OAI: Court Ruling Spotlights Comprehensive Insurance Discount

A federal court judge in Pennsylvania recently ruled against insurers in a lawsuit, saying they breached contract terms with policyholders who should have received discounts on comprehensive coverage for having antitheft devices, highlighting the statute requiring such discounts, according to Online Auto Insurance

Plaintiffs in the case claimed that major insurers-including Nationwide, Encompass Indemnity, Allstate, Peerless Indemnity, State Farm, Progressive and USAA-failed to apply comprehensive coverage discounts of no less than 10 percent that were required by state law for policyholders driving cars with eligible passive antitheft devices. Insurers countered that they were not required to offer or apply the discounts because none of the policyholders requested them.

Policyholders in Pennsylvania who have such devices in their car and want to protect themselves financially in instances of vehicle theft should make auto insurance comparisons of comprehensive coverage at different insurance companies because the policies will likely be discounted.

In the ruling, Timothy J. Savage said that the state's Motor Vehicle Financial Responsibility Law (MVFRL) requiring the discounts was obvious in its intent "to reduce insurance premiums to enable more drivers to purchase insurance."

Savage rejected insurers' argument that ambiguous language in the MVFRL left legal room for them to pass over discounts that were not requested by policyholders. The judge countered by referencing a MVFRL provision that stated that insurers "shall provide premium discounts for motor vehicles with passive antitheft devices."

"The clear meaning of the words 'shall provide' is that automobile insurers must give discounts to insureds whose vehicles have qualifying devices," Savage wrote.

A bulk of Savage's analysis also focused on the intricacies of passive antitheft devices and which technologies fell under the MVFRL's discount-eligible definition.

Generally, passive antitheft devices prevents a vehicle from operating without a specific key or lock, presumably belonging to the car's real owner. Savage determined that the Pass-Key I, Pass-Key II, Pass-Key III, Pass-Key III+, SecuriLock, Sentry Key, Mercedes FBS III, Nissan Vehicle Immobilizer, and PassLock systems all qualified as devices eligible for the discounts.

However, Savage also deemed some systems presented by plaintiffs in the lawsuits to be ineligible for discounts, mainly because descriptions of the devices in car owners' manuals left them outside the definition of a passive antitheft device.

One example was Ronald Bucari, who alleged that a passive antitheft device in his 2008 Honda Accord made him eligible for the comprehensive coverage discount. However, Savage ruled that the owner's manuals for the 2007 and 2008 model years contained a description of the immobilizer device that left out when it was "armed or engaged."

"Without any evidence that shows when it is activated, it is not possible to determine whether this device qualifies as 'passive' under the terms of the statute," Savage wrote.

Insurers also laid blame for their flexible view of the MVFRL on the state Insurance Commissioner, who they said "chose never to fulfill" the job of "prescribing regulations regarding 'passive antitheft devices.'"

"The Legislature chose a clear, precise, specific, and narrow definition," plaintiff USAA wrote in its portion of the lawsuit. "And it allowed for the flexibility to account for technological changes and the imperfect information available in data sources by delegating to the Insurance Commissioner."

Savage agreed with insurers, who he said "correctly point out that the Commissioner could have promulgated regulations to further specify the devices that qualify."

Still, Savage said, "it is not reasonable to conclude, as the defendants urge us to do, that the commissioner's failure to prescribe regulations relieves the insurers of their statutory obligation to provide the discount to insureds whose vehicles contain a qualifying antitheft device."

For more on this and related issues, head to http://www.onlineautoinsurance.com/compare/ for access to an easy-to-use quote-comparison generator and informative resource pages.