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October 21, 2008

Putative Ownership In Motor Vehicle Insurance Coverage

The Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL) defines the rights and responsibilities of motor vehicle owners with respect to the purchase and maintenance of motor vehicle insurance. A motor vehicle owner who fails to maintain insurance on his vehicle will statutorily be deemed a Limited Tort elector and will not be able to claim first-party uninsured/underinsured motorist benefits or to maintain an action for non-economic damages in civil litigation absent a showing of “serious” injury. See 75 Pa. C.S.§1705(a)(5) (2008) (stating that the owner of a vehicle who does not have financial responsibility shall be deemed to have chosen the Limited Tort alternative).

A unique situation arises when an individual buys or utilizes a vehicle through a “straw” purchaser or owner. In these cases, the individual may be unable or unwilling to assume the financial obligations of motor vehicle ownership because of bad credit, bankruptcy, or outstanding family support obligations. The individual will circumvent the usual credit and background checks by enlisting a friend or family member to purchase and title the vehicle in the friend/family member’s name. The individual will use and maintain the vehicle. The individual may also make payments on the vehicle through the friend/family member or insure the vehicle through a policy of insurance issued to the friend/family member.

If the individual files an action for third-party benefits, establishing that the individual is the vehicle’s actual owner is essential to limiting the defendant’s exposure: proof that the individual is a vehicle owner who did not personally insure the vehicle will render the individual a de facto Limited Tort elector under MVFRL.

In Pennsylvania, vehicle ownership for insurance purposes is not based on purchase, title registration, or maintenance of financial responsibility. Rather, ownership is determined by examining the “indicia of ownership.” When the “indicia of ownership” establishes that an individual other than the vehicle’s title-holder uses, controls, and maintains a vehicle, that individual will be deemed a “putative owner” and will be subject to the provisions of MVFRL.

Factors that a Court will use to assess putative ownership may include: (1) the right to unfettered use of the vehicle; (2) the right to use the vehicle without asking the title-holder’s permission; (3) possession of keys to the vehicle; (4) the location where the vehicle is stored or parked; (5) purchase of the vehicle; and (6) payment of maintenance costs for the vehicle. See Allen v. Merriweather, 605 A.2d 424, 426 (Pa. Super. 1992).

These factors are non-exclusive and a Court will have broad latitude to balance and assess the relative importance of each. Compare The Auto. Ins. Co. of Hartford, Conn. v. Curran, 994 F. Supp. 324 (E.D. Pa. 1998) (applying Pennsylvania law) (holding that when the plaintiff paid the purchase price for a vehicle titled in his daughter’s name, his right to unfettered use of the vehicle and payment of vehicle maintenance costs outweighed the facts that the vehicle was kept as his father’s house and used primarily by his father; plaintiff was found to be the putative owner for insurance purposes) with Ibarra v. Prudential Property and Casualty Ins. Co., 585 A.2d 119 (Pa. Super. 1991) (holding that the plaintiff was not the putative owner of a vehicle titled to her estranged husband: her right to partial ownership of the vehicle as marital property was outweighed by the facts that she required her estranged husband’s permission to drive it and by her non-payment of any costs associated with the purchase or maintenance of the vehicle).

The practical consequences of putative ownership are exemplified in Greco v. Schwartzberg, 793 A.2d 945 (Pa. Super. 2002). In Greco, the plaintiff owned an insured vehicle. His license was suspended and he cancelled his auto insurance policy. He permitted his live-in girlfriend to operate the vehicle. Before doing so, she purchased a Limited Tort auto policy that identified the plaintiff as an excluded driver due to his unlicensed status. Sometime thereafter, the plaintiff, while a pedestrian, was struck by a vehicle. He argued that he was not bound by the Limited Tort election in his girlfriend’s insurance policy, because he was an excluded driver under the policy. He further argued that he was not a de facto Limited Tort elector, because the vehicle was insured by his girlfriend. The Pennsylvania Superior Court held that the plaintiff was deemed to have elected Limited Tort by virtue of his failure to personally have motor vehicle insurance on the vehicle he owned, as required by the MVFRL.

What It Means to You

It is important to establish putative ownership when an individual is injured while operating a vehicle titled to another person. The Greco Court’s analysis shows the importance of the failure of the individual to personally insure the vehicle, even if it is insured by another source, will render the individual a Limited Tort elector. As a Limited Tort elector, the individual will be precluded from sustaining third-party claims for non-economic damages for non-“serious” injuries. Please contact a Cipriani & Werner attorney to discuss your MVFRL questions.

Sources

75 Pa. C.S.§1705(a)(5) (2008)