SCOPA announces ruling in “phantom vehicle” case
Scott B. Cooper, Esq., PAJ's Immediate Past President

Here is a summary and link to the Supreme Court of Pennsylvania majority opinion from in Vanderhoff v. Harleysville, 98 MAP 2012 (Pa. October 30, 2013). This case deals with what is involved with preserving an uninsured motorist claim involving a phantom vehicle.

This case was initially the subject of a Pennsylvania Supreme Court opinion in 2010 where the Court held that an insured need not report a phantom vehicle to his or her insurance company within thirty (30) days but the company can deny coverage if it can show prejudice was suffered by the late reporting. Vanderhoff v. Harleysville, 997 A.2d. 328 (Pa. 2010). The case was then remanded back to the trial court for a hearing on the issue of prejudice.

At the trial court level, on remand, to prove prejudice the insurance company presented testimony of an insurance adjuster to explain how the typical uninsured claim is investigated, a local attorney who testified what actions he may have taken if the claim was reported earlier than the eight months in this case, an investigator who testified that the investigation would have been much different if reported sooner, and an accident reconstructionist to testify on the importance of timeliness in reporting the accident. The trial court found that the evidence was insufficient to establish prejudice but did not provide an "explicit, distinct rationale for its finding".

The Superior Court found that the trial court failing to provide a distinct and explicit reason for its rationale is fatal to affirming the opinion. Therefore, the court accepts the testimony of the insurance carrier and finds that prejudice exists in the case. Specifically, the Court held that "[u]nder the specific facts of this case, we conclude that this argument constitutes a clear abuse of discretion..." The trial court was reversed.

In an Order dated November 14, 2012, Pennsylvania Supreme Court granted the Petition for Allowance for Appeal and defined the issues in that Order as involving the following:

(1) What constitutes "actual prejudice" to relieve and insurance company of its obligation to pay insurance benefits to an insured?

(2) Should "actual prejudice" involve proof by an insurance carrier that it suffered a real material impairment of its ability to investigation and defend an uninsured claim?

(3) What constitutes a reasonable basis for a trial court finding that prejudice exists in a late report of a phantom vehicle?

In its majority opinion yesterday the Court holds that all three issues are really part of the same test. The Court holds that "these cases must be addressed on a case-by-case basis wherein the court balances the extent and success of the insurer's investigation with the insured's reasons for the delay. The 30-day notice requirement is there for a reason. It is reasonable that insureds must alert the insurer within a month's time. While an insurer will not be permitted to deny coverage absent prejudice caused by an insured's delay in notice, showing such prejudice does 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. While the insurer is always obligated to investigate the case such as it can, where an insured's delay results in an inability to thoroughly investigate the claim and thereby uncover relevant facts, prejudice is established. Handling these cases in this manner promotes prompt notice and advances MVFRL goals while encouraging insurers to investigate phantom vehicle claims."

Accordingly, the Superior Court decision is affirmed.

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