Smerdon v. GEICO Cas. Co.
342 F. Supp. 3d 582 (2018)
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Rule of Law:
Pennsylvania law sets a high bar for the assumption of the risk defense, requiring a plaintiff to have been subjectively aware of and voluntarily accepted the specific risk that caused their injury, not merely a general danger. An insurer does not commit bad faith under Pennsylvania law by asserting a reasonable, albeit ultimately unsuccessful, legal defense, provided it had a reasonable basis for questioning coverage and did not unreasonably delay processing the claim.
Facts:
- On April 30, 2016, Ms. Smerdon was shopping at Wal-Mart in Mansfield, Tioga County, Pennsylvania.
- A robber demanded cash from a customer service employee at the Wal-Mart.
- Ms. Smerdon and several other individuals chased the robber out to the parking lot where his car was left running.
- Two individuals caught up with the robber as he attempted to enter his vehicle, scuffling with him.
- Ms. Smerdon arrived at the passenger side of the robber's vehicle, opened the door, and attempted to remove the keys from the ignition.
- As the robber put the vehicle in drive and accelerated, Ms. Smerdon was badly injured by his car, suffering a skull fracture, a traumatic brain injury, and injuries to her right knee, right thigh, right ankle, and left shoulder.
- Ms. Smerdon has no recollection of the incident and did not know the identity of the robber, that he had a stolen car, or that she would be run over by him.
- At the time of the incident, Ms. Smerdon was insured by an auto insurance policy with GEICO that included an uninsured motorist amendment, and the robber was naturally uninsured.
Procedural Posture:
- Ms. Smerdon filed a two-count complaint against GEICO in the Tioga County Court of Common Pleas (a state trial court), alleging breach of contract and bad faith, and seeking a declaratory judgment requiring GEICO to cover her uninsured motorist claim and damages for bad faith.
- GEICO removed the case to the United States District Court for the Middle District of Pennsylvania.
- GEICO filed a third-party complaint against Wal-Mart seeking contribution or indemnification.
- Wal-Mart filed a motion to dismiss the third-party complaint.
- The District Court granted Wal-Mart's motion to dismiss, and Wal-Mart was dismissed from the litigation with prejudice.
- In its answer, GEICO raised assumption of the risk as an affirmative defense.
- GEICO filed a motion for partial summary judgment seeking summary judgment on both the breach of contract and bad faith claims.
- Ms. Smerdon filed a partial motion for summary judgment as to GEICO's use of assumption of the risk as an affirmative defense.
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Issue:
Does the affirmative defense of assumption of the risk, under Pennsylvania law, bar an insured's claim for uninsured motorist benefits when the insured was severely injured while attempting to thwart a robber's getaway, and did the insurer act in bad faith by asserting this defense and questioning coverage?
Opinions:
Majority - Court
No, the affirmative defense of assumption of the risk does not bar Ms. Smerdon's claim, but no, GEICO did not act in bad faith. Regarding assumption of the risk, Pennsylvania law requires a defendant to conclusively prove that the plaintiff was subjectively aware of the specific risk that caused their injury, voluntarily accepted it, and suffered harm contemplated by that specific risk. General awareness of danger is insufficient; the plaintiff must be aware of 'the particular danger.' The court found no facts demonstrating that Ms. Smerdon was specifically aware of the risk that the robber would run her over. Her lack of recollection of the incident and her stated ignorance of the robber's identity, a stolen car, or the specific danger of being run over, prevent a finding of subjective awareness of the specific risk. The court referenced Stapas v. Giant Eagle and Handschuh v. Albert Development to illustrate that general awareness of danger (like a physical altercation or trench collapse) does not equate to knowledge of a specific, unforeseeable harm (like being shot or the precise manner of a collapse). Furthermore, the circumstances did not suggest an extraordinary danger so obvious that Ms. Smerdon impliedly waived her right to complain. Therefore, Ms. Smerdon's motion for partial summary judgment as to GEICO's assumption of the risk defense is granted, and GEICO's motion is denied. The court clarified that questions about the reasonableness of Ms. Smerdon's actions are properly resolved through comparative negligence principles, not assumption of the risk, and remain an issue for a jury. Regarding the bad faith claim, a plaintiff must present clear and convincing evidence that the insurer lacked a reasonable basis for denying benefits and knew or recklessly disregarded this lack of basis. The court found that GEICO had a reasonable basis to question coverage by asserting assumption of the risk, as it remains a valid defense under Pennsylvania law, even if it ultimately proved erroneous in this specific case. The presence or absence of bad faith does not turn on the legal correctness of the basis for an insurer's denial. Ms. Smerdon failed to provide clear and convincing evidence that GEICO knew or recklessly disregarded a lack of a reasonable basis. Additionally, GEICO did not unreasonably delay handling the claim, as they were communicating with Ms. Smerdon and requested the police report and surveillance video, which Ms. Smerdon had not yet received when she filed her complaint. Consequently, GEICO's motion for summary judgment on Ms. Smerdon's bad faith claim is granted.
Analysis:
This case significantly reinforces the high burden and narrow application of the assumption of the risk doctrine in Pennsylvania, requiring a plaintiff's subjective awareness of a specific risk rather than just a general appreciation of danger. This distinction channels questions about a plaintiff's reasonableness into comparative negligence, making it more difficult for defendants to entirely bar recovery. The decision also provides crucial guidance for insurance companies, clarifying that the good faith assertion of a reasonable legal defense, even if ultimately unsuccessful, does not automatically constitute bad faith, provided there was a legitimate basis for the claim and no unreasonable delay in processing.
