Berardi v. USAA Gen. Indem. Co.

606 F.Supp.3d 158

Ernest J. BERARDI, individually and on behalf of a class of similarly situated persons

v.USAA GENERAL INDEMNITY COMPANY

Samantha Smith, individually and on behalf of a class of similarly situated persons

v.USAA Casualty Company

CIVIL ACTION NO. 22-813

CIVIL ACTION NO. 22-832

United States District Court, E.D. Pennsylvania.

Signed June 10, 2022

James C. Haggerty, Hgsk, Philadelphia, PA, Jonathan Shub, Shub Law Firm LLC, Haddonfield, NJ, for Ernest J. Berardi, Samantha Smith.

Lyle Washowich, Robert E. Dapper, Jr., Thomas M. Pohl, Daniel J. Twilla, Burns White LLC, Pittsburgh, PA, for USAA General Indemnity Company.

MEMORANDUM RE: DEFENDANTS’ MOTIONS TO DISMISS

Baylson, District Judge

I. Introduction

Defendants USAA General Indemnity Company and USAA Casualty Insurance Company¹ ("USAA") have filed Motions to Dismiss (Berardi ECF 5; Smith ECF 7) in this case arising from a dispute over vehicle insurance. Plaintiff Ernest J. Berardi and Plaintiff Samantha Smith each bring a putative class action on behalf of USAA customers who were allegedly defrauded and charged wrongful premiums by USAA. USAA moves to dismiss all claims.

Although Berardi and Smith have brought separate actions, the cases are virtually identical; the defendant in each case is essentially the same, the plaintiff in each case is represented by the same counsel, and the briefs contain the exact same arguments and assertions. The Court will therefore discuss and decide the cases together.

II. Background and Factual Allegations

As alleged by Plaintiffs, the events giving rise to this case are as follows. Ernest J. Berardi and Samantha Smith are Pennsylvania residents who purchased automobile insurance from, respectively, USAA General Indemnity Company and USAA Casualty Insurance Company. The companies are both based in Texas and are wholly-owned subsidiaries of USAA. (Berardi Compl. ¶¶ 1–2; Smith Compl. ¶¶ 1–2.) Berardi and Smith each own a single vehicle that is covered by the USAA insurance policy, and no one in either Berardi's or Smith's household owns any other vehicles or policies. (Berardi Compl. ¶¶ 9–10; Smith Compl. ¶¶ 9–10.)

In purchasing the USAA policies, Berardi and Smith each elected stacked uninsured/underinsured motorist (UM/UIM) coverage, for which they were each charged an additional premium. (Berardi Compl. ¶¶ 14–17; Smith Compl. ¶¶ 14–17.) UM/UIM insurance is a form of coverage that comes into play when a tortfeasor injures an insured person and the tortfeasor's own insurance coverage is either nonexistent or insufficient to fully compensate the injured insured person. The injured insured person may then draw upon UM/UIM coverage provided by their own insurer.

"Stacking" is the practice of allowing insurance coverage of individual vehicles to be combined to increase the total amount of coverage available to the insured; coverage for one vehicle can be "stacked" on the coverage for another vehicle.

Plaintiffs now bring suit against Defendants, alleging that, as single-vehicle owners with no other household policies, they do not benefit from stacked UM/UIM coverage and therefore should not have to pay a premium for it. Plaintiffs allege that USAA knew or should have known at the time it issued the policies that Berardi and Smith were single-vehicle owners with no other policies in their households. USAA should have accordingly advised Berardi and Smith that they would not benefit from stacked UM/UIM coverage, avers Plaintiff, but failed to do so. (Berardi Compl. ¶¶ 27–42; Smith Compl. ¶¶ 27–42.)

Plaintiffs each bring their action on behalf of a putative class of similarly situated USAA customers—single-vehicle owners with no other household policies—who elected and paid for stacked UM/UIM coverage. (Berardi Compl. ¶¶ 44–57; Smith Compl. ¶¶ 44–57.) Plaintiffs filed their suits in the Philadelphia Court of Common Pleas, and Defendants, pursuant to the Class Action Fairness Act, removed both to federal court (Berardi ECF 1; Smith ECF 1).

Plaintiffs bring the following Counts in each Complaint, some of which are styled as Counts but are actually requests for particular remedies:

1. Count I: Declaratory relief;

2. Count II: Return of premiums;

3. Count III: Unjust enrichment;

4. Count IV: Violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 P.S. § 201-1, et seq. ;

5. Count V: Fraud; and

6. Count VI: Injunctive relief.

Defendants seeks to dismiss both Complaints. Plaintiffs filed Responses (Berardi ECF 11; Smith ECF 12), and Defendants filed Replies (Berardi ECF 12; Smith ECF 13).

The Court held oral argument on the Motions on May 25, 2022. Counsel were well-prepared and reiterated the legal arguments made in the briefs, which the Court will address in turn. Plaintiffs’ counsel helpfully clarified the scope of Plaintiffs’ sought-after relief, explaining that Plaintiffs’ requested declaratory and injunctive relief would not require the Court to rewrite vehicle insurance contracts but only to say whether those contracts actually provide stacking benefits.

III. Legal Standard

In considering a motion to dismiss under Rule 12(b)(6), the Court must "accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff." Warren Gen. Hosp. v. Amgen, Inc., 643 F.3d 77, 84 (3d Cir. 2011) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002) ). To survive the motion, a plaintiff must "plead ‘sufficient factual matter to show that the claim is facially plausible,’ thus enabling ‘the court to draw the reasonable inference that the defendant is liable for misconduct alleged.’ " Id. (quoting Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) ). Importantly, "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

IV. Discussion

a. Declaratory and Injunctive Relief and Return of Premiums

Plaintiffs request that this Court issue a declaration stating that single-vehicle owners with no other household policies who purchased stacked UM/UIM coverage from USAA do not benefit from that coverage and that USAA is required to return to these customers the premiums they paid for stacked UM/UIM coverage. (Berardi Compl. ¶ 111; Smith Compl. ¶ 111.) In the same vein, Count II of Plaintiffs’ Complaints requests that the Court order USAA to return stacked UM/UIM coverage premiums paid by putative class members (Berardi Compl. ¶¶ 144–45; Smith Compl. ¶¶ 144–45), and Count VI of Plaintiffs’ Complaints requests an injunction prohibiting USAA from charging premiums for stacked UM/UIM coverage in policies purchased by single-vehicle owners with no other household policies. (Berardi Compl. ¶¶ 187–93; Smith Compl. ¶¶ 187–93.)

i. Stacked Coverage Requirement

Plaintiffs’ position is effectively at odds with well-established Pennsylvania law. Section 1738(a) of Pennsylvania's Motor Vehicle Financial Responsibility Law (MVFRL) provides that stacked UM/UIM coverage "is the default coverage available to every insured ... on all vehicles and all policies." Gallagher v. GEICO Indemnity Co., 650 Pa. 600, 201 A.3d 131, 137 (2019). To waive stacked UM/UIM coverage, "an insurer must provide the insured with a statutorily-prescribed waiver form, which the named insured must sign if he wishes to reject the default provision of stacked coverage." Id. Plaintiffs’ requested relief would seriously abrogate this regulatory scheme, which reflects "the clear intention of the General Assembly to compel insurers to provide stacking coverage absent a valid waiver." Craley v. State Farm Fire & Cas. Co., 586 Pa. 484, 895 A.2d 530, 539 (2006).

To support their argument, Plaintiffs cite the Pennsylvania Supreme Court's remark in Barnard v. Travelers that "for practical purposes, [the MVFRL] only requires insurance companies to offer stacking waivers when an insured obtains UIM coverage for multiple vehicles." 654 Pa. 604, 216 A.3d 1045, 1054 (2019). Barnard, however, cuts against Plaintiff's position, as, in the absence of a waiver, stacked UM/UIM coverage is the default under the MVFRL.

ii. Benefits of Stacked Coverage

As Plaintiffs’ counsel articulated at oral argument, Plaintiffs seeks to reconcile their position with Gallagher’s clear guidance by drawing a distinction between an insurer providing coverage and an insurer charging premiums for that coverage. In Plaintiffs’ framing, their legal theory would still allow USAA to provide default stacked UM/UIM coverage to single-vehicle owners without other household policies—as the MVFRL requires—but would prevent it from charging premiums for that coverage. This odd outcome is necessitated, Plaintiffs submit, by the principle that an insured should not be charged a premium for coverage they cannot benefit from, even when the insured has expressly elected that type of coverage. (Berardi MtD Resp. Br. 30–32; Smith MtD Resp. Br. 30–32.)

Contrary to Plaintiffs’ contention, a single-vehicle owner without other household policies may well derive benefit from stacked UM/UIM coverage. In Craley v. State Farm Fire & Casualty Company, the Pennsylvania Supreme Court noted this benefit in discussing the finding of Pennsylvania's Insurance Commissioner that

single-vehicle policy holders could obtain a real benefit from the provision of stacking ... where the individual is injured in a vehicle other than his own insured vehicle and is an insured under the non-owned vehicle's policy, which also has uninsured motorist coverage (such as an employer's vehicle).

895 A.2d at 537.

Plaintiffs argue that this apparent benefit of stacked UM/UIM coverage for a single-vehicle owner without other household policies is not actually a benefit of stacked coverage, asserting that the Pennsylvania Supreme Court's decision in Generette v. Donegal Mutual Insurance Company, 598 Pa. 505, 957 A.2d 1180 (2008), significantly narrowed the meaning of "stacking." (...