In Gregg v. Ameriprise Financial, et. al., the Pennsylvania Supreme Court held that the state’s Unfair Trade Practices and Consumer Protection Law (CPL), “catch-all” provision, imposes liability on commercial vendors, including consultants and advisors, who engage in potential deceitful conduct that creates a likelihood of confusion or misunderstanding during a transaction. As a result, any action or representation that creates a likelihood of confusion or misunderstanding is actionable, regardless of whether it was committed intentionally, carelessly, or with the utmost care. In Gregg, the insurance sales’ advisor’s failure to “clearly and fully explain” the costs and terms of a life insurance policy cost the company.
The CPL “catch-all” provision prohibits anyone who advertises, sells, or distributes goods or services from engaging in any fraudulent or deceptive conduct that creates a likelihood of confusion or misunderstanding during a transaction. Construing the language of the provision in accordance with the CPL’s purpose as a remedial measure to eliminate unfairness and deception, the court found that deceptive conduct under the provision does not depend upon the actor’s state of mind, and therefore could be “characterized as a strict liability offense.”
The case arose after the plaintiffs alleged that their financial advisor and insurance salesperson, who advised them on the purchase of a life insurance policy, misrepresented that certain payments would fund the policy, as well as accruing significant cash value. The matter proceeded to a jury trial on the plaintiffs’ claims of negligent misrepresentation and fraudulent misrepresentation, which resulted in a defense verdict. The case proceeded to a bench trial on the plaintiffs’ remaining claim for violation of the CPL “catch-all” provision. The trial court found that the defendants failed to clearly and fully explain the costs and terms of the policy and ruled in favor of the plaintiffs.
On appeal, the defense argued that the plaintiffs were required to establish negligent misrepresentation to prevail under the “catch-all” provision. In its 1925(a) opinion, the trial court distinguished the common law claims by noting the absence of a state of mind requirement under the CPL “catch-all” provision. The Superior Court affirmed the trial court and reasoned that the absence of a state of mind requirement imposed strict liability on vendors who deceive consumers by creating a likelihood of confusion or misunderstanding. On appeal to the Pennsylvania Supreme Court, the defense and numerous amici curiae argued that the plain language of the provision depended on the actor’s intent and that applying a strict liability standard would “open the floodgates” of litigation.
In its ruling, the Pennsylvania Supreme Court focused heavily on the pre-1996 amendment version of the “catch-all” provision, which only prohibited fraudulent conduct. The court found that the plain language of the amended provision eliminates the state of mind element that was required prior to the amendment. The court also reasoned that the vendor is “in a better position to determine whether the representation might be deceptive,” and thus strict liability is consistent with the legislative purpose.
With this ruling, a consumer is only required to prove that “the acts or practices are capable of being interpreted in a misleading way.” With a more relaxed standard than that for fraudulent or negligent misrepresentation, whether the floodgates of claims will open remains to be seen.
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