If an insurance policyholder wants to collect reimbursement for expenses tied to investigating a claim, he or she had better make a claim for them, a divided state Superior Court has ruled in a putative class action suit.
In so holding, the 2-1 panel rejected the appeal of Cathy L. Albert, and all others similarly situated, who argued her insurance company became obligated to reimburse her for the $114 she incurred in lost wages and travel expenses as a result of appearing at a deposition at her insurer’s request.
The court also declined to endorse Albert’s theory that, by hiring a lawyer to represent her, Erie Insurance Exchange triggered a duty of disclosure that she was entitled to expenses under her policy. Erie hired the lawyer after Albert was named an additional defendant in a lawsuit stemming from the underlying motor vehicle accident.
Albert’s lawsuit against Erie alleged breach of contract and bad faith and sought a declaratory judgment that the policy language imposes an affirmative duty on Erie to notify policyholders like herself of the provisions on reimbursement of lost wages and travel expenses. A Philadelphia judge dismissed the claim on preliminary objections.
There was no dispute in the case of Albert v. Erie Insurance Exchange that the policy allowed for recovery of such expenses. (Her policy promised to pay the "reasonable expenses anyone we protect may incur at our request to help us investigate or defend a claim or suit," including up to $100 a day for lost earnings.) Rather, the crux of the appeal was whether Albert was required to make a demand for the expenses or if the policy required Erie to notify her of the reimbursement provision.
The trial court held the policy language imposes no duty on Erie to inform policyholders of their reimbursement and further held the policy does, in fact, impose a duty on the policyholder to come forward with such a claim. The trial court also dismissed Albert’s complaint for lack of specificity.
The majority, led by Judge Anne Lazarus, agreed with the trial court that Albert failed to allege facts supporting the conclusion that Erie breached its contract with her.
Having failed to state a cause of action based on the policy language, Albert further argued that Erie had an implied duty to advise insureds of the potential reimbursement under the policy.
Relying on the 1994 Pennsylvania Supreme Court case Miller v. Keystone, the trial court dismissed that claim. In Miller, the state’s highest court held that, absent evidence of fraud or intentional deception, an insurance company does not have a duty to advise its insureds of every potential claim that could exist under a certain policy.
Albert argued that when Erie appointed a lawyer to represent her as the additional defendant, the company undertook the same type of "’voluntary undertaking to provide assistance and advice’" that the Miller court found was required to create a duty of disclosure.
The majority disagreed.
"The policy itself sets forth the obligation that the insurer has undertaken to provide an attorney to defend the insured," Lazarus said. "Nothing in the policy would lead an insured to believe that, by assuming her defense in litigation, counsel is obligated to advise her with respect to other matters."
The plaintiff also argued the trial court’s holding that Erie had no obligation to inform her of the reimbursement provision ran counter to a provision in the Uniform Insurance Practices Act stating "an insurer or agent may not fail to disclose to first-party claimants benefits, coverages or other provisions of an insurance policy or insurance contract under which a claim is presented."
But Lazarus rejected that argument, noting that case law in Pennsylvania has set forth the UIPA, which is vested in the Pennsylvania Department of Insurance, does not create a private cause of action.
Another argument — that the trial court erred by holding that Albert’s failure to establish a cause of action for breach of contract precluded her from recovering for bad faith — failed as well.
The ruling came over a concurring and dissenting opinion from Senior Judge Robert E. Colville, who agreed the trial court properly sustained Erie’s preliminary objections as to the bad-faith claim, but said he would not have dismissed the claim for breach of contract at this stage in the litigation.
After reviewing the policy, Colville said the relevant provision does not impose a duty on the policyholder to notify Erie and, therefore, the case required further proceedings.
"The policy is silent as to the mechanism triggering Erie’s obligation to
reimburse a policyholder for expenses incurred at Erie’s request. Thus, it is not clear from the record that a demurrer should be sustained with regard to Albert’s breach of contract and declaratory judgment claims."
Albert’s attorney, Howard G. Silverman of Kane & Silverman in Philadelphia, did not return calls requesting comment.
R. Bruce Morrison of Marshall, Dennehey, Warner, Coleman & Goggin in Philadelphia represented Erie and could not be reached for comment.
(Copies of the 16-page opinion in Albert v. Erie Insurance Exchange, PICS No. 13-0731, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •