Timothy Rupert v. Liberty Mutual Insurance Company

BECKER, Chief Judge,

dissenting.

I share Judge Fuentes’ frustration that we must revisit this case and his hope that the Pennsylvania Supreme Court will soon resolve the issue. Since we “write on quicksand,” Maj. op. at 244, I will write succinctly. In my view, Justice Cappy’s views best reflect Pennsylvania law. The critical part of his rationale is as follows:

The legislature placed the burden of obtaining a valid rejection of stacked coverage on the insurance company: The rejection forms in § 1738(d) must be signed and dated by the first named insured, or else the rejection of stacked coverage is void. 75 Pa.C.S. § 1738(e). It is evident that the General Assembly sought to ensure that policyholders would be given full information regarding availability of stacked coverage before deciding whether or not to reject it. Cf. Salazar v. Allstate Insurance Co., 549 Pa. 658, 702 A.2d 1038, 1044 (1997) (sections 1731, 1791 and 1791.1 describe information that insurer must provide “in order that the insured may make a knowing and intelligent decision on whether to waive [uninsured motorists] benefits coverage”).
The question with which we are presented in this matter involves the effect of a valid waiver by the first named insured. The Opinion of Mr. Justice Zappala finds that the validity of a waiver of uninsured motorists coverage is determined “at the inception of the policy.” Yet this language appears nowhere in section 1738. Moreover, under this *250expansive view, a rejection form signed “at the inception of the policy” indefinitely binds all future insureds, including those added long after the original first named insured is removed from the policy; these subsequent insureds are not even minimally afforded constructive knowledge of the option to reject stacked coverage. This troubling result does not follow if the insurer has obtained a rejection form from the current first named insured, whose signature would reject coverage for all those insureds currently on the policy. In light of the legislative goal of ensuring knowledgeable rejection of coverage, and the conclusive effect of the first named insured’s signature upon other insureds, it is of paramount importance that any new first named insureds receive the notice prescribed by § 1738.

Rupert, 781 A.2d at 135-36.

I find this reasoning persuasive. In my view, by rendering the notion of constructive knowledge almost infinitely elastic, Judge Fuentes has placed more weight on it than it can bear, especially in the context of the particular legislative provision at issue, which is part of a statutory scheme (Pennsylvania’s Motor Vehicle Financial Responsibility Law (“the MVFRL”), 75 Pa. C.S. §§ 1701-99) whose “underlying objective” is “to provide broad coverage to assure the financial integrity of the policyholder.” Danko v. Erie Ins. Exch., 428 Pa.Super. 223, 229, 630 A.2d 1219 (1993), aff'd, 538 Pa. 572, 649 A.2d 935 (1994).

Consistent with this objective, the Pennsylvania courts, pursuant to their statutory obligations to construe statutes to effectuate the intent of the legislature, see 1 Pa.C.S. § 1921(a), and to construe statutes liberally in order to promote justice, see 1 Pa.C.S. § 1928(c), have concluded that the MVFRL ought to be interpreted so as to “afford[ ] the injured claimant the greatest possible coverage.” Motorists Ins. Cos. v. Emig, 444 Pa.Super. 524, 538, 664 A.2d 559 (1995). Accordingly, “[i]n close or doubtful cases,” the MVFRL and insurance policies issued in compliance with it should be construed “to favor coverage for the insured.” Id.

As evidenced by the Pennsylvania Supreme Court’s 3-3 split, this case is clearly “close” and “doubtful.” Justice Cappy’s interpretation of § 1738 as requiring that a valid waiver of stacking be executed by the current first named insured is the construction that would afford Timothy, the injured claimant here, “the greatest possible coverage.” As Justice Cappy explained, the very detailed requirements of § 1738 are designed to “ensur[e] knowledgeable rejection of coverage.” Rupert, 781 A.2d at 135 (emphasis added). Consequently, even if ruling for Timothy rewards him for being ignorant as to the terms of the policy, such a result appears to be consistent with § 1738’s purpose of protecting insureds from unintentionally waiving stacked coverage.

Additionally, comparing what the legislature did not state in § 1738 with what it did state in other provisions of the MVFRL informs our resolution of this issue. Section 1791, for instance, which prescribes the notice requirements for insurance policies, explicitly provides that an insured is presumed to have knowledge of the policy’s benefits and limits so long as notice was provided to him “at the time of application for original coverage.” Section 1738, on the other hand, does not contain any similar express presumption that a waiver signed by the first named insured at the inception of coverage is to remain valid throughout the policy’s lifetime.1

*251Finally, I am not convinced that allowing Timothy to reap the benefits of stacked coverage would compromise the legislative goal of reducing insurance costs, as Judge Fuentes intimates. Rather, whatever increased costs that might result from a holding in favor of Timothy would be negligible, for were we to rule in Timothy’s favor, Pennsylvania insurers, as rational profit-maximizing firms, would henceforth always seek the consent of the current first named insured in policies that have waived UM stacking coverage. The unique problem presented by this case, therefore, would not arise again.

For these reasons, I respectfully dissent.

. It is instructive to contrast this case with our decision in Nationwide Mutual Insurance *251Co. v. Buffetta, 230 F.3d 634 (3d Cir.2000). Like the case at bar, Buffetta involved a married couple that was once insured on the same automobile policy. Mr. Buffetta was originally the sole "named insured” while his wife was on the policy as a "driver.” As the sole named insured, Mr. Buffetta chose to increase the policy's bodily injury liability limits, but declined to increase the policy’s uninsured motorist ("UM”) coverage. Under the MVFRL, an insurance company must provide UM coverage at a level equal to the policy’s bodily injury coverage unless the insured requests a reduction by executing an Uninsured Motorist Coverage Authorization Form (a "waive down”). See 75 Pa.C.S. §§ 1731, 1734. Consequently, in order to avoid the increase in UM coverage concomitant to the increase in his bodily injury liability limit, Mr. Buffetta executed the required waive down.

A year later, the Buffettas divorced, and Mrs. Buffetta took title to the car. She then changed the insurance policy to be in her name alone. Soon thereafter, Mrs. Buffetta’s father, who lived in her house and was covered by the policy, was killed in an automobile accident with an uninsured driver. Mrs. Buffetta made a claim on the policy, contending that the limits of the UM coverage should not be the lower amount approved by her husband, but rather the full liability limit of the policy because she had not personally executed the waive down.

The court held that Mrs. Buffetta was bound by her ex-husband's waive down, its opinion focusing on the "permissive terms” of § 1734's waive down provision as it relates to the insurer’s responsibilities. Id. at 641. The panel noted that § 1734, "by its terms, does not require anything to be done by an insurer to permit the reduction in the amount of UIM coverage under a policy,” id. at 639, but rather that it "provides that ‘a named insured may request in writing the issuance of coverages ... in amounts equal to or less than the limits of the liability for bodily injury.’ ” Id. (quoting § 1734) (alteration in original).

The statute at issue in this case, in contrast, is not written in "permissive terms.” Instead, § 1738 imposes various requirements on the insurer for a valid waiver of stacking. For instance, unlike § 1734, § 1738 requires that an opportunity for waiver of stacking be provided to the insured. In short, Buffetta does not control the outcome of this case because its holding was in large part based on the fact that § 1734 never required the insurer to take any affirmative steps to provide the insured with the opportunity to reduce UM coverage, whereas § 1738, the relevant statutory provision in the case at bar, clearly imposes affirmative obligations on the insurer.