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Legal Updates for PA Municipal Liability

Challenge to Sovereign Immunity/Damages Cap

Legal Updates for Pennsylvania Municipal Law, March 20, 2024

March 20, 2024

by Jordan L. Mazzoni

In Freilich v. Se. Pennsylvania Transportation Auth., 302 A.3d 1261 (Pa. Commw. Ct. 2023), appeal granted, No. 245 EAL 2023, 2024 WL 1044586 (Pa. Mar. 11, 2024), the Pennsylvania Supreme Court was asked whether Section 8528(b)’s statutory cap on damages of $250,000 violates Article I, Section 6 and Article I, Section 11 of the Pennsylvania Constitution?

Hayley Freilich, the plaintiff, appealed from the judgment entered in the Philadelphia County Court of Common Pleas and the Commonwealth Court of Pennsylvania. On October 2, 2017, Hayley was struck by a SEPTA bus while in a crosswalk at Broad and Vine Streets in downtown Philadelphia. The bus ran over Hayley’s left foot, and she underwent a partial left foot amputation, which has required multiple additional surgeries and significant medical care and will require medical care for the rest of her life. 

Hayley retained Kline & Specter, P.C. to represent her in litigation against SEPTA. A basis for this representation was that this law firm would challenge the constitutionality of Section 8528(b) of the Code, which limits SEPTA’s liability to the $250,000 cap, asserting that the cap violates Article I, Section 6 and Article I, Section 11 of the Pennsylvania Constitution. The plaintiff brought a one-count complaint in negligence against SEPTA. On July 20, 2018, SEPTA made a formal offer to settle all of the plaintiff’s claims for the maximum $250,000 cap on damages. Hayley rejected this offer as part of her constitutional challenge to the statutory cap. SEPTA admitted liability, and a jury trial limited to determining compensatory damages was scheduled. The parties entered into a stipulated jury verdict for the plaintiff. The damages awarded were $500,000 for past economic loss; $500,000 for future economic loss; and $6,000,000 for past and present non-economic losses. 

The plaintiff then filed a motion for delay damages, while SEPTA filed a motion to mold the verdict, alleging that the stipulated verdict should be molded to conform to the statutory cap. Hayley filed an answer and memorandum of law in opposition, relying on Chief Justice Baer’s concurring opinion in Zauflik v. Pennsbury School District, 104 A.3d 1096, 1134 (Pa. 2014), in which he stated the constitutional challenge to the statutory cap for local political subdivisions was without merit, but “that through a properly developed record, a victim may be able to establish that the statutory damages cap constitutes an onerous procedural barrier to the jury trial right in violation of [a]rticle I, [s]ection 6.” 

Relative to costs, after deducting these litigation expenses and counsel fees from the $250,000 gross recovery, the plaintiff would only net $90,462 in compensation. Hayley’s health insurer, Aetna, has paid $520,668.42 for health care resulting from the accident. Therefore, any net recovery could be recovered by Aetna. Hayley also received $7,967.31 in short-term disability benefits and $31,383.31 in long-term disability benefits, which would also be subject to recovery. The trial court heard argument on the post-trial motions and granted SEPTA’s motion to mold the verdict to comply with Section 8528(b) and denied the plaintiff’s motion for delay damages. The plaintiff appealed, claiming the trial court erred in molding the stipulated verdict to the statutory cap because it violates her right to a jury trial under Article I, Section 6 as the judgment will be consumed by costs, fees, and insurance reimbursement claims.

The Commonwealth Court found that Hayley was able to adequately prosecute the instant matter. The plaintiff asserted that the trial court erred in failing to adopt the late Chief Justice Baer’s minority position and in failing to determine the appropriate criteria upon which she may rely “to establish that the statutory damages cap constitutes an onerous procedural barrier to her jury trial right.” The court found that the trial court and the Commonwealth Court are bound by the majority opinion in Zauflik, in which the Supreme Court rejected the argument that the mere reduction in recovery is a basis upon which the foregoing constitutional violations may be found. The court recognized the harsh result that stemmed from its decision, but, nevertheless, it was compelled to affirm the trial court’s order molding the verdict to conform to the constitutionally valid provision of Section 8528(b) of the Judicial Code unless and until the Pennsylvania Supreme Court provides the basis upon which to do otherwise. 

On March 11, 2024, the Petition for Allowance of Appeal was granted by the Pennsylvania Supreme Court, and the parties are directed to address the following issue: If the court concludes that the limitation of damages set forth in 42 Pa.C.S. § 8528 is unconstitutional, is Section 8528 severable from the limited waiver of sovereign immunity set forth in 42 Pa.C.S. § 8522(a)? 



 

Legal Updates for Pennsylvania Municipal Law, March 20, 2024, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright © 2024 Marshall Dennehey, all rights reserved. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, or if you wish to be removed from this mailing list, contact tamontemuro@mdwcg.com.

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Thought Leadership

Ohio Supreme Court Holds That a Binding Appraisal Award May Not Be Set Aside Absent Specific Evidence of Manifest Mistake or Fraud

On July 23, 2026, the Ohio Supreme Court issued a rare opinion on the binding effect of an appraisal award in a property insurance policy.  The Court in One Church held: A binding appraisal award will not be set aside unless an error is so palpably wrong that it undermines the intent of the agreement, such as corruption or gross mistake, not a mere error of judgment—To plead a claim of mistake with particularity as required by Civ.R. 9(B), facts alleged in a complaint must constitute the elements of mistake—Allegation that additional, hidden damage was discovered after appraisal award failed to state a claim of mistake that could justify setting aside binding appraisal.  The case arose out of a claim brought by One Church against its insurer, Brotherhood Mutual Insurance Company for roof damage from a storm. Pursuant to the terms of the insurance policy, the parties agreed to submit the matter to appraisal. The two appraisers inspected the building, and both appraisers agreed that the damages were $313,271.98. The insurer paid the agreed appraised amount.  Thereafter, the insured submitted a claim for an additional $206,663.09 in damages. The insured argued that these additional damages were not discovered until after the repairs began, and that they should be permitted to submit an additional claim, even though there had already been a binding appraisal of damages. The insurer refused to pay the additional damages, and the insured sued for breach of contract and bad faith.  In the trial court, the insurer moved to dismiss for failure to state a claim, arguing that the binding appraisal award barred any further claims. The insured took the position that additional hidden damages could not be discovered until after the repairs began, and therefore there was a mutual mistake. The trial court dismissed the case on the insurer’s motion, because there was no “evidence of fraud, misfeasance, or mistake”. The Court of Appeals agreed that appraisal awards are generally binding, but noted that an appraisal award can be set aside for fraud or manifest mistake. The Court of Appeals reversed and remanded the case to the trial court, finding that the insured had pled mistake with sufficient particularity. The insurer appealed to the Ohio Supreme Court. On appeal, the Ohio Supreme Court reversed the Court of Appeals, and reinstated the trial court decision dismissing the case for failure to state a claim upon which relief can be granted. The Supreme Court found that since the insured had already demanded appraisal, and the appraisal award was binding, “something more than error of judgement, such as corruption in the arbitrator, or gross mistake” must be pled with particularity, and proven for the insured to override the appraisal award. Since the complaint did not allege fraud or manifest mistake with sufficient particularity, something more than a mere error of judgment, the complaint was insufficient to state a claim.  The complaint in this case did not challenge the appraisal award. It pled that additional damages were discovered that were not apparent when the appraisal was done. It did not specify “who discovered the damages, how they were discovered, where they were found, why they were previously hidden, or why they rise to the level of a manifest mistake that the “appraiser would have corrected...had it been called to his attention”. Id at ¶22 citing Lakewood Mfg. Co. v. Home Ins. Co. of New York, 422 F.2d 796, 798 (6th Cir. 1970). Cases deciding the effect of appraisal awards are unusual. The Ohio Supreme Court’s decision in One Church relies primarily on 19th century case law for its conclusion. This emphasizes the fact that there is minimal case law deciding the effect of binding appraisal clauses in property insurance policies, and makes this case all the more significant. A lengthy dissent was written by Justice Fisher, who would have affirmed the Court of Appeals decision reversing and remanding the case for a decision on the merits. Of course, the decision works both ways, and an insurer dissatisfied with a binding appraisal award will likewise be without further recourse absent evidence of corruption, fraud, misfeasance, or manifest mistake, which must be pled with particularity. To constitute manifest mistake, “the mistake must be of such character that the arbitrator or appraiser would have corrected it had it been called to his attention.”  Lakewood Mfg. Co. v. Home Ins. Co. of New York, 422 F.2d 796, 798 (6th Cir. 1970).  The majority opinion does not specifically identify what would have been sufficient to plead mistake with particularity, or if the insured could have amended the complaint to overcome the deficiencies. The dissent argues that this was not really a case alleging mistake, but rather a question of contract interpretation. The insured did not challenge the appraisal, but argued that the hidden damage was not part of the appraisal, and the appraisal only covered the known damages.  However, this argument did not carry the day with the majority.  *Thomas F. Glassman, a shareholder in Marshall Dennehey’s Cincinnati office, filed a brief in the Ohio Supreme Court on behalf of the Ohio Association of Civil Trial Attorneys, in support of the insurer’s position.