Paylor v. Hartford Ins. Co.

• Decision Date: 20 April 1994
• Citation: 536 Pa. 583,640 A.2d 1234
• Parties: Janet PAYLOR, Administratrix of the Estate of Betty A. Dymond, Deceased, and Janet Paylor, Individually v. The HARTFORD INSURANCE CO. and Norman Dymond, Administrator dbncta of the Estate of Fred E. Dymond, Deceased, and Norman Dymond, Individually. Appeal of the HARTFORD INSURANCE COMPANY.
• Court: Pennsylvania Supreme Court

Page 1234

640 A.2d 1234

536 Pa. 583

Janet PAYLOR, Administratrix of the Estate of Betty A Dymond, Deceased, and Janet Paylor, Individually v. The HARTFORD INSURANCE CO. and Norman Dymond, Administrator dbncta of the Estate of Fred E. Dymond, Deceased and Norman Dymond, Individually Appeal of the HARTFORD INSURANCE COMPANY.

Supreme Court of Pennsylvania.

Argued Jan. 27, 1994.

Decided April 20, 1994.

[536 Pa. 585] David E. Heisler, Scranton, for Hartford Ins. Co.

Marion Munley, Scranton, for J. Paylor.

David L. Lutz, Harrisburg, for amicus curiae--Pa. Trial Lawyers Ass'n.

Before NIX, C.J., and ZAPPALA, PAPADAKOS, CAPPY, CASTILLE and MONTEMURO, JJ.

OPINION

ZAPPALA, Justice.

This appeal presents a question of first impression relating to the enforceability of a "family car exclusion" which excludes a vehicle owned by or furnished or available for the regular use of the named insured or any family member from the definition of an underinsured motor vehicle. We hold that the "family car exclusion" is valid and enforceable under the Motor Vehicle Financial Responsibility Law ("MVFRL"), 75 Pa.C.S.A. § 1701 et seq., under the facts of this case. The order of the Superior Court is hereby reversed, 421 Pa.Super. 641, 612 A.2d 539.

On November 22, 1986, Betty Dymond was a passenger in a motor home that was operated by her husband, Fred Dymond. The motor home was involved in a single-vehicle accident on that day in which both of the Dymonds were killed. The Dymonds' daughter, Janet Paylor, was appointed as the administratrix of Mrs. Dymond's estate.

At the time of the accident, the motor home was insured under an automobile insurance policy issued by Foremost Insurance Company. Both Fred and Betty Dymond were named insureds on the policy. The Dymonds also maintained insurance on three other vehicles that they owned. The three vehicles were insured under a separate policy issued by the Appellant, Hartford Insurance Company. The Dymonds were named insureds on the Hartford Insurance policy as well. Both insurance policies were in effect when the accident occurred.

Paylor recovered the limits of the liability coverage under the policy issued by Foremost Insurance Company on behalf of Mrs. Dymond's estate. Paylor then sought to recover underinsured motorists benefits under the policy issued by Hartford. Hartford denied coverage based upon the family car exclusion contained in the policy, which provided that neither "uninsured motor vehicle" nor "underinsured motor vehicle" includes any vehicle "[o]wned by or furnished or available for the regular use of [the named insured] or any family member."

Paylor initiated a declaratory judgment action against Hartford, asserting that the exclusion violated the MVFRL and the public policy of the Commonwealth and requesting that the exclusion be declared invalid. Following a nonjury trial on June 18, 1990, the trial judge entered judgment in favor of Hartford. On appeal, a panel of the Superior Court reversed in a memorandum opinion. We granted Hartford's Petition for Allowance of Appeal to determine whether the exclusion is enforceable under Pennsylvania law.

The interpretation of a contract of insurance is a matter of law for the courts to decide. In interpreting an insurance contract, we must ascertain the intent of the parties as manifested by the language of the written agreement. When the policy language is clear and unambiguous, we will give effect to the language of the contract. Bateman v. Motorists Mutual Insurance Co., 527 Pa. 241, 245, 590 A.2d 281, 283 (1991), citing Standard Venetian Blind Co. v. American Empire Insurance Co., 503 Pa. 300, 469 A.2d 563 (1983). It is undisputed that the exclusionary provision in the Hartford policy is clear and unambiguous; the dispute centers on whether the provision violates public policy.

"Public policy is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interest." Guardian Life Insurance Co. v. Zerance, 505 Pa. 345, 354, 479 A.2d 949, 954 (1984) (Citations omitted). "It is only when a given policy is so obviously for or against the public health, safety, morals or welfare that there is a virtual unanimity of opinion in regard to it, that a court may constitute itself the voice of the community in [declaring what is or is not in accord with public policy]." Mamlin v. Genoe, 340 Pa. 320, 325, 17 A.2d 407, 409 (1941). The phrase "public policy" has been used also when the courts have interpreted statutes broadly to help manifest their legislative intent. Jeffrey v. Erie Insurance Exchange, 423 Pa.Super. 483, 621 A.2d 635 (1993).

The repeal of the No-Fault Act and the enactment of the MVFRL reflected a legislative concern for the spiralling consumer cost of automobile insurance and the resultant increase in the number of uninsured motorists driving on public highways. The legislative concern for the increasing cost of insurance is the public policy that is to be advanced by statutory interpretation of the MVFRL. This reflects the General Assembly's departure from the principle of "maximum feasible restoration" embodied in the now defunct No-Fault Act.

"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 coverage to compensate for the injuries caused by his negligence." Wolgemuth v. Harleysville Mutual Insurance Co., 370 Pa.Super. 51, 535 A.2d 1145 (1988), allocatur denied, 520 Pa. 590, 551 A.2d 216 (1988). Prior to the passage of the MVFRL, underinsured motorist coverage was not required in Pennsylvania as was uninsured motorist coverage. This led to the anomalous situation that "claimants would find themselves in a better position were the tortfeasor's vehicle totally uninsured, rather than underinsured." Davis v. Government Employees Insurance Co., 500 Pa. 84, 91, 454 A.2d 973, 976 (1982), citing Gorton v. Reliance Insurance Co., 77 N.J. 563, 570, 391 A.2d 1219, 1223 (1978).

The enactment of the MVFRL addressed that problem. When the Hartford policy was issued to the Dymonds, the MVFRL required uninsured motorist and underinsured motorist coverages as part of every motor vehicle liability insurance policy issued in Pennsylvania. ¹ This requirement spawned litigation involving claimants' eligibility for underinsured motorists benefits and exclusionary clauses in automobile insurance policies. A detailed review of the case law that subsequently developed is necessary to address the public policy issue raised in this appeal.

In Wolgemuth, the Superior Court held that a guest passenger who was injured in a one-vehicle accident could not recover underinsurance benefits under a policy applicable to the vehicle when the passenger had received the limits of liability coverage under that same policy. The insurer had paid the full amount of the liability coverage to the passenger, but had denied the claim for underinsurance benefits on the ground that the claim was precluded by policy terms that provided that the insured vehicle could not be an "underinsured motor vehicle" for purposes of determining entitlement to underinsured motorist benefits. The passenger asserted that the policy definition of "underinsured motor vehicle" was void as violative of public policy and contrary to the MVFRL.

The Superior Court rejected the passenger's claim that because the legislature had made underinsured motorist coverage mandatory, any policy provision which operates to deny a claimant underinsured motorist benefits violated public policy. The court observed that the passenger's argument reflected a misapprehension of the nature of the underinsured motorist coverage, noting that the legislature had unquestionably realized that in many instances an accident victim would be insufficiently compensated even though the tortfeasor was insured. The court stated,

The language of the [MVFRL] itself suggests that underinsurance motorist coverage requires the existence of at least two applicable policies of motor vehicle insurance. See, 75 Pa.C.S. § 1731(c). 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 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.

370 Pa.Super. at 57-58, 535 A.2d at 1149 (Emphasis supplied). The court concluded that the statutory scheme of the MVFRL contemplated recovery by the passenger of the available limits of liability applicable to the negligent vehicle, with recourse to underinsurance benefits pursuant to any separate insurance policy under which the passenger was an insured, if any. The court held that the definition of underinsured motor vehicle contained in the insurance policy did not violate the MVFRL or public policy.

The Superior Court limited its holding in Wolgemuth to class two beneficiaries and reserved determination on the issue of whether a class one beneficiary could recover underinsured motorist benefits under the same insurance policy from which liability benefits were paid. ² The issue was finally resolved in Newkirk v. United Services Automobile Association, 388 Pa.Super. 54, 564 A.2d 1263 (1989), allocatur denied, 528 Pa. 624, 597 A.2d 1153 (1990). Sandra Newkirk was involved in a single-car accident while a passenger in a vehicle owned and operated by her husband, Charles Newkirk. Mr....