Grassetti v. Property & Casualty Insurance Company of Hartford et al

Filing 11

MEMORANDUM and ORDER denying Dfts' 7 Motion to Dismiss Count II of pltf's complaint.Signed by Honorable James M. Munley on 4/20/11 (sm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
STEPHEN J. GRASSETTI, SR.
Plaintiff

:
No. 3:10cv2068
:
:
(Judge Munley)
v.
:
:
PROPERTY & CASUALTY
:
INSURANCE COMPANY OF
:
HARTFORD and THE
:
HARTFORD FINANCIAL
:
SERVICES GROUP, INC.,
:
Defendants
:
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
MEMORANDUM
Before the court is the defendants’ motion to dismiss Count II of the
plaintiff’s complaint. (Doc. 7). The motion has been fully briefed and is
ripe for disposition.
BACKGROUND
Plaintiff Stephen J. Grassetti Sr. (“Plaintiff”) was seriously injured on
May 16, 2007 during a traffic accident while driving in Florida. (Compl. ¶
12 (Doc. 7-1)). At the time of the accident, Plaintiff had an auto insurance
policy with Defendants Property & Casualty Insurance Company of
Hartford and The Hartford Financial Services Group, Inc. (“Defendants”).
(Id. ¶ 5). Plaintiff alleges that under the policy, the Defendants “agreed to
pay compensatory damages to the Plaintiff, up to a limit of Fifty Thousand
($50,000), per vehicle, for injuries inflicted upon the Plaintiff by the operator
of an uninsured (“UM”) vehicle.” (Id. ¶ 7). Plaintiff’s complaint implies that
the Plaintiff signed an Uninsured Motorist (“UM”) Rejection form, but
alleges that the form does not comply with the Motor Vehicle Financial
Responsibility Law (“MVFRL”), 75 PA. CONS. STAT. ANN. § 1731(b). (Id. ¶¶
8-10). Plaintiff alleges that the Defendants’ form stated “Uninsured
Motorists 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.”
(Id. ¶ 9; see also Ex. A to Pl.’s Compl., Rejection of Uninsured Motorist
Protection Waiver (Doc. 7-1 at 26)).
Plaintiff alleges that, because the other driver involved in the May 16
accident was unidentified– and therefore uninsured– the Defendants were
obligated to pay compensatory damages of $100,000.00; the stacked
liability limits of $50,000.00 per vehicle for each of Plaintiff’s vehicles. (Id.
¶¶ 11, 15). The Plaintiff made a claim for such compensatory damages
which the Defendants denied. (Id. ¶ 19).
The Plaintiff filed his complaint in the Court of Common Pleas for
Lackawanna County on August 25, 2010. (Doc. 7-1). In Count I of the
complaint, Plaintiff alleges a breach of contract based on the Defendants’
failure to pay $100,000.00 in compensatory damages. (Id. ¶¶ 14-20). In
Count II of the complaint, Plaintiff alleges that the Defendants denied
Plaintiff’s claim for UM benefits knowing they had no reasonable basis for
the denial, in violation Pennsylvania’s Bad Faith Statute, 42 PA. CONS.
STAT. ANN. § 8371. (Id. ¶¶ 21-26).
On October 5, 2010, the Defendants removed the action to this court.
(Doc. 1). On November 24, 2010, the Defendants filed a motion to dismiss
Count II of the complaint, bringing the case to its present posture. (Doc.
7).
JURISDICTION
Because there is complete diversity of citizenship between the
parties and the amount in controversy exceeds $75,000.00, the court has
removal jurisdiction over the case. See 28 U.S.C. § 1332 (“district courts
shall have original jurisdiction of all civil actions where the matter in
controversy exceeds the sum or value of $75,000, exclusive of interest and
costs, and is between . . . citizens of different States[.]”); 28 U.S.C. § 1441
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(A defendant can generally remove a state court civil action to federal court
if the federal court would have had original jurisdiction to address the
matter pursuant to the diversity jurisdiction statute).
As a federal court sitting in diversity, we must apply state law.
Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing Erie
R.R. v. Tompkins, 304 U.S. 64, 78 (1938)). In this case, the relevant state
is Pennsylvania. If the state supreme court has not yet addressed an issue
before us, we must predict how that court would rule if presented with that
issue. Nationwide v. Mutual Ins. Co., 230 F.3d 634, 637 (3d Cir. 2000). In
so doing, we must examine the opinions of the lower state courts, and we
cannot disregard them unless we are convinced by other persuasive data
that the highest court would rule otherwise. Id.
LEGAL STANDARD
When a 12(b)(6) motion is filed, the sufficiency of a complaint’s
allegations are tested. Granting the motion is appropriate if, accepting as
true all the facts alleged in the complaint, the plaintiff has not pleaded
“enough facts to state a claim to relief that is plausible on its face,” or put
another way, “nudged [his or her] claims across the line from conceivable
to plausible.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).
The Third Circuit interprets Twombly to require the plaintiff to describe
“enough facts to raise a reasonable expectation that discovery will reveal
evidence of” each necessary element of the claims alleged in the
complaint. Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir.
2008) (quoting Twombly, 550 U.S. at 556). Moreover, the plaintiff must
allege facts that “justify moving the case beyond the pleadings to the next
stage of litigation.” Id. at 234-35.
In relation to Federal Rule of Civil Procedure 8(a)(2), the complaint
need only provide “‘a short and plain statement of the claim showing that
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the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of
what the . . . claim is and the grounds upon which it rests,’” Twombly, 550
U.S. at 555 (citation omitted). “[T]he factual detail in a complaint [cannot
be] so undeveloped that it does not provide a defendant the type of notice
of claim which is contemplated by Rule 8.” Phillips, 515 F.3d at 232
(citation omitted). “Rule 8(a)(2) requires a ‘showing’ rather than a blanket
assertion of an entitlement to relief.” Id.
The issue is whether the facts alleged in the complaint, if true,
support a claim upon which relief can be granted. In deciding a 12(b)(6)
motion, the court must accept as true all factual allegations in the
complaint and give the pleader the benefit of all reasonable inferences that
can fairly be drawn therefrom, and view them in the light most favorable to
the plaintiff. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.
1997). However, “we are not bound to accept as true a legal conclusion
couched as a factual allegation.” Ashcroft v. Iqbal, -- U.S. --, 129 S. Ct.
1937, 1949-50 (2009) (internal quotations omitted).
To decide a motion to dismiss, a court generally should consider only
the allegations in the complaint, exhibits attached to the complaint, matters
of public record, and documents that form the basis of a claim. See In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997);
Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192,
1196 (3d Cir. 1993).
DISCUSSION
Defendants argue that Plaintiff’s claim under Pennsylvania’s Bad
Faith Statute, 42 PA. CONS. STAT. ANN. § 8371, in Count II of the Plaintiff’s
complaint must be dismissed because the Plaintiff signed a Rejection of
UM Coverage form. In the alternative, the Defendants argue that the
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Plaintiff’s claim for punitive damages must be dismissed because there is
no allegation that they acted intentionally, reckelessly or maliciously.
Section 8371 authorizes recovery for an insurance company’s bad
faith towards an insured. It provides for several remedies upon a finding of
bad faith: (1) an award of “interest on the amount of the claim” at a rate
equal to “the prime rate of interest plus 3%”; (2) an award of “punitive
damages against the insurer”; and/or (3) an assessment of “court costs
and attorney fees against the insurer.” Id. Pennsylvania courts have
adopted the following definition of “bad faith” on the part of an insurer:
any frivolous or unfounded refusal to pay proceeds
of a policy; it is not necessary that such refusal be
fraudulent. For purposes of an action against an
insurer for failure to pay a claim, such conduct
imports a dishonest purpose and means a breach of
a known duty (i.e., good faith and fair dealing),
through some motive of self-interest or ill will; mere
negligence or bad judgment is not bad faith.
Perkins v. State Farm Ins. Co., 589 F. Supp. 2d 559, 562 (M.D. Pa. 2008)
(citing Terletsky v. Prudential Property & Casualty Ins. Co., 649 A. 2d 680,
688 (Pa. Super. Ct. 1994) (quoting Black’s Law Dictionary 139 (6th ed.
1990)) (citations omitted); see also Nw. Mut. Life Ins. Co. v. Babayan, 430
F. 3d 121, 137 (3d Cir. 2005) (predicting the Pennsylvania Supreme Court
would define “bad faith” according to the definition set forth in Terletsky)).
The United States Court of Appeals for the Third Circuit has adopted
the legal standard established by the Pennsylvania Superior Court for
testing the sufficiency of bad faith claims under section 8371, “both
elements of which must be supported with clear and convincing evidence:
(1) that the insurer lacked a reasonable basis for denying benefits; and (2)
that the insurer knew or recklessly disregarded its lack of reasonable
basis.” Klinger v. State Farm Mut. Auto. Ins. Co., 115 F.3d 230, 233 (3d
5

Cir. 1997) (citing Terletsky, 649 A.2d at 688).
“The MVFRL requires insurers to offer underinsured motorist and
uninsured motorist (“UM”) coverage that compensates individuals for
damages sustained in accidents with uninsured or underinsured vehicles.
Purchase of UM and UIM coverage is optional, although to refuse such
coverage, an insured must sign rejection forms whose precise language is
dictated by statute[.]” Jackson v. Allstate Ins. Co., 441 F. Supp. 2d 728,
732 -733 (E.D. Pa. 2006).
UM coverage, and its disclaimer, is dictated by Section 1731(b) of
the MVFRL, which provides:
(b) Uninsured motorist coverage.--Uninsured
motorist coverage shall provide protection for
persons who suffer injury arising out of the
maintenance or use of a motor vehicle and are
legally entitled to recover damages therefor from
owners or operators of uninsured motor vehicles.
The named insured shall be informed that he may
reject uninsured motorist coverage by signing the
following written rejection form:
REJECTION OF UNINSURED
MOTORIST PROTECTION
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.
....................................
Signature of First Named Insured
....................................
Date
75 PA. CONS. STAT. ANN. § 1731(b) (emphasis added).
The Defendants’ form, which the Plaintiff attached to his complaint,
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deviates from the statutory language quoted above in one respect. The
second sentence of the form states, “[u]insured Motorists 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.” (Id. ¶ 9; see also Ex. A to
Pl.’s Compl., Rejection of UM Protection Waiver (Doc. 7-1 at 26)). Thus,
the Defendants’ form refers to “Uninsured Motorists Coverage,” while the
statutory language refers only to “Uninsured Coverage.” Section
1731(c.1), however, states:
Form of waiver.--Insurers shall print the rejection
forms required by subsections (b) and (c) on
separate sheets in prominent type and location.
The forms must be signed by the first named
insured and dated to be valid. The signatures on
the forms may be witnessed by an insurance agent
or broker. Any rejection form that does not
specifically comply with this section is void.
75 PA. CONS. STAT. ANN. § 1731(c.1) (emphasis added).
The Plaintiff cites American Int’l Ins. Co. v. Vaxmonsky, 916 A.2d
1106 (Pa. Super. Ct. 2006), where the Pennsylvania Superior Court,
relying predominantly on section 1731(c.1), held that an insurer’s
underinsured motorist (“UIM”) coverage waiver was null and void for failure
to comply with Section 1731(c) of the MVFRL.1 For purposes of this
motion, the court finds Vaxmonsky persuasive on the issue of interpreting
the specific compliance requirements of section 1731(c.1). That being the
case, reading the complaint in a light most favorable to the Plaintiff, we find

1

Section 1731(c) is the UIM analogue to section 1731(b). The
waiver forms in each subsection have nearly identical language and we
treat the court’s analysis of subsection (c) as being instructive of our
interpretation of subsection (b).
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that the Plaintiff has adequately plead a cause of action for under
Pennsylvania’s Bad Faith Statute, 42 PA. CONS. STAT. ANN. § 8371.
Section 1731(c.1) of the MVFRL requires specific compliance waiver
language of section 1731(b). The Defendants had constructive notice of
these provisions and of the holding in Vaxmonsky that noncompliant
waivers are null and void. Thus, the Plaintiff has adequately alleged that
the Defendants withheld payment upon a claim without a reasonable basis
and that Defendants did so knowing they did not have a reasonable basis.
For these reasons, the Defendants’ motion to dismiss will be denied.
CONCLUSION
For the reasons stated above, Defendants’ motion to dismiss Count II
of the complaint will be denied. An appropriate order follows.

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IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
STEPHEN J. GRASSETTI, SR.
Plaintiff

:
No. 3:10cv2068
:
:
(Judge Munley)
v.
:
:
PROPERTY & CASUALTY
:
INSURANCE COMPANY OF
:
HARTFORD and THE
:
HARTFORD FINANCIAL
:
SERVICES GROUP, INC.,
:
Defendants
:
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
ORDER
AND NOW, to wit, this 20th day of April 2011, upon consideration of
the motion (Doc. 7) of Defendants Property & Casualty Insurance
Company of Hartford and The Hartford Financial Services Group, Inc. to
dismiss Count II of Plaintiff Grassetti’s complaint, it is HEREBY ORDERED
that the motion is DENIED.
BY THE COURT:
s/ James M. Munley
JUDGE JAMES M. MUNLEY
United States District Court

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