Heebner v. Nationwide Ins. Enter.

• Decision Date: 28 September 2011
• Docket Number: Civil Action No. 10–2381.
• Citation: 818 F.Supp.2d 853
• Parties: Linda E. HEEBNER, Plaintiff, v. NATIONWIDE INSURANCE ENTERPRISE, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

818 F.Supp.2d 853

Linda E. HEEBNER, Plaintiff,

v.NATIONWIDE INSURANCE ENTERPRISE, Defendant.

Civil Action No. 10–2381.

United States District Court, E.D. Pennsylvania.

Sept. 28, 2011.

Charles A. Rick, Scott F. Breidenbach, Breidenbach Associates Law Offices, Pottstown, PA, for Plaintiff.

Bryon R. Kaster, Charles E. Haddick, Jr., Dickie McCamey & Chilcote PC, Camp Hill, PA, for Defendant.

Memorandum Opinion

GOLDBERG, District Judge.

The primary issue in this case pertains to whether insurance coverage for compensatory damages, provided under an uninsured/underinsured policy, includes delay damages.¹ This question comes before the Court through Defendant, Nationwide Insurance Enterprise's (hereinafter “Nationwide”), motion to dismiss. For reasons set forth below, Nationwide's motion will be denied in part and granted in part.

I. Factual and Procedural Background

The relevant facts are straightforward and undisputed:

Nationwide provided automobile insurance for Plaintiff, which included uninsured and underinsured (UM/UIM) coverage. Under both types of coverage, the policy states:

We [Nationwide] will pay compensatory damages as a result of bodily injury suffered by you or a relative and due by law from the owner or driver of an [uninsured/underinsured] motor vehicle.

(Compl., Ex. A at 13, 17.) The policy sets forth definitions for several terms, such as “arbitration,” “arbitrator,” “uninsured motor vehicle,” and “underinsured motor vehicle.” “Compensatory damages,” however, is not defined. The policy also specifically excludes from UM/UIM coverage numerous categories of damages,² but none of these exclusions involve delay damages. Indeed, none of the named exclusions even remotely pertain to any type of “interest” or delay-related damages award.

On February 24, 1997, Plaintiff was involved in an accident with an uninsured/underinsured motorist. Plaintiff's Amended Complaint describes this motorist as “self insured.” (Compl. ¶¶ 6, 7.) As is required under Nationwide's policy, Plaintiff sued the motorist and on June 26, 2008, she was awarded $133,201.96.³ This award was allocated as $85,000.00 for compensatory damages, and $48,201.96 for delay damages pursuant to Pa. R.C.P. 238 (hereinafter “ Rule 238”). Nationwide has paid Plaintiff $85,000.00 in compensatory damages, but refuses to pay the $48,201.96 in delay damages, claiming that it is not liable for such damages under the UM/UIM policy. (Compl. ¶¶ 6–7, 11, 13–14.)

In response, Plaintiff filed a declaratory judgment action in the Berks County Court of Common Pleas alleging that her insurance policy entitles her to delay damages (Count I). Plaintiff's complaint also alleges bad faith on the part of Nationwide due to its refusal to pay the delay damages award (Count II). (Compl. ¶¶ 17, 22; Compl. Ex. A, at 13, 17.) On May 20, 2010, Nationwide removed this case to federal court.

II. Legal Standards–Motion to Dismiss

When considering a motion to dismiss, the court must assume the veracity of well-pleaded factual allegations, construe them in a light most favorable to the Plaintiff, and “then determine whether they plausibly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009) ( aff'g Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir.2008). The court may only look to the facts alleged in the complaint and its attachments when deciding a motion to dismiss. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.1994). “ ‘[B]are-bones' allegations will no longer survive a motion to dismiss: ‘threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.’ To prevent dismissal, all civil complaints must now set out ‘sufficient factual matter’ to show that the claim is facially plausible.” Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009) (quoting Iqbal, 129 S.Ct. at 1949).

III. Analysis

As previously noted, the primary issue in this case is whether coverage for “compensatory damages” includes the $48,201.96 awarded to Plaintiff in delay damages.

Plaintiff presses several arguments. She first asserts that delay damages are “compensatory,” pointing to the text of Rule 238, which states that delay damages shall be “added to the amount of compensatory damages ... and shall become part of the verdict, decision or award.” Pa. R.C.P. 238(a)(1). Plaintiff concludes that because “these particular delay damages were a result of a compensatory award, the damages awarded under Rule 238 are compensatory.” Plaintiff also notes that the policy defines an “underinsured motor vehicle” as an insured vehicle that has insufficient coverage to pay the damages an insured motorist is entitled to recover. Because the policy's definition section further explains that Nationwide “will pay damages that exceed such total amount” of coverage, Plaintiff concludes that all damages, including delay damages, should be covered. Finally, Plaintiff argues that the policy is ambiguous on the issue of whether delay damages are “compensatory.”

In urging that delay damages are not covered, Nationwide relies heavily on the text of Rule 238. In particular, Nationwide focuses on the clause that states that delay damages will be “added to the amount of compensatory damages.” Id. From this language, Nationwide contends that delay damages must be separate from—and different than—compensatory damages. Nationwide also asserts that the primary purpose of delay damages is not to compensate, but to encourage quicker settlements and thus lessen the burden on courts. Lastly, Nationwide claims that the policy is not ambiguous and the absence of coverage for delay damages reflects a clear intent that these types of damages are not covered.

A. When Read as a Whole, the Policy is Ambiguous Regarding Whether Delay Damages are Covered.

The interpretation of an insurance contract is a question of law. Donegal Mut. Ins. Co. v. Baumhammers, 595 Pa. 147, 938 A.2d 286, 290 (2007). The United States Court of Appeals for the Third Circuit has set forth several principles of contractual interpretation followed by Pennsylvania courts: ⁴

It is well settled that when interpreting a contract, the Pennsylvania courts look to the words of the agreement in order to determine the parties' intent. Moreover, when construing an insurance contract, we are bound to give effect to clear and unambiguous language. We are not at liberty to rewrite an insurance contract, or to construe clear and unambiguous language to mean something other than what it says.State Farm Mut. Auto. Ins. Co. v. Coviello, 233 F.3d 710, 717 (3d Cir.2000) (citations omitted). However, “[w]here a provision of a policy is ambiguous, the policy provision is to be construed in favor of the insured and against the insurer, the drafter of the agreement.” Prudential Prop. & Cas. Ins. Co. v. Sartno, 903 A.2d 1170, 1174, 588 Pa. 205, 212 (Pa.2006) (internal quotation marks omitted).

A contractual provision is ambiguous if “it is reasonably susceptible to different constructions and capable of being understood in more than one sense.” Gardner v. State Farm Fire & Cas. Co., 544 F.3d 553, 558 (3d Cir.2008). The provisions of the contract must be read as a whole, and not in a vacuum: “contractual terms are ambiguous if they are subject to more than one reasonable interpretation when applied to a particular set of facts.” Genaeya Corp. v. Harco Nat. Ins. Co., 991 A.2d 342, 346–47 (Pa.Super.Ct.2010). Parties' disagreement as to the meaning of a policy does not make it ambiguous. Insurance Co. of Evanston v. Bowers, 758 A.2d 213 (Pa.Super.Ct.2000).

Here, the primary focus is on the meaning of “compensatory damages,” which is not defined under the policy. A policy term or phrase is not, however, necessarily ambiguous because it is not defined. See e.g. Telecomm. Network Design v. Brethren Mut. Ins. Co., 5 A.3d 331, 336–37 (Pa.Super.Ct.2010) (finding that, although the word “privacy” was “not defined and [could] imply several meanings,” it was not ambiguous because the meaning was clear when read in the context of the policy); Wall Rose Mut. Ins. Co. v. Manross, 939 A.2d 958, 964 (Pa.Super.Ct.2007), (“Although the term ‘resident’ is not defined in the policy, we do not find it to be ambiguous.”)

Nevertheless, while failure to define a term does not necessarily create ambiguity, it can reflect a missed opportunity to clarify an already ambiguous term. See Ario v. Ingram Micro, Inc., 600 Pa. 305, 965 A.2d 1194, 1201 (2009) (finding the term “antecedent debt” in a statute ambiguous based upon several considerations, including the failure of the General Assembly to define the term, the parties' competing assertions as to the meaning, and the court's conclusion that both interpretations were reasonable); Erie Ins. Exch. v. E.L. ex rel. Lowry, 941 A.2d 1270, 1277 (Pa.Super.Ct.2008) (concluding that, in drafting an exclusion in the insured's policy, insurer could have utilized more precise language if it intended to preclude coverage).

In the present case, Nationwide's policy defined many terms such as “arbitration,” “uninsured motor vehicle,” “arbitrator,” and “underinsured motor vehicle.” (Compl., Ex. A, pp. 13, 17.) It plainly follows then that if Nationwide desired not to provide coverage for delay damages it could have easily done so. Nationwide also chose not to specifically exclude delay damages or pre-judgment interest of any kind, despite the fact that the policy excluded other types of damages, including “punitive or exemplary damages.” Additionally, reading the term “compensatory damages” in context with the remainder of the policy does not, as was the case in Telecomm., render its meaning clear. All of these factors indicate ambiguity and weigh against Nationwide's position that delay damages are not covered.

B. Pennsylvania Precedent...