Keystone Aerial Surveys, Inc. v. Pennsylvania Property & Casualty Insurance Guaranty Ass'n

829 A.2d 297, 574 Pa. 147, 2003 Pa. LEXIS 1281

• Court: Supreme Court of Pennsylvania
• Decided: July 23, 2003
• Docket: 14 EAP 2002, 15 EAP 2002
• Status: Published

Opinions

OPINION

Justice SAYLOR.

This appeal requires an evaluation of the $300,000 “per claimant” limitation embodied in the Pennsylvania Property and Casualty Insurance Guaranty Association Act.

In May of 1994, Thomas Campbell, a resident of Texas, was killed in Nevada in the crash of an airplane owned and operated by Appellee Keystone Aerial Surveys (“Keystone”), a Pennsylvania corporation. Mr. Campbell’s wife and four surviving children (also Texas residents) commenced a civil action against Keystone in the United States District Court for the Southern District of Texas, advancing claims predicated on, inter alia, theories of wrongful death and survival under Texas law.

Keystone maintained a policy of insurance with American Eagle Insurance Company (“American Eagle”), covering accidental harm to aircraft and passengers. Pursuant to the terms of the policy, American Eagle assumed Keystone’s defense in the litigation initiated by the Campbells; however, in December of 1997, the insurer was deemed insolvent and placed in liquidation via orders of a Texas county court. By virtue of Keystone’s status as a Pennsylvania corporation and as American Eagle’s insured, the insolvency triggered certain statutory obligations on the part of the Pennsylvania Property and Casualty Insurance Guaranty Association (“PPCIGA” or the “Association”) pursuant to the Pennsylvania Property and Casualty Insurance Guaranty Association Act.¹ In particular, PPCIGA assumed Keystone’s defense of the Campbells’ claims, see 40 P.S. § 991.1803(b)(l)(i), (2), and became obligated to pay “covered claims” existing prior to the determination of the insolvency, see 40 P.S. § 991.1803(b)(1), subject to certain conditions and limitations. See generally Bell v. Slezak, 571 Pa. 333, 341, 812 A.2d 566, 570-71 (2002) (describing the overall operation of the PPCIGA Act). The limitation presently in issue prescribes that the Association’s obligations shall be satisfied by paying an amount not exceeding $300,000 “per claimant” for claims other than those relating to return of unearned premiums. See 40 P.S. § 991.1803(b)(l)(i)(B).²

Keystone and the Association apparently reached an impasse concerning the extent of PPCIGA’s potential monetary obligations, inter alia, in light of the statutory, $300,000 “per claimant” limitation. The Association took the position that only Mr. Campbell or his personal representative was a claimant under the PPCIGA Act, thus limiting its potential liability to $300,000; Keystone, on the other hand, maintained that each of the Campbells was a proper claimant, thereby increasing the Association’s potential liability to 1.5 million dollars ($300,000 for each of the five surviving Campbells). Ultimately, Keystone settled the Texas action by committing to pay 1.5 million dollars, in exchange for release from liability on the underlying claims, -with $300,000 of the settlement fund allocated to each of the surviving Campbells, as reflected in a final judgment to which the settlement was reduced.³ Keystone also agreed to cooperate with the Campbells in determining the amount of insurance coverage available from PPCIGA.

Keystone then commenced the present declaratory judgment action against PPCIGA in the common pleas court, seeking an order requiring that each of the Campbells be deemed a separate claimant for purposes of the PPCIGA Act, and that the Association therefore be required to fully fund the 1.5 million dollar settlement. The Campbells sought and obtained leave to intervene as co-plaintiffs. PPCIGA filed an answer and, subsequently, the parties filed cross motions for summary judgment.

In granting summary judgment in favor of PPCIGA, the common pleas court acknowledged that, under Texas law, each of the Campbells was entitled to pursue a discrete, direct cause of action arising out of Mr. Campbell’s death. The court nonetheless contrasted Pennsylvania law, pursuant to which an action for wrongful death is maintained by a personal representative on behalf of survivors, see 42 Pa.C.S. § 8301, see also Pa.R.Civ.P. No. 2202, leaving the individual wrongful death beneficiaries with solely derivative, but not independent, causes of action. See generally Tulewicz v. SEPTA, 529 Pa. 588, 597 n. 9, 606 A.2d 427, 431 n. 9 (1992). Since it concluded that, had the action arisen in Pennsylvania, PPCIGA’s liability would have been limited to $300,000, the court was disinclined to afford greater recovery on claims accruing in Texas, thus effectively discriminating against those whose claims arise locally. Additionally, the common pleas court observed that the more constrained interpretation of the statutory limitation had a salutary effect in the administration of PPCIGA assets. See Keystone Aerial Surveys, Inc. v. PPCIGA, No. 1484, slip op. at 4 (C.P.Phila.Sep.14, 2000) (“Public policy demands that we both maintain .. . consistency [in the treatment of in-state and out-of-state claimants], and that we support the PPCIGA statute’s intent to conserve the funds so that all aggrieved insureds may have a source of coverage to which they may turn.”). Reading the PPCIGA Act’s limitation in light of the Pennsylvania wrongful death statute, the common pleas court thus agreed with the Association that the PPCIGA Act recognizes only a single claim for wrongful death of a person, regardless of the number of potential wrongful death beneficiaries.

The common pleas court found further support for its conclusion in this Court’s treatment of a statutory, $250,000 “per plaintiff’ limitation applicable to certain verdicts against the Commonwealth embodied in Act 1978-152, P.L. 788, 42 Pa.C.S. § 5111 (repealed). See Keystone, No. 1484, slip op. at 3-4 (citing Tulewicz, 529 Pa. at 595, 606 A.2d at 430). The court noted that, in Tulewicz, this Court determined that Act 1978-152’s limitation applied to the aggregate wrongful death and survival claims brought by the single personal representative on behalf of both the estate and the survivors. See id. at 597 n. 9, 606 A.2d at 431 n. 9. Finally, the common pleas court indicated that its interpretation was consistent with that taken by the appellate courts in the motor vehicle coverage context, holding that distinct claims of related parties are not aggregated under a coverage limit, while purely derivative claims are so aggregated. See Anthem Cas. Ins. Co. v. Miller, 729 A.2d 1227 (Pa.Super.1999); Erie Ins. Group v. Shue, 741 A.2d 803 (Pa.Super.1999).

On appeal, the Superior Court reversed in an opinion authored by Judge Lally-Green. See Keystone Aerial Surveys, Inc. v. PPCIGA 777 A.2d 84 (Pa.Super.2001). Applying principles of statutory construction and referencing prior decisional law, the court determined that the term “claimant” under the Act includes third parties whose injuries would have been covered under the policy between the insured and the insolvent insurer. See id. at 92. The Superior Court also considered the problem identified by the common pleas court, namely, that differences arising out of the choice of forum may affect the entitlement to assert a direct claim against an insurer in wrongful death/survival proceedings. The court reasoned, however, that the relevant inquiry should center primarily on the scope of the contractual terms of the insurance policy, not on the cause of action or the jurisdiction in which the action is asserted. See id. at 93. In this regard, the court explained:

Depending on the state in which the action is processed and the specific cause of action asserted, a person could be considered a plaintiff with his or her own cause of action, or a mere beneficiary of a cause of action asserted by another person. Nothing in the Act, however, intimates that the manner in which an action is processed in a state court affects a person’s status as a “claimant.” Indeed, a third party victim may, in certain cases, assert a claim against the insured without ever filing a formal lawsuit.

Keystone, 777 A.2d at 93. The Superior Court deemed the Tulewicz decision, cited by the common pleas court, distinguishable, since Act 1978-152’s limitation functioned as a “per plaintiff’ cap, in contrast to the PPCIGA Act’s approach of limiting the Association’s obligations “per claimant.” See Keystone, 777 A.2d at 93-94. The court also observed that the purposes of Act 1978-152 differed substantially from those of the PPCIGA Act: whereas the former concerned limitations on damages in actions against the Commonwealth, the PPCIGA Act is designed to protect claimants and policyholders, and not for the guiding purpose of limiting recovery. See Keystone, 777 A.2d at 94.

Finally, the Superior Court declined PPCIGA’s invitation to undertake a choice-of-law assessment to determine whether Pennsylvania, as opposed to Texas, law governed resolution of the controversy. Because, under the above analysis, resolution of the question of who is a claimant depends primarily on issues of contract interpretation and not on where or how such claims are asserted in an adjudicatory setting, it was not clear to the court that a true conflict between state laws at issue in the case persisted. See id. Since the parties had not specifically addressed the question of whether the Campbells’ claims were within the contemplation of the American Eagle policy, the court remanded for further proceedings, directing the common pleas court, inter alia, to determine the number of claimants and covered claims. Further, the Superior Court expressly refrained from restraining the common pleas court from applying choice-of-law principles in the course of its examination of the policy terms. See id. at 94-95 n. 15.

After the Superior Court rendered its decision in the present appeal, this Court issued Bell, 571 Pa. at 333, 812 A.2d at 566. There, in the course of considering the application of the PPCIGA Act’s non-duplication of recovery provision, see 40 P.S. § 991.1817(a), the Court addressed foundational questions concerning the workings of the insurance guaranty association statute and the role of the Association. As a threshold matter, the Court recognized that the statutory scheme is designed to ameliorate losses to insureds and third-party claimants resulting from the insolvency of a member insurer. See Bell, 571 Pa. at 341, 812 A.2d at 570-71. The Court proceeded to consider whether first and/or third-party claims fit within the statutory definition of the term “covered claim,” which proceeds, inter alia, as follows:

(1) An unpaid claim, including one for unearned premiums, submitted by a claimant, which arises out of and is within the coverages and is subject to the applicable limits of an insurance policy to which this article applies issued by an insurer if such insurer becomes an insolvent insurer after the effective date of this article....

40 P.S. § 991.1802.⁴

In determining that not only first but also third-party claims constituted “covered claims,” the Court reasoned that the PPCIGA Act makes express reference to third-party claims, and that the cognizance of such claims is consistent with the broad, statutory definition and the remedial purposes of the legislation. See Bell, 571 Pa. at 344, 812 A.2d at 572. Responding to a dissenting position emphasizing the role of potential defenses to third-party claims available to the Association under the statutory scheme via its incorporation of state insurance law precepts, see 40 P.S. § 991.1803(b)(2), the Court determined that “the PPCIGA Act specifically provides the statutory basis for third-party beneficiary claims ... as the Act specifically contemplates third-party beneficiaries as claimants thereunder.” Id. at 345, 812 A.2d at 573.

Bell thus defined the term “claimant” as one who possesses a “covered claim” under the PPCIGA Act, and read those terms as detached from whether or not a direct right of action existed in favor of the claimant and against the insolvent insurer under state law. Further, the decision implemented a broad understanding of the character and effect of the “arising] out of and ... within the coverages” phrase of the statutory language defining “covered claims.” 40 P.S. § 991.1802. This comports with Superior Court’s reasoning in the present case to the effect that the manner in which an action is processed in a state court does not affect a person’s status as a claimant under the PPCIGA Act. Compare Bell, 571 Pa. at 344, 812 A.2d at 572, with Keystone, 777 A.2d at 93. Further, it is generally consistent with one branch of divided lines of authority prevailing in other jurisdictions.⁵ We also agree with, and adopt, the Superior Court’s stated basis for distinguishing Tulewicz, see Keystone, 777 A.2d at 93-94; see also supra. Finally, we observe that the automobile coverage cases cited by the common pleas court, see Anthem Cas., 729 A.2d at 1227; Erie Ins., 741 A.2d at 803, address internal, policy coverage limitations as distinguished from PPCIGA’s unique, statutory cap, and therefore, are relevant, if at all, solely to the common pleas court’s task on remand to assess any relevant, scope-of-coverage limitations embodied in the American Eagle policy.

We hold that the Superior Court correctly determined that each of the five Campbells is a proper claimant for purposes of the Act, so long as it can fairly be said that their claims arise out of and are within the coverage provided by the American Eagle policy, and the common pleas court’s award of summary judgment in favor of the Association was properly reversed.

Although we have answered the question presently before the Court, Mr. Justice Castille’s dissenting opinion merits response. The dissent opines that Texas law does not permit multiple claimants in wrongful death actions, and, for this reason, under any theory all of the Campbells’ claims must be considered a single, aggregate, derivative claim. Dissenting Opinion, Op. at 305. The dissent then posits that the language of any liability insurance policy would command the same conclusion, offering an example of an automobile insurance policy with a $15,000 per individual and $30,000 per occurrence limit, and indicating that the insurance company’s exposure on wrongful death claims in such circumstances could not exceed the $15,000 limit. See id. at 306. Further, the dissent contends that the language of the underlying insurance policy should not control whether a person is a “claimant” for purposes of the PPCIGA Act and suggests that our interpretation compromises the enactment’s salutary aims. See id. at 307.

In response, as a preliminary matter, liability insurance policies tend to be highly individualized and the associated decisional law is specialized and technical; therefore, broad generalizations of the sort offered in the dissenting opinion are likely to be misleading. For example, the aircraft liability portion of the policy in this case contained only an occurrence-based limitation of $5,000,000 — there simply is no “per passenger” (or “per person” or “per individual”) limitation as the dissenting opinion suggests there must be. See American Eagle Insurance Company Aircraft Insurance Policy, Coverage Identification Page 2 (“Passenger sub-limit ... N/A”). Additionally, since the aggregate settlement in this case is well beneath the $5,000,000 figure, the policy limits simply do not, in and of themselves, function as a cap in the manner that the dissenting opinion also claims they must.⁶

Furthermore, in providing its assessment of the term “claimant” under Texas law, the dissent misconstrues our holding. We have not conditioned status as a claimant under the PPCIGA Act on particular state law definitions of the term “claimant.” Rather, we have adopted the Superior Court’s view that this term, as used in Section 991.1803(b)(1)(B) of the Act, means one possessed with a “covered claim,” subsuming, inter alia, losses occasioned to third parties caused by the insured, and for which the insured would be entitled to recompense from its insurer, but for the insurer insolvency. See Keystone, 777 A.2d at 92. As Judge Lally-Green explained, the potential for choice-of-law questions arises in connection with the interpretation of the insurance policy terms to determine whether the insurer would have been required to fund liability on the individual harm asserted, not with respect to construction of the terms “covered claim” and “claimant” set forth in the PPCIGA Act. See Keystone, 777 A.2d at 92-93.⁷ The dissent does not dispute that damages in a Texas wrongful death action are determined based on the individual losses of each of the beneficiaries. See generally 77 Tex. Jur.3d Wrongful Death § 9 (2003). The only remaining issue, then (assuming relevance of Texas law on the preceding question), is whether, and to what extent, the American Eagle policy insured Keystone against this form of consequential damages. See generally 44 AM.JuR.2n Insurance § 1557 (2002).

Respecting the dissent’s assertion that the language of the underlying policy should not affect who is possessed with a covered claim, as we have indicated, this issue was resolved contra to the dissent’s position in Bell v. Slezak, 571 Pa. at 333, 812 A.2d at 566. Bell expressly held that third-party plaintiffs holding judgments against an insured (or who are obligees under a binding settlement agreement) are claimants under the PPCIGA Act, see id. at 344, 812 A.2d at 572-73. The suggestion that the Act creates tiers of such third-party claimants is unsupported by the terms of the PPCIGA Act— nothing in the enactment indicates that those possessed with derivative claims are any less “claimants” than those possessed with direct claims. Moreover, the dissent’s indication that our interpretation effectively eliminates the statutory cap on recovery, see Dissenting Opinion, Op. at 305, is overstatement, since the cap by its terms functions in all instances in which an individual covered claim exceeds $300,000.

Finally, with regard to the dissent’s policy discussion, we recognize that there are mixed considerations involved. The dissenting opinion, on the other hand, gives little account for the substantial adverse effect its interpretation would impose on claimants as well as policyholders (whose financial interests the statute expressly seeks to protect) as it proceeds afield from the expressed provisions of the Act. Accord Oglesby, 832 P.2d at 840 (“A finding that only one claim may arise out of a single occurrence would largely defeat the remedial purpose of the [state guaranty association enactment] — to protect claimants and policyholders from financial losses associated with the insolvency of an insurance company.”); Potts, 550 S.E.2d at 665-66 (same). While it may well be that adjustments by the General Assembly to the PPCIGA scheme will at some point be necessary in order to maintain its fiscal integrity, it exceeds our role to infer that the Legislature intended to include an occurrence-based limitation in a statute which, on its terms, lacks one. Accord Oglesby, 832 P.2d at 840 (“There is no basis for substituting the word ‘occurrence’ for ‘claim’ in order to aggregate multiple claims arising from a single accident.”); Potts, 550 S.E.2d at 665-66 (same).

The order of the Superior Court is affirmed.

Justice EAKIN did not participate in the consideration or decision of this case. Former Chief Justice ZAPPALA did not participate in the decision of this case. Justice CASTILLE files a dissenting opinion.

1 . Act of December 12, 1994, P.L. 1005, No. 137 § 1 (as amended, 40 P.S. §§ 991.1801-991.1820) (the "PPCIGA Act”). This legislation superseded the former Pennsylvania Insurance Guaranty Association Act, Act. of Nov. 25, 1970, P.L. 716, No. 232 (as amended 40 P.S. §§ 1701.101-1701.605), which was the enabling legislation for PPCIGA’s predecessor, the Pennsylvania Insurance Guaranty Association.

2 . Section 1803(b), 40 P.S. § 991.1803, states, in relevant part:

(b) [PPCIGA] shall have the following powers and duties:

(l)(i) To be obligated to pay covered claims existing prior [to] the determination of the insolvency.... Any obligation of the association to defend an insured shall cease upon the association’s payment or tender of an amount equal to the lesser of the association's covered claim obligation or the applicable policy limit. Such obligation shall be satisfied by paying to the claimant an amount as follows:

(B) An amount not exceeding three hundred thousand ($300,000) dollars per claimant for all other covered claims.

40 P.S. § 991.1803(b)(l)(i).

3 . The record is vague concerning the timing and scope of the discussions between Keystone and PPCIGA; however, the final judgment against Keystone entered by the Texas district court reflects that “[a]s a result of [PPCIGA]’s failure to recognize policy limits of $1,500,000 and their failure to settle the case for policy limits, Keystone was forced to enter into the settlement to protect its assets.”

4 . The statute also requires that the claimant or insured be a Commonwealth resident at the time of the insured event, or the property from which the claim arises be permanently located in the Commonwealth. See 40 P.S. § 881.1802 (definition of "covered claim”).

5 . Compare, e.g., West Virginia Ins. Guaranty Ass’n v. Potts, 209 W.Va. 682, 550 S.E.2d 660, 665-66 (W.Va.2001); Oglesby v. Liberty Mutual Ins. Co., 832 P.2d 834, 840-41 (Okla.1992), with Builders Transport v. S.C. Prop. & Cas., 307 S.C. 398, 415 S.E.2d 419, 423 (S.C.1992); Florida Ins. Guaranty Ass'n v. Cole, 573 So.2d 868, 870-71 (Fla.App. 1990).

6 . We do not suggest that there may not be other forms of limitations, definitional or otherwise, which may be discerned in the process of construing the policy at issue. Other than the response to the dissent, our focus here has been on answering the question presented in the case, namely, whether summary judgment was properly entered on the reasons offered by the common pleas court.

7 . As an aside, however, it is interesting to note that, in holding that a statutory "per person" limitation upon wrongful death claims against governmental units referred to the person injured as opposed to the derivative beneficiaries, the Texas Supreme Court expressly distinguished its legislature’s use of the term "per person" from the broader, “per claimant” formulation, the latter of which the court employed when referring to the beneficiaries. See City of Austin v. Cooksey, 570 S.W.2d 386, 388 (Tex. 1978).