Lewis v. Erie Ins. Exchange

• Decision Date: 21 March 2002
• Citation: 793 A.2d 143,568 Pa. 105
• Parties: Robert A. LEWIS, Linda S. Lewis, Husband and Wife, and Robert J. Lewis, Appellants, v. ERIE INSURANCE EXCHANGE, Appellee.
• Court: Pennsylvania Supreme Court

793 A.2d 143

568 Pa. 105

Robert A. LEWIS, Linda S. Lewis, Husband and Wife, and Robert J. Lewis, Appellants, v. ERIE INSURANCE EXCHANGE, Appellee.

Supreme Court of Pennsylvania.

Argued September 11, 2001.

Decided March 21, 2002.

Todd Berkey, Pittsburgh, for Robert A. Lewis, et al.

John W. Pollins, Greensburg, for Pennsylvania Trial Lawyers Association. Craig R.F. Murphey, Erie, for Erie Insurance Exchange.

Christine P. Busch, James C. Haggerty, Philadelphia, for Pennsylvania Defense Institute.

Before FLAHERTY C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.

OPINION

SAYLOR, Justice.

The question presented is whether technical requirements imposed upon insurers under the Motor Vehicle Financial Responsibility Act to effectuate a first named insured's decision to decline uninsured and underinsured motorist coverage also pertain in circumstances involving acceptance of coverage at designated policy limits.

In June of 1992, Appellants Robert A. and Linda Lewis contracted with Appellee, Erie Insurance Exchange ("Erie"), for automobile insurance coverage as named insureds. On the face of the declarations page (as of at least November, 1992), the policy provided, inter alia, bodily injury liability coverage limited to $500,000 per person and per accident; uninsured motorist ("UM") and underinsured motorist ("UIM") coverage with limits of $50,000 per person and $100,000 per accident; and stacking of UM and UIM benefits by virtue of multiple vehicle premium payments. The UM/UIM coverage appears to have been modified in November of 1992 via a form provided by Erie and signed by Mr. Lewis as the first named insured. The single-page form is divided into two primary sections, each of which is separately outlined in box style prominently labeled as pertaining to "uninsured motorist coverage options" and "underinsured motorist coverage options," respectively. The two primary sections are each subdivided into three discrete, individually labeled blocks containing operative language to accomplish waiver or rejection of coverage; reduction of coverage limits; and/or rejection of stacked limits of coverage. Each of the three individual blocks within each primary section contains a line calling for the signature of the first named insured to effectuate selection of the option if chosen. Mr. Lewis's signature appears on the form in both the UM and UIM sections within the blocks labeled "Reduced Limits of [UM/UIM] Motorist Protection," and providing as follows:

By signing this waiver, I am rejecting [UM/UIM] coverage limits equal to my bodily injury liability limits. I knowingly and voluntarily select uninsured motorist coverage limits lower than my bodily injury limits. Instead, I select the following limit(s):

$50,000 EACH PERSON $100,000 EACH ACCIDENT...

No signature is present in any of the four blocks pertaining to waiver/rejection of UM and UIM coverage and stacking.

In July of 1997, the Lewises' son was injured in a motor vehicle accident while a passenger in a vehicle insured by a different company. Pursuant to provisions of the Erie policy extending coverage to resident relatives and affording a degree of portability in the UIM component, the Lewises' son was treated as a covered person thereunder, and Erie apparently conceded coverage limited to $100,000, after stacking, consistent with the declarations page of the policy. The Lewises, however, contended that the limits of available UIM coverage should be extended to the bodily injury liability limits ($500,000, and $1 million after stacking), since Erie's UM/UIM coverage options form failed to conform to Section 1731 of the MVFRL, 75 Pa.C.S. § 1731, governing the mandatory offering by insurers of UM and UIM insurance, and specifically the requirement of Section 1731(c.1) that an insurer must provide forms for waiver/rejection of such offerings printed on separate pages pertaining to each form of coverage waived. See 75 Pa.C.S. § 1731(c.1).¹ Erie disputed the applicability of Section 1731(c.1) in instances involving the selection of specific coverage limits rather than outright waiver/rejection. As relates to an insured's selection of particular limits, Erie identified Section 1734 of the MVFRL as the controlling provision, emphasizing that its provisions require only that a request for specific limits for UM/UIM coverage be in writing but contain no analog to Section 1731(c.1)'s separate-page requirement.²

In light of the dispute concerning available UIM coverage under the Erie policy, the Lewises commenced a declaratory judgment action in the common pleas court seeking a judicial affirmation of their position and a corresponding reformation of the policy's UIM limits. Erie defended the action and filed a motion seeking summary judgment. In response, however, the common pleas court treated the motion as one seeking judgment on the pleadings and granted relief, not for Erie, but rather, in favor of the Lewises. In its initial memorandum opinion, the court explained that the outcome was controlled by National Union Fire Ins. Co. v. Irex Corp., 713 A.2d 1145 (Pa.Super.1998), in which a Superior Court panel indicated that an insurer must strictly comply with Section 1731 of the MVFRL as a prerequisite to a reduction in coverage under Section 1734. See id. at 1152-54.³ On the basis of Irex, the common pleas court reasoned that a court must, as a threshold matter, ensure that the insurer provided forms meeting the technical requirements for the rejection set forth in Section 1731. Only then, if the requirements of Section 1731 are met, may the court proceed to determine whether an insured executed a valid written request to reduce coverage under Section 1734. Accordingly, because Erie failed to provide the Lewises with separate forms for rejection of UM and UIM coverage, the court concluded that Mr. Lewis's request for specific coverage limits was ineffective, and reformation was required pursuant to Section 1731(c.1). In a supplemental opinion, the common pleas court further explained that it had considered Salazar v. Allstate Ins. Co., 549 Pa. 658, 702 A.2d 1038 (1997), and Donnelly v. Bauer, 553 Pa. 596, 720 A.2d 447 (1998), in which this Court determined that, although insurers had violated certain technical requirements of the MVFRL, since the Legislature had not prescribed pertinent remedies for such violations, none was available to the insureds. See Salazar, 549 Pa. at 669-70,

702 A.2d at 1044; Donnelly, 553 Pa. at 609-10,

720 A.2d at 453-54. The common pleas court distinguished these decisions on the basis that, since the 1990 amendments to the MVFRL,⁴ reformation has been expressly required as a remedy for violation of Section 1731's separate-page requirement pertaining to UM/UIM waiver/rejection. See 75 Pa.C.S. § 1731(c.1) ("Any rejection form that does not specifically comply with this section is void[;][i]f the insurer fails to produce a valid rejection form, uninsured or underinsured coverage, or both, as the case may be, under that policy shall be equal to the bodily injury liability limits.").⁵

On appeal, however, a panel of the Superior Court reversed in a published opinion. See Lewis v. Erie Ins. Exch., 753 A.2d 839 (Pa.Super.2000)

. The majority described the issue as "whether policies issued under § 1734 must comply with the technical requirements of § 1731 in order to effect a valid election of reduced UM/UIM coverages under § 1734." See id. at 846. In addressing this question, the majority provided a partial overview of the MVFRL, focusing upon: the legislative requirement for insurers to offer UM/UIM coverage, see 75 Pa.C.S. § 1731; Section 1731's prescription of technical requirements governing requests for waiver/rejection, including the single-page criterion prescribed by Section 1731(c.1); the directive for a specific, written request in order to specify applicable limits for UM/UIM coverage, see 75 Pa.C.S. § 1734; the general requirements respecting statutory language and formatting for notice of available benefits and limits, see 75 Pa.C.S. § 1791; and the separate statutory mandates governing disclosure of premium charges and tort options, see 75 Pa.C.S. § 1791.1. See Lewis, 753 A.2d at 842-46. Further, the court summarized this Court's opinions in Salazar, 549 Pa. at 658,

702 A.2d at 1038,

Rump v. Aetna Cas. & Sur. Co., 551 Pa. 339, 710 A.2d 1093 (1998), and Donnelly, 553 Pa. at 596,

720 A.2d at 447, as well as various decisions of the Superior Court, culminating in a critical review of Irex. The majority distinguished Irex as involving a waiver/rejection paradigm as contrasted with Mr. Lewis's specific limits designation; therefore, it treated Irex`s directives precluding the designation of specific coverage limits in the absence of valid UM/UIM rejection forms, see supra note 3, as dicta. See Lewis, 753 A.2d at 849; accord Lewis, 753 A.2d at 855 (Brosky, J., concurring)("The panel in Irex was called upon to address only whether an invalid rejection form could be treated as a valid reduction request[;][t]he discussion by the panel of the interplay between sections 1791, 1731, and 1734 went beyond the question of whether an invalid rejection of UM and/or UIM coverage may be treated by the insurer as an election by the insured to reduce coverage under section 1734."). The majority then applied its own, plain-meaning interpretation of Section 1734, concluding that its requirement of a written request to implement specific UM/UIM coverage limits does not incorporate Section 1731's technical requirements, which apply solely to instances of outright waiver/rejection. See Lewis, 753 A.2d at 850-51 ("The plain meaning [of Section 1734] contains no standards concerning the language or form that a named insured uses to `request in writing' the issuance of reduced UM/UIM coverages."). The court noted that its interpretation was also supported by the policy of the MVFRL to contain the rising costs of automobile...