Insurance Services – Coverage & Bad Faith Litigation

Key Points:

• Pennsylvania adopts “strict liability standard” applicable to claims brought under “catch-all” provision of UTPCPL, rejecting state-of-mind determination.
• Going forward, the focus of  claims under the “catch-all” provision will be on words and actions that have the tendency or capacity to deceive, as opposed to intent to deceive.

On February 17, 2021, a 4-3 majority of the Supreme Court of Pennsylvania handed down its decision in Gregg v. Ameriprise Financial, Inc., et al., 245 A.3d 637 (Pa. 2021), holding that a strict liability standard would be applied to claims brought under the “catch-all” provision of the Unfair Trade Practices Consumer Protection Law (UTPCPL). The decision likely has far-reaching consequences for insurers, insurance brokers, financial advisors and real estate brokers, any of whom may now find themselves exposed to liability for conduct that has the potential to deceive, without a showing of state of mind or intent to deceive.

Gregg arose from purported misrepresentations by a broker/financial advisor for Ameriprise to his clients, the Greggs, regarding the purchase of life insurance policies. More specifically, the alleged misrepresentations concerned the manner in which monies the Greggs contributed would be used to fund their account. By way of oversimplification, instead of doing what he told the Greggs he would do in conjunction with funding the policies and the Greggs’ accounts, the broker performed different transactions, which increased the commissions he was paid.

After learning that Ameriprise was the subject of a class action claim involving some of its other clients, the Greggs sued their insurance broker/financial advisor and Ameriprise for negligent misrepresentation, fraudulent misrepresentation, violation of the catch-all provision of UTPCPL, breach of fiduciary duty and negligent supervision. Subsequent to the dismissal of some of the claims, the jury found in favor of Ameriprise on the fraudulent and negligent misrepresentation counts. However, the Greggs prevailed on the UTPCPL claim.

Ameriprise appealed to the Pennsylvania Superior Court and ultimately to the Pennsylvania Supreme Court. It contended that it could not be found to have violated the UTPCPL because the jury had entered a verdict in its favor on the fraud and misrepresentation claims.

The trial court had disagreed with Ameriprise’s contention. It noted that, while claims of fraud and negligent misrepresentation require findings of a defendant’s state of mind (intent to deceive) or negligence, respectively, claims under the UTPCPL “catch-all” provision require no such state-of-mind determination. The Superior Court agreed.

In its recent opinion, the Supreme Court affirmed the rulings below and found that an actor’s state of mind is immaterial under the plain statutory language of the “catch-all” provision of the UTPCPL, which was amended in 1996 to include liability for both “fraudulent or deceptive conduct which creates a likelihood of confusion or misunderstanding.” The key issue for the Supreme Court was the Legislature’s addition of the word “deceptive” in the “catch-all” clause, so that liability was no longer moored to a requirement that fraud needed to be shown in order to trigger liability under the statute.

In examining what the word “deceptive” means, the Supreme Court held that the statute imposes “liability upon commercial vendors who engage in conduct that has the potential to deceive and which creates a likelihood of confusion or misunderstanding.” Simply put, the focus moving forward on claims under the “catch-all” provision will be on words and actions that have the tendency or capacity to deceive, as opposed to whether the actor has the intent to deceive.

In disagreeing with the majority’s construction of the statute, the three-justice dissent focused upon the absence of any language indicating a legislative intent to impose strict liability under the “catch-all” provision of the UTPCPL. Additionally, the dissenters noted that reading the “fraudulent” prong of the “catch-all” clause to require a showing of intent, while reading the “deceptive” prong to be a strict liability provision requiring no state of mind in order to impose liability, was nonsensical. Instead, the minority suggested that the Legislature’s addition of the word “deceptive” into the “catch-all” provision was intended to create a negligence standard that would be applicable in the situation where a “vendor is aware, or should be aware, that his statements are capable of being interpreted in a misleading way by a consumer, regardless of the vendor’s belief regarding the truth or falsity of the statements.”

Gregg, thus, holds that, moving forward, a claim for “deceptive conduct during a consumer transaction that creates a likelihood of confusion or misunderstanding … upon which the consumer relies to his or her financial detriment does not depend upon the actor’s state of mind.” How courts will apply this new standard, particularly in the context of the historical divide between claims for “misfeasance” (an improper performance of a contractual obligation), which are actionable under the UTPCPL, and “nonfeasance” (the failure to perform a contractual duty), which are not actionable, will be just one of many fertile areas of litigation.

With all of the above in mind, it is critical that, at minimum, businesses adopt clear, comprehensive, and accurate disclosures capable of consumer comprehension and understanding in order to combat against the anticipated widening of liability under the court’s adoption of a “strict liability” standard for UTPCPL “catch-all” claims.

*Dana, an associate, and Todd, special counsel, work in our Philadelphia, Pennsylvania office. Dana can be reached at 267.519.6597 or dagittleman@mdwcg.com. Todd can be reached at 215.575.2605 or tjleon@mdwcg.com.

_{Defense Digest, Vol. 27, No. 3, June 2021 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2021 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}