Peterman v. Harford Mut. Ins. Co.

• Decision Date: 22 August 2014
• Docket Number: CIVIL ACTION NO. 3:13-263
• Parties: J. RICHARD PETERMAN, Plaintiff, v. THE HARFORD MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of Pennsylvania

J. RICHARD PETERMAN, Plaintiff, v. THE HARFORD MUTUAL INSURANCE COMPANY, Defendant.

CIVIL ACTION NO. 3:13-263

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

August 22, 2014

JUDGE KIM R. GIBSON

MEMORANDUM OPINION

I. INTRODUCTION

The instant action concerns an insurance coverage dispute arising out of an automobile accident involving an owner of a corporate entity insured under a commercial lines policy. The matter is presently before the Court on cross-motions for judgment on the pleadings filed pursuant to Federal Rule of Civil Procedure 12(c). (ECF Nos. 7-8). For the reasons that follow, the Plaintiff's motion will be denied, and the Defendant's motion will be granted.

II. BACKGROUND

Plaintiff J. Richard Peterman ("Peterman") resides in Curwensville, Pennsylvania. (ECF No. 1-2 at 4, ¶ 1). Defendant Harford Mutual Insurance Company ("Harford") is a Maryland corporation maintaining its principal place of business in Bel Air, Maryland. (Id. at 4, ¶ 2). LPL Land, Inc. ("LPL Land"), is a Pennsylvania corporation based in Curwensville. (Id. at 4, ¶ 3). At all times relevant to this case, Peterman owned fifty percent of LPL Land's issued and outstanding shares of common stock. (Id. at 5, ¶ 4). He also served as LPL Land's secretary and treasurer. (Id. at 5, ¶ 5).

LPL Land purchased a commercial lines automobile insurance policy issued by Harford. (ECF No. 7-2 at 7-70). The applicable policy period commenced on August 22, 2011, and ended on August 22, 2012. (Id. at 7-9). LPL Land was listed as the policy's "Named Insured." (Id. at 8, 18, 20). The coverage provided under the policy included underinsured motorist coverage.¹ (Id. at 48-51).

On February 19, 2012, Peterman was severely injured in an automobile accident while traveling as a passenger in a motor vehicle owned and operated by his nephew, Michael Peterman ("Michael"). (ECF No. 8-1 at 70). As a result of his injuries, Peterman suffered a loss of hearing in his right ear and a loss of vision in his left eye. (ECF No. 1-3 at 67). His lung capacity was impaired. (Id.). Because of a soft tissue injury to his cervical spine, Peterman experienced numbness and tingling in his left arm. (Id. at 68). He was also afflicted with headaches and peripheral numbness in his right leg. (Id. at 67-68).

Michael's vehicle was insured by Erie Insurance Company ("Erie"). (ECF No. 7 at 2, ¶ 7; ECF No. 8-1 at 70). Peterman was covered under a personal automobile insurance policy issued by State Farm Insurance ("State Farm"). (ECF No. 7 at 2, ¶ 8; ECF No. 8 at 11, ¶ 46). The coverage available under those policies was apparently inadequate to compensate Peterman for his injuries.² Peterman asserted a claim for underinsured motorist coverage under the Harford policy. (ECF No. 1-2 at 5-6, ¶ 11). Harford denied coverage on the ground that Peterman had not been "insured" under the commercial lines policy issued to LPL Land whileriding in Michael's vehicle. (ECF No. 8-1 at 70-71). Robin Raymond, an employee of Harford's Claims Department, informed Peterman's attorney of the denial in a letter dated October 3, 2012. (Id.).

Peterman commenced this action in the Court of Common Pleas of Clearfield County on October 31, 2013, seeking a declaration that he was entitled to underinsured motorist coverage under the commercial lines policy issued by Harford. (ECF No. 1 -2 at 2-6). On November 20, 2013, Harford removed the case to this Court pursuant to 28 U.S.C. §§ 1441 and 1446. (ECF No. 1). Harford answered Peterman's complaint on December 9, 2013. (ECF No. 3). During a telephonic scheduling conference conducted on January 15, 2014, the parties advised that Peterman's coverage under the policy was the only issue that needed to be resolved. (ECF No. 5). They agreed that no further discovery was necessary. (Id.). Harford and Peterman respectively moved for judgment on the pleadings on January 23, 2014, and January 31, 2014. (ECF Nos. 7 & 8). Those motions are currently ripe for disposition and will be resolved in this memorandum opinion.

III. STANDARD OF REVIEW

"The standard for deciding a motion for judgment on the pleadings filed pursuant to Federal Rule of Civil Procedure 12(c) is not materially different from the standard for deciding a motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6)." Zion v. Nassau, 283 F.R.D. 247, 254 (W.D.Pa. 2012). Either motion may be used to seek the dismissal of a complaint based on a plaintiff's "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6), (h)(2)(B). The only difference between the two motions is that a Rule 12(b) motion must be made before a "responsive pleading" is filed, whereas a Rule 12(c) motion can be made "[a]fter the pleadings are closed." FED. R. CIV. P. 12(b), (c). A court presented with amotion for judgment on the pleadings must consider the plaintiff's complaint, the defendant's answer, and any written instruments or exhibits attached to the pleadings. Perelman v. Perelman, 919 F.Supp.2d 512, 521 (E.D.Pa. 2013).

IV. JURISDICTION AND VENUE

The commercial lines policy issued by Harford provides underinsured motorist coverage in the amount of $500,000.00. (ECF No. 7-2 at 20). Because this case involves "[c]itizens of different States" who dispute the availability of insurance coverage exceeding the value of $75,000.00,³ the Court's exercise of subject-matter jurisdiction is predicated on 28 U.S.C. § 1332(a)(1). Venue is proper under 28 U.S.C. § 1391(b)(2).

V. DISCUSSION

A federal court sitting in diversity must apply the choice-of-law rules of the State in which it sits. Klaxon Co. v. Stentor Electric Manufacturing Co., Inc., 313 U.S. 487, 496-497, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Under Pennsylvania's choice-of-law rules, an insurance contract is governed by the law of the State in which it is contracted and delivered. McMillan v. State Mutual Life Assurance Co. of America, 922 F.2d 1073, 1074-1075 (3d Cir. 1990); Crawford v. Manhattan Life Insurance Co. of New York, 221 A.2d 877, 880 (Pa.Super.Ct. 1966). Given that LPL Land is a Pennsylvania corporation, the commercial lines policy issued by Harford was most likely delivered in Pennsylvania. In any event, both parties rely on Pennsylvania law in support of their respective positions. (ECF No. 7 at 14-19; ECF No. 8 at 18-25; ECF No. 10 at 1-6). Since neither party appears to question the application of Pennsylvanialaw to this case, the Court will analyze the disputed substantive issues in accordance with the law of Pennsylvania. Smith v. Allstate Insurance Co., 904 F.Supp.2d 515, 518, n. 1 (W.D.Pa. 2012).

Peterman brought this action against Harford in the Court of Common Pleas pursuant to Pennsylvania's Declaratory Judgments Act [42 PA. CONS. STAT. § 7531 et seq.]. (ECF No. 1-2 at 2-6). Given that the case has been removed to this Court, the availability of declaratory relief is governed by the federal Declaratory Judgment Act ("DJA") [28 U.S.C. § 2201 et seq.]. Reifer v. Westport Insurance Corp., 751 F.3d 129, 132-137 (3d Cir. 2014); Delaware St. University Student Housing Foundation v. Ambling Management Co., 556 F.Supp.2d 367, 373, n. 49 (D.Del. 2008). Since an "actual controversy" exists between the parties, the Court "may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). A declaration made pursuant to the DJA has "the force and effect of a final judgment or decree." Id. Such a declaratory judgment may serve as a predicate for "[f]urther necessary or proper relief." 28 U.S.C. § 2202.

Pennsylvania's Motor Vehicle Financial Responsibility Law ("MVFRL") [75 PA. CONS. STAT. § 1701 et seq.] defines the term "[u]nderinsured motor vehicle" as "[a] motor vehicle for which the limits of available liability insurance and self-insurance are insufficient to pay losses and damages." 75 PA. CONS. STAT. § 1702. The record indicates that the coverage available under the Erie policy was insufficient to compensate Peterman for his injuries. (ECF No. 1-3 at 67-68). Consequently, Michael's vehicle constituted an "underinsured motor vehicle" within the meaning of the MVFRL. "Underinsured motorist coverage" exists to protect individuals who find themselves in Peterman's predicament. 75 PA. CONS. STAT. § 1731(c). The central question in this case is whether Peterman's status as an owner and officer of LPL Land entitles him to underinsured motorist coverage under the Harford policy.

In Utica Mutual Insurance Co. v. Contrisciane, 473 A.2d 1005, 1010 (Pa. 1984), the Pennsylvania Supreme Court recognized that most "uninsured"⁴ and underinsured motorist policies provided coverage to persons falling within three different classifications. "Class-one" coverage generally protects a discrete category of individuals who are intended beneficiaries of an insurance contract and parties to a contractual relationship with an insurer. Employers Mutual Casualty Co. v. Loos, 476 F.Supp.2d 478, 486 (W.D.Pa. 2007)(explaining that class-one insureds typically include the named insured, his or her spouse, and any other relatives living within the same household). "Class-two" coverage typically extends to individuals who happen to be occupying an insured vehicle at the time of an automobile accident. Id. "Class-three" coverage provides protection to those who are entitled to recover damages attributable to bodily injuries suffered by individuals falling within the first and second categories. Id. Unlike class-one insureds, individuals falling within the second and third categories usually secure coverage through happenstance rather than through the payment of premiums to an insurer. Utica, 413 A.2d at 1010-1011. Since class-one insureds are ordinarily in contractual privity with the insurer, they tend to be "finite and readily discernible in number." Ober v. Aetna Casualty & Surety Co., 766 F.Supp. 342, 349 (W.D.Pa. 1991).

The commercial...