Pennsylvania Superior Court Is the First State Appellate Court To Address the Unfair Insurance Practices Act Protection for Victims of Abuse
By Patricia A. Monahan, Esq.*
The Pennsylvania legislature amended the Unfair Insurance Practices Act (UIPA) in 1996 and 2006 to afford protection for innocent co-insureds who suffer property loss as a result of an intentional act of another insured that constitutes abuse. Without the amendments, an innocent spouse who would otherwise have a covered property loss, such as a fire, would not likely be able to recover under a homeowner's policy with an intentional acts exclusion. His or her claim would be precluded because of the intentional act of the co-insured that was meant to be abusive or intimidating. Thirty-two states currently have similar laws that protect property damage claimants who qualify as victims of abuse. Many insurers have issued related endorsements to their homeowner’s coverage forms.
Although the UIPA amendments have been in place in Pennsylvania for several years, there have not been any appellate opinions or reported lower court opinions applying the law. That is, not until recently, when the Superior Court issued its opinion in Lynn v. Nationwide, 2013 Pa. Super. LEXIS 704 (Pa. Super. May 1, 2013), and definitively held that an insurer cannot rely upon an intentional act policy exclusion to prevent a victim of domestic violence from recovering his or her interest in jointly held property. The Lynn opinion arose out of an Allegheny County Court of Common Pleas summary judgment award to Nationwide, which upheld its denial of Brian Lynn’s property damage claim for reasons that included reliance upon the intentional acts exclusion in his and his wife's homeowner's insurance policy. On October 30, 2009, Brian Lynn’s wife Terra sent an email to their insurance agent requesting cancellation of their policy and signed it “Brian Lynn.” Then, on November 1, 2009, Terra attempted to burn down the marital residence with the couple’s children and herself inside. She left a suicide note. Terra Lynn and the children thankfully escaped serious injury. Terra was arrested and charged with various crimes, including arson. She pled guilty to arson. Brian Lynn had moved from the marital residence months prior and was residing with his girlfriend at the time of the fire.
Nationwide supported its denial of Brian Lynn’s claim based upon the introductory language in the relevant portion of the UIPA, which prohibits an insurer from discriminating against an applicant for benefits "because" the insured is a "victim of abuse." 40 P.S.§1171.5(a)(14)(i). It argued that the denial was, instead, based upon the intentional acts exclusion in the policy. The Superior Court accepted Mr. Lynn’s position that if Nationwide’s interpretation of the UIPA was correct, then a victim of domestic violence would never be able to recover in the face of the intentional acts exclusion, which contravened the intent of the legislature.
The history of the UIPA amendments supported Mr. Lynn’s right to recover from his homeowner's carrier. Decades ago, insurers utilized information that an insured had been subjected to domestic violence as a reason to either deny coverage, or rate an applicant as a higher risk . Some insurers openly admitted to this practice and sought justification with statistics. A physician might, therefore, encourage his patient to refrain from mentioning the source of her injuries that require treatment for fear that the patient could lose her health insurance. The patient would similarly fear reporting abuse. These types of situations lead to the 1996 amendment to the UIPA prohibiting insurers from using domestic violence as an underwriting criterion or as a basis to deny claims. Nevertheless, in 1997, in Kundahl v. Erie Ins. Group, 703 A.2d 542, 545 (Pa. Super. 1997), the Pennsylvania Superior Court upheld Erie Insurance's denial of an innocent spouse’s homeowner’s claim arising out of a fire set by her abusive spouse. In that case, the intentional acts exclusion precluded coverage to both spouses if one acted intentionally because the exclusion had been written so that each spouse’s obligations under the policy were joint and the act of one spouse was attributed to the other. The legislature thus again amended the UIPA in 2006 with “The Innocent Co-Insured Victim Act," 40 P.S. 1171.5(a)(14)(i)(D), which states:
(D) With respect to a policy of a private passenger automobile, a policy covering owner-occupied private residential property or a policy covering personal property of individuals, refusing to pay an insured for losses arising out of abuse to that insured under a property and casualty insurance policy or contract to the extent of the insured's legal interest in the covered property if the loss is caused by the intentional act of another insured or using other exclusions or limitations which the commissioner has determined unreasonably restrict the ability of victims of abuse to be indemnified for such losses. When an insured submits a claim for losses pursuant to this subsection, the insurer shall provide to the insured a notice stating:
(I) that the insurer cannot refuse to pay a claim without conducting a reasonable investigation;
(II) that such investigation may include or result in contact with other insureds;
(III) that, at the request of the insured, the insurer will not disclose the location of the insured to the other insureds or third parties as part of the investigation;
(IV) that the insurer will notify the insured at least fourteen days prior to instituting any legal action against the insured alleged to have caused the loss;
(V) that, after an insurer has paid a loss as a result of the claim, the insurer may nonrenew coverage or impose a surcharge as to the insured alleged to have caused the loss as long as the nonrenewal or surcharge imposition is not done prior to the later of six months following payment of the claim or the policy's renewal date; and
(VI) the national domestic violence hotline number.
(ii) Nothing in this paragraph shall be construed as:
(A) requiring that a person issue, renew or reissue an insurance policy or insurance contract solely because the insured or applicant is a victim of abuse; or
(B) requiring a person to provide benefits or coverage for loss incurred solely because the insured or applicant is a victim of abuse.
(ii.1) Payment of a claim pursuant to subparagraph (i)(D) shall constitute payment as to all other insureds under the policy.
(iii) A person shall not be in violation of this paragraph if any action taken is permissible by law and applies to the same extent to all applicants and insureds without regard to whether an applicant or insured is a victim of abuse.
The Lynn opinion reinforces that an insurer cannot rely upon the intentional acts exclusion to deny recovery to a victim of abuse of his or her interest in the damaged property. As a practical matter though, given the lack of case law in any jurisdiction, insurers currently have no guidance beyond the statutory definition of “victim of abuse” in determining whether a claimant meets that definition.
The UIPA defines the terms "victim" and "victim of abuse" as follows:
40 P.A. § 1171.3. Definitions
As used in this act:
"VICTIM" means an individual who is or has been subjected to abuse.
"VICTIM OF ABUSE" means an individual who is a victim or an individual who seeks or has sought medical or psychological treatment for abuse, protection from abuse or shelter from abuse.
The UIPA also defines the term "abuse" as follows:
§ 1171.3. Definitions
As used in this act:
"ABUSE" has the meaning given in 23 Pa.C.S. § 6102(a) (relating to definitions), notwithstanding the limited applicability provision in paragraph (5) of the definition of "abuse" in 23 Pa.C.S. § 6102(a). The term also means attempting to cause or intentionally, knowingly or recklessly causing damage to property so as to intimidate or attempt to control the behavior of another person covered under 23 Pa.C.S. Ch. 61 (relating to protection from abuse).
Thus, while the UIPA recognizes that there may be damage to property that may intimidate a person, the person intimidated must still be "a person covered under 23 Pa.C.S. Ch. 61." Looking then to the definitions contained in the Protection From Abuse Act at 23 Pa.C.S. § 6102 (2009), we find the following definition of abuse:
§ 6102. Definitions
(a) GENERAL RULE.-- The following words and phrases when used in this chapter shall have the meanings given to them in this section unless the context clearly indicates otherwise:
"ABUSE." The occurrence of one or more of the following acts between family or household members, sexual or intimate partners or persons who share biological parenthood:
(1) Attempting to cause or intentionally, knowingly or recklessly causing bodily injury, serious bodily injury, rape, involuntary deviate sexual intercourse, sexual assault, statutory sexual assault, aggravated indecent assault, indecent assault or incest with or without a deadly weapon.
(2) Placing another in reasonable fear of imminent serious bodily injury.
(3) The infliction of false imprisonment pursuant to 18 Pa.C.S. § 2903 (relating to false imprisonment).
(4) Physically or sexually abusing minor children, including such terms as defined in Chapter 63 (relating to child protective services).
(5) Knowingly engaging in a course of conduct or repeatedly committing acts toward another person, including following the person, without proper authority, under circumstances which place the person in reasonable fear of bodily injury. The definition of this paragraph applies only to proceedings commenced under this title and is inapplicable to any criminal prosecutions commenced under Title 18 (relating to crimes and offenses).
The UIPA's definitions of “victim” and “victim of abuse” are circuitous. Insurers are not clearly guided by the fact that a “victim of abuse” is defined as a “victim.” The additional reference to the Protection from Abuse Act is helpful, but it is not at all clear in what manner the claimant must be a person covered under that Act in order to be an eligible victim of abuse under the UIPA. The insurer additionally faces the question of what type of circumstances qualify as “attempting to cause or intentionally, knowingly or recklessly causing damage to property so as to intimidate or attempt to control the behavior of another person… .” For example, would this language apply to property losses that occur as a result of a fire that is set after an abused victim gets out of the house and away from the abuser? In Lynn, are additional facts necessary to reach a conclusion that the fire damage was the result of Terra Lynn’s intimidating or attempting to control her husband?
Until the legislature or the courts issue further guidance concerning the Innocent Co-Insured Victim Act, insurers faced with a claimant seeking protection under the Act should thoroughly investigate each claim so that it can reasonably apply the law to the unique set of circumstances that each claim is sure to present. Litigation is to be expected, particularly given the uncharted waters in this area of the law. The insurer’s reasonable basis for its decision should protect it from extra contractual exposure, despite whether a court may ultimately disagree with its position. Note that the statute carries some additional notice requirements, such that the insurer must give 14 days notice of potential litigation to a claimant seeking coverage as a victim of abuse. Advance notice of the filing of a declaratory judgment action is thereby required. Also, once a claimant puts the carrier on notice that victim of abuse status is sought, the carrier must issue the written notice specified in 40 P.S. § 1171.5(a)(14)(i)(D). If an insurer determines that payment to an innocent co-insured is appropriate given his or her status as a victim of abuse, the insurer is afforded protection in paying the claim as the UIPA provides that such payment extinguishes the insurer’s obligation to all claimants.
*Trish is a shareholder in our Pittsburgh, Pennsylvania, office who can be reached at 412.803.1151 or firstname.lastname@example.org.
Defense Digest, Vol. 19, No. 3, September 2013
Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2013 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.