This matter was a Class Action filed in the Pennsylvania Court of Common Pleas Philadelphia County by Insured Brenda Jones (and those similarly situated) against her Insurer, Nationwide Property and Casualty Insurance Company.
The basis of the claim was the Insurer did not reimburse the full $500.00 deductible, and instead reimbursed the Insured a pro-rata amount of the recovery, namely $450.00.
Insured’s suit claimed a breach of contract, bad faith, conversion and unjust enrichment by the Insurer. Insurer filed Preliminary Objections to the complaint asserting the complaint failed to state a cause of action.
The Common Pleas Court granted Insurer’s Preliminary Objections, without issuing an opinion. The Insured appealed the Court of Common Pleas decision.
The Superior Court of Pennsylvania affirmed the Court of Common Pleas, finding the pro-rata pay out was consistent with the Insured’s policy language and the insurance practices outlined in 31 Pa. Code § 146.8(c).
Insurers shall, upon the request of the claimant, include the first-party claimant’s deductible, if any, in subrogation demands. Subrogation recoveries shall be shared on a proportionate basis with the first-party claimant, unless the deductible amount has been otherwise recovered. A deduction for expenses can not be made from the deductible recovery unless an outside attorney is retained to collect the recovery. The deduction may then be for only a pro rata share of the allocated loss adjustment expense.
Said practices were created by the Pennsylvania Insurance Department, under the authority granted by the Pennsylvania General Assembly. See 40 P.S.A. § 1171, et seq. (Unfair Insurance Practices Act (UIPA)).
The Superior Court held the Insured’s remedy for alleged violations under the UIPA was to file a grievance requesting an investigation by the Insurance Commissioner. Thereafter the Commissioner may impose sanctions and seek civil penalties.
Lastly, the Superior Court reasoned that since the practices created by the Pennsylvania Insurance Commission “fits squarely within the scope of authority delegated by the General Assembly”, the ‘made whole doctrine’ was not violated (assuming arguendo that it was applicable).
The Court adopted the reasoning of Harnick v. State Farm Mutual Ins. Co., 2009 U.S. Dist. LEXIS 43126 (E.D. Pa., March 6, 2009). Harnick is a federal case and thus not binding upon the Pennsylvania Superior Court however, the Court found Harnick’s reasoning to be sound and directly on point.
To summarize, Pennsylvania Insurers may reimburse their Insureds deductible pro-rata, without fear of running aground of State or Federal law.