A jury may decide whether a change to a Pennsylvania man’s automobile insurance policy, namely the addition of a “household exclusion” limitation, was a “material change,” or one that is more typical for such policies, a question that could ultimately determine whether the plaintiff may claim underinsured motorist benefits for an accident he was in several years ago.
The ruling from Lawrence County Court of Common Pleas Judge Thomas M. Piccione is one of several pretrial decisions in Oesterling v. Allstate Insurance. Earlier this year, President Judge Dominick Motto said Allstate Insurance Co. did not act in bad faith by denying UIM coverage to Robert Oesterling, whose policy was changed to incorporate the household exclusion in 2005, even though Oesterling’s original policy from 1998 did not have such a provision. Oesterling was injured in an accident in 2006 while riding a motor scooter that was not covered under his Allstate policy. He received notice of the addition of the household exclusion to his policy via an Allstate mailer, but has contested the adequacy of Allstate’s notice.
With the bad-faith claim disposed of (though it could be raised on appeal, Oesterling’s lawyer said), there was still the issue of whether he could pursue UIM coverage, despite the exclusion. According to Piccione, a competing body of case law left genuine issues of fact fit for a jury to decide regarding Allstate’s notice requirements.
“When an insured specifically requests and pays for a type of coverage and the insurer unilaterally reduces the coverage requested, the insurer should have the responsibility to advise the insured that the [coverage] desired has been limited in his policy,” Piccione said. “Conversely, when the ‘insured receives precisely the coverage that he requested but failed to read the policy to discover clauses that are the usual incident of the coverage applied for,’ the burden is on the insured to read the policy to discover such exclusions.”
Piccione was quoting Tonkovic v. State Farm Mutual Automobile Insurance, in which the state Supreme Court ruled that an insurer may not unilaterally change an insured’s coverage without an “affirmative showing” the client was notified of and, more importantly, understood the change.
That case was the basis of Oesterling’s argument.
The defense argued the state Superior Court’s 2006 decision in Donegal Mutual Insurance v. Baumhammers, widely read for its impact on insurance policy litigation, rendered Oesterling’s understanding of his policy irrelevant. Allstate’s position was that it mailed the policy changes, which were expressed in clear and unambiguous terms, to the plaintiff, and that Allstate instructed him to read the changes and contact his insurance agent if he had any questions, which he did not.
Piccione acknowledged the exclusion applied, but questioned whether the addition of the household exclusion was a material change that “significantly altered” Oesterling’s policy, so much that a heightened level of notice would be incumbent on Allstate.
“However, if the exclusion was one typical of such an insurance policy, the plaintiff would have the burden to read and discover any limitations in coverage,” Piccione said. “Such [a] determination is one of fact to be decided by the jury.”
According to the opinion, Oesterling was injured in a 2006 collision on his Honda motor scooter that he had insured with another company, Liberty Mutual. Oesterling collected $15,000 from the other driver’s insurance company and another $15,000 in UIM coverage from Liberty Mutual.
He then requested UIM coverage from Allstate, which insured two other vehicles Oesterling owned. But Allstate denied the claim under the household exclusion.
Apparently, Oesterling’s original policy, issued in 1998, would have provided him with coverage. According to the opinion, the policy provided him with up to $200,000 in UIM coverage and did not feature a household exclusion, which essentially blocks coverage for vehicles owned by the insured (or a member of his or her home) but not covered under the policy.
And in 2005, Allstate notified Oesterling of the change adding the household exclusion. According to the opinion, the notice came in a mailer with “Important Notice” written in large, bold print.
“There is unsettled law between two separate lines of cases and I think it’s a good opportunity for the appellate courts to add some clarification to it,” said Oesterling’s attorney Peter C. Acker.
Acker said his client, who is in his seventies, always wanted to make sure he had the most coverage for all of his vehicles.
“They go to great lengths to tell you all the great things they do and then they minimize the ways they peel coverage away,” he added, referring to insurance companies.
David J. Obermeier of Dickie, McCamey & Chilcote, who is representing Allstate, could not be reached for comment.
In February, Motto, in granting partial summary judgment to Allstate on the bad-faith issue, said Allstate’s mailer indicating the policy had changed was “at least arguably sufficient and proper” to get the message across.
In the first of three rounds of motions for summary judgment, a previous motion was granted in part and denied in part in 2011, leaving the claims sounding in negligence, contract, declaratory judgment and bad faith remaining, Piccione said. Summary judgment as to the bad-faith claim was denied, he added, because of inadequate briefing. A motion for summary judgment solely pertaining to bad faith followed, which Motto granted in February of last year.
With Piccione’s most recent ruling on December 17, the case appears to have the green light for trial.
(Copies of the 10-page opinion in Oesterling v. Allstate Insurance, PICS No. 12-2427, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.)