Safeco Ins. Co. of America v. Wetherill

• Decision Date: 01 May 1980
• Docket Number: No. 79-2074,79-2074
• Citation: 622 F.2d 685
• Parties: SAFECO INSURANCE COMPANY OF AMERICA v. Marcia WETHERILL, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 685

622 F.2d 685

SAFECO INSURANCE COMPANY OF AMERICA v. Marcia WETHERILL, Appellant.

No. 79-2074.

United States Court of Appeals, Third Circuit.

Argued Jan. 18, 1980.

Decided May 1, 1980.

Wilfred F. Lorry, Stephen L. Hymowitz, John A. Rothschild (argued), Lorry & Hymowitz, Philadelphia, Pa., for appellant.

Louis E. Bricklin (argued), Michael Saltzburg, Bennett, Bricklin & Saltzburg, Philadelphia, Pa., for appellee.

Before HUNTER, HIGGINBOTHAM and SLOVITER, Circuit Judges.

OPINION OF THE COURT

SLOVITER, Circuit Judge.

In this diversity suit which all parties agree is governed by Pennsylvania law, we must predict whether the Pennsylvania Supreme Court would compel an insurer to arbitrate under the arbitration clause of an uninsured motorist provision where the automobile involved in the collision with its insured was admittedly insured, but in an amount insufficient to cover the claimant's damages and injuries. Suit was brought by Safeco Insurance Company of America (hereinafter "Safeco") to enjoin defendant Wetherill, the injured claimant, from proceeding with the arbitration she invoked pursuant to a provision of the policy applicable to collisions with uninsured automobiles. The district court granted the permanent injunction enjoining Wetherill from proceeding in arbitration with the uninsured motorist claim. The court held that since the other motorist involved in the accident maintained at least the minimum amount of liability insurance required by Pennsylvania for the vehicle, it could not be considered an "uninsured" automobile.

The injured claimant, Wetherill, was the driver of an automobile involved in a collision with an automobile driven by Linda Hatton. Hatton was insured by a policy of motor vehicle liability insurance issued by State Farm Mutual Automobile Insurance Company which provided limits of coverage for personal injury liability insurance in the amount of $15,000 for the claims of any one person arising out of any one accident and $30,000 aggregate for the claims of all persons arising from any one accident. ¹ State Farm paid Wetherill the sum of $15,000 in settlement of her personal injury claims.

At the time of her accident, the car Wetherill was driving was insured under a policy issued by Safeco to David Wetherill, defendant's father. That policy contained a section entitled "Damages for Bodily Injury Caused by Uninsured Automobiles" ², which provided that Safeco would pay:

all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury, sickness or disease, including death resulting therefrom, hereinafter called "bodily injury", sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile; provided, for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insurer or such representative and SAFECO or, if they fail to agree, by arbitration (emphasis added).

The section contained an arbitration clause, which provided:

If any person making claim hereunder and SAFECO do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured automobile because of bodily injury to the insured, or do not agree as to the amount of payment which may be owing under this section, then, upon written demand of either, the matter or matters upon which such person and SAFECO do not agree shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Such person and SAFECO each agree to consider itself bound and to be bound by any award made by the arbitrators pursuant to this section.

For the purposes of this section of the insurance policy, the term "insured" included the named insured, any relative and any other person while occupying an insured automobile. "Uninsured automobile" was defined as:

(a) an automobile or trailer with respect to the ownership, maintenance or use of which there is, in at least the amounts specified by the financial responsibility law of the state in which the insured automobile is principally garaged, no bodily injury liability bond or insurance policy applicable at the time of the accident with respect to any person or organization legally responsible for the use of such automobile, or with respect to which there is a bodily injury liability bond or insurance policy applicable at the time of the accident but the company writing the same denies coverage thereunder or

(b) a hit and run automobile (emphasis added).

Wetherill informed Safeco that she desired to assert a claim under the uninsured motorist provision of her father's policy because she alleged that she suffered damages in excess of $15,000, the maximum amount recoverable under the Hatton policy. Safeco denied payment because it claimed that no uninsured motorist was involved in Wetherill's accident. Wetherill then filed a demand for arbitration with the American Arbitration Association's Philadelphia office. Thereafter Safeco filed suit in district court, seeking both a declaratory judgment that Wetherill was not entitled to recover from Safeco under the uninsured motorist provision and a permanent restraining order enjoining Wetherill from proceeding further with the arbitration demanded through the American Arbitration Association. Wetherill filed an answer and a motion to dismiss the complaint, alleging that under the applicable Pennsylvania law, the district court did not have subject matter jurisdiction over a dispute governed by the arbitration provision of the insurance policy. On June 21, 1979, Safeco filed a motion for a preliminary injunction, enjoining the arbitration hearing which was scheduled for June 28.

On June 26, 1979, the district court granted Safeco's request for a permanent injunction. There was no written opinion. The court announced orally that although "the general rule is that the arbitrators have jurisdiction to determine what is arbitrable under the contract between the parties", the court would follow the decision made a few days earlier in Prudential Property and Casualty Insurance Co. v. Pont, 489 F.Supp. 9, No. 78-3331, (E.D.Pa. June 22, 1979), which the court summarized as holding that a "defendant in a similar case is not entitled to uninsured motorist coverage where the party allegedly responsible for the accident is insured to minimum (sic ) extent required by Pennsylvania law." The district judge concurred with his colleague that the conclusions reached in two Philadelphia County Court of Common Pleas cases, (Stephen v. Nationwide Insurance Co., 2 P.C.R. 129 (C.P.Phila.1979) and Mapp v. Nationwide Insurance Co., 1 P.C.R. 532 (C.P.Phila.1978), rev'd, 408 A.2d 850 (1979), allocatur denied, October 31, 1979), are "sound and practical."

The parties do not dispute the applicability of Pennsylvania law. On appeal, Wetherill claims that this is a dispute concerning uninsured motorist coverage, and that under Pennsylvania law such a dispute is solely within the province of the arbitrators and is not to be decided by a court. Safeco claims that since it is conceded that the other party involved in Wetherill's accident was insured to the minimum extent required by law, the uninsured motorist provision does not apply and therefore the arbitration clause is inapplicable.

In a diversity action such as this, we are governed by state substantive law as pronounced by the state's highest court. Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886 (1967); Western Pennsylvania National Bank v. American Insurance Co., 428 F.2d 1220 (3d Cir. 1970). We begin consideration of this issue with the recognition that Pennsylvania courts favor arbitration. This is reflected in a line of cases where the courts have refused to enjoin arbitration of various issues with respect to coverage under an uninsured motorist arbitration provision. In most of these cases, it was conceded that the vehicle involved was uninsured. See, e. g., Allstate Insurance Co. v. McMonagle, 449 Pa. 362, 296 A.2d 738 (1972); Preferred Risk Mutual Insurance Co. v. Martin, 436 Pa. 374, 260 A.2d 804, cert. denied, 398 U.S. 905, 90 S.Ct. 1697, 26 L.Ed.2d 65 (1970); Pennsylvania General Insurance Co. v. Barr, 435 Pa. 456 257 A.2d 550 (1969); Allstate Insurance Co. v. Taylor, 434 Pa. 21, 252 A.2d 618 (1969); Merchants Mutual Insurance Co. v. American Arbitration Association, 433 Pa. 250, 248 A.2d 842 (1969); and Harleysville Mutual Insurance Co. v. Medycki, 431 Pa. 67, 244 A.2d 655 (1968). In another case, the issue held to be arbitrable was whether or not the motorist was uninsured. See, National Grange Mutual Insurance Co. v. Kuhn, 428 Pa. 179, 236 A.2d 758 (1968). In none of these cases did the Pennsylvania Supreme Court compel arbitration when, as here, the automobile allegedly "uninsured" concededly carried the minimum insurance required by Pennsylvania law. This is an issue it has not yet decided.

This court recently has had occasion to consider the difficulties of the ascertainment of applicable state law when the highest state court has not "recently spoken to the precise question at issue in a particular setting." In McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 661 (3d Cir. 1980), we noted that "our disposition of such cases must be governed by a prediction of how the state's highest court would decide were it confronted with the problem." The sources to be used in making such a prediction are the decisional law of the highest state court in analogous cases, the dicta of that court, and, to a lesser degree, the...