Insurance

July 23rd, 2019 by Rieders Travis in Insurance

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UM/UIM COVERAGE-STACKING MOTORCYCLES

 Erie Insurance Exchange v. Sutherland, No. 10437 of 2019, C.A. (C.P. Lawrence May 22, 2020) Motto, P.J. Before the court for disposition is the Motion for Judgment on the Pleadings filed on behalf of the plaintiff, Erie Insurance Exchange, asserting Defendants are not entitled to stacked underinsured motorist coverage (hereinafter “UIM”) pursuant to the policy insuring their automobiles for injuries sustained while Mr. Sutherland was operating his motorcycle, as Mr. Sutherland waived UIM coverage in the policy insuring the motorcycle.

On May 27, 2017, defendant, Thomas L. Sutherland, was injured while operating his 2017 Indian Scout 60 motorcycle when he was struck by an underinsured motorist at the intersection of Leesburg Station road and New Castle Mercer Road in Wilmington Township, Mercer County, Pennsylvania.  Mr. Sutherland’s motorcycle was insured through a policy issued by Progressive Insurance Company (hereinafter “Progressive”).  He waived underinsured motorist coverage for all vehicles insured pursuant to that policy.  Mr. Sutherland and his wife, Lucinda S. Sutherland, also maintained an insurance policy issued by plaintiff, which provided coverage for a 2000 Toyota Tundra and a 2012 Ford Escape.  Defendants purchased underinsured motorist coverage through the Erie Insurance policy with limits of $100,000 per person and $300,000 per accident.  Defendants did not execute a waiver of stacking for that insurance policy and paid premiums consistent with obtaining stacked coverage.  However, the policy contained a household exclusion, which that insurance does not apply to the following:

  1. Damages sustained by “anyone we protect” while:
  2. “occupying” or being struck by a “motor vehicle” owned or leased by “you” or a “relative,” but not insured for Uninsured or Underinsured Motorists Coverage under this policy…

Mr. Sutherland requested Plaintiff pay UIM benefits for the injuries sustained in the motorcycle accident pursuant to the Defendant’s automobile policy, which Plaintiff rejected by letter dated June 23, 2017, stating the household exclusion applied.  On March 27, 2019, Defendants requested Plaintiff reconsider its denial of UIM coverage based upon the Pennsylvania Supreme Court’s decision in Gallagher v. Geico Indemnity Company, 201 A.3d 131 (Pa. 2019).  Plaintiff refused to approve Defendants’ claim as it assumed the position Defendants were not entitled to UIM coverage concerning the motorcycle.

This case is even more compelling than the aforementioned cases as Mr. Sutherland was a named insured on both policies while the other cases included stacked coverage for a number of the named insured’s household

The Court is required to base its decision on the policy from which Defendants are seeking coverage and not any other policy Defendants may have purchased as stated in Stockdale.  Thus, Mr. Sutherland’s waiver of UIM coverage in the Progressive policy cannot preclude his ability to recover in the Erie policy, as Defendants paid premiums for stacked UIM coverage.  Eichelman is no longer controlling precedent in this matter following the Supreme Court’s decision in Gallagher.  In fact, the Gallagher Court acknowledged it was altering the insurance industry as stated in footnote 6 of that Opinion.  The Court placed the onus on the insurance providers to ensure they were aware of all the vehicles and individuals which may be covered by stacked UIM coverage.  Plaintiff cannot deny coverage to Defendants merely because it was unaware the stacked UIM benefits would include Mr. Sutherland’s motorcycle or as a result of Mr. Sutherland waiving UIM benefits on the Progressive insurance policy.

Based upon the foregoing, Plaintiff’s Motion for Judgment on the Pleadings is denied in its entirety.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UM/UIM COVERAGE-STACKING-HOUSEHOLD EXCLUSION

Erie Insurance v. Petrie, 2020 Pa. Super. LEXIS 921 (November 18, 2020) Pellegrini, J.  On October 16, 2016, Decedent, while operating a Yamaha motorcycle, was struck and killed by a truck operated by an underinsured driver. Decedent was survived by Petrie and their three children, all of whom are parties in this case. At the time of the accident, Decedent and Petrie had purchased and were named insureds on two motor vehicle insurance policies through Erie and Foremost Insurance (Foremost). The Foremost policy provided $25,000.00 in UIM coverage and Decedent’s motorcycle was insured by that company. Petrie made a successful claim for UIM benefits from Foremost. Petrie then submitted a claim for UIM benefits under the Erie policy. The Erie policy covered four vehicles and UIM coverage limits for bodily injury of “$100,000 per person/$300,000 per accident-Unstacked.”

In April 2017, Erie issued a letter denying the claim because the above stacking waiver prevents Petrie from recovering benefits from both Foremost and Erie, i.e., that provision bars inter-policy stacking. In addition, Erie also maintained that the household exclusion bars Petrie’s request for UIM benefits because, at the time of the accident, Decedent was operating a motorcycle he had insured with a different carrier and not under the Erie policy.

Accordingly, because Gallagher, 201 A.3d 131 (Pa. 2019) found the household exclusion provision inconsistent with Section 1738 of the MVFRL requirement that insureds knowingly waive stacked coverage, and Craley v. State Farm Fire and Casualty Company, 895 A.2d 530 (Pa. 2006) found the present stacking waiver provision was not sufficient for an insured to make a knowing decision to waive stacked coverage, the trial court’s grant of judgment on the pleadings is reversed and the matter is remanded to the trial court. Order reversed. Case remanded. Jurisdiction relinquished.

INSURANCE-LIFE INSURANCE-DIVORCE-CHANGE IN BENEFICIARY

State Farm v. Kitko, 2020 Pa. Super. 253 (October 20, 2020) Olson, J.  Section 6111.2, a so-called revocation-on-divorce statute, deems a spouse, or former spouse, of a life insurance policyholder to have predeceased the policyholder for beneficiary purposes under the terms of the life insurance policy when the beneficiary designation occurred prior to the entry of a final divorce decree or prior to the initiation of divorce proceedings, which remain pending at the time of the policyholder’s death. 20 Pa.C.S.A. § 6111.2(a) and (b). In order words, the designation of a spouse, or former spouse, as a beneficiary under his or her spouse’s, or former spouse’s, life insurance policy is automatically revoked upon the entry of a final divorce decree or upon initiation of a divorce proceeding that is not finalized before the policyholder’s death.

The spouse, or former spouse, will not be deemed to have predeceased the policyholder and will remain a beneficiary of the policy, however, if (1) the initial beneficiary designation contains words indicating the designation is to remain effective despite subsequent issuance of a divorce degree, (2) a court orders the beneficiary designation to remain in effect after a divorce decree is issued, (3) the spouses, or former spouses, enter into a written contract, i.e. a divorce settlement agreement, in which they agree the beneficiary designation is to remain in effect after entry of a divorce decree, or (4) the policyholder makes a “designation” after the divorce decree is issued that his or her former spouse is a beneficiary. Id. at § 6111.2(b)(1-4).

While we conclude that the term “designation,” as used in Subsection 6111.2(b)(4) permits beneficiary designation by either oral or written form, we further conclude that a valid “designation” under Subsection 6111.2(b)(4) refers to a designation of a former spouse as a beneficiary of the policy after the divorce decree was issued that either strictly or substantially complies with the terms of the applicable policy. Accordingly, to resolve the dispute in the case sub judice, we must determine whether, after the divorce decree was issued, Appellant established Decedent’s strict compliance with the beneficiary designation provisions of the policy. In the alternative, we must decide whether, in accordance with Pennsylvania law, Appellant demonstrated Decedent’s substantial compliance with the policy terms in any post-divorce beneficiary re-designation. Our analysis, therefore, begins with the policy language itself.

Based upon our review of the record, we discern that Decedent, under the circumstances of this case, reasonably did all that he could have done to designate Appellant as the primary beneficiary of the policy. Decedent notified his agent about his divorce and inquired about Appellant remaining the primary beneficiary of the policy. The agent incorrectly told Decedent that no additional paperwork was necessary in order to strictly comply with the beneficiary designation provisions of the policy and that Appellant was already listed as the primary beneficiary of the policy according State Farm’s electronic records system.

Decedent, under the circumstances of the instant case, substantially complied, as a matter of law, with the policy requirements to designate Appellant as the primary beneficiary of the policy.

Consequently, we vacate the order that granted summary judgment in favor of Allen Kitko and dismissed Appellant’s statement of claim with prejudice. Further, we remand this case with the instructions that the trial court vacate its order that denied Appellant’s motion for summary judgment. Finally, we direct the trial court to enter summary judgment in favor of Appellant and to dismiss Allen Kitko’s statement of claim with prejudice.

Order vacated. Case remanded with instructions.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UIM-STACKING-GALLAGHER

National General Insurance v. Sheldon, 2020 U.S. Dist. LEXIS 178605 (W.D. Pa. September 29, 2020) Bissoon, D.J.  Defendant purchased a motorcycle, insuring it with a different insurance company, Dairyland Insurance Company (“Dairyland”), although he had a preexisting automobile insurance policy (“National General Policy,”) with Plaintiff. Defendant’s policy with Plaintiff included “stackable,” Underinsured Motorist Coverage (“UIM”) of $100,000 per person for bodily injury on four vehicles, for a total of $400,000 in coverage.

At issue before this Court is whether a “household vehicle exclusion” violates Pennsylvania state law when applied to two separate insurance companies issuing two separate policies that include “stacking” UIM coverage for motor vehicles versus a motorcycle for one individual.

The Pennsylvania Supreme Court in Gallagher determined that the “household vehicle exclusion” violates the MVFRL because the exclusion “impermissibly acts as a de fact waiver of stacked uninsured and underinsured motorist (“UM” and “UIM,” respectively) coverages.” Gallagher, 201 A.3d at 132.

At its core, Gallagher held that the household vehicle exclusion violates the MVFRL because it is an impermissible waiver of an individual’s choice to select and pay for stacked UIM benefits. To this Court, that reasoning governs no matter who furnishes those benefits, whether it is one insurance company or two. The Court simply is not persuaded by the older cases cited by Plaintiff in its case, and notes that several of those cases were explicitly abrogated by Gallagher, although not overruled, including those with facts analogous to this case. See Plaintiff’s Brief in Support of Motion for Summary Judgment at 6 (“Pl. Brief ISO,” Doc. 16), citing Erie Ins. Exchange v. Baker972 A.2d 507 (Pa. 2009), abrogated by Gallagher v. GEICO Indem. Co.201 A.3d 131 (Pa. 2019). Again, had the Gallagher court intended to limit its holding with respect to “household vehicle exclusion” provisions, it need not have mentioned specifically how Baker was not binding precedent because it could have easily differentiated the facts of Gallagher by indicating that only one insurance company was involved. See Gallagher201 A.3d at 135 n.5.  This is different from the other case cited by Plaintiff, as that one addresses a different exclusion purporting to limit UIM coverage, which the Gallagher court specifically declined to address. Pl. Opp. at 11, citing Barnhart v. Travelers Home and Marine Ins. Co.417 F. Supp. 3d 653 (W.D. Pa. 2019). See Gallagher201 A. 3d at 138 n.8 (“We offer no opinion or comment on the enforceability of any other exclusion to UM or UIM coverage or to coverage in general”) (emphasis added). Plaintiff’s argument is inapposite.

Consistent with the foregoing, Defendant’s Motion for Summary Judgment is GRANTED and Plaintiff’s Motion for Summary Judgment is DENIED. The Court finds that Plaintiff’s “household vehicle exclusion” in the National General Policy is invalid and unenforceable.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-LIMITED TORT-FUTURE MEDICAL CARE

Darwish v. Einspahr, 2020 Pa. Super. Unpub. LEXIS 3029 (September 24, 2020) Bowes, J.  The jury answered special interrogatories finding that Mr. Einspahr was negligent, that Ms. Darwish was not negligent, and that Mr. Einspahr’s negligence was the factual cause of harm to Ms. Darwish.  The jury found that Ms. Darwish did not suffer severe impairment of bodily function, but it awarded $50,000 in economic damages to compensate her for future medical expenses.  It was wrong for the court to mold the verdict by subtracting the $50,000 since the $50,000 was not speculative and was properly awarded for future care even though the jury found that plaintiff did not suffer severe impairment of bodily function for a grant of damages concerning pain and suffering.

INSURANCE-BAD FAITH-FAILED REPAIRS TO A CAR

Berg v. Nationwide, No. 33 MAP 2019 (Pa. S. Ct. August 25, 2020) Wecht, J.  Twenty-four years ago, Sharon Berg was involved in a collision while driving a vehicle insured by Nationwide Mutual Insurance. Although there were no injuries, the vehicle sustained extensive damage. After a botched repair job, the vehicle remained uncrashworthy. Yet Nationwide knowingly permitted its insured to continue driving this vehicle, while refusing to acknowledge what it already knew: that the repairs had failed. Sharon and her husband, Daniel Berg, eventually sued Nationwide for insurance bad faith. See 42 Pa.C.S. § 8371. After three trials and multiple appeals, the trial court made extensive factual findings and legal conclusions to support a judgment in bad faith against Nationwide. The Superior Court reversed, finding no record support for the trial court’s judgment. The Bergs appealed to this Court. Being divided in a fashion which prevents a majority disposition, this Court is dismissing the Bergs’ appeal. Because we would find ample evidentiary support for the trial court’s judgment, we would reverse the order of the Superior Court and remand to the Superior Court for consideration of Nationwide’s outstanding appellate issues.

 

To prove insurance bad faith, the Bergs were required to demonstrate that Nationwide lacked a reasonable basis to deny benefits under the insurance policy, and that Nationwide knew of or recklessly disregarded its lack of a reasonable basis. See Rancosky v. Washington National Insurance Company, 642 Pa. 153, 170 A.3d at 377. To this end, the Bergs were not required to prove that Nationwide was motivated by self-interest or ill will, although such evidence may be probative of the second prong. Id. And, as the Superior Court held in Berg I, and which Nationwide does not dispute, the Bergs may attempt to prove bad faith by demonstrating that the insurer violated related statutes and regulations. Berg vNationwide MutInsCo., 44 A.3d 1174 (Pa. Super. 2012) (“Berg I“).

We would agree with the trial court that the factual circumstances established above support the trial court’s judgment that Nationwide engaged in bad faith by recklessly disregarding several legal duties.

As the trial court found, Nationwide’s motive in vetoing the total loss appraisal was to save money, as repairing the Jeep would cost half as much as totaling the Jeep. Nationwide stood to benefit from the decision to repair the Jeep in part because of the cost savings it would realize from having its BRRP facility perform the repairs. In contrast, Nationwide would have to pay market value on a total loss. This conflict created a financial incentive to repair structurally impaired vehicles despite the safety concerns of the assigned appraiser.

The process established by Nationwide and implemented in this case was that the purportedly independent appraiser working at a facility participating in Nationwide’s BRRP would make an initial assessment of the vehicle and, if that assessment was that the subject vehicle was a total loss, then Nationwide would dispatch a claims representative to second guess that appraiser and ultimately make the final determination about whether to pay for a total loss or repair the vehicle.

This process was contrary to the Appraiser Act, which requires appraisers to be independent. Joffred believed himself to be working for Nationwide, not the Bergs. Nationwide apparently agreed, and unlawfully interfered with the appraiser’s independent initial opinion that the Jeep was a total structural loss due to its twisted frame. The appraiser that Nationwide contracted with and assigned to appraise the damage to the Bergs’ Jeep was not independent.

The process established through Nationwide’s BRRP and used in this case is also contrary to the regulation, which requires the independence of appraisers in order to protect consumers, 31 Pa. Code § 62.3(f)(1), bars the removal of a vehicle without the owners’ consent, id. § 62.3(f)(2), and requires the owner to be apprised of a total loss appraisal, id. § 62.3(e)(7). Nationwide and Lindgren not only failed to provide the Bergs with the initial total loss appraisal, they also directed the Jeep to be removed to K.C. Auto without the Bergs’ consent to attempt structural repairs.

Appraisers are not beholden to insurance companies. They are independently licensed and disciplined. They must be independent and provide independent appraisals. It is their duty to ensure that the vehicles are in a safe and serviceable condition. Nationwide had no reasonable basis to circumvent the independence of its assigned appraiser, and it recklessly disregarded its obligation to maintain the appraiser’s independence. Rather than deferring to the appraiser’s concern for the safety of the Bergs and the public, Nationwide instead focused upon its own self-interest and recklessly disregarded its obligation to pay for a structural total loss. As the trial court found, Witmer’s concern was purely financial, placing Nationwide’s economic concerns over the safety needs of the insured and the public. An insurer will be held to have acted in bad faith if it fails to “accord the interest of its insured the same faithful consideration it gives its own interest.” Cowden vAetna Cas& SurCo., 134 A.2d 223, 228 (Pa. 1957). The trial court was entitled to rely upon evidence that Nationwide vetoed the total loss appraisal, and chose instead to focus on its own financial concerns at the expense of the safety of the insured and the public, in order to establish bad faith.

 

We would vacate the Superior Court order granting JNOV to Nationwide, affirm the trial court’s bad faith judgment, and remand to the Superior Court for consideration of Nationwide’s outstanding challenges.

INSURANCE-DEFAMATION-INTERFERENCE WITH CONTRACTUAL RELATIONS

Burns v. Cooper, 2020 Pa. Super. LEXIS 675 (August 11, 2020) Stevens, P.J.E.  Appellant Blakeley Cooper appealed from a judgment in favor of Jamiylah Burns in a case for defamation and tortious interference with contract.  The Superior Court affirmed the verdict.  Appellant Cooper filed a divorce complaint against Burns. While the divorce matter was pending, someone smashed the car window and stole Burns’ valuables.  An investigation began.  The claim for the lost possessions was handled by Erie.  Burns claimed that Cooper made false statements to Erie indicating that Cooper filed a fraudulent insurance claim.  The jury answered “yes” as to the question of whether Burns was liable to Cooper for defamation, and answered “yes” as to the tortious interference with contract claim.  This appeal followed.  The court sustained the verdict.  The jury could reasonably find that the defamatory meaning of appellant’s statements were understood by Erie representatives.  The defamation verdict was supported.  The jury could reasonably find that Cooper suffered actual damage as the result of a defamatory statement even though Erie eventually paid out the insurance claim.  The evidence supported the jury’s verdict that Cooper sustained actual damage from the defamatory statement as is necessary for tortious interference with contract claim.  There were attorney’s fees involved and other expenses incurred by Cooper to protect herself because of the allegations.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UIM COVERAGE-WAIVER-NEW STACKING FORM

Franks v. State Farm Mutual Automobile Insurance Company, 2020 Pa. Super. LEXIS 641 (July 31, 2020) McCaffery, J. Robert and Kelly A. Franks (Appellants) appeal from the declaratory judgment entered in the Bucks County Court of Common Pleas, granting relief in favor of State Farm Mutual Automobile Insurance Company (State Farm). Appellants contend the trial court erred when it determined State Farm was not required to obtain a new stacking waiver of underinsured motorist (UIM) coverage when Appellants removed a vehicle from their existing policy. Because we conclude the removal of a vehicle from a multi-vehicle policy changes the stacked amount of UIM coverage, we agree a new stacking waiver was required under Section 1738(c) of the Motor Vehicle Financial Responsibility Law (MVFRL). Thus, we reverse the declaratory judgment in favor of State Farm and remand for further proceedings.  Thus, we hold Section 1738(c) requires a new stacking waiver whenever the stacked amount of UIM coverage changes — regardless of whether the change is an increase or decrease in the amount of stacked coverage. This interpretation complies with our stated policy of construing the statute “liberally in favor of the insured” so as to “afford[ ] the injured claimant the greatest possible coverage.” See Jones, 40 A.3d at 127. Accordingly, in the present case, Appellants are entitled to stacked UIM coverage in the amount of $200,000. Consequently, we reverse the declaratory judgment entered in favor of State Farm, and remand for the entry of judgment in favor of Appellants. Judgment reversed. Case remanded for further proceedings. Jurisdiction relinquished.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UMBRELLA COVERAGE-UIM BENEFITS

Jones v. Amica Mutual Insurance Co., 2020 U.S. Dist. LEXIS 128145 (E.D. Pa. July 21, 2020) Brody, J.  Plaintiff argued that under the Pennsylvania Motor Vehicle Financial Responsibility Law, Amica was required to offer Jones the opportunity to include UIM benefits in an umbrella policy.  The only change under § 1731 of the MVFRL is that UIM coverage is now optional instead of mandatory in motor vehicle insurance policies.  This amendment does not impact the conclusion reached in other cases that the MVFRL does not apply to excess or umbrella policies.  Since the 1990 amendment, the courts have continued to routinely hold that the MVFRL does not apply to excess or umbrella policies.  Because the MVFRL does not apply to Jones’ umbrella policy that explicitly excluded UIM coverage, Jones cannot succeed under a claim for UIM benefits under the umbrella policy.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UNDERINSURANCE MOTORIST COVERAGE-EXHAUSTION REQUIREMENT

Cambridge v. Allstate, 2020 U.S. Dist. LEXIS 126094 (E.D. Pa. July 17, 2020) Baylson, J.  Pennsylvania law clearly permits an underlying third-party negligence action and a separate underinsurance motorist claim to exist in separate courts.  Defendant maintains that plaintiff’s underinsurance motorist claim is unripe for adjudication because plaintiff currently has a third-party negligence action pending in state court.  Defendant references an exhaustion clause in plaintiff’s insurance policy.  However, the Pennsylvania Superior Court has repeatedly held that plaintiffs may pursue underinsurance motorist claims against the insurance carriers while third-party tort suits are pending in spite of the existence of contractual exhaustion provisions.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UNDERINSURANCE-HOUSEHOLD EXCLUSION

Stockdale v. Allstate Fire and Casualty Insurance, 2020 U.S. Dist. LEXIS 33406 (E.D. Pa. February 27, 2020) Beetlestone, J.  This case addressed the scope of the Pennsylvania Supreme Court’s decision in Gallagher v. GEICO Indemnity Co., 201 A.3d 131 (Pa. 2019). Specifically, it addressed the extent to which Gallagher found the “household exclusion” inconsistent with the Pennsylvania Motor Vehicle Financial Responsibility Law’s (“MVFRL”), 75 Pa. C.S.A. §§ 1701 et seq., requirement that insureds knowingly waive stacked coverage. Defendant argues that Gallagher should be read narrowly; should not be understood as invalidating the exclusion entirely; and does not apply in this case. Plaintiff argues that Gallagher should be read broadly and does apply in this case. Because the Pennsylvania Supreme Court invalidated the household vehicle exclusion in all personal auto insurance policies in which such an exclusion operates as a de facto waiver of stacked coverage, Defendant’s Motion for Summary Judgment will be denied and Plaintiff’s Partial Motion for Summary Judgment will be granted. Plaintiff, Kayla Stockdale, is a Pennsylvania resident who, at all times relevant here, resided with her parents, Mark and Jacqueline Sanders. Both Stockdale and her parents held car insurance policies with Defendant, Allstate Fire and Casualty Insurance Company. 

Stockdale’s policy (the “Stockdale Policy”) provided $25,000 in uninsured and underinsured motorist coverage for her one vehicle, while her parents’ policy (the “Sanders Policy”) provided $100,000 in uninsured and underinsured motorist coverage for each of their three vehicles. The Sanders also paid to “stack” their underinsured motorist coverage, meaning the Sanders elected to combine the insurance coverage of individual vehicles within their policy (“intra-policy stacking”) and across policies (“inter-policy stacking”) to increase the amount of total coverage available; Stockdale did not.

On June 10, 2017, while riding as a passenger in her vehicle, Stockdale was injured in a collision with another driver, Ronald Pagliei. Her injuries as a result of the accident were permanent and severe, and she sought recovery for those injuries. Stockdale first made a claim against Pagliei. With the approval of Allstate, she settled that claim for $100,000, the limit of liability coverage under Pagliei’s policy. Stockdale also made a claim for underinsured motorist coverage under the Stockdale Policy. Allstate approved the claim and provided her with $25,000, the limit of underinsured motorist coverage under the Stockdale Policy. 

The combined recovery, however, was insufficient to meet Stockdale’s medical needs. Accordingly, on February 7, 2018, Stockdale made a claim under the Sanders Policy for underinsured motorist coverage, on the basis that the Sanders Policy provided that Allstate “will pay damages to an insured person for bodily injury which an insured person is legally entitled to recover,” and defined “insured person” to include “any resident relative” of the policyholders, Mark and Jacqueline Sanders. Because she lived with her parents at the time of the accident, Plaintiff claimed she was eligible to stack the underinsured coverage provided in the Sanders Policy with the underinsured coverage provided in the Stockdale Policy. 

On February 14, 2018, Allstate denied the claim. It premised the denial on a provision of the Sanders Policy called the “household exclusion”.

Because she was not riding in one of the three vehicles covered by the Sanders Policy, Allstate claimed that the household exclusion rendered Plaintiff ineligible to stack coverage across the Sanders and Stockdale Policies. Plaintiff subsequently filed her Complaint, bringing claims for individual and class relief and seeking $300,000 in underinsured benefits under the Sanders policy.

Here, it is undisputed that Stockdale is making a claim under the Sanders Policy and that she was an insured under that policy. Because it is also undisputed that the Sanders did not waive stacked coverage, and because a household exclusion “cannot operate as a pretext to avoid stacking” or a “de facto waiver” of stacked coverage, the household exclusion in the Sanders Policy is “unenforceable as a matter of law.” See Gallagher, 201 A.3d at 138. 

Because Gallagher is controlling in this case, Allstate’s Motion for Summary Judgment shall be denied, and Stockdale’s Motion for Partial Summary Judgment shall be granted. Allstate shall be required to pay the $300,000 in stacked coverage available to Stockdale under the Sanders Policy.

INSURANCE-COMMERCIAL INSURANCE-SNOW AND ICE REMOVAL

Selective Way Insurance v. MAK Services, 2020 Pa. Super. LEXIS 342 (April 24, 2020) Bowes, J.  This case involved an exclusion for snow and ice.  Somebody fell on the insured’s property and a lawsuit followed.  There was a Reservation of Rights letter.  Pennsylvania law does not require an insured company to list every potential defense to coverage in its Reservation of Rights letter.  However, a small body of recent case law discussing this precise issue suggests that some level of specificity is necessary.  The lack of specificity in the letter speaks of deficient investigation.  Snow and ice removal exclusion was evident on the face of the policy.  The insurance company knew of the exclusion from the onset.  In spite of this, the insurance company waited 18 months to raise the exclusion and provided no further intervening notice to the insured that it might have to mount a defense to the civil action on its own.  Under these facts, Selective Way failed to conduct and adequate investigation and summary judgment in their favor was reversed by the Superior Court.

INSURANCE-FINACIAL RESPONSIBLITY LAW-UNDERINSURANCE-EXLUSION-VEHICLE STACKING

Dunleavy v. Mid-Century Ins. Co., 2020 U.S. Dist. LEXIS 88024 (W.D. Pa. May 19, 2020) Ranjan, J.  This was a motorcycle accident.  The insurance company denied coverage under the “household vehicle exclusion”.  Claimant cited Gallagher v. GEICO Indemnity, 201 A.3d 131 (2019).  Household vehicle exclusions cannot be used to work as a de facto waiver of stacked insurance motorist coverage.  The insurance company argues that Gallagher is irrelevant.  In this case, the insured waived underinsurance for his motorcycle, which was covered by a separate policy issued by a separate insurer.  The insurance company argument, therefore, was that plaintiff is not trying to stack the insurance policy on anything.  Rather, plaintiffs are attempting to use the insurance to establish underinsured motorist coverage in the first instance.  The court dismissed plaintiff’s case and all allegations. 

INSURANCE-BAD FAITH-UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW

Wenk v. State Farm Fire & Casualty Company, 2020 Pa. Super. LEXIS 86 (February 7, 2020) Shogan, J.  This case dealt with many issues but upheld a verdict that the UTPCPL does not apply to the alleged bad faith handling of an insurance claim.  The UTPCPL applies to consumer transactions, which are statutorily defined.  The handling of an insurance claim does not meet the statutory definition.  The Superior Court affirmed the trial court’s discretionary finding that the insured failed to prove reckless or intentional misconduct by the insurance company that would warrant additional statutory relief.  There was no finding for bad faith either.  

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UM/UIM COVERAGE-STACKING-HOUSEHOLD EXCLUSION

Kline v. Travelers Personal Security Insurance Company, 2019 Pa. Super. LEXIS 1157 (November 18, 2019) Gantman, P.J.E.  Appellant Kline obtained insurance with Travelers in August 2002.  He selected uninsured motorist benefits and underinsurance in the amount of $50,000 each person/$100,000 each accident.  He rejected stacked UIM coverage by signing a rejection of stacking waiver form.  The policy covered one vehicle at its inception, a1999 Pontiac Grand Prix.  The 1999 Pontiac Grand Prix was later replaced by a 2002 Pontiac Firebird.  On June 6, 2007, Kline added a 2001 Pontiac Montana.  Now he had two vehicles.  Travelers did not present Kline with a new stacking rejection form when the 2001 Pontiac Montana was added.  The Pontiac Montana was later replaced by a 2008 Chevrolet Uplander.  Kline, in 2011, added a third vehicle to the policy.  Travelers again did not present a new stacking rejection form.  In 2012, Kline was involved in a motor vehicle accident while operating one of his cars.  He asserted a UIM claim under the policy, and Travelers tendered the non-stacked UIM coverage limits of $50,000.  Kline resided with his mother, Miriam Kline, who insured a Chevrolet Cruz with Travelers under a different policy.  Miriam Kline had stacked UIM coverage on her policy in the amount of $100,000 each person, $300,000 each accident.  Miriam Kline’s policy contained a “household vehicle exclusion”, which would have excluded her son from coverage.  The court ruled that each time Mr. Kline entered a car, he was entitled to obtain a new rejection form.  

This Court has held an insurer must offer an insured the opportunity to execute a new waiver of stacked UM/UIM coverage when the insured adds another automobile to an existing policy. Pergolese v. Standard Fire Insurance Co., 162 A.3d 481, 490 (Pa.Super. 2017), appeal denied, 643 Pa. 113, 172 A.2d 590 (2017). The addition of another vehicle to an existing policy constitutes a purchase under Section 1738(c). Id. (explaining: addition of vehicle, which is not replacement vehicle, to insurance policy constitutes “purchase” for Section 1738 purposes and requires execution of new UM/UIM stacking waiver). Accord Bumbarger v. Peerless Indem. Ins. Co., 93 A.3d 872, 879 (Pa.Super. 2014) (en banc) (stating: addition of vehicle to existing insurance policy compels new execution of valid UM/UIM stacking waiver; even if after-acquired automobile clause applied, new stacking waiver would still be required for addition of vehicle to policy, where after-acquired automobile clause in policy makes clear distinction between “the burden placed on an insured to ‘add-on’ a vehicle versus ‘replace’ a vehicle under an existing insurance policy. While the former requires notice to the insurer, the latter does not as the policy extends coverage automatically for replacement vehicles”). An insurer’s failure to provide an insured with a new UM/UIM stacking waiver form when required statutorily entitles the insured to the default of stacked UM/UIM benefits under the policy. Id. at 879; Pergolese, supra at 491.

In addition, due to the decision in Gallagher v. GEICO, 201 A.3d 131 (2019), the household’s exclusion is what is against public policy.  Passarello v. Grumbine, 87 A.3d 285 (2014) addresses the retroactive effect of the opinion and dictates that Gallagher should apply. 

Based upon the foregoing, we vacate the December 18, 2018 order in its entirety and remand for the trial court to enter an amended order granting summary judgment in favor of Appellant/Cross-Appellee Kline on his right to claim stacked UIM coverage under his Policy and under Ms. Kline’s separate automobile insurance policy but without any award of money damages, which are still to be determined.

INSURANCE-FIRST PARTY BENEFITS-INDEPENDENT MEDICAL EXAM

Sayles v. Allstate Insurance Company, 2019 Pa. LEXIS 6483 (November 20, 2019) Todd, J. In these consolidated matters, we answer a certified question from the United States Court of Appeals for the Third Circuit: Does an automobile insurance policy provision, which requires an insured seeking first-party medical benefits under the policy to submit to an independent medical exam whenever the insurer requires and with a [J-49AB-2019] – 2 doctor selected by the insurer, conflict with 75 Pa.C.S. § 1796(a) of the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”), such that the requirement is void as against public policy? After review, we conclude that the provision conflicts with Section 1796(a), and is void as against public policy.

In sum, then, these IME policy provisions manifestly conflict with, and are repugnant to, the statutory protections for individuals insured under automobile insurance policies regarding the conduct of IMEs as established by the General Assembly in Section 1796(a); consequently, they are void as against the public policy of this Commonwealth. We therefore answer the certified question from the Third Circuit in the affirmative. The matter is returned to the United States Court of Appeals for the Third Circuit. Chief Justice Saylor and Justices Baer, Donohue, Dougherty and Mundy join the opinion.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UIM-EXCLUSION-“REGULAR USE”

Barnhart v. Travelers Home & Marine Insurance Company, 2019 U.S. Dist. LEXIS 186232 (W.D. Pa. October 28, 2019) Horan, J.  Barnhart injured while a passenger on a motorcycle operated by her husband.  It was insured through Progressive.  She (the passenger) recovered liability limits against the tortfeasor policy.  She then sought UIM benefits under Travelers automobile policy.  She and her husband had two vehicles insured by Travelers.  Travelers denied Barnhart’s claim for UIM benefits based upon the “regular use exclusion” contained within Barnhart’s policy.  The exception denies coverage for UIM benefits when a person is “occupying” or struck by any motor vehicle that they own when that is furnished or available for regular use which is not named for coverage under the policy.  The court granted Travelers’ motion to dismiss and ruled inapplicable Gallagher v. GEICO, 201 A.3d 131 (Pa. 2019), holding that “household exclusion” used to preclude stacking of underinsurance is unenforceable.  

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UIM COVERAGE-RELEASES

Lane v. USAA General Indemnity Company, 2019 U.S. Dist. LEXIS 181197 (E.D. Pa. October 21, 2019) Surrick, J.  A release with tortfeasor does not let the underinsured carrier off the hook.  A release does not preclude plaintiff from pursuing an action for UIM benefits because the executed general release did not contain language unequivocally discharging defendant from its contractual obligation to provide UIM benefits to plaintiff.  General release cases such as Buttermore v. Aliquippa Hospital, 561 A.2d 733 (Pa. 1989) are distinguished.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-MEDICAL EXPENSES-COST CONTAINMENT PROVISION

Farese v. Robinson, 2019 Pa. Super. LEXIS 1118 (November 8, 2019) Colins, J.  Superior Court considered whether a jury’s award for future medical expenses should be molded pursuant to the cost containment provision of the MVFRL.  That law, which is Section 1797(a), provides that medical bills should be paid in excess of 110% of what Medicare would pay for comparable services.  The court, in looking at the cases, discovered that every court that has looked at it has decided that such is not required.  

INSURANCE-COMMERCIAL POLICY-PRODUCTS DEFECT

Sapa Extrusions, Inc. v. Liberty Mutual Insurance Company, 2019 U.S. App. LEXIS 27668 (3d Cir. September 13, 2019) Porter, C.J. Two policies—the Liberty Mutual Policies—contain the Injurious Exposure Definition of “occurrence.” As noted above, this definition is identical to the Expected/Intended Definition, except that it uses the term “injurious exposure” instead of “accident.” The District Court did not analyze these policies separately, despite their unique wording. As a result, as with the seven policies containing the Expected/Intended Definition, and for many of the same reasons, we will vacate the District Court’s decision as it relates to these two policies and remand for further individualized consideration consistent with this opinion. 

To sum up, the rule we reemphasize here is simple: in Pennsylvania, insurance policies must be interpreted and applied in accordance with their plain language and relevant Pennsylvania law. We believe that this rule best allows the parties to an insurance policy to structure their contractual relationship as they see fit. 

As explained above, for the nineteen policies that contain the Accident Definition of “occurrence,” under Kvaerner, CPB, and Specialty Surfaces, Marvin’s allegations—which, at their core, are solely for faulty workmanship—do not trigger coverage. We will thus affirm the District Court’s decision as it relates to these policies. 

For the seven policies that contain the Expected/Intended Definition of “occurrence,” we hold that the Insured’s Intent Clause triggers the subjective-intent standard from Elitzky. We will vacate the District Court’s decision as it relates to these policies and remand for further consideration consistent with this opinion.

And for the two policies that contain the Injurious Exposure Definition of “occurrence,” since they also include the Insured’s Intent Clause, we will vacate the District Court’s decision and remand for further consideration consistent with this opinion. 

To be clear, we take no position on whether Sapa may ultimately recover under any of the policies we are remanding to the District Court for more consideration. Given the extensive record and the amount in controversy, the parties should be afforded the opportunity to develop their coverage 29 arguments, including various theories of triggering conditions, under those policies before the District Court in the first instance.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UNLISTED RESIDENT DRIVER EXCLUSION-PUBLIC POLICY 

Safe Auto v. Rene Oriental-Guillermo, Rachel Dixon, Priscila Jimenez, Luis Jimenez, Alli Licona Avila and Iris Velazquez, Appeal of:  Priscilla Jimenez and Luis Jimenez, No. 26 MAP 2018 (August 20, 2019).  JUSTICE TODD

On April 29, 2013, Rachel Dixon was driving a car owned by her boyfriend, Rene Oriental-Guillermo (“Policyholder”), when she was involved in an accident with a vehicle in which Priscilla Jimenez was a passenger, and which was owned by Iris Velazquez, and operated by Alli Licona-Avila.  At the time of the accident, Dixon resided with Policyholder, who had purchased a personal automobile insurance policy (“Policy”) for his vehicle through Safe Auto Insurance Company (“Safe Auto”).  The Policy contains a URDE, which excludes from coverage any individuals who live with, but are not related to, the policyholder, and whom the policyholder does not specifically list as an additional driver on the insurance policy.

The Policy contains clear and unambiguous URDE, which excludes coverage for injury or property damage that occurred while Policyholder’s vehicle was operated by a resident of his household or by a regular use of his covered vehicle, unless that person is listed as an additional driver on the Declarations Page.  Although Policyholder did not dispute he was aware of this exclusion, he permitted his vehicle to be operated by his live-in girlfriend, who, under the express terms of the URDE, was not covered by the Policy.  Policyholder had the option of adding his girlfriend to the Policy, but chose not to do so.  Undoubtedly, this choice resulted in reduced insurance premiums, and, as we previously have stated, an insured is not entitled to receive gratis coverage.  Moreover, in the absence of provisions in the MVFRL to the contrary, insurers are not compelled to underwrite unknown and uncompensated risks.  Thus, we decline to hold that the URDE in this case is contrary to public policy.

For all the foregoing reasons, we affirm the order of the Superior Court.

FALSE CLAIMS ACT-STARK ACT-MEDICARE PAYMENTS

FALSE CLAIMS ACT—STARK ACT—MEDICARE PAYMENTS – U.S. v. UPMC, et al., 3rd Cir. No. 18-1693 (September 17, 2019). 

BIBAS, Circuit Judge. Healthcare spending is a huge chunk of the federal budget. Medicare and Medicaid cost roughly a trillion dollars per year. And with trillions of dollars comes the temptation for fraud. Fraud is a particular danger because doctors and hospitals can make lots of money for one another. When doctors refer patients to hospitals for services, the hospitals make money. There is nothing inherently wrong with that. But when hospitals pay their doctors based on the number or value of their referrals, the doctors have incentives to refer more. The potential for abuse is obvious and requires scrutiny. The Stark Act and the False Claims Act work together to ensure this scrutiny and safeguard taxpayer funds against abuse. The Stark Act forbids hospitals to bill Medicare for certain services when the hospital has a financial relationship with the doctor who asked for those services, unless an exception applies. And the False Claims Act gives the government and relators a cause of action with which to sue those who violate the Stark Act. 6 Here, the relators allege that the defendants have for years been billing Medicare for services referred by their neurosurgeons in violation of the Stark Act. The District Court found that the relators had failed to state a plausible claim and dismissed their suit. This appeal revolves around two questions: First, do the relators offer enough facts to plausibly allege that the surgeons’ pay varies with, or takes into account, their referrals? Second, who bears the burden of pleading Stark Act exceptions under the False Claims Act? The answer to the first question is yes. The relators’ complaint alleges enough facts to make out their claim. The surgeons’ contracts make it very likely that their pay varies with their referrals. And the relators also make a plausible case that the surgeons’ pay is so high that it must take referrals into account. All these facts are smoke; and where there is smoke, there might be fire. The answer to the second question is the defendants. The Stark Act’s exceptions work like affirmative defenses in litigation. The burden of pleading these affirmative defenses lies with the defendant. This is true even under the False Claims Act. And even if that burden lay with the relators, their pleadings meet that burden here. We hold that the complaint states plausible violations of both the Stark Act and the False Claims Act. So we will reverse.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UNDERINSURANCE-CHANGE IN LIMITS-FORMS

This is a certified question of law from the United States Court of Appeals for the Third Circuit.  The court inquires whether an increase to the limits of underinsured motorist coverage for multiple vehicles that are insured under an existing policy constitutes a “purchase” for purposes of Subsection 1738(c) of the Pennsylvania Motor Vehicle Financial Responsibility Law.  Based upon the plain language of Subsection 1738(c), the Supreme Court of Pennsylvania concludes that it does.  Therefore, an increase of UIM coverage under such circumstances triggers an insurance company’s statutory obligation to offer an insured the opportunity to waive stacking of the new, aggregate amount of UIM coverage.  Barnard v. Travelers Home and Marine Insurance Company, 2019 Pa. LEXIS 5449 (Pa. S.Ct. September 26, 2019).

QUI TAM ACTION-INSURANCE

Nationwide Mut. Ins. Co vs. Arnold, 2019 Pa. Super. LEXIS 692.  This case involves defense of a case based upon the False Claims Act.  The exception invoked by Nationwide was the Business Pursuits exception.  Summary judgment should have been granted for Nationwide, claims the insurance company because of the “Business Pursuits” exclusion in the umbrella policy.  The court considered this a close case.   Nationwide carries the burden of proving the applicability of the exclusion.   The complaint does not contest specific actions taken by Arnold while he was engaged in his work at PennDot.  Arnold’s position had nothing to do with interpreting contracts or billing.   CMC is not seeking to impose liability on Arnold for something he did at, or in the context of, his employment.   All the context CMC complains of were actions taken by Arnold outside of his job.   According to CMC, Arnold pursued his qui tam action because he personally disagreed with how PennDot officials interpreted the contracts and wanted to benefit himself financially.  We conclude that Arnold’s litigation of the supposedly basis qui tam action against CMC did not arise out of his business pursuits.  Nationwide did not prove that the business pursuits exclusion applied here.   At bottom, CMC’s allegations challenge Arnold’s personal conduct, not actions he took or events that transpired in the context of his employment.  We decline to construe the “business pursuits” exclusion so broadly that coverage is precluded for allegations with any nexus whatsoever to an insured’s work.  Accordingly, we determine that the “business pursuits” exclusion does not apply, and Nationwide has a duty to defend Arnold in the CMC action.  We reverse that aspect of the trial court’s order to the extent it imposes an absolute duty on Nationwide to indemnify Arnold, and we clarify that Nationwide has a duty to indemnity only if Arnold is found to be liable for a covered claim under the Umbrella Policy.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-HOUSEHOLD EXCLUSION-RETROACTIVITY

Stockdale vs. Allstate Fire & Cas. Ins. Co., 2019 U.S. Dist. LEXIS 101133, *2.  This Case presents an unresolved question of Pennsylvania law:  What effect should be given to Gallagher vs. GEICO Indemnity Co., 201 A.3d 131 (Pa. 2019).  A Pennsylvania Supreme Court decision that held a particular insurance exclusion – called the “household exclusion” – violated Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa. C.S.A. 1701 et. seq. (“MVFRL”)?  Plaintiff argues that, as is generally the case, the holding should e applied to cases brought after Gallagher was decided, but concerning events that predate the decision.  Defendant, however, argues that an exception to that general rule is in order here and that Gallagher should be applied only to cases arising out of events that postdate the decision.  As explained below, no exception warranted here and defendant’s motion to dismiss the Complaint will be denied accordingly.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-EXCLUSIONS-HOUSEHOLD EXCLUSION

Gallagher vs. Geico Indem. Co., 201 A.3d 131, *131; 2019 Pa. LEXIS 345, **1 Justice Bear.  This appeal requires the Court to determine whether a “household vehicle exclusion” contained in a motor vehicle insurance policy violates Section 1738 of the Motor Vehicle Financial Responsibility Law (“MVFRL”).  75 Pa. C.S.1738, because the exclusion impermissibly acts as a de facto waiver of stacked uninsured and underinsured motorist (“UM” and “UIM,” respectively) coverages.   We hold that the household vehicle exclusion violates the MVRFL.  Accordingly, we vacate the Superior Court’s judgment, reverse the trial court’s order granting summary judgment in favor of Appellee GEICO Indemnity Company (“GEICO”), and remand to the trial court for further proceedings.   On the morning of August 22, 2012, Appellant Brian Gallagher (“Gallagher”) was operating his motorcycle when William Stouffer (“Stouffer”) failed to stop his pickup truck at a stop sign.  Stouffer’s truck collided with Gallagher’s motorcycle, causing Gallagher to suffer severe injuries.   At the time of the accident, Gallagher had two insurance policies; notably, he purchased both of the policies from GEICO.  One policy, which included $50,000 of UIM coverage insured only Gallagher’s motorcycle (“Motorcycle Policy”).  The second policy insured Gallagher’s two automobiles and provided for $100,000 of UIM coverage for each vehicle (“Automobile Policy”).  Gallagher opted and paid for stacked UM and UIM coverage when purchasing both policies.   Stouffer was insured by Progressive Insurance Company (“Progressive”), and Gallagher eventually settled his claim against Stouffer and Progressive.   However Stouffer’s insurance coverage was insufficient to compensate Gallagher in full.  Consequently, Gallagher filed claims with GEICO seeking staked UIM benefits under both of his GEICO policies.  While GEICO paid Gallagher the $50,000 policy limits of UIM coverage available under the Motorcycle Policy, it denied his claim for stacked UIM benefits  under the Automobile Policy.  GEICO based its decision on a household vehicle exclusion found in an amendment to the Automobile Policy.   The exclusion states as follows:  “This coverage does not apply to bodily injury while occupying or from being struck by a vehicle owned or leased by you or a relative that is not insured for Underinsured Motorists Coverage under this policy.”   Because Gallagher suffered bodily injury while occupying his motorcycle, which was not insured under the Automobile Policy, GEICO took the position that the household vehicle exclusion precluded Gallagher from receiving stacked UIM coverage pursuant to that policy.  Here, it is undisputed that: (1) Stouffer, the tortfeasor who caused the accident, was underinsured; (2) Gallagher did not sign the statutorily-prescribed UIM stacking waiver form for either of his GEICO policies; and (3) he would have received the UIM coverage that he bought and paid for under both of his GEICO policies pursuant to Subsection 1738(a) of the MVFRL, save for the “household vehicle exclusion” found in an amendment to the Automobile Policy for which no explicit, formal acknowledgment was provided.   This policy provision, buried in an amendment, is inconsistent with the unambiguous requirements of Section 1738 of the MVFRL uner the facts of this case insomuch as it acts as a de facto waiver of stacked UIM coverage provided for in the MVFRL, despite the indisputable reality that Gallagher did not sign the statutorily-prescribed UIM coverage waiver form.   Instead, Gallagher decided to purchase stacked UM/UIM coverage under both of his policies, and he paid GEICO premiums commensurate with that decision.  He simply never chose to waive formally stacking as is plainly required by the MVFRL.   For all these reasons, we hold that the household vehicle exclusion violates the MVRFL; therefore, these exclusions are unenforceable as a matter of law.  Accordingly, we vacate the Superior Court’s judgment, reverse the trial court’s order granting GEICO’s motion for summary judgment, and remand the matter to the trial court for further proceedings consistent with this opinion.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-EXCESS COVERAGE-UMBRELLA POLICY-UNDERINSURANCE

Warrick v. Empire Fire & Marine Ins. Co., 2019 U.S. Dist. LEXIS 49716 (March 25, 2019) Kenney, J.-Plaintiff Richard Warrick brings an action for breach of contract and bad faith against Defendant Empire Fire and Marine Insurance Company for denying his claim of underinsured motorist coverage following an accident in November 2016 with an allegedly underinsured motorist. Plaintiff claims that Defendant is liable to Plaintiff based on Plaintiff’s purchase of Supplemental Liability Protection from Enterprise Leasing Company of Philadelphia, LLC, to whom Empire Fire and Marine Insurance Company issued an excess policy. Even if Empire had not separately excluded underinsured motorist coverage, it would be excluded from the MVFRL’s requirement that it provide underinsured motorist coverage or that it use the written rejection form because it is an excess policy and not subject to the requirements of the MVFRL. 

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UM/UIM-HOUSEHOLD EXCLUSION

Gallagher v. Geico Indem. Co., 2019 S. C. of PA, LEXIS 345 (January 23, 2019) Baer, J- This appeal requires the Court to determine whether a “household vehicle exclusion” contained in a motor vehicle insurance policy violates Section 1738 of the Motor Vehicle Financial Responsibility Law (“MVFRL”), 75 Pa.C.S. § 1738, because the exclusion impermissibly acts as a de facto waiver of stacked uninsured and underinsured motorist (“UM” and “UIM,” respectively) coverages.1 We hold that the household vehicle exclusion violates the MVFRL. Accordingly, we vacate the Superior Court’s judgment, reverse the trial court’s order granting summary judgment in favor of Appellee GEICO Indemnity Company (“GEICO”), and remand to the trial court for further proceedings.

The facts underlying this appeal are undisputed. On the morning of August 22, 2012, Appellant Brian Gallagher (“Gallagher”) was operating his motorcycle when William Stouffer (“Stouffer”) failed to stop his pickup truck at a stop sign. Stouffer’s truck collided with Gallagher’s motorcycle, causing Gallagher to suffer severe injuries. At the time of the accident, Gallagher had two insurance policies; he purchased both of the policies from GEICO. One policy, which included $50,000 of UIM coverage, insured only Gallagher’s motorcycle (“Motorcycle Policy”). The second policy insured Gallagher’s two automobiles and provided for $100,000 of UIM coverage for each vehicle (“Automobile Policy”). Gallagher opted and paid for stacked UM and UIM coverage when purchasing both policies. Stouffer was insured by Progressive Insurance Company (“Progressive”), and Gallagher eventually settled his claim against Stouffer and Progressive. However, Stouffer’s insurance coverage was insufficient to compensate Gallagher in full. Gallagher filed claims with GEICO seeking stacked UIM benefits under both of his GEICO policies. While GEICO paid Gallagher the $50,000 policy limits of UIM coverage available under the Motorcycle Policy, it denied his claim for stacked UIM benefits under the Automobile Policy. GEICO based its decision on a household vehicle exclusion found in an amendment to the Automobile Policy. The exclusion states as follows: “This coverage does not apply to bodily injury while occupying or from being struck by a vehicle owned or leased by you or a relative that is not insured for Underinsured Motorists Coverage under this policy.” Because Gallagher suffered bodily injury while occupying his motorcycle, which was not insured under the Automobile Policy, GEICO took the position that the household vehicle exclusion precluded Gallagher from receiving stacked UIM coverage pursuant to that policy. Gallagher claimed that, because he purchased stacked UIM coverage as part of the Automobile Policy, GEICO is required to provide that coverage. GEICO responded by filing an answer with new matter, wherein it contended that stacked UIM coverage was unavailable to Gallagher due to the Automobile Policy’s household vehicle exclusion. Gallagher pointed out that GEICO placed his motorcycle and automobiles on separate policies and, thus, had full knowledge of all of his vehicles. He further stated that, because he opted and paid for stacked UM/UIM coverage, GEICO charged him a higher premium on both policies. According to Gallagher, by denying him stacked UIM coverage based upon the household vehicle exclusion, GEICO was depriving him of the stacked UIM coverage for which he paid. Gallagher highlighted that GEICO was well aware that he had not waived stacked coverage on either of his policies and that he had paid increased premiums for that coverage; yet, GEICO refused to honor his claim for stacked UIM coverage, rendering that coverage illusory. We hold that the household vehicle exclusion violates the MVFRL; therefore, these exclusions are unenforceable as a matter of law. Accordingly, we vacate the Superior Court’s judgment, reverse the trial court’s order granting GEICO’s motion for summary judgment, and remand the matter to the trial court for further proceedings consistent with this opinion.

INSURANCE-MCARE-HOSPITAL 715 STATUS

Montgomery Hosp. & Med. Ctr. vs. Bureau of Med. Care Availability & Reduction of Error Fund (MCARE Fund), 2019 Pa. Cmwlth LEXIS 28 (January 4, 2019) Simpson, J.-Hospital seeks a declaration that it is entitled to §715 status and that the MCARE Fund must be a hospital’s defense cost to the third-party action. Section 715 of the MCARE Act deems a third-party claim to have been brought less than four years after the negligent act where the defendant medical provider rendered “multiple treatments or consultations” to third-party plaintiff-patient within the four year period. Claims falling into this latter category are not covered §715 status. The hospital claimed that the radiologist whose liability was sought by plaintiff were independent contractors and not employees of the hospital. The hospital position as to who is responsible for the radiologist is irrelevant since the plaintiff has pled ostensible agency, which is expressly governed by the MCARE Act. The court could not conclude as a matter of law that the hospital could not be liable for vicarious liability in connection with the radiologist’s allegedly negligent treatment of third-party plaintiff during the four year period preceding commencement of the third-party action. The hospital has requested summary relief based on the purported absence of vicarious liability is denied. 

ERISA-GROUP INSURANCE-SUPPLEMENTAL LONG-TERM DISABILITY POLICY-SPECIALITY RATED-DIAGNOSTIC RADIOLOGIST AS OPPOSED TO INTERVENTIONAL RADIOLOGIST AT TIME OF DISABILITY

McCann v. Unum Provident, 2018 3d Cir. 2018 LEXIS 29638 (October 5, 2018) Scirica, J.-The Department of Labor has promulgated a safe harbor regulation exempting certain plans from the definition of an “employee welfare benefit plan.” But we conclude Dr. McCann’s then-employer sufficiently endorsed the plan under which his policy was purchased to render the safe harbor inapplicable. ERISA will supply the governing framework. As to the merits, we believe Provident incorrectly defined Dr. McCann’s occupation in administering his disability claim and that the claim must be evaluated in the context of his specialty – interventional radiology. We will remand for the District Court to consider whether Dr. McCann’s medical conditions prevent him from being able to perform his “substantial and material duties” as an interventional radiologist as required by the terms of the policy. 

INSURANCE-COMMERCIAL LIABILITY POLICY-EXCLUSIONS-DESIGNATED ONGOING OPERATIONS-VEHICLE DISMANTLING

Tuscarora Wayne Ins. In the Superior Court Co. v. Hebron, Inc., 2018 Superior Ct. LEXIS 1077 (October 3, 2018), Stabile, J.  Fire occurred when truck driver was attempting to pump gas into a flatbed truck in the loading dock outside of the facility. The fire caused damage to the facility. The Superior Court said it was wrong for the lower court to grant summary judgment in favor of the insurance company against the insured. The court reversed. The cause of the fire was completely unrelated to the process of stripping the vehicle of its parts. The fire had nothing to do with designated ongoing operations which in this case was vehicle dismantling operations. The vehicles dismantling operations had ceased and were no more “ongoing operations.” The lower court was wrong. 

INSURANCE-BAD FAITH-ATTORNEY’S FEES

Bernie Clemens, Nicole Clemens v. New York Central Mutual Fire Insurance Company, and/or NYCM Insurance Group and/or NYCM Holdings, Inc., 3d Cir. 2018 (Greenaway, Jr., J.  After a jury awarded him $100,000 in punitive damages under the Pennsylvania Bad Faith Statute, 42 Pa. Cons. Stat. § 8371, Appellant Bernie Clemens submitted a petition for over $900,000 in attorney’s fees from Appellee New York Central Mutual Fire Insurance Company (“NYCM”). The District Court denied this petition in its entirety, reasoning that it was not adequately supported and that the requested amount was grossly excessive given the nature of the case. Finding no abuse of discretion, we will affirm and, in doing so, take the opportunity to formally endorse a view already adopted by several other circuits – that is, where a fee-shifting statute provides a court discretion to award attorney’s fees, such discretion includes the ability to deny a fee request altogether when, under the circumstances, the amount requested is “outrageously excessive.” Brown v. Stackler, 612 F.2d 1057, 1059 (7th Cir. 1980); see also, e.g., Envtl. Def. Fund, Inc. v. Reilly, 1 F.3d 1254, 1258-60 (D.C. Cir. 1993); Fair Hous. Council of Greater Wash. v. Landow, 999 F.2d 92, 97 (4th Cir. 1993); Lewis v. Kendrick, 944 F.2d 949, 956-58 (1st Cir. 1991). Although it was unusual, we cannot say that this decision was an abuse of discretion. Review of the record and the District Court’s comprehensive opinion makes clear that denial of a fee award was entirely appropriate under the circumstances of this case. Counsel’s success was severely deficient in numerous ways. All the more troubling is the fact that counsel’s (supposedly) hard work did not appear to pay off at trial. As the District Court explained, counsel had “to be repeatedly admonished for not being prepared because he was obviously unfamiliar with the Federal Rules of Evidence, the Federal Rules of Civil Procedure and the rulings of th[e] court.” App. 630 (emphasis omitted). Given counsel’s subpar performance and the vagueness and excessiveness of the time entries, the District Court did not abuse its discretion in disallowing all 562 hours. Although we have never had the opportunity to formally endorse such an approach, other circuits have, holding that district courts have the discretion to deny a fee request in its entirety when the requested amount is “outrageously excessive” under the circumstances. Brown v. Stackler, 612 F.2d 1057, 1058 (7th Cir. 1980); see also, e.g., Scham v. District Courts Trying Criminal Cases, 148 F.3d 554, 556-59 (5th Cir. 1998), abrogated on other grounds as recognized in Bailey v. Mississippi, 407 F.3d 684, 686-87 (5th Cir. 2005); Envtl. Def. Fund, Inc. v. Reilly, 1 F.3d 1254, 1258-60 (D.C. Cir. 1993); Fair Hous. Council of Greater Wash. v. Landow, 999 F.2d 92, 97 (4th Cir. 1993); Lewis v. Kendrick, 944 F.2d 949, 956-58 (1st Cir. 1991). Here, the District Court provided a thorough explanation of how counsel failed to fulfill their duty to the court. This failure coupled with the other deficiencies in the petition and counsel’s substandard performance, justified the District Court’s decision to deny the fee request in its entirety. That decision was not an abuse of discretion. 

Appellant’s counsel in district court were Michael J. Pisanchyn & Michael R. Mey.

INSURANCE-UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW-FRAUD OR DECEPTIVE CONDUCT

Gregg v Armerprise Fin., Inc., 2018 Pa. Super. LEXIS 1009 (September 12, 2018) Kunselman, J.  This is a nonjury verdict finding that insurance company deceitfully profited from business transaction with Gary and Mary Gregg. The court found the insurance company violated that section of the Unfair Trade Practices & Consumer Protection Law, which prohibits anyone who advertises, sells or distributes goods and services from engaging in any fraudulent or deceptive conduct which creates a likelihood of confusion or misunderstanding during a transaction. At issue is the sale of life insurance. The transaction was somewhat complex, but what was of concern was where money was placed that was sent to the carriers. The money was put in a growth account which increased commissions because of a 5.75 surcharge.  Insurance companies argued res judicata and collateral estoppel because a jury found that there was no misrepresentation. It acquitted the insurance companies on the UTPCPL count, argued the insurance companies. The companies believe that the trial court erred when it found them in violation of the UTPCPL after the jury verdict, which they felt was to the contrary. The judge, however, decided distinct issues. The defense verdict on misrepresentation is not res judicata or collateral estoppel against a non-jury UTPCPL catchall claim. The law outlawing deceptive conduct regardless of a vendor’s mental state. The consumer’s burden of proof is strict liability. The state of mind of the seller is relevant. A UTPCPL violation is not amenable to excuses. Vendors place themselves, by choosing where, when and how they enter the market, is in a much stronger position to comply fully with the UTPCPL before soliciting or interacting with consumers. Vendors not only elect whether to enter a market, but, because “the market” is a fictional place, they have full volitional control over their conduct when in it. The legislature has placed the duty of UTPCPL compliance squarely and solely on vendors; they are not to engage in deceitful conduct and have no legally cognizable excuse, if they do. The legislature imposed strict liability on vendors who deceive consumers by creating a likelihood of confusion or misunderstanding in private as well as public causes of actions. Carelessness or intent, required for negligent or fraudulent misrepresentations may be absent when perpetrating “deceptive conduct” under 73 P.S. § 201-2(4)(xxi). As such, we conclude that the insurance companies’ assertions of res judicata and collateral estoppel fail the first step of their respective tests. Common law misrepresentations and UTPCPL catchall violations present distinct legal issues. Damages are based upon statute and therefore common law issues concerning restitution and unjust enrichment do not apply.

INSURANCE-DEFENSE, DUTY TO PROVIDE-FOUR CORNERS RULE-EXCEPTIONS

Lupu v. Loan City, LLC, Nos. 17-1944 & 17-2024 (3d Cir. September 10, 2018) Ambro, C.J.  What is the duty of a real estate title insurer in Pennsylvania to defend the insured party (here the successor to a lender) against claims of the borrower/mortgagor? Its courts, we predict, would not apply the “in for one, in for all” rule (known also as the complete defense rule)1—whereby a single covered claim triggers an obligation for the title insurer to defend the entire action—to a case about that insurer’s duty to defend. To identify a covered claim, we apply Pennsylvania’s rule that potentially covered claims are identified by “comparing the four corners of the insurance contract to the four corners of the complaint.” American & Foreign Ins. Co. v. Jerry’s Sport Center, Inc., 2 A.3d 526, 541 (Pa. 2010). The insured in its briefing used the latter term. As both the District Court and the title insurer refer to the rule by its more colloquial name, we do as well.  Although the Pennsylvania Supreme Court was invited to make an exception to the “four corners” rule, it flatly declined, finding “no reason to expand upon the well-reasoned and long-standing rule that an insurer’s duty to defend is triggered, if at all, by the factual averments contained in the complaint itself.” Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006). We thus honor its decision to maintain a simple, bright-line rule. In sum, per Kvaerner, the seminal case on the issue, we may not look for a covered claim beyond the four corners of Lupu’s complaint and how it matches up with the actual terms of the Title Policy. This dispute centers on the Third and Fourth Amended Complaints, to which we turn. The duty to defend arose when Lupu filed the Fourth Amended Complaint, including there the forgery allegations he had referred to earlier in response to interrogatories. After Lupu filed the Fourth Amended Complaint, Stewart Title agreed to provide a partial defense and retained counsel. What is left to consider is whether it needed to defend Ocwen against the entire Complaint. We predict, for the same reasons, that the Pennsylvania Supreme Court would also create a title-policy exception to the “in for one, in for all” rule. Given the unique title insurance context, by doing so it would “consider the language of the policy and the expectation of the insured so as to give reasonable meaning to its terms.” Rood v. Commw. Land Title Ins. Co., 936 A.2d 488, 491 (Pa. Super. Ct. 2007) (citation omitted). As the issue is undecided by the Pennsylvania Supreme Court, the District Court reasoned that it must apply the general rule that “a title insurance policy is subject to the same rules of construction that govern other insurance policies[.]” Lupu, 244 F. Supp. 3d at 465 (quoting Rood, 936 A.2d at 491, which noted the rule is “general[]”). But the lack of state-law authority creating an exception to the “in for one, in for all” rule does not compel us to define its scope by that general statement. Federal courts, when sitting in diversity, are no ostriches. We do and “often must engage in a substantial amount of conjecture.” Wisniewski v. Johns-Manville Corp., 759 F.2d 271, 273 (3d Cir. 1985). While Pennsylvania courts have not addressed this issue, the reasoning applied in out-of-state cases is sufficient “persuasive data” to convince us of the direction they would go. Meyer v. CUNA Mut. Ins. Co., 648 F.3d 154, 162 (3d. Cir. 2011). Pennsylvania’s Supreme Court tells us that an insurer’s duty to defend turns on the allegations within the four corners of a complaint matched against the terms of the insurance policy. Kvaerner, 908 A.2d at 896. We follow suit here in holding that Stewart Title’s duty to defend Ocwen against Lupu’s claims did not exist until the filing of the Fourth Amended Complaint. But is Stewart Title bound to defend the entire Complaint? Its Title Policy states that it would not also defend non-covered claims in the action. There was at least one covered claim in the litigation underlying this coverage dispute, and Stewart Title must defend it (or such other claims covered by the Title Policy). Beyond that, however, we hold the parties to their bargain. We thus affirm in part, reverse in part, and remand.

INSURANCE FINANCIAL RESPONSIBILITY LAW-FIRST PARTY BENEFITS-MEDICAL BENEFITS-CONTRACT BREACH-BAD FAITH-UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW

Shea v USAA, 2018, U.S. Dist. LEXIS 234750 (July 25, 2018), Surrick, J.  This case involves failure to pay first party medical benefits. Instead the insurance company demanded peer review. Viewing the allegations in the light most favorable to Plaintiff, the pleading raises a reasonable expectation that discovery will produce evidence that an insurance contract existed between Plaintiff and Defendant, Defendant breached the contract, and that breach caused Plaintiff to incur ascertainable losses. The breach of contract claim survives dismissal. We join the growing majority of federal and state courts that have followed the rationale of Schwartz. “Whenever a general provision in a statute shall be in conflict with a special provision in the same or another statute, the two shall be construed, if possible, so that effect may be given to both.” Schwartz, 1996 WL 189839, at *5 (citing 1 Pa. C.S.A. 1933). Where an insurer has not complied with Section 1797’s specific provisions, there is no reason to limit the damages recoverable from the insurer to those damages set out in Section 1797. Id. In those situations, as alleged here, Section 1797 and Section 8371 are not irreconcilable. Id. Both statutes can be given full effect. Section 1797 is the exclusive remedy when it applies; Section 8371 applies in all other cases. Id. It is alleged that Defendant knew Plaintiff’s insurance claim was legitimate, but still submitted the medical bills for her treatment to a favored and financially self-interested PRO. Defendant did so, it is alleged, planning or at least fully expecting to procure evaluations that were biased, false and misleading as to the necessity for Plaintiff’s treatment, in order to support Defendant’s preordained decision to preserve its own coffers by denying Plaintiff insured medical benefits. Taking these alleged facts as true, Defendant has acted not only outside the scope of Section 1797, but also in bad faith by refusing to pay Plaintiff’s insurance claim without a reasonable basis for the denial of insured medical benefits. Accordingly, the Count IV claim for bad faith under Section 8371 survives dismissal. In the context of this case, the pleading contains sufficient factual mater to state a plausible claim for deceptive conduct under the UTPCPL’s catchall provision. Viewing those allegations in the light most favorable to Plaintiff, malfeasance is pled. Defendant it is alleged, deceptively misused the peer review proceed in order to procure sham medical opinions to supports its preordained denial of insured medical benefits. This shows more than a “[m]ere refusal to pay a claim or failure to investigate or take other action.” Nordi, 989 A.3d at 385. For the foregoing reasons, USAA’s Motion pursuant to Rule 12(b)(6) to dismiss Counts I, IV and V of the First Amended Complaint will be denied. 

INSURANCE-DEFENSE-COMMERCIAL-ROOFING COVERAGE

Preferred Contrs. Ins. Co., RRG, LLC v Sherman, 2018 Super Ct. of PA, LEXIS 844 (July 24, 2018), Murray, J.  The insured was aware that roofing work would not be covered. There was an incident here and the insurance company denied coverage for an injured individual. Apparently it was decided under Montana law. There were material issues of fact for a jury to resolve as to whether the insured made misrepresentations or omissions in its insurance application that materially affected the decision of the insurance company to issue a policy. The trial court did not error in determining that delivery of the policy did not actually occur here. Montana is cited that insured not rely on the coverage exclusions in an insurance policy if the insurer fails to deliver the policy to the insured.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-COVERAGE-NON-OWNED CAR-LAWFUL POSSESSION BY YOU OR ANY RESIDENT RELATIVE

State Farm Mutual Automobile Insurance Company v. Erin C. Dooner, 2018 Pa. Super. 146 (June 5, 2018) Bender, P.J.E.  State Farm granted summary judgment.  Mr. and Mrs. Dooner were being driven home by third party appellant.  Husband and wife had a fight, and Ms. Dooner grabbed the steering wheel and jerked it.  This caused the car to swerve into oncoming traffic and collide head-on with a police cruiser.  Lawsuits were filed by the injured people against Dooner relative to the accident.  The court found that there was no coverage and granted summary judgment because this was not the situation of a “non-owned car” being lawfully operated.  Ms. Dooner was not in “lawful possession” of the car at the time of the accident when she grabbed the steering wheel.  She was neither in possession nor was her possession, if there was such, “lawful.”  Ms. Dooner’s action of grabbing the steering wheel did not constitute possession of the vehicle but rather interfered with its operation.  Even if Ms. Dooner was found in possession of the car at the time of the accident, the possession was not lawful.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-SUBROGATION-PENNSYLVANIA STATE POLICE

Pennsylvania State Police v. Workers’ Compensation Appeal Board (Bushta), 2018 Pa. LEXIS 2582 (May 29, 2018) Todd, J.  In this discretionary appeal, we consider whether Appellant, the Pennsylvania State Police (“PSP”), is entitled to subrogation of benefits that a trooper—who was injured in a motor vehicle accident—was eligible to receive under the Workers’ Compensation Act (“WCA”)  against the trooper’s recovery from a third-party tortfeasor pursuant to the Motor Vehicle Financial Responsibility Law (“MVFRL”). For the reasons that follow, we conclude that PSP does not have a right of subrogation. Accordingly, we affirm the order of the Commonwealth Court.

The instant appeal involved the interplay between three Pennsylvania statutes—the WCA, the Heart and Lung Act, and the MVFRL.

On January 21, 2014, Claimant and his spouse entered into a Settlement and Indemnity Agreement and Release of all Claims (“Settlement Agreement”) with the tractor-trailer driver, the driver’s employer, and the other responsible parties (collectively, “third-party tortfeasors”) for $1,070.000.1 The Settlement Agreement provided, inter alia, that Claimant would “reimburse any lien holder, known or unknown, for any liens as a result of the ․ incident.” Claimant further acknowledged that he was “solely responsible for the payment of any medical bills, hospital liens, MedPay liens, worker[s’] compensation liens, attorney’s fees, taxes, withholding and all other fees, costs and expenses they have incurred as a result of the Accident.” Id. at 1 ¶ 6.

On February 4, 2014, PSP filed a petition to review compensation benefits pursuant to Section 771 of the WCA, asserting a right of subrogation against the proceeds of Claimant’s settlement with the third-party tortfeasors under Section 319 of the WCA. On November 19, 2014, Claimant entered into a signed stipulation (“Stipulation”) with PSP and PSP’s third-party administrator, Inservco Insurance Services, Inc. (“Inservco”). The Stipulation indicated, in pertinent part, that, between the date of Claimant’s injury on February 26, 2011 and the date he returned to work on June 3, 2012, Claimant had been paid $56,873.13 under the WCA.

By contrast, this case does involve the [MVFRL], and it prohibits a plaintiff from including as an element of damages payments received in the form of workers’ compensation or other “benefits paid or payable by a program ․ or other arrangement.” 75 Pa.C.S. § 720. This language “benefits paid or payable by a program” has been construed to include the program by which Heart and Lung benefits are paid. Fulmer [v. Pennsylvania State Police, 167 Pa.Cmwlth. 60, 647 A.2d 616, 618–19 (Pa. Cmwlth. 1994) ]. Section 25(b) of Act 44 changed the Section 1720 paradigm only for workers’ compensation benefits, not Heart and Lung benefits. This means Claimant continued to be “precluded” from recovering the amount of benefits paid under the Heart and Lung Act from the responsible tortfeasors. 75 Pa.C.S. § 722. There can be no subrogation out of an award that does not include [workers’ compensation benefits]. Likewise, because the tort recovery cannot, as a matter of law, include a loss of wages covered by Heart and Lung benefits, Claimant did not receive a double recovery of lost wages or medical bills.

Payment of a claimant’s medical care and treatment is required under the Heart and Lung Act, and, regardless of the pricing schedule utilized, such payment constitutes a Heart and Lung benefit.

For all of the foregoing reasons, we conclude that all of the benefits Claimant received were Heart and Lung benefits, not WCA benefits. Thus, pursuant to the MVFRL, PSP does not have a right of subrogation against Claimant’s settlement with the third-party tortfeasors. Accordingly, we affirm the order of the Commonwealth Court.

1.   f this amount, $200,000 was apportioned to the Claimant’s spouse’s loss of consortium claim. Further, the contingent fee agreement between Claimant, his spouse, and their personal injury attorneys, Powell Law, provided that the firm would receive 33 1/3 % of the recovery, and that Claimant would be responsible for the costs incurred in connection with the prosecution of the third-party claim, which totaled $18,723.68.

BAD FAITH-COLLISION REPAIR

Berg v. Nationwide Mutual Insurance Company, 2018 Pa. Super. LEXIS 604 (June 5, 2018) Stabile, J.  Appellant, Nationwide Mutual Insurance Company, Inc., appeals from the April 21, 2015 judgment against it on the bad faith claim of Appellee Daniel Berg, individually and as the executor of the estate of Sharon Berg a/k/a Sheryl Berg. We vacate the judgment and remand for entry of judgment in favor of Appellant.

The court, in the bench trial, found against the insurer and the Superior Court threw out the verdict.

The court will reverse the finding of bad faith where the trial court’s “critical factual findings are either unsupported by the record or do not rise to the level of bad faith.”  Brown v. Progressive Insurance, 860 A.2d 493, 502 (Pa. Super. 2004) emphasis added, appeal denied 872 A.2d 1197 (2005).  Insurers must cover insureds for the fair value of their loss.  Here, the insurance company covered the cost of repairs to the Jeep.  In terms of the initial appraisal, the court found bad faith but the appellate court did not believe that was justified.  The evidence does not support the trial court’s finding that anyone in the company overrode or vetoed the total loss appraisal.  Further investigation had been contemplated.  The claims log was not falsified or altered in any way.  The record also confirms that a potential total loss normally triggers further investigation from the insurer.  The trial court ignored a large body of evidence that rendered its findings unsupported.  The witnesses who addressed the matter testified that the Jeep was repairable.  The record contains no evidence to support a finding that the Jeep was beyond repair.  Plaintiffs bore the burden of proving bad faith by clear and convincing evidence.  There is no evidence that the Jeep was beyond repair.   The record only confirms that there was a failure to repair the Jeep properly.  This does not support a finding by clear and convincing evidence that the Jeep was beyond repair.  Insurer does not have a duty to inspect repairs prior to returning a vehicle to an insured.  At most that would be negligence.  The trial court found that the insurance company engaged in bad faith by not properly processing, adjusting and setting the claim.  The trial court points to the length of time litigating the claim, the cost to defend the action, and the overruling of the initial appraisal declaring the Jeep a total loss.  The record does not support a finding that the insurance company failed to attempt to resolve the dispute in its early stages.  In particular, the carrier asked for permission to have an independent expert inspect the Jeep two weeks after plaintiffs filed suit, after which the insurance company informed plaintiff it would have the Jeep repaired at the shop of plaintiff’s choice or purchase the jeep if it could not be repaired.  The evidence merely is not there to support bad faith.

INSURANCE-BAD FAITH-AUTOMOBILE APPRAISAL

Berg v. Nationwide Mutual Insurance Company, 2018 Pa. Super. LEXIS 317 (April 9, 2018) Stabile, J.  Appellant, Nationwide Mutual Insurance Company, Inc., appealed from the April 21, 2015 judgment against it on the bad faith claim of Appellee Daniel Berg, individually and as the executor of the estate of Sharon Berg a/k/a Sheryl Berg.  The court vacated the judgment and remanded for entry of judgment in favor of Appellant.

On September 4, 1996, Plaintiff, Sheryl Berg, the policyholder of a collision insurance contract with [Appellant], was driving her 1996 Jeep Grand Cherokee, insured by [Appellant], when she was hit by another vehicle; fortunately, neither party was injured in the collision. The only issue in this sixteen-year-old case is if [Appellant] breached its fiduciary obligation to Plaintiffs. The ensuing litigation marathon is a significant factor found by this court in resolving the bad faith claim brought by Plaintiffs against [Appellant]. [Appellant’s] fiduciary obligation to Plaintiff arose by the parties entering into a contract whereby the physical damage coverage for the collision required [Appellant] to, inter alia, 1) pay for the loss or 2) repair or replace the damaged parts.

Plaintiffs’ causes of action against Appellant included breach of contract, negligence, fraud, conspiracy, violations of the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), 73 P.S. § 201-2(4)(xxi), 1968 P. L. 1224, as amended, and insurance bad faith, 42 Pa.C.S.A. § 8371. Plaintiffs amended their complaint eight times, raising and ultimately abandoning a class action. Plaintiffs filed their eighth amended complaint on October 25, 1999. Ultimately, the parties proceeded to a jury trial on fraud, conspiracy, and UTPCPL actions. The jury trial commenced on December 13, 2004. The jury rendered a verdict in favor of Appellant and Lindgren on all causes of action except the catchall provision of the UTPCPL. The jury awarded Plaintiffs $1,925.00 in compensatory damages from Lindgren and $295.00 from Appellant for the UTPCPL violation. The basis for the jury’s finding of a UTPCPL violation is not clear from the record.

We find no support in the record for the trial court’s finding that Appellant prevented Plaintiffs from conducting a “full analysis [of the Jeep] in furtherance of this lawsuit.” Opinion and Verdict, 6/23/14, at 10. Plaintiffs were in possession of the Jeep from December 31, 1996, the date Lindgren returned it, until mid-December, 1998, when the lease expired. Phillips inspected the Jeep for Plaintiffs in November of 1997. Plaintiffs made no further inspections of the Jeep prior to the expiration of the lease or during its storage after Appellant purchased it. Pursuant to a February 11, 1999 order from Judge Stallone, the parties were to share storage expenses and each party had full access to the Jeep.

We vacate the judgment because the record does not support many of the trial court’s critical findings of fact. We are cognizant of the standard governing our review, and we have not reached our decision lightly. We understand that the trial court, as fact finder, was free to choose which evidence to believe and disbelieve. Likewise, we understand that our standard of review requires us to defer to findings supported in the record and draw reasonable inferences in favor of Plaintiffs. Nonetheless, our case law provides that bad faith claims are fact specific (Condio, 899 A.2d at 1143), must be proven by clear and convincing evidence, and that the fact finder must consider “all of the evidence available” (Berg II, 44 A.3d at 1179). After an exhaustive review of the very large record in this case, we believe we have no choice but to vacate the judgment. We have quoted extensively from the record in an effort to provide full context for our decision. We observe that the trial court’s opinions, while very lengthy, cite infrequently to the record.

We disagree with the Dissent’s assertion that we are substituting our own findings for those of the trial court. Rather, our review of the extensive record in this matter convinces us that the trial court’s findings are not supported by the facts of record and our citations to the certified record belie any assertion that we have improperly substituted our findings for the trial court’s. The law permits a finding of bad faith only on clear and convincing evidence. Clear and convincing evidence is evidence that is “so clear, direct, weighty, and convincing as to enable either a judge or jury to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue.” Grossi, 79 A.3d at 1165. The trial court’s highly selective citation to a voluminous record plainly failed to meet that standard. Respectfully, we believe the Dissent, under the guise of strict adherence to the standard of review, makes the same error.

In summary, we have concluded: (1) the record does not support the trial court’s finding that Joffred issued a repair estimate on September 20, 1997 only after Witmer vetoed Joffred’s total loss appraisal; (2) the record contains no evidence that the Jeep was damaged beyond repair; (3) the record contains no evidence that Appellant had actual knowledge of the Jeep’s condition upon its return to Plaintiffs; and (4) Appellant’s conduct subsequent to its knowledge of the Jeep’s condition—including its conduct of this litigation—was not a bad faith effort to cover up prior misdeeds.

The trial court engaged in a limited and highly selective analysis of the facts and drew the most malignant possible inferences from the facts it chose to consider. We do not believe our appellate standard of review, circumscribed as it is, requires or even permits us to affirm the trial court’s decision in this case. This is especially so given Plaintiffs’ burden of proving their case by clear and convincing evidence. We have no occasion to address Appellant’s remaining assertions of error.

Judgment vacated. Case remanded for entry of judgment in favor of Appellant. Jurisdiction relinquished.

INSURANCE-ENVIRONMENTAL-BURDEN OF PROOF

Conrail v. Ace Property & Csualty Insurance Co., 2018 Pa. Super. LEXIS 261 (March 23, 2018) Gantman, P.J.  The court found that summary judgment should be denied and a question of fact existed for a jury as to whether pollution-related liabilities should be covered.  The existence of a principal-agent relationship is ordinarily one for the jury to determine.  The policy defines “occrrence” as “an event, continuous repeated exposure to conditions which cause personal injury, property damage or evacuation expenses.”  The case discusses what “property damage” is in this context.  The lower court opinion is cited frequently.  As a practical matter, the burden shifts to the insurance company to proffer evidence that the polluting discharge was expected or intended.  The question of whether designer-induced burps were expected or intended by Conrail is an issue of fact for trial.  Not all of the spills documented at the site during Conrail’s tenure were burps, so some of the spills may well prove to have been unexpected and unintended.  The lower court’s sound analysis was praised.

INSURANCE-FLOOD INSURANCE-STATUTE OF LIMITATIONS

Migliaro v. Fidelity National Indemnity Insurance Company, 2018 U.S. App. LEXIS 2097 (January 29, 2018) Rendell, C.J.  The issue in this case is whether the rejection of a policyholder’s proof of loss constituted a “written denial of all or part of the claim,” thereby triggering the one-year statute of limitations that is set forth in every Standard Flood Insurance Policy (“SFIP”). After receiving a payment from Fidelity National Indemnity Insurance Company, based on an adjuster’s assessment of the damage to his property caused by Hurricane Sandy, Anthony Migliaro submitted a sworn proof of loss seeking additional compensation. Fidelity sent Migliaro a letter rejecting his proof of loss, and he filed suit. The District Court found that the letter rejecting Migliaro’s proof of loss was a “written denial of all or part of the claim.” Since Migliaro filed his complaint almost two years after he received the letter, the District Court dismissed the suit as time-barred. We affirm the District Court’s order. Although the rejection of a proof of loss is not per se a denial of the claim in whole or in part, it does constitute a denial of the claim if, as here, the policyholder treats it as such by filing suit against the carrier.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UNINSURED MOTORIST CLAIM-STATUTE OF LIMITATIONS

Erie Insurance Exchange v. Bristol, 2017 Pa. LEXIS 3183 (November 22, 2017) Mundy, J.  The Supreme Court of Pennsylvania granted allowance of appeal to determine when the statute of limitations begins to run on an uninsured motorist claim.  The Superior Court held that, for purposes of UM and UIM claims, the statute of limitations begins to run when a claimant injured in an automobile accident first learns that the other driver is uninsured or underinsured.  The Supreme Court disagreed and held that the statute of limitations attending contract principles apply and the running of the statute is commenced upon an alleged breach of a contractual duty, which in this case would be occasioned by the insurer’s denial of coverage or refusal to arbitrate.  We therefore reverse the Superior Court’s order to the contrary.

INSURANCE-AUTISM COVERAGE LAW-EXCLUSIONS

Burke v. Independence Blue Cross, No. 23 EAP 2016 (E.D. Pa. October 5, 2017) Saylor, C.J.  The questions presented concern whether a law requiring private insurance companies to provide coverage for treatment of autism spectrum disorders invalidates express, contractual place-of-services exclusions pertaining to the delivery of such services in schools.

Among other modifications to the Insurance Company Law of 1921, Act 62 of 2008 amended this statutory regime to require that certain group health insurance policies provide coverage for the “treatment of autism-spectrum disorders,” subject to an initial $36,000 maximum benefit annually.  Per this amendment — denominated by the Insurance Department as the “Autism Coverage Law” — relevant treatment is defined to include “medically necessary pharmacy care, psychiatric care, psychological care, rehabilitative care and therapeutic care” prescribed and provided in accordance with Act 62, 40 P.S. § 764h(f)(14).

Superior Court was affirmed that the law is ambiguous and confusing.  The case was remanded in order to determine what services are to be provided, and basically when and where.

INSURANCE-LIQUOR LIABILITY COVERAGE-LIMITS

Good v. Frankie & Eddie’s Hanover Inn, LLP, 2017 Pa. Super. LEXIS 727 (September 21, 2017) Musmanno, J.  Florence A. Good (“Good”), individually and as executrix of the Estate of Barry D. Good, deceased (“the Estate”), appeals from the Order denying Good’s Motion for Summary Judgment in a declaratory judgment action against Frankie & Eddie’s Hanover Inn, LLP (“Hanover Inn”), and RCA Insurance Group (“RCA”), on behalf of State National Insurance Company, and denying as moot RCA’s Cross-Motion for Summary Judgment.  We affirm.

On April 4, 2012, at approximately 10:56 p.m., Barry D. Good (“the Deceased”) was fatally injured when a Ford F250, driven by Francis Lynch (“Lynch”), collided with the Deceased’s Kawasaki Vulcan Motorcycle. At the time of the accident, Lynch was driving under the influence of alcohol, which had been served to him at Hanover Inn.

On the date of the accident, Hanover Inn was covered by a commercial insurance policy (“the Policy”) issued by RCA. The Policy includes a Liquor Liability Coverage Form, which provides for liquor liability coverage with an “Aggregate Limit,” as well as an “Each Common Cause Limit.” The Declarations page of the Policy specifies that the liquor liability coverage limit for “Each Occurrence” is $500,000, and the “Aggregate” limit is $1,000,000.

During the pendency of the wrongful death and survival action, a dispute arose regarding the applicable amount of coverage under the Policy. The parties entered into a settlement agreement for the underlying action, whereby RCA agreed to pay the undisputed amount of $500,000 on behalf of Hanover Inn. The parties also agreed that a court of competent jurisdiction would resolve the dispute pertaining to the remaining $500,000. An additional $15,000 was paid by Safe Auto Insurance Company, on behalf of Lynch, for bodily injury.

On June 17, 2013, Good filed a Complaint, seeking relief in the nature of a declaratory judgment that the applicable liability limit is the $1,000,000 “Aggregate Limit,” resulting in an additional payment of $500,000.

Upon review, we conclude that the trial court’s interpretation is sound and free of legal error, and we affirm on this basis as to Good’s claims.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-NAMED INSURED-DRIVER LISTED ON AUTOMOBILE INSURANCE POLICY

Safe Auto Insurance Co. v. Guillermo, 2017 Pa. Super. LEXIS 711 (September 18, 2017) Dubow, J.  This appeal arises from the Declaratory Judgment Action that Appellee, Safe Auto Insurance Company (“Safe Auto”), filed in Lehigh County. The trial court granted Safe Auto’s Motion for Summary Judgment, finding that Safe Auto was not obligated to provide insurance coverage to Rachel Dixon (“Dixon”) because Dixon was driving the policyholder’s car and the policyholder did not list her as a driver on his automobile insurance policy (“Safe Auto Policy”). Appellants, Priscila Jimenez and Luis Jimenez, appealed. After careful review, we affirm.

On April 29, 2013, Dixon and another driver were involved in a two-car motor vehicle accident in Allentown, Pennsylvania. Appellant Priscila Jimenez, the passenger in the other vehicle, filed a separate personal injury lawsuit seeking damages against three individuals: Dixon, the owner of the car that Dixon was driving, and the driver of the other car involved in the accident. Dixon was driving a car that her boyfriend, Rene Oriental-Guillermo, (the “Policyholder”) owned. He insured his car through Safe Auto. The Safe Auto Policy had an Unlisted Resident Driver Exclusion, which specifically excluded from coverage those individuals who lived with the Policyholder, but were not related to the policyholder and whom the Policyholder did not specifically list on the Policy (“Unlisted Resident Driver Exclusion”). In this case, Dixon lived with the Policyholder, but was not related to him and was not specifically listed as a driver of the Policyholder’s car on his Policy.

The policy language is unambiguous. Also, there is no dispute that Dixon lived with Policyholder, but is unrelated to him, and he did not list her as an additional driver on his policy. Therefore, the trial court properly found that the exclusion applied and Safe Auto was not obligated to defend Dixon.

In this case, the Policyholder failed to identify Dixon as a non-relative resident living in his household who was driving his car. Thus, he failed to meet the obligation of section 75 P.S. § 1786(f) that requires him to ensure that a driver of his car had insurance. We, therefore, reject the argument that the Unlisted Resident Driver Exclusion is contrary to the policy set forth in the MVFRL.

Auto’s coverage obligation under the Policyholder’s policy, we agree with the trial court’s conclusion that Safe Auto is entitled to judgment as a matter of law.

INSURANCE-AUTISM COVERAGE

Burke v. Independence Blue Cross, 2017 Pa. LEXIS 2338 (S. Ct. October 5, 2017) Saylor, C.J. The questions presented concern whether a law requiring private insurance companies to provide coverage for treatment of autism spectrum disorders invalidates express, contractual place-of-services exclusions pertaining to the delivery of such services in schools.

Among other modifications to the Insurance Company Law of 1921, Act 62 of 2008 amended this statutory regime to require that certain group health insurance policies provide coverage for the “treatment of autism-spectrum disorders,” subject to an initial $36,000 maximum benefit annually. Per this amendment — denominated by the Insurance Department as the “Autism Coverage Law” — relevant treatment is defined to include “medically necessary pharmacy care, psychiatric care, psychological care, rehabilitative care and therapeutic care” prescribed and provided in accordance with Act 62. 40 P.S. § 64h(f)(14).

Anthony Burke is a child who has been diagnosed with an autism-spectrum disorder. As pertinent here, throughout the first six months of 2010, Anthony and his family were covered by a group health insurance policy (the “Policy”) with Appellant, Independence Blue Cross (“Insurer”), maintained through the employer of John Burke, Anthony’s father. Initially, Anthony received ABA treatment at home.

We hold that the Policy’s place-of-services exclusion is ineffective, under the Autism Recovery Law, to foreclose coverage for ABA treatment provided at school.

The order of the Superior Court is affirmed and the matter is remanded, through the Superior Court to the common pleas court, for further proceedings consistent with this opinion and the intermediate court’s previous remand directive.

INSURANCE-BAD FAITH-CRITERIA

Rancosky v. Wash. Nat’l Ins. Co., 2017 Pa. LEXIS 2286 (S. Ct. September 28, 2017) Baer, J.  In this discretionary appeal, we consider, for the first time, the elements of a bad faith insurance claim brought pursuant to Pennsylvania’s bad faith statute found at 42 Pa.C.S. § 8371.  For the reasons set forth below, we adopt the two-part test articulated by the Superior Court in Terletsky v. Prudential Property & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. 1994), which provides that, in order to recover in a bad faith action, the plaintiff must present clear and convincing evidence (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis. Additionally, we hold that proof of an insurance company’s motive of self-interest or ill-will is not a prerequisite to prevailing in a bad faith claim under Section 8371, as argued by Appellant. While such evidence is probative of the second Terletsky prong, we hold that evidence of the insurer’s knowledge or recklessness as to its lack of a reasonable basis in denying policy benefits is sufficient. Therefore, we affirm the judgment of the Superior Court, which partially vacated the trial court’s judgment and remanded for further proceedings on Appellee’s bad faith claim.

Moreover, looking to the consequences of the competing interpretations of Section 8371, see 1 Pa.C.S. § 1921(c)(6), we find that Conseco’s proffered interpretation would create an unduly high threshold for bad faith claims. Given our conclusion that there is no basis to distinguish between punitive damages and other categories of damages under Section 8371, an ill-will level of culpability would limit recovery in any bad faith claim to the most egregious instances only where the plaintiff uncovers some sort of “smoking gun” evidence indicating personal animus towards the insured. We do not believe that the General Assembly intended to create a standard so stringent that it would be highly unlikely that any plaintiff could prevail thereunder when it created the remedy for bad faith. Such a construction could functionally write bad faith under Section 8371 out of the law altogether.

For the reasons set forth above, we conclude that the Superior Court’s longstanding two-pronged test, first articulated in Terletsky, presents an appropriate framework for analyzing bad faith claims under Section 8371. In particular, we conclude that the Terletsky test, and its imposition of a recklessness standard for liability under the second prong, comports with the historical development of bad faith in Pennsylvania and effectuates the intent of the General Assembly in enacting Section 8371.  Accordingly, we hold that proof of an insurer’s motive of self-interest or ill-will, while potentially probative of the second prong, is not a mandatory prerequisite to bad faith recovery under Section 8371.

Because we agree with the legal test for bad faith claims under Section 8371 articulated by the Superior Court in this case and agree that the trial court misapplied that test by considering Conseco’s subjective motivation in determining whether it had a reasonable basis for denying Rancosky’s claim, we affirm the Superior Court’s ultimate disposition to vacate the trial court’s judgment and remand for further proceedings on Rancosky’s bad faith claim. However, we respectfully believe that the Superior Court erred in making a specific determination as to whether the record in this case demonstrates Conseco’s lack of a reasonable basis for denying Rancosky benefits, i.e., the first Terletsky prong. The Superior Court premised its holding in this regard upon credibility determinations the trial court made in its Rule 1925(a) opinion. However, because it is unclear to what extent the trial court’s findings on the reasonable basis prong of Terletsky were intertwined with its erroneous belief that proof of Conseco’s motive of self-interest or ill-will was required, upon remand the trial court should consider both prongs of the Terletsky test anew.

In summary, we hold that, to prevail in a bad faith insurance claim pursuant to Section 8371, a plaintiff must demonstrate, by clear and convincing evidence, (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew or recklessly disregarded its lack of a reasonable basis in denying the claim. We further hold that proof of the insurer’s subjective motive of self-interest or ill-will, while perhaps probative of the second prong of the above test, is not a necessary prerequisite to succeeding in a bad faith claim. Rather, proof of the insurer’s knowledge or reckless disregard for its lack of reasonable basis in denying the claim is sufficient for demonstrating bad faith under the second prong. For these reasons, we affirm the judgment of the Superior Court, which vacated the trial court’s judgment in part and remanded for further proceedings on Appellee’s bad faith claim. On remand, the trial court should consider anew whether the above test has been met.

INSURANCE-AFFORDABLE HEALTHCARE ACT-CONTRACEPTIVE MANDATE-EXCEPTIONS

Real Alternatives, Inc. v. Secretary Department of Health and Human Services, No. 16-1275 (3rd Cir. August 4, 2017) Rendell, C.J.  One of the many provisions of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010), requires employer-provided health insurance plans to cover an array of preventative services, including FDA-approved contraceptives, at no cost to participating employees. Employees have the option of seeking out covered medical providers and using their services, in which case they are reimbursed, or they can choose not to use them. The particular provision that includes contraceptive coverage is commonly referred to as the “Contraceptive Mandate,” and it includes a limited exemption for houses of worship and their integrated auxiliaries. See 45 C.F.R. § 147.131(a); 77 Fed. Reg. 8,725, 8,726 (Feb. 15, 2012). A wider set of religious non-profit and for-profit employers may receive an accommodation whereby they opt out of providing contraceptive coverage, with the Government then arranging for their employees to receive the coverage through third parties at no cost to, and with no participation of, the objecting employers. See 45 C.F.R. § 147.131(b)–(c); 78 Fed. Reg. 39,870, 39,874–39,875 (July 2, 2013); Zubik v. Burwell, 136 S. Ct. 1557, 1559 (2016).

Two years after we upheld this opt-out accommodation in Geneva College v. Secretary United States Department of Health and Human Services, 778 F.3d 422, 427 (3d Cir. 2015), vacated and remanded sub nom. Zubik, 136 S. Ct. at 1561, we now confront the house-of-worship exemption. This appeal presents two primary questions that again derive from the purported intersection of the Contraceptive Mandate and religion: (1) whether the Contraceptive Mandate must exempt a secular anti-abortion group with no religious affiliation, and (2) whether an employee’s religious beliefs are substantially burdened by the law’s requirement that his or her employer’s insurance plan cover contraceptives. After careful review, but without any hesitation, we answer both questions in the negative.

Appellant Real Alternatives urges that, pursuant to the Equal Protection Clause of the Fifth Amendment, if a religious organization may be exempted from the Contraceptive Mandate, then non-religious entities with an identical stance on contraceptives must be exempted as well. Real Alternatives additionally challenges the Contraceptive Mandate and the criteria for the exemption as not only arbitrary and capricious under the Administrative Procedures Act but also contrary to federal law.

The other appellants, three employees of Real Alternatives, bring individual challenges to the Contraceptive Mandate. They argue that the Contraceptive Mandate violates the Church Amendment, 42 U.S.C. § 300a–7(d). They also argue that maintaining a health insurance plan that covers contraceptives through their employer violates their religious rights under the Religious Freedom Restoration Act, 42 U.S.C. §§ 2000bb to 2000bb-4 (“RFRA”).

The District Court denied Appellants’ motion for summary judgment in its entirety and granted the Government’s cross-motion for summary judgment in its entirety. Because we agree with the District Court’s rulings on all of the issues raised, we will affirm.

Because we conclude that the Real Alternatives Employees have not—and cannot—show that the Contraceptive Mandate imposes a substantial burden on their religious beliefs, we need not reach the question of whether the Contraceptive Mandate is the least restrictive means of furthering a compelling governmental interest.

INSURANCE-FIDUCIARY DUTY

Yenchi v. Ameriprise Financial, Inc., 2017 Pa. LEXIS 1405 (S. Ct. June 20, 2017) Donohue, J.  In this discretionary appeal, we must decide whether a fiduciary duty can arise in a consumer transaction for the purchase of a whole life insurance policy based upon the advice of a financial advisor where the consumer purchasing the policy does not cede decision -making control over the purchase to the financial advisor. We conclude that, consistent with our jurisprudence, no fiduciary duty arises in such a situation. Consequently, we reverse the Superior Court’s decision to the contrary.

In some types of relationships, a fiduciary duty exists as a matter of law. Principal and agent, trustee and cestui que trust, attorney and client, guardian and ward, and partners are recognized examples. See, e.g., McCown v. Fraser, 192 A. 674, 676-77 (Pa. 1937); Young, 279 A.2d at 763. The unique degree of trust and confidence involved in these relationships typically allows for one party to gain easy access to the property or other valuable resources of the other, thus necessitating appropriate legal protections.

We conclude that the Yenchis’ summary judgment evidentiary record falls far short of establishing a fiduciary relationship with Holland. Fiduciary duties do not arise “merely because one party relies on and pays for the specialized skill of the other party.” eToll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10, 23 (Pa. Super. 2003). If this were the law in Pennsylvania, “a fiduciary relationship could arise whenever one party had any marginal greater level of skill and expertise in a particular area than another party.” Id.; see generally Greenberg v. Life Ins. Co. of Virginia, 177 F.3d 507, 522 (6th Cir. 1999) (“To hold otherwise would impose fiduciary obligations on the seller of goods or services in the vast multitude of ordinary arm’s -length transactions simply on the basis that the seller possessed superior knowledge of the product being sold.”).

The record here establishes that the Yenchis made the decision to purchase Appellants’ advice and financial products. Reliance on another’s specialized skill or knowledge in making the purchase, without more, does not create a fiduciary relationship. We acknowledge that the Yenchis may have become comfortable with the Appellants’ expertise before deciding to purchase the 1996 whole life insurance policy, which is to be expected when making a financial decision. It is part of the development of any business relationship — consumer or otherwise. It does not, however, establish a fiduciary relationship. There is no evidence to establish that the Yenchis were overpowered, dominated or unduly influenced in their judgment by Holland.

For these reasons, we reverse the order of the Superior Court in part, as it pertains to the issue of fiduciary duty. The balance of the present appeal is dismissed as improvidently granted, and accordingly, the remainder of the Superior Court’s order remains intact.

Chief Justice Saylor and Justices Baer and Dougherty join the opinion. Justice Todd files a dissenting opinion in which Justice Wecht joins. Justice Mundy did not participate in the consideration or decision of this case.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UM/UIM COVERAGE-STACKING-AFTER-ACQUIRED VEHICLE PROVISION

The insured possessed two insurance policies.  One is a multi-vehicle policy and the other is a single-vehicle policy, under which they executed stacking waivers for uninsured and underinsured motorist coverage.  The issue is whether Standard Fire Insurance Company was required to secure a new stacking waiver from the insured when they added a 1990 Ford F-150 vehicle to their multi-vehicle policy by amending the policy’s declaration pages at the time they assumed ownership of the vehicle.  At issue are interpretation of the Sackett v. Nationwide cases.  The trial court had granted summary judgment in favor of the insureds and denied the insurance company’s motion for summary judgment.  Vehicles, as indicated, were replaced under the continuous after-acquired vehicle provision of the standard fire policy and were not replaced by endorsement or through the purchase of new insurance.  Therefore there was arguably not the requirement of execution of new waivers rejecting stacked underinsurance motorist benefits.  The insureds notified their agent of the new vehicle, the 1990 Ford F-150, and requested proof of coverage before the purchase was completed.  The agent then faxed a copy of the insurance card at issue and amended declarations pages reflecting coverage of the new vehicle at an increased premium.  As in the Bumbarger case, the after-acquired-vehicle provision in the standard fire policy is simply inapplicable.  Therefore we need not consider whether it is continuous or finite.  Pursuant to Sackett I, Sackett III, and Bumbarger, the insured’s addition of the 1990 Ford F-150 to the policy constituted a new “purchase” of UM/UIM coverage under Section 1738 of the Financial Responsibility Law and required the execution of a new UM/UIM stacking waiver.  Pergolese v. The Standard Fire Insurance Company, 2017 Pa. Super. 96 (April 11, 2017) Ford Elliott, P.J.E., dissent by Stabile, J.

INSURANCE-HOMEOWNERS-EXCLUSION-SEWAGE BACKUP

Windows v. Erie Ins. Exch., 2017 Pa. Super. LEXIS 309 (May 1, 2017) Moulton, J.  Erie Insurance Exchange (“Erie”) appeals from the February 24, 2016 judgment entered in the Allegheny County Court of Common Pleas in favor of Howard Windows, Jr. and Eleanor Windows (“Homeowners”). We reverse and remand for further proceedings.

This matter arises from Erie’s denial of an insurance claim made by the Homeowners following the infiltration of raw sewage into their home in May 2012. Erie denied the claim, and on May 2, 2013, the Homeowners filed a complaint, alleging that Erie breached its policy. On March 9, 2015, Erie filed a motion for summary judgment, arguing that the policy’s “general exclusion for water damage unambiguously excludes coverage for the Homeowners’ losses because the back up of raw sewage and water through the Warner Alley sewer system and the drain in the Homeowners’ basement contributed to their losses.”

On summary judgment, Erie argued that the water damage exclusion unambiguously precluded coverage for the Homeowners’ losses.  We disagree.

Here, the water-damage exclusion in the Homeowners’ insurance policy provides that losses caused by “water or sewage which backs up through sewers and drains” are excluded from coverage. The policy does not define the term “backs up.”

Based on the language of the Erie policy, and on the limited case law interpreting similar language, we conclude that the water-damage exclusion is subject to more than one reasonable interpretation. Because the provision is ambiguous, Erie failed to meet its burden at summary judgment of proving that the Homeowners’ loss was necessarily excluded.

FEDERAL EMPLOYEES HEALTH BENEFITS ACT OF 1959-SUBROGATION

Coventry Health Care of Missouri, Inc. v. Jodie Nevils, 581 U.S. ___ (April 18, 2017) Ginsburg, J.  In the Federal Employees Health Benefits Act of 1959 (FEHBA), 5 U. S. C. §8901 et seq., Congress authorized the Office of Personnel Management (OPM) to contract with private carriers for federal employees’ health insurance. §8902(a), (d). FEHBA contains a provision expressly preempting state law. §8902(m)(1). That provision reads: “The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.” Contracts OPM negotiates with private carriers provide for reimbursement and subrogation. Reimbursement requires an insured employee who receives payment from another source (e.g., the proceeds yielded by a tort claim) to return healthcare costs earlier paid out by the carrier. Subrogation involves transfer of the right to a third-party payment from the insured employee to the carrier, who can then pursue the claim against the third party. Several States, however, Missouri among them, bar enforcement of contractual subrogation and reimbursement provisions. The questions here presented: Does FEHBA’s express-preemption prescription, §8902(m)(1), override state law prohibiting subrogation and reimbursement; and if §8902(m)(1) has that effect, is the statutory prescription consistent with the Supremacy Clause, U. S. Const., Art. VI, cl. 2? We hold, contrary to the decision of the Missouri Supreme Court, that contractual subrogation and reimbursement prescriptions plainly “relate to . . . payments with respect to benefits,” §8902(m)(1); therefore, by statutory instruction, they override state law barring subrogation and reimbursement. We further hold, again contrary to the Missouri Supreme Court, that the regime Congress enacted is compatible with the Supremacy Clause. Section 8902(m)(1) itself, not the contracts OPM negotiates, triggers the federal preemption. As Congress directed, where FEHBA contract terms “relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits),” §8902(m)(1) ensures that those terms will be uniformly enforceable nationwide, free from state interference.

INSURANCE-EXCLUSIONS-ENVIRONMENTAL

Pa. Manufacturers’ Ass’n Ins. Co. v. Johnson Matthey, 2017 Pa. Commw. LEXIS 115 (April 21, 2017) Colins, S.J.  This case is a petition for review filed by Pennsylvania Manufacturers’ Association Insurance Company (Insurer) against Johnson Matthey Inc. (JMI) and the Pennsylvania Department of Environmental Protection (DEP) seeking a declaratory judgment that it has no obligation to defend or indemnify JMI with respect to a lawsuit filed by DEP against JMI seeking recovery of costs for cleanup of environmental contamination. Before this Court is Insurer’s motion for summary relief. For the reasons set forth below, we deny Insurer’s motion.  The central issue raised by Insurer’s motion is what event must take place within the policy period to trigger coverage under Insurer’s CGL policies.  The trigger of coverage under an “occurrence” insurance policy is ordinarily the first manifestation of the injury that is alleged to have been caused by the insured.  We therefore conclude that the environmental contamination claims at issue here fall within the J.H. France Refractories Co. exception to the first manifestation rule and that coverage under Insurer’s April 1, 1969 to April 1, 1970 and April 1, 1970 to April 1, 1971 policies is triggered if undetected environmental contamination occurred during the policy period. Because the complaint against JMI in the Underlying Action alleges gradual contamination that began before and continued through the policy periods and Insurer has not shown that the contamination did not occur in the policy periods or that it first manifested before the policy periods, it is not entitled to a declaratory judgment that it has no duty to defend or indemnify JMI. Accordingly, the Court enters the following order denying Insurer’s motion for summary relief.

ASBESTOS-INSURANCE

General Refractories Co. v. First State Ins. Co., 2017 U.S. App. LEXIS 6984 (April 21, 2017) Vanaskie, C.J.  Today we must decide which of two companies will bear costs associated with a staggering number of asbestos claims. These companies—a historical manufacturer of asbestos-containing products and its insurer—dispute the rightful allocation of asbestos-related losses under thirty-year-old excess insurance policies. While the policies are dated, the consequences of our interpretation are immediate both to the parties at hand and to those insurers and insureds whose relationships are similarly governed. The chief issue on appeal is whether a policy exclusion that disclaims losses “arising out of asbestos” will prevent a manufacturer from obtaining indemnification for thousands of negotiated settlements with plaintiffs who have suffered adverse health effects from exposure to its asbestos-containing products. The answer hinges on whether the language of the exclusion is ambiguous. After a bench trial, the District Court found that the phrase “arising out of asbestos” contained latent ambiguity because the exclusion could reasonably be read to exclude only losses related to raw asbestos, as opposed to losses related to asbestos-containing products. We disagree. The phrase “arising out of,” when used in a Pennsylvania insurance exclusion, unambiguously requires “but for” causation. Because the losses relating to the underlying asbestos suits would not have occurred but for asbestos, raw or within finished products, we will reverse the judgment of the District Court and enter judgment for Travelers.

INSURANCE-BAD FAITH-TITLE INSURANCE

Michael v. Stock, 2017 Pa. Super. LEXIS 245 (April 11, 2017) Solano, J.  This case deals with bad faith in the unusual context of title insurance. At issue is an amended third party complaint.  The descriptions of property in an insurance policy must be construed with reference to the insured’s reasonable expectations with respect to the coverage being purchased.  Most cases deal with fire and casualty policies, but the court was aware of no grounds upon which the results should differ for title insurance.  The court reversed the grant of summary judgment and sent the case back to trial on the bad faith claim of the Stock’s.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UIM/UM COVERAGE-REJECTION FORM-COMPLIANCE

Alisha L. Ford v. Am. States Ins. Co., 2017 Pa. LEXIS 444 (S. Ct. February 22, 2017) Baer, J.  Section 1731 of the Motor Vehicle Financial Responsibility Law (“MVFRL”) governs underinsured motorist (“UIM”) and uninsured motorist coverage. 75 Pa.C.S. § 1731. Pertinent to this appeal, the MVFRL requires insurers to offer insureds UIM coverage. Id. at § 1731(a). Insurers need to inform named insureds that they may reject UIM coverage by signing a written rejection form contained in Subsection 1731(c) of the MVFRL. Id. § 1731(c). Subsection 1731(c.1) of the MVFRL states that any UIM coverage rejection form that does not “specifically comply” with Section 1731 of the MVFRL is void and that, if an insurer fails to produce a valid UIM coverage rejection form, then UIM coverage shall be equal to the policy’s bodily injury liability limits. Id. at § 1731(c.1). We granted allowance of appeal in this matter to determine whether an insurer’s UIM coverage rejection form does “specifically comply” with Section 1731 of the MVFRL if the insurer’s form is not a verbatim reproduction of the statutory rejection form found in Subsection 1731(c) of the MVFRL but, rather, differs from the statutory form in an inconsequential manner. For the reasons that follow, we hold that a UIM coverage rejection form specifically complies with Section 1731 of the MVFRL even if the form contains de minimis deviations from the statutory form. Because the Superior Court reached the proper result in this case, we affirm that court’s judgment.

As Appellant noted in her complaint, the UIM coverage rejection form that Mother signed and that American States relied upon when Appellant sought UIM benefits tracks the statutory rejection form found in Subsection 1731(c) of the MVFRL, save for a few minor deviations. The form at issue in this case references “motorists” instead of “motorist” in its title line and first sentence, and it injects the word “motorists” between “Underinsured” and “coverage” in the second sentence.

WORKERS’ COMPENSATION-SUBROGATION-INSURANCE COMPANY AS PLAINTIFF WITH REAL INTEREST IN LAWSUIT

Because employee did not bring suit against third party, Hartford had a right to bring suit on behalf of the employee.  Hartford has a real interest in the lawsuit because it has the statutory right of subrogation to the employee’s recovery against the third party tortfeasor to the extent of compensation payable under the Workers’ Compensation Act by Hartford.  It does not matter that the employee himself is not suing.  Since the employee has not sued the third party tortfeasor, Hartford Insurance Company is the entity as controlling litigation.  Therefore Hartford is a party to this litigation and the representative of Hartford may verify the complaint.  Hartford Insurance Company v. Kamara, 2017 Pa. Super. LEXIS 84 (February 10, 2017).

Babcock & Wilcox v. American Nuclear Insurance, 131 A.3d 445 (Pa. 2015)

The Superior Court was reversed by the Supreme Court and the trial court’s judgment was reinstated.  An insured does not forfeit insurance coverage by settling a tort claim without the consent of its insurer, when the insurer defends the insured subject to a reservation of rights, asserting that the claims may not be covered by the policy.  The broad duties to defend is mutually beneficial as it protects the insured “from the cost of defense” while allowing the insured “to control the defense to protect itself against the potential indemnity exposure.”  We encourage insurance to seek declaratory relief to eliminate uncertainty regarding their responsibility for continued defense and ultimately for indemnity coverage.  In this case after an extensive trial, the jury determined that the settlement was fair and reasonable from the perspective of a reasonably prudent person in the same position of insureds and in light of the totality of the circumstances.  This is the proper standard to adopt to apply in a reservation of right case when an insured settles following the insurer’s refusal to consent to settlement.  The Superior Court erred by requiring an insured to demonstrate bad faith when the insured accepts the settlement offer in a reservation of rights case.

INSURANCE – HEALTH INSURANCE – SCHOOL BASED APPLIED BEHAVIORAL ANALYSIS, AUTISM – COVERAGE OF MEDICALLY NECESSARY TREATMENT FOR AUTISM SPECTRUM DISORDERS

Burke v. Independence Blue Cross, 128 A.3d 223 (Pa. Super. 2015).  The superior court agreed with the trial court that Act 62 requires coverage of medically necessary treatment for autism spectrum disorders including applied behavioral analysis, regardless of whether it is otherwise excluded by policy.  Mootness was raised in issue but the court agreed that the issue was of such great public importance that it should be addressed.  We agree with the trial court that there is an inherent ambiguity or conflict between the Act and the “general exclusion.”  Where there is an ambiguity the court looks to legislative intent, which controls.  Here Pennsylvania’s Act 62 is specifically addressed in the treatment of autism spectrum disorders including services in schools or an institution.

INSURANCE-COMMERCIAL-EXCLUSIONS-“PRIOR PUBLICATION” EXCLUSION

Urban Outfitters contended that the trial court erred in finding that Navajo Nation’s trademark infringement allegations fall under Hanover Insurance policy’s “prior publication” exclusions.  Both sides acknowledge an absence of binding authority.  The District Court was affirmed in Hanover Insurance Company v. Urban Outfitters, Inc., 806 F.3d 761 (3rd Cir. 2015).  There is no binding authority as to what constitutes a “fresh wrong.”  Since Hanover was not responsible for Urban Outfitters’ liability insurance coverage until 16 months after the first publication of the alleged infringement, an exclusion would apply unless the underlying complaint contains allegations of “fresh wrongs” that occurred during Hanover’s policy periods.  It is clear from Navajo Nation’s complaint that Urban Outfitters’ advertisements, which predated Hanover’s coverage period, share a common objective with those that followed.  Thus, the court concluded that the latter ads were not “fresh wrongs.”  The “prior publication” exclusions apply, and Hanover has no duty to defend Urban Outfitters in the underlying action.  The “prior publication” exclusion prevents a continuing tortfeasor from passing the risk for its misconduct onto an unwitting insurer.  Taking Navajo Nation’s underlying allegations as true, Urban Outfitters engaged in similar liability-triggering behavior both before and during Hanover’s coverage period.  Therefore the exclusion applies.

INSURANCE-LIFE INSURANCE-FIDUCIARY RELATIONSHIP-EVIDENCE-UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW-RETROACTIVITY-DECEPTIVE PRACTICES

Yenchi v. Ameriprise Financial, Inc., 123 A.3d 1071 (Pa. Super. 2015).  Insurance company won at the trial court level.  Life insurance was sold with various promises that were not true.  Where the offer to sell an insurance product as premised upon the results of an allegedly independent financial analysis, a question of fact may arise regarding whether the financial analyst/insurance salesperson incurs a fiduciary duty.  Here, the insureds gave up life insurance and used proceeds to purchase other products for their retirement.  An insurance relationship can involve fiduciary duty.  Fiduciary relationships are not confined to any one relationship.  The existence of a confidential relationship is fact sensitive and cannot normally be decided as a matter of law.  It is significant that the salesperson cultivated a relationship with the insureds first as a financial advisor, not an insurance salesperson.  A plaintiff may establish a confidential relationship by demonstrating “weakness, dependence or trust, justifiably reposed.”  Insured sought to put into evidence as to the suitability of the insurance policies sold.  The court kept this evidence out because of its ruling on fiduciary duty.  The court reversed this as well.  The exclusion of this evidence could have affected the verdict in the fraudulent misrepresentation and UTPCPL claims.  The UTPCPL cannot be applied retroactively.  The court reversed the grant of summary judgment in favor of the insurance companies regarding the breach of fiduciary duty claim.  The court remanded for new trial on fraudulent misrepresentation and UTPCPL claims.

INSURANCE-CANCELLATION-LICENSE SUSPENSION IMPOSED FOR UNDERAGE ALCOHOL CONSUMPTION

State Farm Mutual Automobile Insurance Company v. Commissioner, 124 A.3d 775 (Pa. Cmwlth. 2015).  The Insurance Commissioner properly concluded that Act 31 of the Crimes Code prohibits an insurance company from canceling an automobile insurance policy based on license suspension imposed for underage alcohol consumption.  The Commonwealth Court affirmed the decision of the Insurance Commissioner.  State Farm informed the insured that it was canceling her policy because of the suspension and not because of any misrepresentation.  The situation might have been different if there was misrepresentation by the insured.

STATUTE OF LIMITATIONS-ERISA-PLAN NOTIFICATION

Mirza v. Insurance Administrator of America, Inc., 800 F.3d 129 (3rd Cir. 2015).  Regulations implementing ERISA provided when the plan administrator denies a request for benefits, it must set forth a “description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action.”  The ERISA plan at issue contained a one-year deadline for filing a civil action.  In its denial letter, that one year was not mentioned.  The court held that the one-year time period must be set forth and that the appropriate remedy for this regulatory violation is to set aside the plan’s time limit and apply the limitations period from the most analogous state-law cause of action.

UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW-LIFE INSURANCE-FRAUD-COMMON LAW FRAUD

Boehm v. Riversource Life Insurance Company, 117 A.3d 308 (Pa. Super. 2015).  This case involved a claim under the Unfair Trade Practices and Consumer Protection Law and for common law fraud.  The case is governed before there was an amendment to the Unfair Trade Practices law adding a catch-all provision.  Using a preponderance of the evidence standard, the trial court found that defendants purposely and intentionally misrepresented the terms of the policy.  After hearing all the evidence the trial court found that defendants violated the UTPCPL where the policy has issued and delivered differed materially from the policy as sold, the defendants purposely and intentionally misrepresented the terms of the policy, and intentionally failed to explain to the plaintiffs that the premium amount had materially changed.  The insurance company argued that the clear and convincing standard applies to both common law fraud claims and claims brought under the “catch-all” provision of the UTPCPL.  The Superior Court disagreed.  Because this case was brought before the catch-all provision, to establish a claim for common law fraud, the elements must be proven by clear and convincing evidence.  The trial court correctly applied a preponderance of the evidence standard to the plaintiff’s UTPCPL claim.  The trial court was not bound by the jury’s previous finding, using a heightened standard, that defendants did not engage in fraudulent conduct.  Life insurance policies are contracts of adhesion.  The insured is under no duty to read the policy.  Courts must be alert to the fact that expectations of the buying public are in large measure created by the insurance industry itself.  The insurance industry uses obscure language and the buyer is very dependent on what the salesperson says.  It is not unreasonable for consumers to rely upon the expectations of the salespeople who are supposed to be experts.  Justifiable reliance is typically a question of fact for the fact finder to decide.  The court looked at the evidence very closely and said that the Boehms justifiably relied on Day’s (salesperson’s) misrepresentations as to the contents of the policy.  Since the plaintiffs were alleging fraud in the execution of a life insurance contract, the parole evidence rule does not apply and they justifiably relied on Day’s misrepresentations.  Plaintiff must demonstrate an ascertainable loss as a result of the prohibited conduct. Plaintiffs discovered that MetLife had enrolled them in an automatic withdrawal plan without their knowledge or consent.  The correct measure of damages is the amount necessary to place the insureds in the position they would have been if the bargain had been honored, i.e., $200,000 total coverage for $50.00 per month plus an initial dump-in of $5,400.  In spite of Day’s promises, the actual amount necessary fully to fund the policy at guaranteed rates is $240.00 per month, not $50.00 per month.  The trial court awarded $125,000, or approximately $10,000 less than was requested by plaintiffs, which is acceptable.  The court also noted that Day’s conduct was fairly outrageous and intentional.  The court was correct not to discount the award to present value.  The loss of the promised death benefit due to the fraudulent conduct is a present loss, not a future loss.  Attorney’s fee award at $165,000 with costs of over $5,000 was also acceptable.  An abuse of discretion standard would apply in reviewing the attorney’s fee.  A review of the fee petition indicates the court attempted to remove all non-UTPCPL time.  The case was complex.  Counsel fees for Ken Behrend at $400.00 per hour and $275.00 for his associate were reasonable.  This was not a windfall.

INSURANCE-DISABILITY POLICY-TOTAL DISABILITY-BAD FAITH

Mohney v. American General Life Insurance Company, 116 A.3d 1123 (Pa. Super. 2015).  Timothy A. Mohney lost his non-jury case against American General Life Insurance Company, successor to U.S. Life Credit Life Insurance Company.  The court vacated the judgment and remanded the case for new trial.  Mohney purchased disability and life insurance from U.S. Life.  The policy defined total disability.  Mohney suffered a back injury in a traffic accident and was unable to work as a coal miner.  The insurance company refused to pay the claim, and Mohney filed suit.  The question under the bad faith law was whether the insurance company had acted in bad faith.  The court defined bad faith and noted that there is a two-part test:  the insurer did not have a reasonable basis for denying benefits under the policy, and (2) the insurer knew of or reasonably disregarded its lack of reasonable basis in denying the claim.  The appellate court found that U.S. Life had no reasonable basis to terminate Mohney’s benefits.  At best, there may have been a defense that Mohney could perform light duty jobs.  Nobody ever advised U.S. Life that Mohney was acutally capable of performing the identified jobs.  As a result, U.S. Life had no reasonable basis to terminate Mohney’s benefits on the ground that he was no longer “totally disabled.”  The the insurance company investigator acted knowingly or recklessly.  The misrepresentations by the adjustor constitute evidence that his investigation was neither honest nor objective.  He focused solely on those parts of the questionnaire that supported denial of the claim while ignoring important limitations recognized by the doctor which supported a contrary decision.  As a result, the case was sent back to the lower court for a new trial.

INSURANCE-COMMERCIAL LIABILITY INSURANCE POLICY-UMBRELLA POLICY-EXCLUSION-EMPLOYERS LIABILITY-SEPARATION-OF-INSUREDS CLAUSE

Employee of restaurant falls down stairs and sues the owner.  The owner is insured by an umbrella commercial policy and denies coverage under an exclusion that says there is no coverage pertaining to the liability for injury to an employee of the insured arising out of and in the course of employment by the insured.  The suit was brought against the additional insureds, not the employee’s employer.  A separation-of-insureds clause indicates that insurance applies separately to each insured against whom claim is made.  Who was “the insured”?  The insured is the entity against whom the claim is made.  The court concluded that the employer’s liability exclusion under the umbrella policy is ambiguous.  The ambiguous exclusionary language pertains only to claims asserted by employees of “the insured” against whom the claim is directed.  This understanding gave further support by reference to the policy’s separation-of-insureds provision.  Since the property owners who have been sued are not the employers of the restaurant employee who was injured, the employer’s liability exclusion is inapplicable.  There would therefore be coverage.  Mutual Benefit Insurance Company v. Politsopoulos, 115 A.3d 844 (Pa. 2015).

INSURANCE-HOMEOWNERS-ATV ACCIDENT

Wolfe v. Ross, 115 A.3d 880 (Pa. Super. 2015).  Mr. Ross was the host of a graduation party at his residence where alcoholic beverages were served to minors, including Kevin.  Kevin left the party drunk on a dirt bike owned by Mr. Ross’s son, Justin.  He lost control of the vehicle, and suffered fatal injuries.  State Farm, Mr. Ross’s homeowners carrier, refused to defend the claim and denied coverage based on the policy’s exclusion for injuries arising out of the maintenance and use of a motor vehicle owned by an insured.  The Superior Court agreed based upon prior case law.  The motor vehicle played an active role in and was the instrumentality of decedent’s fatal injuries.  The exclusion is unambiguous.  Parties may contractually limit their liability and impose conditions so long as those policies do not violate statute or public policy.  There is nothing in the policy that violates statute or public policy and the vehicle exclusion operates to exclude homeowners coverage for the tragic death of decedent.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-UIM COVERAGE-FOSTER CHILD-WARD OF THE INSURED

Rourke v. Pennsylvania National Mutual Casualty Insurance, 116 A.3d 87 (Pa. Super. 2015).  Frederick Rickard was severely injured while riding as a passenger in a vehicle driven by his friend, Chad Odonel.  Frederick was 19 years of age at the time.  He had been a foster child of Rourke.  The Rourkes were insured by Penn National.  The Rourkes were named as insureds under a personal auto policy.  Rourke requested that Frederick be added as an insured driver under the policy.  Subsequently, Rourke made a claim for UIM coverage.  Penn National denied the claim.  The court found that coverage might apply.  The lower court erred when it granted Penn National’s motion for judgment on the pleadings to the extent that it held that Frederick was not a ward of the Rourkes’.  The trial court abused its discretion in granting Penn National’s motion for summary judgment on the reasonable expectation of coverage issue.  The reasonable expectation of the insured is central.  If the policy is ambiguous, then the reasonable expectation of the insured becomes an issue.  The reasonable expectations doctrine exists in part to protect non-commercial insureds from both deception and non-apparent terms.

INSURANCE-BAD FAITH-PUNITIVE DAMAGES

This is an insurance dispute between Allstate and Jared Wolfe.  The question is whether punitive damages awarded against an insured in a personal injury suit are recoverable in a later breach of contract or bad faith suit against the insurer.  It is Pennsylvania’s public policy that insurers cannot insure against punitive damages and we therefore predict that the Pennsylvania Supreme Court will answer that question in the negative.  In other words, punitive damages cannot be recovered in a bad faith lawsuit, notwithstanding the underlying result that the insurance company was guilty of bad faith damages.  Wolfe v. Allstate Property and Casualty Insurance Company, 790 F.3d 487 (3rd Cir. 2015).

INSURANCE-FINANCIAL RESPONSIBILITY LAW-1718-NAMED DRIVER

Byoung Suk An v. Victoria Fire & Cas. Co., 113 A.3d 1283 (Pa. Super. 2015).  Byoung Suk An filed a lawsuit in connection with a motor vehicle accident in which he was injured.  The vehicle was owned by Walker and operated by Gilmore.  Walker had an insurance policy that excluded from coverage anybody other  than the named driver.  Gilmore was not a named driver.  It was asserted by plaintiff victim that the named driver exclusion in the automobile policy is in violation of the Financial Responsibility Law, 1718(c) and is void as against public policy.  Section 1718(c) addresses policies wherein an insured specifically excludes the driver who would otherwise be covered from benefits under the policy.  Instead, Walker’s policy provided coverage only for the driver named in the policy.  Walker received a big discount for this exclusion.  The “named driver only” policy is not contemplated by Section 1718(c).  Therefore, the law is not applicable to this case.  The court also found that the provision was not void as against public policy.  “Thus, we hold that the provision of low-cost, affordable policies in return for motor vehicle liability coverage of only the named driver, and the concomitant risk reduction, does not violate public policy.”  At 1292.  Summary judgment was properly granted to the insurance company.

INSURANCE-FINANCIAL RESPONSIBILITY LAW-RESERVATION OF RIGHTS LETTER-TIMELINESS

Erie Insurance Exchange v. Lobenthal, 114 A.3d 832 (Pa. Super. 2015).  The trial court granted summary judgment for Erie Insurance Exchange.  Boyd filed a tort claim against defendants Lobenthal and Miller because Boyd was injured in a motor vehicle accident.  Boyd suffered injuries as a result of a car accident while a passenger in a car driven by defendant Miller.  It was claimed that Lobenthal was negligent because she permitted the possession and consumption of controlled substances by Miller at a property owned by Lobenthal’s parents which was covered by Boyd’s insurance policy.  Some of the decision involved whether the insurance company sent a proper reservation of rights letter, which clearly it did not.  The reservation of rights letter was addressed solely to the named insureds.  The court would not impute notice to anyone else.  The court refused to attribute notice even with respect to someone living with her parents, the latter having been served with the reservation of rights letter.  Further, the reservation of rights letter was untimely.  Michaela Lobenthal, as a defendant, was entitled to notice of Erie’s reservation of its rights to disclaim liability.  Notice to her parents, the named insureds, and to insurance defense counsel provided by Erie was ineffective as to Michaela.  In addition, Erie’s reservation of rights letter sent approximately seven (7) months after the complaint was filed, was untimely.

INSURANCE-FIDUCIARY LIABILITY POLICY FOR ERISA-EXCLUSIONS-FRAUD, CRIMINAL ACTS OR OMISSIONS

CIGNA Corp. v. Executive Risk Indemnity, Inc., 111 A.3d 204 (Pa. Super. 2015).  In federal court in a class action, ERISA violations were found.  As a result, appellant sought a declaration of coverage under a fiduciary liability policy for ERISA violations.  Coverage was denied by the insurance company under a policy exclusion for deliberate fraud or criminal acts or omissions.  Appellant challenged the trial court’s application of the fraudulent act’s exclusion and the Superior Court affirmed.  Appellant’s conduct, including affirmative efforts at concealment and intentionally misleading representations that the benefits under the previous plan would not be disturbed, would clearly qualify as fraudulent under Pennsylvania law.  Further, the remedy fashioned by the court showed that it considered appellant’s actions as fraudulent.  The federal court’s finding of fraud would constitute a final judgment.  Therefore the wrongful acts exclusion of the policy applies and there is no coverage.

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