Articles Posted in Insurance Law

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No fiduciary duty arises in a consumer transaction for the purchase of a whole life insurance policy based upon the advice of a financial advisor where the consumer purchasing the policy does not cede decision -making control over the purchase to the financial advisor. In 1995, Bryan Holland, a financial advisor for IDS Life Insurance Corporation, made an unsolicited telephone contact, a "cold call," to Eugene and Ruth Yenchi. At a subsequent meeting and for a fee of $350, Holland presented the Yenchis with a financial management proposal containing a notice that it had been prepared by "your American Express financial advisor" (Holland) and that "[alt your request, your American Express financial advisor can recommend products distributed by American Express Financial Advisors and its affiliates as investment alternatives for existing securities." The Proposal offered the Yenchis a number of general recommendations, including that they monitor monthly expenses, consolidate their debt, consider various savings plans, consolidate current life insurance policies into one policy, review long-term care coverage, keep accurate records for tax purposes (medical expenses and charitable contributions), transfer 401(k) funds into mutual funds, and continue estate planning with an attorney and their financial advisor. The Yenchis implemented some of these recommendations. In 2000, the Yenchis had their portfolio independently reviewed. Through this process, they were advised that Holland’s recommendations would be financially devastating to the Yenchis. In April 2001, the Yenchis sued Holland and his company, American Express Financial Services Corporation, American Express Financial Advisors Corporation, and IDS Life Insurance Company. The Yenchis' asserted claims of negligence/willful disregard, fraudulent misrepresentation, violation of the Uniform Trade Practices and Consumer Protection Law ("UTPCPL"), bad faith, negligent supervision, and breach of fiduciary duty. Of relevance here, with respect to the breach of fiduciary duty claim, the trial court held that no fiduciary relationship was established between the Yenchis and Holland because the Yenchis continued to make their own investment decisions. The Pennsylvania Supreme Court concluded that, consistent with its jurisprudence, no fiduciary duty arose in such a situation. Consequently, the Court reversed the Superior Court's decision to the contrary. View "Yenchi v. Ameriprise Financial" on Justia Law

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Pertinent to this appeal, the Motor Vehicle Financial Responsibility Law (“MVFRL”) required insurers to offer insureds Underinsured Motorist coverage. Subsection 1731(c.1) of the MVFRL stated that any UIM coverage rejection form that does not “specifically comply” with Section 1731 of the MVFRL was void and that, if an insurer failed to produce a valid UIM coverage rejection form, then UIM coverage shall be equal to the policy’s bodily injury liability limits. The Pennsylvania Supreme Court granted allowance of appeal in this matter to determine whether an insurer’s UIM coverage rejection form “specifically compl[ied]” with Section 1731 of the MVFRL if the insurer’s form was not a verbatim reproduction of the statutory rejection form found in Subsection 1731(c) of the MVFRL but, rather, differed from the statutory form in an inconsequential manner. The Court held that a UIM coverage rejection form specifically complies with Section 1731 of the MVFRL even if the form contains de minimis deviations from the statutory form. Because the Superior Court reached the proper result in this case, the Supreme Court affirmed that court’s judgment. View "Ford v. American States Ins." on Justia Law

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From 2010 to 2012, Appellant Freedom Medical Supply, Inc. (“Freedom”), provided electrical muscle stimulators (“EMSs”) and portable whirlpools to automobile accident victims covered by Appellee State Farm Fire and Casualty Company and/or State Farm Mutual Automobile Insurance Company (collectively, “State Farm”). Notably, although Freedom purchased these items for relatively little cost, it applied significant markups. As found by the United States District Court for the Eastern District of Pennsylvania herein, Freedom purchased the EMSs for approximately $20 to $30 each, yet charged approximately $1,525 to $1,600 each, and purchased the whirlpools for approximately $40 each, yet charged approximately $525 each. Because neither the EMSs nor portable whirlpools have a federally-determined Medicare fee, Freedom sought reimbursement from State Farm for 80% of the foregoing charges. State Farm denied Freedom's claims, and the district court ultimately agreed with State Farm when Freedom filed suit. Freedom appealed to the United States Court of Appeals for the Third Circuit, which, noting that no Pennsylvania court or agency has addressed the question, sought to certify to the Pennsylvania Supreme Court. The question presented was: "[m]ay an insurer use methods not specifically identified in [the Motor Vehicle Financial Responsibility Law (MVFRL)] to calculate the 'usual and customary' charge for devices and services not listed on the Medicare Fee Schedule for purposes of determining the amount to be paid to providers of those devices and services?" In answer to the question submitted, the Supreme Court held that Section 69.43(c) of the MVFRL permitted, but did not require, that reimbursements be calculated predicated on the provider’s bill for services or the data collected by the carrier. View "Freedom Medical Supply v. State Farm" on Justia Law

Posted in: Insurance Law

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This appeal centered on the availability of attorneys’ fee awards against insurance companies that have invoked the peer-review provisions of the Motor Vehicle Financial Responsibility Law (MVFRL). In 2004, Angela LaSelva sustained injuries in a motor vehicle accident. She was treated by a licensed chiropractor, David Novatnak, D.C., who practiced with appellee Doctor’s Choice Physical Medicine and Rehabilitation Center, P.C. (“Provider”). Provider submitted invoices for the services directly to LaSelva’s first-party benefits insurance carrier, Appellant Travelers Personal Insurance Company (“Insurer”), as required per the Motor Vehicle Financial Responsibility Law. Insurer later requested peer review through IMX Medical Management Services (“IMX”), a peer review organization (“PRO”). IMX, in turn, enlisted Mark Cavallo, D.C., to conduct the peer review. Dr. Cavallo issued a report deeming certain of the treatments provided by Dr. Novatnak to have been unnecessary. Based on this report, Insurer denied reimbursement for the treatment aspects deemed as excessive. Provider opposed this withholding and commenced a civil action against Insurer. Among other things, the complaint alleged that all treatments undertaken through Provider were reasonable and necessary and that the review conducted by IMX did not comport with the mandates of Section 1797 of the MVFRL. Furthermore, Provider asserted that IMX failed to comply with requirements of the Pennsylvania Code directing PROs to apply national or regional norms in their determinations or, where such norms do not exist, to establish written criteria to be used in conducting reviews. As relevant here, the complaint included a specific demand for attorneys’ fees. After a bench trial, the common pleas court entered a verdict in the Provider’s favor, encompassing an award of attorneys’ fees of approximately $39,000. On appeal, the Superior Court reversed the decision to strike the fee award. The Supreme Court reversed the Superior Court: "the Superior Court’s cryptic pronouncement of 'absurdity' [regarding fee-shifting] that lacks foundation. . . . This Court remains cognizant of the shortcomings of the peer-review regime. We have no reasonable means, however, of assessing the degree to which these may be offset by the benefits of cost containment and potentially lower insurance premiums available to the public at large. Rather, the Legislature is invested with the implements to conduct investigations, hearings, and open deliberations to address such salient policy matters. In such landscape, we decline to deviate from conventional statutory interpretation to advance directed policy aims." View "Doctor's Choice v. Traveler's Personal Ins." on Justia Law

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The Pennsylvania Supreme Court granted review to consider an issue of first impression regarding whether an insured forfeits insurance coverage by settling a tort claim without the consent of its insurer, when the insurer defends the insured subject to a reservation of rights, asserting that the claims may not be covered by the policy. In 1994, a class action lawsuit was filed against Appellant-Insureds Babcock & Wilcox Company (B&W) and Atlantic Richfield Company (ARCO) (collectively, Insureds) brought by plaintiffs claiming to have suffered bodily injury and property damage caused by emissions from nuclear facilities owned by Insureds. Over time, the class action grew to include over 500 named plaintiffs, who lived near the nuclear facilities. Insureds denied that the facilities released any emissions or that the harm suffered by plaintiffs resulted from the facilities. While the underlying tort action was pending in federal court, disputes arose between Insureds and their insurers, Appellees American Nuclear Insurers and Mutual Atomic Energy Liability Underwriters (collectively ANI or Insurer). At the outset of the litigation, Insurer acknowledged that it would defend Insureds but contested whether the policy covered aspects of the claims, and thus defended subject to a reservation of rights. While staying various claims for future determination, including the breach of the duty to cooperate claim, the court decided issues regarding the trigger of coverage and held that B&W and ARCO were entitled to separate counsel. During the course of the litigation, Insurer refused consent to any settlement offers presented to it due to its conclusion that the case had a strong likelihood of a defense verdict given the lack of medical and scientific support for plaintiffs’ claims and decisions by the federal trial court regarding procedural and evidentiary issues in the pending retrial, which Insurer viewed as highly favorable to Insureds’ ultimate outcome. After presenting the settlement offers to Insurer and being denied consent, Insureds ARCO and B&W, respectively in 2008 and 2009, settled with the class action plaintiffs for a total of $80 million, which was substantially less than the $320 million of potential coverage. Insureds then sought reimbursement of the settlement amount from Insurer. The Supreme Court found that after an extensive trial where the jury was presented with voluminous evidence relating to the strength of the underlying action and the settlement offer, the jury determined that the settlement was “fair and reasonable from the perspective of a reasonably prudent person in the same position of [Insureds] and in light of the totality of the circumstances,” a standard which the Court adopted as the proper standard to apply in a reservation of rights case where an insured settles following the insurers’ refusal to consent to settlement. The Court concluded that the Superior Court erred by requiring an insured to demonstrate bad faith when the insured accepts a settlement offer in a reservation of rights case. Accordingly, the Superior Court's decision was reversed and the trial court's judgment reinstated. View "Babcock & Wilcox Co. v. American Nuclear Insurers & Mutual Atomic Energy Liability Underwriters" on Justia Law

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Penn Treaty Network America Insurance Company (“PTNA”) and its subsidiary, American Network Insurance Company (“ANIC”) (collectively, the “Companies”), were Pennsylvania life insurers specializing in long-term care insurance, covering skilled-nursing, nursing home, and assisted living and home health care for individuals with chronic illnesses or disabilities. In January 2009, the Commonwealth Court ordered the rehabilitation of the Companies, upon application of then-Insurance Commissioner Joel Ario, who cited the consent of both entities as the sole grounds for the orders of rehabilitation. Nine months after entry of the rehabilitation order, however, Commissioner Ario filed petitions to covert the Companies’ rehabilitations into liquidations. The Commonwealth Court, per a single-judge proceeding, conducted hearings spanning thirty days of testimony and encompassing the submission of thousands of pages of exhibits and documentary evidence. In May 2012, the Commonwealth Court entered an order denying the petitions to liquidate and directed the Commissioner to develop a plan of rehabilitation within ninety days. The Commonwealth Court concluded the Rehabilitator’s evidence did not show that a rehabilitation was tried and failed. "Rather, it showed that a rehabilitation plan was abandoned in its nascency. In short, the Rehabilitator did not prove that continued rehabilitation substantially increases the risk to policyholders, creditors and the public or is futile." A critical facet of the Commonwealth Court’s opinion concerned the degree of deference owing to a statutory rehabilitator on consideration of a conversion petition. The Commissioner challenged the Commonwealth Court’s decision in such regard, namely, that the court’s no-deference determination was, in fact, inconsistent with the case which it had referenced as being supportive. The Supreme Court affirmed: "In all events, deference does not require the courts to accede to a misuse of the process. In light of the above, and the former Commissioner’s accession at the outset of the rehabilitation proceedings that liquidations would be harmful to policyholders, as well as the Commonwealth Court’s supported finding that there is no present harm in moving forward in rehabilitation, we decline to impede that court’s review of the rehabilitation plan which it directed should be filed, and which has now been submitted. The judicial review, however, should proceed subject to a more deferential overlay relative to the new acting Commissioner." View "In Re: Penn Treaty Network" on Justia Law

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In 2009, George Lawrence, while employed by Schneider National Inc., suffered a work-related injury when he slipped and fell in a parking lot leased by Domtar Paper Company, and allegedly owned and maintained by Commercial Net Lease Realty Services, Inc., Commercial Net Lease Realty Trust, Commercial Net Lease Realty, Inc., National Retail Properties, Inc., and National Retail Properties Trust. As a result of this injury, Schneider's workers' compensation carrier, Liberty Mutual Insurance Company, paid Lawrence $33,929.23 in workers' compensation benefits. The issue this case presented for the Supreme Court's review centered on whether section 319 of the Pennsylvania Workers' Compensation Act (WCA) conferred on employers or their workers' compensation insurers a right to pursue a subrogation claim directly against a third-party tortfeasor when the injured employee took no action against the tortfeasor. Based on established precedent, the Superior Court held that Section 319 did not permit employers/insurers to commence an action directly against the third-party tortfeasor, and affirmed the trial court's grant of preliminary objections in favor of the tortfeasors. Agreeing with that reasoning, the Supreme Court affirmed. View "Liberty Mutual Ins. Co. v. Domtar Paper Co." on Justia Law

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In this matter, Appellants John and Kathy St. John challenged the Superior Court’s decision to affirm a declaratory judgment order finding Pennsylvania National Mutual Casualty Insurance Company (“Penn National”) liable for a judgment against its insured LPH Plumbing and Heating under a commercial general liability (CGL) insurance policy in effect from July 1, 2003 to July 1, 2004. The Supreme Court granted review to determine whether, under the facts of this case and the policy language at issue, Penn National was instead liable for the judgment against its insured under a separate policy of CGL insurance as well as a companion umbrella policy in effect from July 1, 2005 to July 1, 2006. Furthermore, the Court also considered whether the multiple trigger theory of liability insurance coverage (adopted by the Supreme Court in "J.H. France Refractories Co. v. Allstate Ins. Co.," 626 A.2d 502 (Pa. 1993)), within the context of asbestos bodily injury claims applied in this case, where property damage was continuous and progressive, to trigger coverage under all policies in effect from exposure to the harmful condition to manifestation of the injury. After review, the Supreme Court affirmed all aspects of the lower court’s decision finding that coverage was triggered under the policy in effect from July 1, 2003 to July 1, 2004, when property damage became reasonably apparent, and declining to apply the multiple trigger theory of liability insurance coverage. View "PA Natl Mut Casualty v. St. John" on Justia Law

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In 2007, Jared Wolfe was injured when his vehicle was hit from behind by an automobile driven by Karl Zierle. Wolfe attributed blame to Zierle and demanded $25,000 from Zierle’s insurer carrier, Appellant Allstate Property and Casualty Insurance Company, equating to half the liability limits under the applicable policy. Allstate counteroffered $1,200, which Wolfe refused. Wolfe then instituted a personal injury action against Zierle seeking compensatory damages grounded in negligence. Allstate assumed Zierle’s defense while maintaining its additional right, under the policy, to effectuate a settlement. The Pennsylvania Supreme Court accepted certification from a federal appeals court to clarify whether, under Pennsylvania law, an insured may assign the right to recover damages from his insurance company deriving from the insurer’s bad faith toward the insured. The Court concluded that the entitlement to assert damages under Pennsylvania law may be assigned by an insured to an injured plaintiff and judgment creditor such as Wolfe. Having answered the certified question, the Court returned the matter to the federal court. View "Allstate Prop & Casualty Ins Co. v. Wolfe" on Justia Law

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In an interlocutory appeal, the issues before the Supreme Court were: (1) whether a negligence claim brought against an insurer by its insureds for alleged statements made by the insurer’s adjuster and an engineer the insurer had retained (that mold the insureds discovered while performing home renovations was harmless and that they should continue their renovations) was barred by the “gist of the action” doctrine on the grounds that the true gist or gravamen of the action was an alleged breach of the insurance contract (their homeowners’ policy); and (2) whether the provisions of Pa.R.C.P. 1042.1 and 1042.3 required the insureds to obtain a certificate of merit in order for them to proceed with their negligence suit against the professional engineer employed by the insurer to evaluate the mold. After careful review, the Supreme Court held that the insureds’ negligence claim was not barred by the gist of the action doctrine, as the claim was based on an alleged breach of a social duty imposed by the law of torts, and not a breach of a duty created by the underlying contract of insurance. Furthermore, the Court concluded that the insureds were not required to obtain a certificate of merit in order to proceed with their negligence suit against the professional engineer, since they were not patients or clients of the engineering company which employed him. Consequently, the Court reversed the Superior Court and remanded for further proceedings. View "Bruno v. Erie Insurance" on Justia Law