ZENITH INSURANCE COMPANY v. WELLS FARGO INSURANCE SERVICES OF PENNSYLVANIA, INC.
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE HARVEY BARTLE, III ON 1/7/2014. 1/7/2014 ENTERED AND COPIES E-MAILED.(kp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
ZENITH INSURANCE COMPANY
WELLS FARGO INSURANCE SERVICES
OF PENNSYLVANIA, INC., et al.
January 7, 2014
Now pending before the court is the timely post-trial
motion of defendants Albert Granger ("Granger") and Glasbern,
Inc. ("Glasbern") for judgment as a matter of law (incorrectly
denominated by defendants as a motion for judgment
notwithstanding the verdict) under Rule 50(b) of the Federal
Rules of Civil Procedure, and new trial under Rule 59 of the
Federal Rules of Civil Procedure.
Plaintiff Zenith Insurance Company ("Zenith") sued its
insureds, defendants Glasbern and Granger, in this diversity
action for negligent misrepresentation and violation of the
Pennsylvania Insurance Fraud Act ("Insurance Fraud Act"), 18 Pa.
Cons. Stat. Ann. § 4117(b)(4), in connection with Zenith's
issuance to them of a workers' compensation insurance policy.1
1. Zenith also sued defendant Wells Fargo Insurance Services of
Pennsylvania, Inc. ("Wells Fargo"), the insurance broker, for
negligent supply of information. The jury found in favor of
Wells Fargo on that claim, and it is not a party to any posttrial motions.
Glasbern and Granger counterclaimed against Zenith for insurance
bad faith under 42 Pa. Cons. Stat. Ann. § 8371.
Glasbern operates a high-end bed and breakfast in
Lehigh County which features a hotel and restaurant with adjacent
Granger owns Glasbern as well as the farmland
contiguous to the bed and breakfast.
The farming operation, it
turned out, is run by Glasbern employees.
An employee of
Glasbern, Jason Angstadt, was seriously injured on June 11, 2010
when he was struck by a 1200-pound cow on the farm.
A jury trial was held in June, 2013.
While the jury
found that Glasbern and Granger had negligently misrepresented
the nature of Glasbern's operations, it also found that Zenith
had been contributorily negligent.2
The jury proceeded to
determine that Glasbern and Granger had violated the Pennsylvania
Insurance Fraud Act "in connection with failing to disclose the
farming operation of Glasbern to Wells Fargo and/or Zenith so as
to cause Zenith to renew the worker's [sic] compensation
insurance policy for the year 2010."3
As a result of this
finding, and in accordance with the court's instructions, the
jury did not answer the special interrogatories as to whether
2. In Pennsylvania, contributory negligence is a complete
defense to negligence, with exceptions that are not relevant
here. See, e.g., Gorski v. Smith, 812 A.2d 683, 701-702 (Pa.
Super. Ct. 2002).
3. As noted above, Wells Fargo was the insurance broker engaged
by Glasbern and Granger.
Zenith was liable to Glasbern and Granger for insurance bad
By agreement of the parties, the court decided on the
amount of damages owed to Zenith for past and future payments due
to Jason Angstadt.
Judgment was entered in favor of Zenith and
against defendants Glasbern and Granger jointly and severally in
the amount of $1,076,382.37.
The court also issued a declaratory
judgment in Zenith's favor and against Glasbern and Granger
jointly and severally which obligated them to reimburse Zenith
for all reasonable medical and other payments made and to be made
to Angstadt after June 24, 2013.
A motion for judgment as a matter of law is governed by
Rule 50 of the Federal Rules of Civil Procedure.
(a) Judgment as a Matter of Law.
(1) In General. If a party has been
fully heard on an issue during a jury trial
and the court finds that a reasonable jury
would not have a legally sufficient
evidentiary basis to find for the party on
that issue, the court may:
(B) grant a motion for
judgment as a matter of law
against the party on a claim
or defense that, under the
controlling law, can be
maintained or defeated only
with a favorable finding on
(2) Motion. A motion for judgment as a
matter of law may be made at any time before
the case is submitted to the jury. The
motion must specify the judgment sought and
the law and facts that entitle the movant to
(b) Renewing the Motion After Trial;
Alternative Motion for a New Trial.
If the court does not grant a motion for
judgment as a matter of law made under Rule
50(a), the court is considered to have
submitted the action to the jury subject to
the court's later deciding the legal
questions raised by the motion. No later
than 28 days after the entry of judgment...
the movant may file a renewed motion for
judgment as a matter of law and may include
an alternative or joint request for a new
trial under Rule 59...
Judgment as a matter of law is appropriate when there is an
absence of evidence on an issue or claim essential to a nonmoving party's cause of action.
The evidence will be considered
legally insufficient where, viewing the evidence in the light
most favorable to the non-moving party, "the record is critically
deficient of that minimum quantum of evidence from which the jury
might reasonably afford relief."
Williamson v. Piper Aircraft
Corp., 968 F.2d 380, 384 (3d Cir. 1992).
In deciding whether
judgment as a matter of law is appropriate, "the court may not
weigh the evidence, determine the credibility of witnesses, or
substitute its version of the facts for the jury's version."
Eddy v. V.I. Water & Power Auth., 369 F.3d 227, 230 n.4 (3d Cir.
"Although judgment as a matter of law should be granted
sparingly, a scintilla of evidence is not enough to sustain a
verdict of liability."
Pursuant to Rule 59 of the Federal Rules of Civil
Procedure, the court may grant a new trial after a jury trial
"for any reason for which a new trial has heretofore been granted
in an action at law in federal court."
Fed. R. Civ. P.
A new trial "should be granted only where the
'great weight' of the evidence cuts against the verdict and
'where a miscarriage of justice would result if the verdict were
Springer v. Henry, 435 F.3d 268, 274 (3d Cir. 2006)
(citing Sheridan v. E. I. DuPont de Nemours & Co., 100 F.3d 1061,
1076 (3d Cir. 1996)).
Granger and Glasbern moved under Rule 50 after Zenith
The court denied the motion.
After the jury verdict
and the entry of judgment, defendants timely renewed their motion
for judgment as a matter of law and included an alternative
motion for a new trial.
We view the evidence in the light most favorable to
Zenith, the verdict winner.
Williamson, 968 F.2d at 384.
noted above, Glasbern operates a high-end bed and breakfast which
features a hotel and restaurant with adjacent farmland.
owns Glasbern as well as the farmland contiguous to the bed and
The farming operation, it is now undisputed, is run
by Glasbern employees.
Though it has grown over time, Glasbern
has existed as a restaurant, bed and breakfast and farm since
In 2007, John Ford, a producer for Wells Fargo, an
insurance brokerage firm, solicited the business of Glasbern.
visited Glasbern six times leading up to the issuance of the
Zenith workers' compensation policy.
During one of his visits
Granger gave him a tour of most of the facility.
tour, Ford saw some animals, including cattle.
He later asked
Granger about the apparent farm operation at Glasbern.
responded that the farm "has nothing to do with the bed and
Ford also noted that when he was soliciting the
business of Glasbern, he reviewed Granger and Glasbern's existing
workers' compensation insurance policy issued by Lackawanna
That policy made no mention of a farm
In November 2008, on behalf of Glasbern and Granger,
Ford submitted an application for workers' compensation insurance
to several insurance carriers, including Zenith.
contained in the application came from Granger, who described the
nature of the business as "bed and breakfast, hotel and
The application for insurance that Ford submitted to
Zenith on Granger and Glasbern's behalf was on a form commonly
used in the insurance industry.
Glasbern and Granger are both
listed on the application as insureds.
specifically requested information about the acreage of the
business property, any machinery present at the property, as well
as the number of animals at the property.
The place on the
application for inclusion of such information was left blank.
Along with the application, Ford also sent Zenith a print-out of
However, the lefthand panel of the main page
of the website, which referenced a farm operation at Glasbern,
was missing from the print-out.
Cynthia Beswick, the Zenith
underwriter who handled the Glasbern and Granger account,
testified that a map was sent with the application.
showed individual suites, "a fitness center, a parking facility,
a gatehouse" but did not show any farm operation.
On January 2, 2009 Granger signed the application on
behalf of himself and Glasbern.
Above the signature line, the
Any person who knowingly and with intent to
defraud any insurance company or another
person files an application for insurance
containing any materially false information,
or conceals for the purpose of misleading
information concerning any fact material
thereto, commits a fraudulent insurance act,
which is a crime and subjects the person to
substantial criminal and civil penalties.
In response to a question on the witness stand whether he read
the insurance application before signing it, Granger first
testified, "I don't think so."
While he later denied having read
the application prior to signing it, Granger conceded that in the
past he had fully read other insurance applications before
affixing his signature.
Granger admitted that he knew the application would be
sent to Zenith and that Zenith would rely on the information
contained in the application.
He also testified that when Ford
visited Glasbern in 2007, he did not tell Ford how many animals
were on the premises.
At trial, James Schintz, Granger and Glasbern's
previous insurance producer, took the witness stand.
testified that he asked for a quote for workers' compensation
from Lackawanna Insurance Company on behalf of Glasbern and
Granger in 2006.
In response to a question from an employee of
Lackawana regarding the nature of Glasbern's business, Schintz
informed her, via email, that Glasbern's employees were not
involved in any farming operation.
According to Schintz, his
understanding of Glasbern, based on many visits to the property
prior to 2009, was that the farm operation was "incidental" to
the basic operation of the restaurant and bed and breakfast.
Schintz also stated that over the years he worked with Granger he
counseled him to "include any payroll or sales of the farming
operation... on his books, so that if there was a question, there
would be a... trail of that information."
Zenith issued the workers' compensation insurance
policy in issue for the policy year beginning on January 1, 2009.
Both Granger and Glasbern were named insureds.
During that year,
Zenith sent three of its employees, Rodney Peffer, Josh Rogerson,
and Brad Lord to visit Glasbern.
Granger told the jury that he
relied on his bookkeeper, Terry Marrow, to provide correct and
complete information to any Zenith employees who were sent to
Glasbern to audit the payroll or inspect the property.
it turned out, had been convicted of a felony for theft by
deception prior to her employment with Glasbern.
Peffer, a senior premium auditor for Zenith, presented
himself at Glasbern on March 12, 2009.
He met with Marrow for
approximately an hour and a half, during which time Marrow
informed him that Glasbern had employees working to raise sheep,
pigs, cows and greenhouse vegetables to provide food for the
While Peffer noted this information in the report he
generated after his visit, he did not think that Glasbern was
operating a farm but simply that there were merely a few animals
on the premises.
He concluded that Glasbern "was a bed and
breakfast operation that had some animals."
that he returned to Glasbern in March 2010, after the policy had
been renewed for a second year.
At that time he asked Marrow if
there had been any changes in operations since the previous
She told him there were no changes.
Peffer did not note any changes in his report and in fact used
the same language to describe the operation as he had the
The deposition of Rogerson was read into the record at
Rogerson, a safety and health consultant for Zenith, met
with Marrow at Glasbern in or around April 2009, a month or so
after Peffer had first been there.
He "walked the grounds around
the area and got a feel for... everything that was there."
Rogerson "did not see a farm within the immediate proximity of
where [he] was."
However, Rogerson stated that Marrow
"referenced that they only serve organic products [at the
restaurant] and that they got their products from another
business that was under Al [Granger]'s ownership."
told him that the farming operation was "separate from what
[Rogerson] was involved with, and the employees don't mix, they
don't work at both.
There's no intermixing... they're two
Thus, the information Rogerson brought
back to Zenith clarified what Peffer had reported earlier and
specifically described the farming at Glasbern as separate from
the bed and breakfast.
Finally, Brad Lord, who worked in loss control at
Zenith in 2009, travelled to Glasbern in December 2009.
conferred with Marrow in the Glasbern restaurant for
approximately half an hour.
Lord testified that he saw no visual
evidence of a farming operation at Glasbern and as such he saw no
need to ask Marrow about a farm.
Zenith thereafter renewed the workers' compensation
insurance policy for 2010.
Prior to renewal, Cynthia Beswick,
the Zenith underwriter on the Glasbern and Granger account,
requested information from the broker, Wells Fargo, regarding any
changes in operation at Glasbern.
According to Beswick, Zenith
received no information from either Wells Fargo or Glasbern about
changes in operations.
Beswick also testified that the
information about Glasbern gathered by Peffer, Rogerson, and
Lord, during the 2009 policy year, did not alert her to any
As such, she felt comfortable renewing the
While Beswick did not receive a signed application from
Granger for the 2010 policy year, she relied on the first
application and the information gathered by Peffer, Rogerson, and
Beswick further stated that if she had known about "the
extensive animal exposure," Zenith "wouldn't have insured the
On June 11, 2010, as noted above, Jason Angstadt
("Angstadt"), an employee of Glasbern, sustained serious injuries
in the course and scope of his employment when he was struck by a
1200-pound cow from Glasbern's herd of Devon cattle.
of the injuries, Angstadt is now a paraplegic.
As a result
investigated Angstadt's claim and filed a Temporary Notice of
Compensation Payable with the Pennsylvania Workers' Compensation
Bureau ("Compensation Bureau") on June 28, 2010.
became permanent on September 9, 2010.
Zenith has continuously
paid workers' compensation benefits to Angstadt since filing the
Temporary Notice of Compensation Payable and has agreed to
continue to make any future payments owed to or on behalf of
Angstadt pursuant to the workers' compensation policy.
Pennsylvania law, Zenith cannot at this juncture contest its
liability to pay the Angstadt claim.
77 Pa. Cons. Stat. Ann.
Following Angstadt's accident, Zenith sent Lord to
Glasbern a second time to evaluate its operations.
report, dated June 21, 2010, Lord reported that Glasbern had a
herd of approximately 80 to 85 beef cattle, a flock of 75 sheep,
11 pigs, 900 chickens, and a herd of 6 to 8 dairy cattle.
Zenith thereafter sued Glasbern and Granger for
reimbursement for the amounts it has paid as well as all future
payments it must make on the ground that Glasbern and Granger
committed negligent misrepresentation and fraud in connection
with the issuance of the workers' compensation policy by not
disclosing Glasbern's farm operation.
Defendants first argue that this court lacked
jurisdiction over Zenith's insurance fraud claim.
assert that Pennsylvania law grants exclusive jurisdiction over
this action to the Compensation Bureau pursuant to the Workers'
Compensation Act, 77 Pa. Cons. Stat. Ann. § 1.
Glasbern and Granger, Zenith accepted responsibility for
Angstadt's loss when it allowed the Temporary Notice of
Compensation Payable to become permanent on September 9, 2010 but
is now attempting to avoid that responsibility and circumvent the
Workers' Compensation Act through the present lawsuit.
Defendants previously raised this issue in their motion to
As we stated at that time, Zenith had voluntarily
withdrawn its claim for rescission of the policy.
As such, the
outcome of this lawsuit would in no way deprive Angstadt of
workers' compensation benefits in violation of Pennsylvania law
since Zenith is obligated to pay what is due under the policy
regardless of the outcome here against Glasbern and Granger.
Zenith Ins. Co. v. Glasbern, Inc., Civ. A. No. 10-5433, E.D. Pa.,
Doc. # 112 (Dec. 19, 2012).
While a state may eliminate a state cause of action or
decide not to provide one in the first instance, it may not
divest a federal court of diversity jurisdiction to hear an
extant cause of action.
It is uncontested that Pennsylvania law
provides for a private cause of action based on insurance fraud.
We reiterate, for the reasons explained at that time, that this
court possessed diversity jurisdiction over the action under the
Pennsylvania Insurance Fraud Act notwithstanding the provisions
of the Workers' Compensation Act and that Zenith could go forward
with its claims against Glasbern and Granger for reimbursement of
the monies it had paid and is bound to pay Angstadt in the future
under its workers' compensation policy.
We turn first to defendants' assertion that plaintiff
failed to present sufficient evidence to the jury to establish
the requisite intent under the Insurance Fraud Act.
(b)(4) of the Act provides: "A person may not knowingly and with
intend to defraud any insurance company... or other person file
an application for insurance containing any false information or
conceal for the purpose of misleading information concerning any
fact material thereto."
18 Pa. Cons. Stat. Ann. § 4117(b)(4).
In order for Zenith to prevail on a claim for insurance
fraud under the Insurance Fraud Act it must establish by clear
and convincing evidence that the defendant "(1) present[ed]
false, incomplete or misleading statements to [the insurer];
[(2)] that were material to the claim; and [(3)] which were
knowingly made with an attempt to defraud."
Wezorek v. Allstate
Ins. Co., 2007 WL 2264096, *14 (E.D. Pa. Aug. 7, 2007).
generally also requires a showing of justifiable reliance on the
See, e.g., Fort Washington Res., Inc. v.
Tannen, 858 F. Supp. 455, 459 (E.D. Pa. 1994) (citing Scaife Co.
v. Rockwell-Standard Corp., 285 A.2d 451 (Pa. 1971)).
It is uncontested that the application for insurance
omitted required information about Glasbern's farming operation.
According to defendants, the testimony at trial established that
Granger neither prepared nor read the application for insurance
which he signed and which Wells Fargo submitted on his behalf to
If Granger signed the application without having read
it, defendants argue that he cannot have formed the intent to
defraud Zenith necessary to sustain an insurance fraud claim.
Defendants further rely on the testimony presented at trial which
established that Granger never signed an application for
insurance for the second policy year and that Zenith renewed the
policy without a second signed application.
As noted above, it is undisputed that the insurance
application failed to disclose the farm operation of Glasbern.
Ford testified that Granger told him the farm "ha[d] nothing to
do with the bed and breakfast."
Granger admitted that he never
told anybody from Zenith that in 2009 he was developing a dairy
operation, even though he was doing so and paid for Angstadt,
Glasbern's employee, who would later be injured by a dairy cow,
to attend herdsman school to become more familiar with handling
Zenith also points to the statements made by Terry
Marrow, as an agent of Glasbern, to Rogerson that the bed and
breakfast and farm operation were "two separate entities" and
there was no "intermixing".4
Based on the foregoing testimony and documentary
evidence, there was sufficient evidence for the jury to find,
under a clear and convincing evidence standard, that Granger and
Glasbern intended to make false or misleading statements in
connection with the application for insurance submitted to
The jury was entitled to disbelieve Granger when he said
he had not read the application before signing it, particularly
in light of his equivocal statement on the witness stand that he
"didn't think" he had read it, and his admitted history of having
read previous applications for insurance before signing them.
The jury also heard Granger himself testify that he never
informed Zenith of the new dairy operation at Glasbern.
could also have reasonably relied on the testimony, particularly
of Ford and Rogerson, who were misled by Granger and Marrow.
Finally, Glasbern and Granger cite no rule of law that a second
signed application was necessary for an annual renewal of an
Indeed, Zenith presented the testimony of Akos
Swierkiwicz, an expert in the standard of care for insurance
4. Any fraudulent actions of Marrow, who was indisputably an
agent of Granger and Glasbern, are imputed to Granger and
Glasbern under agency principles since she was acting within the
scope of her employment and not out of personal interest. See,
e.g., Official Comm. of Unsecured Creditors of Allegheny Health
Educ. and Research Foundation v. PriceWaterhouseCoopers, LLC, 989
A.2d 313, 333 (Pa. 2010).
underwriters and insurance brokers, who testified that Zenith
reasonably relied on the first signed application for insurance.
We turn next to defendants' argument that there was
insufficient evidence at trial for the jury to find, by clear and
convincing evidence, that there was a misrepresentation of a
material fact by the defendants.
"A fact is material during the
insurance application process 'if knowledge or ignorance of it
would naturally influence the judgment of the insurer in issuing
the policy, in estimating the degree and character of the risk,
or in fixing the premium rate.'"
Wezorek, 2007 WL 2264096, *15
(citing A.G. Allebach, Inc. v. Hurley, 540 A.2d 289, 295 (Pa.
Zenith called as a witness Kenneth Hildebrand, its
regional underwriting manager, who told the jury that the
business of the northeast regional office of Zenith is "limited
to mostly mainstream type business... made up predominantly of
restaurants, hotels, some retail stores, some wholesale
distributors... we do not target [farming businesses] as part of
Hildebrand made it clear that if the northeast
office received an application for insurance for a farming
operation, Zenith would "simply decline it, because it's not in
our area of expertise."
Cindy Beswick, the underwriter for the
Glasbern account, likewise stated that Zenith would not have
written the account if she had been aware of the farm operation.
Defendants rely on the Pennsylvania Compensation Rating
Bureau ("PCRB") codes to argue that even if Granger did omit the
farming operation on the application for insurance, such
information was not material to Zenith's decision to issue either
the 2009 or 2010 policy because the existence of the farming
operation would not have changed the amount of premium Zenith was
entitled to charge Glasbern and Granger for workers' compensation
The PCRB, a licensed rating organization for workers'
compensation insurance in Pennsylvania, classifies businesses
according to certain codes that determine the amount of premium
an insurance carrier may charge a potential insured.
Walker, a representative of the PCRB, testified that the
existence of the farm at Glasbern would not allow Zenith to
charge a higher premium for workers' compensation insurance
because the code applicable to the bed and breakfast with its
farm was the same as the code applicable to the bed and breakfast
without the farm.5
In our view, the jury was entitled to believe the
testimony of Ken Hildebrand and Cindy Beswick that the northeast
regional office of Zenith would not have insured Glasbern if it
had known about the farming operation, even if the PCRB code had
remained the same.
Indeed, the fact that the existence of a
limited farming operation would not have allowed Zenith to charge
5. According to Walker, the codes are identical because the
revenues generated from the farm were less than the revenues
generated by the bed and breakfast and restaurant. Had the
revenues from the farm been greater than the revenues from the
other components of Glasbern, the PCRB would have assigned a
different code which might have changed the amount of premium an
insurance carrier could have charged Glasbern for workers'
compensation insurance coverage.
a higher premium is all the more reason for the jury to have
believed that Zenith would have declined to write the policy for
Glasbern and Granger had the truth been known.
The jury properly
found that the omitted information was material.
We must also address defendants' argument that Zenith
did not meet its burden of presenting sufficient evidence to the
jury of any justifiable reliance on the alleged misrepresentation
by Glasbern and Granger.
Whether reliance on an alleged
misrepresentation is justified depends on whether the recipient
knew or should have known that the information supplied was
Scaife, 285 A.2d 451.
The recipient of a fraudulent
misrepresentation of fact is justified in relying upon its truth,
although he or she might have ascertained the falsity of the
representation had he made an investigation.
recipient is not justified in relying upon its truth if he or she
knows that it is false or its falsity is obvious to him or her.
Restatement (Second) of Torts §§ 540-541 (1977).
According to defendants, Zenith was aware of the
farming operation at Glasbern and any lack of knowledge on its
part was the fault of its own employees.
Defendants assert that
Zenith's own negligence, which the jury found to exist, precludes
any finding of justifiable reliance.
It is well
established under Pennsylvania law that contributory negligence
is not a defense to fraud.
Soltan v. Shahboz, 119 A.2d 242 (Pa.
1956); Restatement (Second) of Torts § 545(a) (1977).
reasonable person standard has no applicability to a fraud claim.
Restatement (Second) of Torts § 545(A), cmt. B (1977).
the jury must focus on the victim of the fraud and decide whether
reliance was justified under the circumstances at issue with
respect to that victim, without regard to a general standard of
Significantly, defendants did not object to the charge to
the jury in which the court instructed that contributory
negligence is not a defense to fraud under the Pennsylvania
Insurance Fraud Act.
Zenith counters that it justifiably relied on the
representations that Granger and Marrow made, both through Wells
Fargo and directly to Zenith, that any farming operation at
Glasbern was separate and apart from the bed and breakfast and
As noted above, the jury was also presented with the
testimony of Zenith's expert, Akos Swierkiwicz, who opined that
Zenith "reasonably relied on inaccurate and incomplete
Swierkiwicz also set forth that
Beswick, the Zenith underwriter, "acted in a reasonable and
professional manner in doing her job."
Finally, as noted
previously, Granger admitted that he knew the application he
signed would be sent to Zenith and that Zenith would rely on the
information contained in the application.
We find that the jury
had sufficient evidence that Zenith justifiably relied on the
untruthful statements made by Granger and Marrow.
In deciding a Rule 50 motion, it is not the role of the
court to make credibility determinations or weigh the evidence or
substitute itself in place of the jury.
Eddy, 369 F.3d at 230.
What the court would have done had it been the finder of fact is
Suffice it to say that the jury, after seeing and
hearing the witnesses and reviewing the documentary evidence, did
not act unreasonably in finding for Zenith, based on clear and
convincing evidence, on its claim under the Pennsylvania
Insurance Fraud Act.
The motion of Granger and Glasbern for
judgment as a matter of law will be denied.
We next turn to the argument of Glasbern and Granger
that this court should grant judgment in their favor as a matter
of law and/or a new trial on their counterclaim against Zenith
for bad faith under 42 Pa. Cons. Stat. Ann. § 8371.6
requisite elements for a bad faith claim under § 8371 are "(1)
that the insurer lacked a reasonable basis for denying benefits;
and (2) that the insurer knew or recklessly disregarded its lack
of a reasonable basis."
Toy v. Metro. Life Ins. Co., 863 A.2d 1
(Pa. Super. 2004) (citing Booze v. Allstate Ins. Co., 750 A.2d
877, 880 (Pa. Super. 2000).
Under the law, the insurance company
must evaluate cases in an honest, intelligent, and objective
Empire Fire & Marine Ins. Co. v. Jones, 739 F. Supp. 2d
746, 767 (M.D. Pa. 2010).
6. Section 8371 provides: "In an action arising under an
insurance policy, if the court finds that the insurer has acted
in bad faith toward the insured, the court may take all of the
following actions: (1) Award interest on the amount of the claim
from the date the claim was made by the insured in an amount
equal to the prime rate of interest plus 3%. (2) Award punitive
damages against the insurer. (3) Assess court cost sand attorney
fees against the insurer."
At trial, the jury was instructed on the elements of
insurance bad faith.
The verdict form asked the jury to answer
the special interrogatories on the issue of bad faith only if it
found that Glasbern and Granger were not liable to Zenith for
As the jury found them both liable for
insurance fraud, it did not reach the bad faith counterclaim.
Under these circumstances, the jury could not possibly have found
that Zenith had acted in bad faith toward its insureds.
finding against Zenith would have resulted in a clearly
Accordingly, the motion of Glasbern and
Granger for judgment as a matter of law and/or a new trial on
their bad faith claim against Zenith will be denied.
Finally, defendants assert that judgment was improperly
entered against Granger individually.
According to defendants,
the evidence at trial does not support the imposition of joint
and several liability against Granger because he did not act on
his own behalf in applying for workers' compensation insurance
but did so only on behalf of Glasbern.
Motions for judgment as a matter of law filed under
Rule 50(b) of the Federal Rules of Civil Procedure after the
entry of judgment may only be considered by the court when the
moving party has made a motion for judgment as a matter of law
before the case has been submitted to the jury.
The Rule 50(b)
motion may only be based upon the specific grounds previously
asserted in the original motion.
Williams v. Runyon, 130 F.3d
568, 572 (3d Cir. 1997) (citing Orlando v. Billcon Int'l, Inc.,
822 F.2d 1294, 1297-98 (3d Cir. 1987)).
This rule exists so as
to give the non-moving party an opportunity to reopen its case in
order to present additional evidence.
See Bonjorno v. Kaiser
Aluminum & Chem. Corp., 752 F.2d 802, 814 (3d Cir. 1984).
As Zenith correctly notes, defendants did not assert
that Granger could not be held individually liable for insurance
fraud when they moved for judgment as a matter of law at the
conclusion of Zenith's evidence.
the merits of the argument.
As such, we may not consider
See Billcon Int'l, 822 F.2d at 1297-
In any event, the argument is without merit.
was a named insured on the Zenith workers' compensation policy.
As such, he did not sign the application merely on behalf of
Glasbern but also on his own behalf.
In addition, Granger may be found individually liable
for his actions on behalf of Glasbern if he engaged in tortious
See, e.g., Wicks v. Milzoco Builders, Inc., 470 A.2d
86, 90 (Pa. 1983).
Because Granger was found to have committed
fraud, he may be held liable for his own tortious actions
independently of the liability of the corporation.
Granger were acting on behalf of Glasbern and not on his own
behalf, he is not shielded from liability simply because of the
corporate form of Glasbern.
See, e.g., Am. Soc'y for Testing and
Materials v. Corrpro Cos., 478 F.3d 557 (3d Cir. 2007).
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