Insurance is a contract between the insurer and the person insured.

Insurance companies sell to the insured the coverage requested: Carriers have no obligation to force, or even advise, the insured about the limits of liability of automobile liability insurance that should be carried by the insured. Rather, the insurer is obligated only to provide the insurance coverages ordered, as some insureds found out when they tried to convince a court to provide liability limits that were not ordered because they believed, as longtime customers, they should have been advised to carry higher limits.

Case background

In 1984, while he was a captain in the U.S. Army, Charles Cohan purchased an automobile insurance policy from USAA with a $100,000 per-person liability limit. He maintained the policy with the same coverage limits through 2011. He married Lisa Cohan in 1995 and added her to the auto policy as an "operator." The Cohans never advised USAA that they should increase their automobile liability coverage.

In 2002, the Cohans purchased land and built a new home. On Dec. 6, 2002, they purchased homeowner's insurance from USAA with liability coverage in the amount of $1 million per occurrence.

Lisa Cohan, while driving a Cohan vehicle, collided with another vehicle, killing the driver. The administrator of the deceased driver's estate brought a wrongful death/survival action, and USAA defended the action on Lisa's behalf. The matter settled for $300,000 but USAA paid only the policy limits of $100,000. The Cohans paid the remainder of the settlement amount.

On April 1, 2015, the Cohans sued USAA, claiming that it should have advised Cohan to increase the auto liability policy limits over the years that he was a customer, and requested judgment in the amount of $200,000. USAA filed preliminary objections, which the trial court granted by order and opinion, and it dismissed the complaint with prejudice.

Issues on appeal

The facts of the case were not in dispute. The two questions on appeal were focused on whether the trial court was mistaken in its rulings:

Did the trial court err in holding that despite their 27-year, multi-policy, insurer-insured relationship and USAA's targeted affinity-group-based marketing, USAA had no duty to coordinate the Cohans liability coverage across their policies or to reform the liability limits of their auto policy?
Did the trial court err in granting USAA's preliminary objection to the Cohans' Unfair Trade Practices and Consumer Protection Law allegations as irrelevant, and holding that the Cohans must plead that they were "lied to" and that USAA's targeting affinity-group-based advertising program was "puffery"?

Analysis

Pennsylvania courts have often stressed that the insured has both the capacity and the duty to inquire about the scope of insurance coverage, rather than rely on hand-holding and substituted judgment.

There was no justification in the law to impose the additional burden on insurers that they anticipate and then counsel their insured on the hypothetical, collateral consequences of the coverage chosen by the insured.

The trial court found that USAA did not have a duty to advise the Cohans to purchase higher liability limits on their auto insurance policy, regardless of the terms in the separate homeowner's policy.

The trial court was correct that USAA had no obligation to advise the Cohans of a disparity in liability coverage that they should have been aware of or to otherwise "coordinate" or "equalize" the liability limits of two different policies.

To the contrary, once the insurance contract takes effect the insured must take responsibility for the policy. The Cohans' argument — that the two policies should have been "equalized" — overlooks the salient fact that an automobile insurance policy and a homeowner's insurance policy are not coextensive and insure against very different risks.

The purpose of the Pennsylvania Unfair Insurance Practices Act (UIPA), the appeals court said, is to regulate trade practices in the business of insurance in accordance with the intent of Congress by defining or providing for the determination of all such practices in this state that constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined.

There is no evidence to suggest, and the court had no reason to believe, that the system of sanctions established under the UIPA must be supplemented by a judicially created cause of action.

Zalma opinion

The Pennsylvania court refused — properly — to substitute itself as a parent for the Cohans. The court correctly found that the duty to decide the coverages to be purchased from an insurer is the obligation of the insured not an insurer or a court.

Barry Zalma, Esq., CFE, has practiced law in California for more than 40 years as an insurance coverage and claims handling lawyer. Contact him at zalma@zalma.com.

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