Post-Koken Article: "Two Roads Diverged"

As promised, here is a copy of my article from this week's Pennsylvania Law Weekly on the post-Koken cases I have been made aware of to date. Click on the label "Koken" down on the right hand column of this blog for continuing updates.

This article is reprinted here with permission from the November 30, 2009 issue of the Pennsylvania Law Weekly.(c) 2009 Incisive Media US Properties, LLC. Further duplication without permission is prohibited. All rights reserved. Please contact the author for permission to reprint or duplicate.


Monday, November 30, 2009

INSURANCE

Two Roads Diverged

Trial courts split over joinder of UIM and third-party claims in post-Koken cases
By Daniel E. Cummins
dancummins@comcast.net

There are signs of a growing rift in trial court opinions on the issue of how consumers should bring third party claims against defendant-drivers when they also have a claim for uninsured or underinsured motorist benefits against their insurance carriers.

The discord appears between courts that have ruled insureds should be allowed to proceed in a consolidated fashion with a single action naming both the tortfeasor and the uninsured/underinsured motorist insurance carrier and those that have favored bifurcation.

To paraphrase Robert Frost’s poem, "The Road Not Taken," auto law litigators, who were initially wandering in the woods without guidance on how to approach these cases are now, with the newly created split in authority created by the current decisions, faced with "two roads diverged in a yellow wood” this fall.

It has now been nearly five years since the Pennsylvania Supreme Court handed down its decision in the case of Insurance Federation of Pennsylvania v. Commonwealth, Department of Insurance (Koken), 889 A.2d 550 (Pa. 2005), holding that automobile insurance carriers were not required to include arbitration clauses in their policies for the resolution of uninsured and underinsured motorist benefits claims.

After that decision was handed down, many carriers quickly rid their policies of the expensive UM/UIM arbitration clauses, thereby requiring such claims to instead proceed by way of a lawsuit. The novel issue became whether these UM/UIM lawsuits were required to be pursued on a consolidated basis with the claim against the defendant-driver and any of the other types of claims that may arise out the same occurrence, i.e., the same motor vehicle accident.

While the first number of trial courts known to have addressed this issue ruled consistently in favor of the consolidation of these claims, recently, three court of common pleas decisions have come down, two from Butler County and one in York County, mandating the severance of the UIM claim from the third party liability claim when such claims are initially filed together in a single lawsuit.

Note that following review of the cases to date, while thorough, may not be exhaustive. Given this changing area of the law it is imperative that members of the bar do all they can to publicize any post-Koken decisions they may secure. One way to get the word out on new cases would be to notify the Pennsylvania Defense Institute or the Pennsylvania Association for Justice.

A CONSISTENT INITIAL LINE OF CASES

A number of the first decisions addressing this issue of consolidation of claims initially came out of the Lackawanna County and Allegheny County courts of common pleas. In Lackawanna County, Judge Carmen Minora allowed for the consolidation of a Koken-type case under Pa.R.C.P. 213, pertaining to consolidation or severance of cases, in Decker v. Nationwide Insurance Co., 83 Pa.D.&C.4th 375, 2007 WL 6853118 (2007)[see also companion decision: Decker v. Nationwide, 2008 WL 6653069 (Lacka. Co. 2008)]. Senior Judge Harold A. Thomson, Jr., then sitting in Lackawanna County, offered a similar opinion in the case of Moyer v. Harrigan and Erie Ins. Exchange, No. 1684-CV-2008 (2008). Lackawanna County Judge Robert Mazzoni also allowed for a UIM claim to proceed in a consolidated fashion with a bad faith claim in Augustine v. Erie Ins. Exchange, 2006-CV-416 (2008).

Similarly, in Allegheny County, consolidation of various first party and third party claims was approved by Judge Eugene B. Strassburger in Collins v. Zieler and State Farm, No. G.D. 08-014817 (2008) and by Judge R. Stanton Wettick in the case of Gunn v. Automobile Ins. Co. of Hartford, 2008 WL 6653070 (2008).

These cases were reviewed in detail in prior Law Weekly columns headlined "Here Comes Hurricane Koken,` 31 PLW 1165 (Oct. 27, 2008) and "Nothing to Fear But Fear Itself," 31 PLW 1214 (Nov. 10, 2008), the 2008 year-end review of auto cases in "Negligence is in the Air ... and on the Road," 31 PLW 1380 (Dec. 22, 2008), and "A Change of Habit," 32 PLW 566 (May 25, 2009). Updates on these issues also regularly appear on my blog, Tort Talk at www.torttalk.com (click on "Koken` under the Labels down on the right-hand column of the blog).

Generally speaking, a review of the above cases indicated that many of the trial courts of Pennsylvania were allowing for the joinder of these separate claims under Pa.R.C.P. 213 ("Consolidation") or Pa.R.C.P. 2229(b) ("Permissive joinder"). The underlying rationale was that since these post-Koken claims arose out of the same "transaction or occurrence," i.e., the same motor vehicle accident and involved similar factual and legal issues, they should be consolidated under one lawsuit. It also appeared that an overriding factor behind these first decisions was the principle of judicial economy, which favored streamlined, as opposed to piecemeal, litigation to handle the glut of anticipated new UIM lawsuits after Koken.

This initial trend of cases continued in other counties across the commonwealth. In Jannone v. McCooey and State Farm, 2009 WL 2418862, 2320-2008-Civil (C.P. Pike April 1, 2009), Pike County Judge Gregory H. Chelak denied the preliminary objections filed by the third party defendant-driver to the joinder of third party liability claim with the UIM claim under one caption or lawsuit. This court also went so far as to note, in what must be termed as dicta, that evidence of insurance may be introduced at trial for limited purposes as necessary in these types of consolidated cases.

Judge Carol K. McGinley of the Lehigh County Court of Common Pleas ruled similarly in the case of Serulneck v. Kilian and Allstate, 2008-Civil-2859 (C.P. Lehigh April 7, 2009). In that case, McGinley denied the motion of the tortfeasor defendant seeking a severance of the claims against him from the UIM claims that were set forth by the plaintiff under one caption. McGinley noted that "[t]he entire cause of action, whether sounding in tort or contract, arises from the same set of facts. Defendant Allstate will be prejudiced if excluded in any litigation which fixes its liability." As such, the Lehigh County court allowed the claims to proceed in a consolidated fashion.

In the Beaver County case of Six v. Phillips and Nationwide Ins. Co., 2009 WL 2418861, 12227-Civil-2008 (C.P. Beaver June 30, 2009), Judge C. Gus Kwidis overruled preliminary objections filed by the tortfeasor to the joinder of the third liability party claims and UIM claim in a single lawsuit. Similar to the Pike County decision in Jannone, this court also noted, in dicta, that evidence of insurance may come into evidence at trial for limited purposes.
In so ruling, Kwidis rejected arguments that the combined lawsuit would prejudice the defendant-driver by impermissibly allowing evidence of the insurance amounts in violation of Pa.R.C.P. 411 (prohibiting evidence of insurance during civil trials). Kwidis noted that, while evidence of insurance is ordinarily not permitted under Rule 411 to show that a defendant had coverage, the rule does allow evidence of insurance when it is offered for a separate, relevant purpose such as, in his opinion, for assisting the jury in determining whether or not a tortfeasor was underinsured in a post-Koken case.

Yet another decision in favor of allowing for the consolidation of post-Koken claims was issued by Judge Thomas Burke in Luzerne County. In the case of Glushefski v. Sadowski and Erie Ins. Exchange, 1189-Civil-2009 (C.P. Luzerne July 24, 2009), Burke rejected preliminary objections filed by the third party defendant driver seeking to sever the liability claim from the consolidated UIM claim filed in the same lawsuit.

More recently, Judge Todd Hoover issued a one-line order in the Dauphin County case of Gingrich v Esurance and Susan Graci, No. 08795-CV-2009 (C.P. Dauphin Nov. 2, 2009), denying the third party liability defendant’s preliminary objections to a complaint which joined the negligence and UIM causes of action under one caption.

Along the way, decisions were also handed down in the following cases where the trial court held that these types of post-Koken claims should proceed in a consolidated fashion under one caption: Richard Hess v. Cosgrove, C.P. Philadelphia, July Term, 2008, no. 3708; Kelly Hess v. Dickel, C.P. Philadelphia, October Term, 2008, no. 3220; Fuhrman v. Frye and State Farm, C.P. Dauphin Co., 2008 CV 17687; and Sellers v. Hindes and State Farm, C.P. Dauphin, 2009 CV 1989.

Thus, by last month there had been at least 15 post-Koken trial court decisions uncovered, all of which consistently ruled, or suggested that they would rule, in favor of allowing the liability claims and the UIM claims to proceed in a consolidated fashion under in a single lawsuit. Again, a common rationale of these decisions continued to be that claims arising out of the same occurrence should be litigated together as a means of furthering the interests of judicial economy and the avoidance of piecemeal litigation.

Concisely, those decisions came out of Lackawanna, Allegheny, Pike, Lehigh, Beaver, Luzerne, Philadelphia, and Dauphin Counties.

Then, within four days of each other in early November, entirely independent of each other, and without citing any of the above cases, three decisions were handed down by other Pennsylvania trial courts ruling, for the first time, that the claims presented in these post-Koken cases should be severed and handled as two entirely separate matters. There was now a split of authority on the issue and Pennsylvania auto law litigators were suddenly faced with "[t]wo roads diverged in a wood,” uncertain as to which road to follow.

THE ROAD LESS TRAVELED

First, Butler County Court of Common Pleas Judge Marilyn J. Horan issued an opinion and order Nov. 5, 2009, in the post-Koken case of Baptiste v. Strobel and State Farm Mut. Auto. Ins. Co., 2009 WL 3793590, A.D. 09-11444 (C.P. Butler Co. Nov. 5, 2009) that went against the trend of the number of prior trial court opinions from around the Commonwealth of Pennsylvania allowing third party claims against the tortfeasor to proceed in a consolidated fashion with the UIM claim under one lawsuit.

Before Horan's decision in Baptiste, her counterpart on the Butler County Court of Common Pleas, Judge S. Michael Yeager, likewise issued a decision severing the UIM claim from the third party claim in the case of Weichey v. Marten and Allstate, A.D. No. 09-10116 (C.P. Butler June 11, 2009). The rationale for that decision was that, generally, evidence of insurance was not admissible in negligence actions. Horan would later expound on that rationale in much greater detail in her opinion in Baptiste.

In Baptiste, the defendant driver was allegedly drunk driving at the time of the accident and it was the UIM carrier, State Farm, that filed preliminary objections against the joinder, presumably to avoid having to face a jury inflamed by the DUI status of the tortfeasor. The court granted the UIM carrier’s preliminary objections filed under Pa.R.C.P. 1028(a)(5), "misjoinder of a cause of action" and severed the claims from each other. The UIM carrier’s additional request that the UIM claim be stayed pending the resolution of the third party action was also granted by Horan.

In its opinion, the court in Baptiste did not cite or review any of the above number of prior trial court opinions from around the commonwealth that have essentially all held that a third party claim and a UIM claim can and should be consolidated under one caption.

In granting the UIM carrier’s preliminary objections, the court accepted argument that keeping an insurance company in as a defendant in a negligence action also involving the third party tortfeasor would violate Pennsylvania Rule of Evidence 411, which generally precludes the admission of evidence of insurance in civil litigation matters.

More specifically, although Rule of Evidence 411 allows the admission of evidence of insurance for certain limited purposes such as to show agency, ownership, control or bias or prejudice of a witness, the Baptiste court stated that there was no "other purpose" under which Rule 411 would support the admission of UIM insurance issues in the third party negligence portion of this post-Koken lawsuit. Stated otherwise, the trial court noted that "the issue of UIM insurance in the claim against State Farm bears no relation to the determination of the negligence cause of action between Plaintiffs and Defendant, Strobel."

The court also noted that, even if the insurance evidence was relevant to the negligence portion of the lawsuit, such evidence would still be inadmissible under Pennsylvania Rule of Evidence 403 which allows a court to exclude evidence "if its probative value is outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence."

Horan opined that the inclusion of insurance evidence in the negligence portion of the case would "yield minimal, if any, probative value in comparison to the potential for undue prejudice" to the tortfeasor defendant.

In Baptiste, the plaintiff’s argument for the permissive joinder of claims under Pa.R.C.P. 2229(c), pertaining to the joinder of claims arising out of the same transaction or occurrence, was rejected by the Butler County Court of Common Pleas. The court again indicated that the joinder of these claims would improperly inject irrelevant and prejudicial insurance issues in the negligence portion of the case against the tortfeasors. The court felt that, even though the severance would require a second trial on the same issues of liability and damages, undue prejudice to the tortfeasor defendant would be avoided by severing the cases into two separate matters.

Horan also rejected the plaintiff's arguments in favor of judicial economy and the goal of avoiding inconsistent verdicts. The court felt that the consideration of whether the joinder would interfere with a just determination of the matter for all parties was of a higher priority than those other interests.

Last but not least, Horan noted the court’s power to sever and order separate trials where warranted under Pa.R.C.P. 213(b). The court reiterated its opinion that "where joinder presents the potential for undue prejudice, [judicial] economy and inconvenience must yield to fairness for all parties."

Accordingly, the court felt that a severance of the third party liability claim from the UIM claim was appropriate and, consequently, the court granted the UIM carrier’s preliminary objections in this regard as well. Not only were the UIM claims were severed by the court in Baptiste, but Horan took the additional step of staying the UIM claim pending the resolution of the third party liability negligence claims.

ANOTHER DECISION IN FAVOR OF SEVERANCE

A few days after Baptiste was handed down in Butler County, York County Judge John H. Chronister issued a similar decision in a Nov. 9, 2009 opinion and order in the case of Grove v. Uffelman and Progressive Ins. Co., 2009 WL 3815756, No. 2009-SU-2878-01 (C.P. York Nov. 9, 2009).

In that case, the third party tortfeasor objected to the plaintiff’s complaint on the grounds that the joinder of these two types of claims was improper in that they did not arise out of the same transaction and given that the introduction of insurance issues would prejudice the defendant-driver on his side of the case.

The plaintiff countered with the argument that the claims did indeed arise out of the same transaction or occurrence and also asserted that judicial economy would be furthered and inconsistent verdicts prevented by a litigation of these claims in a single lawsuit. The plaintiff also argued that the insurance problem could be avoided at trial by simply not mentioning insurance and referring to the issue by some other name.

Chronister chose to side with the third party tortfeasor's arguments in Grove and, as a result, ordered a severance of the cases.

Chronister viewed the two claims as involving separate transactions — a tort claim based on negligence against the defendant-driver and a contract claim against the UIM carrier to enforce the plaintiff's rights under the policy.

The York County judge also emphasized that his decision was largely influenced by the insurance issue. He noted that, by advising the jury that the plaintiff was pursuing an UIM claim, it followed by definition that the jury may conclude that the defendant-driver had insufficient liability insurance, which would be "a violation of the prohibition against the jury knowing about the Defendants' insurance coverage."

Chronister also noted that, "[e]ven worse," the claim for UIM benefits advises the jury that there is a second insurance company involved as a source for payment, "potentially causing the jury to award an increased amount of damages." He also cautioned that such information about the availability of additional UIM insurance coverage to take care of the plaintiff’s verdict may also leave the jury with the incorrect assumption that the tortfeasor defendant would not remain personally responsible for any verdict in excess of the tortfeasor's liability limits.

The court in Grove also did not think it was feasible to allow the claims to remain consolidated and somehow keep the insurance issue away from the jury as suggested by the plaintiff.

Chronister noted that the very fact that the insurance company is named in the caption triggers the concerns that prevent insurance from being mentioned in civil litigation matters as a matter of law. He also noted that "it is always best to tell the jury exactly what is happening, and not camouflage the situation unless it can't be avoided."

The judge also noted, "[m]ost importantly," that if the plaintiff's procedure of consolidated claims was adopted as a general rule, UIM carriers may potentially be forced to unnecessarily participate in pleadings, discovery, and trials in cases where the UIM coverage is never reached either because a defense verdict is entered in favor of the defendant-driver or an award is given that is below the defendant-driver's liability limits.

As such, the court granted the defendant-driver's preliminary objections and severed the two claims presented.

NO APPELLATE GUIDANCE TO DATE

To date there does not appear to be any appellate decisions providing guidance on the consolidation issue in a post-Koken case.

In its April 15, 2009, opinion in Gunn v. Auotomobile Ins. Co. of Hartford, 2009 WL 1001029 (Pa.Super. 2009), the Superior Court refused an opportunity to address a post-Koken UIM case for the first time on the grounds that the appeal before them had to be quashed given that the trial court order appealed from was not a collateral order that was subject to a permissible appeal.

The underlying case in Gunn, involved a plaintiff pursuing a combined UIM claim and bad faith claim under a single caption in a post-Koken case. Allegheny County Court of Common Pleas Judge R. Stanton Wettick had ruled in favor of consolidation.

As for any other appellate decisions in a post-Koken case, it is parenthetically noted that on Nov. 9, 2009, the Pennsylvania Superior Court did issue an opinion upholding Liberty Mutual Insurance Group's forum selection clause in the post-Koken underinsured (UIM) case of O'Hara v. The First Liberty Ins. Corp. d/b/a Liberty Mut. Ins. Group, 2009 Pa.Super. 214 (Nov. 9, 2009, Judges Freedberg, Cleland and Kelly).

In O’Hara, a Delaware County resident was injured in a Delaware County accident but brought suit against the UIM carrier in Philadelphia County. The Superior Court upheld the trial court’s transfer of that case to Delaware County. The consolidation issue was not involved or addressed in this case as the plaintiff had already previously settled out with the defendant-driver and, therefore, the tortfeasor was not included in this suit that was solely filed against the UIM carrier.

Unfortunately, it appears unlikely that any appellate decisions may be forthcoming in the near future to address this split of authority in the Pennsylvania trial courts. In order to get to the Superior Court on the consolidation issue, typically raised in preliminary objections, it appears that the trial court would have to grant permission for such an interlocutory appeal. Securing such permission is difficult.

As such, with these two recent post-Koken cases going the other way on the issue, "two roads diverged in a wood” and Pennsylvania litigators are unable to "travel both and be one traveler.” Rather, they must, instead, choose to continue down the one road which supports the position advocated. Until appellate guidance is provided, counsel will have to hope they have correctly chosen the road "that has made all the difference” in terms of enabling them to prevail on the issue of consolidation versus severance of claims in post-Koken cases.


Daniel E. Cummins is a partner and civil litigator with the Scranton law firm of Foley Cognetti Comerford Cimini & Cummins. Cummins' civil litigation blog, "Tort Talk," may be viewed at www.torttalk.com.