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Sackett v. Nationwide Mutual Insurance Company
No. 8 WAP 2006, 2007 Pa. LEXIS 835
(April 17, 2007)
Holding: Pennsylvania Supreme Court holds that insureds are entitled to stack the UM/UIM coverages on all vehicles, despite an otherwise valid rejection of stacking, if the first named insured did not sign a new rejection form upon the addition of vehicles that increases the number of vehicles under the policy.
Background: Victor Sackett obtained an insurance policy from Nationwide on his two vehicles. He executed a proper UM/UIM rejection of stacking form. Two years later, he acquired a third vehicle, which was added to the policy. He did not request any other changes in his policy. Ten days later, he was injured in a motor vehicle accident.
Nationwide paid the $100,000 UIM limit. Sackett asserted that he was entitled to stack coverage (for an additional $200,000), because he did not execute another rejection of stacking when the third vehicle was added.
The trial court and the Superior Court ruled in favor of Nationwide, holding that a valid rejection of stacking remained effective after additional vehicles were added to the policy.
Disposition: The Supreme Court reversed the Superior Court’s ruling, on the grounds that a new rejection of stacking must be executed whenever the number of vehicles insured under a policy is increased. Furthermore, the Supreme Court held that, where no new rejection of stacking form is executed, the insured is entitled to stack coverage on all vehicles insured under the policy, including vehicles that were covered under the policy when the old rejection of stacking was executed.
Comment: This shocking decision—which is certain to result in payment of millions of dollars of benefits for stacked coverage that was rejected, and a corresponding increase in the cost of insurance—not only requires insurers to obtain new rejection of stacking forms in the future, but it also means that insureds will have the right to stacked coverage on all existing non‑stacked policies on which the number of vehicles increased at any time since 1990. Furthermore, it raises other difficult issues for underwriters and claims personnel. It does not address “newly acquired” vehicles, which of course increase the number of vehicles and which are automatically covered under many policies for a certain period of time even without notice to the insurer. Moreover, although the Court, at least in non‑binding dicta, indicates that new forms are not required if UM/UIM coverage had been rejected entirely, it leaves open the question of whether a selection of UM/UIM limits, lower than the liability limits, remains valid after the number of vehicles covered under a policy is increased.
This decision has the potential to have an enormous impact on claims. Consider the following common scenario. John Doe, trading as Doe Electric, obtains auto coverage for his 2 vehicles, some 15 years ago, and executes proper forms to select liability limits of $500,000, and UM/UIM limits of $35,000, and to reject stacking. Over the years, as his business prospers, he adds 4 more vehicles, but no new forms are executed. As a result of Sackett, he is now entitled to at least $210,000 ($35,000 X 6) in UM/UIM coverage, and perhaps as much as $3,000,000 ($500,000 X 6), depending on how the courts rule on the selection of limits issue.
In light of such potential consequences, insurers are well-advised to implement carefully-planned agency and underwriting procedures to deal with the addition of vehicles in the future (such as: issuing separate policies or obtaining new selection and rejection forms; “defaulting” policies to maximum coverage and charging adequate premiums in the event forms are not executed promptly; and eliminating or carefully restricting newly acquired auto coverage). Insurers also should implement a remedial program to identify and obtain proper forms for existing policies where the number of vehicles have increased since their inception.
The decision is shocking, in part, because it is contrary to the pertinent statutory provisions, prior case law and common sense. The Court disregards the statutory provision, that if proper notice of available coverages is provided at the time of the original application, “no other . . . rejection shall be required” (75 Pa.C.S. §1791), and based its decision primarily on two concepts which are, to say the least, of questionable validity: (1) when an insured increases the number of vehicles by adding a vehicle to the policy, he is “purchasing” coverage, and the statute provides that each insured “purchasing uninsured or underinsured motorist coverage” shall be provided the opportunity to waive stacked coverage; and (2) an insured cannot knowingly reject the right to coverage up to the “sum” of the limits (i.e. stacking) until that sum is known. By that same logic, one should expect insureds’ attorneys to argue in the future that, in cases where a policy has valid “lower” limits of UM/UIM coverage, the addition of a vehicle involves “issuance of coverages,” so insureds are entitled to UM/UIM limits equal to their liability limits, in the absence of a new, written request for “the issuance of coverages . . . less than the limits of liability.” 75 Pa. C.S. §1734 (relating to request for lower limits).
Any questions regarding this case can be directed to Peter Speaker at 717-237-7644 (pspeaker@tthlaw.com).
Tannenbaum v. Nationwide Ins. Co.
2007 PA Super 54
Decided: March 5, 2007
The Pennsylvania Superior Court holds that recovery under personal disability policies, which are policies paid for by the UIM claimant, are not duplicate payments under the MVFRL.
Background: The insured was permanently disabled in an automobile accident. He sought UIM coverage under his Nationwide policy, which claim was arbitrated. Nationwide asserted that payment of individual and group disability policies constituted duplicate recovery under section 1722 of the MVFRL. The arbitrators set off these payments, leaving a net amount payable by Nationwide. The Court of Common Pleas of Bucks County vacated the award.
Holding: The Superior Court affirmed the trial court order. The Court characterized Nationwide as arguing that recovery of any benefit payments was duplicative, other than UIM recovery. The Court stated that Nationwide confused double recovery with recovery of excess benefits, which the MVFRL allows. The Court refused to distinguish prior cases involving types of personally paid insurance. Thus, where personal policies are both separate from UIM or UM coverage, and paid for exclusively by the claimant either directly, or through payroll deductions which result in lower wages, payments received from these coverages do not duplicate benefits under the MVFRL, as they are fundamentally different from those benefits.
Any questions regarding this case can be directed to Paul Walker at 717-441-7061 (pwalker@tthlaw.com).
Vance v. 46 and 2, Inc., et al.
2007 Pa.Super. 71
(March 13, 2007)
The Pennsylvania Superior Court holds that evidence of tortfeasor’s wealth is not a prerequisite to imposition of punitive damages.
Background: Plaintiffs, husband and wife, brought personal injury claims against the Defendants, a bar and two of its bouncer employees, as a result of an alleged attack that occurred as Plaintiff, David Vance, was seeking entrance to the bar. Plaintiffs alleged that David Vance was beaten by the two bouncer employees, and that as a result he sustained various physical injuries. Plaintiffs sought compensatory and punitive damages. The jury awarded Plaintiffs compensatory and punitive damages, with all of the Defendants being found liable for punitive damages ($25K in punitive damages for the bar, and $8K and $4K in punitive damages for each bouncer respectively). Defendants filed for post-trial relief seeking either a nonsuit or a judgment notwithstanding the verdict on the punitive damages issue, both of which were denied by the trial court.
Defendants appealed claiming that, because Plaintiffs had not presented any evidence of the Defendants’ finances or wealth, the jury could not award punitives. The Court reviewed Section 908(2) of the Restatement (Second) of Torts for guidance and acknowledged that the following factors are important in determining an appropriate punitive damage award: 1) the character of the act; 2) the nature and extent of the harm; and 3) the wealth of the defendant. The Court then held that the wealth of a defendant may be a proper consideration for determining the dollar amount of punitive damages to award, but it is not a proper consideration for determining whether or not punitive damages should be imposed in the first instance. In deciding whether or not punitive damages should be imposed, the jury only need determine if a defendant’s conduct was outrageous. Therefore, the Court concluded that evidence of a tortfeasor’s wealth is not a necessary prerequisite for an award of punitive damages. The Defendants did not raise on appeal the issue of the appropriateness of the dollar amount of the punitive damage award. Thus, the Court did not address this issue. Accordingly, the Court’s ruling fails to consider how the jury could have arrived at a dollar amount for the punitive damage award without evidence of the Defendants’ wealth
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
State Farm Mutual Automobile Insurance Co. v. Rosenthal
No. 06‑2158, 2007 U.S. App. LEXIS 9126
(3d Cir., April 20, 2007)
Holding: Third Circuit Court of Appeals rejects argument that statutory period of limitation for a UIM claim does not begin to run until the UIM claim is “denied,” and holds that it begins to run when the claimant settles with the tortfeasor.
Background: Rosenthal was injured in a motor vehicle accident on June 8, 1998. On June 9, 2003, he reached an agreement to settle his claim against the other driver for $85,000, of the driver’s $100,000, liability insurance limit. Rosenthal asked State Farm for consent to settle and notified State Farm of his intent to pursue a UIM claim. State Farm gave its consent and continued to correspond with Rosenthal about his UIM claim. On July 22, 2004, Rosenthal demanded UIM arbitration. On March 11, 2005, State Farm filed a declaratory judgment complaint, seeking a declaration that the claim was barred by the four-year statute of limitations on contract actions.
The trial court, agreeing with the novel decision of another federal trial court Judge (Motorists Mutual Ins. Co. v. Durney, 2005 U.S. Dist. LEXIS 33752 (E.D. Pa., Dec. 16, 2005)), held that the period of limitation begins to run, not when the right to UIM benefits vests, but rather when the claim is denied or, in the trial court’s words, “when the insurer manifests disagreement over the insured’s UIM claim.” The Rosenthal Court held this did not occur until “State Farm manifested its refusal to arbitrate by filing the Complaint seeking declaratory judgment, thereby breaching the contract.” Thus, the District Court granted the insured’s motion to dismiss the declaratory judgment action.
Disposition: The Court of Appeals affirmed the dismissal, but on different grounds. The Court rejected State Farm’s argument that the period of limitation should begin to run on the date of the accident, but the Court also rejected the trial court’s ruling that it does not begin to run until the claim is “denied” or the insurance contract is “breached” by a refusal to arbitrate. Rather, the Court ruled that the period of limitation begins to run when the claimant settles with the underinsured motorist, as argued by Rosenthal.
Comment: Fortunately, this decision seems to put to rest the concept that the statutory period of limitation does not begin to run until a UIM claim is “denied”—a rule which would have defeated the very purpose of a statute of limitations in that, as the Court of Appeals recognized, “this approach has no mechanism for limiting stale claims.” Unfortunately, the insurer and the Court missed an opportunity to establish a better rule, which would be more logical and consistent with other case law that the period of limitations should begin to run when the insured has a viable claim—i.e., when the insured knows or should know the amount of available motor vehicle liability coverage.
Although much of the pertinent case law is conflicting, unclear or outdated, the basic principle seems to be that the statutory period of limitation begins to run when the claimant knows or should know that he has a claim and could proceed with it. In the case of a UM claim, that occurs as soon as the claimant knows or should know that the tortfeasor has no insurance. Seary v. Prudential Prop. & Cas. Ins., 543 A.2d 1166 (Pa. Super. 1988). Indeed, the Court of Appeals in Rosenthal recognizes that it begins to run in anUM case as soon as the uninsured status of the tortfeasor is known. In the case of a UIM claim, the courts formerly held that the statutory period of limitation does not begin to run until the UIM carrier consents to the underlying settlement and/or the underlying limits are exhausted, on the grounds that the UIM claim could not proceed before that. Wheeler v. Nationwide, 749 F.Supp. 660 (E.D. Pa. 1990); Smith v. United States Fidelity & Guaranty Co., 40 D&C 4th 381 (Lycoming C.P. 1998). However, that specific reasoning is no longer valid, since some courts have held that neither consent nor exhaustion is required for a UIM claim to go forward. Nationwide v. Lehman, 743 A.2d 933 (Pa. Super. 1999) (lack of consent does not bar claim in absence of prejudice to insurer), app. dismissed, 772 A.2d 413 (Pa. 2001); Cerankowski v. State Farm, 783 A.2d 343 (Pa. Super. 2001) (same); Harper v. Washington Ins. Co., 753 A.2d 282 (Pa. Super. 2000) (exhaustion is not required).
The courts should hold that the statutory period of limitation with respect to UIM claims begins to run when the claimant knows or should know that the liability limits are insufficient. There is a good argument that this occurs, at the latest, when the claimant knows the extent of his injuries and knows the amount of liability coverage available.
One might pose the following question to a court considering this issue: would the court have granted a petition to compel arbitration if it had been filed more than four (4) years earlier? One could argue that, if the answer is yes, then the statutory period of limitation has expired.
The argument that the period begins to run when the claimant knows or should know the tortfeasor’s limits, remains to be heard, as this issue apparently was not raised and the Court did not address it.
Any questions regarding this case can be directed to Peter Speaker at 717-237-7644 (pspeaker@tthlaw.com).
Salvadia v. Ashbrook
2007 PA Super 108
April 17, 2007
Superior Court holds that dismissal of Plaintiff’s case with prejudice was proper due to Plaintiff’s failure to take out Letters of Administration within one year of the filing of a suggestion of death.
Background: When Tiffanie Salvadia was 11 years old, she began to experience heavy bleeding associated with her menstrual cycle. Her mother took her to her pediatrician’s office, who told her the description was within the normal pattern and asked her to monitor her cycle and report any abnormalities. Eight months later, Tiffany was seen by a gynecological specialist, who found a cancerous vaginal mass. Tiffany’s parents filed suit against the pediatrician in January, 2001, alleging failure to diagnose and properly treat the mass. In December, 2001, Tiffanie died. The parents’ attorney filed a suggestion of death in April, 2003. The parties continued to conduct discovery, and on July 23, 2004 the Defendants filed a Petition for Abatement of the action due to Plaintiffs’ failure to take out Letters of Administration for Tiffanie’s estate. Plaintiffs’ case was dismissed with prejudice.
Disposition: The Superior Court upheld the dismissal of Plaintiffs’ action. Pursuant to 20 Pa.C.S.A. § 3375, if a plaintiff dies during the course of a lawsuit, and a personal representative is not appointed within one year after a suggestion of death is filed, any defendant may file a petition to abate (void) the action. If the Plaintiffs cannot provide a reasonable explanation for the delay in the taking out the Letters of Administration, the case will be abated. In this case, the Plaintiffs, Tiffanie’s parents, argued that the Defendants continued to actively litigate the case after the suggestion of death was filed, and therefore the Plaintiffs did not believe it was necessary to take out Letters of Administration, and there was no prejudice to the Defendants. The Court held that the conducting of discovery by the Defendants was not a reasonable explanation for the delay in taking out Letters of Administration, and prejudice is not required under the statute.
Any questions regarding this case can be directed to Tom Brumbaugh at (717) 441-7060, or tbrumbaugh@tthlaw.com.
Croyle v. Smith
2007 PA Super 47
Decided February 22, 2007
Witness statement in narrative form taken ten minutes after accident, in response to questioning by investigating officer, does not qualify under excited utterance or present sense impression exceptions to hearsay rule. Summary of witness statement prepared by insurance investigator not admissible into evidence for impeachment purposes where videotaped deposition of witness puts the inconsistencies between witness’s current and prior statements before jury for credibility determination.
A motorcycle and a tractor trailer were involved in an accident. The motorcycle driver sustained injuries and sued the driver of the tractor trailer and his employer. At trial, the motorcycle driver attempted to introduce an insurance investigator’s summary of a witness’s statement as extrinsic evidence of a prior inconsistent statement, and was precluded from doing so by the trial court. The motorcycle driver also sought to introduce the narrative statement given to a police officer at the scene of the accident, which the trial court did not allow. The Superior Court upheld both rulings.
The motorcyclist sought to impeach the witness with the summary, where in his videotaped deposition, he stated that he only saw one motorcycle, whereas the summary indicated he had seen two. The witness reviewed the summary and stated that it was accurate, but still maintained that he only remembered seeing a single motorcycle. The Superior Court held that the inconsistencies between the witness’s testimony at his deposition and the statement given to the insurance investigator were put before the jury via the videotaped deposition. The motorcyclist could show no prejudice in being precluded from introducing the summary into evidence for impeachment purposes where the jury was allowed to make a credibility determination as to his recollection of the accident. The motorcyclist also sought to introduce the statement the witness gave to a police officer at the scene of the accident. The motorcyclist contended that the statement qualified under either the present sense impression exception to hearsay, or under the excited utterance exception. The Superior Court held that the witness waited almost ten minutes before making the statements to the officer, had checked on and spoken to the motorcyclist, and gave the statement in narrative form in response to questioning by the officer. As such, the statement did not qualify under either exception.
Any questions about this case can be directed to Corey J. Adamson at 717-255-7639 or cadamson@tthlaw.com.
Donegal Mutual Insurance v. Richard Baumhammers, et al.
Nos. 110-125 WAL 2006
(on appeal to the Pennsylvania Supreme Court)
Oral argument was held before the Pennsylvania Supreme Court on March 5, 2007. Paul R. Walker and Peter J. Speaker filed an amicus brief on behalf of the Pennsylvania Association of Mutual Insurance Companies, supporting the position that there is only one “occurrence” in determining the applicable homeowner policy limit.
In the underlying Superior Court decision, coverage had been found for the claims of negligence alleged against parents arising out of a shooting spree by their son, who shot six people at four different locations. The parents’ negligence, which facilitated the intentional shootings, was deemed an “occurrence.” In then interpreting the “cause of loss” approach to determine the number of “occurrences”, the Superior Court held although the “occurrence” (the accident) was the parents’ negligence, the shootings ultimately caused the injuries. Due to the intervening six intentional acts, the parents’ negligence gave rise to six separate occurrences, requiring payment of six “per occurrence” limits. Oral argument was limited to whether there were multiple occurrences.
Estate of Annette Bright v. City of Monessen, et al.
(Petition for Certiorari to the United States Supreme Court)
U.S. Sup. Ct . No. 06-563
(Decided March 5, 2007)
Thomas McGinnis and Stephanie Hersperger of Thomas, Thomas & Hafer, LLP, successfully opposed a petition by Plaintiff for certiorari to the United States Supreme Court in the civil rights case of Estate of Annette Bright v. City of Monessen, et al. In Bright, the plaintiff's minor daughter was shot and killed by a third party. It was alleged that the City of Monessen and other governmental officials had the duty to protect plaintiff's minor daughter and that they violated her constitutional rights by failing to do so. Defendants were granted summary judgment below and successfully defended said decision before a split Third Circuit Court of Appeals panel. Upon plaintiff petitioning the United States Supreme Court for certiorari, defendants were directed by the United States Supreme Court to file a brief on the issue of whether the Court should accept certiorari. On March 5, 2007, the United States Supreme Court issued an order denying plaintiff's petition for certiorari. Attorney McGinnis, who focuses his practice on litigation, including governmental and civil rights defense, is a partner in the Pittsburgh Office of Thomas, Thomas & Hafer, LLP. Attorney Hersperger is a partner in the Harrisburg Office and focuses her practice, in part, on appellate work.
Any questions about this case can be directed to Stephanie Hersperger at (717) 255-7239 or shersperger@tthlaw.com; and Thomas P. McGinnis at (412)697-7403 or tmcginnis@tthlaw.com.
Nychis, et al v. Bob Cranmer, individually and as a Commissioner of the Allegheny Board of Commissioners, Mike Dawida, individually and as a Commissioner of the Allegheny County Board of Commissioners and the County of Allegheny
04-3324
3rd Cir. March 28, 2007
Thomas McGinnis, Stephanie Hersperger, and Karin Romano Galbraith, of Thomas, Thomas & Hafer, LLP, also recently defended an appeal to the Third Circuit Court of Appeals in the case Nychis, et al v. Bob Cranmer, individually and as a Commissioner of the Allegheny Board of Commissioners, Mike Dawida, individually and as a Commissioner of the Allegheny County Board of Commissioners and the County of Allegheny. The Nychis case involved the alleged wrongful termination of various employees and pertained to events occurring in the mid-1990s and resulting in protracted and lengthy litigation. To date there has been no appeal from the Third Circuit Court's decision. Attorney Romano focuses her practice on litigation, including governmental and civil rights defense, and is an associate in the Pittsburgh Office.
Any questions about this case can be directed to Karin Romano Galbraith at (412) 697-7403 or kromano@tthlaw.com.
The Appellate Department of Thomas, Thomas & Hafer, LLP, also recently was successful in defending several appeals before the Pennsylvania Superior Court in medical malpractice cases, one involving an entry of non pros for a certificate of merit, the other affirming a defense verdict in favor of an obstetrician/gynecologist. For more information regarding the Appellate Department of Thomas, Thomas & Hafer, LLP, please contact Stephanie Hersperger at shersperger@tthlaw.com.