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When a plaintiff wins a bad-faith suit against its insurer, it may be entitled to an award of attorney fees even if the court has already awarded punitive damages, a federal judge has ruled. In Willow Inn Inc. v. Public Service Mutual Insurance Co., U.S. District Judge Berle M. Schiller of the Eastern District of Pennsylvania awarded the plaintiff more than $135,000 in attorney fees and costs after finding that its lawyer, Howard G. Silverman of Kane & Silverman, was entitled to $250 per hour for more than 500 hours of work. “PSM’s conduct forced Willow Inn to hire an attorney in order to enforce its rights under the insurance contract. Because I awarded punitive damages solely to punish PSM, a separate award of attorney’s fees is necessary to make the Willow Inn whole,” Schiller wrote in the April 11 decision. In January, Schiller found PSM liable for both breach of contract and bad faith. In an opinion announcing his verdict after a non-jury trial, Schiller awarded Willow Inn $2,000 on the contract claim and $150,000 in punitive damages on the bad-faith claim. According to court papers, the Willow Inn in Willow Grove, Montgomery County, Pa., was built as a resort in the early 20th century and currently operates as a bar, restaurant and residence. In June 1998, a severe windstorm caused extensive damage to the property and the inn’s owners filed a claim with PSM to recover the cost of repair and lost business income. Schiller found that while the inn was quick to act, PSM dragged its feet for months in order to delay paying the claim. “Unreasonable delays in the processing of the Willow Inn’s claims were extraordinarily unwarranted such that there can be no conclusion except that PSM knowingly or recklessly disregarded the absence of a reasonable basis for its conduct,” Schiller wrote. Schiller found that the record from the trial was “replete with examples of PSM’s failure to respond in a timely fashion to Willow Inn’s various reasonable requests, and even to the requests of those working on PSM’s behalf.” As one “egregious example,” Schiller noted that PSM’s unjustified delay in appointing an appraiser prevented the appraisal from going forward for more than eight months despite the “diligent efforts” of Willow Inn and its adjusters. Schiller found that Willow Inn had cited several examples of PSM’s bad-faith conduct, but that the combined effect of the evidence was even stronger. “While each of these examples evinces bad faith, this conclusion becomes even stronger when one considers the abundance of evidence presented at trial pointing out the dramatic contrast between Willow Inn’s conscientious efforts and PSM’s reckless and obstructive actions,” Schiller wrote. Noting that PSM has more than $500 million in assets and more than $100 million in capital surplus, Schiller concluded that Willow Inn was entitled to an award of $150,000 in punitive damages. Silverman filed a petition for more than $153,000 in attorney fees and costs. But PSM’s lawyers, Louis J. Brown, Edward M. Koch and Peter G. Erdely of White & Williams, argued that Silverman was billing for too many hours and at too high a rate. Schiller sided with Silverman on the hours, but sided with the defense team on the rate. “Although I agree that in many instances Mr. Silverman could have been more specific in describing the tasks he performed, this lack of detail does not rise to the level of inadequacy. No single entry is plainly unreasonable, and the total number of hours claimed is reasonable given the nature, scope, and complexity of the litigation,” Schiller wrote. As a result, Schiller concluded that Silverman should be paid for all 512.3 hours he claimed in the petition. But Schiller also found that Silverman’s $300 hourly rate was excessive. The defense team submitted an affidavit from attorney Robert Horst, who said he frequently litigates bad-faith cases and that the prevailing hourly rate in the Philadelphia area for prosecuting such cases is in the range of $125 to $200. But Schiller said Horst’s affidavit was “of limited usefulness” because he failed to state whether the range covered cases taken on a contingency fee basis. Nonetheless, Schiller found that Silverman’s rate was too high since it was outside the range of rates in the fee schedule compiled by Community Legal Services, which calls for a rate of $220 to $270 for a lawyer with 15 years’ experience. Taking the contingent nature of his representation into account, Schiller found that Silverman should be paid $250 per hour.

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