Dina Devincenzo-Gambone and Anthony R. Gambone v. Erie Insurance Exchange

Summary

The Pennsylvania Superior Court reviews Erie Insurance Exchange’s appeal from a judgment awarding Dina Devincenzo-Gambone and Anthony R. Gambone more than $1.75 million following a bad-faith finding under 42 Pa.C.S. § 8371. The opinion addresses whether sufficient evidence supported the bad-faith verdict and awards of attorneys’ fees and interest, including disputes concerning a binding arbitration award and stacked underinsured-motorist benefits. The court states that it is constrained to vacate the judgment and verdict in part and remand for further proceedings.

Holdings

1. The evidence was sufficient to support the finding that Erie acted in bad faith by withholding $50,000 of the binding arbitration award and petitioning to modify the award after agreeing to binding arbitration on the stacking issue.
2. The trial court erred by awarding $100,000 in attorney fees for the underlying UIM claim solely as one-third of the arbitration award. Fees under Section 8371 must be calculated using the lodestar approach, and a contingency-fee agreement may be considered but cannot serve as a ceiling on the fee award.
3. The award of $117,100 in attorney fees associated with litigating the bad-faith claim could not be sustained because the trial court failed to explain adequately its reductions to the hours and hourly rates and did not sufficiently apply the lodestar approach.
4. For purposes of Section 8371(1), the term "claim" is not limited to the bad-faith claim; it refers to the insured's request for payment under the insurance policy. Thus, the trial court could, in its discretion, calculate interest from May 2, 2006, when the UIM claim was first made, and on the $300,000 policy claim rather than only on the $50,000 withheld amount.
5. Section 8371 does not authorize compound interest. Interest may be compounded only when the parties agree to compounding or a statute expressly authorizes it, and Section 8371 contains no such authorization.

Questions Presented

1. Whether sufficient evidence supported the finding that Erie acted in bad faith under 42 Pa.C.S.A. § 8371.
2. Whether the trial court properly awarded attorney fees for both the underlying UIM claim and the bad-faith claim.
3. Whether the trial court properly calculated the amount and commencement date of interest under 42 Pa.C.S.A. § 8371.
4. Whether interest awarded under Section 8371 may be calculated on a compound-interest basis.

Disposition

vacated