Prudential Property v. Colbert

• Decision Date: 31 December 2002
• Citation: 572 Pa. 82,813 A.2d 747
• Parties: PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, Appellee, v. Adam COLBERT, Gary Colbert, Christine Colbert, Appellants.
• Court: Pennsylvania Supreme Court

813 A.2d 747

572 Pa. 82

PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, Appellee, v. Adam COLBERT, Gary Colbert, Christine Colbert, Appellants.

Supreme Court of Pennsylvania.

Submitted April 19, 2001.

Decided December 31, 2002.

Kenneth G. Fawcett, James Joseph Ross, for Colbert, A., et al.

Matthew Stephen Crosby, Scott B. Cooper, Harrisburg, amicus curiae, for Pennsylvania Trial Lawyers Association.

Peter B. Skeel, for Prudential Property and Casualty Insurance Company.

James C. Haggerty, Pittsburgh, amicus curiae, for Pennsylvania Defense Institute, Nationwide Mutual Insurance Company, Insurance Federation of Pennsylvania.

Before ZAPPALA, C.J., CAPPY, CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN, JJ.

OPINION

Chief Justice ZAPPALA.

This matter comes before this Court on a Petition for Certification of Questions of Law from the United States Court of Appeals for the Third Circuit.¹ We granted the Petition, which certifies two distinct questions for our review: (1) whether the definition of "insured" in the automobile insurance policy of Prudential Property and Casualty Insurance Company impermissibly narrows and conflicts with the statutory definition of "insured" as contained in Section 1702 of Pennsylvania's Motor Vehicle Financial Responsibility Law (MVFRL), 75 Pa.C.S. §§ 1701-1799.7; and (2) whether the "other household vehicle" exclusion contained in the Prudential policy is void as against the public policy of the MVFRL.

On August 26, 1996, Adam Colbert was involved in an automobile accident while driving his car, which he had insured with both uninsured (UM) and underinsured (UIM) motorist coverage under a policy with State Farm Insurance Company. At the time of the accident, Adam resided with his parents, Gary and Christine Colbert, who owned three automobiles, all of which were insured with both UM and UIM coverage under a single policy with Prudential. The Prudential policy did not cover Adam's vehicle in any respect; indeed, as discussed infra, it was expressly excluded from coverage.

Adam Colbert ultimately settled his claim against the driver who caused the accident and received the maximum amount under the tortfeasor's liability coverage. In addition, Adam recovered the maximum amount of UIM coverage recoverable under his policy with State Farm. Adam then made another claim for additional UIM benefits under his parents' policy with Prudential. Prudential denied coverage on two separate grounds: (1) Adam was not an "insured" under the Prudential policy; and (2) the Prudential policy, in its "other household vehicle" exclusion, expressly excluded coverage of a named insured or household resident for accidents occurring while the insured or household resident was using another owned vehicle not insured under the Prudential policy.

Prudential filed a declaratory judgment action against Adam and his parents in the United States District Court for the Western District of Pennsylvania. The parties filed cross-motions for summary judgment. On October 12, 1998, the district court granted Prudential's motion and denied the Colberts' motion, finding that Adam was not an "insured" under the terms of the Prudential policy and that Adam was excluded from coverage by the "other household vehicle" exclusion. See R. 6a-18a. The Colberts appealed to the United States Court of Appeals for the Third Circuit, which certified the above-referenced questions of Pennsylvania law to this Court.

The first question certified for our review is whether the definition of "insured" in Prudential's automobile insurance policy with Gary and Christine Colbert impermissibly narrows and conflicts with the statutory definition of "insured" as set forth in the MVFRL. Section 1702 of the MVFRL defines an "insured" as:

"Insured." Any of the following:

(1) An individual identified by name as an insured in a policy of motor vehicle liability insurance.

(2) If residing in the household of the named insured:

(i) a spouse or other relative of the named insured; or

(ii) a minor in the custody of either the named insured or relative of the named insured.

75 Pa.C.S. § 1702. Adam Colbert was not a named insured on the Prudential policy. Nonetheless, it is undisputed that he falls within the second, more broad definition of insured: he resided in the household of his parents, the named insureds, at the time of the accident.

Adam Colbert does not, however, satisfy Prudential's narrower definition of "insured," which requires that resident relatives be driving an automobile insured under the Prudential policy at the time of the accident:

WHO IS INSURED

IN YOUR CAR (INCLUDES A SUBSTITUTE CAR)

You and a resident relative are insured while using your car or a substitute car covered under this part.

Other people are insured while using your car or a substitute car covered under this part if you give them permission to use it. They must use the car in the way you intended.

R. 127a (emphasis omitted). Thus, Adam Colbert could only qualify as an insured under the Prudential policy if he was driving a car covered by the Prudential policy, or a substitute car. Adam, however, was driving his car, which was not covered by the Prudential policy and did not qualify as a substitute car.² Thus, under the terms of the Prudential policy, Adam was not an "insured" during the accident.

Generally, courts must give plain meaning to a clear and unambiguous contract provision unless to do so would be contrary to a clearly expressed public policy. Eichelman v. Nationwide Ins. Co., 551 Pa. 558, 711 A.2d 1006, 1008 (1998) (citing Antanovich v. Allstate Ins. Co., 507 Pa. 68, 488 A.2d 571, 575 (1985)). The plain language of the definition of "insured" within the Prudential policy clearly and unambiguously disqualifies Adam Colbert as an "insured," as he was driving his car during the accident. The Colberts, however, argue that "[w]here, as here, the legislature has been unequivocal in providing certain classes of individuals with the status of `insured', any contractual efforts to alter that status must be viewed as contrary to law." Appellants' Br. at 16. In support of their argument, the Colberts rely on the Superior Court's en banc decision in Allwein v. Donegal Mutual Insurance Co., 448 Pa.Super. 364, 671 A.2d 744 (1996). In Allwein, the automobile insurance policy under consideration provided "gap underinsurance" coverage, under which a tortfeasor's vehicle was not considered "underinsured" if the tortfeasor's liability limits were greater than or equal to the insured's UIM benefits.

The Superior Court held that the policy's "gap underinsurance" provision violated the MVFRL. Specifically, the court considered that the MVFRL defines underinsured coverage in terms of the damages sustained by the plaintiff. Id. at 748-49. Section 1702 of the MVFRL defines an "underinsured motor vehicle" as: "A motor vehicle for which the limits of available liability insurance and self-insurance are insufficient to pay losses and damages." 75 Pa.C.S. § 1702. The policy, on the other hand, determined its UIM coverage based on the defendant's liability coverage. In operation, "the victim of a negligent driver whose liability insurance is not adequate to indemnify the victim for losses and damages would receive no underinsurance from his or her own policy if the tortfeasor's liability insurance were greater than or equal to the victim's underinsurance benefit." Allwein, 671 A.2d at 747 (emphasis in original). The court reasoned that insurance contract provisions cannot conflict with statutory requirements:

As a general rule, stipulations in a contract of insurance in conflict with, or repugnant to, statutory provisions which are applicable to, and consequently form a part of, the contract, must yield to the statute, and are invalid, since contracts cannot change existing statutory laws.

George J. Couch, Couch on Insurance 2d (Rev.ed) § 13.7 at 827 (1984). While we agree with appellant that "[n]either the courts nor the board of arbitration have a license to rewrite a contract," (Appellant's brief at 3), we also agree with Couch, supra, that insurers do not have a license to rewrite statutes.

Id. at 752; see also Miller v. Allstate Ins. Co., 763 A.2d 401 (Pa.Super.2000)

(holding that, where policy terms conflict with MVFRL, court cannot give effect to contractual provision, even if those terms are clear and unambiguous). Thus, the court concluded that the policy and its end result are "directly at odds with the statutory language, which defines an underinsured vehicle as one for which the tortfeasor's liability limits are less than the victim's losses and damages." Id. at 748 (emphasis in original).

Here, the MVFRL defines the term "insured" as including, inter alia, named insureds and any resident relatives of named insureds. The Prudential policy definition of "insured," however, purports to narrow the broad classification provided by the MVFRL by deeming resident relatives, such as Adam Colbert, to be "insured" only when they are using a vehicle specifically insured under the Prudential policy. As a result, the policy's more restrictive definition of "insured" is in conflict with the MVFRL. Nothing in the MVFRL permits Prudential or any other insurer to diminish the MVFRL's definition of "insured" and thereby provide coverage of a lesser scope than the MVFRL requires. Indeed, "stipulations in a contract of insurance in conflict with, or repugnant to, statutory provisions which are applicable to, and consequently form a part of, the contract, must yield to the statute, and are invalid, since contracts cannot change existing statutory laws." Allwein, 671 A.2d at 752 (quoting Couch on Insurance 2d, supra, § 13.7 at 827). Thus, the Prudential definition of "insured" must yield, even though it is clear and unambiguous. Accordingly, in answer to the first certified question, we hold that the restrictive definition of "insured" within the Prudential policy impermissibly...