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May 2, 2016

Pa. Judge Urged To Ax Contractor Fee Denial Class Action

This article originally ran in Law360 on May 2, 2016.

 

A Pennsylvania judge was urged during oral arguments on Monday to strike the core contention from a pair of class actions against a Farmers Insurance unit by finding that state law did not explicitly require insurers to include fees paid to general contractors when settling claims from homeowners.

 

Conrad O’Brien PC attorney Robert Feltoon said that there was no case law or statute in Pennsylvania that would override a provision in Truck Insurance Exchange’s policies excluding general contractor overhead and profit, or GCOP, from settlements intended to compensate homeowners for replacement and repair costs stemming from covered damage to their properties.

 

“In a nutshell, your honor, the answer is very clear that there is no overarching or overriding legal principle,” Conrad O’Brien PC attorney Robert Feltoon told Judge Ramy Djerassi during the hearing.

 

Konrad Kurach launched his putative class action against the insurer last July claiming that Truck had improperly deducted a 20 percent surcharge for contractor’s overhead and profit included as part of a $50,000 estimate to repair water damage at his Bucks County home.

 

A second suit was filed later the same month by Montgomery County homeowner Mark Winstersteen who also claimed GCOP costs were improperly deducted after he submitted a $40,000 estimate for repairs because of a leaking pipe.

 

The policies at issue dictate that GCOP costs can be recouped after the work has been completed and the fees have been incurred by the insurer, unless the law in the homeowner’s state requires that such charges be paid upfront as part of a settlement cover the actual cash value of the damages.

 

Kurach and Wintersteen argue that Pennsylvania courts have replacement cost policies like Truck’s cover the services of a general contractor in employing, scheduling and subcontractors for the repair and replacement of damaged structures.

 

Jonathan Wheeler, an attorney representing Kurach, told Judge Ramy Djerassi during Monday’s hearing that he believed the Pennsylvania Superior Court’s 1994 ruling in Gilderman v. State Farm Insurance Co. finding that homeowners are entitled to GCOP payments when they opt to buy policies, like the ones at question, with higher premiums.

 

“It’s our position, your honor, that that is the law in Pennsylvania,” Wheeler said. “What they’re doing is trying to short circuit that process by withholding the general contractor overhead and profits and asking the policyholder to reach into his own pocket.”

 

While peppering both sides with questions over case law on the issue, Judge Djerassi also questioning whether the case could ultimately move forward as a class action given the potential for highly individualized damages based on the unique circumstances of each homeowner’s claim.

 

Howard Silverman, an attorney with Kane & Silverman PC, countered that damages would be easy to calculate based on the fact that the GCOP was a uniform 20 percent deduction from the estimates submitted by policyholders.

 

“All the damage are easily calculable,” he said.

 

Judge Djerassi took the matter under advisement.

 

The case was argued for the plaintiffs by Jonathan Wheeler of the Law Offices of Jonathan Wheeler PC and Howard Silverman of Kane & Silverman PC.

 

The case was argued for the insurer by Robert Feltoon of Conrad O’Brien PC.

 

The cases are Konrad Kurach v. Truck Insurance Exchange, case number 150700399, and Mark Wintersteen v. Truck Insurance Exchange, case number 150703543, both in the Court of Common Pleas of Philadelphia County, Pennsylvania.

 

-- Additional reporting by Dan Packel. Editing by Patricia K. Cole.

 

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