Meyers v. Travelers Insurance Company

597 F.Supp.3d 745

Ellen M. MEYERS, Plaintiff,

v.TRAVELERS INSURANCE COMPANY, Defendants.

CIVIL ACTION NO. 21-3291

United States District Court, E.D. Pennsylvania.

Filed April 6, 2022

James C. Haggerty, Hgsk, Philadelphia, PA, Timothy G. Daly, Daly & Clemente, P.C., King of Prussia, PA, for Plaintiff.

Brooks Foland, Marshall Dennehey Warner Coleman & Goggin, Camp Hill, PA, for Defendants.

OPINION

WENDY BEETLESTONE, District Judge In April 2018, Plaintiff Ellen M. Meyers suffered extensive injuries in a car accident in Chester County, Pennsylvania, for which she filed a number of insurance claims. The present action arises out of her dispute with Travelers Home and Marine Insurance Company ("Travelers") concerning the amount of underinsured motorist benefits she may recover under a car insurance policy issued by Travelers. The Parties filed dueling motions for summary judgment. Meyers seeks a declaratory judgment that certain language in the insurance policy violates Pennsylvania's Motor Vehicle Financial Responsibility Law, 75 Pa. C.S. §§ 1701 et seq. (the "MVFRL"), and public policy. Travelers seeks a declaratory judgment that its policy is valid, enforceable, and not against public policy. For the reasons that follow, Travelers’ Motion for Summary Judgment will be granted and Meyers’ Motion for Summary Judgment will be denied.

I. FACTUAL BACKGROUND

On April 29, 2018, Meyers was driving her Ford Flex in Phoenixville Borough, Chester County, when her car was struck by another vehicle at the intersection of Church Street and Gay Street. Meyers suffered extensive injuries from the accident and filed insurance claims under six different car insurance policies.

Meyers first received $100,000 under the other driver's tort liability policy, but this amount did not cover her injuries. Meyers therefore sought to recover underinsured motorist ("UIM") benefits, a type of insurance coverage that becomes available when "the tortfeasor lacks sufficient insurance coverage to compensate the insured in full." Gallagher v. GEICO Indem. Co. , 650 Pa. 600, 201 A.3d 131, 132 n.1 (2019).

At the time of the accident, Meyers was the named insured on four insurance policies that offered UIM benefits. Her first policy, issued by Erie Insurance Exchange ("Erie"), covered her Ford Flex. Erie paid Meyers $100,000, the stacked limit of UIM coverage under the policy. Meyers also held UIM coverage under two policies issued to her by Progressive Preferred Insurance Company ("Progressive") and one issued to her by AIG Property & Casualty Company ("AIG"). Together, Progressive and AIG paid her an additional $1,500,000 in stacked UIM benefits.

Thus, the insurance contracts issued by Erie, Progressive, and AIG all provided stacked UIM benefits. "Stacking" is "the practice of combining the insurance coverage of individual vehicles to increase the amount of total coverage available to an insured," like building blocks stacked on top of one another to make a tower. Gallagher , 201 A.3d at 132 n.1. Meyers recovered full UIM benefits from Erie, Progressive, and AIG, adding together their coverage to recover for her losses.

But there was one more insurance policy on which Meyers could make a UIM claim—a policy that did not provide stacked benefits. This unstacked policy was issued by Defendant to Meyers’ mother, Marie White, with whom Meyers resided at the time of the accident (the "Travelers Policy"). Travelers did not provide stacked UIM benefits because White had waived stacking.

Meyers filed a UIM claim under the Travelers Policy.¹ She expected to receive $300,000, the non-stacked UIM limit under the Policy. But Travelers took the position that Meyers was entitled to recover only $85,000, due to the operation of the Travelers Policy's "Other Insurance" clause.

The Other Insurance clause contains two subparts. As relevant to this case, the first subpart explains which insurers will have to pay first if an insured has UIM coverage under more than one policy. A "first priority" insurer is one that covers the vehicle that the insured was occupying at the time of the accident—in this case, Erie. A second priority insurer is one that provides UIM coverage to the insured as a "named insured" or "family member"—here, Progressive, AIG, and Travelers. An insured must exhaust her first priority UIM insurance before she can make any second priority claims (which Meyers did).²

The second subpart of the Other Insurance clause contains the operative language challenged by Meyers here. It implements the stacking waiver by explaining how much an insured can recover at the second priority level:

The maximum recovery under all policies in the Second priority may equal but not exceed the highest applicable limit of liability for any one vehicle under any one policy providing coverage to you or any "family member".

In other words, Travelers’ Other Insurance clause implements the stacking waiver by limiting maximum UIM coverage to the highest limit applicable under any of Meyers’ second priority policies.

In effect, this clause limited Meyers’ maximum UIM coverage under the Travelers Policy to $500,000 (AIG's policy limit), which was the "highest applicable limit of liability for any one vehicle" under any of the second priority policies.³ Because insurers at an equal level of priority are only responsible for their pro rata share of any claim, 75 Pa. C.S. § 1733(b), and Meyers had already recovered from the other second priority insurers, Travelers offered Meyers $85,000, its 17% pro rata share of the $500,000 maximum.

Meyers accepted payment of $85,000 as a partial release of her claim and filed a complaint in the Court of Common Pleas of Philadelphia County challenging the validity and enforceability of the Other Insurance clause. Travelers removed the suit to federal court. In November 2021, the Parties filed their summary judgment motions.

Meyers concedes that White waived stacking and she agrees that Travelers’ pro rata share of second priority coverage is 17%—but she contends that setting her total second priority maximum recovery at $500,000 would violate the MVFRL's "excess coverage" regime. She seeks a declaratory judgment that she is eligible to recover up to $300,000 in UIM benefits from Travelers and that "the Other Insurance language limiting the coverage benefit is void and unenforceable" under the MVFRL and public policy. She argues that the offset should be against the total value of her claim, not the total amount of coverage. Travelers seeks a declaratory judgment that Meyers is not entitled to any additional UIM recovery and that the Other Insurance clause is valid, enforceable, and not against public policy.

The Parties’ motions pose one question: May an insurer cap an insured's maximum non-stacked second priority UIM coverage at the highest liability limit applicable to any other second priority insurance held by the insured?

II. LEGAL STANDARDS

To prevail on a summary judgment motion, "the movant must show that ‘there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ " Nat'l State Bank v. Fed. Reserve Bank of N.Y. , 979 F.2d 1579, 1581 (3d Cir. 1992) (quoting Fed. R. Civ. P. 56(c) ). "A genuine issue is present when a reasonable trier of fact, viewing all of the record evidence, could rationally find in favor of the non-moving party in light of [the] burden of proof." Doe v. Abington Friends Sch. , 480 F.3d 252, 256 (3d Cir. 2007).

A federal court sitting in diversity applies state substantive law. Liggon-Redding v. Estate of Sugarman , 659 F.3d 258, 262 (3d Cir. 2011) (citing Erie R.R. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ). Under Pennsylvania law, car insurance policies are subject to general principles of contract interpretation, and courts must "ascertain the intent of the parties as manifested by the terms used in the written insurance policy." Gallagher , 201 A.3d at 137 (quoting 401 Fourth St., Inc. v. Inv'rs Ins. Grp. , 583 Pa. 445, 879 A.2d 166, 171 (2005) ). "An insurance contract must be construed as a whole, and not in discrete units." Luko v. Lloyd's London , 393 Pa.Super. 165, 573 A.2d 1139, 1142 (1990). The insurer "bears the burden of establishing the applicability of an exclusion in an insurance contract and exclusions are always strictly construed against the insurer and in favor of the insured." Nationwide Mut. Ins. Co. v. Cosenza , 258 F.3d 197, 206-07 (3d Cir. 2001) (internal citation omitted).

"Generally, courts must give plain meaning to a clear and unambiguous contract provision unless to do so would be contrary to a clearly expressed public policy." Burstein v. Prudential Prop. & Cas. Ins. Co. , 570 Pa. 177, 809 A.2d 204, 206 (2002). "[T]he application of public policy concerns in determining the validity of an insurance exclusion is dependent upon the factual circumstances presented in each case." Id. at 207. The Supreme Court of Pennsylvania "consistently ha[s] been reluctant to invalidate a contractual provision due to public policy concerns." Williams v. GEICO Gov't Emps. Ins. Co. , 613 Pa. 113, 32 A.3d 1195, 1200 (2011). "[A] challenger who asserts that clear and unambiguous contract provisions ... are void as against public policy carries a heavy burden of proof." Sayles v. Allstate Ins. Co. , 656 Pa. 99, 219 A.3d 1110, 1122-23 (2019). But "insurers do not have a right to rewrite or undercut state legislation or policy," Cosenza , 258 F.3d at 207, and "contracts cannot alter existing laws." Gallagher , 201 A.3d at 137. Therefore, "provisions of insurance contracts are invalid and unenforceable if they conflict with statutory mandates." Id.

III. DISCUSSION

A. The Public Policy of Excess Coverage

i. The Contours of Excess Coverage

Meyers’ main argument is that the liability cap contained in the Other Insurance clause violates the MVFRL's "excess coverage" regime.

Before examining this contention on the merits, it is necessary to discuss a...