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When an insurance policy requires an insurer to pay delay damages on any “judgment,” the insurer is liable even if the case settles before a jury’s verdict is formally entered on the court’s docket as a judgment, a federal judge has ruled. In Federal Insurance Co. v. American Employers’ Insurance Co., Senior U.S. District Judge Charles R. Weiner of the Eastern District of Pennsylvania was called on to resolve a dispute between a primary insurer and an insurer that issued a secondary “umbrella” policy. American, the primary insurer, had issued a $1 million policy to Wilgro Services Inc. In 1996, Wilgro was sued in Montgomery County, Pa., by Lawrence and Susan Gatta for personal injuries resulting from a construction accident. The Gattas at first demanded $750,000 to settle and later reduced their demand to $500,000. When the case went to trial, a jury awarded the Gattas slightly more than $2 million, finding that Wilgro was 60 percent liable and its co-defendant, Taylor Rental, was 40 percent liable. The Gattas’ lawyer then filed a motion for more than $183,000 in delay damages. Soon after the verdict, Federal, which had issued a $2 million umbrella policy to Wilgro, was notified about the case for the first time. Federal’s lawyers say they immediately told American that it was liable for more than its $1 million limit because its policy also covered the delay damages. Ultimately, the case settled for $1.5 million. American paid $1 million, Federal paid $300,000, and Taylor Rental’s insurer paid $200,000. Federal says it agreed to pay to protect Wilgro’s interests, but reserved its right to demand that American honor its obligation to pay the delay damages. Now Judge Weiner has sided with Federal and ordered American to pay Federal more than $179,000. American’s lawyers, Mark W. Mekilo and Joseph P. Connor III of Connor Weber in Paoli, Pa., argued that the policy’s promise to pay “all interest on the full amount of any judgment” — even if that results in payment of more than the policy limit — was not triggered because no judgment was ever entered after the jury’s verdict. Weiner disagreed and called the argument “overly simple.” “While American’s definition of ‘judgment’ is one possible use of the word, the law of Pennsylvania also provides that, for the purpose of computing interest, judgment and verdict are synonymous, and the date from which interest accrues is the date of verdict, not the date judgment is finally entered,” Weiner wrote. As a result, Weiner said, “it is immaterial that the underlying lawsuit was settled before the verdict was reduced to a judgment; the delay damages are deemed to be part of the verdict rendered by the jury.” Federal was represented by attorney John P. Kamstra of Deasey Mahoney in Philadelphia.

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