$20,000,000 – Insurer to Pay in Dram Shop Suit

In the largest settlement to date in a Pennsylvania insurance bad faith case, the Princeton Insurance Co. has agreed to pay $20 million to settle a claim brought on behalf of a tavern that was hit with a $75 million verdict in a Dram Shop Act suit after the insurer refused to settle the case for the tavern’s policy limit of $1 million.

In Tuski v. Princeton Insurance Co., the tavern had assigned its rights to pursue the bad faith claim to Joseph Tuski, a former highway construction worker who was left quadriplegic after he was struck by a drunken driver and thrown more than 100 feet.

In the previous suit, Tuski v. Ivyland Cafe Ltd., a Philadelphia jury had awarded more than $75 million to Tuski — including $25 million in punitive damages — but the award was later cut in half by the trial judge, Philadelphia Common Pleas Judge John Milton Younge.

That reduced verdict of $37.5 million was later affirmed by the Pennsylvania Superior Court when a unanimous three-judge panel ruled that both the drunken driver and the tavern where he worked as a manager — and had served himself drinks on the morning of the accident — were properly held liable.

Plaintiffs attorney Robert Mongeluzzi of Saltz Mongeluzzi Bendesky said that when pre-and post-judgment interest was added, the judgment had swelled to more than $48 million.

Mongeluzzi and attorney Louis A. Bove of Bodell Bove Grace & Van Horn filed a bad faith suit alleging that Tuski’s suit against the Ivyland Cafe could have settled for $1 million if not for the insurer’s bad faith refusal to settle for the tavern’s policy limit.

In court papers, the plaintiffs team argued that the insurer had “actual knowledge” of Tuski’s “devastating injuries” and also knew within the first few months of litigation that the Ivyland Cafe “had no possible defense” against Tuski’s claim.

“Any rational insurance professional would have recognized that a Philadelphia jury would find Joe’s condition so compelling, and the circumstances of this loss so heinous, as to guarantee an enormous verdict,” the plaintiffs team wrote in a court brief.

But the brief said, “Princeton repeatedly ignored the facts, the law, and the advice of its own appointed counsel, steadfastly refusing to make any offer whatsoever to settle the claim.”

In the original verdict, both defendants were hit with punitive damage awards. The jury said the owners of the Ivyland Cafe should pay $5 million in punitive damages and that driver Michael Petaccio should pay $20 million in punitive damages.

The jury also awarded Tuski more than $1.6 million for his past medical expenses, $18 million for future medical expenses, and $2 million for lost earnings.

The verdict also included four awards of $7.25 million each — or $29 million — for pain and suffering, loss of life’s pleasures, embarrassment, and disfigurement.

In a post-trial ruling, Younge granted a defense motion for remittitur and cut every aspect of the jury’s award in half, leaving Tuski with an award of $25.34 million in compensatory damages and $12.5 million in punitive damages.

According to court papers, Petaccio had pleaded guilty in Bucks County to a drunken driving charge in September 2001 in connection with the accident, but testified in the civil trial that his guilty plea was motivated by a desire to avoid jail time and that he was not drunk at the time of the accident.

Although his blood-alcohol level was high at the time of his arrest, Petaccio said prior to the accident he had consumed just one-and-a-half bottles of beer at the Ivyland Cafe, and that he had several drinks after the accident, according to court records.

On cross-examination, Mongeluzzi challenged Petaccio’s version and argued to the jury that the evidence showed he must have drank much more while at the bar. Mongeluzzi told the jury that Petaccio’s car was found later with a broken windshield and with empty beer containers in the front seat.

Petaccio’s girlfriend testified in her deposition that Petaccio was a daily drinker and often drank to excess. She also said she tried to warn his family before the accident.

According to court papers, on Jan. 17, 2001, Tuski was working as a flagman for Liberty Construction at a road-paving project in Warminster.

One lane of the road was closed to traffic, and Tuski and another flagman were directing traffic. At the time of the accident, Tuski had several cars stopped in order to allow the oncoming traffic to proceed.

Mongeluzzi told the jury that Petaccio passed the stopped cars on the shoulder and struck Tuski at more than 40 miles per hour, throwing him more than 108 feet and causing injuries that left him paralyzed from the neck down.

After the accident, according to court papers, Petaccio fled the scene and drove to his nearby home where he smashed into pillars near his driveway.

Mongeluzzi said Petaccio then persuaded his girlfriend to take him to his mother’s house in Philadelphia. When they discovered that his mother was not at home, they went to the home of Petaccio’s sister, who immediately called the police and informed them that her brother “was drunk and had been in an accident.”

Police arrested Petaccio several hours after the accident and noted that he appeared intoxicated, Mongeluzzi said in court papers.

But Petaccio at first denied drinking any alcohol in the six hours before his arrest and refused to submit to a blood test, Mongeluzzi said. After police obtained a search warrant, Petaccio’s blood was tested about 8 p.m. It showed a blood-alcohol level of 0.12 percent and a urine-alcohol level of 0.17 percent.

In an interview Wednesday, Mongeluzzi said that Princeton had tendered the $1 million policy limit during the initial appeals and that Tuski has already collected more than $1.4 million from the bond that Ivyland Cafe posted at the time of the appeal.

The bad faith claim was filed in the Philadelphia Court of Common Pleas, Mongeluzzi said, and the insurer agreed to take the case to mediation before Diane Welsh, a former federal magistrate judge now with JAMS, the Resolution Experts.

Mongeluzzi said Welsh “did a tremendous job” in mediating the case, leading to a settlement in which Princeton agreed to pay an additional $20 million, for a total recovery of more than $21.4 million for Tuski.

Princeton’s lawyer, Steven D. Johnson of Gibbons, P.C., could not be reached for comment Wednesday.