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Delaware County Doctor of Osteopathy Charged With Over 1000 Counts Related To Running A "Pill Mill"
Dr. Lenwood Boyer Wert, 79, a longtime staple of the Lansdowne community, has been charged with more than 1,000 criminal counts for allegedly running a “pill mill” out of his home and office on the 200 block of North Lansdowne Avenue.
Wert, who has lived in Lansdowne since 1964, was arraigned before Magisterial District Judge Nicholas S. Lippincott on 536 counts of selling or giving a controlled substance to a dependent person, and 542 counts of administering a controlled substance by a practitioner.
News Coverage on this event can be found at HERE.
Should you have any Plaintiffs or claimants who received pain medication from Dr. Wert, consideration should be given as to whether such care was reasonable or necessary in either first or third party cases.
Forry|Ullman attorney Michael F. Schleigh is the Chair of Public Safety for Lansdowne Borough whose police force spear-headed the criminal investigation, and can provide other information which can be provided to the public about this event. Feel free to contact Michael at (610) 977-4103 or mschleigh@forryullman.com if you have any questions regarding Dr. Wert.
Superior Court Again Upholds Regular Use Exclusion
On September 25, 2012, the Pennsylvania Superior Court once again upheld the validity and enforceability of a regular use exclusion in an underinsured motorist coverage action. That decision came in the case of Adamitis v. Erie Insurance Exchange, No. 893 EDA 2010 (Pa. Super. September 25, 2012 Stephens, P. J., Lazarus, J. and Colville, J.) (opinion by Stephens, P. J.).
The case involved a motor vehicle accident which occurred in October of 2005. Plaintiff Adamitis was operating a bus for the Berks Area Reading Transit Authority. While in the course and scope of his employment, the plaintiff was allegedly injured by an underinsured motorist. After resolving his claims against the tortfeasor, Adamitis sought UIM coverage from Erie, his personal insurance carrier. Coverage was denied on the basis of a regular use exclusion clause in the policy which barred coverage for “bodily injury arising from the use of a non-owned motor vehicle or a nonowned miscellaneous vehicle regularly used by the insured”. Adamitis then bought suit against Erie in the Philadelphia Court of Common Pleas seeking an Order that he is entitled to underinsured motorist coverage for the October 2005 accident. The parties proceeded by way of a non-jury trial at the conclusion of which the trial court found in favor of Erie and against Mr. Adamitis.
On appeal, the plaintiff argued that he never received Erie’s notice with regard to the addition of the regular use exclusion in the policy. Additionally, the plaintiff asserted that the regular use exclusion violated public policy and was also ambiguous when read against another provision of the Erie Insurance policy.
The Superior Court was not persuaded by the Appellant’s arguments. The Court found that sufficient evidence was presented to the Trial Judge to establish that the plaintiff did, indeed, receive the notice of the addition of the regular use exclusion to the Erie policy. The Court further noted that the public policy behind UIM benefits is driven by the correlation between premiums paid and the coverage which the claimant should reasonably expect to receive and nothing more. Accordingly, the Superior Court reasoned that refusing to enforce the regular use exclusion would actually frustrate the policy underlying the MVFRL by requiring insurers to underwrite the unknown risks associated with operation of regularly used, non-owned vehicles.
The Court concluded that under the totality of circumstances established at trial, the appellant was given adequate notice and explanation of the coverage ramifications attendant to the notice thereby upholding the exclusion in favor of Erie Insurance.
Pennsylvania Superior Court Overrules Pusl
In Smith v. Rohrbaugh, 2012 PA Super 208 (2012) recently decided by the Superior Court en banc, the court overruled its prior decision in Pusl v. Means, 982 A.2d 550 (Pa. Super. 2009) and held that there was no bar to double recovery by a Plaintiff who receives a UIM settlement and a subsequent award of damages from a tortfeasor. Thus, the credit that has previously been assigned to the tortfeasor in these circumstances under Pusl was eliminated by Smith.
In the Smith matter, the Plaintiff, Kenneth Smith, was involved in an automobile accident with Linda Rohrbaugh. Smith filed a claim for underinsured motorist benefits (UIM) against his automobile insurance policy. His claim settled for $75,000.00 and his insurer waived subrogation rights against the tortfeasor. Smith then filed a lawsuit against Rohrbaugh. The jury awarded damages in the amount of $50,036.00. Rohrbaugh filed a post-trial motion and the Trial Court molded the verdict to zero to reflect the $75,000.00 payment that the Plaintiff received in UIM benefits.
The Pusl case had the same basic facts as above. In Pusl, the Superior Court ruled that the tortfeasor was entitled to mold the award to reflect the payment of UIM benefits paid to the plaintiff. The court determined that the jury award in addition to the $75,000.00 paid to the Plaintiff by the UIM carrier would be a double recovery, which was precluded by the Motor Vehicle Financial Responsibility Law (MVFRL), Section 1722.
In its new analysis, the Superior Court saw Section 1722 of the Motor Vehicle Financial Responsibility Law (MVFRL) as preventing a double recovery of first-party benefits to a plaintiff. The Court's earlier decision in Pusl was determined to be erroneous as it had concluded that UIM payments were first-party benefits.
The Court explained that UIM benefits were absent from the list of precludable first-party benefits described in Section 1722 of the MVFRL, which includes medical benefits, income loss benefits, accidental death benefits, funeral benefits, combination benefits, and extraordinary medical benefits. The Court also explained that UM/UIM motorist coverage was regulated in Subchapter C of the MVFRL and that it is not even defined or regulated in Subchapter B, which regulates firstparty benefits. Finally, the Court noted that, although UIM benefits are typically referred to as firstparty benefits, the Court could not allow the colloquial reference to the list of first-party benefits to control, as it would usurp the legislature’s power and rewrite the statute.
Based on the reasons above, the Court reversed the Trial Court’s decision to mold the verdict to zero and remanded it to the Trial Court with instructions to award the Plaintiff with the full amount of the jury verdict.
Additional Language in UIM Waiver found to Void Entire Waiver
On February 29, 2012, the Honorable Edmund V. Ludwig, Senior Judge for the United States District Court for the Eastern District of Pennsylvania, issued an opinion in a declaratory judgment action involving a claim for underinsured motorist benefits.
In the case of Robinson v. Travelers Indemnity Co. of America, 2012 WL 677007 (E.D. Pa. February 12, 2012), Judge Ludwig ruled that Travelers’ underinsured motorist coverage waiver was invalid because the insurer had inserted the word “motorist” into the phrase “underinsured coverage” in the standardized waiver language mandated by the Pennsylvania Motor Vehicle Financial Responsibility Law. Ludwig stated that under the MVFRL, an insured can reject underinsured motorist coverage by signing a waiver, so long as the language of the waiver complies strictly with the language set forth in the statute.
Judge Ludwig applied the Pennsylvania Superior Court’s 2011 ruling in Jones v. Unitrin Auto and Home Insurance Company, which held that the existence of additional language at the end of a waiver paragraph which otherwise followed the precise language required by the MVFRL thereby voided the entire waiver.
This opinion underscores the necessity for insurance carriers to strictly comply with the language set forth in the MVFRL in drafting waiver forms.
Owners of Registered but Uninsured Motor Vehicles in Pennsylvania Not
Precluded from Recovering Medical Expenses and Wage Losses from Tortfeasors
The Pennsylvania Supreme Court recently issued an opinion clarifying whether the owner of a registered but uninsured motor vehicle who is injured in a motor vehicle accident may sue a tortfeasor for economic damages (medical expenses and wage loss).
In the case of Corbin v. Khosla, 48 EAP 2010 (Pa. Feb. 21, 2012 McCaffery, J), the Pennsylvania Supreme Court answered a question presented to the Court by the Third Circuit Court of Appeals by way of certification.
Until the Supreme Court addressed the issue, there had been an open question under the Motor Vehicle Financial Responsibility Law (MVFRL) as to whether uninsured drivers, such as those who own a registered motor vehicle but who do not carry insurance on their vehicle, could make a claim for medical expenses and wage losses or were precluded from doing so because they did not obtain insurance coverage required under Pennsylvania law. The MVFRL does not explicitly exclude recovery of benefits from an alleged third party tortfeasor by an uninsured driver.
Earlier Pennsylvania court decisions had concluded that uninsured drivers could not recover damages for economic losses in the nature of wage loss benefits from a third-party tortfeasor. See McClung v. Breneman, 700 A.2d 495 (Pa.Super. 1997) and Bryant v. Reddy, 793 A.2d 926 (Pa. Super. 2002). More recently, in Swords v. Harleysville Ins. Companies, 883 A.2d 562, 564 (Pa. 2005), the Supreme Court held that “Section 1714 of the MVFRL clearly and unambiguously renders an owner of a currently registered motor vehicle ineligible to recover first party benefits when the owner fails to meet the requirements of financial responsibility as detailed in the MVFRL.” Id. at 568. However, the Court did not consider whether reference to the preclusion from receiving first party benefits applied not only to an application for benefits made to an insurance company, or whether it also applied to third party tortfeasors who might be sued by the uninsured operator for their injuries.
With this opportunity, the Pennsylvania Supreme Court cleared up this ambiguity.
In reaching its decision, the Supreme Court considered the interplay between the MVFRL’s §1714 which prohibits an uninsured driver from recovering first party benefits and the MVFRL’s §1705 which designates the same uninsured driver as governed by the limited tort option. With the limited tort designation, economic damages can be recovered from negligent defendant drivers in the event of a “serious” injury.
The Court determined that a plain reading of the relevant provisions of the MVFRL were not ambiguous, and that claims for first-party benefits and claims for economic damages against a third party tortfeasor are separate and distinct claims. As a result, the Supreme Court held that Section 1714 of the MVFRL does not preclude an uninsured motorist from recovering tort damages for economic loss (medical expenses and wage loss) from an alleged third-party tortfeasor under the tortfeasor’s liability coverage.
The Concurring Opinion of Justice Saylor (joined by Chief Justice Castille and Madame Justice Orie Melvin) brings attention to the disadvantage this decision creates for the third party tortfeasor. Under §1722 of the MVFRL, the first-party benefits recovered by insured motorists offset damages available in third-party lawsuits. However, when the uninsured driver is allowed to recover money for medical expenses and wage loss from a tortfeasor in a civil suit, no such credit would be available. Thus, the tortfeasor is placed in a worse position as a result then he would have been had the Plaintiff complied with the law and purchased the required coverage. Conversely, the Plaintiff is in an enhanced position because he has not incurred the expense of insurance coverage while still being able to obtain reimbursement for expenses that would have been covered by insurance.
Justice Saylor attributed this “incongruity” to be a consequence of legislative design and a matter which the General Assembly could correct.
Pennsylvania Supreme Court Restricts Scope of Bad Faith Statue:
Toy v. Metropolitan Life insurance Co., 2000 Pa. Lexis 1463 (Pa. July 18, 2007)
Ruling: On July 18, 2007, the Pennsylvania Supreme Court issued an important decision clarifying the scope of claims which may be brought under Pennsylvania’s Bad Faith statute, 42 Pa. C.S.A. §8371. Specifically, the Court ruled that the Bad Faith statute does not apply to an insured’s claim that an insurer engaged in deceptive or unfair conduct in soliciting the insured to purchase an insurance policy.
Background: By way of background, in 1992, Plaintiff, Georgina Toy, met with Defendant, Metropolitan Life Insurance Company sales agent, Bob Martino, and was presented with information regarding the “Metropolitan Life 50/50 Savings Plan.” Based on the information presented, Toy agreed to purchase the plan thinking that it would assist her in saving for retirement. In 1994, however, Toy became aware that the Plan actually was a life insurance plan, not a savings plan. In 1995, Toy brought suit against Metropolitan and Martino in the Allegheny County Court of Common Pleas. Toy alleged that the Defendants had violated the Bad Faith statute, 42 Pa. C.S.A. §8371, by engaging in an activity that is unlawful under the Unfair Insurance Practices Act (UIPA) by making false or fraudulent statements concerning the Policy she purchased. Toy similarly alleged that the Defendants had violated the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) for essentially the same reasons.
In 1997, in the related case of Ihnat v. Povner, the trial court ruled that a claim under the Bad Faith statute was not, as Metropolitan argued, limited to allegations that an insurer refused to cover claims, but rather was broader and could also be founded on allegations that an insurer did not satisfy a duty that the law imposed upon it in its relationship with its insured. However, in 2003, Metropolitan filed a motion for summary judgment to dismiss Toy’s Bad Faith and UTPCPL claims on the grounds that Toy would be unable to prove that she “justifiably relied” upon Martino’s alleged misrepresentations concerning the Policy. In granting the Motion, the trial court held that, since the insurance Policy was an integrated document, Toy’s allegations that Martino made misrepresentations which induced her to purchase the Policy would be barred by the Parole Evidence Rule.
Thereafter, Toy brought a timely appeal to the Pennsylvania Superior Court which affirmed the lower court ruling without discussing the trial court’s basis for dismissing the Bad Faith claim. In so doing, the Superior Court ruled that the requisite elements of a Bad Faith claim are: 1) the insurer refused to provide benefits; and 2) the insurer knew or recklessly disregarded that it lacked a reasonable basis for the refusal. Through its holding, the Superior Court adopted a narrow reading of §8371 as applying only to actions relating to an insurer’s refusal to provide benefits under a Policy, and not applying to claims such as Toy’s involving an insurer’s alleged misconduct in soliciting or selling an insurance policy prior to the issuance of the policy. The Superior Court, however, reversed the trial court’s dismissal of Toy’s UTPCPL claim, ruling that under the facts presented, Toy should be permitted to proceed as the Parole Evidence Rule would not bar Toy’s claims because the exception for “fraud in the execution of the contract” applied, rather than the “fraud in the inducement” doctrine. As such, Toy should be given the opportunity to prove “justifiable reliance” on the alleged misrepresentations.
The Pennsylvania Supreme Court’s Decision: On appeal to the Pennsylvania Supreme Court, the Court addressed the question of whether a Bad Faith claim under §8371 may be based on allegations that an insurer engaged in deceptive or unfair conduct in soliciting the insured to purchase an insurance policy. Section 8371 provides as follows:
In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of the interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.(emphasis added).
In reaching its decision, the Court applied fundamental principles of statutory construction and engaged in an in-depth review of evolving case law pertaining to the reach of the Bad Faith statute in both the third-party and first-party context. The Court reasoned that the words in the Bad Faith statute are clear and explicit, and the remedy thereunder applies explicitly to “an action arising under an insurance policy.” The Court ruled that a Bad Faith cause of action concerns allegations of the breach of the duty of good faith and fair dealing implied in the party’s contract and focuses on either: 1) the manner by which an insurer discharges its duty to defend and indemnify in a third-party claim context; or 2) its obligation to pay for a loss in the first-party claim context. Based on the foregoing, the Court found that the Legislature did not intend to give relief under the Bad Faith statute to an insured who alleges that his insurer engaged in unfair or deceptive practices in soliciting the purchase of a policy. Accordingly, the Court held that Metropolitan Life was entitled to summary judgment on Toy’s Bad Faith claim as a matter of law.
In rendering this ruling, the Court emphasized the distinction generally between the “nature” of the claim an insured may bring under the Bad Faith statute, which was the focus of its ruling, versus various types of insurer “conduct” which may constitute Bad Faith which were not addressed in its decision. For example, the Court expressly left open the question whether mere allegations of violations under the Unfair Insurance Practices Act (“UIPA”) constitute a Bad Faith claim under §8371, and/or whether an insurer’s conduct in defending against a Bad Faith claim may be considered by the Court in determining whether and to what extent an insured is entitled to relief under §8371. See e.g., Hollock v. Erie Insurance Exchange, 842 A.2d 409 (Pa. Super. 2004), dismissed as improvidently granted, 903 A.2d at 1185.
The Court also addressed Toy’s UTPCPL claim and affirmed the general rule that an insured who asserts a cause of action under the UTPCPL based upon alleged misrepresentations and/or fraudulent conduct must plead all of the traditional elements of common law fraud, including justifiable reliance and causation. Accordingly, since Toy’s allegations of misrepresentation fell within the “fraud in the execution” exception, the Court ruled that Toy would be entitled to proceed with her UTPCPL claim and present evidence to try to prove her “justifiable reliance.” In so holding, the Court concluded that it was for a Jury to decide whether the falsity of Agent Martino’s misrepresentations about the Policy’s contents was obvious to Toy and/or whether her reliance was unjustified.
No Additional Blood Money
In the case of Jay Blood v. Old Guard Insurance Company, Supreme Court of Pennsylvania Madame Justice Baldwin, writing for a unanimous court, found in favor of Old Guard Insurance Company on the issue of the necessity for a carrier to secure new written sign down waivers of UM/UIM coverage following a reduction of liability coverage.
In 1986, Michael and Sharon Blood purchased automobile insurance from Old Guard Insurance Company ("Old Guard") and requested $500,000 of liability coverage. At the same time, they elected to reduce their UM/UIM coverage to only $35,000, albeit with the stacking option on three vehicles.
On June 16, 2000, the Bloods decided to lower their liability limits from $500,000 to $300,000. To this end, they executed a "Coverage Selection Form," and indicated their desire for $300,000 of liability coverage with a "x" in the space next to that amount. The only other marks on the form included a similar "x" indicating a rejection of income loss benefits, and the Bloods' signature, which they dated.
On August 19, 2000, Jay Blood was injured in a motor vehicle accident and suffered serious injuries. As a result of that accident, he recovered $25,000 from the tort feasor's policy and applied for UIM benefits to Old Guard. Old Guard tendered $105,000 of UIM benefits, i.e. $35,000 multiplied by the Bloods' three vehicles. The Bloods subsequently filed a Declaratory Judgment action seeking $900,000, i.e. $300,000 multiplied by the three vehicles.
The basis for the Bloods' Declaratory Judgment Action was that Old Guard was required to secure a new written sign-down for UIM coverage following their reduction of liability benefits and that at no time did the Bloods sign down the $300,000 limits of UIM coverage, which they claimed was available upon their reduction of liability coverage from $500,000 to $300,000. The Bloods relied upon §1734 and §1791 of the MVFRL in support of their argument. Old Guard, in response, took the position that the Bloods' changes to the policy in 2000 were motivated by a desire to reduce premiums, and that the $35,000 UM/UIM selection made in 1986 remained in effect because the Bloods never sought to change their underinsured motorists coverage following the issuance of the original policy. Old Guard moved for summary judgment which the trial court granted. The trial court indicated that, "merely changing the liability limits does not represent an "application for original coverage." Instead, "changing the liability limits is nothing more than a modification of the existing policy." As such, the trial court found that Old Guard had no duty to provide another §1791 "Important Notice," or another written sign down opportunity pursuant to §1734.
The Bloods then appealed to the Superior Court, which in a split decision reversed the trial court decision. The Superior Court was persuaded by the arguments made by the Bloods. The Bloods argued that Old Guard had a duty to comply with its coverage selection form, which, in this case, indicated no choice of lower UIM limits. Since the coverage selection form indicated no selection for the amount of UIM coverage, the Bloods insisted that "under the MVFRL, the policy is presumed to have UIM coverage limits that are equal to the bodily injury liability coverage."
Judge Orie Melvin authored a dissent from the Superior Court's decision, which was ultimately recognized by the Supreme Court as the correct analysis and holding.
Judge Melvin, in her view, stated that it made no sense "to reason that the Bloods' written request to reduce liability limits could operate to increase UM/UIM limits… At the time of amendment, the Bloods already had UIM limits lower than their liability limits and they made no request to increase or decrease the present UM/UIM limits." Judge Orie Melvin would have found the reduction of liability limits to be a modification to an existing policy and not the issuance of a new policy. The remainder of the existing policy, other than the reduction of liability limits, was unmodified and remained in effect, including the original UM/UIM reduction. Judge Orie Melvin correctly wrote in her opinion that the MVFRL does not require "an additional sign down form when a prior express reduction of UM/UIM coverage already exists."
Of equal significance to Old Guard in their argument to the Supreme Court was that even if the Supreme Court was to determine that a new written sign down was required under these circumstances, the fact remained that there was no remedy provided in §1734 and that in absence of a legislative directive the Supreme Court could not imply the remedy of coverage suggested by the Bloods for UM/UIM coverage limits equal to their liability limits.
Old Guard noted that the Supreme Court's decision in Lewis v. Erie Insurance Exchange, 568 Pa. 105 (2002), which explained that Section 1731's technical requirements for a waiver of UM/UIM coverage did not translate into a prescription of the form for reducing UM/UIM coverage under Section 1734, did not resolve whether a remedy exists for a failure to comply with Section 1734. Old Guard insisted that the language of Section 1734 does not discuss a remedy for a failure of an insurer to provide a second opportunity to request lower limits of coverage. The Supreme Court, in deciding this matter along the lines of Judge Orie Melvin's dissent, indicated that this dispute is one resolved by the application of the unambiguous language of the §1731 and §1734. The court found it fatal that the Bloods did not – indeed, could not – direct the Supreme Court to a provision in the MVFRL that requires an insurer to re-comply with the relevant sections of the MVFRL under facts such as those present in the Blood matter.
The Supreme Court went on to state that "even if we were persuaded by appellees' [Bloods'] argument that Old Guard failed in its statutorily-mandated duties, we further agree with Old Guard that no remedy exists and that the judiciary is not to create one. Indeed, the MVFRL does not provide any support for the Bloods' position that a change of liability coverage had an effect on their otherwise valid §1734 reduction. The Bloods would have this Court render a decision in contravention to the relevant portions of the MVFRL that the reduction of existing liability limits is tantamount to the issuance of a policy." The Supreme Court held that it was without authority to write new requirements into the MVFRL when the statutory language was without ambiguity.
Thankfully, the Supreme Court has now given insurance carriers clear guidance that with any modification to an existing policy, an additional sign down is not required.
Suzanne Bukofski and David Bukofski, h/w v. USAA Casualty Insurance Company:
No. 3:08-cv-1779 (Middle District of Pennsylvania, Munley, J.)
On June 9, 2009, Judge Munley of the U.S. District Court for the Middle District of Pennsylvania issued an Order denying defendant USAA’s Motion to Dismiss and held that an insurance company may be liable for bad faith under §8371 for removing the UM/UIM arbitration clause from an insurance policy without notice to the insured or without advising that there is no mechanism in Pennsylvania for resolving such claims. Judge Munley noted that the subject policy contained an arbitration clause from its inception in 1982 until June 24, 2007. The Court noted that the arbitration clause was a material benefit under the policy as it provided for an expeditious and cost-effective means of resolving UM/UIM disputes.
The Court rejected the defendant’s argument that any conduct on the part of the carrier could not amount to bad faith because no claim had arisen at the time the arbitration clause was removed from the policy. It was noted that USAA failed to advise the insured that the removal of the arbitration clause would result in “significant increased expense for plaintiff to pursue a UIM claim … and an increased delay for plaintiff to adjudicate a UIM claim.”
In addition, the Court refused to dismiss plaintiff’s claim that defendant’s use of peer reviews were done to force providers to stop treating the plaintiff, thereby assisting with the defense of the UIM claim. Defendant’s argument, that plaintiff’s statutory bad faith claim is preempted by §1797 of the MVFRL, was rejected by the Court, finding that plaintiff’s argument was not based upon the handling of the first party medical benefits claim, but rather the handling of the UIM claim which is not preempted by MVFRL.
While this decision simply involved the Motion to Dismiss on the part of USAA, in which the Court is required to accept all well-pleaded facts as true, it may set the stage for similar claims where the arbitration clause was removed from the carrier’s policy unilaterally, without any notice to the insured or any explanation concerning how UM/UIM claims are to be resolved under the policy. Moreover, this decision could also form the groundwork for claims of bad faith based upon how the first party medical benefits claim has been handled if a claimant can prove that the medical payments aspect of the claim was handled with the defense of the UM/UIM claim in mind. It would appear that carriers must be conscious of these arguments and keep an appropriate barrier between the handling of each aspect of the claim.
3rd Circuit Holds That Car Driven By Co-employee Is Not Uninsured Or Underinsured Vehicle
Shaw v. State Farm Insurance Co.
(United States Court of Appeals for the Third Circuit)
On May 28, 2009, the United States Court of Appeals for the Third Circuit held that State Farm was not required to provide uninsured motorist and/or underinsured motorist benefits to an individual injured in a work related car accident caused by a co-employee operating his employer's vehicle.
David Shaw was injured on the job when he fell off the back of a garbage truck that was being operated by his co-worker. Shaw filed for, and received, workers compensation benefits and he also applied for uninsured/underinsured motorist benefits with his automobile insurer, State Farm. State Farm denied his claim for uninsured/underinsured motorist benefits.
State Farm's denial was based on its determination that Shaw was not "legally entitled" to damages from his co-worker or his employer and that the garbage truck was not "uninsured" or underinsured."
The Court, after reviewing the State Farm Insurance policy and the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL") for the definition of "underinsured" and "uninsured", held that Shaw's insurance policy was wholly consistent with the MVFRL and according to the definitions provided by both the MVFRL and the insurance policy, it was clear that the garbage truck Shaw fell from was not uninsured. The garbage truck also carried $5 million in liability insurance and therefore was not underinsured.
As such, the Court held that State Farm was not required to provide uninsured or underinsured motorist benefits to Shaw who was injured in a work related car accident caused by a co-employee operating his employer's vehicle.
Court of Appeals Upholds Automatic ERISA Lien on Tort Recovery
In the case of Longaberger v. Kolt, ___ F.3d ____, 2009 WL 3806079 (C.A.6 (Ohio)), the Administrator of employee welfare benefit plan governed by the Employee Retirement Income Security Act (ERISA) brought an action against its beneficiary and the attorney who had reached a settlement on behalf of that beneficiary in a civil tort action. The Administrator sought to enforce the terms of the plan's reimbursement provisions and asserted causes of action in equity for constructive trust, equitable lien, and unjust enrichment. Defendant Jeffrey A. Kolt, the attorney for the beneficiary, had appealed the District Court’s denial of his motion for summary judgment and its granting of summary judgment for The Longaberger Company.
The U.S. Court of Appeals for the Sixth Circuit upheld the District Court’s grant of summary judgment, and held that the District Court had correctly granted Longaberger equitable restitution as authorized by §502(a)(3) of ERISA. The Court of Appeals also held that the Administrator sought appropriate equitable relief, rather than money damages, within the meaning of ERISA's civil enforcement provision, and thus the administrator's claims were within scope of ERISA's permissible remedies.
Additionally, the Court held that as a matter of first impression, the Administrator was not judicially estopped from altering its theory of recovery in response to a change in the controlling law.
Finally, the Court found that the ERISA plan's reimbursement and subrogation provision created an automatic lien on the beneficiary's tort recovery to the extent of benefits he received from plan, and that the plan was entitled to the full reimbursement of funds which the beneficiary received from liable third parties. The plan was also not required to deduct attorney fees that beneficiary expended to obtain settlement. The Court of Appeals held that Kolt was obligated to reimburse the benefit plan from the funds he had received from liable third parties.
For more information, contact: Jennifer L. LeVan, Esquire
Montgomery County Judge Enforces Forum Selection Clause and Severs Uim Claim From Third-Party Case
On June 30, 2010, the Honorable Bernard A. Moore of the Montgomery County, PA Court of Common Pleas entered an Order granting the Preliminary Objections of Progressive Direct Insurance Company in a case involving both a post-Koken severance issue and a claim of improper venue. In Dunne vs. Closs, et al. (Montgomery County No. 09-38446), Plaintiffs claimed severe injuries resulting from an accident which occurred in Northampton County. The Plaintiffs, who were residents of Northampton County, filed a lawsuit in Montgomery County, where the owner and operator of the striking vehicle reside. The lawsuit included negligence claims against the alleged tortfeasors and a claim for underinsured motorist (UIM) benefits against their carrier.
Both Defendants filed Preliminary Objections including motions to sever the tort claims against the alleged tortfeasors from the contract claims against the UIM carrier. Additionally, Progressive moved for enforcement of the Forum Selection Clause contained in its policy. This clause requires that any legal action brought against the carrier on behalf of an insured person must be brought in the state or federal court serving the county of residence of the insured (in this case, Northampton County).
On June 29, 2010, the Court heard oral argument on Progressive’s Preliminary Objections. Arguing on behalf of the carrier, Charles B. Stokes of Forry Ullman conceded that Montgomery County was a proper venue for the case under the Rules of Civil Procedure (which allow for a suit to be filed in any county where one of the Defendants resides and can be served). However, citing O’Hara v. The First Liberty Insurance Corp., 2009 PA Super. 214, (PA Superior Court, 2009, Petition for Allowance of Appeal denied May 3, 2010), Progressive argued that the UIM claim is a contract claim, and that the Forum Selection Clause in the policy supersedes the venue provisions of the Rules of Civil Procedure. The carrier also argued that the Rules prohibit joinder of a tort claim against one defendant with a contract claim against another, and that such a joinder would violate the alleged tortfeasors’ rights under the collateral source rule by requiring the jury to be made aware of the existence – and possibly the amount – of the tortfeasor’s liability coverage. Progressive argued, and Judge Moore ultimately agreed, that the only practical remedy is to sever the tort claims from the contract claims by dismissing all claims against the carrier without prejudice to Plaintiffs’ rights to re-file in a manner consistent with the venue requirements of the policy. Copies of Judge Moore’s Order, which was filed without an opinion, are available upon request.
An Emotional Distress Claim Not A Compensable 'Bodily Injury'
As Defined By The MVFRL and State Farm Policy
On December 14, 2009, the Pennsylvania Supreme Court denied a Petition for Allowance of Appeal from the Superior Court’s Opinion dated April 17, 2009 in State Farm Mutual Automobile Insurance Company v. Moschetta, 1193 WDA 2008. In doing so, the Supreme Court has effectively upheld the Superior Court’s ruling that, under the MVFRL and State Farm’s policy language, a claimant’s emotional distress resulting from witnessing an accident is not a compensable “bodily injury” and, thus, the claimant is not entitled to a separate, per person limit of coverage.
In Moschetta, Joseph Moschetta, a 92 year old father, asserted a claim for negligent infliction of emotional distress after witnessing the immediate aftermath of his 45 year old son’s fatal injury after being struck by a car in a bank parking lot. Importantly, Mr. Moschetta claimed that he also suffered physical symptoms as a result of his emotional distress, including physical weakness, nausea, shaking, shivering, and a racing heartbeat.
The State Farm policy defines “bodily injury” as “bodily injury to a person and sickness, disease or death which results from it.” (emphasis added).
The Superior Court ruled that Joseph Moschetta’s emotional distress and resulting physical symptoms did not constitute a “bodily injury” as defined by State Farm’s policy. Opinion at p.10 citing Zerr v. Erie Insurance Exchange, 667 A.2d 237, 239 (Pa.Super. 1995); Jackson v. Travelers Insurance Company, 606 A.2d 1384, 1386 (Pa.Super. 1992); Needleman v. Liberty Mutual Insurance Company, 352 Pa.Super. 288, 507 A.2d 1233, 1236 (1986). In Zerr, the Superior Court followed its previous decisions in Jackson and Needleman and stated:
“… [w]e find that neither the legislature nor the Pennsylvania Supreme Court has yet to erect a bridge between bodily injury and mental injury, in the context of automobile insurance law; that is, a distinction between physical and psychological maladies remains, such that one who suffers psychological illness cannot successfully claim benefits under the MVFRL for ‘injury’.” Id. at 240.
In addition, the Superior Court ruled that State Farm’s policy definition of “bodily injury” is not ambiguous under the facts presented (Opinion at p.13). The Superior Court was unpersuaded by Joseph Moschetta’s reliance on a New York Appellate Court’s decision in Glinbizzi v. State Farm, 9 A.D.3d 756 (N.Y. App. Div. 2004) which found State Farm’s policy definition to be ambiguous because it could be construed as meaning that that any sickness, disease or death to any person is covered if it results from bodily injury to the same or a different person.
Accordingly, the Superior Court ruled that Joseph Moschetta was not entitled to a separate, per person limit of underinsured motorists (“UIM”) coverage for his emotional distress claim (Opinion at p.15). By contrast, however, under State Farm’s policy language, Joseph Moschetta’s emotional distress claim was nevertheless compensable, but was only compensable out of the per person limit of UIM coverage already extended and paid to decedent, Jonathan Moschetta, who did suffer “bodily injury” as defined by the policy.
Lastly, the Superior Court appears to have resolved an apparent conflict in authority between the Zerr case, supra, and Anthem Casualty Insurance Company v. Miller, 729 A.2d 1227 (Pa.Super. 1999) and Erie v. Shue, 741 A.2d 803 (Pa.Super. 1999) which some claimants’ counsel have argued stand for the proposition that a claimant’s claim for negligent infliction of emotional distress is automatically subject to separate, per person limit of [liability or UM/UIM] coverage simply because such a claim is deemed to be separate and not derivative of the physical injuries suffered by a third party. The Superior Court in Moschetta appears to have clarified the Anthem Court’s holding, and ruled that a claimant must nevertheless first meet the definition of having sustained a “bodily injury” in order to receive a separate, “per person” limit of coverage for emotional distress.
Only When Failure To Report To Insurer Causes Prejudice,
May Coverage Be Denied
On July 6, 2010, the Supreme Court of Pennsylvania in Vanderhoff v. Harleysville Insurance, No. 123 MAP 2006, 2010 Pa. LEXIS 1419 (July 6, 2010) further clarified 75 Pa.C.S.A. §1702 regarding the statutory definition of Phantom vehicles. The issue was whether an insurance carrier should be required to prove prejudice relative to the late reporting to the carrier of an accident involving an unidentified vehicle when such accident was timely reported to law enforcement officials. It held that before an insurer can deny uninsured motorist benefits resulting from an accident involving a phantom vehicle, the insurer must demonstrate prejudice due to the failure of an insured to notify the insurer of the phantom vehicle accident.
The Vanderhoff Court evaluated and distinguished two prior cases: Brakeman v. Potomac Insurance Co., 472 Pa. 66, 371 A.2d 193 (Pa. 1977) which held that to deny benefits an insurer must demonstrate prejudice resulting from the insured's failure to provide notice; versus State Farm v. Foster, 585 Pa. 529, 889 A.2d 78 (Pa. 2005) which held that prejudice is not required to preclude UM coverage for failure to notify law enforcement of an accident with a phantom vehicle.
The Court confirmed the holding in Foster that prejudice was not required for an insurance company to deny a claim based on failure to notify law enforcement under §1702. However, they noted that prior to the enactment of the MVFRL, “an insurance company intending to deny coverage based upon lack of notice had to demonstrate prejudice resulting from the absence of notice, because a coverage denial would result in forfeiture under a non-negotiated contractual term dictated by the insurance company's policy.” The Court, citing Brakeman was reluctant “to allow an insurance company to refuse to provide that which it was paid for unless a sound reason exists for doing so... Where the insurance company's interests have not been harmed by a late notice . . . the reason behind the notice condition in the policy is lacking, and it follows neither logic nor fairness to relieve the insurance company of its obligations under the policy in such a situation.” The Court continued, “where an insurance company seeks to be relieved of its obligations under a liability insurance policy on the ground of late notice, the insurance company will be required to prove that the notice provision was in fact breached and that the breach resulted in prejudice to its position.”
The Court noted that Section 1702 was enacted with Brakeman as the controlling precedent, and it concluded that Section 1702’s silence as to prejudice does not alter the longstanding law set forth in Brakeman, requiring the insurer to demonstrate prejudice, in this instance.
For more information, contact: David R. Friedman
Fall Because of Generally Icy Bad Weather is not Negligence
In the case of Tucker v. Bensalem Twp. School Dist., 2009 WL 4877767 (Dec. 17, 2009), the Commonwealth Court of Pennsylvania, in an Opinion written by Senior Judge Flaherty, upheld a defense verdict in favor of a school district in a parking lot slip and fall involving black ice.
The jury in Bucks County had found in favor of the defendant on plaintiff’s claims that the school was negligent in its failure to maintain the parking lot. Fatal to the plaintiff's case was testimony which suggested that, at the time of the fall, there were generally icy conditions in the Bensalem area, which were continuing at the time of the incident. The local roads and parking lots were all icy and slippery due to the weather. Testimony further revealed that the lot where the plaintiff fell was plowed and salted. The plaintiff herself had testified that she left her house early that morning because of the icy and bad road conditions, that roads were slippery, icy and that she thought school would be cancelled due to the weather. She also testified that she had noted black ice on the parking lot before her fall.
The appellate court agreed with the trial court's findings that the jury had properly concluded that the plaintiff fell because of the slippery surface caused by generally icy bad weather rather than the negligence of the School District.
In its ruling, the Commonwealth Court noted that a property owner is not required to keep his parking lot free from ice at all times, as doing so is impossible in our climate. The Court reiterated case law supporting non-liability of property owners when there are generally slippery weather conditions at the time of a fall. The Court also observed that established case law required, in order for a person to recover for injuries sustained in a fall on ice, that they must prove that there was a dangerous condition due to ridges or elevations which were created by a defendant's negligence, or which were allowed to remain for an unreasonable length of time (a/k/a; the Hills and Ridges Doctrine).
In finding the plaintiff had not met her burden, the Commonwealth Court affirmed the decision of the Bucks County Court of Common Pleas to deny the motion for a new trial filed by the Plaintiff.
For more information, contact: Robert L. Goodman, Esquire
Federal Court Mandates Stacking Waivers
In the case of State Auto Properties & Casualty Insurance Company vs. Pro Design, Judge James Munley of the Middle District of Pennsylvania concluded that the addition of an additional motor vehicle a single motor vehicle policy qualifies as a new purchase of an auto policy and therefore triggers a duty on the part of the insurer to offer the stacking option anew to the insured.
Judge Munley, looking back at the holding in Sackett vs. Nationwide Mutual Insurance Company (Sackett II), found that the Pennsylvania Supreme Court only addressed the issue of providing an insured with a stacking waiver when a new vehicle was added to an already existing multi-vehicle policy. In Sackett, the Supreme Court held that a new stacking waiver was not required when a new vehicle is added to an existing multi-vehicle policy. The Court did not decide the issue of whether an insurer must provide a new stacking waiver when a new car is added to a single-vehicle policy.
Judge Munley, after reviewing the facts in the State Auto case, was asked to decide whether or not a new stacking waiver was required when a new vehicle is added to an already existing single vehicle policy.
State Auto had not secured a stacking waiver when the insured added a new vehicle to a single-vehicle policy. Judge Munley indicated that under the MVFRL, an opportunity to waive stacking is not necessary for the purchase of an initial single-vehicle policy. Judge Munley opined “it would make no sense for the insured to choose stacking when purchasing a single-vehicle policy and pay extra premium for no extra coverage.” It was State Auto’s position that a “purchase” is only at the time of the initial purchase of a single vehicle policy. Judge Munley responded to State Auto’s position by concluding that their construction of the term “purchase” was at odds with the plain meaning and purpose of the Act, which is to provide consumers an opportunity to save money on premiums by waiving stacking when the opportunity first presents itself.
There has been no indication of whether State Auto will appeal, but the clear effect of this decision is to place an additional burden upon the insurer to secure a stacking waiver when an insured adds a new vehicle(s) to an already existing single vehicle policy.
Ferrying a Vehicle May Not Be “Regular Use” Subject to UIM Exclusion
The Pennsylvania Superior Court, in Dixon v. GEICO, 2010 PA Super 133, 3127 EDA 2009 (July 29, 2010) has ruled that a trial court erred in granting summary judgment in a case where there was a question of fact as to whether a postal worker’s who was driving a postal vehicle while servicing it was engaged in the “regular use” of another’s vehicle and subject to an exclusion from UIM coverage under his personal auto insurance policy.
Dixon worked in Philadelphia for the United States Postal Service at a vehicle repair and maintenance facility as a garage man. His duties included transporting vehicles from one location to another. While dropping off a mail delivery vehicle, he was injured when another driver made an illegal left turn into his lane of travel. The third party tortfeasor’s insurance carrier paid its minimum policy limits and Dixon pursued a UIM claim against GEICO under his personal auto policy. GEICO rejected the claim under the following “regular use” exclusion language from the policy:
“When using a motor vehicle furnished for the regular use of you, your spouse, or a relative who resides in your household, which is not insured under this policy.”
GEICO filed a Motion for Summary Judgment. The trial court granted it, enforcing the exclusion and finding that driving a postal vehicle from one place to another after servicing it constituted "regular use.” Dixon appealed.
The Superior Court addressed the issue of whether there was a material issue of fact that the “regular use” exclusion in Dixon’s personal auto policy applied in this case.
Citing Crum & Forster Personal Ins. Co. v. Travelers Corp., 631 A.2d 671, at 673 (Pa. Super. 1993), the Court noted that in Pennsylvania, the test for “regular use” is whether the use is “regular” or “habitual.” While each case must be decided on its own facts and circumstances, the Court noted that, under Crum & Foster, the vehicle must be “furnished or available” for regular use. This implies an understanding with the owner of the vehicle that the insured could use the owner’s vehicle at such times as he or she desired, if available.
In analyzing Dixon’s use of the postal vehicles, the Superior Court took note that this was not a case where Dixon was furnished a vehicle for business or personal use. Nor was it a case where Dixon was regularly assigned a vehicle for business, or a combination of business and personal use. He was not furnished a vehicle from a fleet, either for personal use as a benefit of employment, for commuting back and forth to work, or for the performance of his other job duties, such as police patrol or driving a taxicab.
Applying the Crum & Foster standard, the Superior Court believed that Dixon had presented evidence that his ferrying of the vehicle in question was not “a principal use,” as distinguished from a casual or incidental use. This evidence, according to the Court, should have been sufficient to raise a jury question of whether Dixon’s use of the vehicle he was driving was “regular” or “habitual.” Hence, the Superior Court found that the trial court erred in finding there was no material issue of fact and granting the summary judgment.
Accordingly, the Superior Court vacated the summary judgment order and remanded the case for further proceedings.
For more information, contact: Karl L. Stefan, Esquire
Generette v. Donegal - The Saga Ends
More than 11 ½ years after Josephine Generette was injured in a motor vehicle accident, the Supreme Court of Pennsylvania has rendered a decision on the validity of a clause in her automobile insurance policy that had operated to deny her claim for underinsured motorist benefits.
In December, 1982, Josephine Generette purchased a policy of insurance from Donegal Mutual Insurance Company (Donegal). Over time, and with the changes in what is now known as the Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL), she executed various documents when renewing her policy. One form was a waiver of stacking of uninsured/underinsured motorist benefits coverage. Interestingly, the waiver of stacking form was signed, despite Ms. Generette insuring only one vehicle on the Donegal policy.
On April 29, 1997, Ms. Generette sustained injuries while a passenger in an automobile that was involved in an accident with another vehicle. She presented a claim for damages and was initially paid $25,000 from the insurance policy covering the tortfeasor’s vehicle. In accordance with §1733 of the MVFRL that sets forth the order of priority of recovery, Ms. Generette presented a claim for underinsured motorist benefits to Nationwide Insurance Company, the carrier that issued coverage to the vehicle in which she was a passenger, and thus, first in the order of priority for recovery of UIM benefits. Nationwide paid Ms. Generette the $50,000 amount of its UIM coverage and thereafter, she submitted a claim for UIM benefits to Donegal, the carrier being second in the statutory order of priority and thus, affording coverage in excess of that which was paid by Nationwide.
The non-stacked UIM coverage provided by the Donegal policy contained an endorsement that included an “other insurance” clause. This clause limited recovery of excess UIM benefits from Donegal to the amount by which the UIM policy coverage limit of the Donegal policy exceeded the amount of the UIM coverage limit of the fist priority policy issued by Nationwide. As the amount of the Donegal UIM coverage ($35,000) did not exceed that which was provided by Nationwide ($50,000), Donegal denied Ms. Generette’s claim.
With the denial of her claim, Ms. Generette sought declaratory relief from the court, asserting that the “other insurance” clause was void as against public policy. In response, Donegal asserted that Ms. Generette’s execution of a waiver of stacking operated as a waiver of inter-policy stacking and, in addition, it’s “other insurance” clause did not violate public policy. The case of Generette vs. Donegal Mutual Insurance Company traveled on a long journey through the Court system with most of the rulings being in favor of the carrier. However, the case finally reached the Pennsylvania Supreme Court and on October 23, 2008, in a 5-1 decision, the Court reversed the prior decision of the Superior Court, found in favor of Ms. Generette, and remanded the case to the trial court where things began.
In allowing an appeal from the Superior Court’s decision, the question presented to the Supreme Court was as follows:
“Did the Superior Court err in finding that a named insured cannot collect any UIM benefits based on a waiver of stacking and an “Other Insurance” clause, even though her policy insured only one vehicle and her damages exceed the amount of the available UIM coverage?”
The Court initially noted that Ms. Generette’s claim proceeded in accordance with §1733 of the MVFRL, which designates the order of priority of recovery for UM and UIM claims. It then addressed Donegal’s argument that the stacking waiver signed by Ms. Generette prohibited her from stacking the coverages afforded by policies issued by different companies (Nationwide and Donegal), or what is referred to as “inter-policy stacking.”
The Court noted that under §1738 of the MVFRL, “ … a named insured may waive coverage providing stacking of uninsured or underinsured motorist coverages in which case the limits of coverage available under the policy for an insured shall be the stated limits for the motor vehicle as to which the person is an insured.” The Court determined that whether the stacking waiver could be applied would turn on whether the use of the term “insured” in §1738 was limited by the definition of “insured” in the Section 1702 of the MVFRL. Of importance is that the definition of “insured” does not include guest passengers, the status occupied by Ms. Generette at the time of the subject accident. Therefore, as it applied the specific definition of “insured” to its usage in §1738, the Court stated, “…we are bound to interpret the stacking waiver in §1738 to apply only to insureds as defined by §1702, which does not include guest passengers.”
While the Court found that Donegal’s stacking waiver did not operate as a waiver of inter-policy stacking by Ms. Generette, it pointed out that an individual may be deemed to have waived inter-policy stacking. During the pendency of the Generette case, the Court decided the case of Craley v. State Farm Fire and Casualty Company. In that matter, a claimant sought benefits from multiple policies under which he was an “insured,” but had executed a waiver of stacking. Since he was deemed to fall under the definition of an “insured,” to which a waiver of stacking would apply, the Claimant’s execution of a waiver of stacking form operated to bar him from inter-company stacking. This was distinguished from the facts of the Generette case in which Ms. Generette was a guest passenger at the time of the accident.
In addition to its ruling that Ms. Generette did not waive inter-policy stacking, the Court also addressed the “other insurance” clause in the Donegal policy. The clause limited a Donegal insured’s recovery of excess UIM benefits to the amount by which the UIM policy coverage limit of the Donegal policy exceeded the amount of the UIM coverage limit of any other policy. The court had no hesitation in finding that under the circumstances presented, the UIM coverage provided by Donegal was in direct violation of the language of the MVFRL. The policy provided what is commonly known as “gap” coverage as opposed to “excess” coverage and this is contra to the public policy that mandates that UIM coverage is to be excess coverage, rather than gap coverage. The Supreme Court therefore ruled that the other “insurance” clause was void as violative of public policy.
Household Exclusion Upheld by PA Supreme Court:
Erie v. Baker, 26 WAP 2008 (2009)
In a 4-3 decision, the Pennsylvania Supreme Court on June 23, 2009, affirmed the Superior Court and held that the Household Exclusion is valid and enforceable to preclude underinsured motorists benefits. Erie v. Baker, 26 WAP 2008.
In 1999, Claimant was in an accident while operating his motorcycle which was insured with Universal Underwriters Insurance Company. Claimant’s three other vehicles were insured with Erie. The tortfeasor’s liability limits were insufficient to cover Baker’s injuries and he sought underinsured motorists benefits from both Universal and Erie. Universal paid its UIM limits and Erie denied coverage under their household exclusion language which stated: “This insurance does not apply to… damages sustained by anyone we protect while occupying or being struck by a motor vehicle owned by you or a relative, but not insured for Uninsured or Underinsured Motorists Coverage under this policy.” The Superior Court, via memorandum opinion, upheld the exclusion and precluded recovery of UIM benefits from Erie’s policy.
Claimant asserted that the household exclusion was inconsistent with the MVFRL Section 1738 regarding waivers of stacking. Claimant asserted that he was entitled to the “sum of limits for each motor vehicle as to which [he] is an insured” (stacking between the Universal and Erie policies) under Section 1738(a) because he did not execute the stacking rejection as required by that section.
The Court’s lead opinion held that this is not a stacking issue and the household exclusion is not an impermissible restriction as applied in this case. The Court looked to the prior holdings in Colbert and Eichelman which were noted by the lead opinion to be on point upholding this exclusion.
The concurrence was not as convinced as the lead opinion that Colbert and Eichelman are directly on point. However, the concurring opinion noted that Section 1738 does not invalidate long standing policy exclusions. Justice Saylor opined in his concurrence that the exclusion goes to the scope of the UM/UIM coverage before getting to the stacking issue. Additionally, both the lead and concurrence noted and factored into their analysis the fact that Erie was not aware of the additional risk of a motorcycle insured by another company.
Three Judges joined in the dissent which noted their belief that the exclusion is a violation stacking rights and they would find this a stacking case under Section 1738, and invalidate the household exclusion in Erie’s policy.
For more information, contact: David R. Friedman, Esquire
Middle District Denies Defendants' Motion For Summary Judgement On Punitive Damages; Burke V. Transam Trucking, Inc, Et Al, 605 F. Supp. 2d 647 (2009)
In an Opinion dated March 31, 2009, Judge Richard P. Conaboy of the U. S. District Court for the Middle District of Pennsylvania denied Defendants’ Motion for Partial Summary Judgment on the issue of punitive damages.
On April 10, 2006, Plaintiff Burke, was involved in a motor vehicle, rear-end collision when his vehicle was stopped for a school bus and was struck from behind by a tractor trailer owned by TransAm Trucking, Inc. and operated by its driver, Wirfel.
The Defendants’ Motion for Partial Summary Judgment asserted that Plaintiffs’ claims for punitive damages should be dismissed because Plaintiffs could not establish that Defendants’ conduct was deliberate and outrageous. The facts that Plaintiffs relied upon in opposing the Defendants’ Motion was that: the driver was operating the tractor trailer at an excessive rate of speed; the driver was not paying attention to the roadway before him; and the driver was in violation of the rules and regulations of the Federal Motor Carrier Safety Regulations. Plaintiffs further contended that the driver had a history of speeding violations, failed to document his travel log as required by law, failed to maintain a proper driver’s log, and failed to observe driver rest requirements.
In support of their Motion, Defendants contended that there was no genuine issue of material fact because this was a case of simple negligence, i.e, a rear-end collision where a driver merely failed to stop his vehicle prior to impacting Plaintiffs’ vehicle. Defendants further asserted that the accident happened immediately following a blind corner where, without warning or notice, a school bus was stopped in the roadway discharging students, thus bringing Plaintiffs’ vehicle to a stop. The Defendants further contend that the driver was not under the influence of drugs or alcohol, and that the investigating police officer did not charge him with any violations of the Federal Motor Carrier Safety Regulations.
Plaintiffs asserted that genuine issues of material fact existed regarding the Defendants’ reckless and outrageous conduct. In support of this position, Plaintiffs offered the testimony of two independent witnesses that the Defendant driver was driving 55 mph or greater in a 35 mph zone. Plaintiffs’ accident reconstruction expert opined that the Defendant driver was traveling at a minimum of 43 mph. Plaintiffs’ argued that the Defendant driver was not maintaining a sufficient distance to avoid a collision or to keep a proper lookout. Plaintiffs’ further argued that the Defendant driver’s history of log falsification demonstrated a reckless indifference to the safety of the traveling public, which presented a genuine issue of fact. Defendant TransAm’s own in-house auditing showed log violations on 20 of the 29 days that driver was driving in the month prior to the accident. Furthermore, in the six months before this accident, Defendant TransAm had issued 7 warning letters and log audits to its driver.
In denying the Defendants’ Motion and allowing the punitive damages claims to proceed, the Court ruled, in part, as follows: “It would not be unreasonable for a jury to find that Defendant Wirfel, with his experience in training, consciously appreciated the risk of harm from driving fifty-five miles per hour in a thirty-five mile per hour zone around a curve and consciously disregarded or was indifferent to that risk. … [T]he Court finds that based on Defendant Wirfel’s experience and training, a jury could find that he consciously appreciated the risk of harm that could result by traveling twenty miles per hour over the speed limit in a tractor trailer while approaching a “blind” curve.”
As to Defendant TransAm, the Court further ruled as follows: “We find a genuine issue of material fact exists as to Defendant TransAm’s subjective appreciation of the risk of permitting Defendant Wirfel to drive despite his history of speeding, driving over hours and log falsification. Defendant TransAm’s subjective appreciation of the risk of harm may be evidenced by knowledge attributable to the corporation of the risk attendant when tractor-trailer drivers operate in violation of the hours of service regulations, falsify logs, and continually drive over the speed limit. The Court finds Plaintiffs’ assertion that Defendant TransAm engaged in a pattern and course of conduct permitting Defendant Wirfel to drive over his hours of service and continue to violate speeding regulations may demonstrate a conscious disregard of the risk of harm. The viability of these assertions remain despite Defendants’ argument to the contrary. We find Plaintiffs are entitled to pursue these issues at trial.” The Court went further stating that “[e]ven if Defendant TransAm’s independent actions were not sufficient to survive summary judgment, punitive damages may still be awarded against it for the actions of Defendant Wirfel.”
For more information, contact: Alan S. Battisti
Nationwide Mutual Insurance Company v. Catalini:
Insured’s Request to Increase Bodily Injury Liability Coverage Does Not Automatically Trigger Statutory Requirement for an Election for Reduced UIM Coverage Pursuant to Pa.C.S. § 1734.
On Friday, March 25, 2011, the Pennsylvania Superior Court permitted the publication of the Memorandum Opinion in Nationwide Mutual Insurance Company v. Catalini, 2011 PA Super 61. The case involved a 2002 policy originally issued by Nationwide Insurance to the Catalinis with liability limits of $100,000/$300,000 and uninsured/underinsured limits of $15,000/$30,000. Around 2004 the insured lowered the liability limits to $25,000/$50,000 and also requested the uninsured/underinsured limits be increased to $25,000/$50,000. He executed a change form and the limits were changed. Then in 2006 the insured changed the policy again by adding a vehicle and raising the liability limits to $100,000/$300,000. The policy change form, which Mr. Catalini executed read as follows:
“Please replace 01 Pors[.] with 07 Audi VIN# WAUDF78E57A101464. Change BI limits to 100/300. Leave other coverage the same and add lease holder as requested.”
In reliance upon the October 2006 form signed by Mr. Catalini, Nationwide concluded that Mr. Catalini had selected $100,000/$300,000 in BI liability limits and had elected to maintain $25,000/$50,000 in UIM coverage. As such, Nationwide increased Mr. Catalini’s BI liability limits to $100,000/$300,000. The UIM coverage remained at its previous level of $25,000/$50,000.
Sometime thereafter, Kathleen and Rose Catalini, Mr. Catalini’s wife and mother, were injured in a car accident and sought $100,000 of underinsured motorist coverage, not $25,000. Catalini maintained that, because he did not sign a new form to keep the lower underinsured motorist coverage in 2006, the policy change was invalid and that he intended to increase the policy limits of both the bodily injury liability coverage and the UIM coverage to $100,000/$300,000, the same amount as his BI coverage.
Following a non-jury trial on stipulated facts, on November 13, 2009, the trial court issued a verdict in favor of Nationwide and against Appellants.
Judge Bowes of the Superior Court relied upon Blood v. Old Guard, 934 A.2d 1218 (Pa. 2007) and found persuasive the case of State Farm Mutual Auto Insurance Co. v. Hughes, 438 F.Supp.2d 526 (E.D.Pa. 2006) to hold that "in the absence of a statutory provision requiring insurers to provide a named insured a new opportunity to reject or reduce UIM benefits when increasing bodily injury liability benefits under an existing policy, we will not manufacture such a requirement under the facts of this case." Given Mr. Catalini’s specific direction, the Court concluded that Nationwide was not required to have Catalini execute a new election for reduced UIM benefits to the existing insurance policy when he changed the limits of his bodily injury coverage.
The Superior Court affirmed the trial court’s declaratory judgment in favor of Nationwide.
For more information, contact: Jennifer L. Levan, Esquire
Superior Court Upholds Non-Admissibility of Seat Belt Usage in Civil Trials Gaudio v. Ford Motor Company (2009 PA Super 102)
On June 1, 2009, the Pennsylvania Superior Court affirmed a blanket exclusion of any and all evidence of the non-use of seat belts in civil actions tried in Pennsylvania courts.
The Plaintiff had appealed a defense verdict in favor of Ford Motor Company. One of the issues on appeal was whether the Pike County trial court incorrectly denied Plaintiff's Motion in Limine to keep out evidence that the Plaintiff was not wearing his seat belt at the time of his accident and death. The trial court had ruled that evidence of the deceased Plaintiff’s non-use of a seatbelt could be admitted at trial.
In overturning the trial court’s decision and granting a new trial, the Superior Court examined 75 Pa.C.S.A §4581. The Court noted that Subsection 4581(a)(2) requires drivers and front seat passengers to wear a properly adjusted and fastened safety seat belt. It further noted, however, that Subsection (e) of that statute states the following with regard to the admissibility of evidence of non-use of a seat belt system in civil actions:
(e) Civil actions. In no event shall a violation or alleged violation of this subchapter be used as evidence in a trial of any civil action; nor shall any jury in a civil action be instructed that any conduct did constitute or could be interpreted by them to constitute a violation of this subchapter; nor shall failure to use a child passenger restraint system or safety seat belt system be considered as contributory negligence nor shall failure to use such a system be admissible as evidence in the trial of any civil action. ...
75 Pa.C.S.A. § 4581(e) (emphasis added).
The Superior Court thus concluded that the language of 75 Pa.C.S.A §4581 clearly and unambiguously expressed the intent of the Legislature that evidence of non-use of seat belts should be strictly prohibited in civil actions tried in Pennsylvania courts, for any purpose.
For more information, contact: Robert L. Goodman, Esquire
Pennsylvania Supreme Court Upholds Application of “Regular Use” Exclusion to State Trooper Injured on the Job who Applies for UIM Benefits
On October 19, 2011, the Pennsylvania Supreme Court issued a Majority Opinion in the case of Williams v. GEICO, 29 WAP 2009, affirming the regular use exclusion contained in a motor vehicle insurance policy.
This case involved a state trooper who was injured in a car accident on the job. Because the injured officer did not have the ability to obtain UIM coverage on his police vehicle, he sought that coverage under his personal automobile insurance policy with GEICO. GEICO applied the "regular use" exclusion under its policy to deny coverage. The injured trooper challenged that exclusion and GEICO's denial with a petition to compel arbitration. In response, GEICO filed a declaratory judgment action. GEICO was granted summary judgment by the trial court. Williams then appealed to the Superior Court which affirmed. Williams then petitioned the Supreme Court for allowance of appeal, which was granted.
The Supreme Court, in a majority opinion authored by Justice Orie Melvin, upheld the “regular use” exclusion. The Court noted at the outset that its review was limited to whether the regular-use exclusion, as applied to a state trooper, was void as against a public policy that favors protecting first responders. In support of his position, Williams cited several statutory provisions outside the MVFRL that afford special protects to first responders, including the Workers Compensation Act and the Emergency Medical Services Act. Justice Melvin noted, however, that those statutes neither refer to insurance coverage nor to automobiles, and in no way protect first responders from the consequences of their private contractual agreements. The Court noted that Williams did not argue that binding him to the clear and unambiguous terms of his auto policy was, in any way, contrary to public health, safety, welfare or morals so as to warrant invalidating the insurance contract’s provisions on public policy grounds.
Additionally, Justice Melvin rejected Appellant’s argument that the regular-use exclusion violates the MVFRL because the exclusion amounts to an unsigned waiver of UIM coverage in violation of Section 1731. The Court stated that the exclusion as applied here was neither an implicit waiver of coverage nor a limitation on statutorily required coverage. Rather, the exclusion functioned “as a reasonable preclusion of coverage of the unknown risks associated with operating a regularly used, non-owned vehicle.”
The Court noted that it was for the General Assembly and not the judiciary to implement an exception to the regular-use exclusion for first responders. According to the Court, “a contrary decision is untenable, as it would require insurers to compensate for risks they have not agreed to insure, and for which the premiums have not been collected.”
Justices Saylor, Todd and Baer filed concurring opinions.
This decision by the Supreme Court could have a major impact on all first responders, from police officers, EMTs, and firefighters, who may all be driving out there without any UIM coverage under the current status of the law.
For more information, contact: Theodore P. Winicov, Esquire
Superior Court Decides that Physical Injury Still Means Physical Injury
State Farm Mutual Automobile Insurance Company v. Moschetta
(Pa. Super. 1193 WDA 2008)
On April 17, 2009 the Pennsylvania Superior Court, in a Memorandum Opinion, upheld the trial court’s decision in State Farm’s favor concluding that a father’s claim for emotional distress and accompanying physical symptoms did not constitute a “bodily injury” under the State Farm policy or the Motor Vehicle Financial Responsibility Law.
Moments after dropping off his son and parking his vehicle, a father returned to where he had left his son only to find that the son had been fatally injured by a car. In addition to filing suit against the driver for negligent infliction of emotional distress, the father presented an underinsured motorist claim to State Farm. State Farm filed a declaratory judgment action.
The father had alleged that he was shocked and overcome by grief, immediately felt weak, had difficulty standing, felt nausea, began shaking and shivering, had a racing heart, shivered and shook and ended up coming under the care of a neuropsychologist for depression, grief, loneliness, frustration and irritability and anger. The depression was so severe, he claimed, that it affected him physically; making him weak and easily tired.
The Superior Court found that, notwithstanding the physical symptoms the Plaintiff described, the evidence was insufficient to support a finding that plaintiff had suffered a “bodily injury.” In so doing, the Court held to the well established principal that, unless otherwise expressly defined in the contract, the terms “injury,” “bodily injury” or “bodily harm” do not encompass mental or emotional harm, even where the emotional injuries manifest into physical symptoms. The Superior Court further held that the definition of “bodily injury” in the State Farm policy was unambiguous as applied to the facts of the case.
Supreme Court Rules on Insurance Application as UM/UIM Sign Down Writing
On March 14, 2010, the Supreme Court in Orsag v. Farmers, 2011 Pa. LEXIS 574, issued an opinion regarding whether the insurance policy application alone was sufficient to satisfy the sign down requirements set forth in 75 Pa. C.S.A. Sec. 1734 for UM/UIM limits less that the bodily injury liability limits. The Supreme Court decided that an insurance application could satisfy §1734's writing requirement if it clearly indicated appellants' desire for reduced UM/UIM coverage, and was signed by the insured.
Justice Eakin’s majority opinion noted that Orsag signed a two-page application for automobile insurance seeking coverage from Farmers. The application was mostly preprinted, but contained blank spaces where requested information was filled in by hand. The requested information included vehicle descriptions, coverage amounts, and driver details. In the section devoted to coverage selections, Orsag requested bodily injury liability coverage of $100,000 per person and uninsured/underinsured motorist (UM/UIM) coverage of $15,000 each for two vehicles. There were no additional forms signed in this case.
The Court noted that the application stated, in close proximity to the signature line, “I have read the above application and I declare that to the best of my knowledge and belief all of the foregoing statements are true ... I understand that the coverage selection and limit choices here or in any state supplement will apply to all future policy renewals, continuations and changes unless I notify you otherwise in writing.”
The trial court dismissed Orsag’s Complaint seeking reformation of the UIM limits to be equal to the bodily injury limits, and held the insurance application "convey[ed] the insured's desire to purchase uninsured and underinsured coverage in amounts less than bodily injury limits," satisfying §1734's writing requirement. The Superior Court Affirmed the trial court and found that the insurance application, signed by Orsag and expressly designating the amount of desired coverage, satisfied §1734's writing requirement. The Superior Court held that unlike §1731, which sets forth detailed requirements and a form for rejecting UM/UIM coverage completely, §1734's language is broad and does not require a specific form.
The sole issue before the Supreme Court was one of statutory interpretation, “If an insured signs an insurance application that contains lowered uninsured/underinsured motorist coverage limits, is that signature alone sufficient to meet the requirements of Section 1734 of Pennsylvania's Motor Vehicle Financial Responsibility Law?”
Orsag argued that the two-page insurance application did not constitute a writing for §1734's purposes, and it did not include any language demonstrating it was Orsag’s intent to select a lower limit of coverage. Orsag argued they were not presented with the notice found in §1791, nor were they asked to provide their initials next to their coverage selections. Orsag also argued that if the legislature intended for an insurance application to satisfy §1734's writing requirement, it would have specifically stated as such.
Among other arguments, Farmers asserted that the insurance application satisfies the plain terms of §1734 — it is a writing signed by the insured requesting an amount of coverage less than the amount of bodily injury coverage. Farmers noted that a §1734 sign-down does not require any specific form or format.
The Supreme Court noted, “the language of Sec. 1734 is plain and unambiguous. It states that a named insured may request in writing the issuance of coverages under section 1731 (relating to availability, scope, and amount of coverage) in amounts equal to or less than the limits of liability for bodily injury. 75 Pa.C.S. § 1734. Despite the legislature's detailed requirements for rejecting UM/UIM coverage in 75 Pa.C.S. § 1731, there are no such requirements in §1734, as noted by the Court.
The Supreme Court held that “the insurance application in question here satisfies §1734's writing requirement as it clearly indicated appellants' desire for reduced UM/UIM coverage, and was signed by the insured. There may be a more detailed way of satisfying the "writing" requirement, but it is unnecessary given the simple language of §1734 and the manner in which insurance coverage amounts are selected. Though it is laudable for insurance companies to provide additional information regarding UM/UIM insurance beyond what is found in the application, we see no purpose in requiring a separate statement when it is clear from the coverage selected that the insured intended reduced UM/UIM coverage.”
For more information, contact: David R. Friedman
Superior Court Affirms UIM Credit For Tortfeasor's Umbrella Policy
In the companion cases of D’Adamo v. Erie Insurance Exchange (No. 479 MDA 2008) and Holocher v. Erie insurance Exchange (No. 480 MDA 2008), decided on April 30, 2010, the Pennsylvania Superior Court affirmed the judgment of the Court of Common Pleas of Lackawanna County, and held that an uninsured motorist carrier is entitled to a credit or set-off in the amount of all liability coverage available to the alleged tortfeasor, including a personal umbrella policy.
Holocher was a passenger in a vehicle driven by D’Adamo which was involved in an accident on October 22, 2002 in New Jersey. Both instituted suit against the tortfeasor and, while suit was pending, both made claims for underinsured motorist benefits against D’Adamo’s policy with Erie, including claims for loss of consortium on behalf of their wives. The policy called for statutory arbitration under the Act of 1927. The arbitration was held on January 4, 2006 in Pike County, which was the claimants’ county of residence. With one dissent on each award, the panel rendered identical awards to each pair of claimants. The panel rendered gross awards of $850,000 to each couple, but found that Erie was entitled to a total setoff of $750,000, which included the limits of liability of the tortfeasor’s $250,000 automobile policy as well as his $500,000 personal umbrella policy.
The claimants filed Petitions to Modify or Correct the awards in Lackawanna County, claiming that the exhaustion clause in Erie’s policy was contrary to the Motor Vehicle Financial Responsibility Law and to public policy, and that Erie should be awarded a credit only in the amount of the tortfeasor’s motor vehicle insurance policy. On February 11, 2008, Judge Mazzoni denied the Petitions, and the claimants appealed.
Erie’s “exhaustion clause” provided that UIM benefits were not payable “…until all other forms of insurance under all bodily injury liability bonds and insurance policies and self insurance plans...” were exhausted or resolved. The claimants argued that this clause was in conflict with the definitions of “underinsured motor vehicle” contained in §1702 of the MVFRL and in the Erie policy. §1702 defines “underinsured motor vehicle” as a “motor vehicle for which the limits of available liability insurance and self insurance are insufficient to pay losses and damages”. The definition in the Erie policy contained a similar definition: “a motor vehicle for which the limits of available liability bonds or insurance or self-insurance at the time of the accident are insufficient to pay losses and damages”.
The claimants argued that the definitions of “underinsured motor vehicle” in §1702 and the policy should be interpreted to provide that only a tortfeasor’s motor vehicle insurance policy is relevant to determining whether or not the tortfeasor is underinsured. They also argued that if the legislature had intended for non-motor vehicle coverage to be included in the UIM analysis, it would have said so explicitly in the MVFRL.
The claimants also argued that Erie’s exhaustion clause violated public policy because it was overly broad, and that Erie’s right of subrogation against the tortfeasor would protect Erie if the award were molded to eliminate the $500,000 credit. The claimants also cited the Superior Court’s 1996 ruling in Kromer v. Reliance Ins. Co. , which held that claimants could not collect UIM benefits under their own umbrella policies. They argued that if an injured party’s own umbrella policy cannot be reached to provide UIM coverage, then the tortfeasor’s umbrella policy should likewise not be considered in calculating the offset due the UIM carrier.
Erie countered that that §1702 and the policy make it clear that UIM benefits are triggered by exhaustion of all liability insurance available to the tortfeasor, and that since the umbrella policy was available to compensate the claimants, it should be taken into account in calculating Erie’s offset.
The case was heard by a panel consisting of Judges Lally-Green, Gantman and Allen, although Judge Lally-Green did not participate in the consideration or decision. The Superior court cited Judge Mazzoni’s analysis with approval: “To maintain and suggest that the definition of underinsured motor vehicles in the MVFRL controls how exhaustion clauses are to be applied is a broad stretch that has no merit or legal foundation…” Citing the Superior Court’s 1995 decision in Boyle v. Erie Insurance Exchange, the Court stated as follows: “Erie’s exhaustion clause was designed to control Appellants’ ability to determine how their arbitration awards would be apportioned between Erie and the tortfeasor’s insurance providers”. The Court went on to affirm Judge Mazzoni, explicitly finding that Erie was entitled to a set-off in the full amount of applicable liability insurance available to the tortfeasor, including both his motor vehicle coverage and his umbrella policy.
Amanda E. Pusl Petitioner v. Matthew J. Means et al. Respondents, No. 512 WAL 2009. Petition for Allowance of Appeal from the Order of the Superior Court
On March 23, 2010 the Pa. Supreme Court denied Amanda Pusl's Petition for Allowance of Appeal.
This denial allows the third party verdict to be molded and reduced by the amount of any Underinsured Motorist settlement prior to the date of the verdict.
Pusl settled her UIM claim for $75,000.00 and took her third party claim to verdict in the amount of $100,000.00. Prior to the verdict there was no discussion between the UIM carrier and Pusl regarding waiving subrogation. The verdict was molded to $25,000.00 thereby avoiding double recovery.
As a result of this decision, UIM carriers may see increased reluctance on the part of insureds to settle their UIM claim in order to fund their third party litigation. Moreover, the UIM carrier may see requests for an assignment of subrogation rights. The UIM carrier may also be more frequently be joined in the increased third party litigation.
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