July 8, 2009
Written By Attorneys C. Scott Rybny and Mark H. Rosenberg
Note: This article is an interpretation of current law and is offered for informational purposes only. This material is not legal advice and should not be construed or used as a substitute for the advice of an attorney.
On July 7, 2009, the Pennsylvania Supreme Court granted a Petition for Allowance of Appeal from the Commonwealth Court's decision in Heller v. Pennsylvania League of Cities and Municipalities, 950 A.2d 362 (Pa. Cmwlth. Ct. 2008), for the purpose of determining the enforceability of a uninsured/underinsured motorist policy exclusion pertaining to any claimant eligible for worker's compensation benefits that are the obligation of the policyholder.
A two-to-one majority of the Commonwealth Court panel held that such an exclusion did not violate public policy and was therefore valid and enforceable. In reaching this decision, the Commonwealth Court noted that while the Pennsylvania Supreme Court held in Selected Risks Ins. Co. v. Thompson, 520 Pa. 130, 552 A.2d 1382 (1989), that such exclusionary clauses were contrary to public policy and therefore unenforceable, the Court's decision relied in large part upon since-repealed statutory language making UM/UIM coverage a mandatory element of all automobile liability insurance policies issued in the Commonwealth. The Commonwealth Court also noted that in support of its conclusion, the Selected Risks court cited a since-repealed provision in the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL") prohibiting insurance companies from making UM/UIM benefits subject to an exclusion or reduction based upon the availability of worker's compensation benefits pertaining to the same injury. While this provision was enacted following the loss in question and therefore did not directly govern the Selected Risks matter, the Selected Risks court nonetheless cited the provision as consistent with its determination that the exclusionary clause violated public policy.
The Commonwealth Court also noted that while the Pennsylvania Supreme Court held in Gardner v. Erie Ins. Co., 555 Pa. 59, 722 A.2d 1041 (1999), that the state Workers' Compensation Act did not preclude individuals receiving worker's compensation benefits from obtaining UM/UIM benefits for the same injury, the Gardner court did not address whether UM/UIM insurers could incorporate exclusionary provisions for the purpose of preventing such a double recovery.
Taking into account the absence of statutory law expressly prohibiting an exclusion to UIM coverage based upon eligibility for worker's compensation benefits, the absence of legal precedent holding such an exclusion to be unenforceable under the current UM/UIM statutory scheme, the fact that policyholders are not required to purchase UM/UIM coverage under this statutory scheme, and the general recognition that courts should not redraft contracts "on the sole basis of outcomes that may be desired for the general good," the Commonwealth Court concluded that the policy exclusion at issue was valid and enforceable.
In dissenting from the majority opinion, Commonwealth Court Justice Rochelle Friedman noted that under the current version of the MVFRL, a worker's compensation insurer has a subrogation interest with respect to UM/UIM benefits paid to a claimant. Justice Friedman observed that the Court has previously recognized that this provision was intended to "shift[] the ultimate burden for benefits from innocent employers and their WC carriers to responsible tortfeasors and the insurers who pay in their stead." Justice Friedman contended that this purpose was defeated by policy language excluding UM/UIM coverage for losses where worker's compensation benefits are available. Justice Friedman also noted that as observed by the Selected Risks court, such an exclusionary clause prevents claimants from being made whole by limiting recovery to worker's compensation benefits, which covers only a fraction of the damages available under UM/UIM coverage.
NLdH will continue to monitor this matter as it proceeds through the Pennsylvania Supreme Court and report any significant developments.
