"> April 2011 Bad Faith Cases | Insurer's Waiver Form is Non-Compliant

April 2011 Bad Faith Cases: Bad Faith Claim Survives Summary Judgement When Insurer’s Waiver Form is Non-Compliant and Non-Binding on Insured(Middle District)

In Grassetti v. Property & Casualty Insurance Company, the insured was in a serious car accident while driving in Florida in 2007.  The driver of the other vehicle was never identified and was therefore considered an uninsured driver.  Under his insurance policy, the insurer allegedly agreed to pay compensatory damages up $50,000 per vehicle for injuries inflicted upon the insured by the operator of an uninsured vehicle.  Because the insured had two vehicles, the total compensatory damages available would be $100,000.
The insured filed a two-count Complaint in state court (the action was later removed to federal court).  He first asserted a breach of contract claim based on the insurer’s failure to pay $100,000.00 in compensatory damages.  The second court of the Complaint was a bad faith allegation, as the insured alleged that the insurer denied his claim for uninsured motorist (“UM”) benefits knowing it had no reasonable basis for the denial, in violation Pennsylvania’s Bad Faith Statute, 42 Pa. Cons. Stat. Ann. § 8371.  The insurer filed a motion to dismiss the second count for bad faith.
The main issue before the court was a waiver the insured signed that served as a rejection of UM coverage.  The insured asserted that this waiver did not comply with Motor Vehicle Financial Responsibility Law (“MVFRL”), 75 Pa. Cons. Stat. Ann. § 1731(b).  The statute states that insurers must offer UM coverage that compensates individuals for damages sustained in accidents with uninsured or underinsured vehicles.  The purchase of UM coverage is optional, but to refuse such coverage, “an insured must sign rejection forms whose precise language is dictated by statute.”
In this case, the insurer incorrectly restated the precise language prescribed by the MVFRL, as it wrote the words “uninsured motorist coverage” instead of “uninsured coverage.”  Citing precedent where the Pennsylvania Superior Court held that an insurer’s similar coverage waiver was null and void for failure to comply with the MVFRL, the court here held that the waiver was invalid.  The insurer had thus adequately alleged that the insurer withheld payment upon a claim without a reasonable basis and that it did so knowing it did not have a reasonable basis.  The court therefore denied the insurer’s motion for summary judgment.
Date of Decision:  April 20, 2011
Grassetti v. Property & Cas. Ins. Co., No. 3:10cv2068, United States District Court for the Middle District of Pennsylvania, 2011 U.S. Dist. LEXIS 42731, (Apr. 20, 2011) (Munley, J.)