Chief Justice CAPPY.
In this civil action, Appellant/Cross-Appellee Georgina Toy ("Toy") brought several causes of action against Appellees/Cross-Appellants Metropolitan Life Insurance Company ("Metropolitan Life") and one of its sales representatives, Bob Martini ("Martini") (collectively, "Defendants"). We granted review to consider (1) the purview of the bad faith statute, 42 Pa.C.S. § 8371 ("§ 8371"); (2) whether justifiable reliance is an element of the claims Toy brought under the Unfair Trade Practices and Consumer Protection Law ("Consumer Protection Law"), 73 P.S. § 201-1 et seq.;
The relevant record on summary judgment, based on Toy's deposition testimony, is as follows.
The following month, Toy received a policy of insurance ("Policy") from Metropolitan Life. The cover sheet of the Policy had the following information written on it: "Metropolitan Life Insurance Company will pay the amount of insurance and provide the other benefits of this policy according to its provisions"; "Insured Georgina M. Toy"; "Face Amount of Insurance $31,544 as of Feb. 10, 1992"; "Policy Number 925 001 595 A;" "Plan Whole Life"; "Whole Life Policy"; "Life insurance payable when the insured dies"; "Premiums payable for a stated period"; and "Annual dividends." The cover sheet also displayed a "10-Day Right to Examine Policy," which stated:
(Defendants' Motion for Summary Judgment, Exhibit C.)
On page 4, the Policy set forth a guaranteed cash value at age 65 of $11,008.86 based on a guaranteed interest rate of 4% a year. On page 8, the Policy stated that "[t]his policy includes any riders and, with the application attached when the policy is issued, makes up the entire contract." The Policy also set forth a "Limitation on Sales Representative's Authority," providing that "[n]o sales representative or other person, except our President, Secretary, or a Vice-President may (a) make or change any contract of insurance; or (b) change or waive any terms of this policy. Any change must be in writing and signed by our President, Secretary or a Vice-President." (Id.)
Toy looked at only the Policy's cover sheet. Over time, Toy paid a total of $1,400 in premiums to Metropolitan Life. In 1994, Toy was notified of a Florida class action pending against Metropolitan Life, and became concerned that she had purchased life insurance from the Company. At that point, Toy stopped making premium payments, and the Policy lapsed.
B. Procedural History
Toy filed a Praecipe for Writ of Summons on November 1, 1995, a complaint on February 6, 1996, and an amended complaint ("Complaint") on March 3, 1999 against Defendants. In her Complaint, Toy alleged that Defendants undertook a marketing scheme to disguise the true nature of the Policy and misrepresent it to be a savings or investment vehicle; that Defendants' misrepresentations about the Policy led her to believe that she was investing in a savings plan; that due to Defendants' misrepresentations she purchased life insurance she did not want; that Defendants' misrepresentations prevented her from securing the type of retirement product she needed; and that Defendants engaged in these practices because the premiums and administrative fees associated with life insurance were higher than those for annuities and similar retirement products. Based on these allegations, Toy set forth, inter alia, claims under the Consumer Protection Law against Defendants (Count III and Count IV),
In the interval between the commencement of Toy's action and the filing of her Complaint, the trial court made several rulings in one of the Cases, Ihnat v. Pover, 35 Pa. D. & C. 4th 120 (Pa.Com.Pl.1997). These rulings were applied in all of the Cases, where relevant.
The trial court then articulated two requirements that an insured must meet in order to prevail on a bad faith claim. First, the insured must establish that the insurer breached a known duty; and second, the insured must establish that the insurer acted out of a motive of self-interest or ill will. Id. at 132. In the trial court's view, the former could be established by showing that the insurer engaged in practices that constitute common law fraud or UIPA violations. Id. at 139-40.
On May 23, 2003, Defendants filed a motion for summary judgment, seeking judgment on all of the Counts in Toy's Complaint. As to Toy's bad faith claim, Metropolitan Life's starting point was the trial court's ruling in Ihnat. Metropolitan Life asserted that inasmuch as justifiable reliance is an element of common law fraud, it necessarily followed from the trial court's construction of § 8371 that justifiable reliance was likewise an element of a bad faith claim. Metropolitan Life then repeated the argument that Defendant made in support of their entitlement to summary judgment on any of Toy's claims that were based on Martini's alleged misrepresentations: that Toy could not prove the element of justifiable reliance. In addition, Metropolitan Life set forth the argument it had made in Ihnat that the bad faith statute is limited to a claim that an insurer failed to provide an insured with the benefits or coverage that his insurance policy provided. As to Toy's claims brought under the Consumer Protection Law, Defendants contended that here too, Toy's inability to establish justifiable reliance entitled them to summary judgment since under this Court's decision in Weinberg v. Sun Co., Inc., 565 Pa. 612, 777 A.2d 442 (2001), justifiable reliance was an element of her Consumer Protection Law claims.
The trial court agreed with Defendants that in light of its construction of § 8371 in Ihnat, justifiable reliance was an element of Toy's bad faith claim, and that under Weinberg, justifiable reliance was also an element of her Consumer Protection Law claims. The trial court also agreed with Defendants that Toy was unable to prove that she justifiably relied on Martini's alleged misrepresentations about the Policy, and thus, were entitled to summary judgment on all of the causes of action in the Complaint that required such a showing. For the trial court, the discrepancy between the Policy's cover sheet and the misrepresentations Toy alleged Martini made about the Policy and its terms led to this conclusion. The trial court stated:
(Trial Court's Opinion at 41-42) (footnote omitted). In addition, the trial court ruled that the parol evidence rule barred all of Toy's misrepresentation-based claims. Accordingly, by Order dated December 8, 2003, the trial court granted Defendants' Motion for Summary Judgment, and dismissed Toy's § 8371 and Consumer Protection Law claims with prejudice.
Toy brought a timely appeal in the Superior Court from the trial court's order. In a published opinion, the Superior Court affirmed the trial court's order as to Toy's § 8371 claim, and reversed the trial court's order as to Toy's Consumer Protection Law claims. Toy v. Metropolitan Life Insurance Co., 863 A.2d 1 (Pa.Super.2004).
With respect to Toy's § 8371 claim, the Superior Court did not discuss the basis of the trial court's decision, namely, its construction of the bad faith statute to encompass instances of insurer fraud or unfair trade practices. Rather, the Superior Court disagreed with the two elements that the trial court stated an insured who asserts a bad faith claim must show, see supra p. 7-8, and reiterated its view that the requisite elements of a bad faith claim are that the insurer refused to provide benefits and knew or recklessly disregarded that it lacked a reasonable basis for the refusal. Id. at 14 (quoting Booze v. Allstate Ins. Co., 750 A.2d 877, 880 (Pa.Super.2000)). Since Toy's bad faith claim did not include these elements, the Superior Court held that it was properly dismissed. Id. at 14-15.
As to all of Toy's claims that depended upon proof that Martini made misrepresentations about the Policy, the Superior Court held that the trial court erred in concluding that they were barred by the parol evidence rule, concluding that Toy's allegations fell within one of the rule's exceptions. Reasoning that Toy essentially sought to prove that due to Defendants' fraudulent conduct, the Policy that she agreed to purchase omitted certain savings and investment features, the Superior Court determined that the Toy's claims could proceed under the fraud in the execution of a contract exception to the parol evidence rule that this Court has recognized. Id. at n. 4. See Bardwell v. Willis Co., 375 Pa. 503, 100 A.2d 102, 104 (1953).
With regard specifically to Toy's Consumer Protection Law claims, the Superior Court reviewed this Court's decision in Weinberg, and determined that the trial court correctly required Toy to demonstrate the element of justifiable reliance. 863 A.2d at 9-11. Unlike the trial court, however, the Superior Court concluded that the record did not entitle Defendants to summary judgment. Based on Sections 540 and 541 of the Restatement (Second) of Torts
Toy and the Defendants filed Petitions for Allowance of Appeal, respectively. This Court granted Toy's Petition, limiting review to (1) whether the Superior Court's decision that a claim under § 8371 is limited to the unreasonable refusal by an insurance company to pay a valid claim conflicts with Pennsylvania law and the reasoned decisions of other appellate courts, and (2) whether the Superior Court's interpretation of the Consumer Protection Law to require justifiable reliance conflicts with the rules of statutory construction and contradicts the reasoned decisions of appellate courts in other jurisdictions that require a lesser standard of reliance to bring a claim under those States' consumer protection statutes. Toy v. Metropolitan Life Insurance Co., 584 Pa. 133, 882 A.2d 462 (2005). This Court also granted Defendants' Petition as to whether the Superior Court's determination on the issue of Toy's justifiable reliance was erroneous, negating the express, clear and unambiguous terms of an insurance contract in favor of oral representations allegedly made prior to the issuance of the contract. Id. at 479.
Our analysis begins with our standard and scope of review. The Pennsylvania Rules of Civil Procedure that govern summary judgment instruct in relevant part, that the court shall enter judgment whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense that could be established by additional discovery. Pa.R.C.P. No. 1035.2(1). Under the Rules, a motion for summary judgment
A. The Bad Faith Statute
We turn first to Toy's issue with regard to the bad faith statute, which asks us to consider whether a bad faith claim within the meaning of § 8371 may be premised on allegations that an insurer engaged in deceptive or unfair conduct in soliciting the insured to purchase an insurance policy.
This issue is a question of statutory construction, which the Statutory Construction Act of 1972 ("Act") controls. 1 Pa.C.S. § 1501 et seq. Therefore, we begin with the provisions of the Act that guide us. Under the Act, it is fundamental that "[t]he object of all interpretation and construction of statutes is to ascertain and effectuate the intention of the General Assembly." 1 Pa.C.S. § 1921(a). The Act instructs that "[w]hen the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit." 1 Pa.C.S. § 1921(b). Significantly, only when the words of the statute are not explicit, is the General Assembly's intent to be ascertained by considering matters other than statutory language, like the occasion and necessity for the statute; the circumstances of its enactment; the object it seeks to attain; and the consequences of a particular interpretation. 1 Pa.C.S. § 1921(c); Commonwealth v. Packer, 568 Pa. 481, 798 A.2d 192, 196 (2002). Lastly, the Act provides that "[w]ords and phrases shall be construed according to the rules of grammar and according to their common and approved usage"; but that "technical words and phrases and such others as have acquired a peculiar and appropriate meaning . . . shall be construed according to such peculiar and appropriate meaning or definition." 1 Pa.C.S. § 1903(a). The latter includes words or terms that have acquired a particular meaning in the law. See Semasek v. Semasek, 502 A.2d 109, 111 (1985).
Presently, Toy adopts the trial court's perspective, arguing that the Legislature did not articulate the reach of a bad faith claim under § 8371, and intended the statute to remedy any act that is prohibited to insurers under Pennsylvania's common or statutory law. Thus, Toy argues, if an insured alleges that an insurer violated a provision of the UIPA, as she has, the insured necessarily states a bad faith claim under § 8371.
We disagree. In 1990, at the time that the General Assembly enacted § 8371 to
The historical development of the claim that an insured brings against its insurer when he accuses his insurer of acting in bad faith and the consideration that such a claim has been given reveals this to be the case.
The law in this regard changed. In the landmark case of Hilker v. Western Automobile Ins. Co., 204 Wis. 1, 231 N.W. 257 (1930), an insured, who sought the amount he was compelled to pay to a third party who had secured a judgment in excess of the insured's liability coverage, brought a claim against his insurer, alleging that the insurer acted in bad faith, by not defending him properly, withholding information from him, and failing to settle the action within policy limits. Altering its traditional view that there was no remedy for insureds making such allegations, the Wisconsin Supreme Court recognized the insured's claim, and upheld the jury's verdict in his favor. Id. at 257-59. For the court, the theoretical underpinning of the insured's claim was the implied covenant of good faith and fair dealing that is part of every contract, and which provides that neither party to a contract will do anything to injure the right of the other to receive the benefits of their agreement. Id. at 258-59. Moreover, it was the court's view that recognition of such a claim for bad faith was needed in light of the provisions in insurance contracts that give insurers control over the defense and settlement of third party actions. Id. at 258.
In time, the courts in many jurisdictions provided a remedy at common law under the implied duty of good faith and fair dealing to an insured with liability insurance who alleged that its insurer acted in bad faith in defending or settling or indemnifying a third party action. Ashley, § 1:05 and cases cited in footnote 1.
In 1973, this area of the law underwent another significant transformation by way of a decision rendered by the California Supreme Court. In Gruenberg, 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973), the court extended the remedy that had been given to an insured alleging bad faith in the third-party claim setting to an insured alleging bad faith in a first-party claim context. In Gruenberg, the court permitted an insured with a policy insuring his business premises against fire to rely on the implied duty of good faith and fair dealing to sue his insurer for refusing to pay for the property damage he sustained. The court held that where an insurer "fails to deal fairly and in good faith with its insured by refusing, without proper cause, to compensate its insured for a loss covered by the policy, such conduct may give rise to a cause of action in tort for breach of an implied covenant of good faith and fair dealing." Id. at 1037.
Thereafter, a number of courts adopted Gruenberg or fashioned a similar approach so as to give a common law remedy to an insured who alleged that his insurer dealt with his first party claim in bad faith.
It was against this backdrop that the General Assembly enacted § 8371 in 1990. It is evident that by this time, the term "bad faith" as it concerned allegations made by an insured against his insurer, had acquired a particular meaning in the law. That is, the term "bad faith" concerned the duty of good faith and fair dealing in the parties' contract and the manner by which an insurer discharged its obligations of defense and indemnification in the third-party claim context or its obligation to pay for a loss in the first party claim context. See, e.g., Cowden, 134 A.2d at 223; D'Ambrosio, 431 A.2d at 966. See also Black's Law Dictionary 139 (6th ed.1990). ("`Bad Faith' on the part of an insurer is any frivolous or unfounded refusal to pay proceeds of policy.") In other words, the term captured those actions an insurer took when called upon to perform its contractual obligations of defense and indemnification or payment of a loss that failed to satisfy the duty of good faith and fair dealing implied in the parties' insurance contract.
B. The Consumer Protection Law
We next turn to Toy's second issue, which is whether the Superior Court erred in holding that justifiable reliance is an element of her Consumer Protection Law claims. This issue concerns the meaning of 73 P.S. § 201-9.2, the provision in the Consumer Protection Law that creates a private right of action. Section 201-9.2 states in relevant part that "any person who purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment by any person of a method, act or practice declared unlawful by section 3 of this act." 73 P.S. § 201-9.2.
Toy contends that as a matter of statutory construction, the phrase "as a result of" in § 201-9.2 requires her to establish nothing more than a causal connection between her loss and Defendants' unlawful behavior, not justifiable reliance, as the Superior Court concluded. Toy's position is premised on the contention that the Superior Court incorrectly relied on this Court's decision in Weinberg for its conclusion. While Toy does not dispute that under Pennsylvania law, justifiable reliance is an element of common law fraud, see Gibbs v. Ernst, 538 Pa. 193, 647 A.2d 882, 889 (1994), she argues that Weinberg does not state that the Consumer Protection Law requires that a private party prove it. Rather, all Weinberg states is that a private party must prove "reliance." Since under the law, "reliance" can mean "reasonable reliance" or "justifiable reliance" or bare "reliance in fact," see Field v. Mans, 516 U.S. 59, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995), Toy argues that the level of reliance she must prove under the Consumer Protection Law has yet to be settled, and urges this Court to hold that only the lowest level of reliance is required of her in order to impose liability under the Consumer Protection Law on the Defendants.
Toy is mistaken. Our decision in Weinberg did indeed settle that justifiable reliance is an element of the claims Toy brought under the Consumer Protection Law. In Weinberg, the plaintiffs brought a class action against Sun Oil Company ("Sun") under the Consumer Protection Law alleging that certain television and radio advertisements Sun had broadcasted about the gasoline it was selling were misleading and in violation of 73 P.S. § 201-2(4)(v), (vii), (ix), and (xvii).
The Superior Court, however, disagreed. Following its reasoning in its prior decision, DiLucido v. Terminix International, Inc., 450 Pa.Super. 393, 676 A.2d 1237 (1996), the Superior Court determined that while the claims plaintiffs brought under § 201-2(4)(vii) and the catchall at § 201-2(4)(xvii) were fraud-based and required proof of the traditional elements of common law fraud, the claims they brought under § 201-2(4)(v) and § 201-2(4)(ix) for false advertising, were different and did not require a showing of reliance. 777 A.2d at 444-45. Accordingly, the Superior Court affirmed the trial court in part and reversed the trial court in part. Id.
This Court granted allocatur to Sun, and in a unanimous decision, rejected the Superior Court's conclusion that the Consumer Protection Law did not require plaintiffs to prove the traditional elements of common law fraud in all of their claims. Id. at 446-47. We determined that the Superior Court's view of the Consumer Protection Law, which the court had previously articulated in DiLucido, was erroneous because it was premised on the considerations that guide the Attorney General when he is pursuing an enforcement action. Id. at 445-46. Construing the language in 73 P.S. § 201-9.2, which provides for a private right of action, and differentiating it from the language in 73 P.S. § 201-4, which authorizes Commonwealth officials to act in the public interest, we reiterated that "`the [Consumer Protection Law's] underlying foundation is fraud prevention[,]'" and held that "[n]othing in the legislative history [of the Consumer Protection Law] suggests that the legislature ever intended statutory language directed against consumer fraud to do away with the traditional common law elements of reliance and causation." 777 A.2d at 466 and n. 1 (quoting Commonwealth v. Monumental Properties, Inc., 459 Pa. 450, 329 A.2d 812, 816 (1974), and citing Legislative Journal: House of Representatives, 1975 Sess. vol. 1, no. 63, at 2149-60, 2180-82 (July 16, 1975) (remarks upon final House passage); Legislative Journal: Senate, 1976 Sess. vol. 1, no. 114, at 1197-98 (June 28, 1976) (remarks upon final Senate passage)). Accordingly, we concluded that all of the plaintiffs' claims incorporated the traditional elements of common law fraud of reliance and causation. Id. at 446.
As the type of reliance that a plaintiff alleging common law fraud must prove is justifiable reliance, see Gibbs, 647 A.2d at 889, Weinberg necessarily states that a plaintiff alleging violations of the Consumer Protection Law must prove justifiable reliance. See Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 854 A.2d 425 (2004) (confirming that Weinberg held that justifiable reliance was required of Consumer Protection Law plaintiffs).
C. Justifiable Reliance
We now turn to Defendants' appeal. Defendants contend that the Superior Court erred in reversing the trial court's order granting them summary judgment on Toy's Consumer Protection Law claims. Defendants rely on this Court's decision in Yocca. They argue that under the analysis we set forth in that case, Toy is precluded as a matter of law from pointing to Martini's alleged misrepresentations about the Policy to establish the essential element of justifiable reliance because those misrepresentations are rebutted by the terms of a clearly written and fully integrated contract. Defendants also argue that it follows from Yocca's holding that a plaintiff in Toy's position should be required to read the parties' written contract, such that an action under the Consumer Protection Law does not lie for a party who neglects to do so and thereby fails to detect the differences between the writing and the misrepresentations that were allegedly made about its contents.
We start with our decision in Yocca. Yocca concerned claims that were brought by purchasers of stadium builder licenses ("SBLs"). SBLs were licenses that granted the purchaser the right to buy annual season tickets to games that would be played in the new stadium being built for the Pittsburgh Steelers football team. The plaintiffs received a brochure ("SBL Brochure") that included diagrams depicting the general location of seats in the new stadium, information about applying for the purchase of SBLs, and the process by which one could indicate his preference for specific seats. Each plaintiff applied for an SBL and ultimately executed a written agreement ("SBL Agreement"), specifying the number of SBLs he purchased, the fee, and the location of his stadium seats. The SBL Agreement incorporated a document of additional terms by reference, which included an integration clause, stating that the SBL Agreement "contains the entire agreement of the parties with respect to matters provided for herein and shall supersede any representations or agreements previously made or entered into by the parties hereto." 854 A.2d at 431.
The Steelers filed preliminary objections in the nature of a demurrer to the claims, which the trial court sustained. Pointing out that the SBL Agreement was fully integrated, thereby superseding any of the parties' previous negotiations reflected in the SBL Brochure, the trial court concluded the parol evidence rule precluded the plaintiffs from pursuing their breach of contract claims. Id. at 433. Determining that the SBLs were neither goods nor services that the Consumer Protection Law covered, and that even if they were, the plaintiffs could not prove that they relied on prior representations in the SBL Brochure because of the fully integrated contract they had signed, the trial court also concluded that the plaintiffs' Consumer Protection Law claims failed. Id.
On appeal, the Commonwealth Court reversed the trial court's order, holding that dismissal of the plaintiffs' claims at the preliminary objections stage was improper insofar as it was not completely clear that the SBL Agreement represented the parties' entire contract or that the sale of SBLs fell outside the Consumer Protection Law's purview. Id. at 434-35.
This Court reversed the Commonwealth Court. We first explained the parol evidence rule as applied in Pennsylvania. We reiterated that the rule declares that where "`the parties, without any fraud or mistake, have deliberately put their engagements in writing, the law declares the writing to be not only the best, but the only evidence of their agreement[;]'" that "[a]ll preliminary negotiations, conversations and verbal agreements are merged in and superseded by the subsequent written contract[;]'" and that "`unless fraud, accident, or mistake be averred, the writing constitutes the agreement between the parties, and its terms cannot be added to nor subtracted from by parol evidence.'" Id. at 436 (quoting Gianni v. Russell Co., 281 Pa. 320, 126 A. 791, 792 (1924)). We further explained that for the parol evidence rule to apply, there must be a writing that represents the parties' entire contract, and that whether there exists such a writing is determined by assessing whether the writing appears to be a contract complete in itself, importing a complete legal obligation without any uncertainty as to the object or extent of the parties' engagement. Id. We also noted that an integration clause that states that the writing is meant to represent the parties' entire agreement is a clear sign that the writing is meant to be just that, and thereby expresses all of the parties' negotiations, conversations and agreements made prior to its execution. Id.
We then discussed the so-called exceptions to the rule, observing that parol evidence may be introduced to vary a writing meant to be the parties' entire contract, when a party avers that that the contract is ambiguous or that a term was omitted from the contract because of fraud, accident or mistake. Id. at 437. With regard to the exception for fraud, we noted that this Court has restricted the exception to
Applying these principles to the case at hand, we determined that the SBL Agreement represented the parties' entire contract and was unambiguous concerning the sale of SBLs. Because the plaintiffs' claim was for fraud in the inducement, based on allegations that the representations the Steelers made in the SBL Brochure about the sale of SBLs led the plaintiffs to agree to enter into the SBL Agreement, we determined that the parol evidence rule applied, rather than the rule's fraud exception. Id. at 438. Applying the rule, we concluded that any evidence of previous negotiations or agreements between the parties concerning the sale of SBLs to vary or explain those terms as expressed in the SBL Agreement was barred from admission. Id. Further, we agreed with the trial court that the plaintiffs' breach of contract claims, based on allegations that the Steelers violated terms and conditions in the SBL Brochure, were properly dismissed because those terms and conditions could form no part of the parties' contract. Id.
We then determined that the plaintiffs' Consumer Protection Law claims, which required that the plaintiffs prove that they justifiably relied on the SBL Brochure's representations, failed as matter of law. Id. at 439. We observed that the plaintiffs' Consumer Protection Law claims and their allegations of justifiable reliance were premised on the assertion that representations in the SBL Brochure about the sale of SBLs induced them into purchasing them and becoming parties to the SBL Agreement. Id. We also observed that under the parol evidence rule, any of those representations were superceded by the fully integrated agreement the parties signed and that reliance upon them was disclaimed therein. Id. Accordingly, we concluded that "given this Commonwealth's adoption of the parol evidence rule, [the plaintiffs] simply [could] not be said to have justifiably relied on any representations made by the Steelers before the parties entered into the SBL Agreement." Id. (emphasis added and in original). Thus, we held that the allegations in
Turning to the case at hand, our careful consideration of the principles that guided us in Yocca reveals that the conclusion we reached there, that the plaintiffs' allegations of justifiable reliance were unsustainable as a matter of law is inapt. Defendants are correct that Toy's Consumer Protection Law claims, like those made in Yocca, concern a fully integrated contract,
The fact that the parol evidence rule is not applied to a fraud in the execution of a contract claim, like Toy's, is significant. It means that when fraud in the execution is alleged, representations made prior to contract formation are not considered
This brings us to Defendants' argument that Toy's failure to read the Policy should also lead to Yocca's result. In this context, in order to adopt Defendants' argument, we would have to conclude that even a party whose fraud in the execution of a contract claim is not subject to the parol evidence rule's operation is unable as a matter of law to prove justifiable reliance on misrepresentations that he alleges were fraudulently omitted from the written contract because he did not read the contract to see that they were not in it.
We cannot reach this conclusion. Defendants' position is tantamount to imposing upon such a party a duty to investigate the falsity of the misrepresentations upon which he brings suit, and as such, overrides the law that we have developed over the years for the determination of the element of justifiable reliance in this area. Some time ago, we determined that a party who engages in intentional fraud should be made to answer to the party he defrauded, even if the latter was less than diligent in protecting himself in the conduct of his affairs. See Emery v. Third National Bank of Pittsburgh, 171 A. 881, 882 (1934) (quotation omitted) ("`The law is not designed to protect the vigilant alone, although it rather favors them, but is intended as a protection to even the foolishly credulous, as against the machinations of the designedly wicked.'"). In this regard, we consulted the Restatement of Torts, determined that its approach to the element of justifiable reliance coincided with our own, and as we had done before, embraced the rules it set forth. That is, we have relied on the principle that the recipient of an allegedly fraudulent misrepresentation is under no duty to investigate its falsity in order to justifiably rely, but that he is not justified in relying upon the truth of an allegedly fraudulent misrepresentation if he knows it to be false or if its falsity is obvious. Merritz v. Circelli, 361 Pa. 239, 64 A.2d 796, 798 (1949) (citing Restatement (First) of Torts § 540 for the parameters of the element of justifiable reliance for fraud); See Neuman v. Corn Exchange Nat. Bank & Trust Co., 356 Pa. 442, 51 A.2d 759, 763 (1947) and Savitz v. Weinstein, 395 Pa. 173, 149 A.2d 110, 113 (1959) (citing Restatement (First) of Torts § 525 for the elements of fraud); Gibbs, 647 A.2d at 888, (citing Restatement (Second) of Torts § 525 for the elements of fraud).
Finally, like the Superior Court, we disagree with the trial court's determination that Toy could not establish justifiable reliance because the falsity of Martini's misrepresentations about the Policy was obvious, given the information on the Policy's cover sheet. We have stated that justifiable reliance is typically a question of fact for the fact-finder to decide, and requires a consideration of the parties, their relationship, and the circumstances surrounding their transaction. See Scaife Co. v. Rockwell-Standard Corp., 446 Pa. 280, 285 A.2d 451, 455 (1971). In that Toy asserts that Martini told her that the Metropolitan Life product she was purchasing included a life insurance component, we conclude that it is for the jury to decide whether the falsity of Martini's alleged misrepresentations about the Policy's contents was obvious to Toy and whether her reliance was unjustified. Accordingly, we hold that Defendants are not entitled to summary judgment on Toy's Consumer Protection Law claims because there is a genuine issue of material fact as to the essential element of justifiable reliance. See Pa.R.C.P. No. 1035.2(1).
In summary, this Court concludes that: (1) 42 Pa.C.S. § 8371 does not encompass allegations by an insured that his insurer engaged in unfair or deceptive practices in soliciting the purchase of a policy; (2) this Court's decision in Weinberg, 565 Pa. 612, 777 A.2d 442, stands for the proposition that that a plaintiff alleging violations of the Consumer Protection Law must prove the common law fraud element of justifiable reliance; (3) a plaintiff whose Consumer Protection Law claims set forth a fraud in the execution of a contract claim is not precluded as a matter of law from establishing the element of justifiable reliance; and that (4) such a plaintiff is not under a duty to read the contract in order to allege and prove the element of justifiable reliance.
For all of the forgoing reasons, the order of the Superior Court is affirmed, albeit as a matter of statutory construction as to the claim brought by Toy under § 8371.
Justice BALDWIN did not participate in the consideration or decision of this case.
Former Justice NEWMAN did not participate in the decision of this case.
Chief Justice CAPPY delivered the Opinion of the Court with respect to Part I and Part II(B), in which Justice Castille, Saylor, Eakin and Baer join; with respect to Part II(A), in which Justice Castille and Saylor join; and with respect to Part II(C), in which Justice Eakin and Baer join.
Justice EAKIN files a concurring opinion in which Justice Baer joins.
Justice SAYLOR files a concurring and dissenting opinion in which Justice Castille joins.
I join Part I, Part II(B), and Part II(C). While I agree with the result of Part II(A), I write separately because I find 42 Pa. C.S. § 8371 is not limited to actions for an insurer's wrongful failure to pay an insurance claim or disposal of its obligations of defense and indemnification. The majority finds support for a narrow interpretation of "bad faith" in our case law prior to the enactment of § 8371, arguing:
Majority Op., at 199. However, the plain language of § 8371 is not so limited as it provides a court may grant relief whenever an insurer has acted in bad faith toward an insured, so long as the "action aris[es] under an insurance policy. . . ." See 42 Pa. C.S. § 8371 ("In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions. . . ."). Had the General Assembly intended to limit § 8371 to case law limiting claims to an insurer's bad faith refusal to pay or dispose of claims, it could have used more restrictive language to limit § 8371 to "actions arising under an insurance claim" as opposed to those "under an insurance policy." See Commonwealth v. Rieck Investment Corporation, 419 Pa. 52, 213 A.2d 277, 282 (1965) (The "legislature must be intended to mean what it has plainly expressed." (citation omitted)).
The majority argues because § 8371 permits a court to award interest on the "amount of the claim from the date the claim was made by the insured," the section does not provide a private remedy for the deceptive or unfair practices of insurance companies. See Majority Op., at 196 (quoting § 8371(1)). However, § 8371 also provides an award of punitive damages or the assessment of court costs and attorney's fees against the insurer. See 42 Pa.C.S. § 8371(2-3). While the award of interest under the wording of § 8371(1) may apply exclusively to an insurer's bad faith failure to pay a claim, the plain language of § 8371(2) and § 8371(3) is not limited in this manner and thus may provide a remedy for any other "bad faith" conduct. Therefore, I cannot join the inference that the remedial provisions of § 8371 in any way restrict the meaning of "bad faith."
The majority's reliance on Cowden v. Aetna Casualty and Surety Co., 389 Pa. 459, 134 A.2d 223 (1957), and D'Ambrosio v. Pennsylvania National Mutual Casualty Insurance Co., 494 Pa. 501, 431 A.2d 966 (1981), to establish a "peculiar and appropriate meaning" of the term "bad faith" in the insurance context is equally unpersuasive, as neither expressly limited the notion of "bad faith." In fact, D'Ambrosio employed the term "bad faith" according to the trade practices determined to be unfair methods of competition or unfair or deceptive acts or practices under the Unfair Insurance Practices Act (UIPA):
D'Ambrosio, at 969, 970. Thus, even if our jurisprudence prior to D'Ambrosio established a "particular and appropriate meaning" of the term "bad faith" in the insurance context, D'Ambrosio significantly expanded the meaning of the term.
Subsequently, we held the duty of good faith in the insurance context "includes the duty of full and complete disclosure as to all of the benefits and every coverage that is provided by the applicable policy or policies along with all requirements, including any time limitations for making a claim." Dercoli v. Pa. Nat'l Mut. Ins. Co., 520 Pa. 471, 554 A.2d 906, 909 (1989). Moreover, the Superior Court has not followed the majority's restrictive view. See Condio v. Erie Ins. Exch., 899 A.2d 1136, 1142 (Pa.Super.2006) (considering whether insurer acted in bad faith in selecting neutral arbitrator, securing witness testimony, and permitting attorney to delay litigation); Brown v. Progressive Ins. Co., 860 A.2d 493, 500-01 (Pa.Super.2004) ("Bad faith encompasses a wide variety of objectionable conduct. . . . [It] also includes `lack of good faith investigation into facts, and failure to communicate with the claimant.'" (citation omitted)); Zimmerman v. Harleysville Mutual Ins. Co., 860 A.2d 167, 173 (Pa.Super.2004) ("The scope of [§] 8731 has been extended to the investigatory practices of an insurer during litigation initiated by an insured to obtain the proceeds of his or her insurance policy."); O'Donnell v. Allstate Ins. Co., 734 A.2d 901, 909-10 (Pa.Super.1999) (same).
Therefore, I disagree with the majority that in promulgating § 8371 the General Assembly intended "bad faith" to have a "peculiar and appropriate meaning" constrained by the particular fact situations in Cowden and D'Ambrosio. Instead, "bad faith" concerns any breach of an insurer's "implied covenant of good faith and fair
Nevertheless, I must conclude appellant does not have a remedy under § 8371 for the alleged bad faith conduct committed by appellees in soliciting the purchase of appellant's policy. Extending the insurer's duty of good faith to conduct occurring prior to the making of the insurance policy is contrary to the plain language of § 8371. In my opinion, an insurer's duty of good faith begins only after the creation of an insurance policy. Before the insured receives and signs the policy, there is no legal relationship between the insurer and insured, and neither party has undertaken any obligation regarding the future agreement. Thus, misrepresentations or false statements made by an insurer regarding an insurance policy, while falling under the broad meaning of "bad faith" conduct, do not breach any duty of good faith towards the insured before the creation of the policy. See Brickman Group Ltd., at 930. They do not arise "under an insurance policy."
Because a bad faith claim is a statutory creation, the extent of an insurer's duty to an insured must be resolved by the rules of statutory interpretation. See 1 Pa.C.S. § 1921. Section 8371 provides, "In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions. . . ." 42 Pa.C.S. § 8371 (emphasis added). In addressing whether the scope of the duty of good faith under § 8371 extended to conduct of the insurer during the litigation of a bad faith claim, Chief Justice Cappy noted:
Hollock v. Erie Ins. Exch., 588 Pa. 231, 903 A.2d 1185, 1189 (2006) (plurality) (Cappy, C.J., dissenting). In concluding the scope of bad faith conduct under § 8371 does not cover an insurer's conduct during litigation, Chief Justice Cappy stressed that an insurer's duty of good faith and fair dealing arises from the contractual relationship between the insurer and insured. See id., at 1191. In his words, "[t]he relationship between the parties is defined by the insurance policy. Once that policy has been terminated, the claim paid, or the claim denied the relationship is over." Id. Thus, once the relationship has been severed, the duty of good faith between the parties is extinguished. See id.
While § 8371 may not provide a clear answer to whether it extends to the conduct of parties during the litigation of a bad faith claim, its plain language clearly precludes the imposition of a duty of good faith preceding the execution of insurance coverage. The plain language "arising under an insurance policy" clearly contemplates the existence of an insurance policy at the time of the alleged wrongful conduct. Without a contractual relationship between the parties, the duty of good faith cannot exist. See id. Further, in order to "arise under an insurance policy," the action must bear some relation to the policy itself. Thus, the Superior Court dismissed a claim under § 8371 for an insurer's failure to pay a judgment against it because the plaintiff merely brought the action as a judgment creditor, not as a wronged insured.
Accordingly, I agree that § 8371 cannot extend to claims relating to the conduct of insurers before the formation of an insurance contract. See Brickman Group Ltd., at 930 ("Neither O'Donnell nor any other case interpreting § 8371 extends that section's protection to conduct preceding the execution of insurance coverage."); Kilmore v. Erie Ins. Co., 407 Pa.Super. 245, 595 A.2d 623, 626 (1991); see also Weisblatt v. Minn. Mut. Life Ins. Co., 4 F.Supp.2d 371, 380 (E.D.Pa.1998) ("The duty of good faith and fair-dealing . . . `applies only to the enforcement and performance of [insurance] contracts and not to their formation. . . .'" (citation omitted)). However, this does not preclude appellant from all relief and does not grant a license to insurance companies to mislead customers during solicitations. The Insurance Commissioner may still bring an action against the insurance company to enforce the unfair practices outlined in the UIPA. See 40 P.S. § 1171.8. Further, as appellant alleged in her complaint, an insured may bring a private claim under the Consumer Protection Laws. See 73 P.S. § 201-9.2.
Justice BAER joins this concurring opinion.
Justice SAYLOR, concurring and dissenting.
I join Part I and II(A) and (B) of the majority opinion. As to Part II(C), however, I differ with the majority's treatment of the parol evidence rule.
The majority accepts that the allegations of Toy's complaint concern a fully integrated contract but concludes that the parol evidence rule does not apply. See Majority Opinion, op. at 205-07. The majority reasons that Ms. Toy's claim does not amount to fraud in the inducement (as to which the parol evidence rule would generally apply under prevailing Pennsylvania law), but rather, amounts to fraud in the execution (as to which the parol evidence rule does not apply). See id. In a footnote, the majority dismisses any argument that Ms. Toy's claims reflect allegations of fraud in the inducement, as opposed to fraud in the execution, by indicating that Defendants have not challenged the Superior Court's characterization of Ms. Toy's allegations in this regard. See Majority Opinion, op. at 206 n. 23.
In the first instance, although I agree with the majority that Defendants have not expressly controverted the Superior Court's characterization of Ms. Toy's as involving fraud in the execution, I believe that they have sufficiently challenged the Superior Court's reasoning by arguing, at length, that this matter is governed by Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 854 A.2d 425 (2004), which the majority characterizes as a case involving fraud in the inducement. See Majority Opinion, slip op. at 205. Therefore, I would not resolve the questions concerning the applicability of the parol evidence rule based on waiver.
On the merits, Defendants advance an argument that there should be some reasonable limitations upon a party's ability to advance affirmative claims that very plainly conflict with their integrated, written agreements, even when the plaintiff employs the rubric of fraud. In particular, Defendants highlight that Ms. Toy's allegations as to the promise of a free-standing savings plan with an accumulated value of $100,000 in 23 years is squarely and repeatedly contradicted not only by the
I agree with the tenor of this argument. I believe that the parol evidence rule subsumes an objective to promote certainty and stability of contract, and to place some reasonable limitations on the litigation exposure of the business community and others, by investing contracting parties with an obligation to read their written agreements and abide by clear terms, short of an allegation of fraud of a sort that would not be obvious from the face of the integrated agreement, and/or in the absence of circumstances in which reading the written agreement would not be reasonable. Cf. Thorne v. Warfflein, 100 Pa. 519 (1882) ("We cannot agree that it is proper to throw the whole case into the jury box on the ground of fraud, simply because one of two parties to a written contract testifies that there were parol stipulations contradictory to the terms of the writing, agreed to at the same time. There must be evidence of fraud other than that which may be derived from the mere difference in the parol and written terms. We can find no such evidence in the present case, and we are, therefore, of opinion that the learned court below was in error in leaving the question of fraud to the jury.").
In terms of containing the fraud exception to the parol evidence rule, the approach in Pennsylvania has been to maintain a distinction between reliance on fraud in the "making" of prior oral representations, versus fraud in the "omission" of terms from a subsequent written contract. For example, in Bardwell v. Willis Co., 375 Pa. 503, 100 A.2d 102 (1953), the Court stated:
Id. at 507, 100 A.2d at 104 (emphasis in original).
For the policy reasons set forth in Bardwell, I believe that the Court should not so extend the fraud exception. In my view, in terms of the potential for opening the exception to ready abuse, there is a very modest difference between the making of representations concerning the subject matter of a contract, and general misrepresentations concerning actual terms of the written contract. Moreover, where written contractual terms are clear and apparent, the ability to review the document protects equally against either form of misrepresentation. In my view, in maintaining an exception to the parol evidence rule for "fraud in the omission," the Court should require something beyond mere obvious misrepresentations concerning the terms of an integrated contract.
Here, the circumstances entailed Ms. Toy's execution as the proposed insured of a document that was plainly, obviously, and consistently styled as an application for life insurance. Her position is, however, that she believed that the document was something entirely different based on Mr. Martini's oral representations concerning the subject matter. See Deposition of Georgiana Toy, at 95 ("Mr. Martini never in the entire presentation of the material that was given that evening indicated that what I was buying was a life insurance policy. The entire presentation was totally regarding a 50/50 savings plan, as he referred to it, and it was an investment."); 129 ("My assumption at the time was that what I was signing . . . was a contract to the savings plan."). In the absence of anything more in terms of factual circumstances that would cause Ms. Toy not to read or apprehend the written terms of her application, I believe that such allegations should fall within the purview of the parol evidence rule rather than the exception.
As a final note, fraud of the type alleged by Ms. Toy need not go without redress, as the Insurance Commissioner has the authority to investigate such asserted conduct and to take appropriate remedial measures under the Unfair Insurance Practices Act. See Act of July 22, 1974, P.L. 589, No. 205, as amended, 40 P.S. §§ 1171.1-1171.15.
Justice CASTILLE joins this concurring and dissenting opinion.
73 P.S. §§ 201-2(4)(ii),(v),(vii), and former (xvii).
42 Pa.C.S. § 8371.
The UIPA unfair methods of competition and unfair or deceptive acts or practices that Toy alleged constitute Metropolitan Life's bad faith conduct under § 8371 are:
40 P.S. § 1171.5(a)(1)(i),(2),(10)(vii),(12).
Restatement (Second) of Torts § 540 and Comment a.
Restatement (Second) of Torts § 541 and Comment a.
The second category is non-liability insurance under which an insured makes a first party claim. Id. § 2:03 at 15. A non-liability insurance policy protects the insured from a risk of loss directly to him like, property damage, death, or illness, and promises to pay the insured a specified amount when the loss is sustained. Id. § 2:03 at 16. Claims by a policy holder in these circumstances are often referred to as first party bad faith claims. Id. at 16-17.
It bears repeating that in this case, we determine the essence of the claim given to an insured under the bad faith statute. As we observe in footnotes 17 and 18, we do not consider what actions amount to bad faith, what actions of an insurer may be admitted as proof of its bad faith, whether an insurer's violations of the UIPA are relevant to proving a bad faith claim or whether the standard of conduct the Superior Court has applied to assess an insurer's performance of contractual obligations in bad faith cases is the correct one.
In this area, the term "bad faith" refers not only to the claim an insured brings against his insurer under the bad faith statute, but also, to the conduct an insured asserts his insurer exhibited and establishes that it is liable. These matters although related, are nonetheless, separate and distinct. We write to the former. The concurrence appears to write to the latter. In every one of the cases the concurrence cites on page 4 to describe our view of § 8371 as unduly restrictive and inconsistent with the Superior Court's perspective, the insured brought an action under § 8371, alleging that his insurer failed to satisfy his first party claim in the proper manner. The question before the court in each of those cases was not whether the insured alleged a cognizable claim under the bad faith statute. Rather, it was whether the evidence offered at trial by the insured as to the insurer's behavior was sufficient to prove the bad faith claim and/or admissible in a § 8371 action. See, e.g., Condio v. Erie Ins. Exch., 899 A.2d 1136, 1153 (Pa.Super.2006) (2006) (concluding, inter alia, that the record did not support the findings that the insurer failed to pursue a thorough independent investigation, treated the insured as an adversary; or failed to keep the insured informed); Zimmerman v. Harleysville Mutual Ins. Co., 860 A.2d 167, 173 (Pa.Super.2004) (concluding that the evidence supported the findings that the insurer improperly asserted that its insured concealed information or had prior knowledge of a structural problem with the roof and denied coverage on an unsupportable theory); O'Donnell v. Allstate Ins. Co., 734 A.2d 901 (Pa.Super.1999) (concluding that conduct by an insurer, whether occurring before, during, or after litigation of the bad faith claim is admissible to show bad faith, but that the insured failed to present evidence of improper investigative tactics or an unreasonable denial of the claim).
In the same way, the concurring opinion's quotation of this author's dissenting statement in Hollock v. Erie Ins. Exch., 588 Pa. 231, 903 A.2d 1185, 1189 (2006), misses the mark. There, the insured brought a claim under § 8371 alleging that her insurer failed to properly process and pay her claim for under-insured motorist coverage. The issue presented to this Court was whether the conduct of the insurer during discovery and throughout the course of the trial on the insured's bad faith claim should have been considered for purposes of establishing liability and setting the amount of the punitive damages award. The issue was not, as here, whether the claim the insured brought against the insurer fell within § 8371's purview, given the meaning of the statutory term "bad faith." 42 Pa.C.S. § 8371.
The first question concerns the role that the UIPA may play in the trial of a bad faith claim. Even though it is the Insurance Commissioner who enforces the statute, there are Superior Court decisions that conclude that an insured may ask the court to consider whether an insurer's violations of the UIPA are evidence that an insurer acted in bad faith under § 8371 in handling a claim. See, e.g., Romano v. Nationwide Mutual Fire Ins. Co., 435 Pa.Super. 545, 646 A.2d 1228 (1994) (holding that the insured may make reference to a section in the UIPA to illustrate its insurer's bad faith behavior for refusing to pay a loss). But see Parasco v. Pacific Indemnity Co., 920 F.Supp. 647 (E.D.Pa.1996) (explaining that the insured's references to sections of the UIPA that cover unfair claim or settlement practices if committed with such frequency as to indicate a business practice do not show that the insurer should be liable under § 8371 for wrongfully failing to defend or settle in a particular case).
The second issue concerns whether an insurer's conduct in litigating the bad faith claim that its insured asserts against it in a complaint may be considered by the court in determining whether and to what extent an insured is entitled to relief under § 8371. See, e.g., Hollock v. Erie Ins. Exchange, 842 A.2d 409 (Pa.Super.2004), dismissed as improvidently granted, 588 Pa. 231, 903 A.2d at 1185.
Second, Toy contends that any construction of the Consumer Protection Law that requires justifiable reliance cannot stand in view of the standards that the Federal Trade Commission applies in pursing enforcement actions under the Federal Trade Commission Act. Setting aside the question of what standards actually govern the Federal Trade Commission's enforcement actions, we recognize that federal decisions brought under the federal statute can provide guidance. See Monumental Properties, 329 A.2d at 818. There is, however, no rule that binds us to those decisions.
Finally, Toy's several arguments relating to the amendment that was made to the catchall provision of the Consumer Protection Law in 1996 are irrelevant. As noted, Toy's claims arose and are brought under the statute as it existed before it was amended in 1996. See supra n. 1. Therefore, the 1996 amendment has no bearing in this appeal.
Id. (emphasis in original).
I acknowledge that there is some uncertainty in Pennsylvania regarding the scope of the reasonable expectations doctrine in the consumer insurance arena. I support the notion that consumers in this setting should not be disadvantaged for failing to study detailed policy terms at length in circumstances in which they could reasonably expect that coverage would be available. To Ms. Toy's understanding, however, the main thrust of her agreement with Metropolitan Life did not involve an insurance policy; moreover, I support Judge Wettick's conclusion that it is simply not reasonable for one in Ms. Toy's circumstances to maintain the understanding that she had secured a free-standing savings plan that was not life insurance, when the only application that she signed was one for life insurance, and the policy that she received was, on its face, materially out of sync with her asserted expectation. Notably, as well, the policy was subject to a ten-day "free-look" condition, providing Ms. Toy with a right to examine it, return it for any reason during that period, and secure a full refund.