Jones v. Nationwide Property & Casualty Insurance
32 A.3d 1261
| Pa. | 2011Background
- Case investigates whether an insurer's pro rata recovery of a collision deductible from subrogation proceeds violates the made whole doctrine.
- Jones had a $500 collision deductible; Nationwide paid damages minus deductible and pursued subrogation against the third party.
- Nationwide recovered amount from the third party that exceeded Jones's deductible, but reimbursed Jones only 90% of the deductible ($450) on a pro rata basis.
- Jones filed a class action alleging breach of contract and related claims, arguing the pro rata method violates the made whole doctrine and policy language.
- Regulatory and statutory framework: 31 Pa.Code § 146.8(c) allows pro rata sharing of subrogation recoveries with the first-party claimant unless deductible already recovered; MVFRL imposes mandatory deductibles and premium implications.
- Lower courts dismissed the action; the Pennsylvania Supreme Court narrowed the question to whether made whole applies to collision deductibles, upholding the pro rata practice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does made whole apply to collision deductible subrogation? | Jones: made whole should require full deductible recovery before subrogation. | Nationwide: made whole does not apply to collision deductibles; MVFRL policies and regulatory scheme permit pro rata recoveries. | No; made whole does not apply to collision deductibles. |
| Is the pro rata subrogation allocation authorized by 31 Pa.Code § 146.8(c) valid under law? | Pro rata violates made whole and policy wording; no private remedy under UIPA would invalidate it. | Regulation permits pro rata allocation and reflects subrogation equity. | Regulation permitting pro rata allocation is valid; court does not reach merits of regulation absent made whole violation. |
| Does applying made whole to deductibles undermine MVFRL goals? | Disallowing pro rata would unfairly deprive insureds of full deductible recovery and contravene policy. | Applying made whole would create no-deductible policy inconsistent with MVFRL and premium structure. | Applying made whole to deductibles would undermine MVFRL; thus, pro rata is permissible. |
Key Cases Cited
- Gallop v. Rose, 616 A.2d 1027 (Pa. Super. Ct. 1992) (made whole doctrine governs subrogation recoveries)
- Nationwide Mut. Ins. Co. v. DiTomo, 478 A.2d 1381 (Pa. Super. Ct. 1984) (subrogation and equitable principles underlying recovery)
- Valora v. Pa. Employees Benefit Tr. Fund, 939 A.2d 312 (Pa. 2007) (subrogation rights subject to equitable principles)
- Allstate Ins. Co. v. Clarke, 527 A.2d 1021 (Pa. Super. Ct. 1987) (made whole concept and subrogation balance)