Last week a Pennsylvania federal judge ruled that auto insurers must make determinations about which vehicles have passive antitheft devices qualifying for a premium discount under Pennsylvania law, and give discounts for such devices automatically if the vehicle has such a device, regardless of whether the insured asks for a discount.  All insurers writing auto coverage in Pennsylvania should take note of this decision, although it is possible that an interlocutory appeal might be pursued in this case (that would require both the district court and court of appeals to exercise discretion to allow such an appeal).  This decision could lead to additional class action filings against insurers that are not in this case in Pennsylvania, and may spur plaintiffs’ lawyers to pursue similar issues in other states.  Insurers may want to study applicable statutes and regulations in other states with similar statutory schemes to try to reduce potential class action exposure in the auto premium calculation area.

Willisch v. Nationwide Ins. Co., 2012 U.S. Dist. LEXIS 43484 (E.D. Pa. Mar. 29, 2012) is a consolidated case that includes putative class actions brought against seven insurance companies: Nationwide, Encompass, Allstate, Peerless, State Farm, Progressive and USAA.  The case involves a provision of the Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa. Cons. Stat. Ann. § 1799.1, that provides for discounts on auto insurance premiums of at least 10% where vehicles have passive antitheft devices.  Section 1791.1 further provides that insurers are required to provide notice to insureds of the availability of these discounts at the time of application and at every renewal (except where the discounts are duplicative of other discounts). 

The parties agreed to have cross-motions for summary judgment decided before class certification motion practice.  The dispute centered on: (1) whether discounts were required where the insureds did not ask for them; and (2) the construction of the statutory definition of “passive antitheft device.”  The key statutory provisions were as follows:

All insurance companies authorized to write private passenger automobile insurance within this Commonwealth shall provide premium discounts for motor vehicles with passive antitheft devices. These discounts shall apply to the comprehensive coverage and shall be approved by the commissioner as part of the insurer’s rate filing, provided that such discounts shall not be less than 10%. Some or all of the premium discounts required by this subsection may be omitted upon demonstration to the commissioner in an insurer’s rate filing that the discounts are duplicative of other discounts provided by the insurer.

. . .  

“Passive antitheft  device.” Any item or system installed in an automobile which is activated automatically when the operator turns the ignition key to the off position and which is designed to prevent unauthorized use, as prescribed by regulations of the commissioner. The term does not include an ignition interlock provided as a standard antitheft device by the original automobile manufacturer.

. . .

Notice of premium discounts.—Except where the commissioner has determined that an insurer may omit a discount because the discount is duplicative of other discounts or is specifically reflected in the insurer’s experience, at the time of application for original coverage and every renewal thereafter, an insurer must provide to an insured a notice stating that discounts are available for drivers who meet the requirements of sections 1799 (relating to restraint system), 1799.1 (relating to antitheft devices) and 1799.2 (relating to driver improvement course discounts).

The insurers argued that they were only required to offer premium discounts, and that the statutory notice provision made it the insureds’ obligation to request a discount if they believed their vehicle qualified.  The insurers also argued that the notice provision would be superfluous if the insured was not required to request a discount in order to receive one.  The court rejected those arguments.  It focused on the words “shall provide premium discounts,” and concluded that it was the insurers’ obligation to determine whether insured vehicles had passive antitheft devices (except aftermarket devices added by the insured), using industry sources (such as ISO), owners’ manuals, etc., and provide the discount automatically.  The court also noted that apparently all insurers in the case except Nationwide gave the discount to any insured who requested it, without verifying whether the vehicle had a qualifying device.  The court further explained that the purpose of the statute was to reduce insurance costs, and thus the court’s interpretation furthered that purpose.

The opinion also contains an extensive discussion of what qualifies as a “passive antitheft device” under the Pennsylvania statute.  The court rejected expert testimony offered by the insurers to suggest that application of the definition was a complicated technical matter, finding that “a hypertechnical approach that appears to have been created to excuse the insurers from providing the discount.”  Id. at *46.  The court also focused on the fact that, in their rate filings, the insurers had described how they would apply these discounts.  The court found that the insurers were bound by these rate filings, concluding that, under Pennsylvania law, the rate filings, as well as the applicable statute, were incorporated by law into the insurance contracts.  Id. at *71-74.  The court concluded that the vast majority of the named plaintiffs’ vehicles had devices that qualified for the discount, and that the insurers had committed breaches of the implied terms of the policies by not providing the discounts automatically. 

This case has not yet reached the class certification stage, and it seems to me that there will be a variety of different issues likely to arise at that stage.  Manageability could certainly be an issue – the detailed determinations made by the judge regarding whether the named plaintiffs’ vehicles had qualifying devices likely would need to be made many times over before they could be applied to class members, placing a substantial burden on the court.  The kinds of individualized issues the court found in addressing certain of the named plaintiffs’ claims undoubtedly would apply to numerous class members.  There also undoubtedly would be some instances where factual disputes would require trials on such issues, as the court concluded on one of the named plaintiffs’ claims.  Some insureds may have been specifically asked whether their vehicles had passive antitheft devices and indicated (perhaps incorrectly) that their vehicle did not.  It seems likely there will be a number of issues remaining to be decided at class certification.

I think this is the type of area where a proactive insurer might be able to avoid potential class action exposure by identifying the issue before litigation is filed, explaining in a rate filing with particularity how the insurer intends to handle it, and perhaps seeking guidance from the insurance department on the issue.  If the insurer errs on the side of doing more than the law might require, an effort to more proactively provide discounts can keep customers happy.


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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.