Sparler v. Fireman's Insurance Co. of Newark

521 A.2d 433, 360 Pa. Super. 597, 1987 Pa. Super. LEXIS 7000

• Court: Supreme Court of Pennsylvania
• Decided: February 4, 1987
• Docket: 256
• Status: Published

Opinions

WIEAND, Judge:

In this amicable action for declaratory judgment, submitted on an agreed statement of facts, the trial court was asked to determine whether Fireman’s Insurance Company of Newark, New Jersey (Fireman’s) was liable to its insured, Kenneth J. Sparler, for underinsured motorist coverage. The trial court entered judgment in favor of the insurance company, and Sparler appealed. We affirm.

The agreed statement of facts disclosed that Sparler had sustained personal injuries as a result of an intersectional, vehicular accident in which a vehicle operated by Thomas Garber had violated the mandate of a stop sign. Sparler’s losses were in excess of forty thousand ($40,000.00) dollars. He settled his claim against Garber for twenty-five thousand ($25,000.00) dollars, this being the limit of the liability of Garber’s insurance carrier under the terms of its policy. In connection with the settlement, Sparler and his wife executed a general release. Sparler then made a claim against Fireman’s, his own insurance carrier, for underinsured motorist benefits. Fireman’s denied liability. The parties thereafter commenced an amicable action for declaratory judgment, requesting the trial court to determine whether the insurance policy issued by Fireman’s rendered it liable to Sparler for underinsurance benefits, and if so, whether the general release executed in connection with the third party settlement operated to bar Sparler’s recovery of such benefits from his own insurance carrier. The trial court held that although the insurance policy did establish Sparler’s right to recover underinsurance benefits, he was precluded from recovering the same because of the terms of the general release which he had executed when he settled his third party claim. Therefore, judgment was entered in favor of Fireman’s. .

On appeal, Sparler contends that because the general release which he had executed in favor of the third party tortfeasor was not intended to affect the contractual liability of Fireman’s, the release could not operate to bar his recovery from Fireman’s of underinsurance benefits. We agree with this contention.

Written releases are construed according to the rules governing the construction of contracts generally. 76 C.J.S. Release § 38 (1952). A release normally covers only such matters as can fairly be said to have been within the contemplation of the parties when the release was given. Estate of Bodnar, 472 Pa. 383, 387, 372 A.2d 746, 748 (1977); In re Jones & Laughlin Steel Corp., 328 Pa.Super. 442, 456-457, 477 A.2d 527, 534 (1984); Gateway Center Corp. v. Merriam, 290 Pa.Super. 419, 425, 434 A.2d 823, 826 (1981). The intention of the parties to a written release is paramount, and in construing a release, a court should adopt an interpretation which, under all of the circumstances, “ascribes the most reasonable, probable and natural conduct of the parties, bearing in mind the objects manifestly to be accomplished.” General Mills, Inc. v. Snavely, 203 Pa.Super. 162, 168, 199 A.2d 540, 543 (1964). See: Unit Vending Corp. v. Lacas, 410 Pa. 614, 617, 190 A.2d 298, 300 (1963); Village Beer and Beverage, Inc. v. Vernon D. Cox and Co., 327 Pa.Super. 99, 107, 475 A.2d 117, 121 (1984). Although a court will not relieve the parties of the effect of an improvident contract, it must not allow a “rigid literalness” to be used to create an improvident contract for the parties contrary to their intent. Mowry v. McWherter, 365 Pa. 232, 238, 74 A.2d 154, 158 (1950). Thus, the words of a release “should not be construed to extend beyond the express consideration mentioned so as to make a release for the parties which they never intended or contemplated.” Brill’s Estate, 337 Pa. 525, 527, 12 A.2d 50, 52 (1940). See: Furtek v. West Deer Township, 19 Pa.D. & C.2d 169, 178, aff'd, 191 Pa.Super. 405, 156 A.2d 581, 585 (1959).

The general release executed by Sparler and his wife in the instant case provided as follows:

That we Kenneth Sparler and Jane Sparler, ... for the sole consideration of Twenty-Five Thousand dollars ($25,-000.00), to us in hand paid, receipt whereof is hereby jointly and severally acknowledged, have remised, released, and forever discharged and ... do hereby remise, release and forever discharge Thomas H. Garber and his ... successors and assigns ... and all other persons, firms, and corporations, of and from any and all claims, demands, rights, and causes of action, of whatsoever kind or nature, arising from or by reason of any and all known and unknown, foreseen and unforeseen bodily and personal injuries, loss and damage to property, and the consequences thereof, resulting, and to result, from an accident which happened on or about the 30th day of April 1983....

These terms were contained in a standard release form. In the blank space provided on the form for the name of the party being released and discharged, the name “Thomas H. Garber” had been inserted. Although the phrase “and all other persons, firms and corporations” appeared in boilerplate print following Garber’s name, the release did not otherwise suggest or identify Fireman’s as a party being released or discharged. The only reasonable interpretation of the release, when it is considered in light of the circumstances surrounding its execution, is that Sparler did not intend to release Fireman’s from its contractual obligation. Fireman’s was not a party to the release, did not negotiate to reduce any obligations which it might have had under the policy, and paid no consideration to be released from any such contractual obligations. To interpret the release as discharging Fireman’s alleged contractual obligations, under these circumstances, would be to insert a benefit for which no separate consideration was paid and which does not appear to have been within the contemplation of the parties.

The trial court’s broad interpretation of Sparler’s general release was based upon a decision of the United States District Court for the Eastern District of Pennsylvania in Dorenzo v. General Motors Corp., 334 F.Supp. 1155 (E.D. Pa.1971), appeal dismissed, 474 F.2d 1339 (3d Cir.1973). Dorenzo, however, is inapposite to the instant case. There, the party claiming the benefit of the general release was a joint tortfeasor whose alleged liability, like that of the released party, had been premised on a single tortious injury to the plaintiff. Here, however, the party seeking to benefit from the general release is an insurer whose contractual liability is separate and apart from the tortious liability of the released tortfeasor.

This is an important distinction. It was recognized both in Cingoranelli v. St. Paul Fire & Marine Insurance Co., 658 P.2d 863, 39 A.L.R.4th 366 (Colo.1983) (en banc) and in Bailey v. Aetna Casualty and Surety Co., 497 S.W.2d 816 (Mo.Ct.App.1973). In Cingoranelli, the plaintiff had been injured when the car in which she was a passenger collided with an automobile driven by Bertha Betonski. The driver of the vehicle in which the plaintiff had been riding was insured by St. Paul Fire & Marine Insurance Co. (St. Paul). After the plaintiff had agreed to settle her claim for bodily injury against Betonski, the following release was executed: Cingoranelli v. St. Paul Fire & Marine Insurance Co., supra 658 P.2d at 864 (emphasis added). Thereafter, the plaintiff filed personal injury protection (PIP) claims against St. Paul under Colorado’s no-fault insurance statute. When St. Paul refused payment, the plaintiff commenced an action to recover the PIP benefits. The trial court held that the release of the tortfeasor operated as a total bar to all claims, including that for PIP benefits against St. Paul. The Supreme Court of Colorado reversed, observing that the plaintiff’s PIP claims against St. Paul were “fundamentally distinct in character” from her tort claim against Betonski. Id. 658 P.2d at 868. The PIP claim, the Court noted, was a direct contractual claim against the PIP insurer. Id. 658 P.2d at 867. The only similarities between this claim and the tort claim, the Court said, were purely coincidental; they both arose from an automobile accident, and the ultimate financial responsibility for both rested with St. Paul. Id. 658 P.2d at 868. Therefore, the Court held, “an automobile accident victim’s general release of a tortfeasor, in the absence of a specific provision which unequivocally includes PIP claims within the terms of the release, does not operate to release an automobile insurer from its obligation to pay PIP benefits to the injured victim.” Id. 658 P.2d at 869.

“I, Mary Cingoranelli, ... for the sole consideration of twenty-five thousand dollars ($25,000.00), to me in hand paid, receipt whereof is hereby acknowledged, have remised, released, and forever discharged, and ... do hereby remise, release, and forever discharge, Bertha Betonski and ... her ... successors and assigns ... and all other persons, firms, and corporations, of and from any and all claims, demands, rights, or causes of action of whatsoever kind or nature, arising from or by reason of any and all known and unknown, foreseen and unforeseen bodily and personal injuries, damage to property, and the consequences thereof, resulting, or to result, from a certain accident which happened on or about the 7th day of April 1975, for which I have claimed the said Bertha Betonski to be legally liable, which liability is hereby expressly denied.”

The plaintiff in Bailey also had been injured as a result of an automobile collision. The plaintiff’s medical expenses as a result of the accident were covered by a policy of insurance which had been purchased by her mother from Aetna Casualty and Surety Co. (Aetna). Aetna was notified of the collision and of the medical expenses incurred by the plaintiff but refused to make payment. Meanwhile, the plaintiff executed a general release in which the driver of the other vehicle and “any and all other persons, firms and corporations” were discharged from “any and all claims, actions, causes of action and expense” arising out of the accident. Aetna thereafter argued that as a result of the general release of the driver, it had been discharged from its obligation to pay the plaintiff’s medical expenses. The Missouri Court of Appeals disagreed, holding that the release had not relieved Aetna of its contractual obligation. Recognizing that the intention of the parties was the ultimate test for determining the effect of a release, the Court analyzed the facts underlying the execution of the instrument.

Aetna was not a party to the litigation giving rise to the Release nor was it privy to the defendant tort-feasors. Its obligation to pay medical expenses to Jacquelyn Bailey [the plaintiff] was then in dispute and her claim in the litigation was not only against different persons but was also in tort as distinguished from the present claim on contract asserted against Aetna.

Bailey v. Aetna Casualty and Surety Co., supra at 820. Under these circumstances, the Court concluded, “[i]t would require a degree of judicial agility of which we are incapable, to read into this Release any intention on the part of plaintiff to release her claim for medical expenses against Aetna under its policy of insurance.” Id.

We find the reasoning followed in Cingoranelli and Bailey to be persuasive and, therefore, we adopt it as our own. We conclude that in the absence of unequivocal language to the contrary, a general release of a third party tortfeasor will not be held to discharge the separate contractual obligation of an insurance carrier to provide under-insurance benefits.

In the instant case, the general release executed by Sparler in favor of the third party tortfeasor did not contain language unequivocally discharging Fireman’s from its alleged contractual obligation to provide underinsurance coverage to Sparler. Thus, contrary to the conclusion reached by the trial court, any right to underinsurance benefits which Sparler might have acquired by virtue of the contract was not relinquished by the release which he had executed in favor of the third party tortfeasor.

Although the trial court’s reasoning regarding the release was incorrect, it does not follow that its order disallowing the recovery of underinsurance benefits must be reversed. We are required to affirm the judgment entered by the trial court if it was correct for any reason. E.J. McAleer & Co. v. Iceland Products, Inc., 475 Pa. 610, 613 n. 4, 381 A.2d 441, 443 n. 4 (1977); Gwinn v. Kane, 465 Pa. 269, 279 n. 12, 348 A.2d 900, 905 n. 12 (1975); Green v. Juneja, 337 Pa.Super. 460, 464 n. 5, 487 A.2d 36, 39 n. 5 (1985); Emerick v. Carson, 325 Pa.Super. 308, 316 n. 2, 472 A.2d 1133, 1137 n. 2 (1984).

Fireman’s argued in the trial court and again on appeal that Sparler was not entitled to underinsurance benefits under the terms of its policy. The trial court concluded, however, that there was coverage and that Sparler was entitled to recover the difference between his expenses of forty thousand ($40,000.00) dollars and the twenty-five thousand ($25,000.00) dollars which he was able to recover from the third party tortfeasor. The amount of this difference, of course, was fifteen thousand ($15,000.00) dollars. This requires that we examine the terms of the policy.

Part 6 of the policy issued by Fireman’s provided for “Uninsured (and Underinsured) Motorist” coverage. The amount of the coverage provided was fifteen thousand ($15,000.00) dollars for each person and thirty thousand ($30,000.00) dollars for each accident. The policy provided:

By “uninsured motor vehicle” we mean a land motor vehicle ...

(a) with no bodily injury liability bond or policy applying at the time of the accident.

(b) with minimum legal liability bond or policy applying at the time of the accident as required by law governing the insured auto. However, the minimum is less than the Limit of Coverage of Part 6.

(c) With a bodily injury liability bond or policy applying at the time of the accident which is less than the minimum legal Limit of Coverage where the insured auto is principally garaged.

Another provision pertaining to underinsured motorist coverage is found in Subdivision D of Part 6 as follows:

Any amounts payable under Part 6 shall be reduced by all sums

(a) paid because of bodily injury by or on behalf of someone who may be liable.

Subparagraph (a) of the definitional section by its terms has application to an “uninsured” motor vehicle and not to a vehicle which is “underinsured.” It is subparagraphs (b) and (c), rather, which refer to a third party vehicle which, although insured, is underinsured. The third party vehicle was not “underinsured” according to subparagraph (b), because, as the parties have agreed, Sparler received from the third party tortfeasor’s insurance carrier a sum greater than the “Limit of Coverage of Part 6” of the Fireman’s policy. Because the parties have not stipulated as to the place where the third party vehicle was “principally garaged,” however, we are unable to know whether that vehicle, although insured, was underinsured within the meaning of subparagraph (c).¹

Still, it is clear that Sparler in fact was paid the sum of twenty-five thousand ($25,000.00) dollars by or on behalf of the third party tortfeasor. According to the provision contained in Subdivision D of the policy, the twenty-five thousand ($25,000.00) dollars received by Sparler by or on behalf of the third party tortfeasor must be set off against any amount payable by virtue of the “Uninsured (and Underinsured) Motorist” coverage provided in Part 6 of the policy. When the twenty-five thousand ($25,000.00) dollar recovery is set off against the fifteen thousand ($15,000.00) dollars which Fireman’s agreed to pay to Sparler pursuant to Section 6, it becomes evident that Fireman’s has no further liability for underinsured motorist coverage.

We conclude, therefore, that Sparler’s claim for underinsured motorist coverage has been precluded not because of the terms of the third party release which he executed, as the trial court concluded,² but by the very terms of the policy itself. Because Sparler’s third party recovery was in excess of and had to be set off against the underinsured motorist coverage provided by Fireman’s policy, the judgment entered in favor of Fireman’s was proper and must be affirmed.

Affirmed.

POPOVICH, J., files a concurring opinion. JOHNSON, J., files a concurring opinion in which CAVANAUGH, J., joins. DEL SOLE, J., files a concurring and dissenting opinion.

1 . By thus interpreting the policy, we do not suggest that the terms "uninsured" and "underinsured” can be used interchangeably. We conclude merely that where, as here, the expressed intent of the parties to an insurance contract is to subsume the definition of "underinsured motor vehicle” within a contractual provision which purports to define “uninsured motor vehicle,” it is necessary to look to that provision in order to ascertain the meaning of the term "underinsured motor vehicle.” The policy issued by Fireman’s specifically states that "[t]he term uninsured motor vehicle also includes an underinsured motor vehicle.” Because the term underinsured motor vehicle is not otherwise defined in Part 6 of the policy, it is necessary to turn for guidance to the definitional section for an "uninsured motor vehicle.” That provision contains two subsections, (b) and (c), which obviously do not describe an uninsured motor vehicle, but which provide generally accepted definitions of underinsurance.

The language of a contract should be given its ordinary and usual meaning unless it is clear that some other meaning was intended by the parties. D’Orazio v. Masciantonio, 345 Pa. 428, 432, 29 A.2d 43, 45 (1943); B.F. Goodrich Co. v. Wilson, 337 Pa. 333, 338, 10 A.2d 422, 423 (1940); Rothstein v. Aetna Insurance Co., 216 Pa.Super. 418, 423, 268 A.2d 233, 235 (1970). No provision within a contract is to be treated as surplusage or redundant if any reasonable meaning consistent with the other parts can be given to it. See: General Mills, Inc. v. Snavely, 203 Pa.Super. 162, 168, 199 A.2d 540, 544 (1964). Moreover, legal terms of art, as well as common words of accepted usage, are not to be construed in a manner which would render contractual provisions internally inconsistent. See: Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1013 (3d Cir.1980).

The insurance policy in the instant case was certainly intended to provide underinsurance coverage. According to the terms of the agreement, the definition of underinsured motor vehicles was subsumed in the definition of uninsured motor vehicles. To conclude that the policy does not define underinsurance merely because it fails to contain a separate definitional section for “underinsured motor vehicles," would not only be contrary to the expressed intent of the parties, but would make meaningless surplusage of subsections (b) and (c) and of the contractual provision which states: "The term uninsured motor vehicle also includes an underinsured motor vehicle.” By looking to the definitional provision for uninsured motor vehicles to ascertain the meaning of the term "underinsured motor vehicle," we are able to interpret the contractual provisions of Part 6 with internal consistency.

2 . The trial court also denied recovery on the grounds that'Sparler had settled with the third party tortfeasor without Fireman’s consent. Such consent was required by a clause in the policy which provided: "We do not cover ... (d) any person if that person ... settles the bodily injury claim without our written consent." In light of our disposition of this case, we need not review the propriety of the court’s determination of this issue. We observe, however, that the trial court was not asked by the parties in the action for declaratory judgment to decide this issue. Moreover, the stipulation of facts fails to contain sufficient facts to permit a determination. The statement of agreed facts submitted by the parties to the trial court does not disclose whether Fireman’s consented to the third party settlement, or whether, if not, Fireman’s was prejudiced by Sparler’s settlement of his third party action for policy limits. See: Roberts v. Fireman’s Insurance Co. of Newark, 376 Pa. 99, 101 A.2d 747 (1954) (release of third party tortfeasor may discharge insurer if the release defeats or impairs insurer’s right of subrogation; a key consideration in determining liability is whether insurer had knowledge of release). See also: Bradford v. American Mutual Liability Insurance Co., 213 Pa.Super. 8, 245 A.2d 748 (1968); Murphy & Co. v. Manufacturers’ Casualty Co., 89 Pa.Super. 281 (1926).