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Glickman v. Progressive Casualty Insurance Co.
2007 Pa. Super 41
Decided 2/12/2007

Based upon language found in many auto insurance policies, coverage for first-party benefits was provided to a Plaintiff who suffered post-traumatic stress disorder as the result of a motor vehicle accident although she was not physically injured.

The question presented in this case was whether the Plaintiff could obtain first-party medical benefits under the policy issued by Progressive to the driver of a vehicle who struck and killed the Plaintiff’s husband where the sole injury suffered by the Plaintiff was post-traumatic stress disorder.

The Plaintiff and her husband were crossing a street when Progressive’s insured driver struck and killed the husband. The wife observed the occurrence, causing her to suffer post-traumatic stress disorder. At the time of the accident, the Plaintiff did not own a motor vehicle and did not reside with anyone who did. Therefore, she sought first-party medical coverage under the Progressive policy. The parties filed cross-motions for summary judgment. The trial court granted summary judgment in favor of Progressive, holding that post-traumatic stress disorder was not a bodily injury and therefore not compensable; the Plaintiff appealed.

The Motor Vehicle Financial Responsibility Act (“MVFRL”) defines “injury” as “accidentally sustained bodily harm to an individual and that individual’s illness, disease or death resulting therefrom” [i.e. resulting from the bodily harm]. Progressive relied upon the Superior Court’s opinion in Zerr v. Erie Insurance Exchange in which the appellate court denied a similar claim, holding that one who suffers a psychological illness, such as post-traumatic stress disorder, that does not result from a bodily injury cannot successfully claim benefits under the MVFRL because the injury is mental rather than bodily.

On appeal the Superior Court panel ruled that the holding in Zerr was not controlling because the language of the Progressive policy was different than that involved in Zerr. The Progressive policy defined “bodily injury” as (1) bodily harm, (2) sickness, or (3) disease, including death that results from bodily harm, sickness, or disease. This definition is essentially the same as that contained in the MVFRL and, without more, the case would have been controlled by the holding in Zerr. However, the Progressive policy also separately defined “disease” as a “bodily injury”. Therefore, the Court ruled that “contraction of a ‘disease’ caused by an accident arising out of the maintenance and use of a motor vehicle is a specifically covered bodily injury under the policy”. Because Progressive did not dispute that post-traumatic stress disorder is a disease or that such disorder was the cause of the Plaintiff’s suffering, the Court found that she had sustained a “bodily injury” within the meaning of the policy which entitled her to first-party benefits. The author of the opinion noted that the definition of “bodily injury” in the Progressive policy is consistent with the definition of “injury” in the MVFRL; however, the policy provided greater protection, because it contained a separate definition of “disease” as including a “bodily injury”.

Any questions regarding this case may be directed to C. Kent Price at (717) 255-7632 or kprice@tthlaw.com

Universal Underwriters Insurance Co. v. A. Richard Kacin, Inc.
2007 Pa. Super. LEXIS 16
Decided January 11, 2007.

In a case of first impression, the Superior Court holds waiver of a subrogation provision not invalid, even where the insurer is not party to the contract and there is no evidence that it consented to the provision.

Although the Pennsylvania Superior Court upheld the validity of waiver of subrogation provisions in the case of Penn Avenue Place Assoc., L.P. v. Century Steel Erectors, Inc., 798 A.2d 256 (Pa. Super. 2002), the Court was called upon here to address new issues with respect to these provisions that limit the filing of legal actions.

Kacin and Bassett were the general contractor and subcontractor for construction work performed at Watson Chevrolet Oldsmobile. When a wall fell down allegedly as the result of the contractors’ negligence, Watson’s commercial property insurer, Universal Underwriters, paid for the repairs and then attempted to bring a subrogation action against the contractors for its losses. First, the Court rejected the argument that the waiver of subrogation provision was in conflict with other contract provisions allowing for contractual remedies, as those provisions could be read to allow for a party to pursue such damages when not covered by property insurance.

Second, and perhaps more importantly, the Court rejected Universal Underwriters’ contention that the waiver of subrogation provision could not be enforced, because it did not have notice of or give consent to the provision. Although recognizing that some jurisdictions have reached a different result, the Court agreed with those jurisdictions that determine “the right to subrogation as dependent entirely on the viability of the insured’s cause of action against the third-party tortfeasor.”

Thus, if the insured waives such a claim, the insurer’s ability to bring such a claim is also waived regardless of notice or consent. According to the Court, such a result is not inequitable, as the parties to the contract agreed not to sue each other for damages covered by insurance. In addition, since subrogation is a derivative right, the insurer stands in the shoes of its insured. Finally, insurers can protect themselves from such waiver provisions by inserting exclusions in their policies, charging higher premiums, investigating the insured’s contracts to determine if they have already waived subrogation, or obtaining reinsurance to cover such losses. For these reasons, lack of notice or consent did not make the waiver of subrogation provision unenforceable.

Any questions regarding this case can be directed to Dave Schwalm at 717‑255‑7643 or dschwalm@tthlaw.com.

American States Insurance Co. v. Braheem
2007 Pa.Super. 23
Decided: January 23, 2007

Superior Court holds that UIM insurer must demonstrate actual prejudice related to destruction of subrogation rights against non-automobile tortfeasors to preclude or limit recovery

Background: After Michael Braheem died in a single vehicle accident, his Estate brought claims against the driver of the vehicle and also made claim to Braheem’s own insurer for UIM benefits. After collecting the full limits of coverage from both policies and after the passage of two years, the Estate brought a claim for $900,000 in UIM benefits from another applicable policy. Both Braheem and the vehicle driver were intoxicated at the time of the accident. By the time notice of a claim was received by American States, the statute of limitations had run on its potential right of subrogation against two dram shops.

In summary judgment proceedings, the trial court ruled in favor of American States holding that the failure to give notice of claims and settlement, regardless of prejudice to the insurer, barred the UIM claim. The Estate appealed.

Holding: The Superior Court reversed. The main issue on appeal concerned the two dram shop claims, how prejudice could be proven and how an arbitration panel should proceed. This Opinion requires the UIM insurer to prove not only that a subrogation claim existed against a viable, financially responsible target, but also, the insurer must prove in arbitration (if such a provision exists in the policy) that the subrogation target has sufficient resources to satisfy the entire UIM claim. The arbitration panel is charged with the task of determining the merit and value of the subrogation claim and the total value of the UIM claim. The panel is then to reduce the UIM claim by the value of the lost subrogation claim. If the UIM claim has greater value than the subrogation claim or the resources available to the subrogation target, the UIM claimant collects the difference.

Any questions regarding this case can be directed to Kevin McNamara at 717-237-7132 or kmcnamara@tthlaw.com.

Barnish v. KWI Building Co.
2007 PA Super 1
Decided January 2, 2007

In a manufacturing defect case, if the product is unavailable and had been used for a prolonged period without incident, then plaintiff must present evidence to negate reasonable and probable secondary causes, such as normal wear and tear.

Background: Plaintiffs in consolidated actions stemming from an explosion and fire at a particle board manufacturing facility alleged product liability claims against the manufacturer of heat sensors installed at the facility. The sensors were unavailable for inspection by the manufacturer, when suit was instituted. Plaintiffs proceeded on a malfunction theory. It was conceded that the sensors had worked properly for ten years, since installation by the manufacturer, and Plaintiffs failed to present any proof of a defect in the sensors at the time of installation.

Holding: The Superior Court affirmed the trial court’s grant of summary judgment. The Court stated that although proof of a specific defect is not essential to establish liability under the malfunction theory, Plaintiffs must still produce some circumstantial evidence that the sensors were defective at the time of installation. Plaintiffs failed to present a prima facie case under the malfunction theory, where they did not provide evidence negating possible reasonable secondary causes such as normal wear and tear. The Court concluded that where there was a long period of proper functioning, a jury could not reasonably infer the existence of a defect, merely based upon the occurrence of the accident. Any conclusion otherwise, would be pure speculation, due to the lack of evidence of a defect in the sensors when they left the manufacturer’s hands.

Any questions about this case may be directed to Corey J. Adamson at 717-255-7639 or cadamson@tthlaw.com.

Feldman v. Ide
2007 Pa.Super. 10, 2007 Pa.Super. LEXIS 46
Decided January 9, 2007

Discovery of Expert Financial Information

This case involved a rear-end motor vehicle accident in 2000. Defendant retained Richard Katz, M.D. as his defense expert. Plaintiffs served Defendant with a Request for Production of Documents. The items Plaintiff sought included, Dr. Katz’s federal 1099 forms and other tax forms regarding services rendered in personal injury and worker’s compensation cases issued to Dr. Katz in the past five years by Defendant’s counsel, the Defendant’s insurer, any independent medical exam organizations, and “any miscellaneous source whatsoever”. Defendant objected and argued that the requests were unduly burdensome and not reasonably calculated to lead to the discovery of admissible evidence. The trial court overruled the objections, and ordered that Defendant produce the documents within 30 days or suffer sanctions. Defendant appealed to the Superior Court.

After the parties’ briefs were filed, but before oral argument, the Pennsylvania Supreme Court issued its decision in Cooper v. Schoffstall, 905 A.2d 482 (2006). Referring to Cooper, the Superior Court found that the Trial Court erred as a matter of law in overruling Defendant’s objections to the expert discovery. Although it appeared that interrogatories were forwarded to Dr. Katz for expert information, there was no evidence to demonstrate whether the interrogatories were answered and, if so, how. Accordingly, the Court could not determine if Plaintiffs had demonstrated a “significant pattern of compensation” that would permit the request for production of the documents at issue. Further, the Superior Court held that, under Cooper, even if Plaintiffs make the requisite showing of a significant pattern of compensation, the Trial Court could not order the Defendant to disclose the last five years of Dr. Katz’s income, and such an Order allowing same was overly broad. The Superior Court vacated the Trial Court’s Order and remanded it for further proceedings consistent with the Superior Court’s Opinion.

If you have any questions, or wish to discuss this case, please call Jody A. Mooney at (610) 332-7013 or email her at jmooney@tthlaw.com.

Pennsylvania National Mutual Casualty Company v. Black
No. 109 MAP 2005 (Pa. Supreme Court)
Decided February 21, 2007

Holding: Pennsylvania Supreme Court upholds the validity of a standard set-off provision in an underinsured motorist (“UIM”) endorsement, which reduces the amount recoverable as UIM benefits by the amount paid (or payable) under the liability coverage of the same policy to the same person for the same accident.

Background: Eric Black was a passenger in a car driven by John Myers. Mr. Myers pulled out from a stop sign and his car collided with a car driven by Todd Jamison on the intersecting through highway. Mr. Myers and Mr. Black were killed and Mr. Jamison was injured.

The Black Estate made third-party claims against the Myers Estate, Mr. Jamison and PennDOT. The Myers Estate made claims against Mr. Jamison and PennDOT. Mr. Jamison made claims against the Myers Estate and PennDOT.

Penn National, as the liability insurer of Mr. Myers, offered its $100,000 policy limit to the Black Estate and Mr. Jamison, who agreed to split the fund, with $99,000 going to the Black Estate and $1,000 to Mr. Jamison.

The Myers policy with Penn National included UIM coverage with a $100,000 limit, stacked on three vehicles. The Myers Estate agreed to waive any claim to coverage on the occupied vehicle and settled with Penn National for the $200,000 UIM coverage on the other two vehicles. (The Decedents were cousins). The Black Estate then refused to go forward with the $99,000 liability settlement, in an effort to avoid the effect of a set‑off provision in the Penn National UIM endorsement, which stated: “The limit of liability under this coverage is reduced by any amount paid to the same person for the same accident under Part A [liability coverage] or Part C [uninsured motorist coverage].” The Black Estate then demanded the full $100,000 limit of UIM coverage on the occupied vehicle.

Penn National, represented by Thomas, Thomas & Hafer, LLP, responded that it would treat the $99,000 liability offer as a constructive liability payment, for purposes of the set‑off provision, and tendered a check for $1,000, which it contended was the remaining balance of UIM coverage. The Black Estate refused Penn National’s tender (and accused Penn National of bad faith for relying on an inapplicable and invalid policy provision).

Penn National brought a declaratory judgment action. The Black Estate contended that the set-off provision was inapplicable for several reasons, including the arguments (1) that the Estate, the Decedent’s mother and the Decedent’s father were not the “same person”; and (2) that the set-off provision was invalid as violative of the Motor Vehicle Financial Responsibility Law (“MVFRL”) and public policy.

The Trial Court determined all issues in favor of Penn National and held that the set-off provision was applicable and valid. The Superior Court reversed, holding that the set‑off provision was invalid as against public policy, although the Superior Court agreed with the Trial Court on all other issues. The Pennsylvania Supreme Court agreed to hear an appeal from Penn National on the public policy issue and refused to hear the Black Estate’s appeal on the other issues.

Disposition: The Supreme Court reversed the Superior Court’s reversal of the Trial Court, holding that the set‑off provision is valid and enforceable.

Comment: The Supreme Court’s validation of the set-off provision not only upholds an important standard policy term, but also, and perhaps more importantly, continues a strong trend in favor of restrictions on UM/UIM coverage. The Court states or reiterates several important principles:

· The Court will not invalidate UM/UIM limitations, if they are not directly contrary to clear statutory requirements, on grounds that they are against public policy generally or that the MVFRL is a “remedial” statute that must be “construed liberally to compensate victims.”

· The MVFRL does not mandate UM/UIM coverage, but rather requires that insurers offer coverage, and insurers comply by offering coverage subject to exclusions and set‑offs that are not prohibited.

· Although making UM/UIM coverage available is one purpose of the MVFRL, cost containment is an “increasingly significant” purpose.

· Limitations on coverage reduce the cost of insurance, which is favored, not prohibited, by public policy.

Perhaps most importantly, the Court, in a footnote, suggests that insurers may not be required to offer or include UM/UIM coverage for guest passengers. One of Penn National’s arguments was that the MVFRL, which defines “insured” as named insureds and their resident relatives, does not require UM/UIM coverage for guest passengers, so all restrictions on such coverage are per se valid. In footnote 18, the Court said that “it is not clear whether the MVFRL mandates the offer of underinsured motorist coverage for guest passengers. . . .” However, the Court noted that the statutory rejection forms, required to be presented to policyholders, describe UIM coverage as protecting “me and relatives living in my household.” The Court goes on: “This statement makes no reference to guest passengers. Absent any statement by the legislature requiring a minimum of underinsured motorist coverage to guest passengers or forbidding set‑off provisions and in the absence of a previous expression of a clear public policy against such provisions, we are unwilling to declare the unambiguous set‑off provision in this policy void as against public policy.”

Any questions regarding this case may be directed to Pete Speaker at 717-255-7644 (pspeaker@tthlaw.com) or Kent Price at 717-255-7632 (kprice@tthlaw.com).

Continental Cas. Co. v. ProMachine
2007 PA Super 18
Decided: January 17, 2007

The Pennsylvania Superior Court found that where policy declarations include a partnership and also name the individual partners trading as the partnership, the individuals qualify as named insureds for UIM coverage; that a non-scheduled motorcycle qualifies as a covered auto as an owned auto by the individual; and that the household exclusion does not apply. However, the partner can obtain UIM coverage only if he was acting in his capacity as a partner at the time of the accident.

Background: Pro Machine is a Pennsylvania partnership, registered as a fictitious name. One partner owned a motorcycle, titled in his name, which he used to make customer calls on behalf of Pro Machine. The partners obtained a commercial insurance policy for the partnership from Continental. After the policy was issued, the motorcycle owner was seriously injured. He collected the other driver’s policy limits and recovered UIM benefits under his motorcycle policy. He then filed a claim with Continental for additional UIM coverage. Continental denied coverage, claiming that owner was not a "Named Insured" under the Policy and that the motorcycle was not a "covered motor vehicle" pursuant to the UIM "household" exclusion. Continental filed a motion for summary judgment in its declaratory judgment action, which was granted by the Trial Court.

Holding: The Superior Court found a trial issue of fact and overturned the Trial Court decision. The policy declarations were issued to the partnership and individuals trading as the partnership. “Covered autos” under the UIM coverage form includes autos “you” own. An insured under the form included “you” and if an individual, any family member. The Court found that a partnership is made up of individuals, and is not recognized as an entity like a corporation and is not separate from its partners. In this context, the Court found the declarations not ambiguous, and includes the individuals in their capacity as partners of the partnership. This gives meaning to the reference to family members in the UIM form. The Court also found that the motorcycle is a covered auto, and that the household exclusion does not apply. However, the Court found that coverage only applies if the partner was driving the motorcycle on partnership business at the time of the accident and remanded the case to the Trial Court.

Any questions regarding this case can be directed to Paul Walker at 717-441-7061 (pwalker@tthlaw.com).