Birth Center v. St. Paul Companies, Inc.
Supreme Court of Pennsylvania · 2001-12-31 · cited 170×
The case involved The Birth Center suing its professional liability insurer, St. Paul Companies, for bad faith refusal to settle an underlying medical malpractice lawsuit within policy limits despite multiple judicial recommendations and assessments showing significant risk of an excess verdict. The jury found by clear and convincing evidence that St. Paul's conduct caused The Birth Center $700,000 in compensatory damages from lost business, and the trial court granted the insurer judgment notwithstanding the verdict, but the Superior Court reversed and the Supreme Court affirmed. The court held that an insurer breaches its contractual and fiduciary duties by refusing to settle without a bona fide belief in a good possibility of winning and is liable for the insured's known or foreseeable compensatory damages that reasonably flow from that bad faith, even when the insurer later pays an excess verdict to avoid punitive damages.