Nationwide Mut. Ins. Co. v. US Fid. & Guar. Co.

• Citation: 529 F. Supp. 194
• Decision Date: 08 December 1981
• Docket Number: Civ. A. No. 77-3237.
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY v. UNITED STATES FIDELITY AND GUARANTY COMPANY.
• Court: U.S. District Court — Eastern District of Pennsylvania

529 F. Supp. 194

NATIONWIDE MUTUAL INSURANCE COMPANY v. UNITED STATES FIDELITY AND GUARANTY COMPANY.

Civ. A. No. 77-3237.

United States District Court, E. D. Pennsylvania.

December 8, 1981.

Curtis P. Cheyney, III, Swartz, Campbell & Detweiler, Philadelphia, Pa., for plaintiff.

Albert J. Schell, Jr., Philadelphia, Pa., for defendant.

MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

This action was originally a declaratory judgment action which came before the Court on the parties' cross-motions for summary judgment. The parties now agree that in the event that the plaintiff, Nationwide Mutual Insurance Company (Nationwide), is entitled to summary judgment, that judgment may be entered in the amount of $175,531.66, the amount of benefits paid by Nationwide as a result of an accident involving a minor, Robert Treegoob, now deceased, which occurred on May 21, 1976. Nationwide asks this Court to determine that the defendant, United States Fidelity and Guaranty Company (USF&G), must reimburse it for these loss benefits on the ground that USF&G was responsible for the payment of these benefits under § 204(a) of the Pennsylvania No-Fault Motor Vehicle Insurance Act (No-Fault Act), 40 P.S. § 1009.101 et seq. The facts material to a resolution of the issue before the Court are undisputed and for the reasons set forth below the Court has determined that summary judgment must be granted in favor of Nationwide in the amount of $175,531.66.

There is no dispute as to the facts precipitating this litigation. Robert S. Treegoob was struck and severely injured by an automobile while crossing Stoneridge Road in Villanova, Pennsylvania on May 21, 1976. Robert was the minor son of Warren Treegoob and resided with him. At the time of the accident Nationwide had issued and in full force and effect an automobile liability policy covering the automobile which struck Robert Treegoob, which policy provided no-fault insurance coverage under the provisions of the No-Fault Act. USF&G had issued and in full force and effect at the time of the accident, a comprehensive general-automobile liability insurance policy covering two automobiles owned or leased by Valient Finance Company and/or Treegoob Appliances, Inc., which were available to Warren Treegoob for pleasure and business purposes.

Endorsement # 4 of the USF&G policy identifies the "named insured" of that policy as follows:

It is hereby agreed and understood that the Named Insured is:

Harold and Warren Treegoob T/A Treegoob's;

Treegoob's Appliances, Inc.;

Warren Mark Corporation;

Valient Finance Company, Inc.; and

Valient Consumer Discount Company, A.T.I.M.A.

as their interests may appear

Beneath the designation of the named insured appears the following addendum:

It is also agreed and understood that the five above mentioned entities are of common financial ownership and control.

The USF&G policy contains a number of endorsements defining the type and scope of coverage provided by the policy. Endorsement # 10, entitled Basic Personal Injury Protection Endorsement, which was "rolled on" to the pre-existing policy in 1975 pursuant to the No-Fault Act, provides, in part:

In accordance with the Pennsylvania No-Fault Motor Vehicle Insurance Act, the Company will pay any or all personal injury protection benefits for:

(a) medical expenses,

(b) work loss,

(c) replacement services loss,

(d) funeral expenses and

(e) survivor's loss

for bodily injury to an eligible person due to an accident resulting from the maintenance or use of a motor vehicle as a vehicle.

An "eligible person" is defined in Endorsement # 10 as:

(a) the named insured or any relative who sustains injury while occupying or as a pedestrian struck by, any motor vehicle,

(b) any other person who sustained injury

(1) while occupying, or as a pedestrian struck by, the insured motor vehicle; or

(2) while occupying a motor vehicle not owned by, but operated by the named insured or relative, other than a public livery or conveyance, if bodily injury results from the operation of the motor vehicle by the named insured or relative. (emphasis in the original).

The Warren Treegoob family, at the time of the accident, did not own or have available for their use any automobiles other than those covered by the USF&G policy, nor did they maintain any automobile liability or no-fault insurance coverage other than that provided by the USF&G policy.

The question now before the Court is whether under the policy issued by USF&G, USF&G is responsible for the payment of basic loss benefits to the family of Robert Treegoob. Both parties agree that this question must be decided in accordance with Pennsylvania law and that the applicable statutory provision is § 204(a) of the Act, 40 P.S. § 1009.204(a), which establishes categories and priorities as between insurers responsible for the payment of loss benefits, provides

§ 1009.204 Source of basic restoration benefits

(a) Applicable security. — The security for the payment of basic loss benefits applicable to an injury to:

(1) an employee, or to the spouse or other relative of any employee residing in the same household as the employee, if the accident resulting in injury occurs while the victim or deceased victim is driving or occupying a motor vehicle furnished by such employee's employer, is the security for the payment of basic loss benefits covering such motor vehicle or, if none, any other security applicable to such victim;

(2) an insured is the security under which the victim or deceased victim is insured;

(3) The driver or other occupant of a motor vehicle involved in an accident resulting in injury who is not an insured is the security covering such vehicle;

(4) an individual who is not an insured or the driver or other occupant of a motor vehicle involved in an accident resulting in injury is the security covering any motor vehicle involved in such accident. For purposes of this paragraph, a parked and unoccupied motor vehicle is not a motor vehicle involved in an accident, unless it was parked so as to cause unreasonable risk of injury; and

(5) any other individual is the applicable assigned claims plan.

Under the system of priorities established by § 204(a), each subparagraph only becomes applicable after it has been determined that the prior subparagraph is inapplicable. See Gradler v. Prudential Property & Casualty Insurance Company, 464 F.Supp. 575, 577-78 (W.D.Pa.1979); Schimmelbusch v. Royal-Globe Insurance Co., 247 Pa.Super. 28, 371 A.2d 1021, 1023 (1977).

Nationwide contends that the USF&G policy is the applicable security under § 204(a)(2) for the payment of basic loss benefits to Robert Treegoob. USF&G, on the other hand, asserts that the Nationwide policy is the applicable security under § 204(a)(4). These contrary positions result from the parties' differing interpretations of the named insured endorsement appearing in the USF&G policy.

Nationwide asserts that Warren Treegoob is a named insured under the USF&G policy by virtue of the designation "Harold and Warren Treegoob T/A Treegoobs" appearing in Endorsement # 4 of the USF&G policy. Both parties agree that if Warren Treegoob is in fact a named insured under the policy, his son, Robert Treegoob, is eligible for personal injury protection under Endorsement # 10 of the USF&G policy and that the USF&G policy is the applicable security under § 204(a)(2) as "the security under which the victim is insured".¹

USF&G, however, denies that Warren Treegoob is a named insured under Endorsement # 4 and asserts that the phrase "Harold and Warren Treegoob T/A Treegoobs" designates only the partnership "Treegoobs" as a named insured and since a partnership does not have relatives, Robert Treegoob, under the given facts, is not eligible for personal injury protection under Endorsement # 10 of the USF&G policy and is not an "insured" under § 204(a)(2) of the No-Fault Act.

Nationwide offers three principal arguments in support of its interpretation of the policy. First, Nationwide argues that Endorsement # 4 read as a whole clearly designated Warren Treegoob as a named insured or, at the very least, is ambiguous and must be construed against the insurer USF&G, the company which drafted the policy. Second, Nationwide argues that under Pennsylvania law the designation of a partnership as the named insured operates to insure the partners as individuals. Lastly, Nationwide argues that Robert Treegoob is entitled to personal injury protection benefits under the so-called "reasonable expectations rule" because "insurance contracts should provide that coverage one would reasonably expect upon a reading of the policy."

In support of its motion and in response to Nationwide's arguments, USF&G asserts: that the policy, read as a whole, unambiguously designates the partnership entity as the named insured; that under Pennsylvania law a partnership is an insurable entity independent of the individual partners and; that the reasonable expectations rule is not applicable in this instance because coverage was not denied on the basis of an exclusionary provision.

Neither party has been able to provide the Court with a Pennsylvania decision addressing the question now before the Court. However, the rules relating to the construction of insurance policies in Pennsylvania are well established.

Since the policy is a contract, the court's duty is to ascertain the intent of the parties as manifested in the language of the agreement. Mohn v. American Cas. Co. of Reading, 458 Pa. 576, 326 A.2d 346 (1974); Lovering v. Erie Indem. Co., 412 Pa. 551, 195 A.2d 365 (1963); Treasure Craft Jewelers, Inc. v. Jefferson Ins. Co., 583 F.2d 650, 652 (3d Cir. 1978). The court should read policy provisions so as to avoid ambiguities, if the plain language of the contract permits. Pennsylvania Manufacturers' Association Ins. Co. v. Aetna Casualty & Sur. Ins. Co., 426 Pa. 453, 457, 233 A.2d 548, 551 (1967); Kattelman v. National Union Fire Ins. Co., 415 Pa.

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