Act 78: Establishing Additional Insurance Protections for Victims of Domestic Violence

Pennsylvania House Bill 1632 (Act 78 of 2006 - attached) amending the Unfair Insurance Practices Act was passed unanimously in both the House and Senate and was signed into law by the Governor Rendel on July 7, 2006. The law will go into effect on September 5, 2006.

The prime sponsor of Act 78 was Representative George Kenney (R) representing parts of Montgomery and Philadelphia counties. Representative Kenney became interested in this issue when in 2001, one of his constituents found herself and her children homeless after her estranged husband barricaded himself inside their home with their youngest child and set the house on fire. The insurance company filed a federal lawsuit, claiming no obligation to pay the $60,000 in property damage because the batterer deliberately torched the house, even though the wife was completely innocent. When the story received extensive press, a company executive (although not legally obligated to do so), struck a deal and settled the claim.

Act 78 Provisions

• Expansion of the definition of abuse in the Unfair Insurance Practices statute to include property damage and establish a statutory prohibition against an insurance companys refusal to pay automobile and homeowners claims arising out of abuse to an innocent claimant when an abusive partner intentionally causes the property damage.
• Requires that insurers investigating a claim for losses must notify a victim of abuse that the investigation could result in contact with other insureds, which could include the batterer and that, if requested, the insurer will not disclose the location of the insured (victim of domestic violence).
• Requires insurers to notify the victim of abuse at least 14 days prior to instituting any legal action against the insured alleged to have caused the loss.
• Will allow insurers to not renew coverage or impose a surcharge on the insured that caused the loss but not until six months following payment of the claim or the policys renewal date.
• Requires insurers to provide the innocent co-insured with the national domestic violence hotline number.
• That payment of a claim to a the victim of abuse will constitute payment as to all other insureds under the policy as directed by the statute.

Background

Prior to Passage of Act 78, property and casualty insurance policies typically denied claims resulting from an intentional act by a named insured. This exclusion was developed to prohibit insureds from intentionally damaging their own property in order to receive a financial gain. However, victims of domestic violence faced severe hardship due to this exclusion when batterers damaged property.

In 1997, the Superior Court of Pennsylvania addressed this issue in Kundahl vs. Erie Insurance Group, 703 A2d. 542. In this case, Mr. Kundahl intentionally set fire to the home jointly owned and insured by his spouse and him. The Court denied insurance benefits to Mrs. Kundahl based on the exclusionary clauses in the insurance policies (homeowners and auto). However, the Court ended their decision by stating:

We do sympathize with Mrs. Kundahls plight. Her home and her car are lost without the possibility of recovery. However, we cannot permit our sympathy to cloud the plain language of both policies. Nor can we force insurance companies to insert language in every policy they write to provide coverage for all innocent insureds. Such action is more properly left to our legislature. We, therefore, call upon the legislature to address this problem so that victimized spouses are no longer faced with the twin evils of destruction and destitution.

Legislative Support

Senator Gib Armstrong (R), Lancaster, Senator Pat Vance (R) Cumberland County (who sponsored Act 24 of 1996, to prohibit insurance companies from denying or surcharging an individual based on their history as a victim of domestic violence), the Governors Policy Office and the Insurance Commissioner were instrumental in assisting with passage of Act 78.

The PCADV and the Womens Law Project of Philadelphia have worked together over the last twelve years both state and nationally to obtain these important protections for victims of domestic violence.