Wolfe v. Allstate Prop. & Cas. Ins. Co.

Wolfe v. Allstate Prop. & Cas. Ins. Co.

Opinion

 [*489]  RENDELL, Circuit Judge

In this insurance dispute between appellant Allstate Property & Casualty Insurance Co. ("Allstate") and appellee Jared Wolfe, we are presented with the question of whether punitive damages awarded against an insured in a personal injury suit are recoverable in a later breach of contract or bad faith suit against the insurer. It is Pennsylvania's public policy that insurers cannot insure against [**2]  punitive damages, and we therefore predict that the  [*490]  Pennsylvania Supreme Court will answer that question in the negative.

I. BACKGROUND

A. Underlying Personal Injury Lawsuit

On March 2, 2007, around 4:00 am, Karl Zierle finished his fifteenth or sixteenth beer for the night. At 11:00 am, Zierle was driving and rear-ended Wolfe. Zierle's blood alcohol level tested at 0.25%. Zierle also had three prior DUIs. Wolfe was injured in this accident, and he required treatment at the emergency room.

Zierle was insured by Allstate. Zierle's policy provided liability coverage up to $50,000, and the policy required Allstate to defend Zierle in suits by third parties arising out of automobile accidents. The policy stated that Allstate would "not defend an insured person sued for damages which are not covered by this policy." (App. 362.) Zierle's policy expressly excluded coverage for punitive damages.

Wolfe made an initial settlement demand to Allstate of $25,000, based on medical records provided to Allstate's adjuster. Allstate valued Wolfe's claim at $1200 to $1400, and Allstate responded with a counteroffer of $1200. Wolfe rejected this offer, and neither party moved from those numbers.

Wolfe then [**3]  filed suit against Zierle. Allstate informed Zierle that, because Wolfe's complaint did not indicate the extent of the damages he was claiming, the possibility remained that Zierle could face damages in excess of the $50,000 protection afforded by his policy. If the verdict did exceed the policy limit, Zierle was warned that he would be personally liable for the excess. Zierle was advised that he could hire an attorney at his own expense to cooperate with Allstate's counsel. Zierle did hire his own counsel, but that attorney was not actively involved in the case.

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.