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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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In a decision that resolves years of appellate uncertainty and confirms that insurers and insureds alike can rely on the legal framework in place when a policy is issued, the Supreme Court of Florida last week found that Florida Statute §627.70152, which involves an insured’s requirement to provide an insurer with pre-suit notice before filing a suit, cannot be applied retroactively. In Universal Property & Casualty Insurance Company v. Hughes, the Court was presented with the issue of whether the statutory pre-suit notice requirement applied retroactively and whether it would apply to a breach of contract of an insurance policy that was issued before the statute went into effect. Before the Court was an appeal from a homeowner, Ms. Hughes, who sued her insurance carrier, Universal Property & Casualty Insurance Company (Universal) for breach of contract under an insurance policy that was in effect from April 24, 2019 through April 24, 2020. During the policy period, Ms. Hughes suffered a loss and, on May 29, 2019, made a claim for water damage. The carrier investigated the loss and issued payment; Ms. Hughes disputed the payment, finding the amount insufficient for repairs. On July 1, 2021, Florida Statute §627.70152 went into effect, which required insureds to provide notice of intent to initiate litigation against the carrier prior to filing a lawsuit; if an insured filed the lawsuit without complying with §627.70152, a court must dismiss the case without prejudice. On August 4, 2021, Ms. Hughes filed her lawsuit against Universal for breach of contract. Universal moved to dismiss based on her failure to comply with §627.70152. Ms. Hughes contended the notice requirement could not be applied retroactively. The trial court disagreed and dismissed the lawsuit without prejudice, and Ms. Hughes appealed. During the appeal, the Fourth District Court of Appeal, in Cole v. Universal Property & Casualty, 363 So. 3d 1089 (Fla. 4th DCA 2023), ruled that Florida Statute §627.70152 did apply retroactively to policies issued before the effective date of §627.70152. However, the Sixth District Court agreed with Ms. Hughes and overturned the trial court’s ruling, finding the statute could not retroactively apply to policies issued prior to the statute effective date. Thereafter, the other district courts weighed in, with the Third District Court agreeing with the Fourth District Court, and the First, Second and Fifth District Courts agreeing with the Sixth District Court. In resolving the conflict amongst the district courts, the Supreme Court advised “as a general rule, ‘the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.’ Hassen v. State Farm Mut. Auto. Ins. Co., 674 So. 2d 106, 108 (Fla. 1996). The Court applied the two-step test when deciding whether a statute has retroactive application: “First, the Court must ascertain whether the Legislature intended for the statute to apply retroactively. Second, if such an intent is clearly expressed, the Court must determine whether retroactive application would violate any constitutional principles.” Menendez v. Progressive Exp. Ins. Co., 35 So. 3d 873, 877 (Fla. 2010). In analyzing the Legislature’s intent, the Court must determine whether the Legislature has manifested a clear command for retroactivity in the statutory text.  In review of the statutory text, the Court found nothing in the language of the statute to indicate that the phrase “all suits” was serving another purpose of expanding its reach to suits based on policies that both predate and postdate the enactment of the statute. Buis v. Universal Prop. & Cas. Ins. Co., 394 So. 3d 738, 741 (Fla. 2d DCA 2024). Further, the Court noted the statute has an effective date, which has long been considered to be evidence against retroactive application of a statute. The Court concluded that, on its face, no provision of §627.70152 speaks to application of the statute to insurance policies issued before the statute’s effective date and therefore, the Legislature did not clearly command retroactivity of the statute to include insurance policies issued prior to the enactment of the statute. The Court briefly reviewed Universal’s argument that the presuit notice requirement was procedural, not substantive, and therefore should be applied retroactively; however, the Court agreed with the Sixth District Court’s finding that, in its entirety, §627.70152 transformed an insured’s ability to sue an insurance company under a property insurance policy and an insurer’s obligations to respond to and pay insurance claims, thus making the requirement a substantive change. The Court thereby upheld the decision of the Sixth District and disapproved the decision of the Fourth District in Cole.

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