White v. Concord Mutual Insurance

442 A.2d 713, 296 Pa. Super. 171

• Court: Superior Court of Pennsylvania
• Decided: May 6, 1982
• Docket: 492
• Status: Published

Opinions

SPAETH, Judge:

This is an appeal from an order denying a petition for the appointment of an arbitrator to decide an uninsured motorist claim. In denying the petition, the lower court held that the uninsured motorist coverage required by the Act of August 14, 1963, as amended, 40 P.S. § 2000(a), does not extend to a case where all of the automobiles involved in an accident have at least the minimum amount of liability insurance required by Pennsylvania law but where because of the number of persons injured a claimant recovers less than the minimum amount. After the appeal had been argued before a panel of this court, we ordered reargument before the court en banc. We now affirm.

On July 2, 1977, appellant was injured while a passenger in an automobile that was insured by the Aetna Insurance Company under a $35,000 single limit policy. The other automobile involved in the accident was insured by State Farm Mutual Insurance Company under a policy with limits of $15,000 per person and $30,000 per accident. Because other persons were injured in the accident and participated in the recovery, only $13,000 was available to appellant— $7,000 from one carrier and $6,000 from the other. Claiming that his damages exceeded $13,000, appellant filed claims under the uninsured motorist provisions of his father’s and stepmother’s insurance policies, which had been issued by appellees, Concord Mutual Insurance Company and Commercial Union Insurance Company.¹ Appellees denied appellant’s claims and also, each refused to appoint an arbitrator.

Appellant filed in the lower court a “Petition for the Appointment of Arbitrator Pursuant to Uninsured Motorist Coverage.” This petition alleged only that appellant was insured under policies containing uninsured motorist coverage, that he had been severely injured in a motor vehicle collision, that a dispute had arisen as to whether an uninsured motorist was responsible, and that appellees had not complied with his demand for arbitration. However, the petition was accompanied by a memorandum of law, which recited the additional facts that the tortfeasors were insured but that appellant’s recovery was limited to $7,000 from one insurance carrier and $6,000 from the other because of the existence of multiple claimants, and which argued that this constituted a “denial of coverage” because these amounts were less than the minimum coverage required by law. Also attached to the petition, although not specifically incorporated into it, were copies of the arbitration clauses from both appellees’ policies and the definition of an “uninsured automobile” from appellee Concord Mutual’s policy.

Appellee Commercial Union Insurance Company filed an answer to appellant’s petition for the appointment of an arbitrator, denying that an uninsured motorist had been involved in the accident, and alleging in new matter the identities and policy limits of the insurance carriers that provided coverage to the owner of the automobile in which appellant was a passenger and to the owner of the other automobile involved in the accident.² This answer was also accompanied by a memorandum of law. Appellant filed a reply to Commercial Union’s new matter, which again admitted that both tortfeasors had been insured while repeating the claim that the tortfeasors’ insurance carriers had “denied coverage as to a portion of the applicable limits[.]”

Appellant’s only argument on appeal is that the issue of whether uninsured motorist benefits are available under the facts of this case is within the scope of the arbitration clauses of appellees’ policies, and that the lower court therefore erred by doing anything other than appointing an arbitrator as requested in his petition.³

As a general rule, questions under an uninsured motorist clause with an arbitration provision are within the exclusive jurisdiction of the arbitrators. See, e.g., Preferred Risk Mut. Ins. Co. v. Martin, 436 Pa. 374, 260 A.2d 804, cert. denied, 398 U.S. 905, 90 S.Ct. 1697, 26 L.Ed.2d 65 (1970); Pennsylvania General Ins. Co. v. Barr, 435 Pa. 456, 257 A.2d 550 (1969); Merchants Mut. Ins. Co. v. American Arb. Ass’n, 433 Pa. 250, 248 A.2d 842 (1969); Harleysville Mut. Ins. Co. v. Medycki, 431 Pa. 67, 244 A.2d 655 (1968); National Grange Mut. Ins. Co. v. Kuhn, 428 Pa. 179, 236 A.2d 758 (1968); Smith v. Employers’ Liability Assurance Corp., Ltd., 217 Pa.Superior Ct. 31, 268 A.2d 200 (1970). In some cases, however, an appellate court has decided such questions. In United Services Auto Ass’n Appeal, 227 Pa.Superior Ct. 508, 323 A.2d 737 (1974), we had occasion to examine these cases, and concluded that

the rule, to which all the cases conform, is that where the application or construction of the uninsured motorist clause is at issue the dispute is within the exclusive jurisdiction of the arbitrators; the courts will take jurisdiction only where the claimant attacks a particular provision of the clause itself as being contrary to a constitutional, legislative, or administrative mandate, or against public policy, or unconscionable.

Id., 227 Pa.Super. at 516, 323 A.2d at 741 (footnotes omitted).

And see Wilbert v. Harleysville Mut. Ins. Co., 254 Pa.Superior Ct. 217, 220 n. 3, 385 A.2d 987, 983 n. 3 (1978).

Thus, in this case the lower court properly took jurisdiction if the effect of appellant’s claim is to attack the uninsured motorist clauses in appellees’ policies as being contrary to a constitutional, legislative, or administrative mandate.

As we have noted, appellant’s petition alleged that a dispute had arisen as to whether an uninsured motorist was involved in the accident, and appellee Commercial Union’s answer denied that any dispute had arisen as to whether an uninsured motorist was involved in the accident, since one of the automobiles was covered by a $35,000 single limit policy and the other by a policy with limits of $15,000 per person and $30,000 per accident. The lower court stated the issue before it as being “to what extent automobile casualty insurers writing business in Pennsylvania and thus required to afford uninsured motorist protection to their insured can be held to create a fund for settlement as to acts of an insured motorist where a castastrophic accident renderes [sic] the $15,000/$30,000 liability coverage required by the financial responsibility laws and actually maintained inadequate to compensate all victims for all losses.” Slip op. at 5 (emphasis in original; footnote omitted). Reflection will disclose that the pleadings; and the lower court’s understanding of them, as disclosed by its statement of the issue presented, bring this case within the rule of United Services Auto Ass’n Appeal, supra.

The definition of “uninsured automobile” in appellee Concord Mutual’s policy, which was attached to appellant’s petition, is taken verbatim from the regulations issued by the Insurance Commissioner.⁴ In those regulations an “uninsured automobile” is defined as

an automobile with respect to the ownership, maintenance or use of which there is, in at least the amounts specified by the financial responsibility law of the state in which the insured automobile is principally garaged, no bodily injury liability bond or insurance policy applicable at the time of the accident with respect to any person or organization legally responsible for the use of such automobile, or with respect to which there is a bodily injury liability bond or insurance policy applicable at the time of the accident but the company writing the same denies coverage thereunder[.]

31 Pa.Code § 63.2 (Exhibit C 11(c)(1)).⁵

Automobiles registered in Pennsylvania are required to be covered by liability insurance with limits of at least $15,000 per person and $30,000 per accident, 40 P.S. § 1009.104. Insurance in this amount constitutes proof of financial responsibility, 75 Pa.C.S.A. § 1747. Here, it was uncontested in the pleadings before the lower court that both automobiles had insurance in at least the required amounts. It was also uncontested that the carriers had not denied the applicability of their policies. Accordingly, the lower court found that under the Commissioner’s regulations, as reflected in the policies written by appellees, there was no uninsured automobile involved. (The court italicized its finding that the motorists were “insured.”) The court was then faced with appellant’s claim that automobiles that were “insured” according to the Commissioner’s regulations were nonetheless “uninsured” according to the requirements of the statute, 40 P.S. § 2000(a). It is apparent that this claim is but another way of saying that the Commissioner’s regulations are contrary to the statute. This case is therefore within the rule of United Services Auto Ass’n Appeal, from which it follows that the lower court properly denied the petition for appointment of an arbitrator and took jurisdiction so that it could itself decide the validity of appellant’s attack on the uninsured motorist clauses in appellees’ policies.

The dissent argues that the holding of the Supreme Court in National Grange Mutual Insurance Company v. Kuhn, supra, requires that this case be submitted to arbitration. Dissenting at 723-725. It is true that National Grange, in which the Supreme Court ordered arbitration, did involve a dispute as to whether a motorist was uninsured or not. However, there is no indication that that determination depended on anything but factual questions, much less that it depended on the validity of the Insurance Commissioner’s definition of “uninsured automobile.”

The only authority appellant cites in support of arbitration is Mapp v. Nationwide Ins. Co., 268 Pa.Superior Ct. 404, 408 A.2d 850 (1979), where on facts similar to those in this case a panel of this court held that the lower court’s refusal to appoint an arbitrator was error. The same result has since been reached by two other cases, Gordon v. Keystone Insurance Company, 277 Pa.Superior Ct. 198, 419 A.2d 730 (1980); Hart v. State Farm Ins. Co., 288 Pa.Superior Ct. 53, 431 A.2d 283 (1981). However, Mapp was wrongly decided, and we now overrule it, and, with it, Gordon and Hart.

Mapp contains no analysis and cites only three cases: Runewicz v. Keystone Ins. Co., 476 Pa. 456, 383 A.2d 189 (1978); Grange Mutual Casualty Co. v. Pennsylvania Manufacturers Association Insurance Co., 438 Pa. 95, 263 A.2d 732 (1970); and Gallagher v. Educator and Executive Insurers, Inc., 252 Pa.Superior Ct. 414, 381 A.2d 986 (1977). These cases are distinguishable.⁶

In Runewicz, where the underlying issue was basically the same as in this case, the insurance company proceeded to arbitration without objection, in contrast to this case, where the insurance companies have refused to arbitrate. The Supreme Court sustained the arbitrators’ award on the grounds that judicial review of common law arbitration is extremely narrow and the insurance company had not made the required “showing of denial of a hearing or fraud, misconduct, corruption, or similar irregularity leading to an unjust, inequitable or unconscionable award.” 476 Pa. at 461, 383 A.2d at 192. The majority did not reach the issue of whether the policy definition of “uninsured automobile” was a matter that the parties were required to submit to arbitration. This procedural difference from the present case is critical. For although “[t]he issue of whether [a] dispute is one that is covered by the terms of the arbitration agreement is one for the court to determine,” Women’s SPCA v. Savage, 440 Pa. 34, 36, 269 A.2d 888, 890 (1970), a party that proceeds to arbitration without objecting that the matter at issue is outside the arbitration agreement waives that objection. Cf., Rosenbaum v. Drucker, 346 Pa. 434, 31 A.2d 117 (1943); Britex Waste Co. v. Nathan Schwab & Sons, 139 Pa.Superior Ct. 474, 12 A.2d 473 (1940). Thus, when the insurance company in Runewicz proceeded to arbitration without objection it bound itself to accept the arbitrators’ result subject only to the extremely narrow judicial review of common law arbitration.

In Grange Mutual the “other” automobile’s insurance company disclaimed coverage on the ground that the driver had not obtained the insured’s permission to use it. In response to an action by the victim’s insurance company seeking a declaratory judgment that the driver was covered, and therefore was not “uninsured,” the court ordered arbitration of the purely factual issue of whether that driver had the insured’s permission.

Finally, in Gallagher the insured appealed an award in the insurance company’s favor on the ground that the arbitrators might have relied on exclusionary language in the policy, which she claimed was invalid under Pennsylvania law. This court upheld the award, noting that the insurance company had raised other defenses, and finding no evidence that the arbitrators had relied on the exclusion.

We have already referred to the statute requiring uninsured motorist coverage. The statute provides:

No motor vehicle liability policy of insurance insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this State with respect to any motor vehicle registered or principally garaged in this State, unless coverage is provided therein or supplemental thereto in limits for bodily injury or death as are fixed from time to time' by the General Assembly in section 1421 of article XIV of “The Vehicle Code,” act of April 29, 1959 (P.L. 58), under provisions approved by the Insurance Commissioner, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death resulting therefrom[.]

Act of August 14, 1963, P.L. 909, as amended, 40 P.S. § 2000(a) (emphasis added).

The statute does not itself define “uninsured.” However, the statute requires the Insurance Commissioner to pass on the uninsured motorist provisions of automobile insurance policies, and we have already quoted the Commissioner’s regulation defining “uninsured automobile.” We agree with the lower court that under this definition, no uninsured automobile was involved in the accident in which appellant was injured.

Appellant points out that because other persons were injured in the accident there was less than $15,000 in coverage available to him from each policy. It may be granted that because of this fact, appellant did not recover an amount equal to the minimum amount of coverage required by Pennsylvania law. Thus it may be said that as to appellant, the automobiles involved in the accident were “underinsured,” or “partially” or “inadequately” insured. However, it does not follow that therefore the automobiles were “uninsured.”

On its face, “uninsured” cannot mean “underinsured” or “partially” or “inadequately” insured. If understood as a layman would understand the terms, “uninsured” means “no insurance,” while “underinsured” means “some insurance but not enough.”

To be sure, this common sense conclusion is not dispositive of appellant’s argument. “Uninsured” is a term of art, which, when used in its technical sense, may have a meaning not anticipated by one unfamiliar with the insurance business. However, looking to the Insurance Commissioner’s regulations does not help appellant. For as we have already seen, the Commissioner has defined “uninsured automobile” not as appellant would, exclusively in terms of a claimant’s recovery, but rather according to whether the automobile did or did not have the minimum insurance coverage required by law. By that definition, the automobiles involved in the accident in which appellant was injured were not “uninsured.”

In applying the Commissioner’s regulations, we are bound, as we are in applying a statute, to give plain words their plain meaning. Commonwealth v. Barnes & Tucker Co., 9 Pa.Comwlth. 1, 303 A.2d 544 (1973), rev’d on other grounds, 455 Pa. 392, 319 A.2d 871 (1974). Nothing could be plainer than the conclusion that under the regulations, the automobiles here were not “uninsured.”

Of course, the Commissioner may on occasion issue a regulation that is invalid because it is “contrary to a constitutional, legislative, or administrative mandate, or against public policy, or unconscionable.” United Services Auto Ass’n Appeal, supra. Here, however, we see no such infirmity. The legislature did not define “uninsured” in a manner inconsistent with the Commissioner’s definition; instead it gave no definition at all, preferring to leave definition to the Commissioner. Since insurance is a specialized area in which the Commissioner has expert knowledge, we are bound to defer to his definition. Feingold v. Bell of Pennsylvania, 477 Pa. 1, 383 A.2d 791 (1977). Nothing in his definition appears to us contrary to public policy or unconscionable.

The correctness of our conclusion is confirmed by the fact that the argument appellant makes to us has been made before, and has been almost universally rejected. In Travelers Ins. Co. v. Bouzer, 39 Cal.App.3d 992, 114 Cal.Rptr. 651 (1974), the court held that to allow recovery under an “uninsured motorist” policy where the motorist is insured up to the minimum amount required by law would convert “uninsured motorist” insurance into excess accident insurance.

This is not the coverage for which the insured paid a premium, nor would it conform to any rational public policy. We hesitate to contemplate what premiums insured motorists would have to pay for this coverage should this court declare that to be the proper interpretation of legislative intent.

Id. at 995, 114 Cal.Rptr. at 652-53.

This language has recently been quoted with approval by the Supreme Court of New Jersey. Gorton v. Reliance Ins. Co., 77 N.J. 563, 575, 391 A.2d 1219, 1225 (1978). The courts in many other states have reached the same result. E.g., Simonette v. Great American Ins. Co., 165 Conn. 466, 338 A.2d 453 (1973); Smiley v. Estate of Toney, 44 Ill.2d 127, 254 N.E.2d 440 (1969); Kemp v. Fidelity & Casualty Co. of New York, 512 S.W.2d 688 (Tex.1974); Strunk v. State Farm Mut. Auto. Ins. Co., 90 Wash.2d 210, 580 P.2d 622 (1978). The contrary position, as exemplified by Porter v. Empire Fire & Marine Ins. Co., 106 Ariz. 274, 475 P.2d 258, modified on other grounds, 106 Ariz. 345, 476 P.2d 155 (1970), has been considered and expressly rejected. E.g, Criterion Insurance Co. v. Anderson, 347 So.2d 384 (Ala.1977); Travelers Ins. Co. v. Bouzer, supra ; Golphin v. Home Indemnity Co., 284 So.2d 442 (Fla.Dist.Ct.App.1973). See also, Widiss, A Guide to Uninsured Motorist Coverage § 2.35A (1980 Supp.) (collecting cases).

It is true, as many of the cases cited above have observed, that a result of our conclusion is that an injured party may be less well off than he would have been if there had been an automobile involved in the accident that had no insurance at all. However, many carriers offer underinsurance coverage as a separate form of coverage that an insured may elect to purchase. In any event, anomaly or not, the result is compelled by a valid and unambiguous regulation, issued pursuant to statute. A different result can be achieved only through legislation. Some of the cases cited above have suggested that the uninsured motorist statute in question might be amended to provide coverage where the policy involved, although satisfying the financial responsibility law, is not sufficient to provide full compensation to the injured party.⁷ It has also been suggested that the present minimum amount of coverage required might be increased. These suggestions, however, are not for us to consider but for the Legislature.

Affirmed.

SHERTZ, J., files a dissenting opinion in which CER-CONE, President Judge, joins.

The decision in this case was rendered prior to the expiration of Judges SHERTZ and DiSALLE’s commission on the Superior Court of Pennsylvania.

1 . Appellant claimed that he was eligible to recover under a provision of these policies extending coverage to “relatives” of the respective named insureds. Appellee Commercial Union took the position in the lower court that appellant did not qualify as a “relative” of its named insured, his stepmother. That issue has not been presented to us and we need not consider it.

2 . Appellee Concord Mutual Insurance Company did not file an answer or otherwise participate in the proceedings in the lower court,' and there is nothing in the lower court’s record or opinion to indicate why. However, this court’s docket contains a notice of an order of the Supreme Court of Pennsylvania staying all proceedings involving claims against Concord Mutual. Reargument of this case before the court en banc was delayed until after this stay was ended. Concord Mutual filed a brief and participated in the reargument without objection from any other party.

3 . The dissent argues that the lower court should have considered only the averments of appellant’s petition. Dissenting at 720. While this would be the proper standard in ruling on a preliminary objection in the nature of a demurrer, Linda Coal and Supply Co. v. Tasa Coal Co., 416 Pa. 97, 204 A.2d 451 (1964), it is not the proper standard in ruling on a petition for the appointment of an arbitrator, for “[t]he issue of whether [a] dispute is one that is covered by the terms of the arbitration agreement is one for the court to determine,” Women’s SPCA v. Savage, 440 Pa. 34, 36, 269 A.2d 888, 890 (1970), and the court could not make such a determination based only on the averments of one party.

4 . The definition of “uninsured automobile” in appellee Commercial Union’s policy is not of record. No party has suggested that the proper disposition of this case might depend on any variation between Commercial Union’s definition and the Commissioner’s definition. Commercial Union’s definition is contained in its brief to us, at 3; we note that there are some minor differences in wording but the substance is identical to the Commissioner’s definition.

5 . This definition is part of a sample policy provided by the Commissioner. The regulations note that this is “the National standard form for this insurance.” 31 Pa.Code § 63.2(a).

6 . Also, it appears that Mapp, Gordon and Hart were contrary to Harmer v. State Farm Mutual Insurance Co., 238 Pa.Superior Ct. 773, 357 A.2d 224 (1976), which affirmed without opinion an order refusing to order arbitration in a case similar to this one. See Safeco Insurance Co. of America v. Wetherill, 622 F.2d 685, 690 (3d Cir. 1980).

7 . Several states, including Washington, Florida, and Louisiana, have amended their statutes to include such “underinsured” motorists. See Widiss, supra at §§ 2.38-2.39 (1980 Supp.). This action, it may be noted, further supports the conclusion that these and similar statutes (including Pennsylvania’s) may not be read to include “underinsured” automobile unless they do so expressly.