Colonna et al v. Allstate Fire and Casualty Insurance Company
MEMORANDUM (Order to follow as separate docket entry) re 5 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by Allstate Fire and Casualty Insurance Company.Signed by Honorable Malachy E Mannion on 12/3/13. (bs)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
LINDA AND MAURO COLONNA,
CIVIL ACTION NO. 3:13-802
ALLSTATE FIRE AND CASUALTY :
Presently before the court is the defendant’s motion to dismiss the
plaintiffs’ complaint, requesting declaratory judgment, pursuant to Fed. R. Civ.
P. 12(b)(6). (Doc. No. 5).
This case arises out of a car accident that injured the plaintiffs, Linda
and Mauro Colonna. (Doc. No. 1, ¶8). Mr. Colonna was driving his son’s car
at the time. (Id., ¶16). The plaintiffs and their son were insured under two
separate policies issued by the defendant, Allstate Fire and Casualty
Insurance Company (“Allstate”). (Id., ¶16, 20). At the time of the accident, the
plaintiffs’ son lived with them. (Id., ¶19). The plaintiffs purchased their policy
on May 1, 2010, (Id., Exh. B), while their son purchased his policy on June 10,
2011. (Id., Exh. A). Both policies provide underinsured motorist coverage in
the amount of $100,000 per person or $300,000 per accident. (Id., ¶17, 21).
The plaintiffs’ policy contains an “household exclusion” provision in the
underinsured motorists section, which reads in relevant part:
Exclusions - What is not covered
Allstate will not pay any damages an insured person is
legally entitled to recover because of:...
3. bodily injury while in, on, getting into or out of, or when
struck by an underinsured motor vehicle owned by you or a
(Id., Exh. A)(bolding in original). When the plaintiffs purchased their policy,
“there were no vehicles owned or leased by the plaintiffs or a resident relative
which were not insured for underinsured motorist coverage under the Linda
Colonna policy.” (Id., ¶26).
The plaintiffs have suffered various injuries as a result of the accident.
(Id., ¶10-15). The driver of the other vehicle was also insured by the
defendant and the plaintiffs’ have recovered $100,000 from him, the maximum
available under his policy. (Id., ¶15). The plaintiffs’ then made an
underinsured motorist claim under their son’s policy, but his $100,000 limit
was also insufficient to redress Mrs. Colonna’s injuries. (Id., ¶18). Having
exhausted the third-party and their son’s policies, the plaintiffs made an
underinsured motorist claim under their own policy. (Id., ¶23). The defendant
denied that claim on April 5, 2012, noting that because they were driving their
son’s car, the “household exclusion” barred underinsured motorist recovery.
This case was commenced on March 28, 2013 when the plaintiffs filed
their complaint. (Doc. No. 1). The defendant filed its motion to dismiss on May
29, 2013, (Doc. No. 5), and brief in support on June 12, 2013. (Doc. No. 8).
The plaintiffs filed a brief in opposition on June 19, 2013. (Doc. No. 9). The
motion is ripe for the court’s decision.
STANDARD OF REVIEW
The defendant’s motion to dismiss is brought pursuant to the provisions
of Fed. R. Civ. P. 12(b)(6). This rule provides for the dismissal of a complaint,
in whole or in part, if the plaintiff fails to state a claim upon which relief can be
granted. The moving party bears the burden of showing that no claim has
been stated, Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005), and
dismissal is appropriate only if, accepting all of the facts alleged in the
complaint as true, the plaintiff has failed to plead “enough facts to state a
claim to relief that is plausible on its face,” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 127 S. Ct. 1955, 1974 (2007) (abrogating “no set of facts” language
found in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). The facts alleged must
be sufficient to “raise a right to relief above the speculative level.” Twombly,
550 U.S. 544, 127 S. Ct. at 1965. This requirement “calls for enough fact[s]
to raise a reasonable expectation that discovery will reveal evidence of
[necessary elements]” of the plaintiff’s cause of action. Id. Furthermore, in
order to satisfy federal pleading requirements, the plaintiff must “provide the
grounds of his entitlement to relief,” which “requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action
will not do.” Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008)
(brackets and quotations marks omitted) (quoting Twombly, 550 U.S. 544,
127 S. Ct. at 1964-65).
In considering a motion to dismiss, the court generally relies on the
complaint, attached exhibits, and matters of public record. Sands v.
McCormick, 502 F.3d 263 (3d Cir. 2007). The court may also consider
“undisputedly authentic document[s] that a defendant attaches as an exhibit
to a motion to dismiss if the plaintiff’s claims are based on the [attached]
documents.” Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d
1192, 1196 (3d Cir. 1993). Moreover, “documents whose contents are alleged
in the complaint and whose authenticity no party questions, but which are not
physically attached to the pleading, may be considered.” Pryor v. Nat’l
Collegiate Athletic Ass’n, 288 F.3d 548, 560 (3d Cir. 2002). However, the
court may not rely on other parts of the record in determining a motion to
dismiss. See Jordan v. Fox, Rothschild, O’Brien & Frankel, 20 F.3d 1250,
1261 (3d Cir. 1994).
Generally, the court should grant leave to amend a complaint before
dismissing it as merely deficient. See, e.g., Fletcher-Harlee Corp. v. Pote
Concrete Contractors, Inc., 482 F.3d 247, 252 (3d Cir. 2007); Grayson v.
Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002); Shane v. Fauver,
213 F.3d 113, 116-17 (3d Cir. 2000). “Dismissal without leave to amend is
justified only on the grounds of bad faith, undue delay, prejudice, or futility.”
Alston v. Parker, 363 F.3d 229, 236 (3d Cir. 2004).
The defendant argues that dismissal is appropriate given that
Pennsylvania courts and the Third Circuit have upheld such provisions as
valid. (Doc. No. 8). The plaintiff contends that the “household exclusion”
contained in the plaintiffs’ insurance policy is invalid because the defendant
“failed to perform any risk based analysis to justify the inclusion of this
exclusion” when they purchased the policy. (Doc. No. 9). Centrally, the
plaintiffs’ note that their policy was purchased before their son’s policy,
thereby distinguishing this case from Reichert v. State Farm Ins., Co., 484 F.
App’x 724 (3d Cir. 2012).
“Generally, courts must give plain meaning to a clear and unambiguous
contract provision unless to do so would be contrary to a clearly expressed
public policy.” Prudential Property and Cas. Ins. Co. v. Colbert, 813 A.2d 747,
750 (Pa. 2002). The interpretation of an insurance contract is a matter of law
for the courts to determine. Erie Ins. Exchange v. Baker, 972 A.2d 507, 511
(Pa. 2009). “[A] valid household exclusion in an automobile insurance policy
precludes coverage.” Reichert, 484 F. App’x at 726.
The Pennsylvania Supreme Court has discussed at length the Motor
Vehicle Financial Responsibility Law (MVFRL), 75 Pa. C.S.A. §1701, noting
that the legislation protects insurers against underwriting unknown risks that
insured persons have not disclosed or paid to insure. Colbert, 813 A.2d at 753
(citing Burstein v. Prudential Property and Cas. Ins. Co., 809 A.2d 204
(Pa.2002)). The Third Circuit has also noted that upholding household
exclusions “will further the policy goals of the MVFRL of containing insurance
costs,” something the Colbert court relied heavily upon when deciding that
case. Nationwide Mut. Ins. Co. v. Riley, 352 F.3d 804 (3d Cir. 2003).
The plaintiff does not contend the language of the household exclusion
is ambiguous or vague, but focuses entirely on when each insurance policy
was purchased. They point the court to Justice Saylor’s brief concurrence as
part of a per curiam opinion of the Pennsylvania Supreme Court. Government
Employees Ins. Co. v. Ayers, 18 A.3d 1093 (Pa. 2011). Justice Saylor noted:
“I would disapprove the utilization of separate policies pertaining to multiple
vehicles within the same household solely to subvert intra-policy stacking
without any risk-based justification.” Id. However, the Third Circuit declined
to read Justice Saylor’s opinion “as casting doubt on the rule that a valid
household exclusion provision precludes coverage.” Reichert, 484 F. App’x
The court agrees with the plaintiffs that the timing of the purchases
differentiates this case from Reichert. However, the timing does not bolster
the plaintiffs’ argument. In Riley, a father purchased an insurance policy
before his daughter purchased her insurance policy from the same company.
Riley, 352 F.3d at 805-6. A short time later, the daughter, who was living with
her father at the time, was involved in a car accident. Id. When she recovered
the full policy limit from the other driver and her own policy, she attempted to
collect under her father’s policy, but was denied coverage based upon the
household exclusion included in his policy. Id.
The Third Circuit found that the timing of the purchase was critical given
that when her father purchased his policy, there was no evidence that the
insurer factored in the risk of his daughter having an accident with an
uninsured motorist. Id. at 810. “Indeed, we may presume that [the insurance
company] did not, as [the daughter’s] insurance policy was issued months
after [the father’s] policy.” Riley, 352 F.3d at 810. If the court voided the
household exclusion it “would therefore allow [the daughter] added
underinsured policy recoveries, and force [the insurance company] to pay for
items not factored into its risk calculation.” Id.
Baker also provides further insight to how the Pennsylvania Supreme
Court favors enforcing valid “household exclusion” clauses. In that case, the
plaintiff held two separate policies from two different insurers, one that
covered his three vehicles, and another that covered his motorcycle. Baker,
972 A.2d at 512. He was injured while riding his motorcycle, and subsequently
collected the policy maximum’s on the other driver’s policy and his own
motorcycle insurance policy. Id. When he attempted to collect underinsured
motorist benefits covered on his cars’ policy, the insurance company denied
his claim. Id. The company rejected his claim because of a clause denying
coverage if he is injured driving a vehicle he owned, but insured through
another company. Id. at 512-13. The Pennsylvania Supreme Court upheld the
exclusion because the plaintiff effectively waived his right to any underinsured
motorist coverage when driving his motorcycle that was insured through
another company. Id.
When read together, Riley and Baker direct the outcome of this case.
The plaintiffs obtained an insurance policy that explicitly denied coverage in
the event they were injured in a car owned by a resident relative. They drove
the car of a resident relative and were injured in an accident. See Baker, 972
A.2d at 513 (upholding underinsured motorist coverage when clause explicitly
bars recovery where plaintiff is “injured while driving a vehicle he owned, but
did not insure with” the defendant). Per the terms of the insurance agreement,
recovery is barred.
Turning to the timing, the plaintiffs’ policy was enacted prior to their
sons, so the defendant could not have evaluated any additional risks, similar
to the situation presented in Riley. 352 F.3d at 810. Moreover, as that court
noted, “[t]he fact that the two vehicles were insured by the same insurance
company does not, however, turn the tide” in favor of the plaintiffs. Id. At the
time the plaintiffs’ policy was issued, the defendant had no reason to know of
any additional risks it might be insuring, as the plaintiffs admit they did not
have any resident relatives or additional vehicles not insured by the
defendant. (Doc. No. 1, ¶26).
Even taking into account Justice Saylor’s concurrence, it was the
plaintiffs’ waiver that assured the insurance company that it did not have to
conduct a risk evaluation with regard to the resident relative exception. As
noted in Riley, the court further declines to read Justice Saylor’s concurrence
as casting into doubt the validity of household exclusion clauses as a matter
of Pennsylvania law. The clause is valid and coverage is therefore barred.
As both parties note, the only issue for the court was to determine
whether, as a matter of law, the language of the “household exclusion” was
valid. Given the court’s determination, any leave to amend to the complaint
would be futile.
For the reasons articulated above, the defendant’s motion to dismiss is
GRANTED with prejudice. An appropriate order will follow.
s/ Malachy E. Mannion
MALACHY E. MANNION
United States District Judge
Dated: December 3, 2013
O:\Mannion\shared\MEMORANDA - DJ\2013 MEMORANDA\13-0802-01.wpd
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