INFINITY INDEMNITY INSURANCE COMPANY v. GONZALEZ et al

Filing 23

MEMORANDUM AND/OR OPINION RE: PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT. SIGNED BY HONORABLE BERLE M. SCHILLER ON 6/4/2012. 6/4/2012 ENTERED AND COPIES MAILED TO UNREP, E-MAILED.(kk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
INFINITY INDEMNITY
INSURANCE COMPANY,
Plaintiff,
v.
JANNETTE GONZALEZ, et al.,
Defendants.

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CIVIL ACTION

No. 11-4922

MEMORANDUM
Schiller, J.

June 4, 2012

Plaintiff Infinity Indemnity Insurance Company (“Infinity”) brings this declaratory judgment
action against Jannette Gonzalez, Leonardo Barrios, Lizandro Martinez, and State Farm Indemnity
Company (“State Farm”). Plaintiff seeks a declaration that it owes no coverage under a personal
automobile liability insurance policy issued to Gonzalez. Defaults have been entered against
Defendants Gonzalez, Barrios, and Martinez for failure to appear, plead, or otherwise defend this
lawsuit. Before the Court is Plaintiff’s motion for summary judgment. Defendant State Farm has not
responded and has indicated to the Court that it does not oppose the motion. For the reasons that
follow, the Court will grant Plaintiff’s motion.

I.

BACKGROUND
Infinity issued a personal automobile liability insurance policy to Gonzalez for the period of

May 3, 2010 to May 3, 2011. (Pl.’s Mot. for Summ. J. ¶ 2.) The policy is identified as a
“Pennsylvania Low Cost Personal Auto Policy.” (Compl. Ex. B [Policy and Endorsement].) An
endorsement states that the policy is a “Pennsylvania Named Driver Only Personal Auto Policy

Endorsement,” and it also states: “We will only provide coverage for drivers listed on your
policy. We will not provide coverage for any other driver of the insured auto.” (Id.) Gonzalez
also selected the optional “Economy Low Cost Discount,” which provided a ten percent discount on
premiums in exchange for an agreement that “unlisted drivers are not afforded coverage under the
policy.” (Compl. Ex. A [Application for Insurance] at 4.) The endorsement further states in an
exclusion, “We do not cover bodily injury or property damage resulting from the . . . use of the
insured auto by any person not listed on the Declarations Page before a loss.” (Policy and
Endorsement.) With respect to property damage to a listed vehicle, the endorsement contains a
definition of “authorized driver” that includes only the named insured and any person listed on the
application or added by an endorsement. (Id.)
Jannette Gonzalez is the only listed named insured in the policy. (Id.) One of the listed
vehicles is a 2005 Dodge Caravan. (Id.) In Gonzalez’s application for insurance, Gonzalez initialed
and checked the “No” box next to a question whether there were “any drivers who may operate a
listed vehicle on a regular or infrequent basis that have not been disclosed on this application.”
(Application for Insurance at 3.) Gonzalez also signed an acknowledgment on the signature page of
her application that stated, “The Low Cost Personal Auto Policy specifically addresses who may use
your vehicle and under what conditions coverage will be afforded. In all cases, only those individuals
and vehicles shown on the Declarations Page or endorsed on the policy prior to a loss are afforded
coverage.” (Id. at 4.) Gonzalez further acknowledged that it was her responsibility to report to her
insurance agent anyone not listed on the declarations page who will have access to the listed vehicle,
and that the contract provides coverage only when a driver listed on the ceclarations page is driving
the listed vehicle. (Id.)
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On November 24, 2010, Gonzalez permitted Barrios to drive her Dodge Caravan. On that
day, Barrios struck Martinez’s vehicle, causing serious injury to Martinez. (Compl. Ex. C
[Complaint, Martinez v. Barrios, et al.].) On April 7, 2011, Martinez sued Barrios and Gonzalez in
the Superior Court of New Jersey. (Id.)
On August 2, 2011, Infinity brought this declaratory judgment action in this Court against
Gonzalez, Barrios, Martinez, and State Farm. Defaults were entered against Gonzalez, Barrios, and
Martinez for failure to appear, plead, or otherwise defend the action. State Farm answered the
complaint and participated in a scheduling conference, where it indicated that it provides similar
named driver only insurance policies.

II.

STANDARD OF REVIEW
Summary judgment is appropriate when the admissible evidence fails to demonstrate a

genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. Fed.
R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). When the movant
does not bear the burden of persuasion at trial, it may meet its burden on summary judgment by
showing that the nonmoving party’s evidence is insufficient to carry its burden of persuasion.
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
Thereafter, the nonmoving party demonstrates a genuine issue of material fact if it provides
evidence sufficient to allow a reasonable finder of fact to find in its favor at trial. Anderson, 477 U.S.
at 248. In reviewing the record, a court “must view the facts in the light most favorable to the
nonmoving party and draw all inferences in that party’s favor.” Prowel v. Wise Bus. Forms, 32 F.3d
768, 777 (3d Cir. 2009). The court may not, however, make credibility determinations or weigh the
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evidence in considering motions for summary judgment. See Reeves v. Sanderson Plumbing Prods.,
530 U.S. 133, 150 (2000); see also Goodman v. Pa. Tpk. Comm’n, 293 F.3d 655, 665 (3d Cir. 2002).

III.

DISCUSSION
Infinity contends that it has no duty to defend or indemnify Gonzalez and/or Barrios for any

claims arising out of the collision with Martinez or to reimburse Gonzalez for damage to the Dodge
Caravan resulting from that accident. It asserts that the policy only provides coverage for damage
to the Dodge Caravan when it is being operated by an authorized driver. Because Barrios was not
a named driver on the policy or endorsement, Infinity argues that it has no duty to provide coverage
for damage resulting from the November 24, 2010 collision when Barrios was driving the Dodge
Caravan with Gonzalez’s permission.
Pennsylvania law, which governs the interpretation of the policy, “provides several
well-settled principles governing the interpretation of insurance policies.” J.C. Penney Life Ins. Co.
v. Pilosi, 393 F.3d 356, 363 (3d Cir. 2004). First, the task of interpreting the policy is generally
performed by the court, rather than the jury, and the goal of that task is to ascertain the intent of the
parties through the contract’s language. Id. (citing Standard Venetian Blind Co. v. Am. Empire Ins.
Co., 469 A.2d 563, 566 (Pa. 1983)). Second, when “an insurance policy provision is ambiguous, it
is to be construed against the insurer and in favor of the insured.” Id. (internal quotation marks
omitted). A provision is ambiguous when the language, viewed in the context of the entire policy,
is “reasonably susceptible of different constructions and capable of being understood in more than
one sense.” Id. (internal quotation marks omitted). Third, when an insurance contract’s language is
unambiguous, the court must enforce the language and avoid creating ambiguities where none exist.
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Id. “Thus, ‘[w]here the policy contains definitions for the words contained therein, the court will
apply those definitions in interpreting the policy.’” Id. (quoting Monti v. Rockwood Ins. Co., 450
A.2d 24, 25 (Pa. Super. Ct. 1982)). Courts should not, “under the guise of judicial
interpretation, . . . expand the coverage beyond that as provided in the policy.” Guardian Life Ins.
Co. of Am. v. Zerance, 479 A.2d 949, 953 (Pa. 1984).
Infinity contends that the policy terms are clear and unambiguous and preclude coverage
when the insured automobile is being operated by anyone other than the named insured. The policy
endorsement clearly identifies the policy as a “Named Driver Only” policy, and it states in bold
language that the policy provides coverage only for drivers listed on the policy. The Court finds that
the language in the policy and endorsement is clear and unambiguous in restricting coverage only
to drivers who are listed in the insurance policy. Gonzalez only listed herself in her application for
insurance, and she is the only listed insured driver in the policy and endorsement. Furthermore,
Gonzalez was clearly aware of the restriction, because in her application for insurance, Gonzalez
selected an option whereby she received a discount on her premiums in exchange for a policy that
denied coverage for unlisted drivers.
However, the plain meaning of a contract is not controlling if it is contrary to a clearly
expressed public policy. Eichelman v. Nationwide Ins. Co., 711 A.2d 1006, 1008 (Pa. 1998). The
Court has serious concerns that a named driver only policy invites automobiles to be driven by
uninsured drivers and whether that is contrary to Pennsylvania public policy on automobile
insurance. The Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”) applies to
policies delivered or issued for delivery in Pennsylvania, with respect to any motor vehicle registered
or principally garaged in Pennsylvania. 75 Pa. Cons. Stat. Ann. § 1731(a). The MVFRL requires that
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all insurers must offer underinsurance to their insureds, although it does not require that insurers
provide underinsurance, as the insured can reject such coverage. Canal Ins. Co. v. Underwriters at
Lloyd’s London, 435 F.3d 431, 443 (3d Cir. 2006). The MVFRL reflects “the Legislature’s concern
for the increasing cost of automobile insurance and the parallel aim of cost containment.” Id.
(quoting Burstein v. Prudential Prop. & Cas. Ins. Co., 809 A.2d 204, 207-08 (Pa. 2002)). The
Pennsylvania Supreme Court noted that while “other public policies may underlie the MVFRL, the
legislative concern for the spiralling consumer cost of automobile insurance is its dominant and
overarching public policy.” Burstein, 809 A.2d at 208 n.3.
The Pennsylvania Supreme Court has evaluated named driver exclusions in insurance
policies and found them to be consistent with the public policies of the MVFRL of cost-containment
and consumer choice. Progressive N. Ins. Co. v. Schneck, 813 A.2d 828, 832 (Pa. 2002). An insurer
uses a named driver exclusion to exclude a specified individual from coverage under an automobile
insurance policy. Infinity contends that because named driver exclusions are permitted under
Pennsylvania law, then the converse is true, and named driver only policies are also covered. While
the Pennsylvania law permits named driver exclusions, the Court has not uncovered any case
evaluating named driver only policies. Infinity argues that named driver only policies are permissible
under the MVFRL because they achieve the statute’s goals of cost-containment and consumer
choice. However, the Court remains concerned that unlike named driver exclusions, which only deny
coverage for specific identified risks, thereby containing costs for insureds that live with high-risk
drivers, named driver only policies deny coverage to any potential driver of a vehicle that is not
specifically named in a policy, vastly increasing the number of uninsured drivers on the road.
Infinity also emphasizes that the policy is approved by the Pennsylvania Department of
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Insurance. However, Pennsylvania courts have held that “approval of the policy provision by the
Insurance Commissioner does not per se establish the validity of the particular provision . . . . If a
court determines that a challenged provision is void as being contrary to law, then the approval itself
is invalid as well, since such approval exceeds the power granted to the Commissioner.” Brader v.
Nationwide Mut. Ins. Co., 411 A.2d 516, 517 (Pa. Super. Ct. 1979); see also Schneider v. UNUM
Life Ins. Co. of Am., 149 F. Supp. 2d 169, 187 n.4 (E.D. Pa. 2001) (noting that the court is not bound
by any decision of the Insurance Commissioner and rejecting argument that the Commissioner’s
approval mandates the policy’s validity).
Despite the Court’s serious reservations about upholding an insurance policy that makes it
easier for uninsured motorists to drive on Pennsylvania roads, the Court recognizes that there is no
clear indication of Pennsylvania law to justify the invalidation of this insurance policy based on that
public policy. See Hall v. Amica Mut. Ins. Co., 648 A.2d 755, 760 (Pa. 1994) (quoting Muschany v.
United States, 324 U.S. 49, 66-67 (1945)) (“‘Public policy is to be ascertained by reference to the
laws and legal precedents and not from general considerations of supposed public interest. As the
term “public policy” is vague, there must be found definite indications in the law of the sovereignty
to justify the invalidation of a contract as contrary to that policy. Only dominant public policy would
justify such action. In the absence of a plain indication of that policy through long governmental
practice or statutory enactments, or of violations of obvious ethical or moral standards, the Court
should not assume to declare contracts . . . contrary to public policy. The courts must be content to
await legislative action.’”). As no party has requested that this Court find that a named driver only
insurance policy contravenes Pennsylvania public policy and no precedent indicating that it does,
the Court will uphold the clear and unambiguous language of the policy restricting coverage only
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to those drivers listed in the policy and endorsement. Given the absence of genuine issues of material
fact, the Court finds that Infinity has no duty to defend or indemnify Gonzalez and/or Barrios for
any claims arising out of the automobile accident on November 24, 2010, to pay benefits for
damages to Gonzalez’s 2005 Dodge Caravan arising out of that collision, or to pay any personal
injury claims of Martinez arising out of that collision.

IV.

CONCLUSION
The Court grants Infinity’s motion for summary judgment on its claim for declaratory relief.

An appropriate Order will be docketed separately.

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