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No Harm in Failing to Notify Employees as to Rejection of UIM Coverage (PA)

March 15, 2019

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The Eastern District of Pennsylvania recently granted a Motion for Summary Judgment in favor of an employer and its insurer in an underinsured motorist coverage (“UIM”) case. In <a href="">Morales v. Travelers Property Casualty Company</a>, the Court determined that there were no genuine issues of material fact at hand when all parties agreed that an employer previously signed off on two UIM coverage rejection forms. The two issues involved in the matter were (1) whether the employer’s completion of the rejection forms complied with 75 Pa.S.C. § 1731 and (2) whether the plaintiff employee required notice of such.

The lawsuit arose when the plaintiff, David Morales (“Morales”), was injured in a motor vehicle accident while acting in the scope of his employment with Tribus Services, Inc. (“Tribus”). Morales filed a claim against the tortfeasor and settled at the policy limit of $15,000.00. He later filed a claim for UIM benefits from Tribus’ policy with Travelers Property Casualty Company of America (“Travelers”). Morales was denied, however, as Tribus previously opted out of those benefits. In fact, the Executive Vice President and Corporate Secretary of Tribus signed two UIM rejection forms prior to the date of the accident.

At the close of discovery, all parties filed motions for summary judgment. After reviewing the motions, the Court determined that there were no issues of material fact in dispute. The legal issues were (1) whether Travelers’ UIM rejection form and Tribus’ completion if it complied with 75 Pa.S.C. § 1731; and (2) whether Tribus was obligated to provide notice to Morales that it rejected UIM coverage such that Morales would have the opportunity to obtain his own independent coverage. In reaching its conclusion, the Court first reviewed the two UIM coverage rejection forms in the record and determined that both complied with the statutory language from 75 Pa.S.C. § 1731(c). Morales argued that neither form identified the policy to which it applied. In response, the defendants argued that 75 Pa.S.C. § 1731 does not require that a policy number be found on the UIM coverage rejection form. See Travelers Indem. Co. v. DiBartolo, 171 F.3d 168 (3d Cir. 1999); see also Universal Underwriters Grp. v. Tusay, Jr., 2004 WL 902372, at *3 (E.D. Pa. Apr. 2004). The Court agreed with the defendants’ position. Additionally, Morales argued that the second UIM coverage rejection form post-dated the effective policy by almost two months. However, the insurance administrator for Tribus and its corporate designee testified in her deposition that she understood the rejection form to apply to “all future renewals unless we can cancel in writing.” Thus, the corporate designees of each defendant stated that they intended the rejection to apply to the policy at issue during Morales’ accident.

In granting the defendants’ motion for summary judgment, the Court did highlight one public policy issue which was favorable to Morales. The Court referenced Bielec v. Am. Int’l Grp., Inc., in which Judge Ramy Djerassi granted summary judgment in favor of a plaintiff under similar facts. 2017 WL 6594067, at *7 (Pa. Super. Ct. Dec. 2017). In the opinion, Judge Djerassi stated that even if the employer’s UIM rejection was valid on a statutory text analysis, “we believe an employer who fails to notify its employee driver that UIM coverage has been rejected is acting against public policy.” Id. at *7. The Eastern District of Pennsylvania rejected this argument by stating that Judge Djerassi’s discussion surrounding public policy was merely dicta and not the actual basis for the Superior Court later affirming that decision. Additionally, the Court stated that the Third Circuit and Pennsylvania Supreme Court precedent did not support such a theory.

Thanks to Zhanna Dubinsky for her contribution to this post. Please email <a href="">Vito A. Pinto</a> with any questions.

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