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November 02, 2022

Third Circuit Affirms State Farm's Win in UIM Coverage Dispute

In a case of significant importance to the insurance industry, the United States Court of Appeals for the Third Circuit has concluded that Pennsylvania's Motor Vehicle Financial Responsibility Law (“MVFRL”) does not require insurers to seek new sign down forms for lower underinsured motorists (”UIM”) coverage unless a new policy is issued, and elections of reduced UIM limits of coverage remain in effect when policyholders add vehicles to their existing policies.

Specifically, on September 29, 2022, the Third Circuit affirmed the Eastern District of Pennsylvania’s decision in Geist v. State Farm Mutual Automobile Insurance Company, --- F.4th ----, 2022 WL 4543231 (3d Cir. Sep. 29, 2022).  By way of brief background, Miranda Geist was injured in an automobile accident.  After discovering that the driver's insurance coverage could not compensate her for her injuries, she sought to recover UIM benefits under her parents' automobile insurance policy.  Her parents' insurer, State Farm Mutual Automobile Insurance Company (“State Farm”), offered her up to $100,000 in benefits, but Geist maintained that she was entitled to up to $200,000 in benefits because State Farm failed to seek a waiver to provide a UIM coverage limit below the bodily injury coverage limit when her father added a new vehicle to the policy.

Geist then sued State Farm and the District Court dismissed her complaint with prejudice, concluding that Pennsylvania's Motor Vehicle Financial Responsibility Law, Pa. Cons. Stat. §§ 1701-99.7 (“MVFRL”) does not require insurers to seek such elections of UIM coverage limits when policyholders add vehicles to their existing policies.

On appeal, the Third Circuit noted that Geist contended that the District Court misinterpreted sections 1731 and 1734 and that, contrary to the District Court's conclusion, these statutes require an insurer to obtain a written election to provide UIM coverage limits lower than bodily injury coverage limits when a policyholder adds a new vehicle to an existing automobile insurance policy, and, if the insurer fails to do so, it must provide UIM-coverage limits equal to the bodily injury-coverage limits. Geist at 2.  The Third Circuit disagreed and noted that Geist moved to certify this question to the Supreme Court of Pennsylvania, arguing that it should resolve this important question of first impression.  The Third Circuit stated that although Geist’s appeal presents a question of statutory interpretation that the Supreme Court of Pennsylvania has not yet resolved, the Third Circuit “need not certify this question, as we, for the reasons explained below, find that its answer is clear.” (Emphasis added). See Geist at n. 4.

The Third Circuit affirmed the District Court’s decision and held:

At bottom, we must adhere to the MVFRL's text.  See Blood v. Old Guard Ins. Co., 594 Pa. 151, 934 A.2d 1218, 1227 (Pa. 2007).  (“This Court is without authority to write new requirements into the MVFRL where the statutory language is without ambiguity.”).  Neither section 1731 nor section 1734 of the MVFRL required State Farm to seek a new written election of UIM-coverage limits when her parents insured a new vehicle, so Geist has failed to state a claim under Federal Rule of Civil Procedure 12(b)(6).

III.

The MVFRL requires insurers to seek elections of lower UIM-coverage limits only when they issue policies.  State Farm discharged this duty, and, as her father elected a UIM-coverage limit of $50,000, Geist may not recover any amount in excess of this limit.  For this reason, we will affirm the District Court's order.

In reaching its holding, the Third Circuit stated that Geist’s reliance on Barnard v. Travelers Home & Marine Insurance Co., 654 Pa. 604, 216 A.3d 1045 (Pa. 2019) “proves similarly unpersuasive.” (Emphasis added). Geist at 3.  The Third Circuit stated that while section 1738(c) provides that “[e]ach named insured purchasing uninsured or underinsured motorist coverage for more than one vehicle under a policy shall be provided the opportunity to waive the stacked limits of coverage,” section 1731(a) contains no similar language. (Emphasis added).  Instead, under that provision, the “deliver[y] or issu[ance] for delivery” of a “policy” triggers the opportunity to waive UIM coverage limits. Id. § 1731; see also id. § 1734 (allowing an insured to obtain lower UIM-coverage limits through a written request).

Therefore, the Third Circuit concluded that State Farm discharged its statutorily imposed duty in 2010, when Geist's parents sought an automobile insurance policy that included UIM coverage, and State Farm issued the Policy with UIM-coverage limits of $50,000 per person/$100,000 per accident after it received an executed written document that requested these limits. Geist at 3.  As State Farm never issued a new policy to her parents, the MVRFL never required State Farm to seek a new written election for lower UIM coverage limits under the Policy. Id.

This case is of great importance to the insurance industry, as the plaintiffs’ bar has argued that carriers were required to obtain new sign down forms when a new vehicle was added to the policy and that the failure to obtain new sign down forms required UIM limits in the amount of liability coverage despite the fact that the insured selected reduced UIM limits and paid a reduced premium for the lower UIM limits.  The Third Circuit’s decision in Geist states that the sign down forms selecting reduced UIM limits of coverage remain valid and enforceable even if new vehicles are added to a policy, as long as a new policy is not issued.  We note federal decisions are not binding on Pennsylvania state courts.

If you have any questions about this case or any other coverage issue, please contact Richard Yost, Esq. at ryost@c-wlaw.com, Suzanne Fisher, Esq. at sfisher@c-wlaw.com or Darren Harrison, Esq. at dharrison @c-wlaw.com.  All can be reached by phone at (610) 567-0700.

Disclaimer

The information in this article is provided for general informational purposes only and may not reflect the current law in your jurisdiction.  By reading this article, you understand that there is no attorney-client relationship between you and Cipriani & Werner, P.C. or any of our attorneys.  No information contained in this article should be construed as legal advice from Cipriani & Werner, P.C. or the individual authors.