2011 WL 3584759
M.D. Pa.2011Background
- Herman Douglas injured in an August 21, 2005 car accident; settled with the third-party tortfeasor and seeks underinsured motorist (UIM) benefits from Discover.
- Abbott Laboratories’ commercial fleet policy with Discover covered the vehicle Douglas drove; car was principally garaged in Pennsylvania.
- Policy delivery/issuance involved Abbott in Illinois; defendants claim Abbott intended to waive UIM in every jurisdiction, including Pennsylvania.
- Policy described as a commercial fleet policy with a self-funded retention.
- Plaintiffs filed a Pennsylvania declaratory judgment action (Aug. 5, 2008) asserting the waiver is void under MVFRL § 1731; proceedings included removal to federal court and cross-motions for summary judgment; subsequent rulings addressed whether § 1731 applies, delivery/issuance, waiver compliance, occupant eligibility, and bad-faith considerations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1731 applies to corporate fleet policies | Douglas argues § 1731 applies to corporations; no exclusion for corporate fleets. | Discover contends § 1731 is consumer-protection oriented and not applicable to commercial fleets. | § 1731 applies to corporate fleets; waiver void for noncompliance. |
| Whether the Abbott policy was delivered or issued for delivery in Pennsylvania | Policy delivered/issued for PA; PA law governs waiver validity. | Delivery due to self-serving location could evade PA law. | PA delivery/issuance found; PA law applies. |
| Whether Discover’s waiver substantially complied with § 1731(c) | Noncompliant waiver void; strict compliance required. | Substantial compliance acceptable. | Waiver void for failure to comply with § 1731(c.1) strict form requirements. |
| Whether occupants can reform the policy to receive UIM | Douglas was driver and intended beneficiary; occupants can be eligible. | Only named insured/relatives can reform; guests cannot. | Douglas eligible; Discover’s waiver void; occupants can receive benefits. |
| Whether the bad-faith claim survives summary judgment | Insurer acted with lack of reasonable basis or reckless disregard. | Decisions relied on state-court precedent; not per se bad faith. | Material facts create a genuine issue; bad-faith claim remains unresolved. |
Key Cases Cited
- Everhart v. PMA Ins. Group, 595 Pa. 172 (Pa. 2007) (regarding stacking under MVFRL § 1738 in commercial fleets and legislative intent)
- DiBartolo v. Travelers Indem. Co. of Ill., 171 F.3d 168 (3d Cir. 1999) (corporation may waive UM/UIM; language matters for corporate waivers)
- Bamber v. Lumbermens Mut. Cas. Co., 680 A.2d 901 (Pa. Super. 1996) (delivery/issuance issues under 1731; focus on where policy issued)
- Jackson v. Allstate Ins. Co., 441 F. Supp. 2d 728 (E.D. Pa. 2006) (interpretation of MVFRL 1731 offering; consumer-protection framing)
- Klinger v. State Farm Mut. Auto. Ins. Co., 115 F.3d 230 (3d Cir. 1997) (bad-faith standard under 8371 requires clear and convincing evidence)
- Terletsky v. Prudential Prop. & Cas. Ins. Co., 437 Pa. Super. 108, 649 A.2d 680 (Pa. 1994) (two-pronged standard for bad-faith claims)
- O’Donnell v. Allstate Ins. Co., 734 A.2d 901 (Pa. Super. Ct. 1999) (investigative/communication aspects of bad-faith claims)
- Utica Mutual Ins. Co. v. Contrisciane, 473 A.2d 1005 (Pa. 1984) (contractual relationship and beneficiaries under MVFRL)