Joel Feller
Joel Feller (bh)

The family of a 15-year-old who sustained catastrophic brain injuries as a result of a car accident in Lawrence County has settled their bad-faith case against an insurance company for $18 million.

David and Joyce Piper, on behalf of their son, Stephen Piper, who was a passenger in his brother’s car when it struck a pole, settled their case with Erie Insurance Exchange on Dec. 9.

Piper v. Erie Insurance Exchange produced the second largest verdict or settlement in a bad-faith case in Pennsylvania over the past 10 years. According to The Legal’s annual magazine, PaLaw, the largest bad-faith settlement in the last 10 years was for $20 million in Tuski v. Princeton Insurance in 2007.

According to the Pipers’ attorney, Joel Feller of Philadelphia-based Ross Feller Casey, Stephen Piper sued his brother, Kyle Piper, in the Lawrence County Court of Common Pleas. After granting summary judgment on liability, the case proceeded to a trial on damages that resulted in a $15.6 million verdict.

The bad-faith action, Feller told The Legal on Monday, stems from Erie’s failure to settle the claim that was “grossly underinsured” with $100,000 bodily injury limits.

“Any reasonable insurance professional would conclude that the value of Stephen’s injuries far exceeded the $100,000 policy,” Feller said, “yet Erie refused to timely offer its $100,000 policy to protect its insured, Kyle, and when they finally made an offer it was conditioned on the waiver of another portion of the policy.”

The bad-faith action stems from an accident that took place Feb. 22, 2003, when then-15-year-old Stephen Piper was traveling as a passenger in his then-17-year-old brother Kyle Piper’s car, according to the plaintiffs’ memorandum.

Kyle Piper lost control of the vehicle and struck a pole, ripping the car in half and causing serious brain injuries to Stephen Piper. According to the plaintiffs’ papers, Stephen Piper was flown to a hospital for emergency medical treatment and would spend several weeks in a coma.

As a result of the accident, Piper suffers from permanent physical and cognitive impairments, the plaintiffs’ papers said.

The bodily injury claim had been assigned to Erie Insurance adjuster Lauren Lackey, who continued to investigate liability even after the Erie home office suggested settlement, according to plaintiffs’ papers.

James D. McDonald Jr. of the McDonald Group in Erie, Pa., was counsel for Erie Insurance Exchange and did not return a telephone call seeking comment.

Erie said in defense that it did not have adequate documentation as to the extent of Piper’s injuries, Feller said.

According to the plaintiffs’ papers, Lackey dictated a letter to the Pipers’ legal counsel that Stephen Piper’s claims would not be evaluated until “medical records and expenses” were provided.

Lackey ultimately said that, in terms of documentation, she was waiting for the ambulance trip sheet from the day of the accident, the plaintiffs’ papers said.

However, Lackey said during her deposition that she never told the Pipers’ attorney that she required the trip sheet in order to pay the claim, the plaintiffs’ papers said.

Additionally, “although Erie claims supervisor Brett Ellis claimed in his deposition that all that was necessary was ‘[s]ome form of medical documentation showing prognosis and diagnosis,’ no one from Erie ever communicated that to Stephen Piper’s lawyer, nor is that reflected in Erie’s extensive claims notes,” the plaintiffs’ papers allege.

Further allegations were made in the plaintiffs’ papers that Lackey, as an employee who at the time had worked at Erie for only five months, did not understand the nature of recoverable damages available to Piper.

The plaintiffs’ papers also pointed to an employee performance review of Lackey in which Ellis said that Lackey “questions the legitimacy and/or value of every claim, sometimes too much.”

According to the plaintiffs’ papers, Erie still neglected to offer settlement by September 2003, even after it had allegedly received all pertinent medical records in relation to the bodily injury claim.

On Oct. 6, 2003, Erie made a conditional settlement offer in which it offered the $100,000 of bodily injury limits, contingent upon Erie being released from all other claims made by the Pipers, the plaintiffs’ papers said.

“When an offer was finally made after submission of more than $700,000 in medical records/bills, Erie unreasonably and in bad faith conditioned settlement of Stephen’s bodily injury claim on his release of all claims against Erie,” the plaintiffs’ papers alleged.

At mediation, Feller said, Erie continued to defend itself by claiming that it did not receive medical records in a timely manner in order to determine the full extent of Stephen Piper’s injuries.

However, Feller said that Erie had a copy of the Life Flight report, which is the equivalent of the ambulance trip report.

Additionally, Erie contended that any claims on the plaintiffs’ behalf for punitive damages were time-barred because the bad-faith claim was filed after the two-year expiration date of the statute, he said.

Feller said that defense papers in relation to the mediation for settlement could not be supplied because they were submitted confidentially by the defendant.

P.J. D’Annunzio can be contacted at 215-557-2315 or pdannunzio@alm.com. Follow him on Twitter @PJDannunzioTLI.