eNotes: Liability – November 2024 – Federal

SIGNIFICANT CASE SUMMARIES

Federal Case Summaries

Mid-Century Ins. Co. v. Werley
United States Court of Appeals for the Third Circuit
No. 23-1822

Decided: September 5, 2024

Court addresses validity of UIM household exclusion.

Background

A 15-year-old, Levi Werley, was injured while riding an uninsured motorized dirt bike. The driver who struck him had insufficient insurance to fully compensate Levi for his injuries. Levi’s parents, Chad and Jane Werley, sought to recover underinsured motorist (“UIM”) benefits under their own automobile insurance policies with Mid-Century Insurance Company. Mid-Century paid out $250,000 under one policy, but denied an additional $250,000 under another, citing a household vehicle exclusion. The Werleys argued that this exclusion was invalid and unenforceable.

The District Court agreed with the Werleys that the coverage exclusion in the at-issue policy was invalid under Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”). The District Court found that the Werleys were entitled to the additional UIM benefits sought as the UIM benefits followed the insured not the vehicle. Thus, the District Court found that Levi was entitled to stacked coverage, notwithstanding the uninsured status of the dirt bike. Mid-Century timely appealed.

Holding

The Third Circuit Court of Appeals found that the household vehicle exclusion was valid and enforceable. The Court explained that the exclusion was unambiguous and that the Werleys had no reasonable expectation of UIM coverage for the dirt bike. The Court also stated that Pennsylvania’s MVFRL did not require UIM coverage to follow the insured in all circumstances and that exclusions limiting the scope of UIM coverage were generally enforceable. Moreover, the Court reasoned that the Pennsylvania Supreme Court would find the household vehicle exclusion to be valid under the MVFRL. Thus, applying Pennsylvania substantive law, the Court vacated the District Court’s Order and remanded the case with instructions to enter judgement in favor of Mid-Century.

Questions about this case can be directed to Jhanvi Jamindar at (717) 441-7056 or jjamindar@tthlaw.com.

Holmes v. Am. Home Patient, Inc.
United States District Court for the Middle District of Pennsylvania
No. 4:21-CV-01683

Decided: September 6, 2024

Court addresses the ratio of punitive damages to compensatory damages and reduces award of punitive damages

Background

Plaintiff Patricia Holmes worked as a Customer Service Representative at American HomePatient, Inc.’s (“AHOM”) State College, Pa. location from October 2019 to July 2020. Holmes filed a two-count Complaint against her employer alleging a racially hostile work environment created by a coworker and her manager, deficiencies in AHOM’s anti-discrimination and anti-harassment policies and inadequate investigation by AHOM’s Human Resources Department personnel.

Summary judgment was granted in favor of AHOM on Plaintiff’s retaliation claim. After a three-day jury trial on Plaintiff’s Section 1981 hostile work environment claim, the jury returned a unanimous verdict awarding Holmes $500,000 in compensatory damages and $20 million in punitive damages. Post-trial motions were filed, including seeking Renewed Judgment as a matter of law or Remittitur.

Holding

The U.S. Supreme Court has “instructed courts reviewing punitive damages 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.” Further, “[w]hen compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.” In the present matter, the Trial Court held that the award of $500,000 in compensatory damages is substantial and only some of the subfactors concerning reprehensibility tilt in Plaintiff’s favor, such that a two-to-one ratio reaches the outer constitutional limits. Therefore, Plaintiff’s punitive damages award was decreased from $20 million to $1,000,000.

Questions about this case can be directed to Gabrielle Martin at (610) 332-7003 or gmartin@tthlaw.com.