Newkirk v. United Services Auto. Ass'n

• Decision Date: 20 October 1989
• Citation: 388 Pa.Super. 54,564 A.2d 1263
• Parties: Sandra C. NEWKIRK, Appellant, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Charles G. Newkirk. 00031 PHILA. 1989
• Court: Pennsylvania Superior Court

Page 1263

564 A.2d 1263

388 Pa.Super. 54

Sandra C. NEWKIRK, Appellant, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Charles G. Newkirk.

00031 PHILA. 1989

Superior Court of Pennsylvania.

Argued May 18, 1989.

Filed Aug. 8, 1989.

Reargument Denied Oct. 20, 1989.

Mark H. Scoblionko, Allentown, for appellant.

Eugene J. Maginnis, Philadelphia, for United Services, appellee.

Before CIRILLO, President Judge, and ROWLEY and HESTER, JJ.

CIRILLO, President Judge:

The issue presented in this appeal is whether a "class one" beneficiary, ¹ who was injured in a motor vehicle accident involving only the insured's vehicle, is precluded from recovering both liability and underinsured motorist coverage under an automobile insurance policy which excludes family-owned vehicles from the definition of underinsured vehicles.

Appellant, Sandra C. Newkirk, was riding as a passenger in a car owned and operated by her husband, Charles Newkirk, when her husband lost control of the car. The car went off the roadway and struck three tree trunks. While Mrs. Newkirk survived the crash, she sustained serious personal injuries.

Mr. Newkirk was insured at the time of the crash by appellee, United States Automobile Association (USAA). His policy with USAA provided him with $300,000 of liability coverage per person. An exception in the policy, however, limited liability coverage for bodily injury sustained by family members to $15,000.

Mrs. Newkirk filed suit against her husband in the Court of Common Pleas of Lehigh County to recover for the injuries she sustained in the accident. On behalf of Mr. Newkirk, USAA tendered a settlement offer to Mrs. Newkirk in the amount of $15,000. This figure represented the maximum amount of liability coverage provided for family members under Mr. Newkirk's policy with USAA. Mrs. Newkirk refused to accept USAA's settlement offer.

Mrs. Newkirk subsequently made a settlement demand to USAA for $300,000, which was the maximum amount of underinsured motorist coverage available per person under Mr. Newkirk's policy. USAA rejected this demand based on the following definition provision in its policy (hereinafter referred to as the "family car exclusion"):

[N]either "uninsured motor vehicle" nor "underinsured motor vehicle" includes any vehicle ... [o]wned by or furnished or available for the regular use of you or any family member. ²

Mrs. Newkirk then filed the instant action against USAA in the Court of Common Pleas of Lehigh County, seeking a declaration of her right to recover underinsured benefits pursuant to her husband's policy with USAA. ³ When pleadings closed, the parties filed cross-motions for summary judgment. Both parties agreed that there were no disputed issues of fact to be resolved and that the only issue in dispute was whether Mrs. Newkirk was potentially entitled to receive underinsured motorist benefits for her injuries under Mr. Newkirk's policy with USAA.

On December 8, 1988, the Honorable John E. Backenstoe ruled that Mrs. Newkirk was not entitled to underinsurance coverage pursuant to her husband's insurance policy, and entered an order denying Mrs. Newkirk's motion for summary judgment and granting USAA's motion for summary judgment. Shortly thereafter, Mrs. Newkirk filed this appeal.

The issue raised in this appeal is an issue of first impression which was specifically left unanswered by our court en banc in Wolgemuth v. Harleysville Mutual Insurance Co., 370 Pa.Super. 51, 535 A.2d 1145 (1988). In Wolgemuth, we addressed the issue of whether a guest passenger injured in a single vehicle accident, who had already recovered the maximum amount of liability coverage under the insurance policy carried by the host of the vehicle, was entitled to recover underinsured motor vehicle coverage under the same policy. The policy, like the policy at issue in the present case, excluded family cars from the definition of underinsured motor vehicles. ⁴

The appellant ⁵ in Wolgemuth argued that because the legislature made underinsured motorist coverage mandatory, any policy provision such as the family car exclusion, which operates to deny a claimant underinsured motorist benefits, violates the public policy of this Commonwealth. Id. at 56, 535 A.2d at 1147. We rejected this argument, finding that it was based on a misapprehension of the nature of underinsured motorist coverage.

In reaching this conclusion, we reviewed the history behind the legislature's decision to make underinsured motorist coverage mandatory. We explained that prior to the passage of the MVFRL, "underinsured motorist coverage, unlike uninsured motorist coverage, was not required in Pennsylvania or regulated by statute." Id. at 56, 535 A.2d at 1148. Because of this, those claimants who purchased uninsured motorist coverage were in a better position when they were involved in a car accident with an uninsured tortfeasor rather than an underinsured tortfeasor. If they were hit by an uninsured tortfeasor, they could recover from their uninsured motorist benefits; however, if they were hit by an underinsured tortfeasor, they could not recover from that coverage but were limited to recovering the minimal amount of benefits available to them under the tortfeasor's insurance. The legislature enacted the underinsured motorist coverage in the MVFRL to resolve this anomaly.

With this history in mind, we expounded on the purpose of underinsured motorist coverage:

The purpose of underinsured motorist coverage is to protect the insured (and his additional insureds) from the risk that a negligent driver of another vehicle will cause injury to the insured (or his additional insureds) and will have inadequate liability coverage to compensate for the injuries caused by his negligence. Thus, an insured who purchases $100,000.00 of liability coverage to protect others from his negligence, must, by law, be offered the option of purchasing up to $100,000.00 of underinsured motorist coverage to protect himself and his additional insureds from the risk that they will be severely injured by a negligent driver who has liability coverage in an amount insufficient to fully compensate them for their injuries.

Id. at 58, 535 A.2d at 1149 (emphasis in original). We also noted that the language utilized by the legislature in section 1731(c) of the Motor Vehicle Financial Responsibility Law (MVFRL) suggests that underinsured motorist coverage requires the existence of at least two policies of motor vehicle insurance. Id. Discussing this observation, we stated:

An underinsured motor vehicle, must, by definition, be an insured vehicle. Thus, the statute contemplates one policy applicable to the vehicle which is at fault in causing the injury to the claimant and which is the source of the liability coverage (which is ultimately insufficient to fully compensate the victim), and a second policy, under which the injured claimant is either an insured or a covered person. It is the second policy which the statute contemplates as the source of underinsured motorist coverage, where the liability coverage provided by the first policy of insurance is insufficient to fully compensate the claimant for his injuries.

Id. Based on our findings, we held that the public policy of this Commonwealth was not violated by the exclusion of vehicles owned, furnished, or available for the regular use of an insured or the insured's family from the definition of underinsured vehicles.

We narrowed our holding in Wolgemuth, however, by including the following comments in our discussion:

We are not here asked to determine, and express no opinion upon, whether an insured, as that term is defined by the Motor Vehicle Financial Responsibility Law, could, under certain circumstances, recover under both the liability and underinsured motorist provisions of a single policy. [The passenger of the host vehicle in this case] was a class two beneficiary of the policy issued by appellee Harleysville. ⁶ As a class two beneficiary, Gail M. Wolgemuth had no recognizable contractual relationship with the insurer of the vehicle, had paid no premiums for such coverage, and had no reasonable expectations as to coverage under the policy issued by appellee. To permit appellant to recover underinsured motorist benefits under the circumstances of this case would be to convert essentially first party underinsured motorist coverage into third party liability coverage.

Id. at 59-60, 535 A.2d at 1149-50 (footnote omitted). With the inclusion of these comments, we expressly limited the applicability of our holding in Wolgemuth to class two beneficiaries and specifically left open the question with which we are now presented, namely whether a class one beneficiary such as Mrs. Newkirk could recover underinsured motorist benefits under the same insurance policy from which she received liability benefits.

Mrs. Newkirk contends that we should answer this question in the affirmative. The rationalization she uses to convince us to adopt this position is based in part on the passage from Wolgemuth which we quoted directly above.

Mrs. Newkirk argues that her status as a class one beneficiary distinguishes her in several respects from the passenger claiming underinsured coverage in Wolgemuth. As a class one beneficiary, she states, she had a recognizable contractual relationship with USAA. In addition, unlike the passenger in Wolgemuth, she and her husband paid premiums to USAA for the coverage from which she now seeks to recover. Moreover, she and her husband had a reasonable expectation that she was entitled to coverage under her husband's policy with USAA. These differences between the passenger in Wolgemuth and herself, she asserts, render the reasoning which we utilized in Wolgemuth to uphold the validity of the "family car exclusion" inapplicable in determining the validity of the exclusion in this case.

Mrs. Newkirk states that in this case it would be unconscionable to uphold the validity of the ...