August 03, 2009 : Michael S. Savett Prevails in Declaratory Insurance Action
Deciding an issue of first impression in Pennsylvania, a state court judge ruled that a driver of a dealer-owned car who allegedly struck a pedestrian is only entitled to umbrella coverage after the exhaustion of a $500,000 gap between the umbrella insurance policy and the reduced limits of the dealer’s underlying garage policy.
In the case, Penn National Insurance Company issued garage and umbrella policies to Forrester Lincoln-Mercury of Chambersburg, Pennsylvania. On December 8, 2003, Steve Syverud left his own vehicle at the dealership for service and borrowed a vehicle owned by Forrester. The next day, Syverud was driving the loaner vehicle on Interstate 81 when he allegedly struck a pedestrian walking along the highway. The pedestrian later died of his injuries. The driver was insured under both Penn National policies because he was a customer of the dealership, but in that instance the garage policy’s $500,000 per accident limit “stepped down” to the statutory minimum amount of $15,000. The driver maintained his own personal auto policy with Progressive, which agreed to pay its $15,000 liability limit.
Penn National paid the garage policy’s $15,000 limit but disputed that its $5 million umbrella policy similarly dropped down. Penn National contended that its umbrella policy was not reached until payment of $515,000 (the total of the $15,000 Progressive policy limit and the $500,000 stated limit of the Penn National garage policy). The decedent’s estate claimed that the umbrella policy was triggered after payment of $30,000 (the $15,000 Progressive policy and $15,000 reduced limit of the Penn National garage policy).
Judge Douglas Herman of the Franklin County (Pa.) Court of Common Pleas ruled in a June 24, 2009 opinion that the umbrella policy was not reached until a settlement or judgment of the accident claim exceeded $515,000. Relying on several federal appellate court decisions outside of the Commonwealth, Judge Herman determined that the trigger of the umbrella policy was dictated by the garage liability limit listed on the umbrella policy’s Schedule of Underlying Limits and was not affected by the step-down clause in the garage policy. To rule otherwise, the judge wrote, would contravene the underwriting intent of the umbrella policy.
Partner Michael S. Savett of Weber Gallagher’s Philadelphia office represented Penn National in the lawsuit. The decision was the subject of an article in the August 10, 2009 issue of the Pennsylvania Law Weekly.
File Under: Results, Insurance, Michael S. Savett