Erie Ins. Exchange v. Transamerica Ins. Co.

• Decision Date: 02 December 1987
• Docket Number: Nos. J-173-1987 and 90,s. J-173-1987 and 90
• Citation: 533 A.2d 1363,516 Pa. 574
• Parties: , 56 USLW 2341 ERIE INSURANCE EXCHANGE, Appellant, v. TRANSAMERICA INSURANCE COMPANY, Appellee. W.D. 1986.
• Court: Pennsylvania Supreme Court

Page 1363

533 A.2d 1363

516 Pa. 574, 56 USLW 2341

ERIE INSURANCE EXCHANGE, Appellant, v. TRANSAMERICA INSURANCE COMPANY, Appellee.

Nos. J-173-1987 and 90 W.D. 1986.

Supreme Court of Pennsylvania.

Argued Sept. 23, 1987.

Decided Dec. 2, 1987.

Charles Kirshner, H.N. Rosenberg, Rosenberg, Kirshner, P.A., Pittsburgh, for appellant.

Daniel B. Winters, Robert A. Arcovio, Pittsburgh, for appellee.

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

OPINION OF THE COURT

LARSEN, Justice.

This appeal from a declaratory judgment raises the question of whether the appellant Erie Insurance Exchange (Erie), insurer under an automobile liability policy, or the appellee Transamerica Insurance Company (Transamerica), insurer under a homeowner's policy, has the duty to defend and to pay any damages recovered in the actions brought against Bobby Gilbert and Joyce Gilbert, his wife (hereinafter Gilberts), the insured. The lawsuits against the Gilberts ¹ arise out of a mishap involving a visitor's automobile unwittingly set in motion by Erin Gilbert, the 3 1/2 year old son of the Gilberts. ² The Allegheny County Common Pleas Court held that the appellant, Erie, was solely responsible for coverage under the provisions of the automobile liability policy issued to the Gilberts. The Superior Court panel (Spaeth, P.J., Brosky and Olszewski, JJ., with Spaeth dissenting) affirmed the lower court order. ³ We disagree and, now reverse.

In this declaratory judgment action, the parties agreed to the factual background that gave rise to the underlying lawsuits filed against the Gilberts. That factual background was presented to the lower court upon a stipulation of facts which established the following:

On March 19, 1976, Landis Robinson, a life insurance agent in the employ of New York Life Insurance Company, Inc., drove to the home of the Gilberts located on Broadhead Street in the City of Pittsburgh. Ms. Robinson parked her automobile on Broadhead Street directly across from the Gilberts' residence. Broadhead Street is a hill and the Robinson vehicle was facing downhill.

Ms. Robinson was admitted to the Gilberts' home where she commenced a conversation with Joyce Gilbert. While Ms. Robinson and Mrs. Gilbert were talking, Ms. Robinson permitted Erin Gilbert to gain possession of the keys to her automobile. The youngster left the house, taking the car keys with him. Young Erin Gilbert apparently was able to enter into the unattended Robinson vehicle and somehow set the car in motion. ⁴ Once in motion the automobile rolled down Broadhead Street. The runaway vehicle struck two children as it travelled down the hill. One of the children (Ronald Craighead, Jr.) was injured by the vehicle; the other child (Kevin J. Robinson) was killed. Both parties in this appeal acknowledge that the incident occurred away from the premises of the Gilberts.

At the time of the accident the Gilberts owned an automobile which was insured under an automobile liability policy issued by the appellant, Erie. The Gilberts were also insured under a homeowner's policy issued by the appellee, Transamerica. Transamerica does not dispute that except for a policy exclusion relating to claims arising out of the use of motor vehicles, (set out infra.), there would be coverage under its policy.

Along with others, the Gilberts were sued by the parties who suffered damages because of the injuries and death that were a result of the vehicle set in motion by young Erin Gilbert. After the Gilberts executed a reservation of rights agreement, the appellant Erie caused appearances to be entered on their behalf in the lawsuits filed against them and proceeded to defend each action. The appellee, Transamerica, refused to enter an appearance for the Gilberts and declined to participate in any way in the litigation.

In both the personal injury action and the death claim a settlement was negotiated on behalf of the Gilberts. ⁵ Erie takes the position that the entire cost of defense and the duty to pay the whole settlement sum in each action is the obligation of the appellee, Transamerica. Transamerica, on the other hand, argues that since the alleged injuries and damages arose out of the use of an automobile, the exclusion provisions of the homeowner's policy specifically exclude coverage thereunder.

The question of whether Erie, the automobile liability carrier, or Transamerica, the homeowner's carrier, is responsible for payment of the settlement sum and the cost of defending the suits against the Gilberts, necessarily begins with a consideration of the relevant provisions of the respective insurance policies. In the Erie policy, the pertinent provision is found in the "insuring agreements" and it provides as follows:

I. Coverage A--Bodily Injury Liability: To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accidents and arising out of the ownership, maintenance or use of the automobile. (Emphasis supplied.)

In the Transamerica policy, the relevant language is contained in the policy exclusions and is as follows:

This policy does not apply:

* * *

* * *

a. to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of: (Emphasis supplied.)

(2) any motor vehicle owned or operated by or rented or loaned to any Insured,....

Under the Erie automobile policy, coverage is provided when the accident causing damages arises out of "the ownership, maintenance or use of the automobile." Under the Transamerica homeowner's policy, coverage is excluded where the damages arise out of "the ownership, maintenance, operation, use, loading or unloading of any motor vehicle owned or operated by ... any Insured."

At the outset, we recognize certain general rules which we have held applicable in construing insurance policies:

In Warner v. Employers' L. Assur. Corp., 390 Pa. 62, 133 A.2d 231 (1957), we said: 'While policies of insurance will be construed most strongly against [the] insurer (citation omitted) it is a necessary prerequisite to recovery upon a policy for the insured to show a claim within the coverage provided by the policy.' (Citation omitted.) In Armon v. Aetna Casualty and Surety Co., 369 Pa. 465, 469, 87 A.2d 302 (1952), we held: "A defense based on an exception or exclusion in a policy is an affirmative one, and the burden is cast upon the defendant to establish it." (Citations omitted.)

Miller v. Boston Insurance Company, 420 Pa. 566, 570, 218 A.2d 275 (1966). Although this case involves a controversy between two insurers, we will consider each policy from the point of view of the insured and construe each policy most strongly against the insurer. Additionally, the appellee, Transamerica is charged with the burden of proof in attempting to establish that coverage under the homeowner's policy is specifically excluded.

In interpreting the relevant policy provisions in the context of this case and in light of the above general rules, we direct our attention to the policy-requirement of "use" of the automobile. We focus on "use" as opposed to ownership, maintenance, operation, loading or unloading in that, from the stipulation of facts and the arguments of the parties, there is nothing to suggest that the accident resulted from the ownership, maintenance, operation, loading or unloading of the vehicle. Coverage under the Erie policy and exclusion from coverage under the Transamerica policy turns on whether the accident here arose out of "use " of the automobile.

In support of its position that the accident is not covered by the automobile policy, Erie argues that the actions of the 3 1/2 year old child in setting the car in motion is not "use" of an automobile. Erie further argues that the gist of the underlying actions against the Gilberts is the Gilberts' failure to control their child. The appellee, Transamerica counters Erie's argument by citing the lower court decision and arguing that the word "use" has a broad enough meaning to cover the actions of young Erin Gilbert in setting the Robinson vehicle in motion. Transamerica also contends that the underlying complaints filed against the Gilberts allege causes of action founded on negligent entrustment. Transamerica's argument continues that since an essential element of negligent entrustment is use of the automobile as the proximate cause of the injury, and since it is impossible to separate negligent entrustment from use, coverage for the accident in this case is provided under the Erie automobile policy and excluded under the homeowner's policy.

The term "use" as employed in the insuring agreement in the Erie policy and in the exclusions in the Transamerica homeowner's policy denotes an element of rational, purposeful conduct. In each instance, the relevant policy language is not directed to mere movement of a motor vehicle. The movement of a automobile for which coverage applies under the Erie policy and is excluded under the Transamerica policy must, in reality, constitute "use."

In the Erie automobile policy, "use" (of an automobile) is employed with the words ownership and maintenance. In the Transamerica homeowner's policy, "use" (of a motor vehicle) is employed with the words ownership, maintenance, operation, loading and unloading. In interpreting the pertinent provisions of each policy, it is stretching policy construction beyond reasonable bounds to hold that the word "use" includes the maneuvers of a 3 1/2 year old child that happen to set a vehicle in motion.

"The term 'use' has been defined as the general catchall of an omnibus insurance clause, designed and construed to include all proper uses of the vehicle not falling within other terms of definition such as ownership and maintenance." State Farm Mutual Automobile Insurance...