Recently, the Pennsylvania Supreme Court held that the insured’s eight month delay in providing notice of the involvement of a phantom vehicle in an accident violated the policy’s notice requirement, voiding UM coverage without it showing of prejudice to the insurer resulting from the insured’s untimely notice. In Vanderhoff v. Harleysville Ins. Co., 78 A.3d 1060 (Pa. 2013), the Court held that the insured was not entitled to UM benefits when the insured failed to timely report the involvement of a phantom vehicle in the accident and that a showing of prejudice due to the insured’s untimely notice did not require proof of what the insurer would have found had timely notice been provided.
In Vanderhoff, the insured filed a claim in connection with injuries sustained in an October 4, 2001 automobile accident. The insured was driving a truck insured by Harleysville when he rear-ended a vehicle driven by Ryan Piontkowski who was stopped waiting to make a left-hand turn. The police were immediately summoned to the accident scene at which time the insured interviewed Mr. Piontkowski. The police report showed no mention of a phantom vehicle being involved in the accident.
The insured later reported the accident to his employer at which time the insured explained that he had momentarily taken his eyes off the roadway, and when he looked back he saw a vehicle stopped in front of him.The insured indicated that he was unable to stop his vehicle and rear-ended the vehicle being driven by Mr. Piontkowski. At that time, the insured did not mention the involvement of a phantom vehicle.
Thereafter, the insured completed a written Workers’ Compensation Employee’s Statement in which he reported the facts of the accident and that the accident occurred due to Piontkowski stopping his vehicle suddenly in front of the insured. No phantom vehicle was reported in the Workers’ Compensation Statement.
Eight months later, on June 14, 2002, the insured filed a UM claim alleging that the October 2001 accident was caused by a phantom vehicle pulling out in front of Piontkowski, causing Piontkowski to stop his vehicle suddenly.The UM claim was denied by Harleysville and the insured sought a declaratory judgment.
At a non-jury trial, Harleysville took the position that the phantom vehicle never existed and, even if it did exist, the insured had failed to comply with the statutory requirement established by Pennsylvania’s Motor Vehicle Responsibility Law, 75 Pa.C.S. § 1702, to notify Harleysville of the phantom vehicle within 30 days of the accident.The trial court determined that the phantom vehicle existed and that the insured had reported it to the investigating officer at the accident scene and to Harleysville “as soon as practicable.”
On appeal the trial court’s holding regarding timely notice was reversed as being unsupported by the record and that the earliest evidence of the insured providing notice was during an independent medical examination that occurred in February 2002.
In reversing the trial court, the Pennsylvania Superior Court observed that the justification for the statutory timely reporting requirement was to allow insurance companies to investigate the accident to discover evidence.
The Court found it:
nearly axiomatic that the insurer cannot know what evidence it might discover in such an investigation. In fact, if the insured could establish with certainty what evidence it would have discovered, it would, by definition, not be prejudiced by the lack of timely notice.
Instead, the Superior Court found persuasive Harleysville’s offered testimony regarding the investigative measures it would have employed and the evidence that the investigation might have uncovered if Harleysville had received timely notice of the alleged phantom vehicle.
Harleysville would have: (1) hired an investigator to canvass the scene within days of the accident; (2) obtained counsel to direct an investigation and develop a defense; (3) employed an accident reconstructionist to certify the scene; (4) secured schematics and scene photographs; (5) interviewed the investigating officer when his/her memory of the accident was fresh; (6) requested 911 tapes; and (7) track down witnesses.
Witnesses testified that while some of these measures could have been undertaken by Harleysville after receiving notice, the effectiveness of those measures in aiding the investigation were significantly diminished by the delay due to the short-lived nature of the primary evidence – e.g., tire marks, witness availability and memory.
On review before the Pennsylvania Supreme Court, the Court posed the following questions: (1) what constitutes “actual prejudice” to relieve an insurance company of its obligation to pay insurance benefits to the insureds?; (2) should “actual prejudice” involve proof by an insurance carrier that it suffered a real material impairment of its ability to investigate and defend an uninsured claim?; and, (3) what constitutes a reasonable basis for a trial court finding that prejudice exists in a late report of a phantom vehicle?
However, although these appeared to be three distinct questions, each merely constituted a rephrased challenge to the Superior Court’s finding that Harleysville suffered prejudice.
However, the Court was limited in its review of the declaratory judgment action to a determination of whether the trial court committed a clear abuse of discretion or error of law.
The Pennsylvania Supreme Court began its analysis by making the following observation:
Provision of prompt notice to both law enforcement and the insurance company enables those entities to promptly investigate the accident, thus making it less likely that a claimant might fabricate a phantom vehicle’s involvement to excuse his own neglect. Moreover, it is beyond dispute that, as time passes, memories fade and evidence disappears; therefore, providing prompt notice helps ensures the integrity of the evidence either in support of or discrediting the alleged phantom vehicle’s involvement. This is not to say, however, that every case will be affected by notice delay in the same manner, or that delay cannot be excused based on the facts of the case. The determination of prejudice is highly “circumstance dependent.” Vanderhoff, 78 A.3d at 1067, citing Nationwide Ins. Co. v. Schneider, 599 Pa. 131, 960 A.2d 442, 452 (2008).
The Pennsylvania Supreme Court held that these types of cases must be addressed on a case-by-case basis with the court balancing the extent and success of the insurer’s investigation with the insured’s reasons for the delay. The Court found that while the insurance company will not be permitted to deny coverage absent prejudice caused by the insured’s delay in notice, a showing of prejudice did not require proof of what the insurer would have found had timely notice been provided. “To demand such evidence would result in a Mobius strip whereby, to show prejudice, the insurer would have to show through concrete evidence the evidence it was unable to uncover due to the untimely notice.”
Although the Court found that insurers were always obligated to investigate the case as best it could, however, where an insured’s delay results in an inability to thoroughly investigate the claim and thereby uncover relevant facts, prejudice would be established. Therefore, the Pennsylvania Supreme Court affirmed the Superior Court’s finding of prejudice.
In a special concurrence, Justice Baer indicated that he would have adopted Harleysville’s suggested test that the prejudice requirement can be met if: “the insurer provides reasonable proof that its ability to investigate the accident was impaired in the context of both the accident and the delay at issue in the case.” Harleysville’s had articulated the following factors for courts to consider in applying that test:
(1) to determine whether the insurer was prejudiced as a result of the late notice, courts should account for the evidence available to the insurer at the time notice is finally given from the accident itself; (2) courts may consider whether the insurance company had access to contemporaneous statements of disinterested eyewitnesses and police reports, video of the accident, or physical evidence that can either confirm or disprove the existence of the phantom vehicle; (3) courts should consider the details of the delay in notification and factor in the length of the delay; (4) courts should take into account the justification for the delay.
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