994 F.3d 182
3rd Cir.2021Background
- In April 2016 Eileen Gibson signed a three‑page State Farm application that listed bodily injury limits of $250,000 and underinsured motorist (UIM) coverage of $100,000 per car (stacked to $300,000 for three cars); the page bore a signed attestation that the limits and coverages were selected by her.
- The application referenced additional documents labeled as “required,” including a Pennsylvania acknowledgement form reiterating $300,000 UIM, but those documents were not provided or signed at the time of the April application.
- Shortly after signing the application Ms. Gibson was seriously injured in a car accident; about three weeks later (May 2016, post‑accident) she returned to sign the remaining documents, including an acknowledgement confirming the lower UIM limits.
- The Gibsons sued State Farm for UIM benefits, breach of contract, and bad faith; at trial a jury awarded $1.75 million in damages.
- The Magistrate Judge post‑trial molded the verdict to $750,000 (the higher stacked bodily‑injury limit) finding the April application ambiguous because of the “required” documents; the district court (Pratter, J. sitting by designation) reversed as to coverage, holding the April application satisfied 75 Pa. C.S. § 1734 and ordering the verdict molded to $300,000, but affirmed denial of reconsideration of the dismissed bad‑faith claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ms. Gibson’s signed application constituted a valid “request in writing” under 75 Pa. C.S. § 1734 to elect lower UIM limits | The application was ambiguous because it referenced other “required” documents that were not signed pre‑accident; therefore no valid written election occurred | The signed application expressly listed the lower UIM amount ($100k per car, $300k stacked) and § 1734 does not require a separate form or special language | Court held the April application satisfied § 1734; election valid; verdict must be molded to $300,000 |
| Whether reference to additional “required” documents created ambiguity that defeats the election | References to “required” documents signaled the application was incomplete and ambiguous | The coverage amount in the application was unambiguous; additional materials are not mandated by MVFRL and do not negate the signed election | Court held the amount selected was unambiguous; references to other documents did not invalidate election |
| Whether Freeth v. Zurich requires a Pennsylvania‑specific form or additional disclosures to effect a reduction in coverage | Freeth supports finding summary/summary‑style forms insufficient where insurer warned the summary was not a substitute for state forms | Freeth is distinguishable—the form here contained no disclaimer that signing it was insufficient and plainly listed the Pennsylvania limits | Court distinguished Freeth and declined to impose a Freeth‑type rule here |
| Whether new evidence (post‑accident signing) warranted reconsideration to revive the dismissed bad‑faith claim | Post‑accident signing and State Farm’s conduct constituted new evidence of deception and bad faith | State Farm consistently relied on the April application; the post‑trial facts were not new and State Farm had a reasonable basis for its settlement positions | Court affirmed denial of reconsideration: no new evidence and State Farm’s conduct was reasonable under § 8371 standard |
Key Cases Cited
- Orsag v. Farmers New Century Ins., 15 A.3d 896 (Pa. 2011) (§ 1734 requires insured’s signature and express designation of requested coverage amount; no separate form required when amount is clear)
- Nationwide Ins. Co. v. Resseguie, 980 F.2d 226 (3d Cir. 1992) (insurer must insist on a written authorization signed by the named insured to lower UIM limits)
- Freeth v. Zurich Am. Ins. Co., [citation="645 F. App'x 169"] (3d Cir. 2016) (summary form that explicitly warns it is not a substitute for state‑specific forms does not satisfy § 1734)
- Rotkiske v. Klemm, 890 F.3d 422 (3d Cir. 2018) (apply plain‑text statutory interpretation)
- Rancosky v. Wash. Nat’l Ins. Co., 170 A.3d 364 (Pa. 2017) (bad‑faith standard: clear and convincing proof that insurer lacked a reasonable basis and knew or recklessly disregarded that lack)