Ford v. Progressive Specialty Ins. Co.

588 F.Supp.3d 589

Michael J. FORD, Plaintiff,

v.PROGRESSIVE SPECIALTY INSURANCE COMPANY, Defendant.

CIVIL ACTION NO. 21-04147

United States District Court, E.D. Pennsylvania.

Filed March 2, 2022

James C. Haggerty, Hgsk, Philadelphia, PA, Scott B. Cooper, Schmidt, Ronca & Kramer P.C., Harrisburg, PA, Jonathan Shub, Shub Law Firm LLC, Haddonfield, NJ, for Plaintiff.

Kymberly Kochis, Eversheds Sutherland (US) LLP, New York, NY, for Defendant.

OPINION

Slomsky, District Judge

I. INTRODUCTION

In Donovan v. State Farm, a decision by the Pennsylvania Supreme Court, Donovan suffered significant injuries during a collision of his motorcycle with an underinsured vehicle. 256 A.3d 1145, 1147 (Pa. 2021). He initially filed liability claims with two insurance companies. From the first insurance company, he recovered the $25,000 policy limit on the underinsured vehicle. Id. From the second insurance company, which insured his motorcycle, he recovered the $50,000 limit. Id. He believed that the $75,000 total was not adequate to compensate him for his injuries. Id. So he then sought to recover underinsured motorist benefits from his mother's insurance policy, where he was insured as a resident relative. Id. His mother's policy insured three vehicles, but not the motorcycle. Id. The underinsured motorist liability limits for each vehicle could have been stacked, but his mother had signed the stacking waiver form statutorily provided in 75 Pa. C.S.A § 1738(d),¹ a provision of the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL"). Id. Because of this signed waiver and the fact that his mother's policy also had a household vehicle exclusion, which bars coverage for a vehicle owned by a resident relative not insured under the Policy, the insurance company denied Donovan's claim under this policy. Id. at 1148. He then sought declaratory relief, claiming that the waiver provision in 75 Pa. C.S.A. § 1738(d) is not a knowing waiver of inter-policy stacking when policies insure multiple vehicles.

Based upon two other Pennsylvania Supreme Court cases, Gallagher v. GEICO Indemnity Company, 650 Pa. 600, 201 A.3d 131, 137 (2019) and Craley v. State Farm, 586 Pa. 484, 895 A.2d 530 (2006), the Donovan Court held as follows:

[W]e are bound by the language of Section 1738(d) ’s waiver form ... As highlighted in the majority and concurring opinions in Craley, this language informs insureds that they are waiving intra-policy stacking as they will not be provided the "sum of the limits for each motor vehicle under the policy." It does not, however, alert insureds that they are waiving the ability to stack the coverage for which premiums were paid in "this policy" on top of the coverage available under a separate policy.

...

After review, we find the logic of the case at bar indistinguishable from that in Gallagher. In both cases, the insured did not validly waive inter-policy stacking. Whether the insured did not sign a waiver, as in Gallagher, or signed a deficient waiver as to inter-policy stacking, as in [ Donovan ], the result is the same: the policy defaults to inter-policy stacking of UM/UIM² coverage. In either case, the household vehicle exclusion cannot operate as a de facto waiver of inter-policy stacking because it fails to provide the insured with a knowing waiver of that coverage.

Id. at 1158, 1160 (emphasis added).

In this case, Plaintiff Michael Ford ("Plaintiff") was driving his motorcycle and collided with an underinsured vehicle. He received the $15,000 in liability coverage from the insurance company insuring the underinsured vehicle. (Compl. ¶¶ 6, 13, 19.) Plaintiff also had two of his own insurance policies: one at Progressive Preferred Insurance Company covering his motorcycle and another at a different insurance company, Defendant Progressive Specialty Insurance Company ("Defendant"). Two other vehicles were insured by Defendant. (Id. ¶¶ 14-17, 25-26.) The company insuring the motorcycle paid the full amount of coverage, $25,000. (Id. ¶¶ 22-23.) However, Defendant declined to pay any underinsured benefits, claiming that Plaintiff waived inter-policy stacking under 75 Pa. C.S. § 1738(d) by signing the waiver. Thereafter, Plaintiff, on behalf of himself and putative class members, commenced this action, seeking a declaratory judgment in Count I and asserting a claim for breach of contract in Count II against Defendant for breaching the insurance policy by not paying the stacked coverage under its insurance policy. (See Doc. No. 1.)³

Given the Donovan holding, the parties agree in this case that the facts here are similar to those in Donovan and that Donovan would ordinarily apply and resolve liability coverage. Defendant contends, however, that the holding in Donovan is not retroactive because it creates a new rule of law and therefore the signed stacking waiver is enforceable (see Doc. No. 6-1 at 11). Plaintiff claims that Donovan applies retroactively (see Doc. No. 7 at 7). If Donovan is retroactive, Plaintiff has sufficiently alleged a valid claim for breach of contract at the motion to dismiss stage.

In a diversity of citizenship jurisdiction case, this Court must predict whether the Pennsylvania Supreme Court will apply Donovan retroactively.⁴ Based upon the analysis that follows, this Court predicts that the Pennsylvania Supreme Court will hold that Donovan is retroactive. Consequently, Plaintiff does state a claim here against Defendant for breach of contract and will survive the Motion to Dismiss the Complaint, which is before the Court for disposition.

In the same Motion, Defendant submits that the request for a declaratory judgment in the Complaint is duplicative of the breach of contract claim and should be dismissed. (Id. at 3.) Although the Court disagrees with Defendant on the retroactivity issue, it agrees with Defendant that the declaratory judgment action is duplicative of the breach of contract claim and should be dismissed.

II. FACTUAL BACKGROUND

This case seeks declaratory and compensatory relief in connection with Plaintiff's insurance claims arising from a motor vehicle accident that occurred on August 13, 2020. (Doc. No. 7-1 at 1.) Plaintiff was operating his Honda motorcycle when he was struck by a car driven by Steven Johnson ("Johnson"). (Id. ) Johnson was operating a vehicle insured by the Bristol West Insurance Company ("Bristol West"). (Id. ) After the collision, Plaintiff made a claim upon Bristol West for recovery of damages in tort. (Id. ) Bristol West paid Plaintiff the $15,000 liability limit of coverage under Johnson's policy. (Id. ) Thereafter, Plaintiff made claims upon his two insurance policies for underinsured motorist benefits: 1) Progressive Preferred Insurance Company ("Progressive Preferred"), which insured his motorcycle, and 2) Defendant, which insured two other household vehicles. (Id. ) Progressive Preferred paid the $25,000 limit of underinsured motorist benefits under the motorcycle policy. As to his other vehicle policy, Defendant denied the claim because: 1) Plaintiff waived stacking of underinsured motorist benefits under the policy;⁵ and 2) the household regular use exclusion applied. (Id. ¶ 26.)⁶

In August 2021, Plaintiff filed his Complaint, on behalf of himself and potential class members. (See generally Doc. No. 1-1.) Count I is a claim for declaratory relief, seeking a declaration that, because of the Donovan decision, his claim under the Policy for underinsured motorist benefits is not barred by the stacking waiver or the household regular use exclusion. (Id. ¶¶ 114, 124.) He requests the same declaration on behalf of "each member of the class." (Id. ¶ 125.) While Plaintiff has not moved for class certification at this time, his filings signal that he intends to seek certification of a class under Federal Rule of Civil Procedure 23(b)(2), which permits class certification where a defendant "has acted or refused to act on grounds that apply generally to the class, so that final injunctive or corresponding declaratory relief is appropriate respecting the class as a whole." (See, e.g., Doc. No. 16 at 7) (citations omitted).

Count II is a claim for breach of contract on behalf of both himself and putative class members. (Id. at 25.) The parties do not dispute that the Policy is a valid contract. Like the request for a declaratory judgment, the claim is based on the denial of underinsured motorist benefits under the Policy. (Id. ¶ 138.) As noted, the crux of the dispute is whether the Donovan decision, decided in August 2021, can be applied retroactively to Plaintiff's insurance claim, which arose in 2020. As also noted, Plaintiff argues that if the decision is applied retroactively, he states a claim for breach of contract because Defendant breached the insurance policy when it denied him underinsured motorist benefits. Defendant argues that the decision should not be applied retroactively.

III. LEGAL BACKGROUND

Section 1738 of the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL") provides for the stacking of uninsured and underinsured motorist benefits:

(a) Limit for each vehicle.--When more than one vehicle is insured under one or more policies providing uninsured or underinsured motorist coverage, the stated limit for uninsured or underinsured coverage shall apply separately to each vehicle so insured. The limits of coverages available under this subchapter for an insured shall be the sum of the limits for each motor vehicle as to which the injured person is an insured.

(b) Waiver.--Notwithstanding the provisions of subsection (a), a named insured may waive coverage providing stacking of uninsured or underinsured coverages in which case the limits of coverage available under the policy for an insured shall be the stated limits for the motor vehicle as to which the injured person is an insured.

75 Pa. C.S.A § 1738(a) - (b). To effectuate the waiver outlined in subsection (b), the insured must sign the statutorily prescribed...