Dercoli v. Pennsylvania Nat. Mut. Ins. Co.

• Decision Date: 03 March 1989
• Citation: 520 Pa. 471,554 A.2d 906
• Parties: Dorothea DERCOLI, Appellant, v. PENNSYLVANIA NATIONAL MUTUAL INSURANCE COMPANY and Grange Mutual Casualty Company, Appellees.
• Court: Pennsylvania Supreme Court

Page 906

554 A.2d 906

520 Pa. 471

Dorothea DERCOLI, Appellant, v. PENNSYLVANIA NATIONAL MUTUAL INSURANCE COMPANY and Grange Mutual Casualty Company, Appellees.

Supreme Court of Pennsylvania.

Argued Sept. 29, 1988.

Decided March 3, 1989.

Anthony N. Gemma, Gemma & Gemma, Youngstown, Ohio, for appellant.

Dan P. Wimer, Mansell & Jamison, New Castle, for Pennsylvania Nat. Mut. Ins. Co.

Peter E. Horne, Balph, Nicolls, Mitsos, Flannery & Motto, New Castle, for Grange Mut. Cas. Co.

Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, ZAPPALA, PAPADAKOS and STOUT, JJ.

OPINION ANNOUNCING THE JUDGMENT OF THE COURT

LARSEN, Justice.

Appellant Dorothea Dercoli appeals from an order of the Superior Court affirming an order of the Lawrence County Common Pleas Court which sustained a demurrer to her complaint and dismissed her lawsuit against appellees Pennsylvania National Mutual Insurance Company (Penn National) and Grange Mutual Casualty Company (Grange) for breach of fair dealing and good faith. In her appeal the appellant frames two issues: (1) whether our decision in Hack v. Hack, 495 Pa. 300, 433 A.2d 859 (1981), abolishing the defense of interspousal immunity is to be given retroactive application; and (2) whether the duty of fair dealing and good faith requires an automobile insurer to properly advise its insured of the insured's entitlement to present a claim or claims under the applicable policy where the insurer advises its insured that legal representation is unnecessary and induces the insured to rely upon the insurer to pay appropriate benefits?

The issues presented by the appellant arise out of the following factual background: On the morning of July 21, 1980, the appellant was riding as a passenger in an automobile being operated by her husband, David R. Dercoli. The automobile was travelling on U.S. Route 422 in Lawrence County when, apparently, Mr. Dercoli became drowsy and fell asleep. With Mr. Dercoli asleep at the wheel, the automobile crossed over the centerline of the highway and crashed into the rear wheels of an on-coming tractor-trailer. Mr. Dercoli was killed instantly. The appellant was severely injured.

At the time of the tragic accident Mr. Dercoli was insured under two automobile insurance policies. One of the policies was with appellee Penn National and the other was with appellee Grange. Both insurers were notified of the accident and the injuries and losses resulting therefrom. In the claim process that followed, the appellant relied upon the advice of the appellees' agents to receive the benefits due her under the applicable policies. Subsequently, after receiving the advice of the appellees' agents, the appellant began to receive certain benefits paid by the appellees under the policies in force. Appellant continued to receive the benefit checks until approximately, April, 1984.

On July 14, 1981, approximately one year after the accident and while appellant was receiving benefit checks and relying upon appellees' agents for advice, this Court decided the case of Hack v. Hack, supra. In Hack we abolished the defense of interspousal immunity as a bar to an action for personal injuries caused by the negligence of the injured victim's spouse. The appellant did not learn of the removal of this bar to suit until sometime after March of 1985.

In January, 1986, appellant filed a complaint in civil action against the appellees averring, inter alia, a breach of appellees' duty of fair dealing and good faith. Specifically, the appellant sets forth, as relevant allegations in her complaint, the following:

16. [U]pon notice of said motor vehicle accident by or on behalf of Plaintiff, Defendants PENN NATIONAL and GRANGE, through their authorized Agents, cooperatively and equally undertook the handling, processing and payment of Plaintiff's benefits under said Contracts.

17. At all times herein material, Plaintiff was not represented by legal Counsel, and Defendants' Agents represented to and assured Plaintiff that her claim would be processed without the need for Plaintiff to be independently represented.

18. Plaintiff reasonably relied entirely upon the advice of Defendants' agents as to the nature and extent of benefits which were due to her under said insurance contracts. Further, Defendant's agents were fully cognizant of Plaintiff's said reasonable reliance and lack of independent representation.

19. At all times material herein, and by reason of said insurance Contracts, Defendants PENN NATIONAL and GRANGE were each charged with a duty of good faith and fair dealing in respect of determination of entitlement, processing, and payment of Plaintiff's benefits under said Contracts. This duty included, among other things, the obligation on the part of said Defendants to pay or advise Plaintiff as to any and all benefits to which Plaintiff reasonably appeared to be entitled under said insurance contracts.

20. By reason of the nature of said insurance Contracts, Defendants PENN NATIONAL and GRANGE occupied the position of a fiduciary with respect to determination of entitlement and payment of Plaintiff's benefits thereunder.

25. Upon the decision of Hack vs Hack, Supra, Defendants were thereby placed in a position of conflicting interests, in that presentation or consideration of any claim by or on behalf of Plaintiff and based upon the negligence liability of her said husband would have created a substantial additional risk of loss or liability to each Defendant.

26. Under the circumstances referred to above, and by reason of their said duty of good faith and fair dealing and their fiduciary relationship which they occupied with respect to Plaintiff, Defendants were each obligated to advise Plaintiff of her apparent right to benefits for liability coverage under said insurance Contract, in order that Plaintiff would have realized the maximum amount of benefits to which she reasonably appeared to be entitled.

27. Defendants PENN NATIONAL and GRANGE, and each of them, have breached the said insurance Contracts and the corresponding fiduciary duties and duties of good faith and fair dealing in that said Defendant had failed to advise Plaintiff as to her apparent entitlement to claim for benefits under the liability coverage of said insurance Contracts, of Defendants' conflict of interests in advising or continuing to advise Plaintiff regarding her entitlement to benefits or of her possible need for independent legal counsel, and Defendants further failed to pay or offer to pay to Plaintiff any benefits under the liability coverage of said Contracts.

In response to appellant's complaint the appellees filed preliminary objections in the nature of a demurrer. After argument on appellees' demurrer, the lower court concluded that the appellee-insurers had no duty to inform appellant of the Hack decision and the effect, if any, that decision had on appellee's ability to obtain benefits under the liability provisions of the applicable policies. In reaching this conclusion the lower court cited the case of Taglianetti v. Workmen's Compensation Appeal Board, 503 Pa. 270, 469 A.2d 548 (1983) involving a workmen's compensation claimant. The lower court analogized the situation in the instant case to that involved in Taglianetti. It was decided that the reasoning applied in Taglianetti which held that the insured-employer had no duty to advise a compensation claimant of the maximum possible benefits was applicable to this case. Accordingly, the demurrer was sustained and appellant's complaint was dismissed. On appeal, the Superior Court affirmed. 369 Pa.Super. 289, 535 A.2d 163.

Since this is an appeal from the sustaining of a demurrer, we accept as true all well-pleaded material facts set forth in the complaint as well as all inferences reasonably deducible therefrom. Guy v. Liederbach, 501 Pa. 47, 459 A.2d 744 (1983), Allstate Insurance Co. v. Fioravanti, 451 Pa. 108, 299 A.2d 585 (1973). In her complaint the appellant avers that upon the advice and assurances of appellees' agents, she was induced to refrain from hiring an attorney to represent her in her dealings with the appellees. She alleges that she placed her entire trust and confidence in appellees' agents and relied upon their advice as to the extent of the benefits available to her under the applicable insurance policies.

The appellant argues that as the spouse of David R. Dercoli and as a resident of the same household with him, she is a "named insured" under the terms of the relevant insurance policies. She argues that by virtue of the relationship that existed between her and the appellee-insurers, the appellees were charged with a duty of fair dealing and good faith with respect to the determination of the benefits that appellant may reasonably be entitled to claim. Thus, appellant argues that when Hack v. Hack, supra. was decided, the appellees had a duty to inform her of the decision and of her apparent right to benefits under the liability provisions of the applicable policies as a result of that decision.

In spite of the fact that appellant was assured by appellees' agents that they would see to it that appellant received all benefits to which she was entitled, appellees' agents failed to advise her of her right to seek liability damages. The appellant argues that this failure was a breach of appellees' duty of fair dealing and good faith. In addition, appellant argues that when Hack abolished the bar of interspousal immunity, a conflict of interest arose with the appellees' agents who were advising the appellant. On the one hand these agents were aware of appellant's injuries and expenses and of her reliance on them for advice and guidance in her claims. On the other hand they knew that if they would advise appellant of the Hack decision and of her right to proceed against her husband's estate for damages, such proceedings would substantially increase the financial exposure of the appellee-insurers. Nonetheless, ...