Travelers Indemnity v. DiBartolo ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
3-18-1999
Travelers Indemnity v. DiBartolo
Precedential or Non-Precedential:
Docket 98-1589
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Recommended Citation
"Travelers Indemnity v. DiBartolo" (1999). 1999 Decisions. Paper 69.
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Filed March 18, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NO. 98-1589
TRAVELERS INDEMNITY COMPANY
OF ILLINOIS
v.
JOSEPH N. DIBARTOLO, Appellant
On Appeal From the United States District Court
For the Eastern District of Pennsylvania
(D.C. Civ. No. 96-cv-06238)
District Judge: Honorable Harvey Bartle, III
Argued: January 28, 1999
Before: BECKER, Chief Judge, SCIRICA and ROSENN,
Circuit Judges.
(Filed March 18, 1999)
BRUCE MARTIN GINSBURG,
ESQUIRE
GREGORY D. DiCARLO, ESQUIRE
(ARGUED)
Ginsburg & Associates
2112 Walnut Street
Philadelphia, PA 19103
Counsel for Appellant
CONRAD J.J. RADCLIFFE, ESQUIRE
R. BRUCE MORRISON, ESQUIRE
(ARGUED)
Marshall, Dennehey, Warner,
Coleman & Goggin
1845 Walnut Street
Philadelphia, PA 19103
Counsel for Appellee
OPINION OF THE COURT
BECKER, Chief Judge.
This case requires us to predict whether the Pennsylvania
Supreme Court would hold that Pennsylvania law allows a
corporation to waive uninsured/underinsured motorist
("UM") coverage for its employees under a company
insurance policy. If we decide that it can, we must then
address whether the District Court properly granted
summary judgment on the ground that the corporation in
this case did so waive. We answer both questions in the
affirmative; hence we affirm the judgment of the District
Court.1
I. Facts & Procedural History
The basic facts are simple. In the scope and course of his
employment, Joseph DiBartolo was driving a vehicle owned
and insured by his employer, Knight-Ridder Inc. ("KRI"),
when he was injured in an accident. DiBartolo does not
own a personal vehicle, and so his only auto insurance
comes through KRI. The car that struck him was uninsured
as defined by Pennsylvania law.
Travelers Indemnity Co. ("Travelers"), KRI's insurer,
_________________________________________________________________
1. While we considered certifying the corporate waiver question to the
Pennsylvania Supreme Court pursuant to its order, see No. 197 Judicial
Admin. Dkt. No. 1 (Pa. Oct. 28, 1998), we concluded that the issue was
neither sufficiently important nor sufficiently difficult to command the
attention of that tribunal.
2
brought a declaratory action to determine whether Travelers
is obliged to provide him with uninsured motorist benefits
despite KRI's attempts to waive such coverage. The District
Court first granted summary judgment for Travelers
on the ground that workers' compensation was
DiBartolo's exclusive remedy. We reversed, predicting that
Pennsylvania would hold to the contrary, see Travelers
Indemnity Co. v. DiBartolo, 131 F.3d 343 (3d Cir. 1997)
(DiBartolo I),2 and on remand the District Court again
granted summary judgment for Travelers because it found
that KRI had validly waived UM coverage for its insureds.
See Travelers Indemnity Co. v. DiBartolo, No. 96-6238, 1998
U.S. Dist. LEXIS 10060 (E.D. Pa. June 24, 1998) (DiBartolo
II).
II. Corporate Waiver
In 1990, Pennsylvania enacted the Motor Vehicle
Financial Responsibility Law ("MVFRL") to control rapidly
increasing insurance costs. See Nationwide Mut. Ins. Co. v.
Cummings, 652 A.2d 1338 (Pa. Super. Ct. 1994). At that
time, UM coverage became completely waivable in
Pennsylvania, and KRI signed UM coverage rejection forms
that year.
Under 75 Pa. Cons. Stat. S 1731(a) (1997), the amount of
UM coverage is automatically equal to the bodily injury
limits of a policy unless the insured effectively exercises the
option to lower or waive such coverage. The law specifies
the appropriate waiver language:
By signing this waiver I am rejecting uninsured
motorist coverage under this policy, for myself and all
relatives residing in my household. Uninsured coverage
protects me and relatives living in my household for
losses and damages suffered if injury is caused by the
negligence of a driver who does not have any insurance
to pay for losses and damages. I knowingly and
voluntarily reject this coverage.
_________________________________________________________________
2. Our prediction was recently confirmed by the Pennsylvania Supreme
Court in Gardner v. Erie Insurance Co., 109 W.D. Appeal Dkt. 1997,
1999 Pa. LEXIS 154 (Pa. Jan. 26, 1999).
3
75 Pa. Cons. Stat. S 1731(b).3
Such was the language of the waiver KRI executed, but
DiBartolo, noting that KRI is a corporation, argues that the
plain text of the waiver language ("I," "myself," "[my]
relatives residing in my household") indicates that the
legislature must have envisioned the waiver to apply only to
personal auto insurance policies. Because the legislature
never explained how a corporation could waive UM
coverage, he argues that a corporation cannot waive, or
that at least all covered employees must join in the waiver
for it to be effective as to them. DiBartolo also invokes the
principle that the MVFRL is to be construed liberally in
close cases to afford injured plaintiffs the greatest possible
coverage. See Danko v. Erie Ins. Exchange, 630 A.2d 1219,
1222 (Pa. Super. Ct. 1993), aff'd, 649 A.2d 935 (Pa. 1994).
He notes that state public policy disfavors waiver unless the
law is strictly followed. That principle, however, goes to how
easy it is to waive and not to who may waive.
The District Court found that the "linguistic style of the
rejection form, designed for easy comprehension," does not
evidence a legislative intent to prohibit corporations or
other legal entities from executing a waiver.4 DiBartolo II,
1998 U.S. Dist. LEXIS 10060, at *6. We agree. Section
1731(b) specifically provides that "[t]he named insured shall
be informed that he may reject uninsured motorist coverage
by signing the following written rejection form," which
suggests that any named insured may do so. Furthermore,
under the Pennsylvania Statutory Construction Act, 1 Pa.
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3. In addition, S 1731(c.1) provides that "Any rejection form that does
not
specifically comply with this section is void."
4. DiBartolo points out that Travelers never attempted to get the
insurance commissioner's approval for a corporate waiver form. However,
the law makes no provision for a corporate waiver form. Instead, it
provides the specific language that must be used in a waiver form in
S 1731(b); if Travelers had tried other language, it would have been out
of compliance with the law. See Lucas v. Progressive Cas. Ins. Co., 680
A.2d 873 (Pa. Super. Ct. 1996) (even minor deviations from the section
1731 requirements, such as not printing the forms on separate sheets of
paper, invalidate the waiver). Travelers used the form provided by law,
and, even if the language sounds somewhat strange, it is evident what
the waiver means as to KRI.
4
Cons. Stat. S 1902, words of the masculine gender include
feminine and neuter forms, and thus "he" may stand for a
corporation.
In addition, while the MVFRL supports broad coverage, it
also reflects a public policy to control escalating insurance
costs, which would be thwarted if corporations could not
reject UM coverage. See Paylor v. Hartford Ins. Co., 640
A.2d 1234 (Pa. 1994). It is possible for an insured to reject
UM coverage for members of his or her household, which
suggests that the choice to reject coverage does not have to
be individual but may be made by the person withfinancial
responsibility for the policy. Finally, the MVFRL specifically
provides that UM coverage is optional, see S 1731(a), but if
DiBartolo were correct it would not be very optional for
corporations.5
There are Pennsylvania cases that find it unremarkable
that a corporate entity can waive UM coverage. The issue in
this case was not squarely before those courts and thus
those decisions are not controlling. Nevertheless, they are
worth discussing, since Pennsylvania's courts have been
hostile to attempted waivers if they are not perfectly
executed. Even with this general presumption against
waiver, Pennsylvania courts have not suggested that
corporations are incapable of waiver.
In Blakney v. Gay, 657 A.2d 1302 (Pa. Super. Ct. 1995),
the court denied the claim of a plaintiff seeking to recover
under a rental company's insurance policy. The plaintiff
was an unauthorized driver and thus the car was treated as
if it were uninsured. The court noted that both the rental
company and the person who rented the car rejected UM
coverage. The court concluded that UM coverage "may be
waived by a car rental company." Id. at 1303. DiBartolo
argues that the renter's rejection was the crucial fact, and
we agree that this is a relevant distinction. We find the
court's reasoning telling, however, because it assumed that
a corporation can waive UM coverage. In Blakney the court
_________________________________________________________________
5. DiBartolo suggests that each employee would have to waive UM
coverage to effectuate a corporate waiver, but that theoretical
possibility
seems unlikely to have practical reality in a large corporation, or one
with heavy employee turnover.
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emphasized that the plaintiff was a stranger to the contract
lacking privity, whereas DiBartolo submits that he is a
third-party beneficiary of the contract (a contention
Travelers does not contest). We do not find that distinction
relevant under these circumstances.
In Caron v. Reliance Insurance Co., 703 A.2d 63 (Pa.
Super. Ct. 1997), an employee operating a non-company
vehicle was held not to be entitled to UM coverage from her
employer because she was not operating a covered vehicle.
The court found that the employer, not the employee, was
the "insured," even though the employee was on a list of
drivers the employer submitted to the insurance company.
The court also noted that a reference to "you" in an
insurance policy referred to the employer, a corporation.
See id. at 68 & n.9. This is evidence that standard
language, employed for easy understanding, also covers
corporations.6
Travelers argues that the insurance department's
regulations support its interpretation. At 31 Pa. Code
S 68.101 (1997), there is a list of forms and notices that
must be sent by insurers to their insureds. Section
68.101(a) gives the initial list, and then (b) provides that
_________________________________________________________________
6. There are also two relevant federal cases applying Pennsylvania law. In
DeSilva v. Kemper National Insurance Co., 837 F. Supp. 98 (E.D. Pa.
1993), the court found that the insurer was bound to afford UM coverage
to an injured employee who was insured under the policy, even though
the employer waived coverage. In that case, however, the insured vehicle
was the plaintiff 's personal car, registered in his name, and deductions
were taken from his paycheck to pay for the insurance. Under the
circumstances, the court found that he had to be provided with the
opportunity to waive UM coverage, since the insurance was in a real
sense his. He was not given that opportunity, and so he received full UM
coverage. Similarly, DiBartolo cites Cincinnati Insurance Co. v. Herr
Signal & Lighting Co., 757 F. Supp. 490 (M.D. Pa. 1991), as a case in
which the court held that, even if a corporation can waive UM coverage,
the individual covered must be provided the option to do so. In that case,
one person (one of the company's owners) was a named insured, not just
a covered person. Since the court found a knowing and intelligent waiver
by the individual, it did not need to decide the issue DiBartolo raises.
Moreover, if we were to apply the principle beyond named insureds to all
covered persons, it would contradict the statute's clear provision that a
policyholder has the power to waive for his or her entire household.
6
certain forms, identified in 75 Pa. Cons. Stat.SS 1705(a)(1)
& (3), 1791.1(b) & (c), and 1792(b)(1), are not applicable to
commercial insureds. Travelers contends that this
regulation shows that the section 1731 waiver of UM
coverage, which is not among the forms excluded by 31 Pa.
Code S 68.101(b), does apply to commercial insureds. This
is a reasonable argument based on the interpretive canon
of expressio unius est exclusio alterius. If we were to find
that the statute clearly contradicted the administrative
agency's interpretation, we could discount the agency view,
but we do not find that to be the case here. See Pysh v.
Security Pac. Housing Serv., 610 A.2d 973 (Pa. Super. Ct.
1992).
For the foregoing reasons, we conclude that Pennsylvania
allows a corporation to waive UM coverage when the
corporation is the named insured.7
III. Effective Waiver
Even if corporations generally can waive UM coverage,
DiBartolo argues that KRI did not effectively do so. It is
KRI's corporate policy to reject UM coverage in any state
where that is allowed, and to take the lowest possible
coverage wherever UM coverage is mandatory. The District
Court found that KRI's waiver was valid because the 1990
UM rejection form and the 1994-1995 policy used the
statutorily required language. DiBartolo has several
objections, some of which we reject in the margin.8
_________________________________________________________________
7. We need not address the issue, addressed in DeSilva, of Pennsylvania
law's application to a situation in which a company provides a personal
vehicle for an employee, as the facts in this case are quite different.
8. DiBartolo argues that the rejection forms were not signed prior to the
date of the accident. This argument is meritless. The District Court
found that KRI's risk management director signed Pennsylvania UM
coverage rejection forms on January 1, 1994. Although there was
evidence in the record that KRI had not signed some states' UM rejection
forms as of late January 1994, KRI is a national company and Travelers
provides KRI with insurance in numerous states. Travelers introduced a
checklist into the record that identifies which states' forms KRI's
representative had not yet signed and returned as of January 1, 1994.
Forms for Pennsylvania were not outstanding. See App. at 260. The
7
A. New Policies and Renewals
Pennsylvania requires a substantial amount of
information to be given at the time a new auto insurance
policy is issued. DiBartolo argues that the 1994 policy was
a new policy, not a renewal, and thus, because Travelers
did not supply the requisite amount of information along
with the policy, it did not comply with the law. Defects in
providing information for a new policy might invalidate the
waiver.9
_________________________________________________________________
record does not create an issue of material fact, since there is no
credible
evidence that the Pennsylvania waiver forms were unsigned before the
accident.
DiBartolo also contends that the individual who signed the forms for
KRI had no authority to bind the company. While DiBartolo points to
Louisiana cases indicating that a corporate resolution is required to
waive UM coverage, there is no evidence that this is Pennsylvania's law.
It is not even always true in Louisiana. See, e.g., Thibodeaux v. Burton,
538 So. 2d 1001, 1004 n.1 (La. 1989). DiBartolo cites to Lokay v. Lehigh
Valley Cooperative Farmers, Inc., 492 A.2d 405 (Pa. Super. Ct. 1985), but
that case does not concern authority to waive UM coverage. Both of KRI's
risk managers submitted affidavits that they were told that it was their
job to procure insurance for KRI and to get the lowest possible UM
coverage. There is no evidence in the record that they lacked authority
to waive UM coverage for KRI. Even if they lacked actual authority, no
reasonable fact finder could conclude that they lacked apparent
authority, which would also suffice to bind KRI. See id. at 409.
DiBartolo further contends that KRI could not waive UM coverage
without union consent. Uninsured motorist coverage is a fringe benefit,
according to DiBartolo I, 131 F.3d at 351, and thus a proper subject for
collective bargaining. Yet that does not mean that KRI could not act
without union consent in the absence of any agreement to the contrary.
The union may make UM coverage a mandatory bargaining issue, but
until it does so KRI does not lack authority to negotiate coverage on its
own behalf.
9. However, in Nationwide Mutual Insurance Co. v. Murphy, Nos. 98-CV-
1692 & 98-CV-1884, 1998 U.S. Dist. LEXIS 17641 (E.D. Pa. Nov. 3,
1998), the District Court held that there was no private remedy for a
violation of section 1791's initial notice requirement. This holding is in
tension with the Superior Court case of National Union Fire Insurance Co.
v. Irex Corp., 713 A.2d 1145 (Pa. Super. Ct. 1998), which found a waiver
8
DiBartolo's evidence that the policy was not a renewal is
as follows: Extensive negotiations take place between
Travelers and KRI each year before the policy is issued.
Each year takes the previous year's policy as the starting
point, not the original contract as it was signed the first
year of coverage. Vehicles are dropped and added each
year, and premiums fluctuate. Moreover, Travelers makes a
point of having KRI re-execute its waiver forms. KRI solicits
offers from other potential insurers and has no intention to
be bound beyond the duration of each year's contract.
Travelers concedes that at no time after 1990 did it provide
KRI with the information mandated by section 1791 for new
policies.
Pennsylvania law only defines a renewal for certain
noncommercial automobile insurance policies, not
encompassing the policy at issue here:
"Renewal" or "to renew" means the issuance and
delivery by an insurer of a policy superseding at the
_________________________________________________________________
invalid where initial section 1791 notice was not properly provided. The
Superior Court did not hold that there was a direct private remedy for
the violation of section 1791; instead, it held that, without valid
notice,
the court could not find that waiver was valid under section 1731,
because the insured did not have all of the relevant information
necessary to make an informed decision. The statute explicitly provides
that an invalid initial section 1731 notice voids policy limits.
Complicating matters further, the Pennsylvania Supreme Court
recently decided Donnelly v. Bauer, Nos. 0033 to 0039 Appeal Dkt. 1997,
1998 Pa. LEXIS 2113 (Pa. Sept. 29, 1998). Each of the appellants in that
case, upon applying for insurance, received a notice that explained the
difference between limited and full tort options, and each elected the
limited tort option, receiving a lower premium. The notice did not, as 42
Pa. Cons. Stat. S 1705(a)(1) requires, contain comparisons of the actual
annual premiums under each option. The court noted that the
appellants benefited from their bargain and held that there was no
private remedy, as in Salazar. Irex Corp. was specifically addressed to
UM coverage, which exists for different reasons than the full/limited tort
options. But there appears to be a growing gap between the
Pennsylvania Supreme Court and lower state courts on the meaning and
purpose of the MVFRL; the high court seems unwilling to stand on
formalities, while the lower courts retain a rigid insistence on the same
in order to further the policy of protecting accident victims.
9
end of the policy period a policy previously issued and
delivered by the same insurer, such renewal policy to
provide types and limits of coverage at least equal to
those contained in the policy being superseded, or the
issuance and delivery of a certificate or notice
extending the term of a policy beyond its policy period
or term with types and limits of coverage at least equal
to those contained in the policy being extended . . . .
40 Pa. Cons. Stat. S 1008.1(2) (1998). While this definition
does not compel a result in this context, it does provide
support for our conclusion that the 1994 policy was a
renewal, since it indicates that Pennsylvania recognizes
that a policy that changes somewhat from year to year can
still constitute a renewal.
We do not think that this evidence creates a material
issue of fact as to whether the 1994 contract was a
renewal. KRI consistently sought the lowest possible
coverage, no matter which particular vehicles were covered.
Travelers persuasively argues that the scale of the contract
makes a difference, such that changes in specific vehicles
covered do not convert a renewal into a new policy; a
commercial insured with a large fleet will inevitably
experience vehicle turnover. Furthermore, the record is
replete with references by KRI and Travelers to a"renewal,"
evidencing the parties' understanding that they were
continuing an ongoing relationship with minor alterations.
The parties did not need a contractually enforceable
obligation to renew on identical terms in order to make
each year's policy a "renewal" instead of a new policy,
which is what DiBartolo's argument amounts to. See
Mouton v. Guillory, 494 So. 2d 1374, 1377 (La. Ct. App.
1986) (rejecting a similar argument that significant changes
converted a renewal into a new policy).
In conclusion, we find that DiBartolo has not
demonstrated a material issue of fact on the issue of
whether KRI's policy was a new policy or a renewal. As we
are satisfied that KRI's policy was, legally, a renewal,
Travelers was not required to give the full notice mandated
for new policies in Pennsylvania.
10
B. The Section 1791 Notice
DiBartolo argues that Travelers did not properly give the
"Important Notice" required by section 1791. That section
requires, at the time of application for original coverage,
that the insurer provide an "Important Notice" of benefits
and limits available that also reminds the insureds to
contact their insurance agents with any questions. The
notice must advise insureds that their signature on the
notice or their payment of renewal premiums is evidence of
their knowledge and understanding of the benefits and
limits available as well as those actually selected. If the
insurer strictly follows section 1791, there is a conclusive
presumption that the waiver of UM coverage is valid. See
Insurance Co. v. Miller, 627 A.2d 797, 799 (Pa. Super. Ct.
1993). Unlike section 1731, however, section 1791 does not
contain a provision voiding the benefits and limits chosen
if the insurer does not strictly comply with that section.
Furthermore, the District Court found, and DiBartolo does
not contest, that the "Important Notice" given in 1984, the
time of the initial contract, was valid.10
In Salazar v. Allstate Insurance Co., 702 A.2d 1038 (Pa.
1997), the insured signed a valid section 1791.1 notice in
the original application, but the insurer failed to comply
with section 1791.1's renewal notice provisions. (Section
1791.1 is similar to section 1791; it provides for disclosure
of premium charges and tort options.) The Pennsylvania
Supreme Court held that there was no private remedy for
the insurer's admitted noncompliance with the renewal law.
The Salazar court cited cases holding that, even though a
violation of the initial UM rejection form requirement in
section 1731(c.1) will void the waiver of UM coverage, that
section does not provide a remedy for violation of its
renewal notice requirement. See Maksymiuk v. Maryland
Cas. Ins. Co., 946 F. Supp. 379 (E.D. Pa. 1996). The
structure of the provisions is as follows: When someone
applies for insurance, the insurer must provide certain
information; failure to provide the information as required
_________________________________________________________________
10. KRI also paid renewal premiums, which evidences its knowledge and
understanding of available benefits according to the explicit provisions
of
section 1791.
11
voids a waiver of UM coverage; on renewal, information
must also be provided. From that structure, the
Pennsylvania court concluded that only initial
noncompliance voids a section 1791.1 waiver, and that only
the state administrative agency could enforce the renewal
provisions. The District Court concluded that the same was
true of section 1791, so DiBartolo could not benefit from an
invalid renewal notice.
DiBartolo correctly notes that Salazar would be
distinguishable if we found that there was a new policy in
1994 or that the original notice was flawed; in that case, no
valid section 1791 notice would ever have been signed, and
we would have to determine the import of such a defect.
However, our decision that the District Court properly
found that the 1994 policy was a renewal means that we do
not have to address DiBartolo's arguments on this point.
DiBartolo does not challenge the claim that the initial 1984
notice was sufficient, nor does he suggest that the 1990
notice, given when KRI dropped UM coverage entirely, was
inadequate. Under Pennsylvania law, he has no private
remedy if the renewal notices were inadequate.
The judgment of the District Court will be affirmed.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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