U. S. Federal Court Predicts that State Supreme Court will permit lawsuits by uninsured directly against negligent drivers

In a significant victory for uninsured drivers who are victims of accidents through no fault of their own, a federal judge has predicted that the Pennsylvania Supreme Court is poised to lift a court-imposed ban on their seeking awards of economic damages.

In Corbin v. Khosla, PICS No. 08-2095 (E.D. Pa. Dec. 15, 2008) Slomsky, J. (10 pages), U.S. District Judge Joel H. Slomsky found that although the Pennsylvania Motor Vehicle Financial Responsibility Law specifically prohibits an uninsured motorist from recovering first-party benefits in a suit against an insurer, the law includes no such bar for suits against alleged third-party tortfeasors.

“The bar on recovery in Section 1714 only addresses recovery from insurance companies,” Slomsky wrote.

“Although this court acknowledges that it is interpreting Section 1714 in a manner that reduces somewhat the incentive for a plaintiff to obtain insurance, this court cannot find a bar preventing recovery from a third-party tortfeasor where one does not clearly and unambiguously exist in the statutory language or in the statutory scheme,” Slomsky wrote.

Slomsky also acknowledged that the Pennsylvania Superior Court came to the opposite conclusion in its 1997 decision in McClung v. Breneman, 700 A.2d 495 (Pa. Super. 1997), holding that uninsured motorists are precluded from recovering medical and other expenses from an alleged third-party tortfeasor in the same way that they are ineligible to recover such expenses from an insurer.

And, until recently, Slomsky noted, other federal judges were predicting that the state Supreme Court would adopt McClung as the law in Pennsylvania.

But the legal landscape changed in 2005, Slomsky found, when the Pennsylvania Supreme Court decided Swords v. Harleysville Insurance Co., 883 A.2d 562 (Pa. 2005), a ruling that Slomsky read as a strong sign that the justices would not approve of the McClung court’s rationale.

Citing language in Swords that he characterized as dicta, Slomsky said he nonetheless found “a clear indication of how it would rule on the present issue: it would allow for plaintiff to recover economic damages from defendant, an alleged third-party tortfeasor, assuming he was at fault.”

In Swords, a son was in an accident while driving his father’s car. Although the father’s car was insured, the son owned a registered but uninsured car. The son sued his father’s automobile insurer for a declaratory judgment that he was entitled to first-party benefits.

The Supreme Court held that the son was ineligible for first-party benefits under Section 1714 because he owned an uninsured vehicle.

But Slomsky focused on a remark from the justices in dicta that said the son would “nonetheless be entitled to recover for his economic loss from the third-party tortfeasor.”

The Swords court said that while MVFRL mandates in Section 1714 that owners of registered but uninsured vehicles cannot recover first-party benefits, the law does not preclude such owners from recovering damages for injuries sustained as a result of automobile accidents.

“Indeed, the law deems owners of registered but uninsured vehicles to have chosen the limited tort alternative. ... This deemed choice allows an owner of a registered but uninsured vehicle to be, at least, ‘eligible to seek compensation for economic loss sustained in a motor vehicle accident as the consequence of the fault of another person pursuant to applicable tort law,’” the Swords court said, according to the opinion.

Continuing in dicta, the justices said that when an owner of a registered but uninsured vehicle “is the innocent victim of an accident, he or she can sue in tort and, at the very least, recover damages for economic loss.”

Such a result, they said, was consistent with the decision in Henrich v. Harleysville Insurance Co., 620 A.2d 1122 (1993), which allowed the plaintiff to recover uninsured motorist coverage, which, together with under insured coverage, merely “serves to promote the recovery of damages for innocent victims of accidents with uninsured or under insured drivers.”

Slomsky found that although the plaintiff in Henrich was a passenger and not the driver, the justices’ “primary concern” was “to protect innocent victims of accidents.”

The same rationale, Slomsky said, would apply to plaintiff Mary Corbin, assuming that defendant Suresh Khosla, as a third-party tortfeasor was at fault.

“Construing Section 1714 as only prohibiting an uninsured owner and operator of a vehicle from recovering damages from a defendant insurance company, as opposed to an alleged third-party tortfeasor, is consistent with the statutory language,” Slomsky wrote.

The ruling is a victory for attorney Bruce L. Neff of Neff & Associates, who contends that the brain damage and other injuries suffered by Corbin have left her completely disabled from working as an executive secretary.

Khosla’s attorney, John J. McGrath of Dickie McCamey & Chilcote, said he was disappointed with Slomsky’s decision and disagrees with his legal conclusions.

“For 20 years, this has been the law in Pennsylvania,” McGrath said.

Relying on dicta in Swords to make his prediction was error, McGrath said, because “the issue in Swords is not this issue.”

The lower courts in Pennsylvania have been consistently applying McClung, and the state Supreme Court has had numerous opportunities to overturn McClung, but “have so far declined to do so,” McGrath said.

But Slomsky found that the justices seem to have abandoned one of the key rationales articulated in McClung.

In McClung, the Superior Court held that Section 1714 should preclude a plaintiff from recovering economic damages against an alleged third-party tortfeasor because “allowing uninsured motorists to recover medical expenses from third-party tortfeasors, where they are unable to do so from insurers, would lead to an absurd result.”

That holding was premised on reading Section 1714 in conjunction with Section 1722, which says insured motorists who can recover economic damages from their insurance companies are unable to recover from a third-party tortfeasor, in order to prevent double recovery.

The McClung court concluded that it would be absurd to prohibit these insured plaintiffs from recovering against third-party tortfeasors, while allowing uninsured plaintiffs to do so.

But Slomsky found that, in Swords, the justices drew a new and important distinction between allowing recovery from an insurance company versus a third-party tortfeasor.

Speculating on the justices’ reasons for doing so, Slomsky found there were two possible reasons.

“First, allowing recovery from a third-party tortfeasor, but not an insurance company, avoids an overly harsh outcome for the injured party,” Slomsky wrote.

“Second, the specific purpose of the MVFRL was to ‘address rising insurance costs.’ ... Allowing an innocent victim of an accident to recover economic damages from an uninsured tortfeasor may not implicate concerns of rising insurance costs,” Slomsky wrote. •

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