Rarick v. Federated Serv. Ins. Co.

325 F.Supp.3d 590

Bryan RARICK, individually and on behalf of a class of similarly situated persons, Plaintiff,

v.FEDERATED SERVICE INSURANCE COMPANY, Defendant.

No. 2:13-cv-03286

United States District Court, E.D. Pennsylvania.

Filed July 10, 2018

James C. Haggerty, Suzanne Tighe, Haggerty Goldberg Schleifer & Kupersmith PC, Philadelphia, PA, Paul D. Brandes, Villari, Brandes & Giannone, P.C., Conshohocken, PA, for Plaintiff.

Gale White, Anthony L. Miscioscia, David E. Edwards, White and Williams LLP, James C. Haggerty, Haggerty Goldberg Schleifer & Kupersmith PC, Philadelphia, PA, Charles E. Spevacek, Tiffany M. Brown, Meagher & Geer PLLP, Minneapolis, MN, for Defendant.

OPINION

Plaintiff's Motion for Partial Summary Judgment, ECF No. 65—Denied

Defendant's Motion for Summary Judgment, ECF No. 66—Granted

Joseph F. Leeson, Jr., United States District Judge

While driving a truck owned and insured by his employer, Keystone Automotive Operations, Inc., Plaintiff Bryan Rarick was injured in a car accident in 2011. He sought to recover for his injuries from the truck's insurer, Defendant Federated Mutual Insurance Co., under the Uninsured Motorist/Underinsured Motorist ("UM/UIM") provisions of Keystone's policy. Federated denied his claim because Keystone had rejected UM/UIM coverage for all those insured by its commercial policy, except owners, managers, and their families. Rarick brought this action challenging Federated's denial of benefits as a violation of Pennsylvania insurance law. This opinion addresses cross-motions for Summary Judgment filed by Rarick and Federated. For the reasons set forth below, this Court denies Rarick's Motion for Partial Summary Judgment and grants Federated's Motion for Summary Judgment.

I. FACTS & PROCEDURAL BACKGROUND

The following facts are taken from the Joint Stipulation of Facts.

On June 27, 2011, Rarick was driving a truck owned by his employer, Keystone Automotive Operations, Inc. ("Keystone"). Stip. Facts ¶ 1, ECF No. 62. Keystone was the holder of a commercial automotive insurance policy issued by Federated, intended to cover the vehicles owned by Keystone. Id. ¶ 2. It is important to note from the outset that a default insurance policy carries with it Uninsured Motorist and Underinsured Motorist ("UM/UIM") benefits pursuant to the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL"). See 75 Pa. Cons. Stat. § 1731(a). In order for these benefits to be excluded from a policy, they must be properly rejected pursuant to the MVFRL. See id. §§ 1731(b) - (c).While operating a vehicle covered by the policy, Rarick was involved in an accident. Stip. Facts ¶ 1. Rarick filed a claim under the Federated policy on January 18, 2013, which Federated denied by letter on January 25, 2013 because the policy excluded UM/UIM benefits for employees. Id. ¶ 3, 5. Rarick then requested a copy of the UM/UIM section of the policy. Id. ¶ 6. After commencing this action against Federated, Rarick requested, via email, a copy of the UM/UIM rejection form for the Keystone policy. Id. ¶ 9. Federated provided the forms the following day, August 6, 2013. Both the UM/UIM rejection form and the UM/UIM Endorsements and Declarations attached to the Keystone Policy state that UM/UIM coverage has been rejected for employees but elected for directors, officers, partners, owners, and their family members. See Stip. Facts Ex. A at 39; Stip. Facts Ex. I at 1-2. Rarick is not a director, officer, partner, or owner, of Keystone, nor is he a family member of such. Stip. Facts ¶ 15-16.

Rarick filed this action primarily claiming that the coverage scheme created by Federated is unlawful under the MVFRL. See Notice of Removal Ex. A. ¶ 37-38, ECF No. 1 [hereinafter "Complaint"]. He asserts that UM/UIM benefits must be either rejected for all insureds under a policy or accepted for all insured under a policy. See Pl.'s Supp. Mem. 5, 11-15, ECF No. 65-1. Rarick has since filed a Motion for Partial Summary Judgment on the grounds that (1) the coverage scheme is unlawful under the MVFRL, (2) the delayed production of the rejection form means that Federated is estopped from relying on it, and (3) the policy is ambiguous. See id. 2-3.

Federated filed a Motion for Summary Judgment on the grounds that (1) Rarick does not have standing to challenge the rejection of UM/UIM benefits, (2) the UM/UIM rejection is compliant in both form and substance, (3) the rejection is unambiguous, and (4) Federated is not estopped from asserting the valid rejection as a defense. See Def.'s Supp. Mem. 2-3, ECF No. 66-1.

II. LEGAL STANDARD

Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c) ; Turner v. Schering-Plough Corp. , 901 F.2d 335, 340 (3d Cir. 1990). A disputed fact is "material" if proof of its existence or nonexistence would affect the outcome of the case under applicable substantive law, and a dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The party moving for summary judgment bears the burden of showing the absence of a genuine issue as to any material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Once such a showing has been made, the non-moving party must go beyond the pleadings with affidavits, depositions, answers to interrogatories or the like in order to demonstrate specific material facts which give rise to a genuine issue. Fed. R. Civ. P. 56 ; Celotex , 477 U.S. at 324, 106 S.Ct. 2548 ; Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (stating that the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts"). The party opposing the motion must produce evidence to show the existence of every element essential to its case, which it bears the burden of proving at trial, because "a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex , 477 U.S. at 323, 106 S.Ct. 2548 ; see also Harter v. G.A.F. Corp. , 967 F.2d 846, 851 (3d Cir. 1992). "Inferences should be drawn in the light most favorable to the non-moving party, and where the non-moving party's evidence contradicts the movant's, then the non-movant's must be taken as true." Big Apple BMW, Inc. v. BMW of N. Am. Inc. , 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied , 507 U.S. 912, 113 S.Ct. 1262, 122 L.Ed.2d 659 (1993).

III. ANALYSIS

A. A third-party beneficiary has standing to challenge the statutory validity of a waiver of UM/UIM benefits.

Federated alleges that Rarick does not have statutory standing to challenge the rejection of UM/UIM benefits. See Def.'s Supp. Mem. 20, ECF No. 66-1. Federated argues that only those who appear as a "named insured" in the policy have standing to challenge the rejection. Id.

Pennsylvania courts recognize that "a party seeking judicial resolution of a controversy in this Commonwealth must, as a prerequisite, establish that he has standing to maintain the action." Nye v. Erie Ins. Exch. , 504 Pa. 3, 470 A.2d 98, 100 (1983) (citing William Penn Parking Garage, Inc. v. City of Pittsburgh , 464 Pa. 168, 346 A.2d 269, 280-81 (1975) ). "A person who is not adversely affected in any way by the matter he seeks to challenge is not aggrieved thereby...." Id. Because this Court is sitting in diversity and hearing a state law question, it must keep in mind that "[w]hen the state's highest court has not addressed the precise issue presented, a federal court must predict how the state's highest court would resolve the issue." Travelers Indem. Co. v. Stengel , 512 F. App’x 249, 250-51 (3d Cir. 2013) (citing Orson, Inc. v. Miramax Film Corp. , 79 F.3d 1358, 1373 (3d Cir. 1996) ). Here, the Pennsylvania Supreme Court has not addressed this issue, and thus, it is the duty of this Court to predict how the Pennsylvania Supreme Court would rule.

Federated argues that recent Pennsylvania Superior Court cases stand for the proposition that individuals who are not named insureds on a policy, like Rarick, do not have standing to challenge a waiver of UM/UIM benefits by a named insured. See Def.'s Supp. Mem. 20. Federated first cites to Peters v. National Interstate Insurance Co. , a 2015 case that involved an employee who was attempting to make a claim against his employer's insurer for UM/UIM benefits following an accident. 108 A.3d 38, 41 (Pa. Super. Ct. 2014). The court began by noting that "an injured person who makes a claim for uninsured motorist benefits under a policy to which he is not a signatory is ... a third party beneficiary." Id. at 46 (citing Egan v. USI Mid-Atlantic, Inc. , 92 A.3d 1, 20 (Pa. Super. Ct. 2014) ).¹ Further, the court concluded that because the employee was not a "named insured," he had no "legally cognizable claim of UIM coverage"² where the coverage had been rejected by a named insured. Id. (citing Been v. Empire Fire & Marine Ins. Co. , 751 A.2d 238 (Pa. Super. Ct. 2000) ).

However, Peters did not reach the issue that is central to Rarick's claim because the Pennsylvania MVFRL did not apply to the driver, an Ohio resident, nor the car, an Ohio-registered vehicle that was principally garaged in Ohio. Id. at 45. While Peters stated that a third-party beneficiary has "no legally cognizable claim of UIM coverage" where it had been rejected, the court did not decide whether the rejection of the UIM benefits was legally adequate. Id. ("However, we need not reach the question of the legal adequacy of the rejection form, because, as we have already decided, the Pennsylvania MVFRL does not apply to Appellees."). By...