Innocent third-party under PA law

Island Life Chiropractic, P.C. v Infinity Group, 2017 NY Slip Op 27040 (App. Term 2d Dept. 2017)

I do not normally post about PA-NY choice of law issues on here, but I have seen a trend of appeals where Infinity has gotten a little too “trigger happy” in disclaiming coverage.  This is the second or third case I have recently seen on this issue.  Parenthetically, PA has hourly attorneys fees when a claim is “wrongfully” disclaimed.  I am trusting my memory on that one – not taking the time to research- but this case should spawn a $10,000 attorney fee for Island Life, provided they make a prima facie case in accordance with PA law.

“Under Pennsylvania law, an insurer has a common-law right to rescind a policy of automobile insurance (see 40 P.S. §§ 991.2002, 991.2004; Erie Ins. Exch. v Lake, 543 Pa 363, 375, 671 A2d 681, 687 ; Klopp v Keystone Ins. Cos., 528 Pa 1, 595 A2d 1 ). The Pennsylvania Supreme Court has held, however, that while an automobile insurance policy may be retroactively rescinded as to an insured who has made a material misrepresentation, the policy may not be retroactively rescinded with respect to third parties “who are innocent of trickery, and injured through no fault of their own” (see Erie Ins. Exch. v Lake, 543 Pa at 375, 671 A2d at 687). In the case at bar, the papers defendant submitted in support of its motion set forth no facts tending to demonstrate that the assignor was anything other than an innocent third party. Consequently, defendant failed to establish its prima facie entitlement to summary judgment dismissing the complaint as a matter of law.”

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