Clark v. State Farm Auto. Ins. Co.

• Decision Date: 26 November 1991
• Citation: 410 Pa.Super. 300,599 A.2d 1001
• Court: Pennsylvania Superior Court
• Parties: Michael CLARK v. STATE FARM AUTOMOBILE INSURANCE COMPANY, Appellant.

Page 1001

599 A.2d 1001

410 Pa.Super. 300

Michael CLARK v. STATE FARM AUTOMOBILE INSURANCE COMPANY, Appellant.

Superior Court of Pennsylvania.

Argued April 24, 1991.

Filed Nov. 26, 1991.

Peter J. Hoffman, Philadelphia, for appellant.

John W. Craynock, Philadelphia, for appellee.

Before KELLY, POPOVICH and HOFFMAN, JJ.

HOFFMAN, Judge:

This appeal is from the order of the Court of Common Pleas of Philadelphia County entered on August 17, 1990, which, inter alia, granted appellee Clark's petition to compel arbitration and dismissed appellant State Farm Automobile Insurance Company's (State Farm) counterclaim for declaratory relief. ¹ Appellant presents five issues for our review. First, we must determine whether an employee injured in a work-related automobile accident who has received workmen's compensation but was denied uninsured motorist coverage from his employer's insurance company under then existing law, has complied with the priority requirements of the Motor Vehicle Financial Responsibility Law by then proceeding against his own insurance company. ² Appellant also contends that the trial court erred in not dismissing appellee's petition to compel arbitration and claim for uninsured motorist benefits for failure to comply with both the four-year statute of limitations and the notice provision of the insurance contract. Fourth, appellant argues that the trial court was not empowered to rule on the petition because of improper venue. Finally, we must determine whether the trial court erroneously allowed arbitration of the above disputes. For the reasons that follow, we find that appellee has complied with the MVFRL, appellant's challenge to venue has been waived, and arbitration of issues of fault and damages is appropriate. We remand for determination of whether appellee complied with the statute of limitations and the notice provision.

Appellee Clark, acting within the course and scope of his employment, was injured while operating a vehicle owned by his employer, Harrin Communications, Inc. ³ The vehicle was covered under an insurance policy issued by Reliance Insurance Company (Reliance) pursuant to the Motor Vehicle Financial Responsibility Law (MVFRL). Subsequent to the accident, appellee recovered workmen's compensation benefits from his employer. In addition, appellee requested uninsured motorist benefits from Reliance. However, in the separate action of Clark v. Reliance Insurance Co., CCP, Philadelphia, January Term, 1988, No. 5224 (July 11, 1988) (Reliance ), the Court of Common Pleas of Philadelphia County denied appellee's request and released Reliance from liability, basing its decision on the holding in Lewis v. School Dist. of Philadelphia, 517 Pa. 461, 538 A.2d 862 (1988). ⁴

Appellee, proceeding under the MVFRL, then sought uninsured motorist benefits from his personal auto insurance carrier, appellant State Farm Automobile Insurance Company (State Farm). Appellee submitted a claim for Uninsured Motorist arbitration pursuant to his contract of insurance with appellant and filed a Petition to Appoint an Arbitrator and to Compel Arbitration. Appellant responded by filing a counterclaim against appellee, seeking a declaratory judgment resolving, inter alia, the issue of State Farm's liability to pay Uninsured Motorist Benefits to appellee under the parties' insurance contract. The trial court granted appellee's request. This timely appeal followed.

I. APPEALABILITY

Initially, we must determine whether this case is properly before this court. Ordinarily, an order compelling arbitration is a non-appealable, interlocutory order. Gardner v. Prudential Ins. Co., 332 Pa.Super. 358, 481 A.2d 654 (1984). However, the order sub judice not only compelled arbitration, but also dismissed appellant's counterclaim for declaratory relief. Both the Pennsylvania Supreme Court and this court have held that an order dismissing a counterclaim is appealable. See Commonwealth v. Orsatti, 448 Pa. 72, 75-76, 292 A.2d 313, 315 (1972) (order sustaining preliminary objections to defendant's counterclaim in an amount in excess of plaintiff's claim is appealable); Zivitz v. Centennial Road Properties, 328 Pa.Super. 79, 81 n. 1, 476 A.2d 462, 463 n. 1 (1984) (order sustaining preliminary objections and dismissing counterclaim is appealable since it puts defendant out of court as far as counterclaim is concerned, even though validity of plaintiff's claim is still undetermined). Because the trial court in its order and subsequent opinion, in effect, precluded appellant from litigating its claims, we find the order in question which dismissed appellant's counterclaim for declaratory relief to be appealable.

II. ISSUES

Appellant raises five issues on appeal. We will address these seriatim.

A. COMPLIANCE WITH 75 Pa. C.S.A. § 1733

Appellant first contends that appellee must obtain uninsured motorist benefits under his employer's insurance policy before he can recover from appellant. In order to fully understand the issue presented here, a summary of the prior law is necessary.

The priority section of the MVFRL, § 1733 of the Motor Vehicle Financial Responsibility Law, 75 Pa.C.S.A. § 1701 et seq., provides:

(a) General rule.--Where multiple policies apply, payment shall be made in the following order of priority:

(1) A policy covering a motor vehicle occupied by the injured person at the time of the accident.

(2) A policy covering a motor vehicle not involved in the accident with respect to which the injured person is an insured.

(b) Multiple sources of equal priority.--The insurer against whom a claim is asserted first under the priorities set forth in subsection (a) shall process and pay the claim as if wholly responsible. The insurer is thereafter entitled to recover contribution pro rata from any other insurer for the benefits paid and the costs of processing the claim.

Id.

The case relied upon by the Reliance trial court, Lewis v. School Dist. of Philadelphia 517 Pa. 461, 538 A.2d 862 (1988) held that under the Uninsured Motorist Act, ⁵ an employee's exclusive remedy against his or her employer was under the Workmen's Compensation Act. According to the Lewis court, recovery of uninsured motorist benefits is barred by section 303(a) of the Workmen's Compensation Act, which limits an employee's recovery from his employer to workmen's compensation benefits for any work-related injury. At that time, the specific question whether an employee could recover uninsured motorist benefits from his employer's insurer under the MVFRL had not yet been decided by our courts.

Three years after both the Lewis decision and the decision releasing Reliance from liability, the Pennsylvania Supreme Court handed down its decision in Hackenberg v. Transp. Authority, 526 Pa. 358, 586 A.2d 879 (1991). The Hackenberg court held that § 1735 prevails over § 303(a) in cases concerning employers who have purchased policies of insurance, but is not applicable to self-insured employers. 526 Pa. at 369-370, 586 A.2d at 885. ⁶

Appellant does not dispute that appellee is entitled to insurance benefits in addition to workmen's compensation. Rather, appellant contends that appellee must proceed against Reliance, his employer's insurance company, before he is entitled to collect from appellant. Appellant argues that the earlier trial court that released Reliance improperly relied upon the Lewis decision and consequently the court below similarly erred in not requiring appellee to relitigate its claim against Reliance.

Appellant relies upon several cases for the proposition that an employee must first recover both Workmen's Compensation benefits and uninsured motorist benefits from his employer's insurance carrier before proceeding against his or her own insurance company. Specifically, appellant points to Chatham v. Aetna Life & Casualty Co., 391 Pa.Super. 53, 570 A.2d 509 (1989), allocatur granted, 526 Pa. 626, 584 A.2d 310 (1990); Selective Risks Ins. Co. v. Thompson, 520 Pa. 130, 552 A.2d 1382 (1989); Ferry v. Liberty Mutual Ins. Co., 392 Pa.Super. 571, 573 A.2d 610 (1990); Odom v. Carolina Ins. Co., 394 Pa.Super. 283, 575 A.2d 631 (1990), allocatur granted, 525 Pa. 653, 582 A.2d 320 (1990). Appellant contends that these cases are controlling and require appellee to seek reconsideration of the Reliance decision. Furthermore, according to appellant, the trial court's reliance on Lewis was erroneous because Lewis was decided under the Uninsured Motorist Act, 40 Pa.S.A. § 2000 et seq. rather than the MVFRL. He finds support for this proposition in the statement by the Hackenberg majority that Lewis is not controlling precedent in cases decided under the MVFRL. Hackenberg, 526 Pa. at 368, 586 A.2d at 884. According to appellant, if appellee was required to once again seek benefits from Reliance, the trial court would be required to determine that the aforementioned MVFRL provision would prevail over the workmen's compensation provision, thereby allowing recovery from Reliance, and consequently lessening or precluding recovery from appellant in accordance with § 1733.

We disagree. The cited cases are not dispositive for two reasons. First, and most importantly, these cases were decided after the decision releasing Reliance from liability and thus were not available as precedent for that trial court. ⁷ Second, we believe that appellee had indeed exhausted his remedies under the Reliance policy. Apparently appellee did not appeal the Reliance decision because he believed that it was correct under then existing law and that he could then proceed against his insurance company, appellant, under 75 Pa.C.S.A. § 1733. Moreover, we note that although appellant's argument has merit, it does not warrant a reversal of the lower court's decision. The Reliance court's interpretation of the then-existing law was a colorable one. We also note that the Uninsured Motorist Act (1963) has been supplanted in some respects by the MVFRL (1984) and,...