Travelers Cas. & Sur. Co. v. Castegnaro

• Decision Date: 07 June 2001
• Citation: 772 A.2d 456,565 Pa. 246
• Court: Pennsylvania Supreme Court
• Parties: The TRAVELERS CASUALTY & SURETY COMPANY, Formerly Aetna Casualty and Surety Company, Appellee, v. Patrick CASTEGNARO and James Fedele, t/d/b/a Associated Insurance Agencies, Appellees. v. Utica Mutual Insurance Company, Appellant.

772 A.2d 456

565 Pa. 246

The TRAVELERS CASUALTY & SURETY COMPANY, Formerly Aetna Casualty and Surety Company, Appellee, v. Patrick CASTEGNARO and James Fedele, t/d/b/a Associated Insurance Agencies, Appellees. v. Utica Mutual Insurance Company, Appellant.

Supreme Court of Pennsylvania.

Argued September 11, 2000.

Decided June 7, 2001.

Larry Alan Silverman, Pittsburgh, for appellant, Utica Mut. Ins. Co.

Dianne S. Wainwright, Avrum Levicoff, Pittsburgh, for appellee, Travelers Cas. & Sur. Co.

Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO and SAYLOR, JJ.

OPINION

NIGRO, Justice.

In this appeal, Appellant Utica Mutual Insurance Company ("Utica") argues that the Superior Court improperly reversed the order of the trial court granting Utica's motion for judgment on the pleadings premised on an exclusion in the insurance contract between Utica and Associated Insurance Agencies. We agree, and therefore reverse.

Patrick Castegnaro was an insurance agent authorized by Associated Insurance Agencies ("Associated") to bind coverage on its behalf for Aetna Casualty and Surety Company ("Aetna").¹ From January of 1988 through April of 1992, Castegnaro fraudulently submitted forged cancellation notices or failed to process renewals for at least six Aetna insurance policies. In each instance, Castegnaro knowingly misrepresented to the insureds that their coverage with Aetna had been renewed. The insureds, believing that their coverage with Aetna had been renewed, remitted checks for the premiums to Castegnaro. Castegnaro then fraudulently cashed the premium checks. Eventually, Castegnaro confessed to the fraud and Aetna provided retroactive coverage to the defrauded insureds for the periods during which Castegnaro had represented that the coverage was in place. Based on Castegnaro's actions, Aetna filed suit against Associated for negligence and vicarious liability.

During the relevant time period, Associated was insured under a policy issued by Utica which provided coverage for claims arising out of negligent acts, errors or omissions in the conduct of Associated's business. Pursuant to the policy, Associated gave timely notice to Utica of Aetna's claims. Utica retained counsel to defend Associated, but informed Associated that it would not provide coverage for any part of a settlement or judgment entered against Associated. On April 29, 1996, Associated and Aetna entered into a stipulation providing for entry of a consent judgment and an assignment of Associated's rights against Utica under its error and omissions liability policy to Aetna.² Pursuant to the consent judgment, judgment was entered against Associated on April 30, 1996, in the amount of $225,968.18.

On February 3, 1997, Aetna commenced execution of the judgment by filing and serving interrogatories upon Utica as garnishee. Utica answered the interrogatories and asserted, in New Matter, that its policy did not cover Associated's claim based upon Exclusion 4 in the policy which precludes coverage for "[a]ny liability for money received by an insured...." (Ins. Policy p. 6, R.R. at 219a). Utica then filed a Motion for Judgment on the Pleadings and Aetna filed a Cross Motion for Summary Judgment.

Finding that Exclusion 4 plainly and unambiguously excluded coverage for Associated's lost premiums, the trial court granted Utica's Motion for Judgment on the Pleadings. The trial court noted that Aetna admitted in its Reply to Utica's New Matter that Castegnaro was "an insured" under the policy and, consequently, the trial court rejected Aetna's argument that the phrase "money received by an insured" rendered Exclusion 4 ambiguous. Aetna subsequently appealed to the Superior Court.

The Superior Court reversed the order of the trial court, finding that Exclusion 4 did not preclude coverage for Associated. The Superior Court reasoned that "[c]learly it would have been reasonable for Associated to expect coverage to be foreclosed if it had received or been credited with the premiums. It is not reasonable, however, to expect coverage to be foreclosed by the terms of this exclusion where Associated's agent or employee steals the premiums." Travelers Casualty and Surety Co. v. Utica Mutual Ins. Co., 737 A.2d 1288, slip op. at 7 (Pa.Super. 1999). The Superior Court further noted that "[a]bsent explicit language in the policy permitting imputation of an additional insured's conduct to the named insured, we find such an interpretation to be contrary to the objectively reasonable expectation of the named insured." See id. Subsequently, Utica filed a Petition for Allowance of Appeal to this Court and we granted allocatur.

Our review of a trial court's decision to grant or deny judgment on the pleadings is limited to determining whether the trial court committed an error of law or whether there were facts presented which warranted a jury trial. See Pennsylvania Financial Responsibility Assigned Claims Plan v. English, 541 Pa. 424, 664 A.2d 84, 86 (1995)

. In conducting this review, we look only to the pleadings and any documents properly attached thereto. See id. Judgment on the pleadings is proper only where the pleadings evidence that there are no material facts in dispute such that a trial by jury would be unnecessary. See id. at 429, 664 A.2d 84 (citing Bata v. Central-Penn National Bank, 423 Pa. 373, 224 A.2d 174 (1966)).

"Interpretation of an insurance policy is a question of law, subject to plenary review by this Court." State Farm Mutual Auto Ins. Co. v. Universal Underwriters Ins. Co., 549 Pa. 518, 701 A.2d 1330, 1331 (1997)(citing Paylor v. Hartford Ins. Co., 536 Pa. 583, 640 A.2d 1234 (1994)). When interpreting an insurance policy, a court must ascertain the intent of the parties as manifested by the language of the written agreement. When the policy language is clear and unambiguous, the court must give effect to the language of the contract. See Bateman v. Motorists Mutual Inc. Co., 527 Pa. 241, 590 A.2d 281, 283 (1991)

(citing Standard Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300, 469 A.2d 563 (1983)).

Here, the language of the insurance policy, in pertinent part, reads as follows:

SECTION III — WHO IS AN INSURED

The unqualified word "insured" whenever used in this policy means:

1. The individual, partnership, or corporation designated as the named insured in the Declarations;

2. Any partner, executive officer, director or employee of the Named insured, while acting within the scope of his or her duties on behalf of the Named Insured.

...

SECTION IV — EXCLUSIONS

This insurance does not apply to any claim arising

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