UIM Coverage

Third Circuit Rejects Policyholder Claims Where Pennsylvania’s UIM Coverage Rejection Requirements Are Satisfied

Uninsured and underinsured motorist (“UIM”) coverage is not mandatory in Pennsylvania and insureds have the option of rejecting such coverage by signing an approved form. In Keeler v. Esurance Insurance Services, Inc., the Court of Appeals for the Third Circuit recently addressed whether a waiver of UIM coverage by insureds was void to permit them to maintain claims against their motorcycle insurer. Plaintiff Nathan Keeler suffered serious injuries when his motorcycle collided with an SUV which had pulled out of an intersection. The SUV driver’s insurer settled for the bodily injury limit of $300,000 but Keeler claimed injuries in excess of that amount and sought to recover UIM benefits from their insurer Esurance. The claim was denied on the basis that plaintiff had signed a rejection form waiving UIM coverage and had consistently not paid premiums for such coverage. Plaintiffs sued various Esurance entities, claiming breach of contract and bad faith denial of insurance coverage. They sought damages exceeding $75,000 and Esurance removed the case to the United States District Court for the Western District of Pennsylvania. Esurance moved for summary judgment, arguing that it properly denied the claim for UIM benefits based upon plaintiffs’ signed waiver. Plaintiffs cross-moved on the grounds that the waiver was void because Esurance failed to print it in a “prominent type and location” as per Pennsylvania law. They also claimed that because Esurance’s renewal notices did not mention UIM protection, also required by Pennsylvania law, that the waiver was void. The District Court disagreed and held that the UIM rejection form was valid and that there was no civil remedy for defective renewal notice under Pennsylvania law. The Third Circuit affirmed, holding that the UIM rejection form satisfied the prominent-type-and-location requirement under Pennsylvania law. The court observed that the form was included on a separate document from the policy itself, was organized by subject matter, with the waiver in its own section in a readable sized font with a bold, underlined title in all capital letters, with a signature line that was signed by plaintiff. The court also held that while Esurance violated Pennsylvania’s renewal form prominence requirement, Pennsylvania law does not provide for a civil remedy for such deficiencies. Thus, Esurance’s violation did not affect the validity of the UIM waiver. The Keeler decision highlights the importance of insurer compliance with Pennsylvania’s UIM rejection form requirements and supports a denial of UIM coverage where the requirements are met, and insureds waive such coverage. Thank you to Haley Matthes for her contribution to this post. Please contact Andrew Gibbs with any questions.Read More

Insurer Wins On Anti-Stacking Provision In UIM Case (PA)

In a recent case from the Eastern District of PA, Meyers v. Travelers Ins. Co. the court granted the defendant insurance company’s motion for summary judgment consistent with the Motor Vehicle Financial Responsibility Law and focused on a secondary policy’s waiver of inter-policy stacking.

The plaintiff in the case was in a car accident, in which she received the policy limit of the at fault driver. However, this did not cover the extent of her injuries.  She then recovered from her own primary policy, and attempted to “stack” UIM polices. The policy at issue in the case was the plaintiff’s mother’s policy in which she waived inter-policy stacking. The inter-policy stacking waiver provision is made by the holder in exchange for reduced insurance payments. The plaintiff attempted to argue that waiver against inter-policy stacking had significant public policy concerns and prevented her from being made whole. However, the court ruled in favor of the defendant, stating The Supreme Court of Pennsylvania “consistently ha[s] been reluctant to invalidate a contractual provision due to public policy concerns.” Williams v. GEICO Gov’t Emps. Ins. Co., 32 A.3d 1195, 1200 (Pa. 2011). As a result, amongst other arguments the court ruled in favor of the defendant insurance company’s motion for summary judgment.

Thus, this case continues the PA insurance law case where courts have upheld waiver of inter policy stacking provisions as a valid.

Thanks to Kevin Riley for his contribution to this article.  Should you have any questions, please contact Tom Bracken.

Read More

UIM Coverage Limitation Held Consistent With The MVFRL And Pennsylvania Public Policy

In Meyers v. Travelers, the Eastern District of Pennsylvania recently held that non-stacked underinsured motorist (“UIM”) coverage limiting recovery to the highest applicable limit of any other second-priority policy was consistent with the stacking waiver statute under Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL), and with Pennsylvania public policy. The plaintiff in that case suffered severe injuries when her vehicle was struck by another car. She filed insurance claims under six different policies and first received $100,000 from the at-fault driver’s policy. That amount did not cover her injuries, so she sought to recover UIM benefits. At the time of the accident, the plaintiff was the named insured on four policies that offered UIM benefits, and she received a total of $1.6 million in stacked benefits from these carriers. However, the sixth policy on which Meyers could make a UIM claim – issued by Travelers to plaintiff’s mother – did not allow for stacked benefits due to an “other insurance” clause in the policy. This clause implemented a stacking waiver made by plaintiff’s mother when the policy was issued, thus limiting plaintiff’s UIM coverage to $85,000 of the policy’s $300,000 limit. Plaintiff filed a motion for summary judgment, arguing that the “other insurance” clause of the Travelers policy was void and unenforceable under the MVFRL. The court disagreed, finding that limiting recovery to the highest applicable limit for any one vehicle under a second priority policy was consistent with the staking waiver statute. The court also held that the MVFRL provision making insurers “wholly responsible” did not entitle an insured to certain coverage. Finally, the court held that the decrease in Travelers’ exposure was consistent with Pennsylvania public policy as it was the result of plaintiff’s mother having voluntarily waived stacking and obtaining a lower premium as a result. Thank you to Mason Bailey for his contribution to this post. Please contact Andrew Gibbs with any questions.Read More

Bad Faith Underinsured Motorist Claim Requires at Least SOME Bad Faith (PA)

In a recent Eastern District Court of Pennsylvania case, Bond v. Geico, the court dismissed an underinsured motorist claim against the insurer where the policyholder brought vague, unsubstantiated, conclusory allegations of bad faith in the claim handling.

Plaintiff in the case was an underinsured motorist under Pennsylvania statute who sought underinsured coverage from Geico (his own UIM insurer). The Insurer initially offered $10,000, then after the plaintiff retained counsel and pursued his claim, he ultimately received $50,000 in UIM benefits.  Plaintiff then brought suit against Geico for $1,000,000 claiming the carrier failed to provide “reasonable coverage,” seeking bad faith damages along with the policy limits.

In dismissing Plaintiff’s pro se complaint, the Court noted that rather than require detailed pleadings, the “Rules demand only a short and plain statement of the claim showing that the pleader is entitled to relief[.]” Connelly v. Lane Const. Corp., 809 F.3d 780, 786 (3d Cir. 2016). As such, the court requires specific averments in order to sustain a complaint. Here, the Court found that the plaintiff did not provide enough information regarding identification of the actual policy limits in the complaint. Further, Plaintiff did not provide the court enough information to even show a basis that the policy limits were 1,000,000. Additionally, while a cause of action may be brought by insured parties against their insurer for bad faith. See 42 Pa. Cons. Stat. § 8371, the plaintiff did not allege adequate facts to sustain a claim that the insurer acted improperly here.

While the Court would permit the policyholder to amend his complaint, at least this it did in fact require the plaintiff to specifically plead allegations of bad faith, rather than mere conclusory statements.

Thanks to Kevin Riley for his contribution to this post.  Should you have any questions, please contact Thomas Bracken.

Read More

Insurers In SUM Arbitration Must Timely Seek Discovery Or Risk Losing The Right To Do So

In In the Matter of Arbitration Allstate Insurance Company and James M. Twomey, an insurer moved to stay arbitration of a supplementary uninsured/underinsured motorist (SUM) claim to compel discovery in aid of arbitration pursuant to CPLR 3102 (c). The Supreme Court denied the initial Petition and the insurer appealed.

The Fourth Department affirmed, finding that the Supreme Court correctly found that the insurer “had ample time . . . within which to seek discovery of the respondent insured as provided for in the insurance policy, and unjustifiably failed to utilize that opportunity” to obtain the requested discovery. The Fourth Department also found that the insurer failed to establish the “extraordinary circumstances” necessary to warrant court-ordered disclosure in aid of arbitration under CPLR 3102 (c), or that the discovery if it was allowed would be inadequate for it to establish its case.

The court also rejected the insurer’s argument that the insured respondent’s demand for arbitration was premature in that he had not complied with the terms of the SUM endorsement in the policy. The insurer failed to properly raise the issue on appeal, but the court nonetheless found that the insurer failed to show that its insured had failed to comply with the terms of the endorsement.

This decision highlights the importance of promptly seeking discovery in SUM arbitration and shows that an insurer can lose the right to do so if it does not seek discovery in a timely manner.

Please e-mail John Diffley with any questions.

Read More

Joyride Fails to Bring Joy to Injured Passenger (NJ)

New Jersey motorist Sheavonra Adderly was involved in a one-car collision that caused injury to one of her passengers. That passenger sought coverage under the vehicle’s insurance policy issued by Liberty Mutual. However, Adderly was not the owner of the vehicle involved in the accident, and the policy excluded coverage if a person drives the covered vehicle without a reasonable belief that the insured gave them permission to do so.

The facts were stacked against the driver in this matter. The vehicle owner was adamant that Adderly drove the car without her consent. Additionally, Adderly admitted to an investigator that she was not given permission to operate the vehicle. Finally, Adderly’s own mother testified that her daughter did not have permission to use the vehicle, and she wanted to “strangle her” for taking the car.

The Appellate Court upheld the trial court’s denial of coverage for the accident, noting that coverage is not available to a vehicle or operator of a vehicle once they steal it. This case confirms that gathering the specific facts of a case is essential to proving whether or not a driver had permission to use a vehicle involved in an accident. Coverage may often turn on whether the court determines that a vehicle operator was a permissive user of a vehicle.

Please contact Heather Aquino with any questions.Read More

UIM Coverage and Avoidance of Forum Selection Requirements? Court Holds That’s Too Much to Ask For Following an Invalid Waiver (PA)

In Matthews v. Erie Insurance Group, the plaintiff’s action arose following a motor vehicle accident. The plaintiff appealed from the trial court order sustaining Erie Insurance Group (“Erie”)’s preliminary objections to venue and transferring the case from Philadelphia County to Bucks County. The Superior Court affirmed the trial court’s decision.

The Appellant, Matthews, was operating a motor vehicle insured by Erie, under a policy issued to Ion Construction. Appellant was a named insured under the policy. Appellant asserted Ion Construction never rejected underinsured motorist coverage (“UIM”) and therefore the policy should include such coverage. The court recognized the remedy would be reformation of the contract to provide UIM coverage. But, as Erie stated in preliminary objections, Erie’s standard UIM benefits contain a clause establishing venue in any legal action involving UIM coverage to be the county where the plaintiff is domiciled. Appellant argued the trial court was incorrect in enforcing a forum selection clause to transfer venue that was not contained in the original insurance contract.

The Court balanced multiple factors in determining whether reformation of a contract to provide coverage must also include the forum selection provision which would have attached to such coverage in the absence of a waiver. The Court referenced 75 Pa.C.S. § 1731(c.1) which dictates reformation of a contract in the case of an invalid waiver, and also took into account a related declaratory action which is also being litigated in Bucks County. Lastly, the Appellant raised issues on appeal – including the prematurity of the court’s decision to transfer venue before it had been determined UIM coverage was appropriate – that were not argued before the trial court. Therefore, the Superior Court declined to hear such arguments. Yet, the Court noted that even if such arguments were not waived, transferring the matter is valid and in the interest of judicial economy.

This case displays the Court’s concern about inconsistent ruling, given a declaratory action regarding the same legal issues are being litigated in Bucks County. Judicial economy was held the most weighted factor, and thus the Superior Court affirmed the trial court’s order of transferring Matthews v. Erie Insurance Group from Court of Common Pleas of Philadelphia to Court of Common Pleas of Bucks County.

Thanks to Madeline Troutman for her contribution to this post.  Please email Georgia Coats with any questions.

   Read More

NJ Court Holds Statutory Insurance Minimums Supersede Stated Policy Coverage Limits

The matter of Rafanello v. Taylor-Esquivel arose out of a multi-vehicle accident involving a commercial dump truck operated by Jorge Taylor-Esquivel and under the control of his employer, NAB Trucking (the truck was leased). Esquivel, however, was not listed in the Covered Driver’s section of NAB’s liability policy. The trial court determined that NAB’s exposure was capped at $35,000 which, in the court’s view, was the maximum liability limit pursuant to the policy which was clear and unambiguous. The policy at issue was underwritten by American Millennium Insurance Company (AMIC).

Plaintiff’s auto insurer, Encompass, filed a third-party action against AMIC to recover underinsured motorist benefits it paid to plaintiff Rafanello, who was injured as a result of Esquivel’s alleged negligence. The trial court granted summary judgment in favor of AMIC and dismissed the third-party claim, finding that the policy’s plain terms mandated that coverage be reduced to $35,000.

However, the Appellate Division reversed.  On appeal, the Court found that where the Legislature had adopted a separate statutory scheme for a class of motor vehicles and did not specify the amount of compulsory liability insurance coverage required, it had delegated that authority to the Commissioner of Insurance in consultation with the Director of the Division of Motor Vehicles. These regulating agencies had adopted federal statutes and regulations into its own regulatory scheme for a specific class of motor vehicle. The Appellate Division found that the subject dump truck was transporting hazardous materials and was therefore a vehicle governed by a specific NJ statutory scheme that incorporated Federal law through interpreting regulations. Thus, since Federal law required interstate trucking companies to provide liability limits of $750,000 for any commercial interstate vehicle weighing more than 10,001 pounds, the AMIC policy had to conform to those requirements and provide the statutory minimum in insurance coverage.

This case illustrates the importance of knowing state and federal statutory insurance minimums, as a policy’s stated coverage limits may be called into question when there is conflicting statutory insurance minimums required for certain vehicles.

Thanks to Mike Noblett for his contribution to this post. If you have any questions or comments, please contact Colleen Hayes.Read More

Despite Error, Insurer Escapes Liability for UM/UIM Coverage

In Beach v. The Navigators Ins. Co., No. 1550 MDA 2019 (Pa. Super. Ct. Sept. 11, 2020), the plaintiffs sought UIM coverage under an automobile insurance policy issued to their employer. The dispute centered on the applicable limits of the UIM policy.

The question as to the applicable UIM limit arose out of an error the insurer made when renewing the policy at issue. Beaches’ employer sought to renew an existing Navigators policy with $35,000 in UIM coverage. Navigators tendered a declaration page for the renewal, but the declarations page contained several errors, including the provision of $1,000,000 in UIM coverage. The employers’ broker immediately contacted the insurer the same day the declaration page was issued to correct the error. The insurer issued a corrective endorsement shortly thereafter. However, the plaintiffs demanded coverage beyond the $35,000 UIM limit.

The plaintiffs appealed the trial court’s grant of summary judgment to Navigators. First, they argued that a valid underinsurance coverage sign-down form was not executed as required by Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”). The MVFRL requires insurers to offer UM and UIM coverage, and an insurer is precluded from offering a policy with UM/UIM limits lower than the bodily injury coverage limits. The Superior Court disagreed, reasoning that the record included three written requests from the employer for lower UIM limits, and the mere fact that an obvious scriveners error was made was insufficient to warrant an expansion of coverage or subsequent writing from the insured because the error was immediately identified by the employer’s agent and shortly thereafter corrected by the insurer.

The Court also affirmed dismissal of the bad faith claim. The burden of proof for bad faith requires clear and convincing evidence that the insurer lacked a reasonable basis for denial of benefits and either knew or recklessly disregarded the lack of reasonableness in denying the claim. The Court held “there can be no dispute that Navigators had a reasonable basis for denying” the claim in reliance on the $35,000 limit. The Court was similarly unpersuaded by the argument that Navigators engaged in bad faith by denying payment because the record reflected that Navigators offered the $35,000 limit on more than one occasion and claimant rejected those offers.

This case reveals that insurers should act quickly to rectify errors on a declaration page and should ensure that they offer UM and UIM coverage as required under the MVFRL.

Thank you to Jennifer Seme for her contribution to this post. Please contact Heather Aquino with any questions.

Read More

Keep on Stacking . . . PA Court Declines Insurer’s Request to Deny UIM Benefits (PA)

In Donegal Mutual Insurance Company v. Kevin Krautsack, et al, the Court of Common Pleas of Lancaster County held that “the household vehicle exclusion violates the Motor Vehicle Financial Responsibility Law (“MVFRL”); therefore, these exclusions are unenforceable as a matter of law.”

The case stems from an accident in which Kevin Krautsack was injured while riding his mother’s motorcycle. After the accident, the Krautsacks claimed and accepted the maximum uninsured benefits allowed under the motorcycle’s policy, which was issued by Progressive. The Krautsacks then initiated a claim with Donegal for stacked UIM benefits. Donegal responded that it had no duty to provide UIM benefits to Krautsack because the motorcycle he was riding at the time of the injury was not insured under the Donegal policy. As such, Donegal sought to enforce the household exclusion. In Pennsylvania, the “household exclusion” is a clause that insurance companies began using in the 1990’s in auto insurance policies to limit the amount of uninsured motorists (UM) and underinsured motorists (UIM) coverage they had to provide after claims made by their insureds after a car accident.

In this case, the Krautsacks argued that the pivotal case of Gallagher v. GEICO Indemnity Company, 201 A.3d 131 (2019), invalidated all household exclusions. Donegal attempted to argue that Gallagher was limited to the specific facts of that case. The Court, however, agreed with the Krautsack, and Judge Ashworth held that the household exclusion is unenforceable as a matter of law.

Donegal is further evidence in the Pennsylvania court trend eliminating the household exclusion. It indicates that insurers should no longer rely on the exclusion to deny claims.

Thanks to John Lang for his contribution to this post. Please contact Heather Aquino with any questions.Read More