Burstein v. Prudential Prop. and Cas. Ins. Co.

• Decision Date: 29 November 1999
• Parties: Sid BURSTEIN and Doreen Burstein, Appellees, v. PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, Appellant.
• Court: Pennsylvania Superior Court

742 A.2d 684

Sid BURSTEIN and Doreen Burstein, Appellees, v. PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, Appellant.

Superior Court of Pennsylvania.

Argued June 14, 1999.

Filed November 29, 1999.

Charles W. Craven, Philadelphia, for appellant.

Milton J. Frank, Philadelphia, for appellees.

Before McEWEN, President Judge, and CAVANAUGH, KELLY, POPOVICH, JOHNSON, FORD ELLIOTT, STEVENS, SCHILLER and LALLY-GREEN, JJ.

SCHILLER, J.:

¶ 1 Appellant, Prudential Property and Casualty Insurance Company, appeals from an order dated June 2, 1997, in the Court of Common Pleas of Philadelphia County. We affirm and hold that the "regularly used non-owned car" exclusion is void as against public policy under the facts of this case.

FACTS:

¶ 2 On September 4, 1993, Appellees, Sid and Doreen Burstein, were returning from dinner and a movie when a speeding motorcyclist struck their automobile. The automobile, which was being driven by Mr. Burstein at the time, had been provided to Mrs. Burstein by her employer; Mrs. Burstein was in the passenger seat when the accident occurred.¹ Although Mrs. Burstein used the vehicle primarily for business purposes, she paid a $25.00 weekly fee allowing her and her husband to drive it for personal use.² Mrs. Burstein's employer did not notify her of the types of coverage he had purchased for the company vehicle, nor did he give her the option to change such coverage. Stipulated Facts, at ¶¶ 12, 14.

¶ 3 After the accident, Appellees recovered from the negligent motorcyclist's insurance carrier. Appellees were not, however, fully compensated for their injuries because the liability limits of the motorcyclist's insurance policy proved inadequate. As such, Appellees submitted a claim for underinsured motorist coverage under Mrs. Burstein's employer's insurance policy. It was at that time that Appellees were informed that the employer's policy did not include underinsured motorist coverage. Appellees therefore filed a claim for underinsured motorist benefits under their personal policy; Appellees owned three motor vehicles, all insured under a single policy with Appellant that provided both liability and underinsured motorist coverage. Appellant subsequently denied coverage based on a policy exclusion for a "regularly used non-owned car" not insured under their policy.³

¶ 4 Appellees thereafter filed suit, and on March 14, 1996, a panel of arbitrators found that the exclusion violated public policy when applied to Mr. Burstein but upheld it in regard to Mrs. Burstein. Both Appellees and Appellant petitioned the trial court for a modification of the arbitrator's decision to reflect their respective positions. The trial court found that the exclusion violated public policy in regard to both Appellees, thereby affirming the arbitrator's decision as to Mr. Burstein but reversing it as to Mrs. Burstein. A divided panel of this Court affirmed the trial court's decision. This appeal followed.

DISCUSSION:

¶ 5 Appellant raises one issue on appeal: whether the trial court erred in finding that the "regularly used non-owned car" exclusion contained in Appellees' insurance policy was void as against public policy. We note at the outset that we will reverse a trial court's decision to vacate an arbitration award only for an abuse of discretion or error of law. Patton v. J.C. Penney Ins. Co., 445 Pa.Super. 317, 665 A.2d 510 (1995). However, where the trial court determines that a provision in an insurance policy violates the public policy of this Commonwealth, our standard of review is plenary as said issue presents a question of law for our determination. See generally Phillips v. A-Best Products Co., 542 Pa. 124, 130, 665 A.2d 1167, 1170 (1995)

.

¶ 6 The particular policy exclusion in question provided that Appellees were not entitled to recover underinsured motorist coverage if they were using a regularly used, non-owned vehicle not insured under their policy.⁴ Appellees argue, and the trial court agreed, that because underinsured motorist coverage follows the person, not the vehicle, and because the Motor Vehicle Financial Responsibility Law (MVFRL)⁵ is to be liberally construed to provide the fullest possible coverage, this particular exception is void as against public policy. Appellant, on the other hand, claims that voiding such an exclusion would not further the public policy of this Commonwealth but rather would hinder it, citing to other public policy as well as prior case law.

¶ 7 In deciding whether a provision of an insurance contract should be held void as against public policy, we are mindful of the following:

"Public policy is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interest. As the term `public policy' is vague, there must be found definite indications in the law of the sovereignty to justify the invalidation of a contract as contrary to that policy.... Only dominant public policy would justify such action. In the absence of a plain indication of that policy through long governmental practice or statutory enactments, or of violations of obvious ethical or moral standards, the Court should not assume to declare contracts ... contrary to public policy. The courts must be content to await legislative action."

Hall v. Amica Mut. Ins. Co., 538 Pa. 337, 347-48, 648 A.2d 755, 760 (1994) (quoting Muschany v. United States, 324 U.S. 49, 66-67, 65 S.Ct. 442, 451, 89 L.Ed. 744, 756 (1945)) (alterations in original).

"It is only when a given policy is so obviously for or against the public health, safety, morals or welfare that there is a virtual unanimity of opinion in regard to it, that a court may constitute itself the voice of the community in so declaring. There must be a positive, well-defined, universal public sentiment, deeply integrated in the customs and beliefs of the people and in their conviction of what is just and right and in the interest of the public weal.... Only in the clearest cases, therefore, may a court make an alleged public policy the basis of judicial decision."

Id. (quoting Mamlin v. Genoe, 340 Pa. 320, 325, 17 A.2d 407, 409 (1941)) (alteration in original). Moreover, a key focus in deciding whether to uphold a policy exclusion, which operates to deny coverage to an injured party, is on the factual circumstances of the particular case. Paylor v. Hartford Ins. Co., 536 Pa. 583, 587, 640 A.2d 1234, 1235 (1994).

¶ 8 We note, however, that we are not called upon in this case to decide whether a particular concept is so engrained in our customs and beliefs that it rises to the level of public policy; both Appellant and Appellees cite to public policies that are well-defined and universally accepted in this Commonwealth. Rather, it is the duty of this Court to weigh those competing public policy interests and determine which interest prevails under the circumstances presented. We find that the prevailing policies are those which favor voiding the exclusion.

¶ 9 The first public policy in favor of voiding the exclusion is that the MVFRL was enacted in order to establish a liberal compensatory scheme of underinsured motorist protection, Marroquin v. Mutual Benefit Ins. Co., 404 Pa.Super. 444, 591 A.2d 290, 293 (1991), and should be construed to provide the greatest possible coverage to injured claimants. Danko v. Erie Ins. Exch., 428 Pa.Super. 223, 630 A.2d 1219, 1222 (1993), aff'd 538 Pa. 572, 649 A.2d 935 (1994). "`In close or doubtful cases, we must interpret the intent of the legislature and the language of insurance policies to favor coverage for the insured.'" Allwein v. Donegal Mut. Ins. Co., 448 Pa.Super. 364, 671 A.2d 744, 751 (en banc), appeal denied, 546 Pa. 660, 685 A.2d 541 (1996) (quoting Motorists Ins. Companies v. Emig, 444 Pa.Super. 524, 664 A.2d 559, 566 (1995)).

¶ 10 The second public policy favoring Appellees' position is that it is in the public's best interest for insurance companies to provide underinsured motorist coverage. Marroquin, supra at 296 (stating that "this Commonwealth considers underinsured motorist coverage to be in the public interest"). Underinsured motorist coverage is designed to protect an insured from a negligent driver of another vehicle, who causes injury to the insured and lacks adequate insurance coverage to compensate the insured for those injuries. Eichelman v. Nationwide Ins. Co., 551 Pa. 558, 711 A.2d 1006 (1998); Paylor, supra; Wolgemuth v. Harleysville Mut. Ins. Co., 370 Pa.Super. 51, 535 A.2d 1145 (en banc), appeal denied, 520 Pa. 590, 551 A.2d 216 (1988). Prior to the passage of the MVFRL, motor vehicle drivers were required to carry uninsured motorist coverage but not underinsured motorist coverage.⁶ As a result, an individual involved in a motor vehicle accident was in a better position if injured by a negligent driver who was uninsured rather than one who had insurance but whose liability limits were inadequate. In an attempt to rectify this inequity, the legislature passed the MVFRL, requiring insurers to offer underinsured motorist coverage. 75 Pa.C.S. § 1731(a).⁷ Appellees are precisely the type of individuals who underinsured motorist coverage was designed to protect— individuals injured by a tortfeasor with inadequate insurance coverage.

¶ 11 Finally, the public policy we find most persuasive is that underinsured motorist coverage is first-party coverage and therefore necessarily follows the person, not the vehicle. Wolgemuth, supra. This means that if an individual purchases underinsured motorist coverage, that individual will be protected from negligent drivers with inadequate coverage regardless of the vehicle in which he or she happens to be injured. We have stated in the past that "`[o]rdinarily, a passenger injured in a one-car accident involving someone else's car ... would be able to recover underinsured motorist benefits under his or her own underinsured motorist coverage.'" Id. at 1150 (quoting Myers v....