Rocca v. Pennsylvania General Ins. Co.

• Decision Date: 24 October 1986
• Parties: Linda ROCCA, Appellant, v. PENNSYLVANIA GENERAL INSURANCE COMPANY.
• Court: Pennsylvania Superior Court

Page 772

516 A.2d 772

358 Pa.Super. 67

Linda ROCCA, Appellant, v. PENNSYLVANIA GENERAL INSURANCE COMPANY.

Superior Court of Pennsylvania.

Argued April 10, 1986.

Filed Oct. 24, 1986.

Dennis Veneziale, Philadelphia, for appellant.

Roger J. Harrington, Philadelphia, for appellee.

Before BECK, POPOVICH and HOFFMAN, JJ.

POPOVICH, Judge:

This is an appeal from an order of the Court of Common Pleas of Philadelphia County denying a petition to compel arbitration by the appellant, Linda Rocca. We reverse.

The facts of record indicate that the appellant was a passenger in a vehicle which collided with another vehicle. The second driver's insurance limited recovery to $25,000.00, which was ultimately secured by the appellant in an out-of-court settlement. However, because the injuries sustained exceeded the policy limits of the second driver's insurance, the appellant filed a claim with her parents' insurance carrier, which provided for underinsured motorist coverage. This policy was issued by the appellee, Pennsylvania General Insurance Co., and listed the appellant as a named insured on the declaration sheet.

When the appellee refused to honor the appellant's claim, the appellant notified it of her selection of an arbitrator to activate the dispute-resolution process afforded by the terms of the policy of insurance. Because the demand for arbitration was not answered, the appellant filed a petition to appoint arbitrators with the Court of Common Pleas. See 42 Pa.C.S. §§ 7305, 7342 (Supp.1986).

The appellee's response, in the form of an answer and new matter, contended that the petition was "premature" in that the appellant, under the terms of its policy, was "required to pursue a claim against the [driver of the vehicle she was a passenger in] prior to bringing th[e] underinsured claim, because nothing [was] payable under th[e] endorsement ¹ until Petitioner ha[d] exhausted her claims against the tortfeasors who had liability insurance." The court below agreed and entered an order confirming the denial of the petition. This appeal was timely filed and is properly before us. See 42 Pa.C.S. § 7302(a).

The sole issue raised relates to whether a claimant can compel an insurer to arbitrate a claim for benefits, in accordance with the terms of a policy, if the policy requirement of exhaustion of remedies--the "limits of liability" under any other applicable bond or policy--has not been first sought.

To begin with, it is settled law in this jurisdiction that when a party to an agreement seeks to enjoin the other from proceeding to arbitration, judicial inquiry is limited to the question of (1) whether an agreement to arbitrate was entered into and (2) whether the dispute involved comes within the ambit of the arbitration provision. See, e.g., Flightways Corp. v. Keystone Helicopter Corp., 459 Pa. 660, 331 A.2d 184 (1975).

Instantly, the agreement to arbitrate is activated if the insurer and insured/person "do not agree: 1. Whether that person is legally entitled to recover damages ...; or 2. As to the amount of damages[.]" (See Exhibit B, page 6) Nevertheless, the appellee launches a three-pronged assault in support of its belief as to the prematurity of the arbitration demand by the appellant. ²

First, the appellee asserts that because the appellant's entitlement to recovery is linked to her suit against the driver of the vehicle in which she rode (see note 2, supra ), the arbitrators would be precluded from deciding what amount would be due the claimant under the terms of the underinsured motorist endorsement, which reads:

We will pay under this coverage only after the limits of liability under any applicable bodily injury liability bonds or policies have been exhausted by payment of judgments or settlements.

Essentially, we interpret the appellee's argument to be a dispute over the "amount of damages" due the claimant, a topic specifically reserved in the arbitration section of the policy to a panel of arbitrators for resolution. (See Reproduced Record at 14a) This, necessarily, undermines the second of the appellee's contentions, couched in terms that, procedurally, the language of the insurance contract required the appellant to pursue other policies of applicable insurance as a precondition to filing a claim with it. Absent this course of events, the appellee continues, the authority of the court below was properly invoked to hold in abeyance the appellant's resort to arbitration as a method to resolve the dispute. We disagree on the basis of Harleysville Mutual Insurance Co. v. Medycki, 431 Pa. 67, 244 A.2d 655 (1968) and statutory law.

In Harleysville, an insured had submitted a claim under the uninsured motorist section of his policy. However, he refused to execute certain papers and supply the insurer with copies of legal documents evidencing a suit against the alleged uninsured motorist, as required by the terms of the policy. Instead, he filed a demand for arbitration with the American Arbitration Association (AAA) in accordance with the arbitration provision of his policy.

The insurer informed the insured that, because of his violation of the policy, his claim would not be processed. This same reason was given to the AAA regarding the claimed insurance owed, and was the basis for the insurer's belief that the AAA had no jurisdiction to hear the claim. Further, the insurer filed a complaint in equity to enjoin the arbitration pending a judicial determination of the validity of the disclaimer of coverage, or, in the alternative, to halt the arbitration "until such time as [the insured] supplied [the insurer] with the information called for under the policy."

The insured's preliminary objections were sustained and the complaint was dismissed. On appeal, the Supreme Court framed the issue as one of whether the arbitration clause contemplated a resolution of the dispute. Since the policy concededly provided for uninsured motorist coverage, the Court had only to decide whether the insured's alleged forfeiture of his right to the protection of the policy, by virtue of some non-compliance with provisions of the document, was a proper subject of review for the arbitrators. In concluding that the arbitrators possessed such competence, the Court stated its rationale in a manner which we find to be instructive:

... appellant argues that the arbitrator should not be permitted to decide an issue which has bearing upon all of the coverages of the policy, and that the arbitration should not be permitted to proceed until all conditions precedent to an action against the company have been fulfilled. While it is true that the notification provision of the policy is applicable to all of its coverages, and while it is also true that the policy states that: "No action shall lie against the company, unless, as a condition precedent thereto, there shall have been full compliance with all the terms of this policy * * * ", it must be borne in mind that the arbitration provision applies only to the uninsured motorists coverage. It follows, therefore, that with respect to that coverage, a dispute involving proper notification or compliance with policy provisions is to be determined by arbitration and not judicially. The arbitrator, in short, can determine not only whether the insured has forfeited his coverage, but also whether he has complied with the conditions precedent to any right against the carrier.

431 Pa. at 73, 244 A.2d at 657-58.

At bar, as in Harleysville, the insurer urges that the non-compliance with certain prerequisites set forth in the policy (there, the submission of loss reports and signed documents; here, the exhaustion of other applicable liability policies) forecloses the matter from proceeding to arbitration.

However, one must not lose sight of the fact that the arbitration provision here embraces a determination of a claimant's entitlement to (all)...