Pennsylvania Record

Thursday, November 14, 2019

Commonwealth Court: State Farm wrong to terminate policy of customer previously guilty of underage drinking

By Nicholas Malfitano | Sep 28, 2015

Friedman rochelle
Commonwealth Court Judge Rochelle S. Friedman

HARRISBURG – Per a Sept. 24 ruling from the Commonwealth Court of Pennsylvania, a major insurance provider improperly terminated a vehicle policy for a client found guilty of underage consumption of alcohol.

The Commonwealth Court affirmed a January decision of the Commonwealth of Pennsylvania Insurance Department, which determined State Farm Insurance Company violated Act 68 when it cancelled a motor vehicle insurance policy for Alanna Dougherty.

The department’s then-Commissioner Michael F. Consedine concluded Act 31 of the Crimes Code prohibits an insurance company from cancelling an automobile insurance policy, based on a license suspension imposed for underage alcohol consumption.

The case was heard before judges Renée Cohn Jubelirer, P. Kevin Brobson and Rochelle S. Friedman of the Commonwealth Court, as Friedman authored the Court’s opinion affirming the decision of the state’s Insurance Department. 

Dougherty applied to State Farm for a policy in May 2014, and answered “No” when she was asked the question if her license had been suspended, revoked or refused at any point in the preceding six years. State Farm thus issued her a temporary policy on May 2, 2014.

State Farm’s subsequent investigation revealed Dougherty’s license had in fact once been suspended for 90 days, for underage consumption of alcohol. Though the violation in question did not involve a motor vehicle, State Farm cancelled Dougherty’s temporary policy on May 15, 2014, using the prior license suspension as their rationale for the cancellation.

Dougherty requested that the state’s Insurance Department review the policy cancellation. The department concluded that State Farm violated Act 68, governing cancellation of an automobile insurance policy within the first 60 days of issuance. State Farm appealed and requested a formal hearing, during which the commissioner made the decision explaining its violation of Act 68.

Further, the commissioner ruled State Farm was precluded from arguing it was justified in cancelling Dougherty’s insurance because she misrepresented whether her license had been suspended.

The commissioner concluded because State Farm’s notice of cancellation relied solely on Dougherty’s license suspension, State Farm could not now argue misrepresentation as a reason for the policy cancellation.

Subsequently, State Farm filed a petition for reconsideration that the commissioner later denied. Finally, State Farm filed a petition for review with the Commonwealth Court.

Though Act 68 does not include license suspension as one of its 14 reasons for which policy termination is prohibited within 60 days, Act 31 prohibits an insurer from penalizing, in any way, a person convicted for underage alcohol consumption.

Act 31 states that the penalty for underage use of alcoholic beverages is a license suspension. In addition to the imposition of a license suspension, Act 31 further outlines: “An insurer shall not increase premiums, impose any surcharge or rate penalty, or make any driver record point assignment for automobile insurance, nor shall an insurer cancel or refuse to renew an automobile insurance policy on account of a suspension under this section.”

Friedman wrote: “An insurer who refuses to issue a policy shall give the applicant written notice stating ‘the specific reason or reasons of the insurer for refusal to write a policy for the applicant. State Farm specifically notified Dougherty that it was cancelling her policy because of the suspension, not because of a misrepresentation. Thus, the Commissioner did not err. Accordingly, we affirm.”

The Commonwealth Court of Pennsylvania case 167 C.D. 2015

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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