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Third Circuit Agrees that Business Earnings Prior to an Accident Are Inconclusive (PA)

May 7, 2020

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The United States Court of Appeals for the Third Circuit recently affirmed a decision from the United States District Court for the Western District of Pennsylvania and determined that an insurer’s issues with trial evidence and claims were invalid. In <a href="https://www.wcmlaw.com/wp-content/uploads/2020/05/Kirkpatrick-v.-GEICO-Casualty-Company.pdf">Kirkpatrick v. GEICO Casualty Company</a>, the insurance company moved for relief from a judgment or, alternatively, for a new trial which was ultimately denied on appeal.
The underlying incident involved a motor vehicle accident in which Ronnie Kirkpatrick and Michelle Vensel (“Plaintiffs”) suffered permanent injuries after an automobile accident caused by a negligent driver. The plaintiffs alleged that Geico failed to make proper payment of claims under the underinsured motorist benefit of their Geico insurance policy. Specifically, the plaintiffs argued that the accident impacted their car restoration business, despite reporting losses to the IRS in the years leading up to the accident and not having finished or sold any cars to date. In response, Geico argued that the loss of earning capacity was not a result of the automobile accident. However, at the close of trial, a jury returned an award of $900,000.00 in favor of the plaintiffs.
On appeal, Geico argued that the jury’s award was against the weight of the evidence because there was no evidence that the plaintiffs’ business lost profits. In fact, the plaintiffs had only recently launched their business and restored extremely expensive antique cars. The jury was able to hear evidence that the cars currently in production had “substantial estimated appraisal value upon completion” and the delays resulted in later-than-anticipated dates of sale. Furthermore, the plaintiffs demonstrated that Ronnie Kirkpatrick was unable to perform his work at the same pace as prior to the accident. Overall, the Court determined the jury had sufficient evidence to conclude that the plaintiffs’ injuries led to a “shorter economic horizon” for their business in the form of less cars restored due to more time per restoration and delayed sales dates. 
In affirming the District Court’s decision, the Third Circuit relied on Pennsylvania case law holding that “[d]amages for loss of earning capacity arise out of an impairment of that capacity, and not out of loss of earnings.” The Court also determined that the plaintiffs’ earnings subsequent to the injury compared with their earnings at the time of the injury is not conclusive evidence as to whether earning power has been diminished by the accident. 
Additionally, Geico argued that there was insufficient evidence from which the jury could use as a “yardstick” for calculating lost earning capacity. The Third Circuit disagreed and determined that the damages presented to the jury on the issues were not impermissibly speculative. The Court relied on the Pennsylvania Supreme Court decision Kaczkowski v. Bolubasz, which concluded that some speculation does not justify excluding reliable economic evidence since impression is inherent in any computation of lost future benefits. The Third Circuit also pointed out that inflation and productivity can be included in the computation of lost future earnings. Overall, the Third Circuit held that, based on the evidence presented by the plaintiffs, the jury had a sufficient evidentiary foundation and were not unduly speculative so as to warrant vacating the award.
Thanks to Zhanna Dubinsky for her contribution to this post. Please contact <a href="mailto:vterrasi@wcmlaw.com">Vincent Terrasi</a> with any questions or comments.

Wade Clark Mulcahy LLP

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Third Circuit Agrees that Business Earnings Prior to an Accident Are Inconclusive (PA)

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