Court Opinion

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Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

1-30-2004

Fire & Cslty Ins Co v. Ligon
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-1283

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                                                                 NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT

                                     No. 03-1283

                         FIRE & CASUALTY INSURANCE
                          COMPANY OF CONNECTICUT

                                          v.

                                 QUENTIN LIGON,

                                                     Appellant

                     Appeal from the United States District Court
                        for the Eastern District of Pennsylvania
                         (D.C. Civil Action No. 01-cv-05300)
                   District Judge: Honorable Thomas N. O’Neill, Jr.

                     Submitted Under Third Circuit LAR 34.1(a)
                                 October 30, 2003

       Before: SCIRICA, Chief Judge, NYGAARD and AMBRO, Circuit Judges

                              (filed : January 30, 2004)

                                     OPINION

AM BRO, Circuit Judge

      Quentin Ligon appeals the decision of the District Court granting summary

judgment in favor of Fire & Casualty Insurance Company of Connecticut (“F&C”). In
October 2001 F&C filed a declaratory judgment action that sought to cap its obligation to

Ligon for underinsured motorist benefits at $35,000. We have jurisdiction under

28 U.S.C. § 1291. For the reasons that follow, we vacate the decision of the District

Court and remand this case for further proceedings.

                                              I.

       The dispute in this case arises from a motor vehicle accident that occurred on

January 31, 2000. Ligon was operating a motor vehicle owned by his employer, Atlantic

Express Transportation Group (“Atlantic”), and insured by F&C. He was rear-ended by

another vehicle. Ligon settled with the vehicle driver’s insurer for the policy limit of

$100,000. Thereafter, Ligon sought coverage from F& C under the underinsured motorist

provision of Atlantic’s policy.

       More relevant to this case, however, are the facts surrounding the issuance of

Atlantic’s insurance binder and after-issued policy. In December 1999, Atlantic was

seeking to obtain automobile insurance for its operations in a variety of states. For this

purpose, Atlantic employed an insurance broker, Capacity Coverage Company

(“Capacity”). The insurance sought by Atlantic was a new policy. On December 23,

1999, Capacity faxed a binder of insurance coverage to Atlantic. The coverage period

began December 31, 1999 and expired on February 29, 2001. The binder applied to all

vehicles operated by Atlantic wherever located (except in Massachusetts). The binder

listed the bodily injury liability limit as $1,000,000 and provided for “statutory” uninsured

                                              2
motorist coverage.

       At some unspecified time, Nathan Schlenker, Chief Financial Officer of Atlantic,

signed an accord indicating Atlantic’s election to limit underinsured motorist coverage to

$35,000 in Pennsylvania. As discussed in more detail below, there are several apparent

deficiencies with the accord.

       On February 3, 2000 (after Ligon’s accident), F&C issued policy no. AUT001884

providing coverage for Atlantic. An unsigned endorsement form attached to the policy

sets the uninsured/underinsured motorist limits for Pennsylvania at $35,000.

                                              II.

       We exercise plenary review over a decision granting summary judgment.

Witkowski v. Welch, 173 F.3d 192, 198 (3d Cir. Cir. 1999). In deciding a summary

judgment motion, “the test is whether there is a genuine issue of material fact and, if not,

whether the moving party is entitled to judgment as a matter of law.” Med. Protective Co.

v. Watkins, 198 F.3d 100, 103 (3d Cir. 1999). “Summary judgment will not lie if the

dispute about a material fact is ‘genuine,’ that is, if the evidence is such that a reasonable

jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 250 (1986). We must also examine the evidence in the light most favorable

to, and resolve all inferences in favor of, the non-moving party. Matsushita Elect. Indus.

Co. v. Zenith Radio Corp., 475 U.S. 574 587 (1986).

                                               3
                                              III.

       The insurance binder issued by F&C was an enforceable insurance document until

canceled or replaced by a formal policy. The binder provided for “statutory”

underinsured motorist coverage. Pursuant to Pennsylvania statute, underinsured motorist

coverage is equal to the liability limits of a policy until or unless a lower limit is

requested. And although Atlantic executed an accord — lowering underinsured motorist

coverage to $35,000 — an issue of material fact exists as to when the accord was

executed and whether it applies to the binder, the after-issued policy or both.

       As to whether the binder issued by F&C is a valid insurance contract, “[i]t is well

settled in Pennsylvania that a binder constitutes evidence that insurance coverage has

attached at a specific time, and continues in effect until either the policy is issued or the

risk is declined and notice thereof is given.” Strickler v. Huffine, 618 A.2d 430, 433 (Pa.

Super. Ct. 1992) (citing Harris v. Sachse, 52 A.2d 375, 378 (Pa. Super. Ct. 1947)); see

also Springer v. Allstate Life Ins. Co., 731 N.E.2d. 1106, 1108 (N.Y. 2000).1 “It is the

custom of the insurance industry, and sound public policy, to provide on-the-spot

       1
         A federal court exercising diversity jurisdiction is to apply the choice-of-law rules
of the forum state. Shuder v. McDonald’s Corp., 859 F.2d 266, 269 (3d Cir. 1988).
Under Pennsylvania law, an insurance policy is interpreted according to the law of the
state where it was delivered. Crawford v. Manhattan Life Ins. Co., 221 A.2d 877, 880-81
(Pa. Super. Ct. 1966); see also Travelers Indem. Co. v. Fantozzi ex rel. Fantozzi,
825 F.Supp. 80, 84 (E.D. Pa. 1993). The insurance binder was delivered in New York.
However, because Pennsylvania law does not differ from New York law on the relevant
issues, and as this case involves interpretation of a Pennsylvania statute, we cite to cases
from both jurisdictions.

                                               4
temporary insurance coverage in the form of a binder until the application information

can be verified and a formal policy issued.” Klopp v. Keystone Ins. Cos., 595 A.2d 1, 4

n.5 (Pa. 1991). The “Conditions” section of the binder also provides that, absent notice of

cancellation, the binder remains in effect until “replaced by a policy.”

       Legally the presumption is that the insurance binder issued by F&C provides

$1,000,000 in underinsured motorist coverage. The binder states that underinsured

motorist coverage is “statutory.” The Pennsylvania Motor Vehicle Financial

Responsibility Law (“MVFRL”) 2 requires insurers to offer uninsured and underinsured

motorist coverage “equal to bodily injury liability coverage except where the insured, in

writing, requests UM/UIM coverages in amounts less than the limits of liability for bodily

injury purchased by the insured.” Salazar v. Allstate Ins. Co., 675 A.2d 1259, 1262 (Pa.

Super. Ct. 1996); accord 75 Pa. Cons. Stat. §§ 1731, 1734. A recent Pennsylvania case

interpreting the term “statutory” in an insurance binder concluded that it unambiguously

provided underinsured coverage in the amount of the policy’s bodily injury liability

limits. Peele v. Atl. Express Transp. Group, Inc., 2003 PA Super. 514 , ¶ 13.3 Even if the

term statutory is ambiguous, we generally must interpret the provisions of an insurance

       2
        “Pennsylvania courts are unanimous that the legislative intent underlying the
MVFRL was to establish a liberal compensatory scheme of underinsured motorist
protection.” Nationwide Mut. Ins. Co. v. Consensza, 258 F.3d 197, 208 (3d Cir. 2001).
       3
         The facts in Peele are very similar to those in our case. In fact, both Peele and
Ligon were employed by Atlantic at the time of their respective accidents. We also note
that the District Court did not have the benefit of Peele. It was decided in December
2003, almost a full year after the District Court filed its opinion.

                                              5
policy against the insurer and in favor of the insured. See, e.g., Jeffrey v. Erie Ins.

Exchange, 621 A.2d 635, 638 (Pa. Super. Ct. 1993) (en banc); but see 12th Street Gym,

Inc. v. Gen. Star Indem. Co., 93 F.3d 1158, 1166 (3d Cir. 1996) (stating “a court will only

construe ambiguous language against the drafter in the absence of relevant extrinsic

evidence” and that, in such a situation, the factfinder should normally resolve the

ambiguity). Therefore, until or unless Atlantic made a written request to lower its

underinsured motorist coverage, or until the insurance binder was replaced by an after-

issued policy as to which Atlantic requested lower underinsured motorist coverage,

Ligon was entitled to $1,000,000 in underinsured motorist coverage – the binder’s bodily

injury liability limit.

       In addition, Ligon’s rights under the insurance binder vested on January 31, 2000,

the day of his accident. The replacement of the binder by the after-issued insurance

policy (on February 3, 2000) cannot retroactively strip Ligon of these rights. See Peele,

2003 PA Super. 514 , ¶ 13 (rejecting argument that a request to lower underinsured

motorist coverage under 75 Pa. Cons. Stat. § 1734 could be applied retroactively); see

also Turley v. John Hancock Mut. Ins. Co., 173 A. 163, 165 (Pa. 1934) (concluding that

an employee’s subsequent discharge did not affect his rights under a disability insurance

policy carried by his employer because the employee’s rights vested [i.e., he became

disabled] prior to his termination); Bennacer v. Travelers Ins. Co., 695 N.Y.S.2d 846

(N.Y. App. Div. 1999) (finding that insurer was obligated to indemnify and defend

                                               6
insured as to a matter that the after-issued insurance policy excluded coverage, but the

binder was ambiguous as to coverage when the event in question occurred during the 30-

day period during which the binder was effective); See also State Farm Mut. Auto. Ins.

Co. v. Kendall, 122 S.E.2d 139, 143 (Ga. Ct. App. 1961) (“Rights against [an] insurer

arise immediately upon the happening of the accident and cannot be destroyed by

attempted subsequent cancellation, release or compromise by insured and insurer.”).

       Finally, although Atlantic CFO Nathan Schlenker executed an accord requesting to

limit underinsured motorist coverage at $35,000, genuine issues of material fact remain.

Specifically, it is unclear when the accord was executed and whether it applied to the

binder, the after-issued insurance policy, or both.

       As to when the accord was executed, the date “12/31/99” appears in the upper

right-hand corner of the document. Based on this, and other extrinsic evidence of

Atlantic’s general intent, the District Court concluded that this was the date the accord

was signed. Examination of the record, however, demonstrates that reasonable jurors

could disagree with this conclusion. The date field next to Schlenker’s signature is

empty. While Schlenker executed a certification indicating the reduction in underinsured

motorist coverage was requested knowingly and intelligently, the certification is silent on

when the accord was signed. Further, F&C has failed to produce any evidence about

when it received the accord. Nathan Lull, the President of Capacity, admitted in his

deposition that Schlenker may have executed the accord after February 1, 2003.

                                              7
Examination of the record also indicates that the “12/31/99” date may have been entered

by Capacity (to correlate with the effective date of the binder) and then forwarded to

Atlantic for execution. In addition, evidence in the record shows Schlenker and Lull may

have been unaware of the Pennsylvania underinsured motorist scheme (and hence the

need to request lower levels of underinsured coverage) in December 1999.

       Based on the evidence in the record, an issue of material fact also remains whether

the accord amends the insurance binder, the after-issued policy or both. The District

Court’s opinion focused on the record evidence indicating Atlantic’s general desire to

minimize coverage and thus insurance premiums. The accord itself, however, is silent as

to what it amends. And as stated above, examination of the record indicates that at least

Atlantic and Capacity — there is no evidence in the record from any F&C officer or

employee — may not have possessed a full understanding of Pennsylvania’s underinsured

motorist scheme. Accordingly, they may have been unaware what the term “statutory” in

the insurance binder even meant. Further, in contrast to the binder, the after-issued policy

affirmatively limits underinsured motorist coverage in Pennsylvania to $35,000.

Examining the available evidence in the light most favorable to and drawing all

inferences in favor of Ligon, a reasonable jury could conclude F&C and Atlantic intended

the accord to apply exclusively to the after-issued policy.

                                          *****

       In this context, we vacate the decision of the District Court and remand this case

                                              8
for further proceedings.

TO THE CLERK:

       Please file the foregoing Opinion.

                                            By the Court,

                                            /s/ Thomas L. Ambro, Circuit Judge

                                              9