|Government vehicle exclusion
is in conflict with MVFRL
� A copy of the court�s opinion in Michelle Kmonk-Sullivan v. State Farm Mutual Automobile Ins. Co. is available by contacting Craig Giangiulio of the Philadelphia office ([email protected]).
Exclusions in automobile insurance policies that deny underinsured motorist benefits because the underinsured vehicle is owned by a commonwealth agency or other government entity violate the Motor Vehicle Financial Responsibility Law and are contrary to public policy, the Supreme Court ruled in two consolidated cases on Dec. 19, 2001.
�Insurers� policy exclusion is contrary to the MVFRL because it attempts to withdraw coverage that the Legislature required it to offer,� Justice Sandra Schultz Newman wrote in Michelle Kmonk-Sullivan v. State Farm Mutual Automobile Ins. Co. �We, therefore, agree with the majority of State Appellate Courts that have considered this issue and conclude that the insurance policy definition of underinsured vehicle, which excludes government vehicles, ��is an unwarranted invasion of the broad coverage required by the state and is, therefore, void,�� Justice Newman wrote. Justice Thomas Saylor wrote a 3-page concurring opinion.
Newman concluded that because the court determined that the insurance policy exclusions violated the terms of the MVFRL, and are therefore invalid, the court declined to consider the public policy argument. Kmonk-Sullivan was consolidated with Midili v. Erie Insurance Group upon reargument, as it involved the same issues. The case was the first of its kind to be decided in Pennsylvania.
Counsel for the plaintiffs were John P. Gismondi (PaTLA Board member), of Gismondi & Associates, and John A. Tumolo (PaTLA member) of the law offices of John A. Tumolo, both of Pittsburgh. In commenting on the case, Gismondi, who served as lead counsel for the plaintiffs, said he was pleased with the result. �I am very gratified that the court found in favor of the victims. It has been a long haul for these folks, and I am glad that there was a reward for them in the end,� Gismondi said. Gismondi handled the five-year appeal without charging any fee for his services. He said that the court�s decision will have broad implications. �This case will now come into play any time a person is hurt in an accident caused by a government-owned vehicle,� Gismondi said. There are a large number of people who will benefit from this decision for years to come,� he concluded.
PaTLA also participated as amicus curiae on behalf of the plaintiffs, with Dale G. Larrimore of the Philadelphia firm of Deutsch, Larrimore, Farnish & Andersson, writing the amicus brief for PaTLA. Larrimore also said the decision was significant, given the large number of government-owned vehicles operating on a daily basis in the commonwealth. �One PAT or SEPTA bus accident can cause significant damage to many people. As in this case, the losses can quickly exceed the very small total cap on damages and it�s important that innocent victims have the right to turn to their own UIM coverage,� Larrimore said.
The Supreme Court�s decision also represents some closure for attorneys and PaTLA members Steven Gillman and Nicholas Pinto of the Philadelphia law firm of Gillman & Pinto. They had one of the very first cases involving the government vehicle exclusion and also participated as amicus in Kmonk-Sullivan. Gillman and Pinto represent a 45-year-old Delaware County man who sustained traumatic brain injury in a collision with a City of Chester police cruiser. The plaintiff�s $5 million underinsured motorist arbitration award was tied to the Supreme Court�s decision in Kmonk-Sullivan. Gillman said that Kmonk-Sullivan is important because it rejects the insurance industry�s argument that reducing the cost of insurance by reducing the payment of claims is the primary and, in fact, the only purpose of the MVFRL that a court should consider in ruling upon the validity of an exclusion. �The insurance companies have been very successful with this argument in limiting coverages,� said Gillman, �but with this decision, the Supreme Court has put insurance carriers on notice that they will not have a free hand to rewrite automobile policies to limit or eliminate coverages which the Pennsylvania consumers have paid for and have the right to expect in their time of need.�
In Kmonk-Sullivan one rider was killed and another 50 passengers were injured while riding a Port Authority of Allegheny County (PAT) bus when it collided with another PAT bus head-on. PAT is a commonwealth agency and is therefore subject to statutory provision for sovereign immunity, according to the Supreme Court�s opinion. The Judicial Code provides that, in an action against the commonwealth arising from the �same cause of action or transaction of occurrence,� the damages the commonwealth must pay are limited to no more than $250,000 for any one person or a total of $1 million, according to the court�s opinion.
PAT paid the injured individuals $1 million, however, once the money was distributed, it only satisfied about one-third of the victims� damages, according to the opinion. Thirty-four individuals then filed UIM claims with their own automobile insurance carriers, according to the opinion. The insurers denied those claims based on the exclusions in each policy.
The injured passengers then filed for a declaratory judgment that the insurers were required to pay UIM benefits. The trial court ruled in favor of the insureds, but a three-judge panel of the Superior Court reversed the trial court�s decision. However, the Superior Court then granted the insureds� application for reargument. The Superior Court, en banc, affirmed the decision of the trial court in favor of the insureds, and concluded that the governmental vehicle exclusions impermissibly conflicted with the provisions of the MVFRL and violated public policy.
The insurance companies then appealed to the Supreme Court.
In Midili, Arnold W. Midili died in an automobile accident in which a motor vehicle operated by an employee of Allegheny County struck the car he was driving. The county paid Sandra Midili, the decedent�s wife, $500,000, the maximum payable for a single tort claim against a local government unit.
Sandra Midili then submitted a claim to Erie Insurance Group in an attempt to recover the $300,000 in UIM benefits. Erie admitted that Midili�s damages exceeded $800,000, but it refused to pay the claim based on its policy exclusion.
A board of arbitrators found in favor of Erie and a Washington County Common Pleas trial court adopted the arbitrators� decision and refused Midili�s motion to vacate the award. The case was then consolidated with Kmonk-Sullivan.
In examining the consolidated cases, Justice Newman wrote that the insureds claimed that while the insurance companies� policy language is unambiguous, they asserted that it is not the terms of the policies that are in dispute, but whether the terms violate the provisions of the MVFRL. �Insureds argue that because the MVFRL is broad enough to include government vehicles in the definition of �underinsured motor vehicle[s],� the insurers� exclusion of the vehicles from coverage violates the MVFRL.�
But the insurers asserted that the policies define �Underinsured Motor Vehicle� in such a way as to explicitly exclude government vehicles and, thereby, specifically foreclose recovery of UIM benefits when the tortfeasor is a government entity. �They [insurers] reasoned that an undersinsured vehicle is defined as one for which �limits of available�self-insurance are insufficient�and that the available limits of the government�s self-insurance may not be made insufficient by the damages cap of the Judicial Code.�
To resolve the issue, the court looked to the MVFRL and the definition of an underinsured vehicle. Newman wrote: �An underinsured vehicle is one for which the �limits of available�self-insurance are insufficient.� Here, it is clear that: the �limits of available�self-insurance are insufficient� to satisfy the damages of Insureds; and, the statute does not limit the circumstances or reasons why the available limits may be made so. Consequently, where the damages cap causes the available limits of underinsurance to be insufficient, the requirements of 75 Pa.C.S. � 1702 are met.�
The court also said that the sections of the MVFRL related to underinsured vehicles apply to government vehicles.
Finally, the court said that the legislature chose to exempt federally owned vehicles from the statute, but did not exclude all government vehicles.
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