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Western District of Pennsylvania Rules That Non-Party Insurer May Not Intervene to Assist With Drafting Verdict Slip

July 2015. Feel free to direct questions or comments to Greg Delfiner.

Delfiner_thumbA non-party insurer desiring to have input in crafting jury verdict interrogatories in an effort to aid in the determination of coverage obligations must act promptly according to the Western District of Pennsylvania.  See Gadley v. Ellis, No. 3:13-cv-00017 (W.D. Pa. June 26, 2015).

Acting as the general contractor to construct his own home, Gary Gadley hired Jerry Ellis Construction to install structural insulated panels on his roof. Gadley claimed several shortcomings in the quality of the installation and filed suit in December 2012.  Ellis tendered the Gadley claim to its insurer, Cincinnati Insurance Company, who defended under a reservation of rights.  On July 31, 2014, Cincinnati filed a declaratory judgment action in the same Court (Civil Action No. 3:14-cv-1555), seeking a declaration that it was not obligated to defend and indemnify Ellis against the allegations and claims asserted by Gadley.

On April 8, 2015 (well over two years since the underlying action commenced), Cincinnati sought intervention for the “sole and limited purpose of participating in the formulation of specific interrogatories to be submitted to the jury … so as to protect [its] interests.”  Cincinnati argued that: (i) permitting it to assist with drafting the jury interrogatories may eliminate the need to litigate issues in the declaratory judgment action; (ii) if it was not permitted to participate it would not be able to protect its interest in the declaratory judgment action because it may not be possible to “discern on what basis the jury awarded damages;” and (iii) its motion was timely and would not prejudice the parties.

In turn, Gadley and Ellis opposed Cincinnati’s motion arguing that: (i) the issues presented by Cincinnati would be adequately addressed in the underlying action; (ii) permitting Cincinnati to craft categories of damages on the jury verdict form would only confuse the jury and prejudice the parties; and (iii) the motion was untimely, vague, and would delay the trial.

The Court found that Cincinnati’s motion was untimely because: (i) Cincinnati, which had represented Ellis since the initial underlying complaint was filed in December 2012, had no adequate reason for its delay in seeking intervention until April 8, 2015 (on the eve of trial after the pretrial conference);  (ii) both fact and expert discovery had long been closed; (iii) the Court had already ruled on the parties’ motions for summary judgment; (iv) intervention was sought after numerous proceedings of substance on the merits of the case (including the categories of damages) had already taken place; (v) permission for intervention would require additional discovery at a very late stage; and (vi) the suggested interrogatories might inject issues from the declaratory judgment action that were unrelated to the underlying case, thereby confusing the jury in the underlying case.  Accordingly, the Court stated that intervention for the purpose of submitting special interrogatories to the jury on the damage issues would present significant prejudice to the parties.  Based on these facts, the Court ruled that Cincinnati failed to establish that its motion to intervene satisfied the timeliness threshold under the Federal Rules of Civil Procedure and denied its motion.

The implications of Gadley is plain: an insurer that wishes to mold special jury interrogatories in an underlying action so that the jury verdict can be apportioned between covered and non-covered claims or losses (thereby assisting with coverage determinations) must move to intervene in a timely manner.  Thus, insurers should be mindful of seeking to intervene as soon as it becomes apparent that classification of damages is an issue that may affect its coverage obligations.