Horrible Insurers: PA Judge Sends Message To Bad Faith Insurer

Cropped shot of a businessman crossing his fingers behind his back

In a scathing opinion, a Pennsylvania trial court judge urged an appellate court to uphold an award of $18 million in punitive damages and $3 million in attorneys fees against Nationwide Mutual Insurance Company. See Berg v. Nationwide Insurance Company, Civ. Action No. 98-813 (Pa. Common Pleas, Berks, Cty.). The award stemmed from Nationwide’s “scorched earth” litigation policy and bad faith conduct directed towards one of its policyholders.

The case involved a claim under an automobile insurance policy. After the insured’s car was damaged, a claim for coverage was made. Although Nationwide’s independent appraiser determined that the car was totaled, Nationwide overrode that decision and sought to repair the car. Nationwide then spent in excess of $3 million on lawyers to fight the claim.

The words of Judge Jeffrey K. Sprecher of the Berks County Court of Common Pleas cannot be improved upon and I will not try. Instead, I will simply let Judge Sprecher’s words speak for themselves.

Year after year, [the insureds] trustingly paid the premiums for insurance coverage for defendant’s provision of representation and payment of any liability if ever needed. Premiums are paid, regardless of whether or not Nationwide ever has to incur any claims and regardless of whether its expense is one hundred dollars or one hundred thousand dollars. [The insureds], as with other policyholders, pay for this peace of mind.

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Was there a failure to make a timely offer of settlement? There most certainly was. [Nationwide] tries to divert the blame for this unprecedented endless and protracted litigation to plaintiffs. Of course, the only one who could settle this case was Nationwide if it had made a legitimate offer. Instead it sent a scorched earth message to litigants and the plaintiffs bar that they cannot fight Goliath, especially in small claims cases because their lives will be made miserable. Nationwide will dig in its heels and fight all the way to the end.

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[Nationwide] clearly followed a litigation strategy designed to “starve out” and wear down plaintiffs and their counsel. Nationwide’s message: the wealthy and powerful corporation could wait 20 years or until the end of time, while plaintiffs’ counsel tires of waiting for compensation from his clients to pay his legal fees and expenses or if plaintiffs are able to pay their legal fees, Nationwide could wait until the end of time for plaintiffs to grow weary of spending hundreds of thousands of dollars to compete with defendant’s billions.

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[Nationwide] has done everything it possibly could to stonewall the claims processing disposition for its insured. It failed, dismally, to treat the [the insureds] fairly to properly remediate the claim. It looked to its own economic considerations and has sought to limit its potential liability and operated in a fashion designed to send a message.

To the extent Nationwide “operated in a fashion designed to send a message,” Judge Sprecher reciprocated. Insurers who act in bad faith in Pennsylvania will pay a heavy price.

Start at the End: Reducing the Costs of Discovery Gone Wild

EAPMore dollars are expended in the litigation of lawsuits than are expended in settlements and judgments. Often, the biggest component of litigation dollars is devoted to discovery. The advent of electronically stored information and associated discovery issues over the past couple of decades has only increased the costs of discovery.

All of this prompts the question, most urgently, from in-house counsel: What can be done to curtail the spiraling costs of discovery? One simple tip that leads to big savings is to start at the end. By that, I mean envision the end of the case, whether that is at closing argument before a jury or oral argument at the summary judgment stage before a judge, and picture what you need to say in order to prevail. With that in place, work backwards, outline the proof required and plan your discovery accordingly.

Starting at the end applies equally well to all phases of litigation. Obviously, it is much easier to arrive at your intended destination if you know where it is.

Indeed, starting at the end is a time honored principle applied throughout industry and the arts. I recently came across an article published in the design thinking and innovation magazine, MISC, that discussed how innovators like Apple, Nike and Virgin Airlines employ the same “start at the end” principle employed by Edgar Allen Poe.

“Poe wrote his last stanza first. This enabled him to determine his structure and progression, and afforded him to graduate levels of importance and wit. It also established the rhythm, meter, length, and general arrangement of his stanzas. Defining an initial set of constraints helps to set the parameters of the experience.”


What worked for Poe and the Raven also works for litigation discovery; “defining an initial set of constraints helps to set the parameters of the experience” and, as importantly, leads to a reduction of discovery costs.

Questions? Let me know.