Nationwide Mutual Insurance Company v. Reidler, CIVIL ACTION NO. 99-4463 (E.D. Pa. 4/19/2000)

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NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff v. JOHN JOSEPH REIDLER and JANET M. REIDLER, h/w, Defendant.

CIVIL ACTION NO. 99-4463.

United States District Court, E.D. Pennsylvania.

April 19, 2000.

JAMES C. HAGGERTY, SWARTZ, CAMPBELL & DETWEILER PHILADELPHIA, PA, PLAINTIFF.

STUART J. AGINS, AGINS HAAZ & SEIDEL, L.L.P., PHILADELPHIA, PA, DEFENDANT

MEMORANDUM & ORDER

MARVIN KATZ, S.J.

Before the court are cross-motions for summary judgment in this declaratory action addressing insurance coverage. Because neither the policy language nor public policy considerations require coverage, the plaintiffs motion will be granted.

I. Background¹

On April 12, 1996, defendant John Joseph Reidler was a passenger in the 1955 Chevrolet Belair he owned. His son, John James Reidler, was driving with his permission. The defendant was injured when the Belair was involved in a single-vehicle accident. John Joseph Reidler and his wife Janet Reidler subsequently made claim on their son for recovery of tort damages.

At the time of the accident, the defendants were covered by a personal automobile policy issued by Nationwide Mutual Insurance, the plaintiff. This policy provided $250,000.00/$500,000.00 in liability coverage and $250,000.00/$500,000.00 in stacked underinsured motorist (UIM) coverage for three vehicles. One of the vehicles covered under this policy was the Belair. Although the defendants' son was driving the vehicle at the time of the accident, the son did not live with his parents, and the vehicle was not regularly made available for his use. The Belair was, however, made available for the regular use of the defendant father.

John James was also covered by a personal automobile policy issued by Nationwide. This policy provided $50,000.00/$100,000.00 in liability coverage and $15,000.00/$30,000.00 in stacked UIM coverage for one vehicle.

After the defendants filed a tort claim against their son, Nationwide offered them $300,000. This sum represented the liability limits under both the father's policy and the son's policy. Mr. and Mrs. Reidler have refused to accept these limits of coverage and have made a claim for $50,000 in liability coverage under their son's policy and $750,000 in full UIM benefits under their own policy. Nationwide has refused to pay any UIM benefits based on certain policy language and case law discussed subsequently.

As the matter presently stands, pursuant to an agreement entitled "partial release," see Stip. Facts Ex. B, the parties agreed that Nationwide would pay the liability limits under the son's policy ($50,000) to the defendants, and the tort claim filed in the Bucks County Court of Common Pleas would be marked settled. The parties also agreed that Nationwide would pay $250,000 to the defendants under the father's policy, with the understanding that it would be considered either the liability limits of that policy if Nationwide prevailed in this declaratory action claim or the first $250,000 of payable UIM benefits under the policy if the defendants prevailed.

II. Standards

In interpreting an insurance policy in a declaratory action, the court must apply Pennsylvania's clear, well-settled rules governing the interpretation of an insurance contract. Normally, the court rather than the jury interprets the contract with the goal of determining the intent of the parties as indicated by the language of the contract itself. When the language of the contract is unambiguous, the court must give effect to that language. See Medical Protective Co. v. Watkins, 198 F.3d 100, 103 (3d Cir. 1999); Madison Const. v. Harleysville Mut. Ins., 735 A.2d 100, 106 (Pa. 1999); Gene and Harvey Builders v. Pennsylvania Mfrs. Ass'n, 517 A.2d 910, 913 (Pa. 1986); Standard Venetian Blind Co. v. American Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983).

"The courts have held, however, that if the policy provision is reasonably susceptible to more than one interpretation, it is ambiguous. In determining whether a contract is ambiguous, the court must examine the questionable term or language in the context of the entire policy and decide whether the contract is reasonably susceptible of different constructions and capable of being understood in more than one sense." Medical Protective Co., 198 F.3d at 103 (citations, internal punctuation omitted); see also Madison Const., 735 A.2d at 106 (same). That is, if there are two reasonable interpretations, one of which is offered by the insured, one of which is offered by the insurer, the provision is ambiguous and should be construed against the insurer. See, e.g., Medical Protective Co., 198 F.3d at 103-04; Standard Venetian Blind Co, 469 A.2d at 566. However, the court should read policy provisions so as to avoid ambiguity and not twist the language or rewrite the contract to create doubts where none exist. See Medical Protective Co., 198 F.3d at 103; Northbrook Ins. Co. v. Kuljian Corp., 690 F.2d 368, 372 (3d Cir. 1982); Madison Const., 735 A.2d at 106.

III. Discussion

The question before the court is whether the defendants may recover UIM benefits from their own policy under the facts of this case. The court does not believe that the present matter is truly one of first impression, as the facts are similar to those of previous decisions. However, to the extent that prior holdings are not precisely on point, the court must attempt to predict how the Pennsylvania Supreme Court would rule. See, e.g., 2-J Corp. v. Tice, 126 F.3d 539, 541 (3d Cir. 1997).

Plaintiff contends that the defendants' liability, rather than UIM, coverage applies; that liability coverage generally is intended to be primary, while UIM coverage is intended to be excess; and that the policy language precludes UIM recovery. In response, defendants argue that the applicable policy language is ambiguous and that, even if it is not, it is against public policy to bar their recovery of UIM benefits.

A. The Policy Language

The defendants' policy states, under "auto liability coverage agreement," that

We will pay for damages for which you are legally liable as a result of an accident arising out of the:

(a) ownership;

(b) maintenance or use; or

(c) loading or unloading;

of your auto. A relative also has this protection. So does any person or organization who is liable for the use of your auto while used with your permission.

Policy at 6.² The Belair is included under the policy definition of "your auto." See id. at 2 ("your auto' means the vehicle(s) described in the Declarations."); Decl. Item 3 (listing 1955 Chevy Belair).

The disputed provisions of the defendants' policy are found in the UIM coverage endorsement. First, under the policy, Nationwide agrees to

pay compensatory damages, including derivative claims, which are due by law to you or a relative from the owner or driver of an underinsured motor vehicle because of bodily injury suffered by you or a relative. Damages must result from an accident arising out of the

1. ownership;

2. maintenance; or

3. use; of the underinsured motor vehicle.

UIM Endorsement at 1 ("Coverage Agreement"). An "underinsured motor vehicle" is subsequently defined as a

motor vehicle for which bodily injury liability coverage, bonds or insurance are in effect. However, their total amount is insufficient to pay the damages an insured is entitled to recover. We will pay damages that exceed such total amount. We will not consider as an underinsured motor vehicle:

e) any motor vehicle insured under the Auto Liability coverage of this policy; nor

f) any motor vehicle furnished for the regular use of you or a relative.

Id. ("Additional Definitions"). Finally, the UIM endorsement states, "The insured may recover for bodily injury under the Auto Liability coverage or the Underinsured Motorists coverage of this policy, but not under both coverages." Id. at 3 ("Limits of Payment").

B. Application of the Policy Language

Under a plain reading of the policy language, the defendants may not recover UIM benefits under their own policy because a vehicle insured under the liability coverage of the policy or that is furnished for the regular use of one of the insureds cannot be an underinsured vehicle.

Initially, as does plaintiff, it is important to stress that UIM coverage is primarily intended as excess coverage. The applicable statute 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. § 1702. As the Pennsylvania Superior Court explained,

The purpose of underinsured motorist coverage is to protect the insured (and his additional insureds) from the risk that a negligent driver of another vehicle will cause injury to the insured (or his additional insureds) and will have inadequate liability coverage to compensate for the injuries caused by his negligence. Thus, an insured who purchases $100,000.00 of liability coverage to protect others from his negligence, must, by law, be offered the option of purchasing up to $100,000.00 of underinsured motorist coverage to protect himself and his additional insureds from the risk that they will be severely injured by a negligent driver who had liability coverage in an amount insufficient to fully compensate them for their injuries.

Wolgemuth v. Harleysville Mut. Ins. Co., 535 A.2d 1145, 1149 (Pa. Super. 1988). This, however, is not a predicament in which the claimants found themselves. Unlike that hypothetical motorist, they were able to control the amount of coverage they wished to purchase for the risk that they might be injured while riding as passengers in their own vehicle.

Apparently in acknowledgment that the plain language of these provisions precludes UIM recovery, the defendants argue that the policy as a whole is ambiguous. In support of their argument, defendants focus on the following provisions contained in the UIM endorsement:

Coverage Exclusions This [UIM]...