![The Insurance Coverage Law Information Center
The following article is from National Underwriter’s latest online resource,
FC&S Legal: The Insurance Coverage Law Information Center.
CLASSIC CAR INSURANCE POLICIES THAT BARRED STACKING DID
NOT PROVIDE ILLUSORY COVERAGE, THIRD CIRCUIT AFFIRMS
March 4, 2014 Steven A. Meyerowitz, Esq., Director, FC&S Legal
The U.S. Court of Appeals for the Third Circuit has affirmed a district court’s decision dismissing a putative class action
complaint that alleged that classic car insurance sold by Foremost Insurance Company provided illusory coverage be-
cause it did not permit stacking.
The Case
Arlene Grudkowski purchased insurance from Foremost Insurance Company for two classic vehicles: a 1991 BMW 318i and
a 1972 Mercedes 280 SEL. The vehicles were covered under separate policies, each of which provided $300,000 in unin-
sured motorist (“UM”) coverage and $300,000 in underinsured motorist (“UIM”) coverage.
At the time the policies were issued, Foremost provided a stacking rejection form to Ms. Grudkowski, who declined to
sign it. The policies, however, contained provisions that limited UM and UIM coverage to accidents that actually involved
the covered vehicles, making stacking effectively unavailable.
Ms. Grudkowski filed a putative class action complaint against Foremost, alleging that she and the putative class were
harmed by having paid for stacking insurance coverage that was not included in their policies. She alleged breach of
contract, violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, 73 Pa. Cons.Stat. § 201–1 et seq.
(“UTPCPL”), unjust enrichment, and bad faith under 42 Pa. Cons.Stat. § 8371.
The district court granted Foremost’s motion to dismiss, and Ms. Grudkowski appealed.
The Circuit Court’s Decision
The Third Circuit affirmed.
In its decision, the circuit court first found that because the limited antique car insurance Foremost sold was permissible
under Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”), and because the contract clearly limited cov-
erage and Ms. Grudkowski had not alleged that her insurance contracts with Foremost were breached in any other way,
Ms. Grudkowski had failed to state a breach of contract claim upon which relief could be granted. Accordingly, the circuit
court ruled, dismissal of this claim was warranted.
The circuit court next upheld the district court’s decision dismissing Ms. Grudkowski’s UTPCPL claim, finding that Fore-
most’s actions were consistent with the MVFRL. The circuit court added that although Ms. Grudkowski alleged that she
and the putative class had relied on Foremost’s “misrepresentation” of the scope of its insurance coverage by accepting
the unsigned waiver form whereby she conveyed that she did not waive stacking, any misrepresentation that may have
transpired through Foremost’s conveyance of the form “was corrected by the other provisions of the policy which clearly
and unambiguously” limited coverage to incidents involving the covered antique cars and hence disclosed that stacking
was unavailable.
Next, the Third Circuit found that Ms. Grudkowski’s unjust enrichment claim also had properly been dismissed. Because
the relationship between Ms. Grudkowski and Foremost was governed by valid insurance contracts, unjust enrichment
could not provide Ms. Grudkowski with a basis for relief, according to the circuit court.
Finally, the circuit court upheld dismissal of Ms. Grudkowski’s statutory bad faith claim under 42 Pa. Cons.Stat. § 8371, not-
ing that Section 8371 permitted the recovery of damages if, “[i]n an action arising under an insurance policy,” an insurer
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Classic Car Insurance Policies that Barred Stacking Did Not Provide Illusory Coverage, Third Circuit Affirms
- 1. The Insurance Coverage Law Information Center The following article is from National Underwriter’s latest online resource, FC&S Legal: The Insurance Coverage Law Information Center. CLASSIC CAR INSURANCE POLICIES THAT BARRED STACKING DID NOT PROVIDE ILLUSORY COVERAGE, THIRD CIRCUIT AFFIRMS March 4, 2014 Steven A. Meyerowitz, Esq., Director, FC&S Legal The U.S. Court of Appeals for the Third Circuit has affirmed a district court’s decision dismissing a putative class action complaint that alleged that classic car insurance sold by Foremost Insurance Company provided illusory coverage be- cause it did not permit stacking. The Case Arlene Grudkowski purchased insurance from Foremost Insurance Company for two classic vehicles: a 1991 BMW 318i and a 1972 Mercedes 280 SEL. The vehicles were covered under separate policies, each of which provided $300,000 in unin- sured motorist (“UM”) coverage and $300,000 in underinsured motorist (“UIM”) coverage. At the time the policies were issued, Foremost provided a stacking rejection form to Ms. Grudkowski, who declined to sign it. The policies, however, contained provisions that limited UM and UIM coverage to accidents that actually involved the covered vehicles, making stacking effectively unavailable. Ms. Grudkowski filed a putative class action complaint against Foremost, alleging that she and the putative class were harmed by having paid for stacking insurance coverage that was not included in their policies. She alleged breach of contract, violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, 73 Pa. Cons.Stat. § 201–1 et seq. (“UTPCPL”), unjust enrichment, and bad faith under 42 Pa. Cons.Stat. § 8371. The district court granted Foremost’s motion to dismiss, and Ms. Grudkowski appealed. The Circuit Court’s Decision The Third Circuit affirmed. In its decision, the circuit court first found that because the limited antique car insurance Foremost sold was permissible under Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”), and because the contract clearly limited cov- erage and Ms. Grudkowski had not alleged that her insurance contracts with Foremost were breached in any other way, Ms. Grudkowski had failed to state a breach of contract claim upon which relief could be granted. Accordingly, the circuit court ruled, dismissal of this claim was warranted. The circuit court next upheld the district court’s decision dismissing Ms. Grudkowski’s UTPCPL claim, finding that Fore- most’s actions were consistent with the MVFRL. The circuit court added that although Ms. Grudkowski alleged that she and the putative class had relied on Foremost’s “misrepresentation” of the scope of its insurance coverage by accepting the unsigned waiver form whereby she conveyed that she did not waive stacking, any misrepresentation that may have transpired through Foremost’s conveyance of the form “was corrected by the other provisions of the policy which clearly and unambiguously” limited coverage to incidents involving the covered antique cars and hence disclosed that stacking was unavailable. Next, the Third Circuit found that Ms. Grudkowski’s unjust enrichment claim also had properly been dismissed. Because the relationship between Ms. Grudkowski and Foremost was governed by valid insurance contracts, unjust enrichment could not provide Ms. Grudkowski with a basis for relief, according to the circuit court. Finally, the circuit court upheld dismissal of Ms. Grudkowski’s statutory bad faith claim under 42 Pa. Cons.Stat. § 8371, not- ing that Section 8371 permitted the recovery of damages if, “[i]n an action arising under an insurance policy,” an insurer Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com
- 2. had “acted in bad faith toward the insured.” Here, the circuit court concluded, Ms. Grudkowski’s allegations concerned the sale of policies that allegedly provided illusory coverage, and not Foremost’s actions in discharging its obligations under those policies, and Ms. Grudkowski was not entitled to relief under Section 8371. The case is Grudkowski v. Foremost Ins. Co., No. 13–1893 (3d Cir. Feb. 27, 2014). Attorneys involved include: Thomas J. Campenni, Esq., Richard A. Russo, Esq., Rosenn, Jenkins & Greenwald, Wilkes–Barre, PA, James C. Haggerty, Esq., Hag- gerty, Goldberg, Schleifer & Kupersmith, Philadelphia, PA, for Appellant; Patrick R. Casey, Esq., John G. Dean, Esq., Elliott Greenleaf & Dean, Scranton, PA, Joseph Kernen, Esq., Brian M. Robinson, Esq., Dla Piper, Philadelphia, PA, for Foremost Insurance Company. Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com Copyright © 2014 The National Underwriter Company. All Rights Reserved. NOTE: The content posted to this account from FC&S Legal: The Insurance Coverage Law Information Center is current to the date of its initial publication. There may have been further developments of the issues discussed since the original publication. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice is required, the services of a competent professional person should be sought. For more information, or to begin your free trial: • Call: 1-800-543-0874 • Email: customerservice@SummitProNets.com • Online: www.fcandslegal.com FC&S Legal guarantees you instant access to the most authoritative and comprehensive insurance coverage law information available today. This powerful, up-to-the-minute online resource enables you to stay apprised of the latest developments through your desktop, laptop, tablet, or smart phone —whenever and wherever you need it.