T & N PLC v. Pennsylvania Ins. Guar. Ass'n

Decision Date24 August 1992
Docket NumberCiv. A. No. 90-4946.
Citation800 F. Supp. 1259
CourtU.S. District Court — Eastern District of Pennsylvania

Philip L. Graham, Jr., Mark F. Rosenberg, Tariq Mundiya, New York City, Richard L. Berkman, Philadelphia, Pa., for plaintiff.

Joseph Hankins, Lise Luborsky, Philadelphia, Pa., for defendant.


VAN ANTWERPEN, District Judge.

This is an action for statutory benefits under the Pennsylvania Insurance Guaranty Association Act, 40 P.S. § 1701.101 et seq. Plaintiff, T & N plc ("T & N") has filed a three count complaint against Defendant Pennsylvania Insurance Guaranty Association ("PIGA") which is an unincorporated association of insurers created by statute to provide insolvency insurance for its members. T & N seeks damages against PIGA for its alleged failure to assume the payment obligations of the now insolvent American Mutual Liability Insurance Company. Count I of the Complaint was based upon the terms of a settlement agreement, and Count II of the Complaint was based upon certain insurance policies. The settlement agreement resolved insurance coverage claims between American Mutual and T & N which arose under certain insurance policies which were issued by American Mutual to Keasbey and Mattison Company, T & N's now dissolved but one-time subsidiary. In addition, T & N seeks damages for PIGA's alleged bad faith handling of T & N's claims under 42 Pa.C.S. § 8371 in Count III of the Complaint.

On May 28, 1992, this Court partially granted T & N's motion for summary judgment on Count I of the Complaint and granted PIGA's motion for summary judgment on Count II of the Complaint. The Court found that the settlement agreement arose out of an insurance policy and that a separate action could not be maintained on the underlying insurance policies. The Court denied the parties' motions for summary judgement in all other respects with leave to renew when discovery was complete. Although, discovery is not yet fully complete, this court has reconsidered its prior ruling with respect to Count III of the Complaint and, by Order of July 9, 1992, granted PIGA leave to file an additional motion for summary judgment with respect to this Count.1 This matter is presently before the Court on the PIGA's renewed motion for summary judgment on Count III of the Complaint. Jurisdiction is based upon diversity of citizenship 28 U.S.C. §§ 1332(a)(2) and 2201.


The court shall render summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). An issue is "genuine" only if there is a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). A factual dispute is "material" only if it might affect the outcome of the suit under governing law. Id. at 248, 106 S.Ct. at 2510. All inferences must be drawn and all doubts resolved in favor of the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Gans v. Mundy, 762 F.2d 338, 341 (3d Cir.1985), cert. denied, 474 U.S. 1010, 106 S.Ct. 537, 88 L.Ed.2d 467 (1985).

On motion for summary judgment, the moving party bears the initial burden of identifying for the court those portions of the record that it believes demonstrate the absence of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). To defeat summary judgment, the non-moving party must respond with facts of record that contradict the facts identified by the movant and may not rest on mere denials. Id. at 321 n. 3, 106 S.Ct. at 2552 n. 3 (quoting Fed.R.Civ.P. 56(e)); see First Nat'l Bank of Pennsylvania v. Lincoln Nat'l Life Ins. Co., 824 F.2d 277, 282 (3d Cir.1987). The non-moving party must demonstrate the existence of evidence that would support a jury finding in its favor. See Anderson, 477 U.S. at 248-49, 106 S.Ct. at 2510-11.


Although we are uncertain whether or not T & N will be able to sustain its burden of proof at trial, we will accept as true, for purposes of this motion, the following allegations of T & N.

T & N maintains that PIGA has, to date, uniformly refused to provide coverage for claims involving latent injuries, like the asbestos-related diseases at issue in this case. In support of this position, T & N alleges that PIGA has never covered such a claim (Dahme Dep. at 26-27, 69; Rhule Dep. at 66-67, 131-32, 214); PIGA has failed to pay T & N's latent injury claims; PIGA has failed to provide T & N with claims-filing information as defined by 40 P.S. § 1701.202(a)(2) (Rosenberg Aff., Ex. D-G, I); PIGA has failed to act upon T & N's written or oral communications (Rosenberg Aff. Ex. J; Rhule Dep. at 184); PIGA has refused to conduct a reasonable investigation of T & N's claims (Dahme Dep. at 26-27, 60-61; Rosenberg Aff.Exs. C, K; Rhule Dep. at 184); and PIGA has failed to settle T & N's claims. (Rhule Dep. at 184, Dahme Dep. at 27).

In response, PIGA maintains that it has declined to handle, investigate, or pay T & N's claims on the grounds that such claims do not amount to statutorily covered claims.

We turn now to the merits of Count III.


In Count III of the Complaint, T & N seeks damages for PIGA's alleged bad faith handling of T & N's claims pursuant to 42 Pa.C.S. § 8371. In support of its motion PIGA argues that (1) PIGA is not an insurer pursuant to 42 Pa.C.S. § 8371; (2) PIGA is immune from bad faith claims under the Pennsylvania Insurance Guaranty Association Act; (3) T & N's claims for bad faith are not "covered claims" under the Insurance Guaranty Association Act; (4) T & N's claims for bad faith do not arise within thirty days after the determination of insolvency as required by the Insurance Guaranty Association Act; and (5) 42 Pa. C.S. § 8371 may not be applied retroactively. As discussed below, we agree with PIGA's analysis of its first two arguments and find it to be dispositive on the issue before us. Accordingly, we need not reach PIGA's remaining arguments.

1. PIGA is not an insurer.

42 Pa.C.S. § 8371 provides as follows:

In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith towards the insured, the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.

(emphasis added). Taken together, to sustain a claim for damages under 42 Pa.C.S. § 8371, T & N must prove: (1) that T & N's claims against PIGA arose under an insurance policy; (2) that PIGA was an "insurer"; and (3) that PIGA acted in bad faith. We have previously held that T & N's claims against PIGA arose under the insurance policies issued to Keasbey and Mattison Company, T & N's now dissolved but one-time subsidiary. (VAN ANTWERPEN, J., Memorandum and Order, May 28, 1992, 1992 WL 125554). Moreover, as discussed above, we will assume for purposes of this motion that PIGA's conduct amounted to "bad faith." Accordingly, we turn now to the issue of whether or not PIGA is, as T & N alleges, an insurer for purposes of 42 Pa.C.S. § 8371.

As a federal court interpreting Pennsylvania state law in this diversity action, we must consider and accept the decisions of the state's highest court as the ultimate authority on this issue. Ciccarelli v. Cary Canadian Mines, Ltd., 757 F.2d 548, 553 (3d Cir.1985); Connecticut Mutual Life Insurance Co. v. Wyman, 718 F.2d 63, 65 (3d Cir.1983). When, however, as in this case, the Pennsylvania Supreme Court has not authoritatively considered the issue at hand, "our disposition of such cases must be governed by a prediction of how the state's highest court would decide were it confronted with the problem." McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 661 (3d Cir.1980), cert. denied, 449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d 237 (1980). See also Becker v. Interstate Properties, 569 F.2d 1203, 1205 (3d Cir. 1977), cert. denied, 436 U.S. 906, 98 S.Ct. 2237, 56 L.Ed.2d 404 (1978). In this effort, we must give "proper regard" to the relevant rulings of other courts within the state. Commissioner v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886 (1967). See also Erie Castings Co. v. Grinding Supply, Inc., 736 F.2d 99, 100 (3d Cir.1984).

Since § 8371 contains no definition of the term "insurer," we must look to the Pennsylvania statutes, cases, and rules of statutory construction in resolving what appears to be an issue of first impression. Coyne v. Allstate Ins. Co., 771 F.Supp. 673, 677-78 (E.D.Pa.1991). As discussed in Pennsylvania's rules of statutory construction:

Words and phrases shall be construed according to rules of grammar and according to their common and approved usage; but technical words and phrases and such others as have acquired a peculiar and appropriate meaning or are defined in this part, shall be construed according to such peculiar and appropriate meaning or definition.

1 Pa.C.S. § 1903. Moreover, the parameters of § 8371 may be discerned by reference to analogous Pennsylvania insurance law. As stated in 1 Pa.C.S. § 1921: "when the words of a statute are not explicit, the intention of the General Assembly may be ascertained by considering, among other matters ... (5) ... other statutes upon the same or similar subjects." See also Coyne, 771 F.Supp. at 678. Accordingly, we look first to another statute pertaining to insurance, the Pennsylvania...

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