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A Pennsylvania trial court recently reduced the amount of security required of a primary insurer to stay execution upon a substantial judgment in a medical malpractice case. In White v. Behlke, 2009 WL 3344849 (C.P. Lackawanna County October 7, 2009), the jury returned a verdict far in excess of the insureds’ policy limits. The court allowed a supersedeas upon posting security in the amount of the insurer’s policy limits plus its pro-rata share of delay damages.
Dr. Behlke and his practice group were found liable for a $16,000,000 malpractice award. However, the total amount of their primary coverage available was $1,000,000. The doctor and the practice group had access to the state-operated excess liability fund, but that coverage did not factor into court’s ruling on the amount of security required for the appeal because the excess fund was not legally required to contribute to the supersedeas.
Under Pennsylvania law, a judgment debtor may obtain an automatic supersedeas by posting security in the amount of 120% for the judgment. Pa.R.A.P. 1731(a). The primary insurer, on behalf of the doctor and his practice group, filed an application under Pa.R.A.P. 1731(b) requesting a reduction in the amount of security required for the appeal. In addition, the court considered a provision of a statute, applicable only to medical professional liability cases, wherein the legislature acknowledged the general authority of trial courts to limit or reduce the amount of security for an appeal. 40 P.S. § 1303.515(d). Nonetheless, the plaintiffs objected to the reduction of security, arguing that the insurer acted had in bad faith by failing to settle the case within the limits of liability of the policies issued to the doctor and his practice group.
The court held that the insurer was not required to bond the entire excess judgment, despite the allegations of bad faith. It explained that the allegations of bad faith had yet to be proven and that the insurer’s liability for bad faith must be determined by some future proceeding which would include the insurer as a named party.
Rather, the court reasoned that the question of whether the insurer would be obligated to post security for a supersedeas bond for that portion of the judgment which exceeded the insurer’s policy limits depended upon the language of the applicable insurance policies. It noted that the policies did require the insurer to post a bond, but that the policies limited the amount of the bond to the amount of coverage provided per claim plus a pro rata share of interest. The court construed this language to require the insurer to bond the amount of coverage ($500,000 per claim) plus the pro rata share of pre-judgment interest awarded pursuant to Pa.R.Civ.P. 238. Thus, the amount that the insurer was contractually required to post as security was approximately $1,600,000.
Although White v. Behlke was decided in the context of a medical malpractice action, the unique statute and case law applicable to such cases did not animate the court’s decision. Rather, the court’s ruling was grounded upon its interpretation of the applicable insurance policy and the common sense recognition that any claims against the insurer for bad faith would have to be adjudicated in a separate action brought against the insurer in its own name. Thus, White v. Behlke may provide a basis for insurers to seek a limitation upon their obligations to provide security for an excess judgment in other types of cases.