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Henderson v. Charter Oak Fire Insurance Co.

United States District Court, E.D. Pennsylvania

March 21, 2014



C. DARNELL JONES, II District Judge.


The within matter involves a dispute over underinsured motorist benefits relating to an automobile accident that occurred on October 12, 2010. Plaintiffs originally filed a Civil Action Complaint in the Philadelphia Court of Common Pleas, which sought declaratory relief, compensatory damages, and damages for loss of consortium. Defendants removed the action to this Court and at the conclusion of discovery, both sides filed motions for summary judgment. For the reasons set forth below, Defendants' Motion shall be granted and Plaintiffs' Motion shall be denied.


On October 12, 2010, Haverford Township employees Robert Henderson and Richard Barone were operating a motor vehicle owned by the Township and insured by Defendants when it was struck by another vehicle that was being operated by Stamatina Mylonas but was owned by Steven Mylonas and insured by Allstate Insurance Company. (Pls.' Stmt. Facts ¶¶ 2-3, 5, 10). Plaintiffs Henderson and Barone were seriously injured in the accident and subsequently sought recovery of damages from the Mylonases and Allstate. ( Id. at ¶¶ 4, 6). Allstate paid the $25, 000.00/$50, 000.00 liability limits of coverage available to Plaintiffs and the underlying tort claims were settled with the consent of Defendant Charter Oak. ( Id. at ¶¶ 6-7). Plaintiffs then sought Underinsured Motorist Coverage benefits from Defendants to further compensate for their injuries. ( Id. at ¶ 9). At the time of the accident, Haverford Township had an insurance policy with Defendants Charter Oak and Travelers Insurance which included $1, 000, 000.00 in primary liability coverage and $35, 000.00 in combined single limit ("CSL") of uninsured ("UM") and underinsured ("UIM") motorist coverage. ( Id. at ¶¶ 5-7). Charter Oak paid Plaintiffs the $35, 000.00 in Underinsured Motorist Coverage; $17, 500 each to Mr. Henderson and Mr. Barone. (Defs.' Stmt. Facts ¶ 8).


Under Fed.R.Civ.P. 56(c), summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a summary judgment as a matter of law." Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986); Fed.R.Civ.P. 56(c). In order to defeat a motion for summary judgment, disputes must be both (1) material, meaning concerning facts that will affect the outcome of the issue under substantive law, and (2) genuine, meaning the evidence must be such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex , 477 U.S. at 322-23. An issue is genuine if the fact finder could reasonably return a verdict in favor of the non-moving party with respect to that issue. Anderson , 477 U.S. at 248. In reviewing a motion for summary judgment, the court "does not make credibility determinations and must view facts and inferences in the light most favorable to the party opposing the motion." Seigel Transfer, Inc. v. Carrier Express, Inc., 54 F.3d 1125, 1127 (3d Cir. 1995).

"Whether a particular loss is within the coverage of an insurance policy is a question of law which may be decided on a motion for summary judgment in a declaratory judgment action." Allstate Ins. Co. v. Levell , Civ. No. 07-3790, 2008 U.S. Dist. LEXIS 101648, at *7 (E.D. Pa. Oct. 31, 2008) (quoting Lebanon Coach Co. v. Carolina Cas. Ins. Co ., 675 A.2d 279, 283 (Pa.Super. Ct. 1996)). Specifically,

A district court sitting in diversity must apply the substantive law of the forum state, here, Pennsylvania. In Pennsylvania, the court, not a jury, generally performs the function of interpreting an insurance contract. The initial burden lies with the insured to establish coverage under an insurance policy. When an insurer relies on a policy exclusion to deny coverage, however, it bears the burden of showing the exclusion applies. The court's task is to unearth the intention of the parties as evidenced by the words used in the insurance policy. The policy must be read as a whole and its meaning must be construed according to its plain language. Words of common usage are to be construed in their natural, plain, and ordinary sense, and a court is free to consult a dictionary to inform its understanding of terms. However, should the policy define certain terms, the court will apply those definitions in construing the policy. Courts must not assume that contractual language was chosen carelessly. When the language of an insurance policy is clear and unambiguous, a court must enforce that language.

Id. at *9-11 (citations omitted).

IV. Discussion

a. The Policies

Under Pennsylvania's Motor Vehicle Financial Responsibility Law ("MVFRL"), insurers must offer to its insured parties UM and UIM coverage equal to bodily injury liability limits. The insured parties may select UM/UIM at limits equal to or lower than the amount of bodily injury liability limits or may reject UM/UIM coverage altogether. Purchase of UM/UIM coverage is optional. 75 Pa.C.S.A. § 1731.[1] According to Section 1734 of the MVFRL, the named insured may request in writing to lower the limits of UM/UIM coverage below the amount of bodily injury liability limits coverage. 75 Pa.C.S.A. § 1734.

Plaintiffs herein assert the Township's selection of lower limits for the 2010-2011 policy year does not comply with the requirements of Section 1734 of the MVFRL because there is not a specific amount designated in writing , and thus, there is no effective selection of $35, 000.00 in lower limits. (Pls.' Mot. Summ. J. ¶¶ 36-38). Defendants maintain that the Township intended to select $35, 000 CSL for UM/UIM Coverage for the 2010-2011 year and that Charter Oak/Travelers accepted the Township's selection of lower limits as valid and in compliance with Section 1734 of the MVFRL (Defs.' Stmt. Facts ¶¶ 32-33).[2] As such, Defendants are asking this Court to enforce the terms of the insurance contract that the insurer and insured knowingly and intentionally entered into. (Defs.' Summ. J. Br. pp. 16-17).

Haverford had a policy with Travelers for six years. However, the two policy applications currently under consideration are the 2008-2009 application for the year of the current policy's inception and the 2010-2011 supplementary application for renewal of the policy during the year the accident occurred.

The August 1, 2008-August 1, 2009 application for Travelers contains a section titled "Uninsured and Underinsured Motorists Coverage Selection/Rejection, " which provides explanations and instructions for selecting lower limits or wholly rejecting UM/UIM coverage. The language explains that under Pennsylvania law,

You may reject Uninsured or Underinsured Motorist Coverage, or you may purchase Uninsured or Underinsured Motorist Coverage with limits equal to your Bodily Injury Liability Limits or select lower limits, but not less than the minimum limits required by statute ($15, 000 each person/$30, ...

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