A Pittsburgh law firm has been ordered to pay double the cost of an expert it didn’t use in an insurance case.
After a tornado damaged the insured’s home, the homeowners sued their homeowner insurance carrier to pay damages in excess of policy limits because it negligently underinsured the property and acted in bad faith during negotiations with its insureds.
The insured’s attorney contracted with an expert to draft a report to be used in the insurance coverage dispute over the tornado damage to the insured’s home. The construction expert was to provide an evaluation of the cost of repairing the home and the cost of rebuilding the home. Although the attorney said they had a verbal agreement that the expert report would cost between $7,500 and $10,000, the expert invoiced them for $30,000.
The attorney refused to pay the invoice, and the expert demanded that the law firm not use the report in the underlying litigation. The attorney withdrew the report from the insured’s case and didn’t get a substitute. The underlying case was settled for $1.3 million.
The expert brought an action against the attorney and his firm for breach of contract, pointing to a written engagement letter that provided for him to be paid based on the hourly rate of its employees. The attorney didn’t dispute that it had agreed to pay the expert based on an hourly rate, but filed a counterclaim alleging the expert had orally agreed to keep the price of the report in the $7,500 to $10,000 range. However, the lower estimate wasn’t stated in the written engagement letter—an important detail for the attorney’s argument.
After a bench trial, an Allegheny County trial judge entered a $20,000 verdict in favor of the expert and against the law firm. The judge also found in favor of the expert on the counterclaim. On appeal, the Superior Court pointed out that the judge said the attorney acknowledged that he “definitely knew” he would be billed hourly for the report and that he expected to receive an invoice for an amount more than $10,000, even though he didn’t foresee more than double the original estimate. The three-judge panel of the Superior Court upheld the trial court’s ruling.
“It was undisputed that [the expert] performed its duties under the contract,” Judge Mary Jane Bowes wrote for the panel. The attorney testified that the expert “did exactly what I asked him to do, and it looked like a good report to me.”
The law firm accepted the report, tendered it to opposing counsel and the insurance company, and then refused to pay the expert’s fee for the report, which was calculated on an hourly basis pursuant the engagement letter.
The panel rejected the attorney’s argument that the orally agreed-to estimate that the expert gave him constituted an accepted and enforceable offer to provide a report for less than $10,000. Citing the Superior Court’s 1949 ruling in Western Newspaper Union v. Shaltz, Judge Bowes said the oral estimate in Western Newspaper Union was found by the trial court to be an express contract.
“Herein, in contrast to Western Newspaper Union … we have an off-the-cuff oral estimate proffered ‘following an hour-long examination of the site on a cold day in late January,’” Bowes said, citing language from the trial court opinion. “The court expressly rejected the law firm’s contention that the estimate was an express contract term. The ballpark figure was followed by a written engagement letter that specifically outlined an offer to perform expert consulting services on an hourly fee basis, which the law firm admittedly accepted.”
The Superior Court also upheld the trial judge’s decision to reject the attorney’s claim that it suffered damages because the insured’s insurance case settled for less than it should have since he didn’t have an expert report.
The court found no abuse of discretion or error of law that would warrant a new trial, and the judgment was affirmed.