Presented by the Insurance Coverage/Bad Faith Litigation Group

Legal Updates for Coverage and Bad Faith

July 26, 2016

edited by Allison L. Krupp, Esq.

When Molding the Jury's Verdict on the Underinsured Motorist Claim, the Verdict Was Reduced by Percentage of the Insured's Comparative Negligence Before the Tortfeasor's Bodily Injury Liability Limits Were Subtracted from the Award.

Pusey v. Allstate Ins. Co., No. 888 EDA 2015 (Pa. Super. Ct. May 20, 2016) (non-precedential)

Pusey, a minor, was hit by the tortfeasor’s motor vehicle while traveling across the Baltimore Pike on his bicycle. The tortfeasor’s insurer paid the policy limits of $25,000. Pusey then filed suit against his insurer, Allstate, for underinsured motorist coverage. The jury awarded Pusey $58,600 and found that he was 41% comparatively negligent with respect to the accident. Allstate filed a motion to mold the verdict, arguing that the jury’s award should be reduced by the percentage of Pusey’s own negligence, and that it would then receive a credit for the $25,000 policy limits of the tortfeasor. Pusey agreed that Allstate should receive the $25,000 credit; however, he argued that the deduction for his own negligence should have been applied after the credit for the third party recovery was applied to the jury's verdict. In reviewing the policy language, the Superior Court (in this non-precedential opinion) ruled that, according to the jury’s verdict, Pusey was only entitled to recover $58,600 from the underinsured driver less Pusey’s comparative negligence. The court considered that reducing the total verdict by $25,000 before reducing the total verdict by Pusey’s comparative negligence would allow a recovery that did not comply with the jury’s verdict. Pusey’s arguments to the contrary ignored the plain language of the policy.

For a copy of the Pusey decision, please contact Allison L. Krupp in our Harrisburg office.

Motion to Dismiss Was Granted Where the Court Determined that Zurich Had No Fiduciary Duty to the Third Party Claimant; Its Fiduciary duties Ran Solely to its Insureds.

Leboon v. Zurich American Ins. Co., et al., No. 15-05904 (E.D. Pa. April 18, 2016)

Leboon sued Zurich for statutory bad faith, common law bad faith, and breach of the implied covenant of good faith and fair dealing. Leboon’s allegations arose from Zurich’s alleged misconduct while defending a prior lawsuit that Leboon had brought against his former employer, Alan McIlvain Company. Zurich was the employer’s liability insurer. Leboon claimed that Zurich failed to make any “offers of good faith” to settle the case and “used 100% of the liability policy for themselves instead of for Leboon.” Zurich filed a motion to dismiss the complaint, and Leboon filed a motion for sanctions against Zurich for failing to properly serve him with its motion to dismiss. The Eastern District Court granted Zurich’s motion to dismiss the complaint and denied Leboon’s motion for sanctions. The court found that, because Zurich had included a certificate of service with its motion to dismiss, the certificate was sufficient to establish the presumption that the addressee received the pleading and that Leboon failed to produce evidence to the contrary. With respect to the motion to dismiss, the court considered that Leboon was not an insured under the policy but, rather, was an adversary of the insured, who Zurich had the right and duty to defend. Because Zurich’s fiduciary duties ran solely to its insureds, Zurich did not owe any duties to Leboon to settle.

For a copy of the Leboon decision, please contact Allison L. Krupp in our Harrisburg office.

Forum Selection Clause Included in Policy Did Not Preclude GEICO from Removing the Case to Federal Court.

Schutte v. GEICO Casualty Co., 16-CV-0374 (W.D. Pa. May 10, 2016)

The plaintiffs sought underinsured motorist coverage in connection with a motor vehicle accident. The plaintiff-husband was a pedestrian who was allegedly hit by an underinsured motorist. The plaintiffs sued their insurer for breach of contract, bad faith and loss of consortium. The case was originally filed in the Court of Common Pleas of Allegheny County but was removed to the Western District Court by GEICO. The plaintiffs filed a motion to remand to state court, arguing that the policy contained a forum selection clause, which stated: “This dispute shall be resolved in a court of competent jurisdiction in the county or federal district where the insured resided at the time of the accident.” The plaintiffs argued that this language excluded GEICO’s right to remove the matter from state to federal court and gave the plaintiffs the sole discretion to choose the venue. In the alterative, the plaintiffs argued that the policy was ambiguous. The court held that nothing in the forum selection clause could reasonably be construed as a waiver of the right to remove or as consent to submit to the plaintiffs’ chosen forum. The court considered that the clear language of the policy provided that the plaintiffs may file suit in either federal or state court in which they reside. The plaintiffs did that, and GEICO was well within its right to remove the matter to federal court. Thus, the plaintiffs’ motion to remand was denied.

For a copy of the Schutte decision, please contact Allison L. Krupp in our Harrisburg office.

"Other Insurance" Provision Applied and Did Not Violate Public Policy; Insured Had Also Validly Waived Stacking Under the Progressive Policy.

Costa v. Progressive Preferred Ins. Co., 2:16-CV-74 (W.D. Pa. June 10, 2016)

The decedent was insured under three policies at the time of the motor vehicle accident: (1) a policy issued to his father by Safeco Insurance, which provided underinsured motorist (UIM) coverage of $100,000, stacked; (2) a policy issued to his mother and her sister by Erie Insurance, which provided UIM coverage of $100,000, non-stacked; and (3) the Progressive Policy, which was issued to the decedent’s mother and provided for $50,000 UIM coverage. The decedent’s mother had signed a stacking waiver with respect to the Progressive policy. Following the accident, the administrator of the decedent’s estate settled with the tortfeasor’s insurer for the policy limits, and both Safeco and Erie tendered their policy limits as well. Progressive offered $20,000, taking the position that the policy’s “Other Insurance” clause limited its exposure to its pro rata share of the largest applicable single-limit UIM policy limits, which was $100,000. The plaintiff filed suit, alleging breach of contract and bad faith based on Progressive’s refusal to tender the $50,000 UIM limits. Progressive argued that the decedent’s mother had validly waived inter-policy stacking and, therefore, under the “Other Insurance” provision, the plaintiff’s recovery was limited to Progressive’s pro rata share of the largest applicable policy limit. The decedent’s mother submitted an affidavit in which she attested that her insurance agent had led her to believe that she did not need stacked coverage since there was only one vehicle listed on her policy. The plaintiff also argued that the “Other Insurance” provision violated public policy. The court held that the decedent’s mother had validly waived stacking and that the “Other Insurance” provision applied. The court also rejected the reasonable expectations argument presented by the plaintiff since any expectation that the mother had to the contrary was not reasonable in light of the clear language of the policy. Finally, the court held that the "Other Insurance" provision did not violate public policy and that it was consistent with the MVFRL’s concern with cost-containment. Thus, summary judgment was granted on the plaintiff’s claims in favor of Progressive.

For a copy of the Costa decision, please contact Allison L. Krupp in our Harrisburg office.

_{The material in this law alert has been prepared for our readers by Marshall Dennehey Warner Coleman & Goggin. It is solely intended to provide information on recent legal developments, and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. To be removed from our list of subscribers who receive these complimentary Coverage and Bad Faith updates, please contact alkrupp@mdwcg.com. If however you continue to receive the alerts in error, please send a note to alkrupp@mdwcg.com.}