New Court Decisions Affect Claims Made By Uninsured Motorists

by Platte B. Moring, III and Daniel J. Twilla

The Pennsylvania Supreme Court recently issued two decisions which will impact claims made by uninsured motorists. In Holland v. Marcy, the Court ruled that children of uninsured motorists may sue tortfeasors for both economic and non-economic damages. In Swords v. Harleysville Insurance Companies, the Court ruled that owners of uninsured, registered vehicles are ineligible to recover first party benefits under an insurance policy which might otherwise have been applicable.

In Holland v. Marcy, the Pennsylvania Supreme Court held that children of parents who elected the limited tort auto insurance option may nonetheless recover full tort damages. In Holland, injured minor passengers were riding in their mother’s uninsured car, driven by the mother’s ex-husband, when they where struck by tortfeasor. The
Hollands filed suit against tortfeasor to recover economic and non-economic damages. The trial court ruled that since the Holland’s vehicle was uninsured, then by operation of Sections 1705(a)(5) and 1705(b)(2) of the Motor Vehicle Financial Responsibility Law, the owner and occupants (the children) were deemed to have elected the limited tort option. The limited tort option precludes recovery of non-economic damages for injuries which are not
considered serious. The Supreme Court ruled differently. It held that the children were not bound by their mother’s deemed selection of the limited tort option. The Court noted that Section 1705(b)(2) states that the tort option selected by a named insured will apply to those who are considered insured under the named insured’s policy, including the named insured’s children. However, under Section 1705(b)(3), an individual who is neither an owner of a vehicle nor an insured under a private passenger motor vehicle policy may seek both economic and noneconomic damages if they are injured in a motor vehicle accident as a result of another’s fault. The Court reasoned that the Holland children were not owners of any registered motor vehicle. Further, because their mother did not hold a current insurance policy, the children were not “insured” under any private passenger motor vehicle policy. Having fallen through the cracks in the legislation, the children were given full rights to pursue economic and non-economic damages.

The Holland decision permits children of uninsured drivers to recover damages which children of insured, limited tort drivers could not. Because children of drivers who have selected the limited tort option are insured under their parents’ policies, Section 1705(b)(2) limits their recovery to the tort option selected by their parents. Therefore, children of insured drivers who have selected the limited tort option may only recover economic damages, while
children of uninsured drivers may recover both economic and noneconomic damages. However, the Supreme Court rejected suggestions that public policy encouraging insurance coverage prohibits such a result. The Court believes a number of other disincentives apply to those who do not obtain insurance. Included among these are the denial of first party benefits under any other policy, criminal penalties, and, where the uninsured driver is at fault, the
risk of claims against the family’s assets. According to the Court, these disincentives “clearly outweigh the suggestion that the children of uninsured owners will be ‘better off ’ than children of parents who choose the limited tort option.”

A day after issuing its decision in Holland, the Supreme Court unanimously held that owners of uninsured, registered vehicles are ineligible to collect first party benefits, such as medical and wage loss benefits, under any insurance policy which would otherwise cover the vehicle in which the uninsured person is riding. In Swords v. Harleysville Insurance Companies, an owner of an uninsured, registered car was driving his father’s insured pickup truck when he was injured in an accident.

As a general rule, Section 1714 of the Motor Vehicle Financial Responsibility Law prohibits owners of registered but uninsured vehicles from recovering first party benefits. However, Swords, the owner of the registered, uninsured car, argued that he should be able to recover first party benefits from his father’s policy because he was driving a car covered by that policy, not his uninsured vehicle. Swords’ father’s insurer denied benefits on the basis of Section 1714. Swords and his father then filed suit against the insurer.

The trial court sided with Swords, based on its interpretation of two prior cases, Heinrich v. Harleysville Insurance Companies and Kafando v. State Farm Mutual Automobile Insurance Company. In Heinrich, Pennsylvania’s Supreme Court had ruled that the owner of a registered but uninsured vehicle who was injured while a passenger in her friend’s car could recover uninsured motorist benefits under her father’s automobile insurance policy. In Kafando, the Superior Court had relied on the Supreme Court’s decision in Heinrich to hold that first party benefits could be awarded to those in similar circumstances. Based on Heinrich and Kafando, the Swords trial court ruled that Section 1714 does not apply to a driver who is not operating his or her uninsured vehicle at the time of the accident.

On appeal, however, the Pennsylvania Supreme Court held that Swords was ineligible to receive first party benefits under his father’s policy. The Court acknowledged that when the Pennsylvania Legislature passed the Motor Vehicle Financial Responsibility Law, it included penalties designed to “forcefully deter people from failing to insure their vehicles.” The Court viewed Section 1714 as one such penalty. Additionally, the Court distinguished Heinrich from Swords based on the nature of the benefits claimed. The Court pointed out that the Motor Vehicle Financial Responsibility Law deals with eligibility for uninsured motorist benefits and first party benefits differently. “[N]owhere in the Law did the Legislature expressly preclude owners of uninsured vehicles from being eligible to receive the benefits of uninsured and underinsured motorist coverage if such an owner qualifies to receive this coverage pursuant to another person’s policy.” Thus, owners of registered but uninsured vehicles may collect uninsured motorist benefits. On the other hand, “the Legislature could not have been any clearer insomuch as it intended to preclude owners of registered vehicles who do not have financial responsibility from being eligible to recover first-party benefits, regardless of what vehicle in which they are injured.” The statute expressly states that “an owner of a currently registered motor vehicle who does not have financial responsibility...cannot recover first party benefits.” Pursuant to Swords, owners of registered but uninsured vehicles cannot collect first party benefits under an insurance policy covering a car in which they are riding at the time of an accident. However, Swords did not overturn Heinrich, and those same owners remain eligible to collect uninsured motorist benefits under the applicable policy. Furthermore, owners of registered but uninsured vehicles remain eligible to sue parties at fault in tort to recover damages for economic loss.