325 F. Supp. 3d 590
E.D. Pa.2018Background
- In 2011 Bryan Rarick, an employee of Keystone Automotive Operations, was injured while driving a Keystone-owned truck insured by Federated Mutual.
- Keystone's commercial policy with Federated included a UM/UIM rejection form that rejected UM/UIM coverage for employees but elected coverage for directors, officers, partners, owners and their family members; Rarick was not in those covered categories.
- Federated denied Rarick's UM/UIM claim and later produced the rejection form during discovery; Rarick sued, challenging the legal validity of the waiver, arguing it unlawfully bifurcates coverage, is ambiguous, and that Federated should be estopped from relying on the late-produced form.
- Federated moved for summary judgment asserting (inter alia) that Rarick lacked standing, the rejection complied with MVFRL §1731, the policy is unambiguous, and it was not estopped.
- The district court considered Pennsylvania law (predicting how the PA Supreme Court would rule) and denied Rarick’s summary judgment motion but granted Federated’s, holding the rejection valid and enforceable and that Federated was not estopped.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge validity of employer's UM/UIM waiver | Rarick: as an injured third‑party beneficiary he can challenge legality of the waiver | Federated: non‑named insureds lack statutory standing to challenge waiver | Court: third‑party beneficiary has standing to challenge the legal validity of a §1731 waiver |
| Applicability of MVFRL §1731 to commercial fleet policies | Rarick: §1731 applies to commercial policies; MVFRL governs | Federated: §1731 intended for natural persons; Everhart limits MVFRL application to personal policies | Court: §1731 applies to commercial policies; statutory language and precedent permit corporate application |
| Validity of Federated's §1731 rejection form and two‑tier coverage scheme | Rarick: the two‑tier (some insureds covered, others not) is unlawful or ambiguous | Federated: form complies with §1731 and corporations may lawfully elect different coverage levels for different personnel | Court: the rejection language specifically complies with §1731 and the bifurcated coverage scheme is lawful and not ambiguous |
| Estoppel based on delayed production of rejection form | Rarick: late production estops Federated from asserting the rejection | Federated: no statutory timing requirement; Rarick had notice of the coverage denial and the form was produced in discovery | Court: no estoppel — §1731(c.1) imposes no timing, Rarick suffered no detrimental reliance beyond filing suit, and Federated gave adequate notice |
Key Cases Cited
- Everhart v. PMA Ins. Grp., 938 A.2d 301 (Pa. 2007) (analyzed applicability of MVFRL §1738 to commercial fleets)
- DiBartolo v. Travelers Indem. Co. of Ill., 171 F.3d 168 (3d Cir. 1999) (per §1902 statutory interpretation, corporations may waive UM coverage under §1731)
- Ford v. Am. States Ins. Co., 154 A.3d 237 (Pa. 2017) (§1731 requires specific compliance but allows de minimis deviations)
- Petty v. Federated Mut. Ins. Co., 152 A.3d 1020 (Pa. Super. Ct. 2016) (upheld similar Federated rejection form; alternative footnote on standing tied to a valid waiver)
- Peters v. Nat'l Interstate Ins. Co., 108 A.3d 38 (Pa. Super. Ct. 2014) (described injured employee as third‑party beneficiary; did not decide validity of rejection where MVFRL inapplicable)
- Egan v. USI Mid‑Atlantic, Inc., 92 A.3d 1 (Pa. Super. Ct. 2014) (concluded §1731 mandates offering UM/UIM in commercial context)
- Douglas v. Discover Prop. & Cas. Ins. Co., 810 F. Supp. 2d 724 (M.D. Pa. 2011) (applied §1731 to a commercial policy; held expense concerns that informed Everhart’s §1738 decision do not preclude §1731 application)
- Byoung Suk An v. Victoria Fire & Cas. Co., 113 A.3d 1283 (Pa. Super. Ct. 2015) (upholding limited/low‑cost coverage structures as not contrary to public policy)