Superior Court Publishes Important Opinion About How to Try Post-Koken Cases

Since the Pennsylvania Supreme Court's decision in Insurance Federation of Pennsylvania v. Koken, 889 A.2d 550 (Pa. 2005), where the Supreme Court held that the Insurance Commissioner could no longer require a mandatory arbitration clause in uninsured/ underinsured motorist policies, the trial courts of Pennsylvania have struggled with how to efficiently and fairly handle the litigation of auto accident cases involving concurrent claims against the negligent driver and the plaintiff's own underinsured motorist ("UIM") carrier.  A number of courts of common pleas and U.S. district courts have wrestled with the issues and have come to a variety of solutions.

For the first time, an appellate court has decided some of the questions routinely presented.  In Stepanovich v. McGraw and State Farm, 2013 Pa. Super LEXIS 3092 (Pa. Super. Oct. 15, 2013), a panel of the Superior Court made several holdings that should provide trial courts with some instruction on how to try these cases.

The Stepanovich plaintiff was crossing a street on foot when he was hit by McGraw's vehicle.  Liability was disputed.

In addition to the tort claim against McGraw, Stepanovich also filed a lawsuit against State Farm, his own UIM carrier.  McGraw sought bifurcation of the liability and UIM actions.  His primary argument was that the liability case cannot be tried with the UIM claim because he would be unfairly prejudiced by the jury knowing about existence of insurance to pay the verdict.

McGraw opposed bifurcation on the grounds that judicial economy compels trial of the third party and UIM cases together since they both involve questions of who is at fault in the accident and the amount of damages awardable to the plaintiff.  McGraw argued that simply because an insurer is a party to the action does not mean that "evidence of insurance" will be introduced at trial or that any party would be prejudiced by the mere mention of insurance.  Importantly, in his opposition to bifurcation, the plaintiff's attorney wrote "[a]ll issues involving Mr. Stepanovich's claim against his UIM carrier can be resolved without reference to the policy of insurance, insurance limits, etc."

The trial court rejected the request for bifurcation, and also held that insurance should not be mentioned at trial.

The tortfeasor and the UIM carrier were separately represented.  Just before trial, the plaintiff's attorney asked the court to limit the defense to one opening argument, one closing argument, and only one attorney questioning witnesses so that the plaintiff would not be prejudiced by being "double-teamed."  The trial judge concluded that bifurcation of the case would resolve that problem, but since the plaintiff's attorney had already resisted bifurcation, the only way to allow the tortfeasor and UIM carrier to protect their own separate interests was to allow each attorney to participate fully at trial.  Therefore, the trial court allowed counsel for both defendants to actively participate, with the only limitation being on cumulative questioning.  Despite the fact there was an attorney representing the UIM carrier, the court maintained its refusal to allow any mention of insurance.

The jury returned a verdict in favor of the defendants, holding that the driver was not negligent and therefore the plaintiff was not entitled to an award of damages.

Stepanovich filed a motion for a new trial arguing that his due process rights were violated by the way in which the trial was conducted.  He argued that either the jury should have been told that one of the defense lawyers was representing a UIM carrier and that UIM coverage was therefore available to compensate the plaintiff if his damages exceeded the coverage available to the driver, or the defendant should have been limited to one attorney providing a coordinated defense.

In response, State Farm argued that the plaintiff had waived his complaints about the manner in which the trial was conducted because he rejected bifurcation.

The trial judge granted a new trial, holding that he had erred by allowing both counsel to participate without telling the jury about the UIM coverage.

On appeal, the Superior Court reversed and reinstated the defense verdict, holding as follows:
     •    Pennsylvania's Rules of Evidence do not prohibit the introduction of the evidence of the existence of UIM coverage in a combined trial like this.  Rather, Rule 411 prohibits only evidence of liability insurance, i.e. coverage that provides indemnity to the alleged tortfeasor for injuries caused to others.  Since UIM benefits are personal protection for the injured victim, and not indemnity for the tortfeasor, Rule 411 does not apply and a mention of such insurance is not necessarily violative of the Pennsylvania Rules of Evidence.  (Importantly, at this point in the opinion the Superior Court noted that the State Farm policy requires the third party action and UIM claims to be tried together.  The court wrote that, in drafting such a policy, State Farm must have considered the fact that a jury would know about the existence of UIM coverage and concluded that the allegedly negligent driver would not be prejudiced thereby.)
     •    However, even if the jury should have known of State Farm's participation and the existence of UIM coverage, the plaintiff was still not entitled to relief because there lacked evidence that the manner in which the case was tried caused any prejudice to the plaintiff.  A due process violation requires some evidence of prejudice before it can be used to set aside a jury's verdict.  Here, the court found that there is no legal or logical connection between the existence of UIM coverage and the question of whether the driver was negligent.  Since the jury in this case found that the driver was not negligent, the plaintiff was not entitled to make a recovery from either the defendant driver or the UIM carrier, and the question of his negligence could in no way be influenced by the mere existence of UIM coverage.

Judge Ford Elliott filed a dissenting opinion, in which she said she would affirm the trial court's decision to grant a new trial because she would defer to the trial court's decision that the "double-teaming" of the plaintiff was per se prejudicial to the plaintiff's case.

Many questions regarding the proper way to structure trial of a combined third party and UIM case remain, even after the Stepanovich decision, especially for UIM carriers who do not have language similar to State Farm's requiring the third party and UIM claims to be tried together.  However, the specific holdings regarding the mention of insurance and the absence of prejudice when a jury finds no negligence should helpful guide the lower courts, as well as counsel and claim representatives handling these types of cases.

For further information about Stepanovich v. McGraw and State Farm, or any other auto insurance coverage matter, please contact Craig Murphey or any other attorney with MacDonald Illig's insurance practice group.


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