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US Appeals Court Sides with State Farm in New York PIP Case

State Farm recently won a class-action lawsuit where one of their policyholders claimed that the personal injury protection (PIP) aspect of the insurance he purchased was promoted to him in a deceptive manner. This complaint appealwas originally filed in 2010, and it has taken three years for a decision to finally be made. The plaintiff in the case, Dominick Servedio, tried to claim that State Farm was promoting a misleading definition of exactly what was provided by PIP coverage. This was mainly a case against false advertising from insurance giant, State Farm.

Was the PIP Coverage Misleading to Consumers?

The crux of this case revolved around the basic $50,000 worth of PIP coverage that was offered by State Farm and the optional PIP add-on package. The $50,000 aspect of this coverage is actually the minimum amount of car insurance coverage required by the state of New York when it comes to personal injury protection.

The main part of the coverage that Mr. Servedio had a problem with was the additional coverage. Mr. Servedio paid for the additional coverage, which was supposed to cover “any vehicle operated by the insured or his or her relatives.” This was the official definition of the coverage that was eventually approved by the appeals court. The decision from the appeals court also noted that the additional coverage did not merit an increase in the total dollar amount insured by the policy purchaser. In other words, this was an expansion of coverage rather than an increase in the dollar-denominated amount of coverage.

The main argument that Servedio was trying to make was that State Farm deceived him into believing that the extra PIP coverage that he purchased would come with an increased total dollar amount of coverage. This would mean that Servedio was paying more money on a monthly basis for extra coverage that he was not receiving. The court used New York’s filed rate doctrine in the dismissal of this case to show that Servedio received a good value for the insurance that he was paying for every month.

The appeal of this case started with Servedio asked the court to reconsider his arguments when he felt like the court misunderstood his wording of “worth less” as “worthless”. This appeal was rejected because the court felt that all of the claims were dealt with properly in the first go around. According to the court, customers can be deceived into purchasing something that they do not completely understand. In other words, they were saying that Servedio should have known what he was purchasing, and it is not State Farm’s fault that he did not fully understand the coverage that he purchased.

Backup from the Appeals Court

Servedio’s initial case was dismissed in September of 2011 under common law. The US Second Circuit Court of Appeals backed up the dismissal of that case, and the court ruling stuck with the state law of New York throughout the entire case. The US Appeals Court also mentioned that there was not much new information that Mr. Servedio was bringing to the case, so there was no reason for them to overturn the decision.

At the end of the day, this court ruling should show people that they need to completely understand the coverage that they are buying before they pull the trigger. While the materials handed out by insurance companies can sometimes be misleading, the truth is usually in the fine details. If you are willing to do a bit of reading to read the basic details of your coverage, then you should not find yourself in a situation similar to this one.

Image Credit: Daniel Jefferies

James Shaffer

James Shaffer

James Shaffer writes for various insurance publications and websites. In his free time he likes to travel outside of the United States, Singapore and Taiwan being two of his favorite places to visit. The easiest way to reach him is via his Google+ Profile.

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