Berg v. Nationwide Mut. Ins. Co.

• Decision Date: 29 June 2012
• Citation: 2012 PA Super 88,44 A.3d 1164
• Parties: Daniel BERG and Sheryl Berg, H/W, Appellants v. NATIONWIDE MUTUAL INSURANCE COMPANY, INC., Appellee.
• Court: Pennsylvania Superior Court

44 A.3d 1164

2012 PA Super 88

Daniel BERG and Sheryl Berg, H/W, Appellants

v.NATIONWIDE MUTUAL INSURANCE COMPANY, INC., Appellee.

Superior Court of Pennsylvania.

Argued Oct. 25, 2012.

Filed April 17, 2012.

Reargument Denied June 29, 2012.

Benjamin J. Mayerson, Pottstown, for appellants.

Micheal R. Nelson, Blue Bell, for appellee.

BEFORE: DONOHUE, OLSON and STRASSBURGER^*, JJ.

OPINION BY DONOHUE, J.:

Appellants, Daniel and Sheryl Berg (collectively, the “Bergs”), appeal from the entry of judgment after the trial court granted Appellee Nationwide Mutual Insurance Company, Inc.'s (“Nationwide”) motion for a directed verdict on the Bergs' claims under Pennsylvania's bad faith insurance statute, 42 Pa.C.S.A. § 8371. For the reasons set forth herein, we vacate the judgment and remand the case for a new trial.

On September 4, 1996, the Bergs' 1996 Jeep Grand Cherokee was involved in an accident and sustained extensive damage. On the date of the accident, the Bergs were insured by a Nationwide automobile policy that covered, inter alia, losses “caused by collision or upset.” The Bergs elected to take the Jeep to Lindgren Chrysler–Plymouth, Inc. (“Lindgren”), a participating repair facility in Nationwide's “Blue Ribbon Repair Service Program” (“BRRP”). The BRRP is Nationwide's direct repair program, pursuant to which claimants may take their vehicles to a designated “Blue Ribbon” repair facility for appraisal and repair. The BRRP is an option to the more traditional method of claims processing, where the claimant obtains an appraisal from a third-party repair shop to institute the repair process. On or about December 30, 1996, after approximately four months of repairs, the Bergs' vehicle was finally returned to them.

According to the Bergs, in October 1997 they received a telephone call from David Wert, a former employee of Lindgren, who advised them of possible structural repair failures to their Jeep. On January 23, 1998, the Bergs commenced the present action through the filing of a writ of summons against Lindgren and Nationwide. After pre-trial discovery, on May 4, 1998 the Bergs filed their initial complaint, and after a series of preliminary objections, the Bergs' final amended complaint (the eighth) was filed on October 25, 1998. It asserted causes of action against Lindgren for breach of contract, negligence, breach of warranty, common law fraud, conspiracy, and violation of the catchall provision of the Uniform Trade Practices and Consumer Protection Law, 73 P.S. § 201–2(4)(xxi) (“UTPCPL”).¹ It asserted claims against Nationwide for breach of contract, negligence, common law fraud, conspiracy, violation of the UTPCPL, and for insurance bad faith, 42 Pa.C.S.A. § 8371.

The trial court bifurcated the trial, with the first phase consisting of a jury trial on the Bergs' claims for common law fraud, conspiracy, and liability under the UTPCPL, and the second phase a bench trial on the issues of treble damages under the UTPCPL and for claims pursuant to the insurance bad faith statute. The first phase began on December 13, 2004, and after five days of trial, the jury returned a verdict finding that both Lindgren and Nationwide had violated the catchall provision of the UTPCPL, and in favor of Lindgren and Nationwide on the common law fraud and conspiracy claims. The jury awarded compensatory damages of $1,925 against Lindgren and $295 against Nationwide.

Lindgren and Nationwide both filed motions for post-trial relief, arguing that the jury's verdict was inconsistent. In their arguments, Lindgren and Nationwide relied on Booze v. Allstate, 750 A.2d 877, 880 (Pa.Super.2000), for the proposition that liability under the catchall provision of the UTPCPL required a finding of common law fraud as a prerequisite to liability under the statute.² According to Lindgren and Nationwide, the jury's decision in their favor on the common law fraud claim necessitated a similar verdict on the UTPCPL claim as well. In a written opinion, the trial court disagreed for two reasons. First, the trial court ruled that Lindgren and Nationwide had waived this argument when they declined the trial court's offer to have the jurors questioned regarding the possible inconsistency in their verdict. Trial Court Opinion, 4/7/05, at 10. Second, detailing Pennsylvania's strong presumption of the consistency of verdicts, the trial court concluded that the jury could have decided, “that it would be more appropriate to find that Nationwide and Lindgren engaged in fraudulent or deceptive conduct in a consumer or business transaction which created a likelihood of confusion or misunderstanding, rather than simply common law fraud.” ³Id. at 9.

The phase two trial began on June 5, 2007, and after four days of testimony, Nationwide moved for a directed verdict. On July 10, 2007, after the submission of briefs and oral argument, the trial court granted Nationwide's motion for directed verdict on the Bergs' claims under the insurance bad faith statute (42 Pa.C.S.A. § 8371).⁴ On October 29, 2007, the trial court denied the Bergs' motion for post-trial relief, and after entry of judgment on December 7, 2007, the Bergs filed a timely notice of appeal. ⁵

The Bergs raise five issues for our consideration and determination:

1. Was it reversible error to grant a directed verdict on the issue of statutory bad faith, after the jury found the insurer's conduct violated the catchall provision under the UTPCPL in the first phase of the trial.

2. Was it reversible error to rule that this lawsuit, stemming from a first party collision claim, was not ‘an action arising under an insurance policy,’ simply because the insured[s] agreed to have their collision damage appraised and repaired by the insurer's collision repair program which the insurer does not identify in the policy of insurance.

3. Was it reversible error to preclude evidence, in a non-jury phase of a bifurcated trial, when that evidence was relevant to prove the insurer implemented its secret, but well documented strategy to deter contingency-fee lawyers from representing claimants with small value claims by making the litigation too expensive. Specifically, did the trial court abuse its discretion when it precluded from evidence, during the non-jury trial phase, the $922,654.25 that the insurer paid its attorneys to defend this lawsuit over a failed collision claim.

4. Was it reversible error to find the insured[s] waived their right to obtain discoverable claim file entries improperly redacted pursuant to a false assertion of attorney-client privilege, where an Order of record required the insurer to produce all claim file materials protected by attorney-client privilege, and where a second Order was entered after the insured filed a motion for sanctions, and, notwithstanding the two Orders, the insurer nevertheless continued to conceal the evidence via a false assertion of privilege.

5. Was it reversible error to permit the insurer to use the attorney-client privilege as a shield and sword. Specifically, was it reversible error to permit the insurer to conceal numerous claim file entries pursuant to an asserted attorney-client privilege, and then to also permit the insurer to offer the same claim file as evidence to prove it had no knowledge of repair issues inasmuch as there was no reference to repair issues in the redacted claim file.

Bergs' Brief at 5–6.

For their first two issues on appeal, the Bergs contend that the trial court's two reasons for entering a directed verdict in favor of Nationwide were in error. In its Pa.R.A.P. Rule 1925(a) opinion, the trial court indicated that it entered a directed verdict because: (1) the BRRP “is not a part of Nationwide's automobile insurance policy” and thus Pennsylvania's bad faith insurance statute does not apply in this case, and (2) the case of Romano v. Nationwide Mut. Fire Ins. Co., 435 Pa.Super. 545, 646 A.2d 1228 (1994), does not apply in this case and thus the jury's verdict against Nationwide for a violation of the catchall provision of the UTPCPL does not require a finding of bad faith against Nationwide.Trial Court Opinion, 6/3/11, at 5, 9. For the reasons set forth here, we conclude that the trial court erred in both of these respects.

We begin with our standards of review. In reviewing the trial court's entry of a motion for a directed verdict, “our scope of review is limited to determining whether the trial court abused its discretion or committed an error of law that controlled the outcome of the case.” Fetherolf v. Torosian, 759 A.2d 391, 393 (Pa.Super.2000). “A directed verdict may be granted only where the facts are clear and there is no room for doubt.” Id. (quoting Lear, Inc. v. Eddy, 749 A.2d 971, 973 (Pa.Super.2000)). “In deciding whether to grant a motion for a directed verdict, the trial court must consider the facts in the light most favorable to the nonmoving party and must accept as true all evidence which supports that party's contention and reject all adverse testimony.” Id.

On the other hand, the interpretation of an insurance policy is a question of law for this Court to resolve. Travelers Casualty & Surety Company v. Castegnaro, 565 Pa. 246, 251, 772 A.2d 456, 459 (2001). Our standard of review, therefore, is plenary. Continental Cas. Co. v. Pro Machine, 916 A.2d 1111, 1118 (Pa.Super.2007). In interpreting the language of an insurance policy, the goal is “to ascertain the intent of the parties as manifested by the language of the written instrument.” Kane v. State Farm Fire and Casualty Co., 841 A.2d 1038, 1042 (Pa.Super.2003) (citation omitted). Our Supreme Court has instructed that the “polestar of our inquiry ... is the language of the insurance policy.” Madison Const. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 606, 735 A.2d 100, 106 (1999).

Our Supreme Court has long recognized that “the utmost fair dealing should characterize the transactions between an insurance company and the insured.” Dercoli v....