Patrick J. Boland III

The rule throughout the Commonwealth has long been that an insured’s failure to read the language of an insurance policy does not prohibit them from relying on the representations of an insurance agent in securing insurance. Pennsylvania’s Supreme Court first made this finding in Rempel v. Nationwide Insurance Company, Inc., 471 Pa. 404 (1977), where the beneficiary under a mortgage protection life insurance policy alleged the agent of an insurer misrepresented the extent of coverage under the policy. There, the beneficiary/insured admittedly did not read the language of the policy, however, given the complicated nature of the insurance business as well as the trust that one generally has in their insurance agent, the court found it was not unreasonable for a consumer to rely on the representations of her agent. Thus, to an extent, the old adage, “never sign anything before you read it,” does not apply across the board in insurance context.  Subsequently, in Pressley v. Travelers Prop. Cas. Corp., 817 A.2d 1131 (Pa. Super. 2003), the Superior Court further lessened the duty of the consumer by finding an insured was not required to read the policy where they had requested a specific type of coverage and were told by the agent that it would be provided. In such a situation, the duty is on the agent to inform the insured that the policy differs from what was requested if, in fact, that is the case. Where the agent fails to discharge that duty, an insured is under no duty to read the policy to uncover the misrepresentation. Thus, insureds are allowed to presume the coverage they have requested is in place, unless they are told otherwise. Conversely, in matters where an insured received precisely the coverage they requested, courts have consistently enforced the plain language of the exclusions and limitations, despite an agent’s failure to inform the insured of the same.  The courts’ decisions in this context are all based on the “reasonable expectations of the insured.” In Pennsylvania, the traditional rules with respect to contracts do not always apply in the realm of insurance. Instead of the policy language being the guiding light, even where the terms of the policy are clear and unambiguous, the reasonable expectations of the insured are controlling. This “reasonable expectation” analysis is to be employed in matters where an insured alleges deceptive practices, whether it be the misrepresentation of the terms of the policy or the issuance of a policy different than that which was requested by the insured.       More recently, however, the protections afforded by the “reasonable expectations” standard and the insured’s lack of a duty to investigate were somewhat eroded. In Palek v. State Farm Fire & Casualty Company, 535 F. Supp. 3d 382 (W.D. Pa., April 4, 2021), the homeowners alleged the insurer’s agent misled them regarding the kinds of damages to their in-ground swimming pool that were covered under their homeowners’ insurance policy. In fact, the homeowners alleged the insurer’s agent specifically informed them the policy would “cover their in-ground pool in the event the [pool] was damaged from foreseeable types of harm.” After purchasing the policy, the homeowners’ pool suffered damage as a result of hydrostatic pressure, or a “pool pop.”  In analyzing the homeowners’ claim for justifiable reliance, the U.S. District Court for the Western District of Pennsylvania observed the decisions throughout the Commonwealth, noting consumers do not possess a duty to investigate and read the underlying policy where there are allegations of fraud against an insurer or its agent. The Palek court, however, pointed out that, where there are no allegations of fraud, the duty of an insured to read the language of the policy depends on whether it would be unreasonable not to read the policy under the circumstances. As applicable in Palek, the insurer’s agent represented the policy would cover the “foreseeable” damages to the homeowners’ in-ground pool. It was the presence of this vague representation, or qualifier, that triggered the homeowners’ duty to read the language of the policy. The court noted that: It is objectively unreasonable for a consumer in [the homeowners’] position to rely, without further inquiry, on an unadorned representation that an insurance policy will provide coverage for ‘foreseeable’ types of harm from the simple reason that such a representation says nothing about what is or is not ‘foreseeable.’   While consumers are provided latitude with respect to their duty to read the language of an insurance policy, that does not permit cart blanche to claim they justifiably relied on the representations of the insurance company or its agents. As Palek establishes, there is a “reasonable under the circumstances” analysis that must be undertaken by the courts on this issue. While insureds may not have a definitive duty to read the policy language, such a duty can arise depending upon the extent and specifics of any alleged representation by the insurer, or its agent, upon which the insured relied.    Legal Update for Insurance Agents & Brokers, August 2024, has been prepared for our readers by Marshall Dennehey. It is solely intended to provide information on recent legal developments and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note tgventura@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved.