TERLETSKY v. PRUD. PROP. & CAS. INS. CO.

KELLY, Judge:

In this appeal and cross-appeal, we must determine whether the trial court's findings of fact are adequately supported by evidence. In addition, we are asked to determine whether the trial court properly concluded that appellee, Prudential Property and Casualty Insurance Company, acted in bad faith in partially disputing payment of appellant's, Alexander Terletsky's, uninsured motorist claim. We hold that the trial court's factual findings have adequate support in the evidence. We further hold that appellee had a rational basis for disputing appellant's claim; thus, the trial court's determination of bad faith was improper. Accordingly, we reverse.

The relevant facts and procedural history are as follows. On March 5, 1989, appellants, Alexander and Marina Terletsky (the Terletskys) were involved in a motor vehicle accident with uninsured motorist, Michael Brown. The police report of the accident indicated that no injuries were sustained. Following the accident, the Terletskys filed uninsured motorist claims against their carrier, appellee, Prudential Property and Casualty Insurance Company (Prudential). In addition, Michael Brown filed a liability claim against Prudential which was assigned to the same claims adjuster as the Terletskys' uninsured motorist claims. On September 5, 1989, Prudential settled Michael Brown's liability claim for $2,000.00 and a waiver of subrogation rights. On September 27, 1989, in connection with the investigation of the accident and in an attempt to resolve medical questions relating to the Terletskys, Prudential requested independent medical examinations at Penn Diagnostic Center of both Marina and Alexander Terletsky. Counsel for the Terletskys refused the request. However, the Terletskys' counsel proposed an alternative plan for the examinations which was subsequently rejected by Prudential.1

As of December, 1989, the Terletskys had submitted to Prudential $5,600.00 in medical bills for the treatment of Marina Terletsky's alleged injuries and $9,100.00 in medical bills for the treatment of Alexander Terletsky. Alexander Terletsky did not sustain a wage loss in his employment as an engineer. Marina Terletsky sustained, but did not claim, a few days wage loss as a paralegal.

The Terletskys demanded settlement of their uninsured motorist claims on December 14, 1989, in the amount of their policy limits. The Terletskys' policy provided $100,000.00/$300,000.00 coverage which allowed $100,000.00 of uninsured motorist coverage for each of the two cars they owned and $300,000.00 per accident. Also, on December 14, 1989, the Terletskys demanded arbitration of their claim disputes pursuant to the arbitration clause in their policy. The clause provided that arbitration could be invoked when the insurer and insured could not reach an agreement.2

The neutral arbitrator for the arbitration panel was selected in June, 1990. Prudential then petitioned the arbitrators to compel the independent medical examinations of the Terletskys. On July 6, 1990, the arbitrators ordered the independent medical examinations; however, on July 19, 1990, the Terletskys sought reconsideration. After hearing arguments on September 19, 1990, the arbitrators again ordered that the Terletskys submit to the independent medical examinations as well as provide Prudential with statements under oath. Consequently, the independent medical examinations took place on October 3, 1990.

On October 17, 1990, Prudential offered $40,000.00 for the bodily injury claim of Alexander Terletsky and $17,500.00 for the bodily injury claim of Marina Terletsky. In response, counsel for the Terletskys indicated that he would "not blink" at any offer below $100,000.00 for each claimant.

An arbitration hearing was held on December 27, 1990, at which Alexander Terletsky testified. The hearing on Marina Terletsky's claim, however, was continued for the purpose of receiving the videotaped testimony of the Terletskys' orthopedist. In connection with the December 27, 1990 hearing, Prudential's house counsel, Anna Pace, interviewed Michael Brown by telephone. Michael Brown agreed to accept a subpoena and testify before the arbitrators on behalf of Prudential; however, he never received the subpoena and he never testified. Following the hearings, Anna Pace spoke with Prudential's arbitrator regarding the status of the arbitration awards.

On January 22, 1991, the arbitrators awarded Alexander Terletsky the amount of $125,000.00 for his uninsured motorist claim with the following caveat:3

Arbitration Award of Alexander Terletsky, January 22, 1991.

Subsequently, Prudential decided to appeal the award of the arbitrators. On February 7, 1991, Prudential's claims representative for the case, Laurie Trythall, instructed Prudential's house counsel to appeal the award on the grounds that the Terletskys policy provided for only $100,000.00 liability and "stacking"4 was not permitted. The appeal was based on Chartan v. Chubb Corp., 725 F.Supp. 849 (E.D.Pa.1989) (Chartan I).5 However, Prudential's corporate counsel, Clayton W. Boulware, had advised management that "stacking" was now permitted in Pennsylvania. The "Boulware memo" stated in part:

Memorandum of Clayton W. Boulware, January 8, 1991.

On February 20, 1991, Prudential, represented by outside counsel, filed a petition to modify the award of the arbitrators. The petition did not refer to the stacking issue, but stated that the award of the arbitrators was deficient in form. Prudential requested that the award to Alexander Terletsky be reduced to $100,000.00. A hearing on the request for modification was scheduled for July 12, 1991.

Between February and June of 1991, Prudential paid Marina Terletsky $125,000.00 in satisfaction of the arbitration award in her favor and paid Alexander Terletsky $100,000.00 of the $125,000.00 award in his favor. Subsequently, in June of 1991, Prudential paid Alexander Terletsky the $25,000.00 outstanding on his arbitration award. Thereafter, the hearing on the request for modification of the arbitration award was cancelled.

On February 22, 1991, Alexander Terletsky filed a complaint against Prudential which alleged that Prudential had acted in bad faith during the handling of his uninsured motorist claim. Additionally, on November 12, 1991, the Terletskys jointly filed a complaint against Prudential which alleged that Prudential had acted in bad faith during the handling of Marina Terletsky's uninsured motorist claim. The complainants sought damages pursuant to 42 Pa.C.S.A. § 8371.7 The actions were consolidated for trial and heard by arbitrators of the Philadelphia Court of Common Pleas on August 17, 1992. An appeal was taken from the arbitrator's award.

A four day non-jury trial was held before the trial court from February 18, 1993 to February 23, 1993. The trial court found in favor of Alexander Terletsky on April 2, 1993, and concluded as a matter of law that Prudential had acted in bad faith with respect to the handling of Alexander Terletsky's uninsured motorist claim. The trial court found that the bad faith commenced on or about February 6, 1991 and ended in mid-July when Prudential satisfied all claims and cancelled the petition to modify the arbitration award. For the bad faith claim, the trial court awarded Alexander Terletsky $15,000.00 in counsel fees for services in connection with the proceedings. The trial court, however, did not award punitive damages. Further, the trial court found in favor of Prudential on Marina Terletsky's bad faith claim and issued extensive findings of fact and conclusions of law. Following the award, the Terletskys and Prudential filed motions for post-trial relief. Prudential filed post-trial motions seeking judgment notwithstanding the verdict. The Terletskys filed post-trial motions requesting additional findings of fact and alleging error on the part of the trial court in not awarding punitive damages. Additionally, the Terletskys filed an objection to Prudential's post-trial motions.8 The trial court issued its opinion on January 19, 1994 which incorporated its original findings of fact and conclusions of law. The trial court denied all post-trial motions. This timely appeal and cross-appeal followed.

On appeal, the Terletskys present the following issues for our review:

The Terletskys' Brief at 4-5.

Prudential raises the following issues in its cross-appeal:

Prudential's Brief at 1-4.

As the Terletskys and Prudential have raised similar issues on appeal, we will review them together. Initially, we consider the trial court's findings of fact. The Terletskys and Prudential both contend that the trial court erred in its factual findings. We note the following standard in addressing these claims:

American States Insurance Company v. Maryland Casualty Company, 427 Pa.Super. 170, 192, 628 A.2d 880, 891 (1993). Further, "[i]t is well-established that decisions regarding the weight and the credibility of testimony are within the province of the trier of fact and will not be disturbed upon our cold review of the record." Id. (citing Gemini Equipment Co. v. Pennsy Supply, Inc., 407 Pa.Super. 404, 595 A.2d 1211 (1991); In Re New 12th Ward Republican Club, 412 Pa.Super. 255, 603 A.2d 205 (1992)). Moreover, as a fact finder, it is a judge's prerogative to believe part of a witness' testimony and find him mistaken as to the other part. Miller v. C.P. Centers Inc., 334 Pa.Super. 623, 629, 483 A.2d 912, 915 (1984) (citing Walker v. Martin, 214 Pa.Super. 287, 257 A.2d 619 (1969)).

The Terletskys assert that the trial court erred in not considering their request for additional findings of fact, thereby not taking into account all of the evidence against Prudential prior to entering judgment. Specifically, the Terletskys maintain that the trial court should have found that no basis existed for the independent medical examination or the sworn statements, that the independent medical examination was simply a cost-cutting measure, that Anna Pace interfered with the arbitration deliberation process and that it was a conflict of interest to use the same claims adjuster to defend the third-party claims of Michael Brown and the uninsured motorist claims of the Terletskys. We disagree.

The trial court's findings of fact are adequately supported by competent evidence. First, witness testimony indicates that a legitimate medical basis existed for the independent medical examinations. There were conflicting doctor's opinions with regard to the injuries of Alexander Terletsky (N.T. February 18, 1993 at 93), and there was a specific question as to Alexander Terletsky's back injury. (N.T. February 19, 1993 at 96). Further, questions existed as to the medical treatments of Marina Terletsky. (Id. at 27-28). Next, there is no evidence to suggest that the sworn statements requested by Prudential lacked basis. On the contrary, evidence indicates that although a summary of the statements was sufficient for review by management, the statements were expected to be reviewed for the uninsured motorist claims. (Id. at 97-98).

Additionally, there is no indication that Anna Pace interfered with the deliberation process. Anna Pace stated that she had spoken with the arbitrator and that he had informed her of the status of the arbitration awards.9 Although Anna Pace may have been given specific information regarding the arbitration award status (N.T. February 22, 1993 at 164) (Plaintiff's Exhibit 22), there is no evidence that she interfered with or influenced the deliberations of the arbitrators.

Finally, the evidence does not support a conflict of interest on the part of the claims adjuster. The adjuster was handling both the Terletskys' uninsured motorist claims and Michael Brown's liability claim; however, there is no evidence that claims adjuster performed her duties in a manner which was partial toward Michael Brown. In contrast, Michael Brown's claim against the Terletskys was settled for a relatively nominal amount of money. Further, there is no indication that the claims adjuster attempted to extract testimony from Michael Brown that was detrimental to the Terletskys in exchange for a generous settlement of his claim against the Terletskys. Moreover, the trial court judge was unconcerned with the fact that the claims adjuster was handling both claims. See Hudock v. Donegal Mutual Insurance Company, 438 Pa. 272, 264 A.2d 668 (1970) (while insurance adjuster had a duty to his principal, the insurance company, to perform whatever tasks assigned to him, such duty did not serve to create a contractual obligation between the adjuster and the insured).

In its cross-appeal, Prudential argues that the trial court erred in its findings of fact 16(a), (b), (c) and (d) because those facts were incomplete and not representative of the entire record and ignored unrebutted credible evidence which showed that Prudential's conduct in disputing the $25,000.00 was not reckless.10 We disagree.

Initially, we note that the trial court's findings of fact 16(a), (b), (c) and (d) are well supported by evidence.11 However, Prudential has failed to include any evidentiary support for its contention that these findings are incomplete and not representative of the record.12 Thus, Prudential has contravened the Pennsylvania Rule of Appellate Procedure 2119. See Dalton v. Dalton, 409 Pa.Super. 258, 597 A.2d 1192 (1991) (appellant fails to develop any argument; we will not conjecture any theory absent appellant's consideration of this issue); Giant Markets v. Sigma, 313 Pa.Super. 115, 459 A.2d 765 (1983) (where argument is not carried forward in the brief, it will not be considered). Hence, this issue is deemed waived. Therefore, we conclude that the trial court's factual findings are supported by competent evidence and will not be disturbed.

Next, we address the trial court's finding of bad faith. The Terletskys claim that the trial court failed to include additional acts of bad faith in making its determination. Prudential, however, avers that the trial court's initial finding of bad faith was erroneous.

We recognize that there is no common law remedy in Pennsylvania for bad faith on the part of insurers. D'Ambrosio v. Pennsylvania National Mutual Casualty Insurance Company, 494 Pa. 501, 507, 431 A.2d 966, 970 (1981); Romano v. Nationwide Mutual Fire Ins. Co., 435 Pa.Super. 545, 552, 646 A.2d 1228, 1232 (1994). However, the Pennsylvania Legislature has created a statutory remedy in 42 Pa.C.S.A. § 8371 which became effective on July 1, 1990. The statute provides that:

42 Pa.C.S.A. § 8371. In the insurance context, the term bad faith has acquired a particular meaning:

Rottmund v. Continental Assurance Company, 813 F.Supp. 1104, 1108-09 (E.D.Pa.1992); Coyne v. Allstate Insurance Company, 771 F.Supp. 673, 677-78 (E.D.Pa.1991). Further, bad faith must be proven by clear and convincing evidence and not merely insinuated. Cowden v. Aetna Casualty and Surety Company, 389 Pa. 459, 472, 134 A.2d 223, 229 (1957); Hall v. Brown, 363 Pa.Super. 415, 420, 526 A.2d 413, 416 (1987), appeal denied, 522 Pa. 624, 564 A.2d 916 (1989); United States Fire Insurance Company v. Royal Insurance Company, 759 F.2d 306, 309 (3d Cir.1985). Finally, to recover under a claim of bad faith, the plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim. American Franklin Life Insurance Company v. Galati, 776 F.Supp. 1054, 1064 (E.D.Pa.1991); see also D'Ambrosio v. Pennsylvania National Mutual Casualty Insurance Company, supra.

The Terletskys allege that Prudential's low settlement offers prior to the uninsured motorist arbitration were indicative of bad faith.13 We disagree.

Prudential offered Marina Terletsky $17,500.00 in settlement of her uninsured motorist claim. Additionally, Alexander Terletsky was offered $40,000.00 in settlement of his uninsured motorist claim. (N.T. February 19, 1993 at 48). Prudential's offers were reasonably based, thus they did not constitute bad faith. Prudential took into account many factors in determining the offers. (N.T. February 18, 1993 at 66). For example, Prudential considered medical questions that existed with regard to the Terletskys' claims. The diagnosis of Marina Terletsky's "frozen shoulder" was unclear (N.T. February 19, 1993 at 120), and there was a question as to whether she sustained a soft tissue injury. (Id. at 119-20). Additionally, there were conflicting reports as to the severity of her injuries. (Id. at 67-68). Neither Marina nor Alexander Terletsky claimed a wage loss as a result of the accident (N.T. February 18, 1993 at 143), and the police report of the accident did not indicate that any passengers had been injured. (Id. at 130). Finally, the minor damage to the car during the accident suggested that the passengers had not received serious injuries. (Id. at 155).

In addition, Prudential assessed the liability of each driver before making an offer. (N.T. February 19, 1993 at 61). See Day v. State Farm Mutual Insurance Company, 261 Pa.Super. 216, 396 A.2d 3 (1978) (Uninsured Motorist Act was intended to provide recovery by an insured only those damages which he would have received had the uninsured motorist maintained liability insurance). The location of the damage to the cars, for example, entered into the liability evaluation because it indicated that Michael Brown had successfully completed his turn before the impact. (Id. at 58). The probable liability of each driver was set at fifty-fifty (Id. at 61); therefore, the offers made to the Terletskys were fifty percent lower than the value of the case. (Id. at 62). Finally, Prudential determined that Michael Brown was a credible witness and, thus, his testimony was also considered in reaching a settlement offer. Consequently, Prudential's initial settlement offers to the Terletskys had a reasonable basis. Accordingly, we conclude that the offers were not indicative of bad faith.

On cross-appeal, Prudential contends that the trial court's finding of bad faith was against the weight of the evidence.14 We agree.

Our scope of review on a weight of evidence claim is limited. We will respect the trial court's finding with regard to credibility of the evidence unless it can be shown that the determination was manifestly erroneous, arbitrary and capricious or flagrantly contrary to the evidence. Gemini Equipment v. Pennsy Supply, supra, 407 Pa.Super. at 413, 595 A.2d at 1215 (citations omitted). We address Prudential's claim mindful of this standard.

To recover under a claim of bad faith, the Terletskys were required to show that Prudential lacked a reasonable basis for partially denying payment of the arbitration award and that Prudential recklessly disregarded a lack of reasonable basis in denying the payment. Prudential's actions, however, were reasonably based. Prudential was justified in relying on Chartan v. Chubb Corp., supra, in disputing the remaining portion of the arbitration award. At the time of the Terletskys' accident, Pennsylvania law regarding the "stacking" issue was unsettled. Similarly, federal courts interpreting Pennsylvania law could not reach an agreement on the issue. In Chartan v. Chubb Corp., supra, the federal court held that an insured could not "stack" uninsured motorist coverage in an amount that exceeds the insured's liability coverage. Id. Prudential's claims manager, William Swartz, stated that Prudential had adopted this philosophy on every claim it handled, thus, it would not pay claims or awards above the bodily injury limit of the policy. (N.T. February 19, 1993 at 135-36). Further, Swartz admitted that although he was familiar with the cases that followed Chartan v. Chubb Corp., supra, he was also aware of federal cases that disagreed with its holding. (Id. at 130-31). However, he testified that he was unaware of any Pennsylvania Superior Court or Pennsylvania Supreme Court cases that addressed this specific stacking issue. (Id.) Therefore, he believed that Prudential had a reasonable basis for partially disputing payment and filing a petition to modify the arbitration award. (Id. at 138).

Additionally, the Boulware memo does not indicate that Prudential's actions lacked a reasonable basis. In the memo, Clayton Boulware, Prudential's general corporate counsel, advised Prudential with regard to the Terletskys uninsured motorist claims that stacking was permitted. (Memorandum of Clayton Boulware, January 8, 1991). However, the memo discussed the state of the law as it existed after the enactment of Act 6. (Id.) Anna Pace reviewed the memo and later determined that an appealable issue existed because the Terletskys' claim was made prior to the enactment of Act 6, thus the reasoning in the Boulware memo would not apply. (Id.)

Moreover, Prudential's actions were reasonably based because Prudential obtained advice of outside counsel with regard to the Terletskys' claims. Prudential claims representative, Trythall, and Prudential claims manager, Swartz, both consulted outside counsel about the issue of "stacking" in Pennsylvania. (N.T. February 18, 1993 at 110; N.T. February 19, 1993 at 138). Outside counsel Joseph Cunningham testified that he had advised Prudential as to the case law relating to "stacking" (N.T. February 22, 1993 at 24), and stated that at the time of Terletskys' claim, he believed that the law in Pennsylvania regarding "stacking" of uninsured motorist claims was in flux and that various companies were relying on the Chartan decision. (Id. at 220). Therefore, we conclude that Prudential had a reasonable basis for disputing a portion of Alexander Terletsky's arbitration award. Thus, the Terletskys have not proven that Prudential acted in bad faith.15 Hence, the Terletskys are not entitled to damages under the "bad faith" statute 42 Pa.C.S.A. § 8371.

Consequently, due to our disposition of the bad faith claim, we need not address the Terletskys' claims with regard to punitive damages. Additionally, we need not consider Prudential's claims on cross appeal relating to the imposition of counsel fees and the retroactive application of the bad faith statute.16 Accordingly, we reverse the trial court's finding of bad faith.

Order reversed.

CAVANAUGH, J., concurs in the result.