                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


11-23-2004

State Farm Ins Co v. Taylor
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-4593




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Recommended Citation
"State Farm Ins Co v. Taylor" (2004). 2004 Decisions. Paper 125.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/125


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                                                     NOT PRECEDENTIAL

                  IN THE UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                              _______________

                                     No. 03-4593
                                  ________________

                      STATE FARM INSURANCE COMPANY

                                          v.

               KATHRYN TAYLOR, MARK TAYLOR and TAYLOR
                      GENERAL CONTRACTING, INC.,
                                        Appellants
                   ____________________________________

                   On Appeal From the United States District Court
                       For the Eastern District of Pennsylvania
                                (D.C. No. 02-cv-07459)
                     District Judge: Honorable Cynthia M. Rufe
                   _______________________________________

                     Submitted Under Third Circuit LAR 34.1(a)
                                November 18, 2004
                 Before: ROTH, SMITH and BECKER, Circuit Judges


                             (Filed: November 23, 2004)


                             _______________________

                                    OPINION
                             _______________________

BECKER, Circuit Judge.

      This is an appeal by Kathryn Taylor, Mark Taylor and Taylor General Contracting,

Inc. (TGC) from an adverse judgment in a declaratory judgment action brought by State
Farm Insurance Company seeking a coverage ruling. Kathryn Taylor (Taylor) is a co-

principal of TCG (along with her husband Mark). The District Court held that Taylor,

who was injured in a motor vehicle accident in which she was occupying her private

vehicle, not one of the four TCG corporate vehicles covered under the corporation’s

policies which are the subject of this suit, could not stack her UIM coverage onto the four

policies on which the corporation was the named insured. We affirm, essentially for the

reasons set forth in Judge Rufe’s thorough and thoughtful opinion. Because the parties

are fully familiar with the background facts and procedural history we need not set them

forth, and limit our discussion to our ratio decidendi.

                                              I.

       Taylor correctly notes that the four corporate policies had formerly listed Mark

Taylor as the named insured, and that under that nomenclature she could have stacked

under the policy terms. Proceeding from that premise, Taylor first argues that the policy

was surreptitiously changed to list the corporation as the named insured, depriving her of

the right to stack, see infra, and that the change should be ignored. We disagree. As

Judge Rufe convincingly demonstrates:

              Even assuming Defendants could produce evidence demonstrating
       that State Farm made a unilateral, unauthorized change to the “named
       insured,” Defendants ratified and thereby assented to the change. There is
       no dispute that Defendants received copies of the policies and the new
       declaration pages years before the accident. By paying the premiums and
       renewing the policies three times prior to the accident, Defendants accepted
       and ratified the terms of the policies, including the “named insured”
       appearing in the declarations. See Richard A. Lord, 12 Williston on

                                              2
      Contracts § 35:22 (4th ed. 2003) (“Where an agent lacks actual authority to
      agree on behalf of the principal, the principal may still be bound if the
      principal acquiesces in the agent’s action, or fails to promptly disavow the
      unauthorized conduct after acquiring knowledge of the material facts.”);
      Restatement (Second) of Contracts § 380(2) (1981) (“The power of a party
      to avoid a contract for mistake or misrepresentation is lost if after he knows
      or has reason to know of the mistake or of the misrepresentation . . . he
      manifests to the other party his intention to affirm it or acts with respect to
      anything that he has received in a manner inconsistent with
      disaffirmance.”); see also United States v. One 1973 Rolls Royce, 43 F.3d
      794, 818 n.26 (3d Cir. 1994) (“The concept of ratification in agency law,
      for example, allows a principal to be bound by an agent’s unauthorized
      prior act if the principal knows about it and fails to take affirmative steps to
      disavow the act.”) (citation omitted).

              Defendants accepted the benefits of coverage when they paid the
      policy premiums. Had they reviewed the insurance documents prior to Mrs.
      Taylor’s accident, they would have reached the inescapable conclusion
      outlined above: if Mrs. Taylor became involved in an accident in her
      personal vehicle with an underinsured driver, she would not be eligible for
      UIM benefits under the Corporation’s policies. Despite having sufficient
      information available to them, Defendants did nothing in the twenty-one
      months between the policies’ inception dates and the date of the accident to
      address any perceived questions or errors concerning the “named insured”
      or the scope of coverage.

      In fallback arguments, Taylor submits that State Farm had an obligation to notify

her that her right to stack had been diminished when the named insured was changed and

that she had a reasonable expectation of coverage. We find no authority for these

propositions and reject them.

                                             II.

      Taylor also argues that under Pennsylvania law and public policy she was entitled

to coverage. Again we disagree. The UIM policy language limits individual “insureds”



                                             3
to occupants of the vehicle when the named insured is an “organization”. A review of

Pennsylvania cases, as well as federal cases interpreting Pennsylvania law, reveals that

there is no prohibition on an insurer’s limiting the UIM coverage on corporate-owned

vehicles to the occupant(s) of those vehicles. Even if there were some merit to Taylor’s

argument on the circumstances where she had been occupying one of the insured

vehicles, see Ober v. Aetna Cas. & Sur. Co., 766 F. Supp. 342 (W.D. Pa. 1990), aff’d

without opinion, 944 F.2d 898 (3d Cir. 1991), there is no possible merit to the argument

in this case where she was occupying a personal vehicle. This argument was rejected in

Hunyady v. Aetna, 578 A.2d 1312 (Pa. Super. Ct. 1990).

       The judgment of the District Court will be affirmed.




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