Owners Of Registered But Uninsured Vehicles Beware Pennsylvania Superior Court Ruling Makes First Party Benefits Unrecoverable - DD 12/03

Defense Digest

Owners Of Registered But Uninsured Vehicles Beware Pennsylvania Superior Court Ruling Makes First Party Benefits Unrecoverable

Recently, the Pennsylvania Superior Court decided in Swords v. Harleysville Ins. Co., 2003 Pa. Super. 302 (2003), that owners of registered but uninsured vehicles were precluded by 75 Pa. C.S.A. §1714 from receiving medical and wage loss benefits from anyone’s policy.  This holding also overruled an earlier decision of the court in Kafando v. State Farm Mutual Ins. Co., 704 A.2d 675 (Pa. Super. 1998), that found such benefits to be available to those individuals.

Under the Motor Vehicle Financial Responsibility Law (“MVFRL”), it is clear that first-party benefits, which include medical and wage loss benefits, are intended to follow the person and not the vehicle.  75 Pa. C.S.A. §1713 establishes the hierarchy of auto insurance sources that anyone injured in an auto accident must follow when seeking to recover first party benefits.  Pertinent to the Swords decision, the first source of insurance from which an individual involved in an auto accident must seek recovery of first-party benefits is any insurance policy on which that person is a “named insured.”  The Legislature also drafted §1714 of the MVFRL, which provides, “An owner of a currently registered motor vehicle who does not have financial responsibility… cannot recover first-party benefits.”  75 Pa. C.S.A. §1714.

In Swords, the plaintiff was involved in an accident while driving a vehicle owned by his father.  The plaintiff also owned a registered vehicle, but did not maintain insurance for it.  The lower court found in favor of the plaintiff on the issue and granted partial summary judgment.  On appeal, the Pennsylvania Superior Court reversed, and held, citing a string of supporting cases, that the statutory language of §1714 clearly and unambiguously states that an owner of an uninsured car is precluded from recovering any medical and wage loss benefits, without exception.  This result would extend to situations where an owner of an uninsured car is a passenger in an insured car, even when the uninsured car is inoperable or has been relegated to a junkyard.

The holding in Kafando, which Swords overrules, reached the opposite result by basing its decision on Henrich v. Harleysville Ins. Co., 620 A.2d 1122 (Pa. 1993).  The Henrich case, however, dealt with an owner of an uninsured car who sought to recover uninsured motorist benefits as a passenger in an insured vehicle.  The Pennsylvania Supreme Court in Henrich found that an owner of a registered but uninsured car can recover uninsured motorist/underinsured motorist benefits.  Using rather strong language, the Pennsylvania Supreme Court reasoned that it would not attribute harsh motives to deprive one of the benefits to the Legislature, “unless they were clearly spelled out.”  See id.

Swords held that the Kafando Court mistakenly relied upon Henrich since Henrich referred only to uninsured motorist coverage, which is not included in the statutory definition of “first-party benefits,” and was, therefore, not applicable to the issues presented in the case.  Likewise, the court found that the exclusion of medical and wage loss benefits under §1714 to owners of registered but uninsured vehicles does not apply to uninsured motorist/underinsured motorist benefits as discussed in Henrich.

Finally, the Superior Court concluded that their holding is consistent with the legislative intent regarding the hierarchy of recovery of first-party benefits under §1713.  When reading this section together with §1714, the court found that the Legislature chose to make an individual who elects to register but not insure their own vehicle ineligible to obtain these first-party benefits by virtue of his or her own failure to obtain financial responsibility.  In short, a vehicle owner who has not provided for his or her own first-party benefits is not entitled to receive these benefits from someone else who has.

*  Vlada is an associate in our Philadelphia, PA office.  He can be reached at (215) 575-2659 or vtasich@mdwcg.com.