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PA Supreme Court Holds Uninsured Motorist Carrier Must Provide Coverage Despite Failure of Insured to Give 30 Day Phantom Vehicle Notice

The Pennsylvania Supreme Court recently held that an insurance company is not relieved of its contractual obligation to provide uninsured motorist coverage merely because the insured failed to provide notice to the insurance company of a phantom vehicle within 30 days as required by the MVFRL and/or the policy.

In Vanderhoff v. Harleysville Insurance Company , a copy of which is provided in our articles library here , the insured was involved in an accident which was timely reported to law enforcement. The accident purportedly involved a phantom vehicle. Notice was not, however, provided to the Uninsured Motorist carrier until sometime after 30 days had passed following the accident.

The Motor Vehicle Financial Responsibility Law (the "MVFRL") provides that an uninsured motor vehicle includes, "An unidentified motor vehicle that causes an accident resulting in injury provided the accident is reported to the police or proper governmental authority and the claimant notifies his insurer within 30 days, or as soon as practicable thereafter, that the claimant or his legal representative has a legal action arising out of the accident." 75 Pa. C.S.A. Section 1702. Thus, by definition, a claim for uninsured motorist coverage based upon a so-called "phantom vehicle" requires notice to both police and the insurance company.

Prior to enactment of the MVFRL, however, the Supreme Court had interpreted similar language in a policy providing uninsured motorist benefits. In Brakeman v. Potomac Insurance Company , 371 A.2d 193 (Pa. 1977)(also available in our articles library here ), the Court held that an insurer was not permitted to deny UM benefits even though its insured had failed to comply with policy language requiring notice of phantom vehicle UM claims within 30 days of the accident. The Court in Brakeman held that the insurance company was permitted to deny benefits for violation of the policy language only if it could demonstrate that it had been prejudiced by the late notice, i.e. its ability to investigate the claim was harmed in some material matter.

In a potentially conflicting opinion issued in 2005, the Supreme Court concluded that a showing of prejudice was not required where the insured failed to provide notice to law enforcement within 30 days. In State Farm Insurance v. Foster , 889 A.2d 78 (Pa. 2005)(also available in our articles library here ), the Court held that the requirements of the MVFRL (which had been passed following the decision in Brakeman) were addressed to the public interest and would be enforced as written. Thus, when an insured fails to notify law enforcement of a phantom vehicle accident within 30 days, the uninsured motorist carrier was permitted to deny UM benefits regardless of whether the UM carrier was prejudiced by the delay in notice.

The decision in Vanderhoff limits the holding of Foster to those cases where law enforcement is not notified and confirms the vitality of Brakeman in cases where law enforcement is notified but the insurance carrier is not. Thus, the rules going forward can be stated thusly:

An insured involved in an accident with a phantom motor vehicle must: 1. notify law enforcement of the accident within 30 days or the UM carrier will be entitled to deny coverage; and 2. notify his or her UM insurance company of the accident within 30 days or take the risk that the UM carrier may be entitled to deny coverage if the UM carrier can demonstrate it has been prejudiced by the delay in providing notice.

Pennsylvania insurance lawyers and Erie uninsured motorist claim lawyers should be aware of this new decision and the interplay of all three cases in order to ensure that injured people in Pennsylvania don't make mistakes that will cost them their coverage.

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