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


10-27-2004

O'Connor-Kohler v. State Farm Ins Co
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-3961




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                                                      NOT PRECEDENTIAL

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

                                    NO. 03-3961
                               ____________________

                           KAREN O’CONNOR-KOHLER,
                                           Appellant

                                           v.

                      STATE FARM INSURANCE COMPANY

                    _______________________________________

                   On Appeal From the United States District Court
                       For the Middle District of Pennsylvania
                               (D.C. No. 01-CV-01412)
                     District Judge: Honorable James M. Munley
                   ______________________________________

                    Submitted Under Third Circuit LAR 34.1(a)
                                 October 26, 2004
        Before: SCIRICA, Chief Judge, FISHER and BECKER, Circuit Judges.

                               (Filed: October 27, 2004)
                             ________________________

                                     OPINION
                             ________________________


BECKER, Circuit Judge.

      This is a diversity case about the stacking of underinsured motorist (UIM)

insurance coverage. Plaintiff Karen O’Connor-Kohler was severely injured while a guest

in a vehicle owned by a corporation whose vehicles were insured by defendant State Farm
Insurance Co. She appeals from a grant of summary judgment in favor of State Farm.

O’Connor-Kohler claims that she can “stack” the UIM coverage on the corporation’s

other vehicles. State Farm claims that, because O’Connor-Kohler was merely a passenger

in the vehicle, with no other connection to the company or the insurer, and was not related

to the driver, she cannot stack the company’s coverage. State Farm’s position is correct,

so we affirm. The parties are fully familiar with the facts; hence, we limit our discussion

largely to a statement of the ratio decidendi.

                                                 I

       State Farm covered three vehicles owned by Gastroenterology Consultants, Inc.

(GCI) under separate, non-fleet, $100,000/$300,000 policies (with $100,000 each in UIM

coverage). O’Connor-Kohler was injured while a passenger in one of the vehicles, as the

guest of GCI principal Dr. Martin Fried, en route to a GCI Christmas party. GCI selected,

and paid extra for, optional “stacking” of UIM coverage: insureds would be entitled to

stack the coverage of each policy in case the coverage of one was insufficient.

       The State Farm policy included the following statements:

       Who Is an Insured—Coverages U, U3, W and W3
       Insured—M eans the insured person or persons covered by uninsured motor
       vehicle or underinsured motor vehicle coverage.

       This is:
       1. the first person named in the declarations;
       2. his or her spouse;
       3. their relatives; and
       4. any other person while occupying:
               a.      your car, a temporary substitute car, or a trailer

                                                 2
                     attached to such a car. Such other person is an
                     insured only under the coverage applicable to
                     the vehicle which that person was occupying
                     and such person is not an insured under the
                     coverage applicable to any other vehicle insured
                     by this policy. Such vehicle has to be used
                     within the scope of the consent of you or your
                     spouse.

The named insured under the policy was GCI.

       O’Connor-Kohler filed a claim for $300,000, the amount of “stacked” coverage.

State Farm paid only $100,000, claiming that O’Connor-Kohler was ineligible for

stacking. Our review of the District Court’s grant of summary judgment is plenary. There

is no dispute that this case is governed by Pennsylvania law.

                                             II

       The basic Pennsylvania rule is that a policy of the type in this case allows stacking

for “class one” insureds, but not for “class two” insureds. Utica Mut. Ins. Co. v.

Contrisciane, 473 A.2d 1005, 1010-11 (Pa. 1984).1 Traditionally,“class one” consists of

  1
    Contrisciane concerned a fleet policy, but its reasoning did not turn on that fact.
O’Connor-Kohler notes that the policies at issue here were non-fleet, separate policies,
but does not explain why the difference is significant. It is true that courts are more
hostile to stacking in fleet policies: O’Connor-Kohler cites Miller v. Royal Ins. Co., 510
A.2d 1257, 1258-59 (Pa. Super. Ct. 1986), aff’d without opinion, 535 A.2d 1049 (Pa.
1988), which determined that even class one insureds are not eligible for stacking under
commercial fleet policies, because they might cover many vehicles, so allowing stacking
could make costs prohibitive and defeat reasonable expectations. Miller noted that “courts
are virtually unanimous” in denying stacking under commercial fleet policies. Id. (quoting
Howell v. Harleysville Mut. Ins. Co., 505 A.2d 109, 111 (Md. 1986)); cf. Contrisciane,
473 A.2d at 1010 n.4 (“We expressly reserve for another day the question[] of whether a
“class one” insured may stack coverages under a fleet policy . . . .”).
        None of this, however, establishes that courts would allow class two insureds to

                                             3
the named insured, his or her spouse, and his or her relatives; “class two” consists of

guests in the named insured’s vehicle. Id. at 1010. The Supreme Court of Pennsylvania

has explained why class two insureds are not entitled to stack benefits:

       A claimant whose coverage is solely a result of membership in this class has
       not paid premiums, nor is he a specifically intended beneficiary of the
       policy. Thus, he has no recognizable contractual relationship with the
       insurer, and there is no basis upon which he can reasonably expect multiple
       coverage.

Id. at 1010-11.2




       The argument pressed by O’Connor-Kohler is a function of the fact that the named

insured here is not a human being. It is clear enough that GCI itself could never suffer

bodily injury (which is what is covered by the UIM coverage). GCI, of course, does not

have a spouse or relatives. Thus, O’Connor-Kohler argues, under the State Farm policy at

issue, there were no class one insureds. In her submission, if only class one insureds can

stack coverage, and there are no class one insureds, then State Farm was charging



stack in non-fleet cases. While there is no Pennsylvania Supreme Court case on the
question, Bowdren v. Aetna Life & Cas., 591 A.2d 751, 755 (Pa. Super. Ct. 1991), upheld
an arbitrator’s decision denying stacking to a class two insured under a non-fleet, personal
UIM policy.
  2
    As for class one insureds, after Contrisciane, Pennsylvania enacted a statute explicitly
requiring insurers to stack UIM benefits for class one insureds. See 75 Pa. C.S.A. § 1738.
The statute requires stacking for an “insured,” defined as the named insured and his or her
spouse and relatives if they reside in the same household. See 75 P.S.A. § 1702. This
statute was adopted in 1990, see State Farm Mut. Auto. Ins. Co. v. Kramer, 2003 WL
23100165, *3 (Pa. C.P. Mar. 31, 2003).

                                             4
additional premiums for nonexistent coverage.

       State Farm has a compelling response to this. It notes that some people might

legitimately be class one insureds under GCI’s policy—but not O’Connor-Kohler. In

Contrisciane, the Pennsylvania Supreme Court “reserve[d] for another day the question[]

. . . whether the owner and/or officers of a corporation are ‘class one’ insureds under a

policy issued in the name of a corporation.” 473 A.2d at 1010 n.4. That question appears

to have been answered in the affirmative in later cases.

       In Ober v. Aetna Cas. & Sur. Co., 766 F. Supp. 342, 345 (W.D. Pa. 1990), aff’d

without opinion, 944 F.2d 898 (3d Cir. 1991), Judge Lee determined that, under

Pennsylvania law, the “intended beneficiaries [i.e. class one insureds] of [a corporate]

policy are at minimum the officers and directors of the corporation, whose coverage is not

‘solely the result’ of membership in a class.” The quoted language is from Contrisciane,

and is intended to distinguish officers and directors from those who are covered only

because they are unrelated passengers— as O’Connor-Kohler indisputably was. Similarly,

in Miller, the Pennsylvania Superior Court appears to have assumed that the wife of a

corporate officer was a class one insured under the corporation’s policy, though it did not

actually decide the question. See Miller, 510 A.2d at 1258; cf. Ober, 766 F. Supp. at 345-

46.

       Given this, it seems likely that, as a matter of Pennsylvania law, there are human

class one insureds under GCI’s policy: GCI’s officers and directors. Dr. Fried, therefore,



                                             5
would have been able to stack coverage if he had been injured in the accident. If

O’Connor-Kohler had been his wife or daughter, she would have been able to stack

coverage. If she had been a GCI employee, she might have had a colorable claim that she

could stack coverage. Indeed, State Farm conceded in its papers in the District Court that

if she had been a GCI employee, she could receive stacked coverage.3 But, in fact, she

had no connection to GCI beyond being a passenger in a corporate vehicle—which makes

her the clearest possible example of a class two insured.

       O’Connor-Kohler argues that because she was a passenger in a GCI vehicle, being

operated by a GCI officer, and on the way to a GCI employee Christmas party, “[t]he

clear inference is that this particular travel was for a business purpose to promote the

corporation’s interest.” This proves too much: if this is a “business purpose,” then almost

every conceivable purpose for which anyone might be in a corporate vehicle is a

“business purpose,” and so every unrelated passenger would be a class one insured.

       O’Connor-Kohler argues that the definition of a class one insured under the policy

at issue here is open to more than one interpretation, and therefore the ambiguity should

be construed against the insurer. In fact, the policy language and current law are

  3
    Despite State Farm’s concession, Pennsylvania courts do not appear to have decided
this issue. In Ober, a federal judge determined that the class one insureds on a corporate
policy are “at a minimum” the directors and officers, 766 F. Supp. at 345, but left open
the “maximum” scope of that class. One Pennsylvania Court of Common Pleas case, State
Farm Mut. Auto. Ins. Co. v. Kramer, 2003 WL 23100165 (Pa. C.P. Mar. 31, 2003),
allowed an employee to stack coverage on his employer’s UIM policies, under the
particular policy language at issue, but it did not determine whether that employee was in
fact a class one insured.

                                              6
unambiguous. The language in item 4(a) of the policy cited above (“Such other person is

an insured only under the coverage applicable to the vehicle which that person was

occupying and such person is not an insured under the coverage applicable to any other

vehicle insured by this policy.”) unambiguously excludes stacking by unrelated guests,

and the Pennsylvania cases all seem to be in accord. Therefore, there is no basis for her

claim that she is a class one insured and so entitled to stack coverage.

       The judgment of the District Court will be affirmed.




                                              7
