Court Forces Insurers to Apply Discounts for Antitheft Devices

A federal court in Pennsylvania handed down a decision in late March clarifying that major auto insurance providers must apply coverage discounts for “passive antitheft devices” that the court said are mandated under state law.

What began as separate lawsuits against nine different insurers was ultimately consolidated into class-action litigation. Judge Timothy J. Savage rendered a decision in a March 29 ruling from the U.S. District Court for the Eastern District of Pennsylvania. Defendants included Nationwide, Encompass Indemnity, Allstate, Peerless Indemnity, State Farm, Progressive and USAA.

Discounts Apply Even Without Policyholder’s Request

Suing policyholders claimed that insurers passed them over for comprehensive insurance coverage discounts of no less than 10 percent that are required by law. The evidence of this was in rate filings that the insurers regularly submitted to state regulators.

Much of the case was based on discount-related provisions within the state’s Motor Vehicle Financial Responsibility Law (MVFRL), which was enacted by the state Legislature in 1984. One applicable section of the MVFRL reads that all authorized insurers in the state “shall provide premium discounts for motor vehicles with passive antitheft devices.”

Insurance carriers contended that they filed their rate structures without applying those discounts because policyholders never requested them.

Judge Savage sided with plaintiffs in the case, ruling that the discounts should be applied automatically because legislators’ wording within the law left no room for interpretation.

“The General Assembly did not use discretionary language,” Savage wrote in his ruling. “It did not say that the insurer ‘may’ provide premium discounts. Instead, it used mandatory language—‘shall’ provide premium discounts. … The clear meaning of the words ‘shall provide’ is that automobile insurers must give discounts to insureds whose vehicles have qualifying devices.”

Sides Wrangled Over Definition of ‘Passive Antitheft Devices’

Passive antitheft devices are generally categorized as technology that immobilizes vehicles “to prevent unauthorized use” after the car key is turned to the off position, according to the MVFRL.

Insurance companies in the case contended they could not “identify a single device that qualifies” as a passive antitheft device because the MVFRL’s definition was unclear in its application “to actual devices.”

Insurers also argued that it is impossible to determine if an antitheft device is passive because a person would not be able to know exactly when the device is activated after the car key is “turned to the off position,” an action that makes the device passive by definition.

Robert Mangine, an expert witness for the defendants who authored part of “Forensic Investigation of Stolen-Recovered and Other Crime Related Vehicles” said that automatic activation after a key is in the off position would qualify an antitheft device as passive, but “no systems referred to today as ‘passive antitheft devices’ activate automatically.”

Judge Savage responded with a strong scolding of insurance companies in the case, saying that the state Legislature clearly did not intend to complicate the definition of the device to the point that all devices would be made ineligible to obtain auto insurance discounts.

“If we accepted the insurers’ argument that they cannot determine which devices qualify and which vehicles have qualifying devices, we would have to conclude that the insurers never intended to give the discount to anyone even though in their rate filings they represented that they would,” he wrote. “In other words, each insurer’s promise of an antitheft device discount made in its rate filing was an empty one.”

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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