Sorber v. American Motorists Insurance

680 A.2d 881, 451 Pa. Super. 507, 1996 Pa. Super. LEXIS 2130

• Court: Superior Court of Pennsylvania
• Decided: July 12, 1996
• Status: Published

Opinions

HESTER, Judge.

American Motorists Insurance Company appeals from the August 10,1995 order¹ entered by the trial court in this action which was filed by appellant’s insureds, Bradley R. and Phyllis Sorber. We affirm.

The record reveals the following. Appellant’s insureds, Bradley R. and Phyllis Sorber (appellees), were involved in an automobile accident on August 1, 1992, with Daniel Agresta, the tortfeasor. Anthem Insurance Company insured Daniel Agresta. On behalf of Agresta, Anthem tendered a partial settlement of $40,000 of the tortfeasor’s face amount of $50,-000 liability, or eighty percent of the policy. The issues of liability and damages had not yet been determined. Appellees informed appellant that they desired to accept the proposed settlement as long as the settlement did not preclude their claim for the underinsured coverage under their insurance policy with appellant. Appellant refused to agree to any proposed settlement for less than the face amount of the tortfeasor’s policy for bodily injury liability. On July 17, 1995, appellees filed a praecipe for a writ of summons and on July 24, 1995, a petition to resolve their rights under their policy.

The court issued a rule to show cause and then filed the contested order. In the order, the trial court offered appellant two choices. Either it could pay appellees the $40,000 which had been offered by the tortfeasor’s insurer from the $50,000 face value of the tortfeasor’s policy within ten days and preserve its right to proceed against the other insurer in the trial as subrogee, or appellees could settle the action against the tortfeasor for the $40,000 offered. Appellees nevertheless then would be permitted to go forward with arbitration regarding the amount of their uninsured motorist’s claim, with appellant receiving credit toward the unexhausted underinsured motorist coverage for the gap between underinsured motorist coverage liability and the face amount of the tortfeasor’s policy. Appellant wished to avoid either agreeing to the settlement or tendering its draft now since liability and damages have yet to be determined through arbitration. This appeal followed.

In Boyle v. Erie Insurance Co., 441 Pa.Super. 103, 656 A.2d 941 (1995), we declared that an exhaustion clause which requires that the limits of bodily insurance coverage must be exhausted prior to any claim for underinsured motorist coverage was against public policy and did not preclude recovery by the insured from underinsurance motorist coverage. We nevertheless required that a credit must be given to the insured’s insurance company for any difference between such a settlement and the ultimate award of damages. In Chambers v. Aetna Casualty, 442 Pa.Super. 155, 658 A.2d 1346 (1995), we expressly determined that failure to settle a claim for the tortfeasor’s full policy face value did not bar an insured’s subsequent claim for underinsurance motorist coverage but held that the insurer could not also be required to pay the insured any gap between the partial settlement and the limits of the underinsurance coverage. The trial court simply is applying this precedent in the instant case.

Appellant first argues that Chambers is not binding. It argues that the Supreme Court has not yet denied a pending petition for allowance of appeal filed in the Chambers case. It therefore claims Chambers is not binding precedent. We reject this claim. As long as the decision has not been overturned by our Supreme Court, it remains binding precedent. Consequently, the trial court order is proper.

Appellant next claims that although a petition for allowance of appeal was denied by our Supreme Court in Boyle, Boyle is distinguishable on its facts. Appellant notes that whereas the insured in Boyle actually had settled with the tortfeasor, only a proposed settlement has been offered at this point in the present case. Further, appellant asserts there was a considerable and unreasonable delay of ten months by the insurer in Boyle; whereas in the instant case only two months have elapsed since the proposed settlement offer. Therefore, appellant asserts the trial court’s order is premature, and it is unfair to force it to settle now for less than the face value of the tortfeasor’s policy or tender its draft to its insured and pursue its subrogation rights.

We disagree. The reasoning in Boyle applies herein even though the period since the offer of settlement is short. If the insureds wish to accept the tender of less than the face amount of the tortfeasor’s policy, and the insurer nonetheless is to receive a credit against the uninsured motorists’ award for the full value of the policy, Boyle is satisfied. Boyle stands for the proposition that an insurer may not unreasonably withhold permission to settle for less than the face value of the tortfeasor’s policy limits when it will be protected by a credit for the difference against any liability it may incur for under-insurance coverage. That reasoning applies herein. Two months is sufficient time to consider a settlement offer. Further, the fact that a settlement has not yet occurred does not alter this.

In this case, appellant was given a credit to insulate it against any liability for underinsured payments for the difference between the settlement and the face value of the tortfeasor’s policy. The settlement herein represented eighty percent of the face value of the tortfeasor’s liability coverage. Appellant has not alleged any concrete benefit from delay or what prejudice will occur by not delaying, other than it must accept the settlement and waive its subrogation rights or tender the draft to its insureds and pursue its subrogation rights. We already have declared that exhaustion clauses as a predicate for coverage under underinsurance provisions of an insurance contract are void as against public policy. This, in reality, is what appellant is doing by not approving the settlement. Accordingly, we conclude that order of the trial court is proper.

Order affirmed.

McEWEN, J., files a concurring statement and concurs in the result.

1 . We consider the instant order a declaration of the insured’s rights under the policy. Accordingly, it is a final, appealable order. See Palladino v. Dunn, 361 Pa.Super. 99, 521 A.2d 946 (1987)