Aetna Cas. and Sur. Co. v. Deitrich

• Decision Date: 15 October 1992
• Docket Number: Civ. A. No. 1:CV-92-707.
• Parties: AETNA CASUALTY AND SURETY COMPANY, Plaintiff, v. Harry J. DEITRICH, administrator of the Estate of Judy A. Deitrich, Deceased, and Joann M. Deitrich, a minor by Harry J. Deitrich, Parent and Natural Guardian, Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

803 F. Supp. 1032

AETNA CASUALTY AND SURETY COMPANY, Plaintiff, v. Harry J. DEITRICH, administrator of the Estate of Judy A. Deitrich, Deceased, and Joann M. Deitrich, a minor by Harry J. Deitrich, Parent and Natural Guardian, Defendants.

Civ. A. No. 1:CV-92-707.

United States District Court, M.D. Pennsylvania.

October 15, 1992.

Dennis J. Bonetti, Peters and Wasilefski, Harrisburg, Pa., for plaintiff.

David B. Dowling, Rhodes & Sinon, Harrisburg, Pa., for defendants.

MEMORANDUM

RAMBO, Chief Judge.

Before the court is Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiffs have filed an opposition brief, Defendants have filed a reply brief, and Plaintiffs have filed a surreply brief. The motion is now ripe for consideration.

Background

The captioned action arose from a two car accident which occurred on April 30, 1987. Judy A. Deitrich was a front seat passenger in an automobile driven by Nancy Deiter. Ms. Deitrich was killed when their vehicle collided with one driven by George S. Kotkiewicz.

In July of 1987, Ms. Deitrich's estate and Ms. Deiter's insurance company settled for the policy limit of $50,000. Ms. Deitrich was insured by Aetna Casualty and Surety Company ("Aetna"), the policy of which provided for underinsured motorist benefits of $500,000. However, Aetna did not give its consent to the settlement between the Deitrich estate and Ms. Deiter's insurance company, and, citing a consent-to-settle provision in the policy, refused to compensate Defendants with the underinsurance payments they demanded.

On July 10, 1990, Defendants requested arbitration, as provided in the insurance policy. On August 2, 1991, Aetna requested that the arbitration be stayed, and filed a declaratory judgment action in this court. On October 16, 1991, this court ordered arbitration. Aetna Cas. and Sur. Co. v. Deitrich, 775 F.Supp. 836 (M.D.Pa.1991).

An underinsured motorist arbitration hearing was held on November 22, 1991. On or about April 25, 1992, the arbitrators awarded the Deitrich estate $420,000 less the $50,000 already received from the insurer.

Discussion

I. 12(b)(6) Motion

A Rule 12(b)(6) motion tests the legal foundation of the plaintiff's claims; it serves not to question the plaintiff's facts. United States v. Marisol, Inc., 725 F.Supp. 833, 836 (M.D.Pa.1989). The Court must determine if the plaintiff's claim would fail even if all facts alleged in the complaint were true. Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). The Rule 12(b)(6) movant carries the burden of showing this legal insufficiency of the claims asserted. Johnsrud v. Carter, 620 F.2d 29, 33 (3d Cir.1980).

To prevent unwarranted dismissal of the plaintiff's claims, the allegations put forth in the complaint are taken as true and inferences from those facts are viewed in the light most favorable to the plaintiff. Mortensen, 549 F.2d at 891; Truhe v. Rupell, 641 F.Supp. 57, 58 (M.D.Pa.1985). However, "conclusory allegations of law, unsupported conclusions and unwarranted inferences need not be accepted as true." Pennsylvania House, Inc. v. Barrett, 760 F.Supp. 439, 449-50 (M.D.Pa.1991) (citing Conley, 355 U.S. at 45-46, 78 S.Ct. at 101-102). A Rule 12(b)(6) motion will be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley, 355 U.S. at 45-46, 78 S.Ct. at 102.

II. Standard of Review

In the captioned case, the insurance policy in question provided the following:

ARBITRATION — If we and a covered person do not agree:

1. Whether that person is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle; or 2. On the amount of payment which may be owed under this insurance;

either party may make a written demand for arbitration in accordance with the provisions of the Pennsylvania Uniform Arbitration Act. In this event, each party will select an arbitrator. The two arbitrators will select a third. If they cannot agree within 30 days, either may request that the selection be made by a judge of a court having jurisdiction.

Complaint, Exhibit E. Citing this provision, this court ordered the parties to arbitration, following their dispute over Aetna's liability. Aetna Cas. and Ins. Co. v. Deitrich, 775 F.Supp. 836 (M.D.Pa.1991). This court determined that it "must assume the arbitrators will apply the law and in the absence thereof, Aetna can appeal. See 42 Pa.Cons.Stat.Ann. § 7302." Id. at 839 (citations omitted). Plaintiff and Defendant now disagree over whether the standard provided under § 7302 governs this court's review of the arbitrators' award. For the reasons that follow, this court has determined that it was erroneous in previously concluding that § 7302 governs the applicable standard of review in the captioned case.

Arbitration is governed by two separate spheres — statutory and common law. Statutory arbitration is presently provided for in the "Uniform Arbitration Act" of October 5, 1980 found at §§ 7301-7320 of the Pennsylvania Judicial Code. Statutory arbitration principles only apply where the agreement to arbitrate is written and expressly provides for statutory arbitration. 42 Pa.Cons.Stat.Ann. § 7302(a). Otherwise, arbitration is presumed to be governed by common law arbitration principles. 42 Pa.Cons.Stat.Ann. § 7302(a).

The 1980 arbitration statute replaces a now repealed statute, the Uniform Arbitration Act of 1927, 5 P.S. § 161, et seq., which provided:

§ 171 Modifying or correcting award, grounds

In either of the following cases the court shall make an order modifying or correcting the award upon the application of any part to the arbitration:

....

(d) Where the award is against the law, and is such that had it been a verdict of the jury the court would have entered different or other judgment notwithstanding the verdict....

With its "against the law" standard of review, the 1927 Act provides relatively broad powers to vacate an arbitration award.

This 1927 Act has been replaced by two statutory standards. First, statutory arbitration is ordinarily governed by 42 Pa. Cons.Stat.Ann. § 7314, which provides for vacating an award for those reasons provided by common law along with a few other clearly specified grounds; this is a much more narrow standard of review than that provided by its predecessor since an arbitration award can no longer be vacated for being legally erroneous.

Second, statutory arbitration may be governed by 42 Pa.Cons.Stat.Ann. § 7302 which provides:

(d) Special application —

(1) Paragraph (2) shall be applicable where:

....

(iii) Any person has been required by law to submit to or to agree to submit a controversy to arbitration pursuant to this subchapter.

(2) Where this paragraph is applicable a court in reviewing an arbitration award pursuant to this subchapter shall, notwithstanding any other provision of this subchapter, modify or correct the award where the award is contrary to law and is such that had it been a verdict of a jury the court would have entered a different judgment or a judgment notwithstanding the verdict.

(emphasis added). Like the 1927 Act, this standard of review is quite broad, permitting a court to vacate an arbitration award if it is based on shaky law.

However, this section only applies in two situations: As explained by § 501(b) of Act 1980, Oct. 5, P.L. 693, No. 142 (which is cited in the "Application" following § 7302):

The provisions of 42 Pa.C.S. § 7302(d)(2) (relating to special application) shall be applicable to any nonjudicial arbitration pursuant to:

(1) An agreement made prior to the effective date of this act which expressly provides that it shall be interpreted pursuant to the law of this Commonwealth and which expressly provides for statutory arbitration.

(2) An agreement heretofore or hereafter made which expressly provides for arbitration pursuant to the former provisions of the act of April 25, 1927 (P.L. 381, No. 248), relating to statutory arbitration.

As Popskyj v. Keystone Insurance Co., 388 Pa.Super. 429, 565 A.2d 1184, 1190 (1989), allocatur denied, 525 Pa. 602, 575 A.2d 567 (1990) explained,

the legislature recognized the inequity and chaos likely to result by imposing the 1980 Act's limitations as to the review of awards, upon parties who had expressly agreed to the rules, and broad scope of review, provided in the 1927 Act. To avoid this result, the legislature included the above historical note, which specified two instances which, without more, shall be viewed as falling within the parameters of § 7302(d)(1)(iii), as involving parties legally bound to arbitrate subject to broad judicial review: (1) agreements to arbitrate made prior to December 4, 1980, the effective date of the 1980 Act, expressly providing for arbitration pursuant to the laws of the Commonwealth; and (2) agreements to arbitrate, made either before or after 1980, expressly providing for arbitration under the 1927 Act.

Popskyj laid out the three types of cases that could come within the ambit of § 7302(d). First, the broad review of § 7302(d) is appropriate in "cases in which the accident precipitating the cause of action occurred pre-1980, and the parties' agreement thereby either expressly or implicitly provided for arbitration under the 1927 Act." Id., 565 A.2d at 1191 (citations omitted). The policy in the captioned case did not implicitly provide for statutory arbitration under the 1927 Act, as neither the accident nor the endorsement occurred prior to 1980. Thus, it does not fall within the first set of cases governed by § 7302(d).

Second, § 7302(d) applies in "cases in which the insurance agreement was made prior to December 4, 1980, and contained language providing that the law of the Commonwealth would apply, in accordance with part (1) of the...