Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—3rdCir: Consumer’s Claim against Disability Insurer Barred by Economic Loss Doctrine, (Feb 19, 2013)

By E. Darius Sturmer, J.D.

An insurance company—Reassure America Life Insurance Co.—did not violate Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) by ceasing its payments to an insured consumer under a disability insurance policy on the consumer’s sixty-fifth birthday, rather than on the policy anniversary that came up almost exactly six months after that birthday, the U.S. Court of Appeals in Philadelphia has ruled in a not-for-publication opinion (Sunshine v. Reassure America Life Insurance Co., February 15, 2013, Chagares, M.). A federal district court’s dismissal of the claim with prejudice was therefore affirmed.

The consumer alleged a loss of money as a result of the insurer’s “ongoing misrepresentations” and “deceitful course of conduct” related to the advertised benefits of the policy. The appellate court, however, agreed with the district court that the consumer’s UTPCPL claim was barred by the economic loss doctrine.

Under the economic loss doctrine, “no cause of action exists for negligence that results solely in economic damages unaccompanied by physical injury or property damage.” Citing its own earlier opinion in Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002), the court explained that the purpose of the doctrine is to “prevent tort law from reallocating risks between parties who fairly have negotiated an arms-length contract.”

Like the plaintiffs in Werwinski, the complaining consumer failed to explain why contract remedies were inadequate to provide redress, the appellate court said. In claiming that Reassure has failed to provide the coverage promised by the terms of the policy, he was alleging a solely economic loss. The consumer also claimed a wrong extraneous to that policy: that Reassure “advertis[ed] the Policy with intent not to provide the full coverage detailed therein.” However, his complaint alleged no specific instance of false or misleading advertising with respect to the policy he purchased.

As the lower court had pointed out, the consumer could not now “convert his claim to a tort claim by alleging that Reassure’s failure to pay disability benefits to [him] means Reassure made misrepresentations and false advertisements when selling him the disability insurance.” Thus, the district court properly applied Werwinski and concluded that the economic loss doctrine barred the consumer’s UTPCPL claim, in the appellate court’s view.

The court also affirmed dismissal of the consumer’s breach of contract, fraud, and unjust enrichment claims against the company.

The case is No. 12-1796.

Companies: Reassure America Life Insurance Co.; Swiss Re Life & Health America, Inc.

Attorneys: Kevin W. Fay (Golomb & Honik) for Barry Sunshine. Stephen C. Baker (Drinker, Biddle & Reath) for Reassure America Life Insurance Co.

Cases: StateUnfairTradePractices NewJerseyNews PennsylvaniaNews DelawareNews