicted
                testimony need not be accepted as true or accurate,
                especially opinion evidence. Taliaferro v. Darky Twp.
                Zoning Hearing Bd., 873 A.2d 807 (Pa. Cmwltb. 2005).
                         Therefore, the court's findings of fact must be
                tested under an abuse of discretion layer of analysis. If the
                mistake alleged involves a discretionary act, it should be
                tested for abuse oftbc exercise: of that discretion in order
                to determine: if clTOr bas occurred. The standard of review
                of a triaJ cow1's decisioo post-trial is whether the trial
                coun paJpably am clearly abused its discretion or
                committed an error of law which controlled the outcome
                ofthec8sc. Coker v. Flickinger Co., 55] Pa. 441, 445,
                625 A.2d 1181 (pa. \993).. , . "Abuse of discretion is not
                a meTe error of judgment; one must show that the law was
                misapplied or overridden, or that thl! judgment exercised
                was manifestly unreasollable or the result of bias,
                prejudice or partiality." Cova1esky, supra at 13 (citing
                Cacurak v. St. Francis Medical Center. 823 A.2d 159 (pa.
                SUpCQvaJesky, supra, at 8-9, 13; Harman, 562 Pa. at   467;~, 789 A.2d at 236;        and

Luzerne Co. Flood Protection Auth., 825 A.2d 779. With respect to the court's analysis

of lost profits., we find no mista.'< e was made. Our conclusion is supported by discussion

of the 3 elements on this page above with respect to Plaintiffs' increased construction

costs and depreciation damages due to Defendant's conduct.

    1. There was a Showing that Plaintiffs ' Damages Were Proximately Caused by
       Defendants' Wrong
    Defendants allege that the court did not prove by clear and convincing evidence that

Plaintiffs' dllfflsges were proximately caused by Defendant' s wrong.   ~    Defendant's

Brief in Support ofits Malian for Post-Trial Reliefal 20. As discussed in our August

1S, 2013 Opinion, this Court, as finder of faCt and assessor of credibility, properl y

                                             7
                                                                               Circulated 02/27/2015 02:49 PM
                                       1995a

found Defendant's bad faith. breach of contract, and breach of the covenants of good

faith and fair dealing were the cause of the delay in construction of Plaintiffs' twelve

towMomes . ~ Dayy v. fidelity National Ins. CQ .• Memorandum and Order. 2010-

CV ·8868, (Aug. 15, 20 IJ) at pp. 12·18 (hereinafter "Davis, 201 O-CY -8868"). The trial

coun properly assessed its award of primary lost profits, based on its review of the

record. The court found credible the evidence presented by Plaintiff and Defendant

appraisers and Plaintiffs' contractor regarding depreciation of home value! and

increased construction costs of the homes as a result afme delay in their construction.

    Accordingly, since the record supports our factual conclusion, we find no error that

Plaintiffs' damages were proximately caused by Defendant's wrong.

   2. Plaintiffs L9s;t. Profit Damages (As Laid Out By !he Coun With R~ct So The
      Demeeiation and Increased Construction Cost Damages. Included in the CQurt's
      De1eanination QfLQSl Profits) Were Established with Reasonable Certainty
        Defendants also argue the trial court's lost profits award flows from a

misapplication of the correct legal siandard requiring "reasonably certain proof."

Defendants allege that the losl profits award was precluded by the trial coun's own

findings concerning the lack of evidence for any timeframe for development and

construction and the unreHability of hypothetical valuations, and specifically in the

court's assessment of depl1!ciation damages and increased construction costs.     ~

Defendant's Brief in Support of its MOlion for Post-Trial Reliefst pp.17·18.

   As we did above in our review oftbe August 1S, 2013 fmdings of Defendant's bad

faith and Defendant's wrong causing Plainliffharm, we again note that to Whether there

was 8 mistake, a court must begin with an analysis   or the alleged underlying conduct or

                                             8
                                                                                 Circulated 02/27/2015 02:49 PM
                                         1996a

omission by the trial court that forms the basis for the request or motion for new trial.

Next.. the court must also decide whether there are one or more mistakes that implicate

factual. legal, or discretionary maners, that may have occurred during trial . See this

Opinion at 3-4 (citing Covaleslcy. 200J-EQ-60069 at 8-9. 13; Hllmlan. 562 Pa, at 467;

lky. 789 A.2d at 236; Luzerne Co, Flood Protection Aulh .• 825 A.2d 779). As sel forth

below in sections a. and h.   ~Iow,   we hold that based on !.he record there was no

mistake in our finding of lost profits. We also hold lost profits ~re established with a

reasonable certainty.

   a. The Trial Court Properly Detennined Depreciation Damages

       This Court made no mistake in its analysis of depreciation damages. The trial

court, as sale wesSOl' of credibility, may believe all, part, or none orlhe evidence

presented Lou Balti Construction v, Harbulak, 2000 Pa. Super. 287, 760 A.2d 896, 898

(2000). This Court found the evidence offered by Plaintiff and Defendants' licensed real

estate appraisers '"to be competent, credible, rele'\l8Dt, and admissible." ~ Dayis. 20 I ()..

CV-8868, lntroduclion al p.2, and Conclusiorlll of Law at p.21 '20. The Court. in

properly exertising its discretion as fact finder, determined a depreciation value of the

townhomes was somewhere in between the timelines asserted by Plaintiff and

Defendants' expert real estate appraisers, and allowed for SI35,OOO for depreciation,

half of what Plaintiff's expert appf'.llsed for depreciation. SM: ~ 20 IO-CV -8868 a1

p.2l. Where the amount of damages can be fairly estimaU!d from the evidence, the

recovery will be sustained even though such amount cannot be determined with

complete accuracy. Kaczkowski v. Bolubasz.49 1 Po. 561 , 567,421 A.2d 1027 (1980).

                                               9
                                                                                 Circulated 02/27/2015 02:49 PM
                                       1997a

       Accordingly, since the trial CQW1'S determination of depreciation dameges are

lIUpported in me record in the form oflhe testimony of Plaintiff and Defendant's

appraisers, depreciation damages were established with a reasonable certainty. As such,

we find no misWcc made by the trial oourt in its calculation of depreciation damages.

   b. The Trial CQurt Properly Detennined Increased Construction Costs
   Likewise, in pe:rfonning the same review of whether the court made a mistake in its

finding ofPlaiotifrs increased comtruction costs of the lownhomes, the trilll court

made no such mistake. m Covalesky. 2003·EQ·60069 at 8·9,13; Hannan, 562 Pa. at

467; Bey. 789 A.2d 111236; Luzerne Co. Flood Protection Auth. 82S A.2d 779. The trial

coun found Plaintiffs' building contractor', testimony and evidence with regard to

increased construction costs to be "competent, credible, relevant, and admissible," See

~      2010-CV-8868, Introduction at p.2 and Conclusions of Law at p.21 . The court's

detennination as to increased con3truction costs is therefore supported by testimony in

the t"erord. We find no error in the calculation of increased construction costs.

   Accordingly, since the trial coul1 's findings of de precialion and increased

construction cOSts are both supported 10 the record. the trial coun made no mistake in its

findings as to lost profits. Lost profi ts were established with reasooable certainty.

    3. The Trial Court Properly Found Thllt Plantlffs' Lost Profits Wele Foreseeable
        Finally, in our review of the trial court's detmnination of lost profits. we must

assess whether the court made a mistake in its delermination that Plaimiffs' lost profit!

were foreseeable. See this Opinion Ilt)'4; Covalesky, 2003·EQ-60069 at 8·9. The trial

                                             10
                                                                                 Circulated 02/27/2015 02:49 PM
                                       1998a

coun properly found that Plaintiffs' losl profits were foreseeable. This de1ermination is

supported by the recoro. See Davis. 2010-CV-8868. Findings of FIK:[ at pp.2-8.

       This court, wing its discretion as fact finder, fOWld credible Plaintiffs' evidence

at trial thaI Defendant had knowledge that Plaintiffs' title insurance policy was for

residential development. including the construction oftownhomes. The court found

Defendant had this knowledge both before and at the time the policy was issued.

       We also found credible evidence in the record showing that Defendant! were

aware of the delay they had caused in the construction. See N.T. Vo!.l. p33-34

(hereinafter "N.T."); Davis. 2010-CV-8868. Non-Jury Trial (Lacka Co.) (Jan. 29-.3 I,

2013). Tn addition, the record supports that it was reasonable for Drlendant to have

known or should have known market conditions change from year to year and delay

would affect the value of Plaintiffs' development. Defendants' appraiser Mr. YUler,

acknowledged at trial how market condhions can change drastically from year to year.

~ N,T.   Vol. JJl p.69 line 24~25 .

       Therefore, we made no mistake in finding Plaintiffs' damages for lost profits in

the form of increased cost of wnstr\1ction and depreciation were reasonably foreseeab le,

       As this court properly exm:ised its discretion as fact finder to determine thai 1.

Plaintiffs' lost profits were caused by Defendant's wrong; 2. the lost profits were

established with reasonable certainty; and 3. the lost profilS were reasonably

foreseeable, as !Upported by the retord, there was no mistake in the court's

determination of lost profits. Accordingly, the relief requested by Defendants witb

respect to the trial court's finding or lost profits is denied and dismissed,

                                             11
                                                                                       Circulated 02/27/2015 02:49 PM
                                             1999a

       Ill.       Whether Tbe Trial Court', Award 0(1.011 Profits Was "In Derogation
                  oftbe Contractua l Liability In the Title Insuraoce Policy" h to No Avail

              Defendant next argues that the trial court's award of compensatory damagt3 in

the fonn oflost profits was trial coUrt error because a lost profits award is precluded by

the tide insurance policy. S« Defendant's Brief in Support of Motion for Post-Trial

Relief at p.2 L Defendant's argument is without merit. No mislake was made at the trial

court. ~ Covalesky. 2003·CV -60069 at &-9. As noted in our August 15, 2013 Opinion

!It   p. t 6, in Pennsylvania, consequential damages may be awarded for bad faith.        ~

~        Opinion, Conclusions of Law at p.IS 1 I. As addressed both in the August 15,

2013 Opinion at pp.13-17 and p,21 and in this Opinion on p.6, the trial court properly

found that Defendal'lt engaged in bad faith conduct under 42 Pa.C.S . § 8371(a) and that

Plaintiffs endUIcd lost profits. FinaJly, primary lost profits are a proper measure of

consequential damages in this case. Davis. 2010·CV·8868 at p.I S ,2 and p.16 ~ 3.

              In properly detennining Defendant's bad faith and Plaintiffs' lost profits being

caused by this bad faith, the triaJ court's award ofJOSt profits, supported by the record,

was appropriate. Defendant's requested relief with respect La a lost profits award "in

derogation of the contractual liability in the ... policy" is denied and dismissed.

       IV.       The Trial Court',PuDitive Damages Award ofSl.S72.909.24 Wu
                 Proper
              Defendant abo alleges that the trial court erred in awarding ex.cessive punitive

damages because there was no finding         ofi ll~will ,   fraud, or dishonest purpose by

Defendant. We hold there was no mistake in the trial court's conclusion of Defendant's

ill-will and resulting calculation of punitive damages. See ~ 2010-CV-8868 at p.
                                                                                  Circulated 02/27/2015 02:49 PM
                                        2000a

14 , 22, The punitive damages award is based on the various factors set forth in detail in

OUT August 15.2013 Opinion. all of which are supported in the record through

stipulations, submissions of the parties, exhibits, and testimony. See Davis. 20tO-CV·

8868, at pp.21 ·23. In addition the facts of oW' case follow case law on punitive damage

multipliers . .l!!..; see also Plaintiff's Brief in Opposition to Defendant's Motion ror Post

Trial Reliefal pp.18-19 (and case law within). As the record suppol1S the pWlitive

damages award. no mistake has been made. See CQvalesky, supra at 8-9. Therefore, the

relief requested by Defendants with regard to punitive damages is denied and dismissed.

        Since the record supports the trial court's decisions as to all components mised

by Defendant in Defendant's Motion for Post-Trial Relief, the trial court' s order must

be af'finned. Rand! v, Abex Corn.. 671 A.2d 228, 448 Pa 224 (Pa, Super. 1996)

(emphasis addocl).

       An appropriate final order and entry of judgment follows.

                                              "
                                                                                                   Circulated 02/27/2015 02:49 PM
                                       2001a

RlCHARD DAVIS and                                  THE COURT OF COMMON PLEAS
MARlADAVlS                                            Of LACKAWANNA COUNTY
     Plaintiffs                                                    • -:-     ,. to, ,   L~'I
                                                                        .'       ;.~. I~ "
                                                                      .',,: .:
y,                                                         CIVIL ACTION· LAW
                                                      Z6\\ liAR 28 P. 2' ~ 1
FIDELITY NATIONAL                                               2010·CV·8868
INSURANCE COMPANY,                                                                "
d/b/. FIDELITY NATIONAL                               ,." . •,i ... " ....      ~'C""
                                                                                   vh".        .
TITLE INSURANCE COMPANY
OF NEW YORK
        Defendants

                                     FINAL ORDER

       AND NOW, this Zgtt.dBy of March 2014, upon this Court's thorough review of

the pleadings, the answers thereto, the briefs in support and in opposition, the trial

record transcript and arguments of able counsel, it is hereby held:

       (I) Defendants' Motion for Post-Trial Relief is DENIED and DlSMJSSED;

       (2) The Non-Jury Decision by the Court filro August 15,2013 is hereby

           AFFIRMED in all respetts per Pa.R.C,P. 227.1;

       (3) The Clerk of Judicial Records is directed to enter judgment in accordance

            with the Non·Jury Decision and Order filed August 15,20 13;

       (4) This Order, in conjunction with our non-jury decision of August 15,2013

           and with our September 16, 2013 Order Denying and Dismissing Plaintiffs'

           Motion for Post· Trial Relief representS 8 final order for appellate purposes

            and for P•.R.C.P. 1921(b) pwposes.

                                                                                                    J.

                                             14
                                                                          Circulated 02/27/2015 02:49 PM
                                    2002a

 Cc: Writ/en notice o/the entry oftneforegoing Memorandum and Order has been
provided to each party pursuonr 10 Pa.R.CP. 326(0)(1) by mailing time·stamped copies
10'

       Attorney for Plajntiffs                    Anorney for Defendants
       Carll Guagliardo, Esq.                     Scon M. Rothman, Esq,
       Selingo GuagJiaxdo, L.L.C.                 Halberstadt Curley LLC
       345 Market Street                          1\00 E. Hector Street. Suite 425
       Kingston. PA 18704                         Conshohocken, PA 19428

                                         15