Until 2005 in Pennsylvania, the Insurance Department would not approve for use any personal or commercial automobile policy unless it contained a clause requiring arbitration of uninsured (UM) and underinsured (UIM) motorist claims. In IFP v. Koken
, 889 A.2d 550 (Pa. 2005), the Insurance Federation of Pennsylvania challenged the authority of the Insurance Commissioner to mandate the inclusion of a mandatory arbitration clause for resolution of uninsured and underinsured motorist disputes in auto policies. The Supreme Court found that the Insurance Commissioner exceeded her express and implied authority in requiring arbitration of such claims. In so holding, the Court determined that insurers need not include mandatory arbitration clauses in auto policies in Pennsylvania. Koken
, 889 A.2d at 555. As a result most (if not all) insurers in Pennsylvania removed mandatory arbitration clauses from their personal and commercial automobile insurance policies. Accordingly, uninsured and underinsured motorist claims are now litigated in Court and not in arbitration.
With the advent of direct claims filed in the Court, the UM or UIM insurer now becomes a named defendant in a personal injury claim. As a result, numerous issues, not heretofore addressed in UM and UIM claims, must be faced. A brief overview of some of these important issues is set forth below.
In UM or UIM claims filed in Court, an issue arises regarding whether the jury is entitled to learn of the existence of insurance. Customarily, evidence of insurance is inadmissible at trial. See Greenwood v. Hildebrand
, 515 A.2d 963, 968 (Pa. Super. 1986), appeal denied, 528 A.2d 602 (Pa. 1987). In the UM or UIM motorist case, however, the insurer is often the only defendant. Thus, a question exists as to the manner in which insurance is to be handled at the time of trial. From the insurer’s point of view, there should be little or no mention of insurance coverage. Ideally, the matter should be tried as a standard tort action, much the same way that UM and UIM claims were handled in arbitration. At trial, however, the insurance company defendant must be identified, at a minimum, in voir dire. Efforts need to be taken to eliminate any other references to the insurance company or the availability of insurance during trial.
Tort v. Contract
An UM or UIM claim is essentially contractual in nature. See Boyle v. State Farm
, 456 A.2d 156 (Pa. Super. 1983). However, in the UM or UIM claim, the insurer stands in the shoes of the uninsured or underinsured tortfeasor. Thus, the claim essentially sounds in tort. From the point of view of the insurer, therefore, the case should be tried much the same as a standard tort action. Contractual principles should not be involved. There should be no reference to the existence of the insurance contract, the limits of coverage, the payment of premiums, etc. Similarly, other evidence, regarding slogans, duties of insurers, etc., should similarly be precluded from admission at the time of trial.
Molding of the Verdict
In the UM or UIM case at trial, the jury should not be given any information regarding the existence of a policy or the limits of coverage. In the UIM context, the settlement of the underlying tort case, and the credits to be applied, should similarly be withheld from evidence. Instead, an agreement should be sought between counsel to try the case as a traditional tort action, with the jury fully evaluating the case as a standard negligence claim. In such cases, the Court should then mold the verdict to account for the applicable credits (in the UIM claim) and the limits of coverage (in the UM and UIM matter). In this way, insurance information is kept from the jury, thereby eliminating prejudice.
Recently, Swartz Campbell, LLC served as trial counsel in one of the first post-Koken
cases to be tried in Philadelphia County. In Johnson v. Nationwide Insurance Company of America
, Court of Common Pleas of Philadelphia County, June Term, 2009, No. 3375, the plaintiff sought recovery of UIM benefits under a personal automobile policy of insurance. The tort action had been settled for $14,500. Thus, the UIM insurer was the sole defendant in the action.
Jordan S. Derringer and James C. Haggerty handled the matter on behalf of Nationwide. In this regard, a Motion in Limine was prepared. In that Motion, the following positions were asserted on behalf of the insurer:
- the UIM claims should be tried as a standard auto tort action;
- information regarding the existence of an insurance policy, the applicable policy limits and the terms of coverage should be excluded from evidence;
- no information regarding the underlying tort action should be given to the jury;
- premium payments and advertising slogan were irrelevant and inadmissible;
- any verdict should be molded to reflect the credits from the settlement of the tort action and the limits of UIM coverage.
These legal issues were presented to the Court prior to trial.
At trial, the Court accepted the position set forth by the insurer. Insurance was not mentioned at trial. Nonetheless, since the defendant was an insurance company, the insurer was identified in voir dire. Prospective jurors were questioned regarding their attitude toward insurance companies. During trial, however, there was no mention of insurance, policy limits, premiums or slogans. Similarly, the jury charge did not contain any mention of the presence of an insurer defendant. In fact, no charge was even given on the nature and existence of UIM coverage.
In this matter, the plaintiff had demanded $100,000 in settlement of her claims. No offer was extended. An issue also existed at trial as to the satisfaction of the limited tort threshold. In this regard, the plaintiff contended that she sustained a serious injury, thereby entitling her to damages for pain and suffering. The verdict slip presented to the jury stated:
Question 1: Was [the tortfeasor’s] negligence a factual cause in bringing about any harm to the Plaintiff?
If your answer to Question #1 is “Yes”, proceed to Question #2. If your answer to Question #1 is “No”, the Plaintiff cannot recover and you should not answer any further questions and you should return to the Courtroom.
Question 2: State the amount of recoverable lost-wages sustained by the Plaintiff as a result of the accident.
Proceed to Question #3.
Question 3: Do you find that the Plaintiff sustained a serious impairment of a body function as a result of the accident?
If your answer to Question #3 is “Yes”, proceed to Question #4
If you answer to Question #3 is “No”, the Plaintiff cannot recover any non-economic damages and you should not answer any further questions and should return to the Courtroom.
Question 4: State the amount of non-economic damages, if any, sustained by the Plaintiff as a result of the accident.
Following deliberations, the jury returned a verdict in favor of the plaintiff, awarding $2,000 in economic loss, i.e. lost wages and $2,150 in non-economic damages, i.e. pain and suffering. Accordingly, a Motion to Mold the verdict was presented to the Court, seeking to apply the credit from the settlement of the tort action. The Motion was granted and the verdict was molded to zero.
The ultimate result was favorable. The plaintiff received no UIM benefits. The result was facilitated by the identification of potential issues and the presentation to the Court of reasonable legal arguments by way of Motion in Limine prior to trial. Absent the adoption of uniform rules for the handling of post-Koken
cases by the Supreme Court, the issues will be individually addressed by the trial courts in each county. Consideration should be given to a uniform set of rules to govern the litigation in Court of post-Koken
cases. In the meantime, insurers need to closely monitor and carefully handle these cases in order to avoid unexpected results.
James C. Haggerty is a partner in the firm’s Philadelphia office and Jordan Derringer is an associate in the firm’s Philadelphia office. Both practice in the field of uninsured/underinsured motorists’ coverage.