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Costello v. Government Employees Insurance Co.

March 25, 2010


The opinion of the court was delivered by: Judge Vanaskie


This underinsured motorist insurance coverage and insurer bad faith action is before the Court on a Motion for Judgment on the Pleadings filed by Defendant Government Employees Insurance Company ("GEICO"). (Dkt. 10.)*fn1 Concluding that judgment in favor of GEICO is warranted on the insurance policy's "regular use" exclusion and on the statutory bad faith claim presented by Plaintiffs John J. Costello and his wife, Margaret, but that adjudication of Mr. Costello's "reasonable expectation" of coverage claim is premature, this Court will grant in part GEICO's motion, and schedule a conference call to establish deadlines for discovery and submission of any additional dispositive motions in this case.


Mr. Costello was employed as an Auditor II with the Auditor General's Office of the Commonwealth of Pennsylvania. On February 22, 2007, he was operating a 2003 Dodge Intrepid owned by the Commonwealth of Pennsylvania, while acting within the scope and course of his employment with the Commonwealth. (Complaint, Dkt. 1-3, at ¶ 5.)

On that day, at approximately 1:00 p.m., while stopped at or near the intersection of Harrison Avenue and Myrtle Street, in Scranton, Pennsylvania, the Commonwealth vehicle operated by Mr. Costello was rear-ended by a car driven by Warren David Cox. (Id. at ¶¶ 7-8.) The accident caused serious, permanent, and disabling injuries to Mr. Costello. (Id.)

As a result of these injuries, Mr. Costello has received medical care and been forced to incur various expenses to obtain treatment for his injuries. (Id. at ¶ 12.) Furthermore, Mr. Costello has lost earnings as a result of the accident and believes that he will be unable to work fully in the future. (Id. at ¶¶ 14-15.)

Prior to the accident, "Plaintiffs had purchased private automobile insurance coverage with [GEICO] which included underinsured [motorist] ("UIM") coverage of $100,000.00 stacked coverage for 2 vehicles...." (Id. at ¶ 24.) On or before October 17, 2007, Plaintiffs notified GEICO of the February 22, 2007 motor vehicle accident and GEICO properly opened, processed, and was paying "on a first party benefit claim being made by [Mr. Costello] for medical and wage loss benefits arising out of the subject accident." (Id. at ¶ 29.) On October 17, 2007, Plaintiffs counsel contacted GEICO to advise it of an underinsured motorist claim and to request a certified copy of Plaintiffs' personal automobile insurance policy in order to confirm what coverage was available and what procedures needed to be followed. (Id. at ¶ 30.)

On November 12, 2007, GEICO sent Plaintiffs their Declaration Sheet and a sample copy of the personal automobile insurance coverage. (Id. at ¶ 31.) That same date, GEICO raised the possibility of a "regular use" exclusion that could defeat Plaintiffs' UIM claim. (Id. at ¶ 32.)

On November 30, 2007, Plaintiffs advised GEICO that there was no Commonwealth of Pennsylvania underinsured motorist coverage for the vehicle he was operating at the time of the accident. (Id. at ¶ 33.) On December 3, 2007, Plaintiffs' counsel again requested that GEICO provide, in writing, with page citation, the policy language that established the "regular use exclusion." (Id. at ¶ 34.) On December 11, 2007, GEICO forwarded a sample policy, but did not provide in writing any type of citation, or a certified copy of Plaintiffs' personal automobile insurance policy that included a "regular use exclusion." (Id. at ¶ 35.) On January 31, February 13, and February 21, 2008, Plaintiffs' counsel again requested, in writing, that GEICO address the "regular use exclusion" language that was allegedly applicable to Plaintiffs' claim. (Id. at ¶¶ 36-39.) Finally, on March 6, 2008, GEICO directed Plaintiffs to the policy language containing the "regular use" exclusion.

On March 11, 2008, in response to GEICO's request for information, Mr. Costello provided a written report concerning his use of the Commonwealth vehicle that he was driving at the time of the accident. (Id. at ¶ 41.) On March 20, 2008, Plaintiffs provided GEICO with "full investigative file information" concerning the February 22, 2007 accident and all pre-existing and post-accident medical records and treatment notes of Mr. Costello. (Id. at ¶ 42.) Additional information concerning this request were provided on May 28, July 11, September 15, September 16, and September 26, 2008. (Id.) On July 1, 2008, Plaintiffs gave GEICO permission to allow UIM claim handlers to review Mr. Costello's first party benefit file with GEICO. (Id. at ¶ 43.) On April 20, 2009, GEICO advised Plaintiffs that it was declining any underinsured motorist payment pursuant to the UIM Coverage Endorsement Exclusion found in section 9. (Id. at ¶ 45.)

Plaintiffs initiated this action on April 22, 2009 in the Court of Common Pleas of Lackawanna County. Plaintiffs assert claims for (1) breach of contract; (2) bad faith; and (3) loss of consortium. (Comp., Dkt. 1-3.) GEICO removed the action to this Court on June 30, 2009, based on diversity of citizenship. (Dkt. 1.)

On July 29, 2009, GEICO filed a motion for judgment on the pleadings. (Dkt. 10.) The motion has been fully briefed and is ripe for review. Oral argument was held on the motion on Friday, March 19, 2010. (Dkt. 21.)


A. Standard of Review

The Supreme Court recently abrogated its longstanding decision in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), which had held that a complaint may be dismissed only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." The Court retired this "no set of facts" language in favor of a new standard: a plaintiff's obligation to state a claim for relief under Rule 8(a)(2) "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). As a result of Twombly, plaintiffs are required to nudge their claims "across the line from conceivable to plausible." Id. "A motion for judgment on the pleadings, like a motion to dismiss, will be granted if the plaintiff has not articulated enough facts to 'raise a right to relief above the speculative level.'" Bangura v. City of Philadelphia, 338 F. App'x 261, 264 (3d Cir. 2009).

Generally, in ruling on a motion to dismiss, a district court relies on the complaint, attached exhibits, and matters of public record. Sands v. McCormick, 502 F.3d 263 (3d Cir. 2007) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993)). The court may consider "undisputedly authentic document[s] that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] documents." Pension Benefits, 998 F.2d at 1196. Additionally, "documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered." Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002); see also U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002). However, the court may not rely on other parts of the record in making its decision. Jordan v. Fox, Rothchild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).

In this case, GEICO attached to its Answer to the Complaint certified copies of the automobile insurance policies purchased by Plaintiffs from May of 2005 through the date of the accident. GEICO also attached to its responsive pleadings the transcribed testimony of Mr. Costello and other pertinent documents. Plaintiffs do not contest the authenticity of the attachments to GEICO's Answer. Accordingly, the contents of those documents will be considered in determining whether GEICO is entitled to judgment on the pleadings.

B. Regular Use Exclusion

GEICO seeks judgment on the pleadings on the basis of the "regular use" exclusion. (Mt. J.P., Dkt. 11, at 10.) It is Plaintiffs' position that the Commonwealth vehicle was not regularly used by Mr. Costello, and consequently, GEICO's reliance on the regular use exception is misplaced. (Opp. Mt. J.P., Dkt. 14, at 19.)

"Regular use exclusions that limit UM/UIM coverage on certain vehicles... have been held valid under Pennsylvania law." Decker v. Nationwide Ins. Co.,1 Pa. D. & C. 5th 147 (Pa. D. & C. 2007) (citing Prudential Prop. & Cas. Ins. Co. v. Gisler, 806 A.2d 854 (Pa. 2002)). Moreover, the regular use exclusion does not violate public policy interests. See Calhoun v. Prudential Gen. Ins. Co., 1CV04-1576, 2005 WL 1154599, *1 ...

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