SAVAGE, District Judge.
In these putative class actions filed on behalf of all policyholders of the defendant automobile insurers whose cars were equipped with antitheft devices and did not receive a ten percent discount on their premium for comprehensive coverage, the plaintiffs allege that the insurers violated § 1799.1 of Pennsylvania's Motor Vehicle Financial Responsibility Law ("MVFRL"), 75 Pa. Cons.Stat. Ann. §§ 1701-1799.7 (West 2011). In addition to the statutory claim, they also contend that the insurers breached the implied terms of their insurance contracts when they failed to give the antitheft device discount as they had promised in their rate filings with the Insurance Commissioner. Some plaintiffs assert an additional claim for breach of express contract terms.
With respect to the statutory claim, the plaintiffs contend that the insurers violated § 1799.1 of the MVFRL, the antitheft device discount statute, when they failed to apply a ten percent discount to the premiums for comprehensive coverage for cars equipped with a passive antitheft device as standard equipment. Their breach of contract claim is based on the respective insurer's rate filing with the Pennsylvania Insurance Commissioner and the insurance contract. Asserting that the rate filing is an implied term of each insurance contract and that the devices on the insured vehicles meet the respective insurers' rate filings' definition of a qualifying device, the insureds argue that the insurers breached the contracts by failing to give the discount. The express breach of contract claim rests upon the language of some policies that represent that the insurers will give the insureds all discounts to which they are entitled under the rate filings and/or information in their possession.
The insurers contend that the plaintiffs' theory of liability rests upon a flawed interpretation of § 1799.1. They argue that the statute does not require them to give the discount described in § 1799.1 unless the insured explicitly requests it. The plaintiffs, on the other hand, contend that the insurers must give the discount for each insured's vehicle that has a qualifying device, even without the insured specifically requesting it. Thus, the dispute over the statutory claim is whether the insurer must give the discount only if the insured asks for it.
Initially, nine separate putative class actions were filed, each case filed by one or two insureds against a different insurer.
Typically, a ruling on the plaintiffs' motions for class certification would precede disposition of the motions for summary judgment. However, the parties requested a ruling on the summary judgment motions before deciding the class certification motions.
At the center of the dispute is the Pennsylvania antitheft device discount provision, 75 Pa. Cons.Stat. Ann. § 1799.1. The question is whether the statute mandates that automobile insurers give discounts of at least ten percent on comprehensive coverage premiums to an insured whose vehicle is equipped with a "passive antitheft device" without the insured requesting the discount. Put another way, are insurers only required to give the discount to those insureds who request it?
In resolving the dispute, we must construe the antitheft device statute by applying rules of statutory construction. As a federal court in a diversity action, we shall apply Pennsylvania law to interpret the Pennsylvania statute.
The aim of interpreting and construing a statute is to ascertain and effectuate the intention of the legislature. Bd. of Revision of Taxes v. City of Philadelphia, 607 Pa. 104, 4 A.3d 610, 622 (2010); Swords v.
On the other hand, where the statutory language is ambiguous or the words are "not explicit," the statutory principles established by the General Assembly for ascertaining its intent are employed. 1 Pa. Cons.Stat. Ann. § 1921(c).
Additionally, there are two important presumptions that guide the interpretation task. First, it is presumed that the General Assembly did not intend an absurd or unreasonable result, or one that is impossible to execute. Bd. of Revision of Taxes, 4 A.3d at 622 (citing 1 Pa. Cons.Stat. Ann. § 1922(1)-(2)).
To overhaul Pennsylvania's automobile insurance scheme, the General Assembly enacted the MVFRL, 75 Pa. Cons.Stat. Ann. §§ 1701-1798, in 1984. The MVFRL was later amended in 1990 ("Act 6"), amending many MVFRL provisions and adding §§ 1799-1799.7. One of the primary purposes of the MVFRL and its amendments was to reduce insurance premiums to enable more drivers to purchase insurance. See State Auto Prop. & Cas. Ins. Co. v. Pro Design, P.C., 566 F.3d 86, 93-94 (3d Cir.2009) ("[T]he primary purpose of the MVFRL, and especially the 1990 amendments ..., was to control the cost of insurance such that a higher percentage of drivers would be able to afford insurance." (quoting Everhart v. PMA Ins. Grp., 595 Pa. 172, 938 A.2d 301, 306 (2007))).
75 Pa. Cons.Stat. Ann. § 1799.1.
To enhance awareness of the availability of the discounts, the MVFRL requires insurers to notify their insureds of their existence. The notice provision states:
Id. § 1791.1.
What does the statute require automobile insurance companies to do with respect to the antitheft device discount? Although all parties assert that the statutory language is plain and unambiguous,
The insurers contend that they need to give the discount only to those insureds who request it. According to their interpretation, §§ 1799.1 and 1791.1(c) impose a
The plaintiffs argue that the statute requires insurers to give the discount for each vehicle that has a qualifying device, even without the insured specifically requesting it. Pointing to the language in § 1799.1(a), which states that insurers "shall provide premium discounts," they argue that the statute is "unequivocal" in requiring insurers to apply the discount to vehicles with qualifying devices because "provide" means "to give."
The insurers contend that the plaintiffs "isolat[e] four words — `shall provide premium discounts' — and ignor[e] the rest of the statute."
Whose interpretation is correct turns on the meaning of the words "shall provide." The language of the antitheft device discount provision is clear and unambiguous. The General Assembly did not use discretionary language. It did not say that the insurer "may" provide premium discounts. Instead, it used mandatory language — "shall provide premium discounts." 75 Pa. Cons.Stat. Ann., § 1799.1(a) (emphasis added). In the same statute, "shall" is defined as requiring an act. See id. § 102 ("`Shall.' Indicates that an action is required or prohibited. `Should.' Indicates that an action is advisable but not required.").
Pennsylvania's statutory construction rules direct that "[w]ords and phrases shall be construed according to rules of grammar and according to their common and approved usage...." 1 Pa. Cons.Stat. Ann. § 1903(a). The common and approved usage of a word is found in the dictionary. See Harcourt v. General Acc. Ins. Co., 419 Pa.Super. 155, 615 A.2d 71, 77 (1992) (construing peer review provisions of MVFRL). As defined in the dictionary, "provide" means "to furnish; to supply," Webster's Third New International Dictionary of the English Language 1827 (1993), or "to supply or make available." Merriam-Webster's Collegiate Dictionary 1001 (11th ed.2005). Synonyms are "give, deliver, hand over, hand, furnish, supply." Merriam-Webster's Collegiate Thesaurus 586 (1988).
Taken together, the words "shall provide" cannot be construed to mean that insurers need only offer the discount by providing insureds with the § 1791.1(c) notice. The clear meaning of the words "shall provide" is that automobile insurers must give discounts to insureds whose vehicles have qualifying devices.
Contrary to the defendants' arguments, mandating the insurers to give the discount under § 1799.1 does not render the notice provision superfluous. Rather, § 1791.1(c) provides for notice of the discount to insureds in situations where only the insured would know if a vehicle contains a passive antitheft device. For example, if an insured selects a qualifying passive antitheft device as an option to a new vehicle in which the device is not standard equipment, or an insured installs an after-market passive antitheft device, the insurer would not know that the vehicle has a qualifying device. In those situations, § 1791.1(c) serves to put the insureds on notice that they are eligible for the § 1799.1 discount and should request it. Additionally, the notice alerts insureds as to how they can save money on their insurance premium, such as installing a passive antitheft device on their car. It also provides a means for insureds to verify that the insurer actually gave them the antitheft device discount.
Reinforcing the interpretation that the General Assembly intended the discount to be mandatory is the reference to the discount in another part of the statute. In
Additionally, where one discount provision of a statute includes specific language imposing a burden on the insured, but another discount provision excludes such language, a burden should not be implied in the latter provision. Fletcher v. Pa. Prop. & Cas. Ins. Guar. Ass'n, 603 Pa. 452, 985 A.2d 678, 684 (2009) (where the legislature includes specific language in one section of a statute and excludes it from another, the language should not be implied where excluded) (citations omitted). Here, the statutory provision that governs the driver improvement course discount clearly imposes a requirement on the insured to provide the insurer with a certificate showing that he completed an eligible course. Section 1799.2 provides that upon successful completion of a course approved by the Department of Transportation, "each participant shall be issued, by the course's sponsoring agency, a certificate which shall be the basis of qualification for the discount on insurance." 75 Pa. Cons.Stat. Ann. § 1799.2(b).
The insurers argue that because the identical phrase "shall provide a premium discount" appears in both discount provisions, § 1799.1(a) and § 1799.2(a), both sections put the burden on the insured to prove eligibility for the respective discount.
We agree with the insurers that the driver improvement provision requires the insured to produce proof of entitlement to the driver's education discount. But, we do not agree that this discount provision supports the insurers' position that the insured bears the burden of proving entitlement to the antitheft discount. On the contrary, it demonstrates that the legislature knew how to impose a burden on the insured to affirmatively prove entitlement to a discount when it wanted to do so. Section 1799.2(b) of the driver-improvement discount provision requires the insured to produce a certificate showing that he completed a qualifying course.
Even though they argue that the statute requires an insurer to give the discount only to those who request it, all insurers except Nationwide give the discount to every insured who requests it without verifying that the insured vehicle has a qualifying device. Yet, an insured who does not request the discount, but whose vehicle has a qualifying device, may not get the discount. Consequently, insureds who have the same make, year and model of vehicle with the same antitheft device are treated differently. Such disparate treatment certainly was not intended by the legislature.
Interpreting the antitheft device provision as mandatory is consistent with the express purpose of the statute and accomplishes that purpose. The statute, which was an overhaul of Pennsylvania's automobile insurance law, was aimed at reducing automobile insurance premiums. See State Auto Prop. & Cas. v. Pro Design, 566 F.3d at 93-94. Discounts certainly reduce the cost of insurance. At the same time, they provide incentives to insureds to use devices that reduce risks of loss, decreasing the number of claims made and/or minimizing the extent of loss.
The clear and unambiguous language of the passive antitheft device discount provision, § 1799.1, read in the context of the structure and the purpose of the MVFRL, requires insurers to give the premium discount to their insureds whose vehicles are equipped with a passive antitheft device that meets the statutory definition without the insureds requesting the discount.
Determining that insurers are obligated to give the premium antitheft device discount to all insureds whose vehicles have qualifying antitheft devices without the insureds requesting the discount does not end the inquiry. We must now consider what is a qualifying device.
The insurers take two contradictory positions. On the one hand, they argue that
The insurers claim they cannot identify a single device that qualifies.
The insurers correctly point out that the Commissioner could have promulgated regulations "to further specify the devices that qualify."
USAA criticizes the Commissioner's failure to prescribe regulations, arguing that this failure leaves insureds and insurers "without guidance" in determining which devices meet the statutory definition and which vehicles contain qualifying devices.
We agree with the defendants that it is a reasonable interpretation, giving effect to the purpose of the MVFRL, that the Commissioner may approve or disapprove certain devices depending on whether they meet the minimum statutory definition. This interpretation allows the Commissioner to expand the qualifying category and to take into account the changing technology the insurers have noted. It is not reasonable to conclude, as the defendants urge us to do, that the Commissioner's failure to prescribe regulations relieves the insurers of their statutory obligation to provide the discount to insureds whose vehicles contain a qualifying antitheft device. Adopting the insurers' interpretation that it is up to the Commissioner to define a passive antitheft device would render the statutory definition meaningless or superfluous. See Prestol Espinal v. Attorney Gen., 653 F.3d 213, 224 (3d Cir.2011) (quoting TRW v. Andrews, 534 U.S. 19, 31, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001)).
Notwithstanding their argument to the contrary, each insurer had an understanding of what devices qualify under the statute. Each explicitly defined what devices entitled its insureds to the discount when it submitted its rate filing to the Commissioner. Some recited the statutory definition verbatim. Others varied slightly, adopting the definition used by third party vendors supplying them information for each vehicle make and model. All represented they would give the discount to those insureds whose vehicles had devices as defined in their respective rate filings. None advised the Commissioner that the definition of a qualifying device was incomprehensible, or that it was impossible to determine what specific devices qualify.
Even though the defendants now argue that the definition of a qualifying device is incomprehensible, some rely on the insureds' owners' manuals to determine eligibility. For instance, Nationwide and NAIC require their agents to verify a request for the discount by consulting the owner's manual. These insurers must believe that the agents are capable of understanding what devices qualify for the discount. Otherwise, how could the agents make the determination in each case that the insured is entitled to the discount?
Contradicting their argument that they cannot comprehend how the definition applies to actual devices, the defendants argue that they must rely on the insureds to identify whether their vehicles are equipped with qualifying devices. Implicit in this contention is that they do not have access to information regarding what antitheft device a given make and model has. However, that is not the case. The insurers can and do use manufacturers' manuals, industry compilations, government information and their own databases to learn what equipment, standard or optional, is included with each manufacturer, make
When an insured applies for insurance coverage, the insurers can verify entitlement to the discount through these various sources. If the insured does not know whether his vehicle has a qualifying device or incorrectly states that it does not have one, the insurer can easily verify if it does. Having once determined that a given make and model has the qualifying device, either one that meets the statutory definition or one that meets its rate filing definition, or both, the insurer can process all new and renewal applications by applying the discount to the same make and model without the applicant's requesting the discount.
Citing the opinion of Eugene P. Ericksen,
Even if the assertion that the information comes too late is correct, it affords no excuse for the insurers failing to give the discount. Eventually, they receive confirmation that a given make and model has a qualifying device. Once they get it, they can issue a refund for the premium discount that was not given because they did not have the information earlier. In addition, they can then update their databases to ensure that all new and renewal applicants for insurance covering the same make and model receive the discount. In those instances, there is no excuse for failure to unilaterally process the discount.
Placing the burden on the insureds to identify a qualifying device, the insurers contend the insureds can check with the dealer or consult the owner's manual. These are simple verifiable steps that the insurers themselves can take to identify that a given make and model vehicle has a qualifying device. Once an insurer possesses the information for one insured, it can apply it to all insureds insuring the same make and model. It can input the information into its database. Indeed, this is the process that State Farm employs.
Despite contending that the insured is in a better position than the insurer to identify whether a given vehicle has a qualifying device, USAA's own proffered expert claims he cannot. Livernois, an electrical engineer, opines that he cannot determine what devices qualify because each one activates at a different time, making it impossible to establish that it is activated at the precise moment the ignition key is turned to the "off" position as defined in the statute. He does not claim that the system is not activated at some time in the process. Rather, he posits that there are at least eight different points in time, measured in seconds, at which various antitheft devices are activated.
Using Livernois's approach, no device qualifies under the statute. This interpretation runs head on into the presumption that the legislature did not intend an absurd or unreasonable result, or one that is impossible of execution. See Bd. of Revision of Taxes, 4 A.3d at 622 (citing 1 Pa. Cons.Stat. Ann. § 1922(1)-(2)). Adopting Livernois's opinion would render the antitheft discount illusory because no device would qualify; or, at least, it would be nearly impossible to determine if a particular device qualifies.
Similarly, if we accepted the insurers' argument that they cannot determine which devices qualify and which vehicles have qualifying devices, we would have to conclude that the insurers never intended to give the discount to anyone even though in their rate filings they represented that they would. In other words, each insurer's promise of an antitheft device discount made in its rate filing was an empty one.
It is absurd to assume that the legislature intended the process of determining what is a qualifying device to be so complicated. Nor can we find that the legislature intended that no device would qualify for the discount.
Having dismissed the insurers' arguments that they cannot determine which devices qualify and that there are no vehicles with qualifying devices, we consider whether the plaintiffs' vehicles were equipped with qualifying passive antitheft devices.
Since 1986, there have been three popular engine immobilizing antitheft devices: resistor-pellet, transponder-based, and magnetic rotation device systems.
In 1986, General Motors introduced the vehicle antitheft system (VATS) or Pass-Key I system on the Corvette. It has been described as "the first system to be an integrated part of the vehicle electronics and ushered in the engine immobilizer concept.... The system availability expanded through the various GM product lines since 1986, and by 1994, over 66% of GM domestically produced vehicles were Pass-Key equipped."
In information provided to the National Highway Traffic Safety Administration ("NHTSA"), General Motors described how its Pass-Key vehicle antitheft system operates.
A shorter description of Pass-Key appears in GM's owner's manuals. For example, the owner's manual for GM's 1997 Cadillac Eldorado, a vehicle owned by plaintiff Mecadon, states:
In 1996, Ford introduced the first transponder-based antitheft device with its
In Ford's owners' manuals, the SecuriLock system is described more succinctly. For example, the owner's manual for Ford's 2001 Ford Taurus LX, a vehicle owned by plaintiff Boyle, describes the system as follows:
Other plaintiffs who also own Ford vehicles equipped with the SecuriLock antitheft system are the Willisches, who own a 2004 Ford Explorer and a 2008 Ford Expedition; and Justice, who owns a 2000 Lincoln Town Car. The description of the SecuriLock system in these vehicles' owners' manuals is the same as the one in the 2001 Ford Taurus owner's manual — that the vehicle's antitheft system is armed immediately after switching the ignition to the "off" position.
GM began installing its transponder-based system in 1997 with Pass-Key III. As described by GM in its NHTSA filing, Pass-Key III works as follows. The transponder, embedded in the head of the key, is stimulated by a coil surrounding the key cylinder. The identity of the key
Pass-Key III+ operates similarly to Pass-Key III, except that when the transponder receives energy and data from the control module, it calculates a response to the data using secret information and an internal encryption algorithm before transmitting the response back to the decoder and then to the PCM. The PASS-Key III+ device has the capability for producing billions of codes, making it virtually impossible to steal a vehicle by scanning the code.
In its owner's manuals, GM provides a less technical description of Pass-Key III. The owner's manual for GM's 2002 Buick Rendezvous, a vehicle owned by the Beseckers, states:
Pls.' Ex. 323 at 7326, 7355.
DaimlerChrysler had been installing the Sentry Key Immobilizer System ("SKIS") in its vehicles as standard equipment since 1999.
(emphasis added).
The Sentry Key Immobilizer System is also standard equipment installed in the 2005 Jeep Liberty Renegade, owned by the Bucaris; and Warrick's 2003 Dodge Neon.
In its petition to NHTSA, Mercedes described its transponder-based electronic immobilizer device as including an electronic key, electronic ignition starter switch control unit and an engine control unit, which prevents the engine from running unless a valid key is used in the ignition switch. The vehicle is immobilized when the key is removed from the ignition switch, whether the doors are open or closed. Once activated, a valid, coded-key must be inserted into the ignition switch to permit the vehicle to start.
The owner's manuals for Baldoni's 2006 Mercedes CLK 350 and 2007 Mercedes GL 450 describe the system even more simply. They advise that to "activate" the immobilizer, you must "remove the SmartKey from the starter switch," and to "deactivate" the immobilizer, you must "insert the SmartKey in the starter switch."
According to Nissan North America's NHTSA filing, Nissan vehicles have a transponder-based, electronic engine immobilizer device installed as standard equipment. Nissan's device, which includes an engine electronic control module, immobilizer control, antenna and transponder
The owner's manual for the 2007 Nissan Murano, the vehicle owned by plaintiff Waterman, similarly describes the Nissan Vehicle Immobilizer System ("NVIS"). It states that the antitheft system "will not allow the engine to start without the use of the registered Nissan Vehicle Immobilizer System key," which has "a transponder chip in the key head." The security indicator light blinks when the valid NVIS key "is removed or turned to the OFF, ACC or LOCK position," indicating that the immobilizer system is operating.
In 1996, GM began phasing out its use of its Pass-Key systems, replacing them with the magnetic-rotation system device PassLock I. The following year, it began installing its PassLock II, a magnetic-rotation system device.
PassLock is also described, though in much less detail, in GM's owners' manuals. The owner's manual for the 2000 Chevrolet Blazer, a vehicle owned by plaintiff Kolesar, states:
The legislature defined a qualifying passive antitheft device in the statute as "an item or system" which is "designed to prevent unauthorized use" and is "activated automatically when the operator turns the ignition key to the off position." 75 Pa. Cons.Stat. Ann. § 1799.1(b). This means that the system is armed when the vehicle is turned off.
The Pass-Key I, Pass-Key II, Pass-Key III, Pass-Key III+, SecuriLock, Sentry Key, Mercedes FBS III, Nissan Vehicle Immobilizer, and PassLock systems all qualify as passive antitheft devices under the statute. Designed to prevent unauthorized use, they immobilize the vehicle when they are activated by turning the key to the "off" position.
Removing the ignition key after turning it to the off position is not a step that disqualifies the device. Leaving the key in the ignition allows anyone, authorized and unauthorized, to start the engine regardless of the presence of any antitheft device. That the driver must remove the key before the system activates does not mean the system is not passive under § 1799.1. All passive antitheft devices are designed with the assumption that the driver will remove the key. Otherwise, the car could easily be stolen simply by turning the key back into the "on" position. To conclude otherwise would be absurd and nonsensical.
When the owner's manual or NHTSA filing advises that the key must be removed, the advice is nothing more than an explication of the obvious. Leaving the valid key in the ignition, even in the off position, does not prevent theft. Merely turning it from the "off" position to the "on" position will deactivate or disarm the device. Thus, for the system to be effective, the key must be removed.
In the descriptions in their NHTSA filings and owners' manuals, manufacturers explain how these immobilizers are activated or armed in one of two ways: (1) when the ignition switch is turned to the "off" position with a valid key (SecuriLock, Nissan VIS); or (2) when the ignition switch is turned to the "off" position with a valid key and the key is removed from the ignition. (Pass-Key, PassLock, Sentry Key, Mercedes FBS III). These descriptions demonstrate that each of these immobilizers is activated automatically when the operator turns the valid ignition key to the "off" position.
In its NHTSA filings, Ford states that its SecuriLock transponder-based electronic immobilizer system "is activated when the driver/operator turns off the engine by using the properly coded ignition key."
The Willisches, Boyle and Justice each have one or more vehicles equipped with SecuriLock. Therefore, their vehicles qualify for the statutory passive antitheft device discount.
With respect to the manufacturers that describe their antitheft device systems as activating or being fully functional when the ignition switch is turned to the "off" position and the key is removed from the ignition, the requirement that the key be removed from the ignition does not disqualify the devices from the discount.
Leaving the key in the ignition allows anyone, authorized and unauthorized, to start and run the engine functions. Merely turning the key from the "off" position to the "on" position will deactivate or disarm the device. In this situation, the system is activated and armed when the valid ignition key is in the "off" position. Removing the valid key from the ignition prevents an unauthorized user from using the valid key to disarm the device.
Even though the manufacturers who equip their vehicles with Pass-Key, PassLock, Sentry Key and FBSIII describe these immobilizers as activating when the ignition switch is turned to the "off" position with a valid key and the key is removed from the ignition, the passive antitheft device discount mandated by § 1799.1 must be applied to any vehicle equipped with those devices. As we have noted, removing the key after the ignition is turned off is not an additional step that goes beyond the statutory definition of a passive antitheft device. Therefore, the vehicles insured by Mecadon, Besecker, Bucari, Warrick, Baldoni and Kolesar, which are equipped with one of these devices, qualified for the statutory passive antitheft device discount.
Progressive argues that Boyle is not entitled to relief based on his Jeep Grand Cherokee because the owner's manual states that the Sentry Key theft deterrent system is optional equipment, and plaintiff alleges his car was equipped with this device as standard equipment. See Am. Compl. ¶¶ 2-4, 9. Boyle claims that the Sentry Key system is standard on all Jeep Grand Cherokee Limited models, which Boyle claims he has, and the statement in the owner's manual that it is optional applies to another sub-model, the 1999 Grand Cherokee Laredo, which does not come with the Sentry Key System as standard equipment.
Plaintiff provides insufficient evidentiary support for his statement that the "optional" language in the owner's manual applied to the Laredo sub-model, or that it did not apply to the Limited submodel. Therefore, because it is a question of fact as to whether Boyle's Jeep was equipped with a Sentry Key immobilizer as original standard manufacturer's equipment, Boyle is not entitled to summary judgment as to his claim based on his Jeep.
The Bucaris' 2008 Honda Accord does not qualify for the discount because there is insufficient evidence to determine how the immobilizer works or at what point it is armed or activated. Accordingly, the Bucari plaintiffs' motion for summary cannot be granted.
The Bucaris produced the affidavit of a senior technical specialist at Honda North America stating that since 2003, all Honda vehicles sold in America "were equipped with antitheft immobilizer devices as standard
The Honda Accord owners' manuals state that "[t]he immobilizer system protects your vehicle from theft. If an improperly-coded key (or other device) is used, the engine's fuel system is disabled." It further states:
This description does not address when the immobilizer is armed or engaged. Thus, without any evidence that shows when it is activated, it is not possible to determine whether this device qualifies as "passive" under the terms of the statute.
Lowe-Fenick's vehicle, a 2006 Hyundai Sonata, contains an alarm system but does not have an engine immobilizer. The owner's manual states that the system is armed by removing the key from the ignition switch, and closing and locking the doors. Because locking a door to activate the alarm system does not qualify as "passive" under the statutory definition, Lowe-Fenick's vehicle does not qualify for the statutory discount.
The claim for breach of implied terms of the contract is based on the insurers' alleged violation of both the antitheft device discount statute, 75 Pa. Cons.Stat. Ann. § 1799.1, and the rate filing statute, 40 P.S. § 1184(h). Plaintiffs contend that these statutes are, by operation of law, incorporated into and are implied terms of the insurance contract. Thus, according to the plaintiffs, a violation of either of these statutes amounts to a breach of the insurance contract.
Statutes that pertain to the subject matter of a contract "form a part of the contractual obligation as if actually incorporated into the contract." Stroback v. Camaioni, 449 Pa.Super. 395, 674 A.2d 257, 261 (Pa.Super.1996) (citations omitted). Specifically, applicable statutory provisions of insurance law are deemed incorporated into insurance contracts. Coolspring Stone Supply, Inc. v. American States Life Ins. Co., 10 F.3d 144, 148 (3d Cir.1993) (citing Santos v. Ins. Placement Facility, 426 Pa.Super. 226, 626 A.2d 1177, 1179 (1993) ("pertinent statutory provisions of Pennsylvania insurance law are deemed incorporated into insurance policies")). Because "[i]nsurance contracts are presumed to have been made with reference to substantive law, including applicable statutes in force," pertinent statutory provisions are deemed incorporated into the insurance contract. Clairton City Sch. Dist. v. Mary, 116 Pa.Cmwlth. 376, 541 A.2d 849, 851 (1988) (citing First Nat'l Bank of Pa. v. Flanagan, 515 Pa. 263, 528 A.2d 134,
The antitheft device discount provision of the MVFRL pertains to the subject matter of the insurance contract between the insureds and the insurers. The antitheft device discount statute expressly states that private passenger automobile insurance companies are required to provide an antitheft discount for vehicles with "passive antitheft devices." § 1799.1(a). Accordingly, because the terms of § 1799.1 are incorporated into every automobile insurance policy contract issued in the Commonwealth of Pennsylvania, the failure to give the antitheft device discount to an insured whose vehicle is equipped with a qualifying device constitutes a breach of the implied terms of the contract.
Likewise, 40 P.S. § 1184(h), which provides that "no insurer shall make or issue a contract or policy except in accordance with filings or rates which are in effect for said insurer," is an implied term of every automobile insurance policy issued in Pennsylvania. It also operates to incorporate the insurer's rate filing into the insurance contract.
Rate filings have the force of law and insurers are bound by their terms. 40 P.S. § 1184; Brockway Glass Co. v. Pa. Pub. Util. Comm'n, 63 Pa.Cmwlth. 238, 437 A.2d 1067, 1070 (1981) (tariffs have the force of law and bind the regulated industry to their terms); Escher v. Decision One Mortg. Co., 417 B.R. 245, 257 n. 8 (E.D.Pa.2009) (citations omitted) (same). The insurers agree.
By approving the rate filings, which included each insurer's own definition of a "passive antitheft device," the Commissioner has effectively determined that the insurer's definition conformed to the statutory definition. Had the Commissioner determined that the definition in a given rate filing did not satisfy the statutory requirement, the rate filing would not have been approved. Thus, we conclude that each automobile insurer was mandated to give the passive antitheft discount to each insured whose vehicle was equipped with a device meeting the definition in the insurer's approved rate filing.
The three elements of a breach of contract cause of action are: (1) there was a contract; (2) the defendant breached it; and, (3) the plaintiff suffered damages as a result of the breach. McShea v. City of Phila., 606 Pa. 88, 995 A.2d 334, 340 (2010). In each case, there was a contract — the insurance policy — which impliedly incorporated the terms of the antitheft device statute and the insurer's rate filing. If the antitheft discount was not given to insureds whose vehicles had antitheft devices that qualify under either or both the statutory definition and the insurers' rate filing definition, the insurers violated the antitheft device and/or the rate filing statutes.
Any insurer who failed to apply the antitheft device discount to an insured's vehicle that was equipped with a device that qualified as "passive" under the statute violated the statute's terms. Because the terms of § 1799.1 are implied in the insurance contracts between each plaintiff and his or her insurer, the violation of the antitheft device statute constitutes a breach of the implied terms of the contract.
As explained earlier, the Pass-Key I, the Pass-Key II, the Pass-Key III, the Pass-Key III+, the SecuriLock, the Sentry Key, the Mercedes FBS III, the Nissan Vehicle Immobilizer, and the PassLock systems all qualify as "passive" antitheft devices under the statute. Willisch, Justice, Mecadon, Besecker, Bucari, Warrick, Baldoni, Kolesar and Waterman each insured one or more vehicles equipped with one of these devices as standard. Because the insurers of those vehicles
Similarly, because the terms of 40 P.S. § 1184(h) are implied in the insurance contracts between each plaintiff and his or her insurer, any insurer who failed to apply the antitheft device discount to an insured's vehicle that was equipped with a device that qualified as "passive" under its rate filing violated the terms of the rate-filing statute. The violation of the rate-filing statute also constitutes a breach of the implied terms of the contract.
The insurers' definitions of devices that qualify for a passive antitheft device discount in their rate filings fall into four groups: (1) those that are identical to the statutory definition, stating that a passive antitheft device "activates automatically when the operator turns the ignition key to the off position" (State Farm, Progressive); (2) those that define "passive" as "engaged automatically when the operator turns the ignition switch of the vehicle to the off position" and "a separate manual step is not required to engage the device" (Nationwide, NAIC); (3) those that define a "passive" device as where a "separate manual step is not required to engage the device" (Peerless; Encompass; USAA); and (4) those that define "passive" as "activated automatically when the driver turns the ignition key to the off position and the key is removed" (Allstate Insurance Co., Allstate Indemnity, Allstate P & C).
With respect to the first group's rate filings, which define "passive" almost exactly as the statute defines it, each plaintiff whose vehicle qualified for the statutory antitheft discount and was insured by an insurer in this group will have a device that qualifies for the passive antitheft device discount under the insurer's rate filing.
State Farm and Progressive are the insurers in the first group, whose rate filings define a qualifying antitheft device nearly identically to the statute. State Farm's rate filing states as follows:
Progressive's rate filing states as follows:
State Farm insured the Baldonis' 2006 and 2007 Mercedes vehicles, which were equipped with the Mercedes FBS III antitheft system. Because these vehicles contain devices that qualified for the statutory antitheft discount, they likewise qualify for the passive antitheft device discount under State Farm's rate filing.
Progressive insured two of Boyle's vehicles — a 1999 Jeep Grand Cherokee, which may have been equipped with a Sentry Key device, and a 2001 Ford Taurus, which was equipped with the SecuriLock system as standard equipment. Progressive also insured Lowe-Fenick's 2006 Hyundai Sonata, which was equipped with an alarm system but had no engine immobilizer. Because Boyle's Ford Taurus contain a device that qualified for the statutory antitheft discount, this vehicle likewise qualifies for the passive antitheft device discount under Progressive's rate filing. Because there is a factual dispute whether Boyle's Jeep Cherokee was equipped with a Sentry Key system as standard equipment, he is not entitled to summary judgment as to the Jeep. Because Lowe-Fenick's 2006 Hyundai Sonata does not have an antitheft device that qualifies as "passive" under the statute, it does not qualify as "passive" under Progressive's rate filing. Therefore, Progressive is entitled to summary judgment on Lowe-Fenick's statutory and contract causes of action.
The second group of insurers includes Nationwide and NAIC, whose rate filings define "passive" as "engaged automatically when the operator turns the ignition switch of the vehicle to the off position" and "a separate manual step is not required to engage the device." Specifically, Nationwide and NAIC's rate filings state as follows:
Nationwide insured the Willisches's 2004 Ford Explorer and 2008 Ford Expedition. NAIC insured Justice's 2000 Lincoln Town Car. Each of these vehicles is equipped with the SecuriLock antitheft system.
As described earlier, because the SecuriLock system is activated when the operator turns the ignition to "off" using a properly coded key, it qualifies for the statutory antitheft discount. The definition of "passive" antitheft device in Nationwide and NAIC's rate filings is almost identical to the statute's definition, with the only difference being that they add that a "separate manual step is not required to engage the device." Because no separate manual step is required to engage the SecuriLock device, these vehicles qualify as "passive" under Nationwide and NAIC's rate filings.
The rate filings of the third group of insurers, comprised of Peerless, Encompass and USAA, define "passive" as where a "separate manual step is not required to activate the device." They do not explicitly state that the device is activated when the ignition key is turned off. Consequently, these descriptions are broader than the statutory definition. They simply describe a qualifying antitheft device as
Peerless's rate filing states as follows:
Encompass's and USAA's rate filing are almost identical to Peerless's, except USAA does not require the vehicle to be equipped with a hood lock.
As defined in the rate filings of these three insurers, an antitheft device is "passive" when a "separate manual step is not required to engage" it. This definition is similar to the statutory definition; but, unlike the statute, it does not require a specific point in time when the antitheft system must be activated. The statute states that the system must be automatically activated by the time the ignition is turned to "off." The rate filings do not place any time restriction on when it must be activated. In this way, the rate filing definition of "passive" is broader than the statute's, including devices that may not qualify under § 1799.1.
Peerless insured the Beseckers' 2004 Chrysler Pacifica and 2002 Buick Rendezvous, which are equipped with the Sentry Key and Pass-Key II antitheft systems, respectively. Encompass insured Kolesar's 2000 Chevy Blazer, which is equipped with the PassLock system. USAA insured Waterman's 2007 Nissan Murano, which was equipped with the Nissan immobilizer system.
As explained earlier, the antitheft systems on the plaintiffs' vehicles — Pass-Key III, Sentry Key, Nissan Vehicle Immobilizer, and PassLock systems — all qualify as "passive" under the antitheft device discount statute. They also qualify under these insurers' rate filings because they immobilize the vehicle by disabling at least one of the vehicle's fuel, ignition or starting systems.
The rate filings of the fourth group of insurers, comprised of Allstate Insurance Company, Allstate Indemnity and Allstate P & C, define "passive" as an anti-theft device or system which is "activated automatically when the driver turns the ignition key to the off position and the key is removed."
Allstate Insurance Company insured Warrick's 2003 Dodge Neon, which is equipped with the Sentry Key system. Allstate Indemnity insured Mecadon's 1997 Cadillac Eldorado, which is equipped with Pass-Key II. Allstate P & C insured the Bucaris' 2005 Jeep Liberty Renegade, which is equipped with Sentry Key, and a 2008 Honda Accord, which is equipped with the Honda Immobilizer System.
Except for the Bucaris' Honda Accord, the vehicles insured by the Allstate defendants had either Sentry Key or Pass-Key II systems, which qualify as "passive" under the antitheft device discount statute. Therefore, because the additional language "and the key is removed" in the insurers' rate filings defining "passive" does not disqualify these devices,
As we have concluded, one cannot determine, from the evidence presented, how the immobilizer in the Bucaris' Honda Accord works or how or when it is armed or activated. Thus, it is not possible to determine whether this device qualifies as "passive" under the insurer's rate filing.
As explained earlier, some manufacturers instruct that the valid key must be removed from the ignition to arm the antitheft system. Even if one, construing the statutory meaning of "passive" in a hyper-technical manner, concluded that the system is not activated until the key is removed once it is placed in the "off" position, the devices would still qualify under the rate filings of insurers in the third and fourth groups.
The rate filings of the third group of insurers, comprised of Peerless, Encompass and USAA, define "passive" as where a "separate manual step is not required to activate the device." Removing a key from the ignition switch is not a separate, manual step. An operator removes the key from the ignition as part of the routine operation of the vehicle. In the words of Mangine, it does not "require action on the part of the driver to arm the system (active system) as opposed to OEM [original equipment manufacturer] immobilizer systems, which require no action on the part of the driver (passive system)."
The rate filings of the fourth group of insurers, comprised of Allstate Insurance, Allstate Indemnity and Allstate P & C, define "passive" as an anti-theft device or system which is "activated automatically when the driver turns the ignition key to the off position and the key is removed." The manufacturers of Pass-Key, PassLock, Sentry Key and Mercedes FBS III describe their devices as armed or activated when the ignition switch is turned to the "off" position with a valid key and the key is removed from the ignition. These manufacturers' description of the antitheft
In two actions, Waterman and Justice, plaintiffs assert in their complaints an additional claim for breach of contract based on the express terms of the contract. The plaintiffs in Willisch, Mecadon, Bucari, Warrick and Lowe-Fenick/Boyle also assert that the insurers breached the express terms of the insurance contracts, but allege these claims for the first time in their summary judgment motions. The defendants argue that the plaintiffs who failed to allege this cause of action in their complaints cannot assert it now in a summary judgment motion. We agree.
At no time did the plaintiffs who raised this cause of action at the summary judgment stage move under Fed.R.Civ.P. 15 to amend the complaints to add this claim. This additional cause of action has not been asserted timely in those cases other than Waterman and Justice. Therefore, we shall not consider the claims of these other insureds for breach of contract based on the language in the insurance policies.
The express terms of the contract on which Waterman's breach of contract claim is based appear in the policy as follows:
With respect to the first provision, Waterman alleges that USAA expressly incorporated its rate filing into the insurance contract, which it breached when it did not apply the rate filing in calculating plaintiff's premium. Because the insurer's rate filings are incorporated into the insurance contract, and we already determined that USAA breached its contract with Waterman for violating its rate filing, this claim for breach of an express term of the contract is a redundant cause of action.
With respect to the second provision in which USAA represents that the premium USAA charges is based on information it has "received from [the insured] and other sources," Waterman alleges that USAA failed to take into account information it had in its possession from Insurance Services Office, Inc. ("ISO") showing that plaintiff's vehicle had a qualifying device.
USAA's rate filing is similar to ISO's definition. ISO defines a "passive disabling antitheft device"
The information ISO supplied USAA identified Waterman's vehicle as equipped with a qualifying device. There was a code with a "P" for "passive disabling" device.
Because the ISO information that USAA possessed showed that Waterman's vehicle was equipped with a passive disabling device (an ISO "P"), and USAA's definition of "passive" antitheft device in its rate filing is not unlike ISO's definition, USAA possessed information that Waterman's vehicle had an antitheft device that qualified for the "passive" discount under its rate filing. Because USAA failed to base its premium on information it had "received from ... other sources," USAA breached this express term of the contract. In effect, this claim is no different than the implied contract one based on the rate-filing statute.
Justice relies on the following language in NAIC's insurance contract to support his claim for breach of the express terms of the contract:
The first provision is nothing more than a statement of the law. It means that the terms of the antitheft device discount statute and the insurer's rate filings are incorporated into the insurance contract. In any event, this claim for breach of an express term of the contract based on this contract provision is redundant of the claim for breach of the implied terms of the contract based on violation of the antitheft device statute.
The second policy provision on which Justice relies represents that the premium "is based on information in our possession." NAIC's rate filing defines a passive antitheft device as one that is "engaged automatically when the operator turns the ignition switch of the vehicle to the off position ... [and a] separate manual step is not required to engage the device." ISO defines a "passive disabling antitheft device"
ISO's definition of a passive antitheft device differs from NAIC's definition in its rate filing. It does not include NAIC's requirement that the device "engage automatically when the operator turns the ignition switch to the off position." Consequently, the passive device information in NAIC's possession from ISO would not have aided in determining which vehicles were equipped with qualifying devices. In other words, NAIC's and ISO's definitions of antitheft devices are dissimilar. Therefore, Justice has not proven that NAIC had information in its possession from third-party vendors showing that plaintiffs' vehicles had antitheft devices qualifying
However, NAIC had another source of information that would have shown whether the vehicles had qualifying devices. Standard NAIC company practice required agents to obtain "trailing documentation" — preferably the owner's manual — to support an antitheft discount.
Based on the clear and unambiguous language of the passive antitheft device discount provision, § 1799.1, read in the context of the structure and the purpose of the MVFRL, we hold that insurers must give a ten percent discount on the premium for comprehensive coverage to all of its insureds whose vehicles are equipped with a passive antitheft device that meets the statutory definition, whether or not the insureds request the discount. We also hold that the failure to give the discount to those insureds whose vehicles contain passive antitheft devices as defined in the insurers' rate filings constitutes a breach of the implied terms of the insurance contracts.
Therefore, we shall grant the motions for summary judgment on plaintiffs' statutory and contract causes of action in their entirety of plaintiffs Willisch, Justice, Mecadon, Besecker, Warrick, Baldoni, Kolesar and Waterman; grant the motions for summary judgment of plaintiff Bucari as to only the 2005 Jeep Liberty Renegade and of plaintiff Boyle as to only the 2001 Ford Taurus; deny the motions of plaintiff Bucaris as to the 2008 Honda and of plaintiff Boyle as to the 1999 Jeep Grand Cherokee; and deny the motion of Lowe-Fenick in its entirety. With respect to the defendants' motions for summary judgment, we shall deny the summary judgment motions of all defendants except for Progressive, who is entitled to summary judgment on Lowe-Fenick's statutory and contract causes of action.
Standards for resolving motions for summary judgment do not change when the parties file cross-motions. Benckini v. Hawk, 654 F.Supp.2d 310, 315 (E.D.Pa.2009). Although a court may consider cross-motions for summary judgment concurrently, it must resolve the motions independently. Williams v. Phila. Hous. Auth., 834 F.Supp. 794, 797 (E.D.Pa.1993). The fact that both parties have moved for summary judgment "does not mean that the case will necessarily be resolved at the summary judgment stage," Atlantic Used Auto Parts v. City of Philadelphia, 957 F.Supp. 622, 626 (E.D.Pa.1997), or that either party has waived its right to have the case presented to a jury. Facenda v. N.F.L. Films, 542 F.3d 1007, 1023 (3d Cir.2008).
Allstate Indemnity's rate filing states: "Rule 29-Anti-Theft Device Discount-Coverage HH: The Anti-Theft Device Discount applies to all insurable vehicles equipped with a passive anti-theft device or system which is activated automatically when the driver turns the ignition key to the off position and the key is removed."
Allstate P & C's rate filing states: "Rule 40-Anti-Theft Discount-Coverages HF, HG & HH: This rule applies to all private passenger motor vehicles ... equipped with a passive anti-theft device or system which is activated automatically when the driver turns the ignition key to the off position, and the key is removed...."
