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Murphy Spadaro & Landon, a five-attorney firm in Wilmington, Del., has landed a $1.65 million fee award in the wake of securing a $5 million settlement in a class action that alleged claims of breach of contract, bad faith and fraud against Nationwide Mutual Insurance Co. The road to recovery, however, was dotted with landmines. According to partner John Spadaro, his firm faced potential devastation as it litigated not just the class action, but also a counterclaim by Nationwide that could have resulted in a seven-figure damages award against the firm and two of its partners. According to Superior Court documents in Crowhorn v. Nationwide, Nationwide alleged a breach of confidentiality claim against Murphy Spadaro partner Roger Landon, Spadaro and the firm because some of the arguments made in the class action originated with an earlier case the firm had settled with the insurer pursuant to a confidentiality agreement. In a brief filed in support of their fee request, Spadaro and Landon claimed that Nationwide had sought to derail the class action suit with its breach of confidentiality claim. “In the first of the two arbitration proceedings spawned by confidentiality disputes,” the brief said, “Nationwide sought a seven-figure recovery against [Murphy Spadaro.] Though the arbitrator rejected Nationwide’s claim and assessed no damages against [the firm,] few litigation outcomes are ever certain from the start. … Had the arbitration gone badly for [Murphy Spadaro,] it is an open question whether the firm would have survived.” Spadaro told the Delaware Law Weekly that the Murphy Spadaro partners stood by him when they could have had the opposite reaction and deemed the continued pursuit of the case financially reckless. “It’s a big moment for a little firm,” Spadaro said of the substantial settlement, “because we worked very hard for a long time, and I think fairly regard this as a complete victory in a novel area that’s going to mean good things for ordinary people for at least some time to come.” In court papers, the firm asserted that until Crowhorn, no Delaware lawyer had pursued a class action suit against an insurance company that was based on how the insurer handled personal injury protection claims. According to the state insurance department, PIP coverage is mandatory for Delaware drivers. Regardless of whether an insured is responsible for an automobile accident, his or her insurance company will pay for the medical expenses and lost wages of the insured driver and any passengers, according to an insurance department brochure. Superior Court Judge William L. Witham Jr. penned the final settlement order in Crowhorn earlier this month. He had tentatively approved its terms in late June. Representative plaintiff James M. Crowhorn’s claims arose from allegations that Nationwide had improperly processed PIP matters, the order said. “The underlying basis of the plaintiff’s complaint is that Nationwide systematically delayed or denied the payment of PIP claims and benefits of Delaware automobile insurance policies,” Witham wrote. “More specifically, plaintiff alleges that such claims were denied or delayed without providing the insured with a reasonable, written explanation within 30 days.” In his complaint, Crowhorn contended that Nationwide delayed payment of lost-earnings claims; used requests for independent medical exams to reduce or terminate PIP benefits; limited payments of benefits; refused to pre-certify medical treatments; used pre-existing conditions to reduce medical benefit payments; and inadequately trained adjusters regarding the handling of medical records. In a statement provided to the Delaware Law Weekly, Nationwide said it has at all times properly evaluated and paid PIP claims in Delaware, and that it settled the suit to avoid prolonged litigation. According to the statement, “Nationwide continually reviews and revises its procedures to provide the best claims services to its policyholders. The class action and its settlement have provided Nationwide a further opportunity to improve its delivery of claim services to all its policyholders.” The settlement class consists of approximately 28,000 Nationwide automobile policyholders in Delaware, insureds and passengers of insured vehicles, as well as fee-for-service medical care providers, the order said. The class is limited to those who, between 1997 and 2003, made claims for medical expenses, lost earnings or other PIP benefits and allegedly did not receive timely payments from Nationwide. Pursuant to the settlement, class members may accept $100 checks from Nationwide, opt out of the settlement or adjudicate their claims before a neutral arbitrator. According to the order, the last two options are reserved for class members whose claims exceed the $100 settlement amount. In approving the settlement, Witham noted that the representative plaintiff and Nationwide had “intensely litigated” the case for three years, exposing the strengths and weaknesses of the case. Indeed, the settlement order said that the Superior Court has issued seven opinions in the matter, with an additional three from the state Supreme Court. Spadaro said the case has produced a total of about 50 orders and opinions. “There was very little in the case that wasn’t litigated, and litigated heavily,” Spadaro commented. “The big challenge was getting the PIP files [from Nationwide] and synthesizing them in a meaningful way for settlement and trial. It was an awful lot of paper, and we are a small firm.” Witham’s order said that Murphy Spadaro devoted more than 2,600 attorney and paralegal hours to Crowhorn. In addition, expenses and advances totaled more than $24,400, according to the order. The court also highlighted the fact that class counsel mailed approximately 28,000 class notices and fielded thousands of telephone calls from class members; Spadaro put the number of calls received in the range of five to six thousand. “In addition,” Witham said, “Murphy Spadaro’s work is not finished. They will continue to represent those class members who choose to go to arbitration rather than taking the $100 payment.” Spadaro estimated that 360 class members thus far have opted for arbitration. The firm’s fees for representing them will come out of the settlement funds, he said. “Finally,” the order said, “the contingent risk warrants a fee award. Not only did counsel risk losing this case and not recovering any amount of money, but they risked a seven-figure judgment against them based on Nationwide’s claim of confidentiality violations.” Spadaro credited his firm’s paralegals and legal secretaries for devoting significant time and energy to Crowhorn. Murphy Spadaro associate Chase Brockstedt also worked extensively on the case, Spadaro said. In addition to Nationwide’s in-house counsel, Swartz Campbell in Philadelphia handled the defense.

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