Piper Aircraft Corp. v. Insurance Co. of North America

• Decision Date: 24 July 1980
• Parties: PIPER AIRCRAFT CORPORATION, Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA and Commonwealth of Pennsylvania, Department of Transportation, Defendants.
• Court: Pennsylvania Commonwealth Court

417 A.2d 283

53 Pa.Cmwlth. 209

PIPER AIRCRAFT CORPORATION, Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA and Commonwealth of

Pennsylvania, Department of Transportation, Defendants.

Commonwealth Court of Pennsylvania.

July 24, 1980

Argued March 10, 1980.

Bernard A. Ryan, Jr. and Stephen E Godsall-Myers, Dechert, Price & Rhoads, Harrisburg, F Hastings Griffin, Philadelphia, for plaintiff.

J Grant McCabe, III, Rawle & Henderson, Philadelphia, and Henry H. Janssen, Philadelphia, Gregory C. Santoro, Ward T. Williams, Dept. of Transportation, Harrisburg, for defendants.

Before CRUMLISH, President Judge, and ROGERS and WILLIAMS, JJ.

WILLIAMS Judge.

Directed to this Court's original jurisdiction, Piper Aircraft Corporation (Piper) has filed a petition for review seeking declaratory relief under the Declaratory Judgments Act, 42 Pa.C.S. § 7531 et seq. Named as parties-defendant are the Insurance Company of North America (INA) and the Pennsylvania Department of Transportation (Department). Plaintiff Piper requests this Court to determine the contractual duty, if any, of each defendant to bear the burden and expense of defending Piper in several damage suits arising from the crash of an airplane. The airplane was owned by Piper, leased to the Department, and insured by INA. Piper's petition has been met by preliminary objections filed by both defendants.

Piper's petition avers the following facts: On February 1, 1977 Piper leased a Cheyenne airplane to the Department for a term of one year. Under the provisions of the written lease the Department agreed to indemnify and "save" Piper harmless from all claims, liabilities, costs and expenses occasioned by the operation of the airplane during the term of the lease. In addition, the Department obtained from INA an insurance policy covering the airplane. Then, by subsequent endorsement on the policy, the insurance was extended to include Piper, as a co-insured with the Department. On February 24, 1977 the airplane crashed near Harrisburg, Pennsylvania, causing several fatal injuries. From that crash nine lawsuits have been commenced against Piper.

Count One of the petition is directed against INA but is made to include the Department as an indispensable party. Count Two is against the Department only. In the first count Piper asserts that under the insurance policy INA has an obligation to defend both it and the Department, but has not defended Piper in the crash lawsuits. The second count contends that the Department also has a duty to defend Piper in those lawsuits, pursuant to a covenant in the lease, but has failed to do so. It is these asserted obligations to defend that Piper asks us to determine and declare.

The preliminary objections filed by the defendants raise questions of this Court's jurisdiction to entertain the matter, assert that Piper's two counts constitute a misjoinder of actions, and move for a more specific pleading. With the case in that posture, we consider only the issues generated by the objections.

The plaintiff urges that this Court has exclusive original jurisdiction over the action laid in Count One of the petition, pursuant to Section 761(a)(1) of the Judicial Code, 42 Pa.C.S. § 761(a)(1). That assertion is based on the premise that the Department is an indispensable party to the action against INA set forth in that count.

The plaintiff's contention recognizes the current state of the law. We have established the rule that for this Court to have exclusive original jurisdiction over a suit against the Commonwealth and another party, the Commonwealth must be an indispensable party to the action. Royal Indemnity Co. v. Department of Environmental Resources, 39 Pa.Cmwlth. 322, 395 A.2d 641 (1978); Keitt v. Ross, 17 Pa.Cmwlth. 183, 331 A.2d 582 (1975); Ross v. Keitt, 10 Pa.Cmwlth. 375, 308 A.2d 906 (1973). Accordingly, we must determine at the outset whether the Department is an indispensable party to the action in Count One of the plaintiff's petition for declaratory relief.

By general definition, an indispensable party is one whose rights are so connected with the claims of the litigants that no relief can be granted without infringing upon those rights. Tigue v. Basalyga, 451 Pa. 436, 304 A.2d 119 (1973). However, Section 7540(a) of the Declaratory Judgments Act, 42 Pa.C.S. § 7540(a), gives us a more specialized conception of an indispensable party. That Section provides:

"When declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration . . ."

With particular regard to declaratory judgment proceedings, we have held that a Commonwealth agency whose interest will be affected by a declaration, sought by a plaintiff against another, is an indispensable party. Pleasant Township v. Erie Insurance Exchange, 22 Pa.Cmwlth. 307, 348 A.2d 477 (1975).

At least on the face of things, the Department is legally bound under the lease agreement to "save" Piper harmless from claims, liabilities, costs and expenses occasioned by the operation of the airplane. That provision conceivably could impose a substantial financial obligation on the Department, because of the lawsuits against Piper arising from the plane crash. Ostensibly, the Department purchased the insurance to have INA absorb that financial risk, in whole or part.

If plaintiff Piper obtains a declaration that INA has a legal duty to bear the burden of defending the lawsuits, then that would exonerate the Department of legal duties it might have in that regard under the lease. If there is a declaration that INA has no such obligation, then the Department will be exposed to potential liability under the indemnification clause of the lease. Any judicial declaration, by any court, relative to INA's alleged contractual duty to bear the defense of Piper will affect an ostensible right reposing in the Department: to have that burden borne by INA pursuant to the insurance policy, instead of by the Department under the lease.

In this case the legal relation of the Commonwealth agency to the insurance company is arguably even stronger than that in the Pleasant Township case, supra, in which the agency was a claimant against the insurance carrier's insured and was ruled indispensable for that reason. In the case at bar, the agency has a direct contractual relationship with the carrier, allegedly designed to...