Devincenzo-Gambone v. Erie Ins. Exch., 2025 Pa. Super. LEXIS 491 (October 17, 2025) Olson, J.
Judges: BEFORE: OLSON, J., DUBOW, J., and BECK, J.
Opinion by: OLSON
Appellant, Erie Insurance Exchange, (“Erie Insurance”) appeals from the May 22, 2024, judgment entered in the Court of Common Pleas of Montgomery County upon a non-jury verdict in favor of Dina Devincenzo-Gambone and Anthony R. Gambone (collectively, “Gambone”) in the amount of $1,754,188.24. For the reasons set forth herein, we are constrained to vacate the May 22, 2024, judgment, as well as the January 10, 2024, verdict, in part, and remand this case for further proceedings in accordance with this decision.
Dina Devincenzo-Gambone was involved in an automobile accident on February 24, 2004. At the time of the accident, Gambone’s automobile was insured by Erie Insurance. Gambone settled with the tortfeasor and subsequently filed, with the Court of Common Pleas of Philadelphia County, an under-insured motorist (“UIM”) claim against Erie Insurance on August 3, 2011. The parties thereafter agreed to submit the UIM claim to binding arbitration in the Court of Common Pleas of Montgomery County and, pursuant to the parties’ agreement to seek arbitration, Gambone’s case in the Court of Common Pleas of Philadelphia County was stayed.
On August 31, 2016, the arbitrator found that the stacking provisions of Gambone’s insurance policy applied and awarded Gambone $300,000.00. Upon issuance of the arbitration decision and pursuant to the parties’ agreement, Gambone dismissed the
UIM claim against Erie Insurance in the Court of Common Pleas of Philadelphia County. On September 23, 2016, Erie Insurance tendered $250,000.00 to Gambone, which represented a portion of the arbitration award, and withheld payment of $50,000.00. On September 29, 2016, Erie Insurance filed a petition to modify the arbitration award with the Court of Common Pleas of Montgomery County.
In response to Erie Insurance’s petition, which contested the arbitration award, Gambone filed a complaint in the Court of Common Pleas of Montgomery County asserting, inter alia, claims for breach of fiduciary duty and bad faith. On November 27, 2018, the trial court denied Erie Insurance’s petition to modify the arbitration award. Thereafter, in January 2019, Erie Insurance tendered payment of the balance of the arbitration award, $50,000.00, to Gambone.
Concerning Gambone’s claims against Erie Insurance, the trial court bifurcated the action into a non-jury trial for purpose of determining liability and, if necessary, a subsequent non-jury trial to determine damages. On October 12, 2022, the trial court entered a non-jury verdict in favor of Gambone and against Erie Insurance on the claim of bad faith. On January 10, 2024, the trial court entered a damage award in favor of Gambone and against Erie Insurance in the amount of $1,754,188.24. The damage award was comprised of $659,007.90 for interest, $217,100.00 for attorneys’ fees, and $986.22 for court costs. The damage award also included $877,094.12 for punitive damages.
On January 22, 2024, Erie Insurance filed a motion for post-trial relief, seeking a judgment non obstante verdicto. On February 9, 2024, Gambone filed a response to Erie Insurance’s post-trial motion. After receiving briefs from both parties, the trial court, on May 20, 2024, denied the request for post-trial relief. On May 22, 2024, judgment was entered in favor of Gambone and against Erie Insurance in the amount of $1,754,188.24. This appeal followed.
In reviewing similar bad faith claims under Section 8371, this Court has consistently held that there can be no finding of bad faith where an insurer withholds a portion of an arbitration award because an issue regarding stacking remains unresolved. Terletsky v. Prudential Prop. and Cas. Insur. Co., 437 Pa. Super. 108, 649 A.2d 680, 690 (Pa. Super. 1994) (agreeing that, no bad faith exists when the insurer withholds a portion of the arbitration award because Pennsylvania law regarding stacking is unsettled and still in “flux”), appeal denied, 659 A.2d 560, 540 Pa. 641 (Pa. 1995); see also Hollock, 842 A.2d at 417 (affirming that, the unsettled state of the law on stacking effectively precluded a showing by the insured that the insurer acted in bad faith when it refused to honor a claim for stacked benefits). Bad faith, however, can exist when the insurer fails to make a “good faith investigation into [the] facts” or fails “to communicate with the claimant.” Greene, 936 A.2d at 1188; see also Sartain v. United Servs. Auto. Ass’n, 249 A.3d 1130, at *5 (Pa. Super. filed Feb. 4, 2021) (unpublished decision) (stating that, “bad faith” “includes a lack of good faith investigation, as well as evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect
performance, abuse of a power to specify terms, and interference with or failure to cooperate in the other party’s performance” (original quotation marks and citation omitted)).
In viewing the evidence in the light most favorable to Gambone, as the verdict winner, and granting Gambone the benefit of every favorable inference, we find there was sufficient evidence to support the trial court’s October 12, 2022, verdict. As the trial court found, and the record supports, the parties agreed to submit the UIM claims to a binding arbitration in which the arbitrator was tasked with deciding not only liability but also damages and, as part of the damages determination, the issue of stacking. Erie Insurance never communicated to Gambone that it reserved its right to appeal the arbitration decision or reject the arbitrator’s stacking determination. Instead, Erie Insurance participated in the binding arbitration, in which the arbitrator was asked to decide the issue of stacking, and only after Gambone dismissed the UIM claims against Erie in the Court of Common Pleas of Philadelphia County, pursuant to the parties’ agreement, did Erie Insurance challenge the arbitration award. Therefore, we discern no abuse of discretion or error of law in the trial court’s verdict.
An award of attorneys’ fees “is within the discretion of the trial court.” Zimmerman v. Harleysville Mut. Insur. Co., 2004 PA Super 383, 860 A.2d 167, 174 (Pa. Super. 2004), appeal denied, 584 Pa. 687, 881 A.2d 820 (Pa. 2005). “An abuse of discretion is not merely an error of judgment, but if in reaching a conclusion[,] the law is overridden or misapplied, or the judgment exercised is manifestly unreasonable, or the result of partiality, prejudice, bias[,] or ill-will, as shown by the evidence or the record, discretion is abused.” Zimmerman, 860 A.2d at 174 (citation omitted). An award of attorneys’ fees must be reasonable. Birth Center v. St. Paul Cos., Inc., 787 A.2d 376, 408, 567 Pa. 386 (Pa. 2001).
We reiterate that “as a general rule, the method of determining reasonable attorneys’ fees under fee-shifting provisions in Pennsylvania is the lodestar approach[.]” Krebs v. United Refining Co. of Pennsylvania, 2006 PA Super 31, 893 A.2d 776, 790 (Pa. Super. 2006); see also Krishnan, 171 A.3d at 903; Richards v. Ameriprise Fin., Inc., 305 A.3d 1013, at *4 (Pa. Super. filed Sept. 26, 2023) (unpublished memorandum), appeal denied, 320 A.3d 664 (Pa. 2024). A contingency fee agreement “is just one of many factors to consider in arriving at an award of a reasonable attorneys’ fee,” and the contingency fee agreement cannot “create a ceiling” on the amount of reasonable attorneys’ fees a party may recover under a fee-shifting provision. Krishnan, 171 A.3d at 903; see also Krebs, 893 A.2d at 790 (explaining that, a contingency fee agreement can aid a trial court in determining the reasonableness of an award of attorneys’ fees because the fee agreement “can aid in demonstrating an attorney[s’] remunerative expectations”). “[T]he responsibility for setting [reasonable attorneys’] fees lies primarily with the trial court” and [appellate courts] have “limited power of review” because “the trial court [] has the best opportunity to judge the attorneys’ skills, the effort that was required and actually put forth in the matter at hand, and the value of that effort at the
time and place involved.” Carmen Enter., Inc. v. Murpenter, LLC, 185 A.3d 380, 389-390, 2018 PA Super 97 (Pa. Super. 2018) (stating that, “[w]hat is a fair and reasonable fee is sometimes a delicate, and at times a difficult[,] question”), appeal denied, 201 A.3d 725, 650 Pa. 671 (Pa. 2019). “[T]he burden is on the claimant to justify a fee request.” Carmen, 185 A.3d at 390.
Upon review, we find that the trial court erred as a matter of law and abused its discretion in awarding $100,000.00 for attorneys’ fees related to the UIM claim. The trial court basing its award solely on a percentage of the arbitration award and, in so doing, allowed the contingency fee agreement to serve as a ceiling on the fee award. The trial court was required, instead, to apply the lodestar approach by first determining a reasonable number of hours spent by the attorneys to litigate the UIM claim and multiply those hours by what the trial court determines is a reasonable hourly rate for each attorney. In making its determination under the lodestar approach, the trial court is permitted to consider, as one of its factors, the contingency fee agreement. The amount of fees Gambone’s counsel was entitled to receive, pursuant to the contingency fee agreement, based upon the recovery in the underlying UIM claim cannot, however, serve as a “ceiling” or a determination of the attorneys’ fees recoverable under Section 8371. Krishnan, 171 A.3d at 903.
As stated supra, Section 8371 provides the trial court with discretion to award interest, as part of a bad faith claim, “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%.” 42 Pa.C.S.A. § 8371(1).
As to the question of whether, or not, Section 8371 permits an award of interest calculated on a compounded interest basis, we find that it does not.19 It was well-established that “the law in this Commonwealth frowns upon compound interest and[,] as such[,] will only permit compound interest on a debt when the parties have provided for it by agreement or a statute expressly authorizes it.” Powell v. Ret. Bd. of Allegheny Cnty., 431 Pa. 396, 246 A.2d 110, 115 (Pa. 1968), citing Murray v. Prudential Insur. Co. of Am., 144 Pa. Super. 178, 18 A.2d 820, 823 (Pa. Super. 1941). Therefore, at the time Section 8371 was first enacted in 1990, the General Assembly understood that, to permit the compounding of interest under Section 8371, the statute must explicitly state that interest is permitted to be calculated on a compounding basis. Section 8371 does not state that interest shall be calculated on a compounded interest basis but, rather, simply states that interest may be awarded “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%.” 42 Pa.C.S.A. § 8371(1). As such, we find that the trial court erred in calculating its award of interest on a compounded interest basis.
For the reasons set forth herein, we are constrained to vacate the May 22, 2024, judgment. In so doing, we affirm the October 12, 2022, verdict entered in favor of Gambone and against Erie Insurance on the claim of bad faith. We vacate the January 10, 2024, verdict entered in favor of Gambone and against Erie, in part, to the extent
that the trial court awarded interest in the amount of $659,007.90 and attorneys’ fees in the amount of $217,100.00. We remand the case for further proceedings on the issues of attorneys’ fees and interest in accordance with this decision.
