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Pennsylvania Insurance Company Allowed By Court To Pro-rate Deductibles Paid For Property Damage
On March 5, 2009, the District Court for the Eastern District of Pennsylvania in Harnick v. State Farm Mutual Insurance Company, 08-5752 (McLaughlin, J.) dismissed a case dealing with the pro-rating of deductibles based upon the insured's comparative negligence. Jennifer Harnick (Harnick) filed a class action against her insurance company State Farm after it pro-rated the repayment of her deductible when it received subrogation from a third party arising from an accident in which she was involved. Harnick was involved in the accident and paid her $500 deductible to State Farm which then pursued a subrogation claim against the other driver involved in the accident. In pursuing the subrogation claim, State Farm and the third party driver determined and agreed that each driver was equally at fault for the accident, so even though State Farm recovered in excess of $500 through the subrogation claim, it reduced the repayment of the deductible by 50% to be $250, the pro-rated share of the deductible. State Farm filed a motion to Dismiss arguing that the practice of pro-rating is valid under the Pennsylvania State Regulations relating to the prompt payment of settlements under the Insurance Code Section 146.8(c). The District Court decision agrees with the position of State Farm that the regulation grants the insurance company the right to pro-rate the deductible. The Court finds that the authority to issue the regulation is valid as the Insurance Department is allowed to issue regulations to prevent unfair practices. This regulation helps to accomplish that task. The Motion to Dismiss is Granted.
Scott B. Cooper
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