Panizzi v. State Farm Mutual Automobile Insurance Co.
| Citation | 386 F.2d 600 |
| Decision Date | 04 December 1967 |
| Docket Number | No. 16469,16470.,16469 |
| Parties | Elaine PANIZZI and Louis T. Gedeon, Jr., Administrators of the Estate of Louis T. Gedeon, Deceased, Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee. Elaine PANIZZI and Louis T. Gedeon, Jr., Administrators of the Estate of Elaine Edith Gedeon, Deceased, Appellees, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Paul A. Simmons, Tempest & Simmons, Monongahela, Pa., for Elaine Panizzi and Louis T. Gedeon, Jr., Administrators.
Francis H. Patrono, Patrono, Ceisler & Edwards, Washington, Pa., for State Farm Mut. Auto. Ins. Co.
Before STALEY, Chief Judge, and MARIS and VAN DUSEN, Circuit Judges.
These cases are before the court on the appeal of an insurer from a judgment for the insured in the face amount of an automobile liability insurance policy and the appeal of the insured from a judgment for the insurer in a companion case, claiming breach by the insurer of its fiduciary duties under the policy. The car of Louis T. Gedeon (Gedeon) left the highway and struck a guard rail on August 11, 1955; his wife died on that day as a result of the accident.
On January 5, 1956, Gedeon, as administrator of his wife's estate, sued himself under the Pennsylvania Wrongful Death Act in the state court.1 He made no defense personally and a verdict for the estate awarded $51,318.92 on June 1, 1956. Judgment on this verdict was entered November 25, 1957. On February 10, 1958, Gedeon, individually, sued State Farm Mutual Automobile Insurance Company (State Farm) in assumpsit in the same court,2 claiming damages of $51,318.92 for State Farm's breach of its covenant to defend found in an insurance policy issued by State Farm to Gedeon in 1955. The Court of Common Pleas of Washington County, Pennsylvania, en banc with a dissent, affirmed the finding of the trial judge that the defendant insurer was not liable on three grounds: (1) the insurance policy was not in force at the time of the accident because of failure to pay premiums; (2) even if the policy were in force, obligations to members of the insured's household were excluded from coverage; and (3) that even if there were a breach of the contractual duty to defend, Gedeon had shown no damages because he conducted his own defense by choosing not to contest the wrongful death action, and, hence, no counsel fees or other costs were thus incurred. On appeal to the Supreme Court of Pennsylvania, the decision was affirmed solely on the basis of the third argument. Gedeon v. State Farm Mutual Automobile Ins. Co., 410 Pa. 55, 188 A.2d 320 (1963).
After this decision, Gedeon filed two civil actions against State Farm in the United States District Court for the Western District of Pennsylvania. As administrator of his wife's estate, he sought $10,000. indemnity, the face amount of the insurance policy, in one cause of action, and in the other, suing individually, $51,318.92 as damages for State Farm's breach of its fiduciary duties under the policy.3 The District Court denied State Farm's motion for summary judgment on the $10,000. indemnity claim, saying that the policy appeared to have been in force at the time of the accident and any controverted issues of fact that might be lurking would have to be determined by trial. Gedeon v. State Farm Mutual Automobile Insurance Co., 227 F.Supp. 342, 347 (W.D.Pa.1964). This same opinion granted summary judgment to the insurer, however, on the action claiming breach of fiduciary duties under the policy. We reversed this latter decision on February 26, 1965 (Gedeon v. State Farm Mutual Automobile Insurance Co., 3 Cir., 342 F.2d 15), and remanded to the District Court for trial. After trial on both causes of action,4 the trial judge awarded Gedeon the $10,000. indemnity but found for State Farm on the issue of breach of fiduciary duty. Gedeon v. State Farm Mutual Automobile Insurance Co., 261 F.Supp. 122 (W.D.Pa.1966). In No. 16469, plaintiff Gedeon appeals from the denial of his claim for $51,318.92 for breach of fiduciary duties; in No. 16470 State Farm appeals the judgment for the $10,000. indemnity of the insurance policy.
We dispose of both appeals and this entire controversy because, on this record,5 the conclusion is required, as a matter of law, that Gedeon was not insured by State Farm at the time of the accident. Accordingly, State Farm is not liable for any claimed indemnity, for any payments under the insurance contract, nor for the breach of any duties or obligations allegedly arising from the terms of that policy.6
The Court of Common Pleas of Washington County, Pennsylvania, decided on November 13, 1961, that Gedeon was not covered by the State Farm policy on August 11, 1955, when the accident occurred. This decision is not res judicata of this question. See 342 F.2d at 17-18 and 227 F.Supp. at 344-345. The litigation in Pennsylvania operates as an estoppel only on the issue of coverage as it relates to the breach of the duty to defend (342 F.2d 18). Other claims (including different fiduciary claims) are made in this litigation.
As clearly shown by the record in this case in all the courts where this controversy has been heard, Gedeon agreed to purchase automobile insurance for six months' coverage. He paid State Farm his $17.00 membership fee on May 18, 1955,7 and rather than pay the premium of $52.00 then, was allowed to sign a "time check" for the $52.00, agreeing to pay the full premium "on demand, but not before July 18." Sometime prior to July 26 (and almost certainly prior to July 23),8 Gedeon received a bill demanding payment of the $52.00 and showing that the due date was July 18. Gedeon made no payments on or before July 18 and consequently, on July 25, State Farm mailed him a notice of cancellation of the policy, effective August 7.9 In addition to this cancellation, State Farm included an invitation to the insured to reinstate his policy and stated, "Reinstatement of your policy will be effective upon receipt of the required amount," namely, $52.00. The day after this mailing, Gedeon mailed $26.00 to State Farm with a letter stating that he was "sending Twenty-six dollars on my insurance policy" and "the balance" ($26.00) would be forwarded in twelve days (August 7). On August 7, Gedeon failed to pay the $26.00 balance, and the final payment was not mailed until August 12, the day after the accident.
After receipt of the full $52.00, State Farm's bookkeeping procedure, after digesting the above facts, computed that the policy was out of force as of August 7, according to the notice of cancellation, but was reinstated on August 12. Accordingly, on August 25 State Farm mailed to Gedeon a refund of $1.46 for the five days the premium was unearned, the policy not being in force from August 7 to August 12.
Although, as noted above, the State Court decision is not res judicata, we agree substantially with the Court of Common Pleas en banc decision (No. 420, Feb.Term 1958 — see fn. 2 above) that as a matter of law no contract was in force at the time of the accident. Although State Farm granted coverage in return for Gedeon's "time check," non-payment as of July 18 and demand gave it the right to cancel any coverage merely by giving the required five-day notice. The notice of July 25 should have been expected by Gedeon; he knew he was in default on his "time check."10 As the notice stated, whatever contract or coverage was created on May 18 was terminated as of August 7. The fact that it could have been terminated as early as July 23 or 24 adds nothing to the case; we need not speculate on State Farm's possible business reasons for picking August 7. Testimony revealed that the internal bookkeeping of such large insurers often takes considerable time. State Farm had the power to refuse coverage until payment in full of the premium. See, e. g., Mackie v. Prudential Ins. Co. of America, 148 Pa. Super. 498, 500, 25 A.2d 736, 737 (1942); Bush v. Prudential Ins. Co. of America, 52 F.Supp. 52, 53 (E.D.Pa.1943) aff'd 150 F.2d 631, 634 (3rd Cir. 1945).11
State Farm, however, apparently still hoping for Gedeon's business, invited him to reinstate the policy by paying the required amount, the full $52.00. A policy of insurance is unilateral. The agreed exchange for the insurer's promise is the payment of the premium. The offer of reinstatement clearly stated that such reinstatement would be "effective upon receipt of the required amount," which did not occur until after the accident. Also, a liability policy such as this is an aleatory contract where the insurer promises to make payment on the occurrence of a fortuitous event while the policy is in effect. See Moyer v. Diehl, 139 Pa.Super. 59, 11 A.2d 651, 655 (1940); Restatement, Contracts, § 291. If Gedeon had paid before the August 7 termination date, no lapse in coverage would have occurred. But Gedeon did not accept by full payment until August 12. He was without coverage from August 7 through August 12. See Cooper v. Belt Auto. Indemnity Ass'n, 79 Pa. Super. 479 (1922), where, after the insured's failure to make timely payment was followed by an offer to reinstate, the company did not receive and credit the premium until July 22, the day after an auto accident, and the court said at pp. 481-482:
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