In Dougherty v. Farmers New Century Insurance Company, the insured plaintiff purchased insurance for three automobiles.  As was its practice, Farmers issued a separate policy for each automobile.  Further, the plaintiff opted to pay additional premiums on the policies for stacked insurance.  However, the polices also contained a household exclusion that provided, in pertinent part, “We do not provide Underinsured Motorists Coverage for ‘bodily injury’ sustained: By you while ‘occupying’ or when struck by, any motor vehicle which is not insured for coverage under this policy.”  At the time of the purchase of the policies, and also later at the time of the plaintiff’s automobile accident, Farmers had a practice of non-enforcement of the household exclusion when the insured paid for stacking and was subsequently injured while occupying a household vehicle.  Therefore, after the plaintiff was involved in an accident, the plaintiff was initially notified that the stacked values of the three individual vehicle polices were available for her claim.  More than six months later, the plaintiff was notified that the household exclusion excluded stacking for coverage for household vehicles.  The plaintiff filed suit against the insurer based on an alleged denial of her claim for stacking in bad faith.

 

Addressing cross-motions for summary judgment, the court stated that non-enforcement of the household exclusion would provide the plaintiff with an extra benefit for which she did not pay because the premium charged by Farmers was higher than a premium for unstacked coverage but presumably less than a premium for stacking without the household exclusion.  Further, the court found that although the plaintiff testified in her deposition that her agent told her that by selecting the stacking option she would be able “to stack [the] coverage on the number of vehicles [plaintiff] had on the policy,”  the statement by the agent was not inaccurate and did not indicate an intention to mislead.  The court also found that the plaintiff’s argument that she did not receive any benefit for the higher premium lacked merit, because the “fact that [the plaintiff] did not have stacked coverage for household vehicles does not negate the fact that she did, in fact receive stacking.”  Finally, the court rejected the plaintiff’s argument that Farmers was estopped from providing the stacked coverage to the plaintiff based on its prior practice of not enforcing the household exclusion because the plaintiff did not show that she knew of Farmers’ enforcement practices until after the litigation commenced, and therefore she could not have reasonably relied on Farmers’ previous conduct.  The court granted summary judgment in favor of Farmers and denied the plaintiff’s cross-motion for summary judgment.

Date of Decision:  February 8, 2007

Dougherty v. Farmers New Century Ins. Co., United States District Court for the Middle District of Pennsylvania, No. 3:CV 06-98, 2007 U.S. Dist. LEXIS 9023 (M.D. Pa. Feb. 8, 2007) (Nealon, J.)

In Viechnicki v. Unumprovident Corp. plaintiff brought suit as the beneficiary of a disability insurance policy against an insurance company due to the termination of coverage.  The insurance carrier filed a motion to dismiss asserting that all of plaintiff’s claims, including plaintiff’s bad faith claim, were preempted by ERISA.  After finding that plaintiff’s claims were preempted by ERISA, the Court held that although plaintiff’s bad faith claim arises under a state statute which is directed at insurers, the Third Circuit Court of Appeals has held Pennsylvania’s bad faith statute was preempted by ERISA as well.  Accordingly, plaintiff’s bad faith claim was dismissed and plaintiff was given leave of Court to refile an Amended Complaint asserting a claim under ERISA.

Viechnicki v. Unumprovident Corp., United States District Court for the Eastern District of Pennsylvania, No. 06-2460, 2007 U.S. Dist. LEXIS 8959 (E.D. Pa. Feb. 8, 2007) (Stengel, J.)

In Scarpato v. Allstate Insurance Company plaintiff brought suit in the United States District Court for the Eastern District of Pennsylvania against Allstate and his Allstate Agents stemming from the denial of a property loss claim.  Plaintiff had purchased a single commercial property located in Philadelphia which contained seven subunits including an office, multiple apartments and a barber shop.  Plaintiff advised his Allstate Agents that although he occasionally slept overnight in his office, he had a primary residence in New Jersey, which was insured under another policy.  A policy was issued for the commercial property providing coverage, inter alia, for the property, its contents and loss of use.  On August 1, 2004 the property was seriously damaged due to a fire.  Allstate denied the claim asserting that since plaintiff did not reside on the premises, it was not covered under the property’s insurance policy.  Allegedly, plaintiff did not know until after the claim had been denied that his Allstate agents had written the policy as a “homeowner’s policy” because that was the only way they could obtain coverage for all of the commercial properties. 

Plaintiff subsequently brought suit against Allstate and his Allstate agents alleging that they had acted in bad faith.  Allstate subsequently filed a motion for judgment on the pleadings stating that plaintiff’s bad faith claim should be dismissed because plaintiff’s Answer to Allstate’s Counterclaims concedes that plaintiff resided in New Jersey and not at the property at issue.  In the alternative, Allstate argued that plaintiff’s bad faith claim should be dismissed because, at a minimum, its coverage determination was at least reasonable.  In response, plaintiff argued that if the terms of the policy precluded coverage, it was due to the failure of Allstate’s agents to obtain the appropriate policy and that Allstate could be found liable for bad faith if the loss is deemed to be compensable.  The Court noted that the issue on a motion for judgment on the pleadings is whether under any reasonable reading of the pleadings plaintiff has sufficiently alleged a claim.  Since Allstate was moving for a judgment on the pleadings, and not summary judgment, the Court held that it would be premature to conclude that plaintiff could not provide evidence at some point in the future that Allstate had acted in bad faith.

Scarpato v. Allstate Ins. Co., United States District Court for the Eastern District of Pennsylvania, No. 05-05520, 2007 U.S. Dist LEXIS 4585 (E.D. Pa. Jan. 23, 2007) (Yohn, J.)