Stechert v. Travelers Home and Marine Ins

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_
No. 18-2305
________________
KYLE STECHERT AND MARIE STECHERT,
on behalf of themselves and all others similarly situated,
Appellant
v.
THE TRAVELERS HOME AND MARINE INSURANCE COMPANY; THE
TRAVELERS COMPANIES, INC.; TRAVELERS PROPERTY
CASUALTY COMPANIES; TRAVELERS INDEMNITY COMPANY
_
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(District Court No. 2-17-cv-00784)
District Judge: Honorable J. Curtis Joyner
________________
Submitted Pursuant to Third Circuit LAR 34.1(a)
March 15, 2019
Before: McKEE, ROTH, FUENTES Circuit Judges
(Opinion filed: August 2, 2019)
OPINION*
McKEE, Circuit Judge
Kyle and Marie Stechert appeal the District Court’s grant of summary judgment in
favor of Travelers Home and Marine Insurance Company 1 and against the Stecherts on
their claims that Travelers breached the terms of its automobile insurance policy and
acted in bad faith under 42 Pa. C.S. § 837 when it denied Extended Transportation
Expense (ETE) coverage after their automobile was “totaled” in an accident. The
Stecherts also appeal the District Court’s denial of their request for declaratory and
equitable relief. For the reasons that follow, we will reverse. 2
I.
The Stecherts’ Travelers insurance policy covered ETE to compensate them for
the cost of transportation if a covered accident deprived them of the use of a covered
vehicle. The coverage allowed for replacement transportation expenses up to $900 ($30
per day for 30 days) unless Travelers determined that replacement transportation could
reasonably be obtained in less time. The specific language is as follows:
* This disposition is not an opinion of the full court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
1
The Travelers Home and Marine Insurance Company, the Travelers Companies, Inc.,
Travelers Property Causal Companies, and Travelers Indemnity Company were all
named as defendants. The District Court failed to address their claim that only Travelers
Marine is an appropriate party here. The court can address this claim, along with subject
matter jurisdiction, on remand.
2
Judge Roth would affirm for substantially the reasons set out by the District Court in its
opinion.
2
B. Extended Transportation Expenses. When there is a loss to a “your
covered auto” described in Declarations for which a specific premium
charge indicates Coverage G - Extended Transportation Expenses is
afforded, or to a “non-owned auto”, we will pay, without application of a
deductible, up to the amount per day to a maximum as shown in
Declarations for:
1. Transportation expenses incurred by you
2. Loss expenses incurred for which you become legally responsible in
the event of a loss to a “non-owned auto”.
This coverage applies if:
1. “Your covered auto” or the “non-owned auto” is withdrawn from use
for more than 24 hours; and
2. The loss is caused by “collision” or is covered under Coverage F-
Comprehensive of this policy.
However, this coverage does not apply when there is a total theft of “your
covered auto” or “non-owned auto”. Such coverage is provided under
Coverage F of this policy.
Our payment will be limited to that period of time reasonably required to
repair or replace the “your covered auto” or the “non-owned auto”. 3
Marie Stechert was involved in an automobile accident on January 23, 2015 that
resulted in the total loss of her 2014 Chevrolet Equinox. Travelers concedes that the
automobile was covered under the policy. Accordingly, by the terms of the policy,
Travelers had agreed to pay ETE expenses for a maximum of 30 days or such lesser time
as Travelers may have determined was reasonable for the Stecherts to obtain replacement
transportation. Although Travelers argues that insurance adjuster Mary Jane Hamrah
determined it was reasonable for the Stecherts to obtain a replacement vehicle in less than
3
Br. for Appellant, 6.
3
30 days, Hamrah testified in her deposition that she did not make any such determination.
Travelers’ recital of the undisputed facts also did not include an assertion that any such
determination was made by any of its agents.
Rather, Travelers states that it “extended the rental vehicle return date several
times” even though the 30-day ETE period had not lapsed. 4 This extension was made in
accordance with Travelers’ practice of limiting ETE coverage to periods of 5 days. This
practice was set forth in Rental Letters, including the letter that Travelers sent to the
Stecherts after the accident. The Rental Letter informed insureds that the ETE coverage
lasts for only 5 days unless the period is renewed by Travelers. The 5-day rental practice
was also reflected in a “Knowledge Guide” that Travelers used to train its agents in the
proper handling of claims. That Knowledge Guide was consistent with the Rental Letter
and stated, in relevant part: “[i]n general, you should instruct the . . . claimant that it is
reasonable to limit rental to 5 or less days from the day that total loss figures have been
communicated.” 5
That 5-day limitation is in direct conflict with the limitation specified in the
Stecherts’ policy, which provides for 30-days of coverage in the absence of a
determination that it is reasonable for the insureds to obtain alternative transportation
sooner. Despite statements in Travelers’ brief to the contrary, the record does not
establish that any such determination was ever made. Accordingly, there is at least a
4
Id.
5
Br. for Appellant, 14.
4
genuine issue of material fact as to whether a Travelers’ agent determined that the it was
reasonable for the Stecherts to obtain transportation before the 30-day policy limit.
It is, however, uncontested that 21 days after the loss of the Equinox, the Stecherts
felt compelled to lease another car because Travelers’ representatives had led them to
believe that their ETE coverage was ending and no more “extensions” would be granted.
On February 12, Travelers called Mr. Stechert to ask if the Stecherts had found a
replacement vehicle. According to Travelers, Hamrah left a voicemail for Mr. Stechert.
Although Hamrah and Stechert did not speak, Hamrah claims that she extended the rental
car coverage until February 18. Not receiving the message, and believing that their
coverage would end on February 13, the Stecherts signed a lease for a replacement
vehicle on February 12. There is testimony that the Stecherts were still waiting for a letter
of guarantee when Travelers extended the rental to February 21, which was the maximum
date allowed by the ETE provision of the policy. The Stecherts allege that they were
thereby forced to acquire a vehicle they were not satisfied with and would not have
otherwise leased had they not believed their rental car coverage was ending. The
Stecherts contend that they were injured as a result of Travelers’ actions because the
vehicle that they felt compelled to lease was 2 years older than their Equinox, had almost
50,000 more miles, and cost nearly twice as much per month.
5
II.
We exercise de novo review over the grant of summary judgment and we conduct
the same analysis as the District Court. 6 Summary judgment is appropriate when the
moving party “shows that there is no genuine dispute as to any material fact and the
movant is entitled to a judgment as a matter of law.” 7 The moving party has the burden
of proving that the record contains no genuine issue of material fact. 8 Summary
judgment is proper when the non-moving party “fails to make a showing sufficient to
establish the existence of an element essential to that party’s case.” 9 Our review must
examine the facts in the light most favorable to the non-moving party.
In Pennsylvania, in order to prevail on a breach of contract claim, the plaintiff
must demonstrate three elements: 1) the existence of a contract, 2) a breach of duty, and
3) damages as a result of the breach. The second and third elements are at issue here.
Examining the facts in the light most favorable to the Stecherts, a reasonable
factfinder could conclude that Travelers breached its contract given the inconsistencies
between 1) the Stecherts’ insurance policy with Travelers, 2) Travelers’ internal
documents which appear to direct agents to limit replacement coverage to 5 days, and 3)
the conduct of Travelers’ agents which is consistent with 5-day limitation and contrary to
the 30-day ETE coverage set forth in the policy.
6
Willis v. UPMC Children’s Hosp. of Pittsburgh, 808 F.3d 638, 643 (3d Cir. 2015).
7
Fed. R. Civ. P. 56.
8
Id.
9
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
6
In granting summary judgment, the District Court concluded that the events that
transpired throughout the life of the Stecherts’ claim were miscommunications between
both parties, and ultimately mistakes, rather than a breach of contract. 10 A factfinder
may agree. However, that conclusion is inconsistent with this record when viewed in the
light most favorable to the Stecherts. There is clearly a discrepancy between Travelers’
internal communications to its agents and the terms of the ETE coverage in the Stecherts’
policy. Looking to Pennsylvania law governing the interpretation of insurance contracts,
we must examine the totality of the circumstances to determine insureds’ reasonable
expectations. If the insurer changes the terms of coverage, it must demonstrate that the
insured was “notified of, and understood the change.” 11
Travelers purported to extend the rental coverage five times throughout the life of
the claim (January 23, January 27, February 4, February 6, and February 9). Stechert
requested three extensions, two of which were granted. According to Mr. Stechert, the
third request on February 6 was not granted. In each instance, there was no
determination of a reasonable amount of time to find a replacement vehicle, as set forth in
the ETE policy. 12
The District Court noted that had the defendants adhered to the 5-day limitation in
the “Rental Reimbursement/Loss of Use Notice” and terminated plaintiff’s benefits, the
10
Stechert v. Travelers Home & Marine Ins. Co., No. 17-CV-784, 2018 WL 2267447, at
*9 (E.D. Pa. May 17, 2018).
11
Bensalem Tp. v. International Surplus Lines Ins. Co., 38 F.3d 1303, 1309 (3d Cir.1994)
(quoting Tonkovic v. State Farm Mut. Auto Ins. Co., 521 A.2d 920 (1987)).
12
See Br. for Appellant, 9; Br. for Appellee, 22; see also JA 0720 – 0721.
7
outcome would have been different. 13 Yet, a factfinder could conclude that the very
imposition of a 5-day limitation was contrary to the terms of the insurance policy and that
it resulted in pressuring the Stecherts into leasing a replacement car that they would not
otherwise have had to acquire and that was a “total lemon.” 14 We also note that Amanda
Lanzy, who worked in the total loss department and handled the Stecherts’ claim prior to
the vehicle being determined a total loss, testified in a deposition about the apparent
inconsistencies between the policy and the Rental letter. She admitted that the letter
appears to limit the coverage provided in the Stecherts’ policy.
The District Court also held that the calculation of damages was speculative
because the Stecherts received the full 30 days of benefits and that it is unclear what
vehicles were available to the Stecherts throughout the period of coverage. 15 Given our
conclusion that summary judgment was not appropriate we need not address the
Stecherts’ claim that the District Court erred in discussing alleged damages. However,
on remand, the District Court will note that we have acknowledged that when calculating
damages “mathematical certainty is not typically required, the general rule in
Pennsylvania, as in most jurisdictions, is that if damages are difficult to establish, an
injured party need only prove damages with reasonable certainty.” 16 We express no
13
Stechert v. Travelers Home & Marine Ins. Co., No. 17-CV-784, 2018 WL 2267447, at
*9 n.4. Although the District Court viewed the proffered testimony about a five-day
limitation period as a “mis-communication,” we must view the evidence in the light most
favorable to the Stecherts. So viewed, it is evidence of a practice that directly conflicts
with the ETE provisions of the policy.
14
Id. at *6.
15
Stechert, 2018 WL 2267447, at *6.
16
ATACS Corp. v. Trans World Commc’ns, 155 F.2d 659, 669 (3d Cir. 1998).
8
opinion regarding the ultimate damages that the Stecherts may be able to prove if they are
successful on their claim(s).
The Stecherts also claim that the District Court erred as a matter of law in
concluding that Travelers’ conduct did not amount to bad faith under 42 Pa C.S.A. §
8371. 17 We have explained that the “essence of bad faith claims is the unreasonable and
intentional (or reckless) denial of benefits.” 18 For bad faith claims, summary judgment in
favor of an insurer is inappropriate “when there is no clear and convincing evidence that
[its] conduct was unreasonable and that it knew or recklessly disregarded its lack of a
reasonable basis in denying the claim.” 19 Plaintiff’s burden to prove bad faith requires
“clear, direct, weighty, and convincing” evidence, as well as its heightened burden in
opposing summary judgment on bad faith claims. 20
While the District Court focused on the fact that the Stecherts technically received
the full 30 days of coverage of the policy, the appropriate inquiry under §8371 is the
“manner in which insurers discharge their duties of good faith and fair dealing during the
pendency of an insurance claim, not whether the claim is eventually paid.” 21
The Stecherts claim that Travelers violated 42 Pa C.S.A. § 8371 through the
misrepresentation of their benefits in the “Loss of Use” letter and by “failing to conduct
17
42 Pa. C. S. § 8371.
18
Amica Mut. Ins. Co. v. Fogel, 656 F.3d 167, 179 (3d Cir. 2011) (quoting UPMC Health
Sys. v. Metro. Life. Ins. Co., 391 F.3d 497, 506 (3d Cir.2004)).
19
Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 523 (3d Cir. 2012) (quoting Bostick
v. ITT Hartford Grp., 56 F. Supp. 2d 580, 587 (E.D.Pa.1999)).
20
Id; see also Polselli v. Nationwide Mut. Fire Ins. Co., 23 F.3d 747, 752 (3d Cir. 1994).
21
Wolfe v. Allstate Prop. & Cas. Ins. Co., 790 F.3d 487, 499 (3d Cir. 2015) (quoting
Berg v. Nationwide Mut. Ins. Co., 44 A.3d 1164, 1177 (Pa. Super. Ct.2012)).
9
the analysis needed to determine the amount of time its insureds reasonably required to
replace their vehicle without terminating ETE benefits as required by Travelers’
insurance policy.” 22 For claims against insurers in Pennsylvania, bad faith is “any
frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such
refusal be fraudulent.” 23 A reasonable fact finder could conclude on this record that the
manner in which the claim was handled evidenced Travelers’ bad faith. However, that
conclusion is not mandated by this evidence and there is therefore a genuine issue of
material fact as to Travelers’ liability under 42 Pa C.S.A. § 8371.
For the reasons set forth above, we will reverse the grant of summary judgment
and remand to the District Court for further proceedings consistent with this opinion.
22
Br. for Appellant, 43.
23
Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 523 (3d Cir. 2012) (quoting Terletsky
v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994)).
10