Friday, June 24, 2011

Recent Bad Faith Decision Out of Lackawanna County by Judge Minora

On June 14, 2011, Judge Carmen D. Minora, issued one of the latest bad faith decisions in the automobile insurance context in the Lackawanna County case of Struble v. Erie Insurance Exchange, No. 2010-CV-4789 (Lacka. Co. June 14, 2011, Minora, J.).

This opinion arises out of Preliminary Objections asserted by Erie to the Plaintiff’s Complaint for declaratory judgment which sought a judicial declaration that Erie should provide uninsured motorist coverage under the facts presented.

By way of background, in June of 2003, the Plaintiff’s employer, Stone Silo Foods, Inc., secured a commercial non-fleet/fleet auto insurance policy from Erie Insurance Company. The application for insurance named a 1991 Ford van and also provided coverages for hired autos and non-owned autos. Significantly, the application for insurance specifically requested uninsured and underinsured coverages for all vehicles in the amount of $1 million dollars.

Eventually, a policy was issued by Erie to the Plaintiff’s employer. Under an amendment to the declarations page, the policy listed Penske Truck Leasing as an additional insured under the policy for hired and non-owned autos.

The Plaintiff, James Struble, was an officer and an employee of the employer at issue, Stone Silo Foods, Inc. On January 31, 2008, the Plaintiff, James Struble, was operating a refrigerated truck, hired by his employer, Stone Silo Foods, Inc., from Penske Truck Leasing Company.

A phantom vehicle allegedly came into the Plaintiff’s lane, causing the Plaintiff’s vehicle to go off the road and result in an accident. A police report was filed an uninsured motorist claim was timely made to Erie Insurance Company under the Stone Silo Foods, Inc. commercial automobile insurance policy issued by the carrier.

At the time the vehicle was leased by Penske Truck Leasing Company, Stone Silo Foods, Inc. declined liability coverage from the rental company, as such coverage was provided under the Erie Insurance policy.

Defendant Erie denied the Plaintiff’s UM claim stating that there was no uninsured coverage for hired and non-owned autos. When Plaintiff’s counsel requested copies of any waivers of uninsured motorist coverage under the policy, Erie Insurance advised that they had no such waivers to produce.

The Plaintiff thereafter filed a declaratory judgment action seeking a declaration as to the existence of uninsured motorist coverage under the facts presented. Additionally, the Complaint also alleged bad faith under 42 Pa.C.S. Section 8371 along with a request for punitive damages.

Erie responded by filing Preliminary Objections to the Plaintiff’s Complaint. Primarily, Erie asserted a demurrer to the Plaintiff’s bad faith and punitive damages claims. The carrier also objected to the Plaintiff’s failure to join Penske Trucking and Leasing as its insurer, Old Republican Insurance Company, as indispensible parties to the action.

After reviewing the briefs and arguments presented by the parties, Judge Minora issued an Opinion and Order overruling the Preliminary Objections asserted by Erie Insurance Exchange. The Court noted that reviewing the facts plead in the Plaintiff’s Complaint against Pennsylvania bad faith law compelled the conclusion that the Plaintiff had properly stated a bad faith claim.

Concisely, the Plaintiff had alleged that his employer, Stone Silo Foods, Inc. purchased a commercial liability automobile policy from Erie Insurance to coverage one vehicle owned by Stone Silo Foods, Inc., as well as hired autos and non-hired autos. The Plaintiff also alleged that both bodily injury and UM/UIM coverages were requested and purchased in the amount of $1 million dollars. The Plaintiff additionally alleged that he was operating a hired/leased auto covered under the Erie policy when he was injured by an uninsured motorist. The Plaintiff also went on to aver that, when he presented his uninsured motorist claim under the Erie policy, Erie unreasonably denied coverage to its insured.

In his opinion, Judge Minora noted that, under the Pennsylvania Motor Vehicle Code, no motor vehicle liability insurance policy shall be delivered in Pennsylvania unless uninsured motorist and underinsured motorist coverages are offered therein. He emphasized that, while the purchase of UM/UIM coverages are optional, the offering of such coverage in the first place by the carrier is mandatory.

In this case, since there was no dispute that the Plaintiff’s Complaint asserted that Stone Silo Foods, Inc. have purchased motor vehicle liability insurance for hired autos under its policy with Erie and no dispute that the leased vehicle at issue was registered in the State of Pennsylvania, UM/UIM coverages were required to be offered under Pennsylvania law (citing 75 Pa.C.S. §1731(a)).

Furthermore, in addition to the offer of such coverages being mandatory, if the insured was not going to purchase those coverages, the law required a written waiver confirming the rejection of coverage. As noted, Erie failed to produce any waivers in this matter.

Accordingly, the court found that it was arguable under the facts pled that Erie knew or recklessly disregarded its lack of a reasonable basis in denying the claim by either not complying with the original application for insurance or by failing to produce the required waivers of UM/UIM coverages.

Judge Minora noted that since the Plaintiff had established that the Erie insured had requested UM/UIM coverage in that Erie could not produce any sign waivers of the same, it was a viable allegation by the Plaintiff that any provisions in the subject Erie contact were void as against law and public policy and should be reformed to reflect UIM coverage.

Judge Minora went on to state that while discovery may yield further information, the Court could not find that it was clear and free from doubt, as a matter of law, at this Complaint stage, that the Plaintiff had failed to state a cause of action that would sustain a bad faith claim. As such, the demurrer to the bad faith claim was overruled and dismissed.

Given that punitive damages are an allowable remedy under the bad faith statute, the court also denied the demurrer to that claim.

Judge Minora additionally found that the Penske Leasing Company and Old Republican Insurance Company, were not indispensable parties under the facts presented. As such, the Defendant carrier’s Preliminary Objections in this regard were overruled as well.


Anyone desiring a copy of this opinion may contact me at dancummins@comcast.net.

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