Summary
In Midili, the estate of Arnold Midili sued the decedent's insurance company because the company asserted that the Allegheny County vehicle which stuck and killed Mr. Midili was excluded from UIM coverage because it was owned by a "governmental unit or agency."
Summary of this case from Selective Insurance Group, Inc. v. MartinOpinion
No. 2359 Pittsburgh 1997
Filed January 22, 1999.
Appeal from the JUDGMENT entered October 30, 1997, In the Court of Common Pleas of WASHINGTON County, CIVIL NO. 97-3319.
BEFORE: CAVANAUGH, POPOVICH and LALLY-GREEN, JJ.
OPINION
¶ 1 In this appeal, we are presented with a question of first impression in this Commonwealth: whether a provision of an automobile insurance policy that excludes motor vehicles owned by a governmental unit or agency from the definition of underinsured motor vehicle is violative of the Motor Vehicle Financial Responsibility Law ("MVFRL") or the public policy lying thereunder. Judgment was entered in favor of appellee Erie Insurance Group ("Erie") after the trial court upheld the validity of the exclusion. After careful review and for the reasons that follow, we affirm.
75 Pa.C.S.A. § 1701 et seq.
¶ 2 Arnold W. Midili was killed in an automobile accident when the car he was driving was struck by a vehicle owned by Allegheny County and operated by one of its employees. Allegheny County paid its $500,000.00 liability limit under the Political Subdivision Tort Claims Act ("PSTCA") to settle the claims asserted against it by decedent's wife, Sandra Midili, and his estate. Appellant then asserted a claim for underinsured motorist ("UIM") coverage with Erie, pursuant to an automobile policy issued to appellant and her decedent. This policy provided stacked underinsurance coverage in the amount of $300,000.00. The policy also contained an endorsement that stated that an "Underinsured motor vehicle does not include: . . . motor vehicles owned by any governmental unit or agency." On the basis of this language, Erie denied appellant's claim.
42 Pa.C.S.A. § 8501 et seq.
The parties stipulated that the damages sustained by appellant exceeded $800,000.00, the total coverage limit under the PSTCA ($500,000.00) and the Erie policy ($300,000.00).
¶ 3 The matter ultimately proceeded to arbitration pursuant to the terms of the Erie policy. In a split decision, the arbitration panel ruled in favor of Erie and upheld the validity of the governmental vehicle exclusion. Appellant then filed a motion with the trial court to vacate or modify that decision. The trial court denied appellant's motion, adopting the majority opinion of the arbitration panel. This appeal followed.
¶ 4 The policy at issue expressly provided for arbitration pursuant to the Arbitration Act of 1927, which states:
(d) Special application. —
(1) Paragraph (2) shall be applicable where:
(iii) Any person has been required by law to submit or to agree to submit a controversy to arbitration pursuant to this subchapter.
(2) Where this paragraph is applicable a court in reviewing an arbitration award pursuant to this subchapter shall, notwithstanding any other provision of this subchapter, modify or correct the award where the award is contrary to law and is such that had it been a verdict of a jury the court would have entered a different judgment or a judgment notwithstanding the verdict.
42 Pa.C.S.A. § 7302(d); Nationwide Ins. Co. v. Calhoun, 635 A.2d 643 (Pa.Super. 1993) ("error of law" standard of review applicable where policy contains express provision for arbitration pursuant to Arbitration Act of 1927).
¶ 5 The interpretation of a contract of insurance is a question of law. State Farm Mut. Auto. Ins. Co. v. Universal Underwriters Ins. Co., 549 Pa. 518, 522, 701 A.2d 1330, 1331 (1997). In interpreting the contract, the intent of the parties, as manifested by the language of the written agreement must be ascertained. Paylor v. Hartford Ins. Co., 536 Pa. 583, 586, 640 A.2d 1234, 1235 (1994). Effect will be given to the language of the insurance contract or policy where it is clear and unambiguous, unless the limitation or exclusion violates the MVFRL or its public policy. Id.
¶ 6 We begin our analysis by noting that appellant does not claim that the language of the governmental vehicle exclusion in decedent's policy is unclear or ambiguous. Neither does she dispute that the language of the exclusion bars her recovery of UIM benefits under the insurance policy since decedent suffered his injuries in an accident involving a government vehicle. Rather, the present dispute hinges on whether the governmental vehicle exclusion is contrary to the provisions of the MVFRL and/or violative of the public policy lying thereunder.
¶ 7 The history of legislatively mandated UIM coverage in Pennsylvania has evolved significantly over the past fifteen years. Prior to October 1, 1984, an insurance company was not required by law to provide UIM coverage. When an insurance company did offer such coverage, its terms and limitations were governed solely by the policy of insurance, subject only to the requirement that any limitations or exclusions be explicitly and unambiguously stated in the policy. Neither statutory enactment nor public policy were controlling when a question regarding coverage arose. See Votedian v. General Acc. Fire and Life Assur. Corp., 478 A.2d 1324, 1327 (Pa.Super. 1984).
¶ 8 The MVFRL took effect on October 1, 1984 and required that future motor vehicle liability insurance policies contain both uninsured motorist ("UM") and UIM coverage in minimum amounts. The added requirement of UIM coverage remedied the anomaly, under prior law, that a claimant could find himself in a better position, by virtue of legislatively mandated UM coverage, where the tortfeasor's vehicle was uninsured rather than underinsured. See Davis v. Government Employees Ins. Co., 500 Pa. 84, 91, 454 A.2d 973, 976 (1982). The enactment of the MVFRL and the repeal of prior law reflected the legislature's concern for the spiraling cost of automobile insurance and the resultant increase in the number of uninsured motorists driving on public highways. Paylor, 536 Pa. at 587, 640 A.2d at 1235 (1994). This legislative concern for the increasing cost of insurance is the public policy that is to be advanced by statutory interpretation of the MVFRL. Id.
¶ 9 The MVFRL was amended in 1990 with the result that the requirement, that insurance policies contain minimum amounts of UM and UIM coverage, was eliminated. The amendment did continue to require, however, that both UM and UIM coverage be offered, but left the purchase of these coverages to the discretion of the insured. See 75 Pa.C.S.A. § 1731(a). This change further reflects the continued legislative concern for the increasingly burdensome cost of automobile insurance. Pempkowski v. State Farm Mut. Auto. Ins. Co., 678 A.2d 398, 403 (Pa.Super. 1996), aff'd, 693 A.2d 201 (Pa. 1997).
¶ 10 With this background, we turn to the specific provisions of the MVFRL now at issue. The MVFRL defines an underinsured motor vehicle as:
A motor vehicle for which the limits of available liability insurance and self-insurance are insufficient to pay losses and damages.
75 Pa.C.S.A. § 1702. The Act further provides:
§ 1731. Availability, scope and amount of coverage
(c) Underinsured motorist coverage. — Underinsured motorist coverage shall provide protection for persons who suffer injury arising out of the maintenance or use of a motor vehicle and are legally entitled to recover damages therefor from owners or operators of underinsured motor vehicles.
75 Pa.C.S.A. § 1731(c).
¶ 11 The Act contains no provision that either explicitly prohibits or permits recovery of UIM benefits by an injured motorist from the Commonwealth, its agencies or its political subdivisions. Appellant directs our attention to § 1703 of the Act which provides:
Although the MVFRL does not explicitly allow an exclusion from coverage for non-federally owned government vehicles, our jurisprudence is replete with examples in which policy limitations or exclusions were upheld, even though they were not explicitly authorized by the MVFRL. See Eichelman v. Nationwide Ins. Co. 711 A.2d 1006 (Pa. 1998) ("household exclusion" clause, in separate policies of family members with whom plaintiff resided, which excluded UIM coverage for bodily injury suffered while occupying motor vehicle not insured with UIM coverage, upheld where plaintiff voluntarily elected to forego UIM coverage on his own vehicle); Hall v. Amica Mut. Ins. Co., 538 Pa. 337, 648 A.2d 755 (1994) (court upheld territorial limitation in policy that limited UM coverage to United States, its territories and possessions, Puerto Rico and Canada); Paylor v. Hartford Ins. Co., 536 Pa. 583, 640 A.2d 1234 (1994) (court upheld family car exclusion that excluded vehicle from definition of underinsured motor vehicle, where vehicle is owned by or furnished or available for the regular use of the named insured or any family member); Caron v. Reliance Ins. Co., 703 A.2d 63 (Pa.Super. 1997) (court upheld exclusion from UIM coverage from employer's policy where employee was driving vehicle belonging to third party while on company business); St. Paul Mercury Ins. Co. v. Corbett, 630 A.2d 28 (Pa.Super. 1997) (limitation upheld that restricted UM coverage contained in limited use automobile policy that provided coverage solely for antique automobile); Jeffrey v. Erie Ins. Exch., 621 A.2d 635 (Pa.Super. 1993) (en banc) (public policy not violated by set off provision in policy under which any recovery by guest passenger under policy's liability coverage was set off against recovery from UM coverage); Marino v. General Acc. Ins. Co., 610 A.2d 477 (Pa. Super. 1992) (exclusion from UM/UIM coverage upheld where insured vehicle operated to transport persons or goods for a fee). See also Pempkowski v. State Farm Mut. Auto. Ins. Co. 678 A.2d 398 (Pa.Super. 1996), aff'd, 693 A.2d 201(Pa. 1997); Windrim v. Nationwide Ins. Co., 537 Pa. 129, 641 A.2d 1154 (1994); Frazier v. State Farm Mut. Auto. Ins. Co., 665 A.2d 1 (Pa.Super. 1995); State Farm Mut. Auto. Ins. Co. v. Brnardic, 657 A.2d 1311 (Pa. Super. 1995); Nationwide Mut. Ins. Co. v. Cummings, 652 A.2d 1338 (1994); State Farm Mut. Auto. Ins. Co. v. Broughton, 621 A.2d 654 (Pa.Super. 1993).
This chapter does not apply to any motor vehicle owned by the United States.
75 Pa.C.S.A. § 1703. She argues that, in light of this section, it is clear that the legislature considered the exclusion of government vehicles and concluded that only vehicles owned by the federal government would be excluded from coverage. She specifically relies on the rule of statutory construction that states "exceptions expressed in a statute shall be construed to exclude all others." 1 Pa.C.S.A. § 1924. As such, appellant maintains that all government vehicles, other than those owned by the federal government, are specifically included within the statute and that any policy of insurance purporting to exclude such vehicles is contrary to the statute and void as a matter of law. We disagree.
¶ 12 A similar argument was presented and rejected by our Supreme Court in Hall v. Amica Mut. Ins. Co., 538 Pa. 337, 648 A.2d 755 (1994). There, the insured was injured while operating a motor vehicle in Barbados. His claim for UM benefits was denied on the basis of a territorial limitation contained in the insurance policy. The Court concluded that this limitation was valid and enforceable and that summary judgment should have been entered in favor of the insurance company. In reaching this conclusion, the Court rejected the argument, based on the rules of statutory construction, that "exceptions expressed in a statute shall be construed to exclude all others," even though a territorial limitation was not among the exceptions enumerated in the statute. The Court's reasoning is instructive:
This rationale . . . is not persuasive. It provides an illustrative example of the logical fallacy of petitio principii. The syllogism representing this rationale may be stated thus: the statute requires worldwide uninsured motorist coverage; the statute authorizes three exceptions but does not authorize a territorial limitation; explicit exceptions exclude all other exceptions; therefore the statute requires worldwide coverage. The reasoning is valid only if one starts with the conclusion. Unless the statute requires worldwide coverage, a territorial limitation is not an exception, the rule of statutory construction, expressio unius est exclusio alterius — expression of one exception excludes all others — does not come into play, and the logic breaks down entirely.
Id. at 344, 648 A.2d at 758-59.
¶ 13 Here, we confront a similar situation as appellant's reasoning is valid only if we begin with the conclusion that the MVFRL requires that UIM coverage be provided for all governmentally owned vehicles that fall within the definition of underinsured motor vehicle. The syllogism may be stated: the statute requires that UIM coverage be provided for government owned vehicles that fall within the definition of underinsured motor vehicle; the statute provides that the MVFRL does not apply to vehicles owned by the federal government but does not except any other governmentally owned vehicle; explicit exceptions exclude all other exceptions; therefore the statute requires that UIM coverage be provided for all underinsured nonfederal government vehicles. Just as in Hall, the rule of statutory construction is inapplicable; the federal government limitation is not an exception because the statute does not explicitly require that UIM coverage be provided for all underinsured government vehicles. As such, we conclude that the governmental vehicle exclusion does not violate or conflict with the provisions of the MVFRL, but is consistent therewith.
¶ 14 With respect to § 1703, we further note that all motor vehicles owned by the United States are exempted from the provisions of the MVFRL and not just from the definition of underinsured motor vehicles. Such an express exclusion from the provisions of the entire MVFRL likely reflects the legislature's concern for constitutional difficulties that could arise from any attempt to subject vehicles of the federal government to the provisions of the Act. In view of this apparent concern, it is not surprising that § 1703 does not mention governmental vehicles other than those owned by the United States. If the legislature intended that non-U.S. government vehicles be covered by the MVFRL, it could have specifically provided for such in the Act.
In addition to this statutory construction argument, two other points have been raised which warrant comment. Both of these points are ancillary to the interpretation of the MVFRL and the insurance contract in this case. Their respective resolution in appellant's favor would not require that appellant be eligible to recover UIM benefits but simply would not foreclose such recovery. As our interpretation of the MVFRL and the insurance policy at issue give complete resolution to this matter, our comments are illustrative only.
The first point concerns § 1731(c):
§ 1731. Availability, scope and amount of coverage
(c) Underinsured motorist coverage. — Underinsured motorist coverage shall provide protection for persons who suffer injury arising out of the maintenance or use of a motor vehicle and are legally entitled to recover damages therefor from owners or operators of underinsured motor vehicles.
75 Pa.C.S.A. § 1731(c).
Appellant focuses on the "legally entitled to" language of this section and maintains that the limitation on damages of the PSTCA does not bar her right to seek damages from other sources, but merely limits the amount of damages that can be recovered from Allegheny County. We would only note that the PSTCA waives immunity only in limited circumstances and only to a limited extent. It further limits the aggregate amount of damages that a victim may recover. As the ability to recover damages from a governmental entity is strictly circumscribed, it is questionable whether there is any legal entitlement to damages beyond those specifically outlined by the statute. Cf. Bruck v. Pennsylvania Nat'l Ins. Co., 672 A.2d 1335 (Pa. Super. 1996) ("uninsured motorist" is a motorist having no insurance; immune defendant is not an uninsured defendant); Federal Kemper Ins. Co. v. Wales, 633 A.2d 1212 (Pa.Super. 1993) (coemployee of insured not "uninsured motorist" where insured unable to recover from coemployee due to exclusivity provision of workers' compensation law).
The second point concerns Erie's inability to collect subrogation claims because of the damage limitation imposed by the PSTCA. It is correct that, in many instances, an insurer is unable to enforce its subrogation claims because of a tortfeasor's lack of assets. The inability to enforce these rights as a practical matter, however, is something different than the complete inability to enforce these rights due to the statutory cap of the PSTCA. Although Erie collected a premium from the decedent for UIM coverage, it likely reflected a discount in view that the policy contained a clear exclusion for government vehicles. As such, an insurer's inability to enforce subrogation rights in these circumstances is compelling. See generally Allstate Ins. Co. v. Clarke, 527 A.2d 1021 (Pa.Super. 1987) (right of subrogation is based upon and governed by equitable principles).
¶ 15 Having concluded that the governmental vehicle exclusion does not contravene the provisions of the MVFRL, we now examine whether the exclusion is violative of public policy.
Generally, a clear and unambiguous contract provision must be given its plain meaning unless to do so would be contrary to a clearly expressed public policy. Antanovich v. Allstate Ins. Co. 507 Pa. 68, 76, 488 A.2d 571, 575 (1985). When examining whether a contract violates public policy, this Court is mindful that public policy is more than a vague goal which may be used to circumvent the plain meaning of the contract. Hall v. Amica Mut. Ins. Co. 538 Pa. 337, 347, 648 A.2d 755, 760 (1994). As this Court has stated:
Public policy is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interest. As the term "public policy" is vague, there must be found definite indications in the law of the sovereignty to justify the invalidation of a contract as contrary to that policy. . . Only dominant public policy would justify such action. In the absence of a plain indication of that policy through long governmental practice or statutory enactments, or of violations of obvious ethical or moral standards, the Court should not assume to declare contracts . . . contrary to public policy. The courts must be content to await legislative action.
Id. at 347-48, 648 A.2d at 760 (citations omitted). This Court has further elaborated that:
It is only when a given policy is so obviously for or against the public health, safety, morals or welfare that there is a virtual unanimity of opinion in regard to it, that a court may constitute itself the voice of the community in so declaring [that the contract is against public policy].
Mamlin v. Genoe, 340 Pa. 320, 325, 17 A.2d 407, 409 (1941). Eichelman v. Nationwide Ins. Co., 711 A.2d 1006, 1008 (Pa. 1998).
¶ 16 In considering whether the governmental vehicle exclusion violates public policy, we must consider both the legislative intent behind the MVFRL and its UIM provision. Our Supreme Court has consistently stated:
[T]he repeal of the No-Fault Motor Vehicle Insurance Act, 40 P. S. § 1009.101, and the simultaneous enactment of the MVFRL, reflected a legislative "concern for the spiraling consumer cost of automobile insurance and the resultant increase in the number of uninsured motorists driving on public highways." Paylor v. Hartford Ins. Co., 536 Pa. 583, 587, 640 A.2d 1234, 1235 (1994). This legislative concern over the increasing costs of automobile insurance is the public policy which is to be advanced when interpreting the statutory provisions of the MVFRL. Id.
Rump v. Aetna Cas. and Sur. Co., 710 A.2d 1093, 1096 (Pa. 1998). See also Eichelman, supra; Hall, supra. UIM coverage is intended to protect an insured against the risk "that a negligent driver of another vehicle will cause injury to the insured and will have inadequate insurance coverage to compensate the insured for his injuries. Rump, 711 A.2d at 1008-9. In view of these concerns, the scope and effect of the governmental vehicle exclusion and the reasoning that follows, we discern no overriding public policy that would prohibit enforcement of the exclusion in this case.
Appellant proffers this Court's decision in Allwein v. Donegal Mut. Ins. Co., 671 A.2d 744 (Pa.Super. 1996) (en banc) for the proposition that the goal of insurance cost reduction is tied to the broader goal of indemnification. The Court explained:
While it is true that the MVFRL was concerned with the spiraling costs of automobile insurance under the then-existing no-fault laws, the reason for the concern was the increasing number of uninsured and underinsured drivers on the highways, and the resultant inability of those drivers to indemnify their victims for losses and damages sustained as a result of their negligence.
Id. at 751. As a general matter, we do not find this proposition to be inconsistent with our Supreme Court's pronouncement of the public policy underlying the MVFRL. The goal of indemnification is to be achieved through affordable automobile insurance for Pennsylvania drivers. Blanket UM and UIM coverage, permitting of no exceptions, most certainly is not what the legislature intended when it enacted the MVFRL. Rather, rational exclusions, that are consistent with the Act and the public policy lying thereunder, are permissible and will continue to be upheld by our courts.
¶ 17 We first consider whether there is unanimity of opinion that the government vehicle exclusion violates public policy. Although this exclusion presents an issue of first impression in this Commonwealth, we note that our courts have upheld numerous policy exclusions that were not explicitly or implicitly authorized by the MVFRL. See Note 4, supra. With regard to other jurisdictions that have examined the issue, there is no unanimity of opinion, although a majority have invalidated the exclusion.
As we have decided this case on the basis of the specific provisions of Pennsylvania's automobile insurance law and the policy at issue, these other decisions are not particularly relevant to our disposition. Nonetheless, we note that the following jurisdictions have invalidated the governmental vehicle exclusion: Alabama, Arkansas, Georgia, Maryland, Minnesota, Montana, North Carolina and Oklahoma. Several other jurisdictions have upheld the governmental vehicle exclusion for UM or UIM benefits: Indiana, Massachusetts, Ohio and Washington.
¶ 18 We also consider whether the exclusion is contrary to the public health, safety, morals or welfare of the people. Appellant has not demonstrated, nor can we discern, how the exclusion is so obviously against these public concerns that it should not be enforced on public policy grounds. Although the damage limitation contained in the PSTCA may result in an injured victim not being fully compensated for his/her injuries, it nonetheless allows for substantial monetary recovery, which in many, if not most, cases will likely provide full compensation to injured victims. See 42 Pa.C.S.A. § 8528(b) (in actions against Commonwealth parties arising from the same cause of action or series of causes of action, damages up to $250,000.00 may be recovered by any plaintiff, with the aggregate recovery not to exceed $1,000,000.00) and 42 Pa.C.S.A. § 8553(b) (in actions against local governmental entities arising from the same action or series of causes of action, the aggregate recovery may not exceed $500,000.00).
¶ 19 Finally, we consider the legislative intent underpinning the MVFRL. Although the purpose of UIM coverage is to protect innocent victims from underinsured motorists who cannot adequately compensate them for their injuries, such does not rise to the level of public policy overriding every other consideration of contract construction. "[T] here is a correlation between the premiums paid by the insured and the coverage the claimant could reasonably expect to receive." Hall, 538 Pa. at 349, 648 A.2d at 761 (quoting Jeffrey v. Erie Ins. Exch., 621 A.2d 635, 645 (Pa. Super. 1993)). Here, appellant's decedent purchased an automobile insurance policy that clearly and unambiguously excluded government vehicles from the definition of underinsured motor vehicle. The premium he paid for this policy no doubt reflected the exclusions from coverage. This reduction in cost furthers the MVFRL's purpose of containing spiraling automobile insurance costs. As such, we conclude that the governmental vehicle exclusion is not violative of public policy, but rather, is consistent with the intent behind the MVFRL.
¶ 20 We have reviewed the arguments raised by appellant and have found them to be without merit. The governmental vehicle exclusion contained in the Erie insurance policy purchased by decedent is not contrary to the provisions of the MVFRL. Nor is it violative of public policy. As such, the trial court did not commit an error of law in denying appellant's motion to vacate or modify the decision of the arbitration panel.
¶ 21 Judgment affirmed.