J-A25026-17
2018 PA Super 153
DANIEL BERG, INDIVIDUALLY AND AS IN THE SUPERIOR COURT
THE EXECUTOR OF THE ESTATE OF OF
SHARON BERG A/K/A SHERYL BERG PENNSYLVANIA
Appellee
v.
NATIONWIDE MUTUAL INSURANCE
COMPANY, INC.
Appellant No. 713 MDA 2015
Appeal from the Judgment Entered April 21, 2015
In the Court of Common Pleas of Berks County
Civil Division at No: 98-813
BEFORE: OTT, STABILE, JJ., and STEVENS, P.J.E.*
OPINION BY STABILE, J.: FILED JUNE 05, 2018
Appellant, Nationwide Mutual Insurance Company, Inc., appeals from
the April 21, 2015 judgment against it on the bad faith claim of Appellee Daniel
Berg, individually and as the executor of the estate of Sharon Berg a/k/a
Sheryl Berg.1 We vacate the judgment and remand for entry of judgment in
favor of Appellant.
The trial court recited the following facts in its June 21, 2014 opinion
and verdict:
On September 4, 1996, Plaintiff, Sheryl Berg, the
policyholder of a collision insurance contract with [Appellant], was
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* Former Justice specially assigned to the Superior Court.
1 We will refer to Mr. and Mrs. Berg as “Plaintiffs.”
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driving her 1996 Jeep Grand Cherokee, insured by [Appellant],
when she was hit by another vehicle; fortunately, neither party
was injured in the collision. The only issue in this sixteen-year-
old case is if [Appellant] breached its fiduciary obligation to
Plaintiffs. The ensuing litigation marathon is a significant factor
found by this court in resolving the bad faith claim brought by
Plaintiffs against [Appellant]. [Appellant’s] fiduciary obligation to
Plaintiff arose by the parties entering into a contract whereby the
physical damage coverage for the collision required [Appellant] to,
inter alia, 1) pay for the loss or 2) repair or replace the damaged
parts.
[Appellant’s] first damage estimate, dated September 10,
1996, concluded that [Appellant’s] vehicle should be ‘totaled,’ the
present value, at the time of the collision being $25,000.
However, that was not the final resolution. [Appellant] vetoed
this appraisal and a second estimate, ten days later, called for the
Jeep to be repaired. This saved [Appellant] approximately half of
the $25,000 expense to replace the Jeep. The repair process
began immediately but took nearly four months until complete.
[Appellant’s] position to repair rather than total and replace the
Jeep, never changed until the expiration of the lease in December
1998, twenty-eight months after the collision. Until [Plaintiffs]
completed their remaining monthly payments on the lease
agreement with Summit Bank, they were forced to drive what they
claim is a defectively repaired Jeep. They further claim that the
Jeep, after the four months of attempted repairs was not
crashworthy, that it could not withstand a collision because of
permanent frame damage. When all lease payments were paid
by Plaintiff, [Appellant], in December 1998, suddenly changed its
mind, totaled the car, and paid Summit Bank $18,000 to settle
the claim and obtain ownership of the Jeep. [Appellant’s] $12,500
repair quickly increased in total cost to [Appellant] to nearly
double the replacement cost of $25,000. However, that increase
has proven to be only a drop in [Appellant’s] expenditure bucket.
The parties have been in litigation for over 16 years and
[Appellant] has paid in excess of one hundred times the original
Jeep replacement costs in legal defense costs alone.
Trial Court Opinion, 6/21/14, at 1-2.
As is evident from the trial court’s opinion, this case has a lengthy
procedural history. Plaintiffs filed a writ of summons On January 23, 1998
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against Appellant and Lindgren Chrysler-Plymouth (“Lindgren”), which initially
handled the repair of the Plaintiffs Jeep (the “Jeep”). Pre-complaint discovery
followed. On May 4, 1998, Plaintiffs filed a complaint against Appellant and
Lindgren. Plaintiffs’ causes of action against Appellant included breach of
contract, negligence, fraud, conspiracy, violations of the Unfair Trade Practices
and Consumer Protection Law (“UTPCPL”), 73 P.S. § 201-2(4)(xxi), 1968 P.
L. 1224, as amended, and insurance bad faith, 42 Pa.C.S.A. § 8371. Plaintiffs
amended their complaint eight times, raising and ultimately abandoning a
class action. Plaintiffs filed their eighth amended complaint on October 25,
1999. Ultimately, the parties proceeded to a jury trial on fraud, conspiracy,
and UTPCPL actions. The jury trial commenced on December 13, 2004. The
jury rendered a verdict in favor of Appellant and Lindgren on all causes of
action except the catchall provision of the UTPCPL.2 The jury awarded
Plaintiffs $1,925.00 in compensatory damages from Lindgren and $295.00
from Appellant for the UTPCPL violation.3 The basis for the jury’s finding of a
UTPCPL violation is not clear from the record.
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2 The UTPCPL makes unlawful twenty-one specific instances of conduct
considered to constitute “unfair methods of competition” and “unfair or
deceptive acts or practices”. The last of these instances is the catch-all
provision that captures “any other fraudulent or deceptive conduct which
creates a likelihood of confusion or misunderstanding.” 73 P.S. § 201-
2(4)(xxi).
3 Lindgren paid compensatory damages and was dismissed from the case.
Though not relevant to our decision to vacate the judgment, we find it telling
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The second phase, a bench trial on UTPCPL treble damages4 and bad
faith, commenced on June 5, 2007. The trial court, Judge Albert A. Stallone,
entered a directed verdict in favor of Appellant on Plaintiffs’ bad faith claim
and did not treble the jury’s $295.00 UTPCPL award. The trial court entered
judgment on December 7, 2007, and Plaintiffs filed a timely appeal.
In an unpublished memorandum filed November 12, 2008, this Court
concluded Plaintiffs waived all issues on appeal because they failed to serve
the trial court with a copy of their Pa.R.A.P. 1925(b) statement. On October
22, 2010, a divided Supreme Court reversed and remanded. Berg v.
Nationwide Mut. Ins. Co., Inc. 6 A.3d 1002 (Pa. 2010) (plurality).
After remand, this Court issued a published opinion concluding that the
trial court in three respects erred in directing a verdict on Plaintiffs’ bad faith
claim. Berg v. Nationwide Mut. Ins. Co., Inc., 44 A.3d 1164 (Pa. Super.
2012) (“Berg II”). First, this Court observed that the trial court entered a
directed verdict in Appellant’s favor because it believed Appellant’s “Blue
Ribbon Repair Program”—the program through which Appellant referred
Plaintiffs to Lindgren for vehicle repairs—was not a part of the insurance policy
and therefore not subject to a bad faith claim. Id. at 1169. We concluded
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that a case in which a jury found in favor of Appellant on all but one cause of
action and awarded Plaintiffs only $295 has morphed into a judgment of more
than $20 million on Plaintiffs’ bad faith claim.
4 73 P.S. § 201-9.2(a), 1968 P.L. 1224, as amended.
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that Plaintiffs’ action against Appellant arises under an insurance contract in
accord with section 8371, since insurers at all times must act in good faith
towards their insureds regardless of whether loss claims are processed
through a third-party repair facility or through a direct repair program. Id.
at 1173. Second, the trial court held that Appellant’s violation of the UTPCPL
did not require a finding of bad faith. Id. We rejected this reasoning stating:
The Bergs have not argued that the phase one jury’s finding
against Nationwide on the UTPCPL claim “was sufficient in and of
itself to support a finding of ‘bad faith’ on Nationwide’s part.” To
the contrary, the Bergs have consistently argued, in our view
correctly, that the jury’s finding that Nationwide violated the
UTPCPL constitutes some evidence of bad faith conduct by
Nationwide. In other words, because Romano [v. Nationwide
Mut. Fire Ins. Co., 646 A.2d 1228 (Pa. Super. 1994)] holds that
bad faith conduct may be defined by reference to violations of
statutes related to insurance practices, the jury’s finding that
Nationwide violated the UTPCPL constitutes some evidence of
Nationwide’s bad faith. Because the jury was not asked to specify
precisely what conduct by Nationwide it found to be fraudulent or
deceptive under the UTPCPL, the overall probative value of this
evidence of bad faith may be somewhat limited.[5] But since a
directed verdict may be granted “only where the facts are clear
and there is no room for doubt,” […] this evidence of bad faith was
sufficient to preclude the entry of a directed verdict in
Nationwide’s favor.
Id. at 1175 (some citation omitted). Thus, while the UTPCPL violation was
sufficient to avoid a directed verdict, it was not sufficient, in and of itself, to
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5 As the prior panel of this Court noted, we are unable to address the UTPCPL
violation directly because the record does not divulge the basis for the jury’s
UTPCPL verdict. Presumably, the factual basis for that verdict is subsumed
within our extensive discussion of the parties’ disputes and the trial court’s
findings of fact and conclusions of law.
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prove bad faith. Id. Third, recognizing that when faced with a motion for
directed verdict, a trial court must consider facts in a light most favorable to
the nonmoving party and accept as true all evidence which supports that
party’s contention and reject all adverse testimony, we held it was error
for the trial court to direct a verdict on the evidence introduced by Plaintiffs.
Id. at 1170, 1175-76. Given the standard governing motions for directed
verdict, we observed that Plaintiffs introduced evidence that Appellant sent
the vehicle to another repair facility to avoid having to pay the cost of a total
loss, Appellant returned the vehicle representing repairs had been successfully
completed, even though its representatives had actual knowledge otherwise,
and Appellant’s utilized a “defense-minded” litigation strategy.6 Id. at 1176.
Accordingly, we remanded for a new trial where Plaintiffs again would have
the burden to prove their bad faith allegations by clear and convincing
evidence. Id.
The new trial took place in front of Judge Jeffrey K. Sprecher. Judge
Sprecher heard the testimony of only four damage witnesses, no additional
evidence of bad faith by Plaintiffs, and otherwise relied on transcripts from
the prior proceedings. In a 42-page opinion and verdict issued on June 21,
2014, Judge Sprecher found in favor of Plaintiffs on their bad faith claim and
____________________________________________
6 We explain, infra, under the standard governing motions for judgment
notwithstanding the verdict, a review of all the record evidence in this case
does not support these claims.
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ordered Appellant to pay $18 million in punitive damages and $3 million in
attorney’s fees. Appellant filed a timely post-trial motion seeking entry of
judgment in its favor or a new trial. The trial court denied that motion on
March 19, 2015. The trial court entered judgment on the verdict on April 21,
2015. This timely appeal followed:
Appellant raises four questions for our review:
1. Did the trial court err in finding, without record evidence
much less clear and convincing evidence, and without
hearing any of the relevant fact witnesses testify live,
that Nationwide violated the insurance bad faith statute,
where the record evidence showed, among other things:
(a) the vehicle was repairable; (b) there was only one
appraisal and it was not vetoed by [Appellant]; (c)
[Appellant] was unaware of any problems with the
vehicle when it was returned to [Plaintiffs]; and (d)
[Appellant] did not delay the resolution of this matter by
engaging in ‘scorched earth’ litigation pursuant to a
claims manual and strategy that did not apply to
[Plaintiffs’] claim?
2. Did the trial court err in awarding $18 million in punitive
damages after a jury verdict of $295 when: (a)
[Appellant] prevailed before the jury on [Plaintiffs’]
common law fraud claim; (b) no one was hurt; (c)
[Plaintiffs] chose to drive the vehicle for months and
thousands of miles after an expert told them it was
supposedly unsafe; (d) [Appellant] paid the insurance
claim in full; (e) [Appellant] disposed of the vehicle only
after obtaining court permission to do so and after storing
it for eight years: and (f) the trial judge included in his
opinions lengthy diatribes reflecting animus against
[Appellant] and the entire insurance industry?
3. Did the trial court err in awarding [Plaintiffs] $3 million
in attorneys’ fees based upon the fees incurred by
[Appellant], rather than the lodestar method required
under Pennsylvania Rule of Civil Procedure 1717, and
without making numerous necessary deductions?
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4. Did the trial court err in awarding interest on an award
comprised solely of attorneys’ fees and punitive
damages, and not on the amount of the underlying
insurance claim, which [Appellant] paid in full in 1998?
Appellant’s Brief at 4.
We begin with an analysis of whether the trial court erred in finding that
Appellant acted in bad faith under § 8371:
§ 8371. Actions on insurance policies
In an action arising under an insurance policy, if the court
finds that the insurer has acted in bad faith toward the insured,
the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date
the claim was made by the insured in an amount equal to the
prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.
42 Pa.C.S.A. § 8371.
The following standard governs our review of the trial court’s verdict:
Our review in a nonjury case is limited to whether the
findings of the trial court are supported by competent evidence
and whether the trial court committed error in the application of
law. We must grant the court’s findings of fact the same weight
and effect as the verdict of a jury and, accordingly, may disturb
the nonjury verdict only if the court’s findings are unsupported by
competent evidence or the court committed legal error that
affected the outcome of the trial. It is not the role of an appellate
court to pass on the credibility of witnesses; hence we will not
substitute our judgment for that of the factfinder. Thus, the test
we apply is not whether we would have reached the same result
on the evidence presented, but rather, after due consideration of
the evidence which the trial court found credible, whether the trial
court could have reasonably reached its conclusion.
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Mohney v. Am. Gen. Life Ins. Co., 116 A.3d 1123, 1130, (Pa. Super. 2015
2015), appeal denied, 130 A.3d 1291 (Pa. 2015). Because Plaintiffs prevailed
before the trial court, we view the evidence and all reasonable inferences
therefrom in a light most favorable to Plaintiffs. Rizzo v. Haines, 555 A.2d
58, 61 (Pa. 1989).
Similarly, entry of judgment notwithstanding the verdict requires us to
consider whether there was sufficient competent evidence to sustain the
verdict. Condio v. Erie Ins. Exch., 899 A.2d 1136, 1141 (Pa. Super. 2006),
appeal denied, 912 A.2d 838 (Pa. 2006). “Judgment notwithstanding the
verdict “should be entered only in a clear case, where the evidence is such
that no reasonable minds could disagree that the moving party is entitled to
relief.” Id. We must not substitute our judgment for that of the factfinder on
matters of credibility and weight of the evidence. Id.
The Pennsylvania General Assembly enacted § 8371 to protect insureds
from bad faith denials of coverage. Gen. Accident Ins. Co. v. Fed. Kemper
Ins. Co., 682 A.2d 819, 822 (Pa. Super. 1996). Thus, an insurer must act
with utmost good faith towards its insured. Berg II, 44 A.3d at 1170 (citing
Dercoli v. Pennsylvania Nat. Mut. Ins. Co., 554 A.2d 906, 909 (Pa. 1989)).
“The duty of good faith originates from the insurer’s status as fiduciary for its
insured under the insurance contract, which gives the insurer the right, inter
alia, to handle and process claims.” Berg II, 44 A.3d at 1170 (citing
Ridgeway v. U.S. Life Credit Life Ins. Co., 793 A.2d 972, 977 (Pa. super.
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2002)). Bad faith applies to “those actions an insurer took when called upon
to perform its contractual obligations of defense and indemnification or
payment of a loss that failed to satisfy the duty of good faith and fair dealing
implied in the parties’ insurance contract.” Toy v. Metro. Life Ins. Co., 928
A.2d 186, 199 (Pa. 2007). “[I]n order to recover in a bad faith action, the
plaintiff must present clear and convincing evidence (1) that the insurer did
not have a reasonable basis for denying benefits under the policy and (2) that
the insurer knew of or recklessly disregarded its lack of a reasonable basis.
Rancosky v. Washington Nat'l Ins. Co., 170 A.3d 364, 365 (Pa. 2017).
“[P]roof of an insurance company’s motive of self-interest or ill-will is not a
prerequisite to prevailing in a bad faith claim[,]” though such evidence is
probative of the second prong of the bad faith test. Id. “The clear and
convincing evidence standard is the highest standard of proof for civil
claims[.]” Grossi v. Travelers Pers. Ins. Co., 79 A.3d 1141, 1165 (Pa.
Super. 2013). It “requires evidence clear, direct, weighty, and convincing as
to enable the trier of fact to come to a clear conviction, without hesitancy of
the truth of the precise facts in issue.” Id.
“Bad faith claims are fact specific and depend on the conduct of the
insurer vis à vis the insured.” Condio, 899 A.2d at 1143. “[T]he fact finder
needs to consider all of the evidence available to determine whether the
insurer’s conduct was objective and intelligent under the circumstances.
Berg II, 44 A.3d at 1179. The insurer’s conduct during litigation of a bad
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faith claim can itself support a finding of bad faith. Hollock v. Erie Ins.
Exch., 842 A.2d 409, 416 (Pa. Super. 2004) (en banc), appeal dismissed, 903
A.2d 1185 (Pa. 2006). Furthermore, “[a]n insurance company may not look
to its own economic considerations, seek to limit its potential liability, and
operate in a fashion designed to ‘send a message.’ Rather, it has a duty to
compensate its insureds for the fair value of their injuries.” Bonenberger v.
Nationwide Mut. Ins. Co., 791 A.2d 378, 382 (Pa. Super. 2002).
This Court will reverse a finding of bad faith where the trial court’s
“critical factual findings are either unsupported by the record or do not
rise to the level of bad faith.” Brown v. Progressive Ins. Co., 860 A.2d
493, 502 (Pa. Super. 2004) (emphasis added), appeal denied, 872 A.2d 1197
(Pa. 2005). Furthermore:
The [factfinder] may not be permitted to reach its verdict
merely on the basis of speculation and conjecture, but there must
be evidence upon which logically its conclusion may be based.
Therefore, when a party who has the burden of proof relies upon
circumstantial evidence and inferences reasonably deducible
therefrom, such evidence, in order to prevail, must be adequate
to establish the conclusion sought and must so preponderate in
favor of that conclusion as to outweigh in the mind of the fact-
finder any other evidence and reasonable inferences therefrom
which are inconsistent therewith.
Id. at 498 (quoting Van Zandt v. Holy Redeemer Hosp., 806 A.2d 879, 886
(Pa. Super. 2002), appeal denied, 823 A.2d 145 (Pa. 2003)).
Insurers must cover insureds for the fair value of their loss. See Toy,
928 A.2d at 199; Bonenberger, 791 A.2d at 382. Here, Appellant covered
the cost of repairs to the Jeep. Nonetheless, “the focus in section 8371 claims
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cannot be on whether the insurer ultimately fulfilled its policy obligations,
since if that were the case then insurers could act in bad faith throughout the
entire pendency of the claim process, but avoid any liability under section
8371 by paying the claim at the end.” Berg II, 44 A.3d at 1178 (emphasis
in original). Section 8371 concerns the “manner in which insurers discharge
their duties of good faith and fair dealing during the pendency of an insurance
claim[.]” Id. (emphasis in original).
Plaintiffs argue, and the trial court found, that Appellant acted in bad
faith by repairing the Jeep rather than declaring the Jeep a total loss and
compensating Plaintiffs for its value at the time of the loss. The parties agree
that Lindgren did poor repair work. They dispute Appellant’s role in and
knowledge of the faulty repair job. In summary, the parties dispute (1)
whether Appellant overrode Lindgren’s initial total loss appraisal in order to
save money; (2) whether Appellant forced Lindgren to repair the Jeep knowing
the Jeep could not be restored to its pre-accident condition; (3) whether
Appellant allowed Lindgren to return the Jeep to Plaintiffs knowing the Jeep
was not crashworthy and therefore not safe to drive; and (4) whether
Appellant’s subsequent conduct—including its conduct of this litigation—was
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an elaborate cover-up of its prior bad faith conduct. We will consider these
findings in turn.7
1. The Initial Appraisal.
Douglass Joffred, the body shop manager for Lindgren, did the initial
appraisal of the Jeep. N.T. Trial, 12/15/04, at 619, 622. Lindgren is part of
Nationwide’s Blue Ribbon Repair Program (“BRRP”), pursuant to which
Nationwide refers its insureds to BRRP shops, and the shops in turn offer
discounted repairs to Nationwide. Id. at 631, 708-09. Joffred testified that
the Jeep initially appeared to him to be a total loss, but that he ultimately
decided it was repairable:
Q. You testified with regard to Plaintiffs’ vehicle that when you
first looked at it it quote on quote [sic] appeared to be a
total loss; is that correct?
A. Yes.
Q. At that point you had not made a final determination, if in
fact, the vehicle was a total loss?
A. No.
Q. You didn’t really know one way or the other. It was just a
first impression?
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7 The trial court’s organization of its findings on bad faith between its June
21, 14 Opinion and Verdict and its July 23, 2015 1925(a) Opinion do not align
precisely, but the factual bases upon which the trial court found bad faith are
the same. Similarly, the statement of questions presented by the Appellant
and as restated by the Appellee do not align precisely. In substance, however,
the matters in dispute are clear. We have offered our summary of the issues
purely for organizing our discussion. We address the trial court’s bases for
finding bad faith throughout our discussion.
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A. Correct.
[…]
Q. Is it unusual in what you do to have a situation where maybe
at first you think it might be a total loss then you decide it
is not a total loss?
A. No.
Q. It happens?
A. Yes.
Id. at 662-63.
Despite his first impression, Joffred stated he prepared a repair estimate
on September 10, 1996. Id. at 671; Trial Exhibit 6. The printed estimate is
dated September 20, 1996 and reflects $12,326 in parts and labor to repair
the Jeep. Id. at 674, Trial Exhibit 6, at 8. Joffred testified that September
20, 1996 is the date the document was printed, not the date the estimate was
prepared.8 Id. at 674, 691. Joffred testified that his estimate did not change
between September 10 and September 20, 1996. Id. at 672.
Doug Witmer was Nationwide’s claims adjustor who handled Plaintiffs’
claim. N.T. Trial, 12/14/04, at 293, 295. Witmer and Joffred discussed
options for the Jeep, and Witmer received Joffred’s $12,326 repair estimate.
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8 Joffred’s testimony on Trial Exhibit 19 further reinforces this point. Exhibit
19 is a supplemental estimate. Id. at 679-80. It is dated February 5, 1997.
Id. Lindgren returned the Jeep to Plaintiffs on December 30, 1996. Id.
Joffred testified that Exhibit 19 was printed on February 5, 1997 but depicts a
supplemental estimate prepared at an earlier date, when Lindgren was still in
possession of the Jeep. Id. at 679-80, 692.
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Id. at 303. Witmer believed the Jeep to be worth roughly $25,000 or $26,000.
Id. at 338. Thus, the estimated cost of repair was roughly 50% of the actual
cash value (“ACV”) of the Jeep. Id. at 302-03; 336-37. Witmer said that if
the repair costs approach 80% of a vehicle’s ACV, the insurer will consider
declaring a total loss. Id. at 336. In addition, Witmer and Joffred testified
that a vehicle can be declared a “structural total loss,” regardless of ACV, if
the vehicle cannot be repaired to its pre-accident condition. Id. at 365; N.T.
Trial, 12/15/04, at 629.
Appellant’s claims log, produced as Trial Exhibit 8, includes several
entries relevant to the initial appraisal of the Jeep’s condition. An entry dated
September 10, 1996 at 1:49 p.m. provides:
LOSS Reassigned for COLL on Daniel G. & Sharon E Berg, D. v. Nationwide Mut. Ins. Co.
Combined Opinion