State Farm Mut. Auto. Ins. Co. v. Universal Underwriters Ins. Co.

• Decision Date: 01 June 1995
• Citation: 657 A.2d 1252,441 Pa.Super. 446
• Court: Pennsylvania Superior Court
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Appellant.

Page 1252

657 A.2d 1252

441 Pa.Super. 446

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY.

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Appellant.

Superior Court of Pennsylvania.

Argued April 5, 1994.

Filed March 22, 1995.

Reargument or Reconsideration Denied June 1, 1995.

Robert A. Seiferth, Williamsport, for State Farm Mut.

Glenn A. Ricketti, Philadelphia, for Universal Underwriters.

Before ROWLEY, President Judge, and KELLY and POPOVICH, JJ.

ROWLEY, President Judge.

On October 14, 1988, a motor vehicle driven by Dollie Hill and owned by Kinley's Subaru, Inc., collided with a motor vehicle driven by Leo Lorson. Hill, whose own vehicle was being repaired by Kinley's Subaru, was an insured driver under a policy issued by State Farm Mutual Insurance Company ("State Farm"). Kinley's Subaru was insured under a policy issued by Universal Underwriters Insurance Company ("Universal"). State Farm defended Hill against actions brought by Lorson for damage to his vehicle and by his passenger, Pearl English, for personal injuries. The parties settled the actions for $300.00 and $17,000.00, respectively.

State Farm then filed the present action against Universal, requesting a declaratory judgment as to Universal's obligations to defend and indemnify Hill, as well as judgment against Universal in an amount equal to 10/11 of the cost of defending and settling the claims against Hill. Following discovery, both parties filed motions for summary judgment.

In an order entered February 19, 1993, the trial court partially granted State Farm's motion for summary judgment, stating that State Farm "will be awarded fifty (50%) percent of the sum expended in defending and settling the actions brought by Leo E. Lorson and Pearl E. English." Both parties have filed timely appeals from the order.

APPEAL OF UNIVERSAL AT NO. 219 HARRISBURG 1993

Universal states the first of its two issues as follows:

1. Did the [trial] Court err in determining that the operator of the vehicle, Ms. Hill, was an "insured" of the Defendant Universal ... in light of the definitions provided in their policy of insurance with Kinley Subaru[?]

Brief for Appellant Universal at 1. The remaining issues of both parties concern the allocation of the costs of coverage between the two insurers. Because it will not be necessary to address those issues if we determine that the trial court erred in finding that Ms. Hill was an insured under the Universal policy, we turn first to that question.

Preliminarily, we note that the interpretation of an insurance policy is a question of law for the court. Patterson v. Reliance Insurance Companies, 332 Pa.Super. 592, 596, 481 A.2d 947, 949 (1984). Whether a particular loss is within the coverage of an insurance policy is such a question of law and may be decided on a motion for summary judgment in a declaratory judgment action. Equibank v. State Farm Mutual Automobile Insurance Company, 426 Pa.Super. 354, 359, 626 A.2d 1243, 1244 (1993), appeal denied, 536 Pa. 642, 639 A.2d 28 (1994) (quoting Neil v. Allstate Insurance Company, 379 Pa.Super. 299, 302, 549 A.2d 1304, 1305 (1988), appeal denied, 522 Pa. 578, 559 A.2d 38, 39 (1989)). Accordingly, we will apply our well-settled standard of review in summary judgment matters. See Aetna Casualty and Surety Company v. Roe, 437 Pa.Super. 414, 418-20, 650 A.2d 94, 97 (1994); Equibank v. State Farm, supra, 426 Pa.Super. 354, 626 A.2d 1243; Neil v. Allstate, supra, 379 Pa.Super. 299, 549 A.2d 1304; Washington Federal Savings and Loan Association v. Stein, 357 Pa.Super. 286, 288-89, 515 A.2d 980, 981 (1986). We will not reverse the trial court's order granting summary judgment absent an error of law or clear abuse of discretion. Aetna v. Roe, supra, 437 Pa.Super. 414, 650 A.2d 94; Danko v. Erie Insurance Exchange, 428 Pa.Super. 223, 226, 630 A.2d 1219, 1221 (1993), appeal granted, 536 Pa. 642, 639 A.2d 27 (1994) (citing Denlinger, Inc. v. Dendler, 415 Pa.Super. 164, 608 A.2d 1061 (1992)).

We begin our analysis by reviewing the portions of the Universal policy on which the trial court based its finding. In the "Garage" section of the policy, Universal states that

WE will pay all sums the INSURED legally must pay as damages ... because of INJURY to which this insurance applies caused by an OCCURRENCE arising out of GARAGE OPERATIONS or AUTO HAZARD.

Universal Policy at 32. "Auto hazard" is defined in the same section as follows:

"AUTO HAZARD" means the ownership, maintenance, or use of any AUTO YOU own or which is in YOUR care, custody or control and:

(1) used for the purpose of GARAGE OPERATIONS or

(2) used principally in GARAGE OPERATIONS with occasional use for other business or non-business purposes or

(3) furnished for the use of any person or organization.

Universal Policy at 32. Also provided is an explanation of "who is an insured":

With respect to the AUTO HAZARD:

1. YOU;

2. Any of YOUR partners, paid employees, directors, stockholders, executive officers, a member of their household or a member of YOUR household, while using an AUTO covered by this Coverage Part, or when legally responsible for its use. The actual use of the AUTO must be by YOU or within the scope of YOUR permission;

3. Any other person or organization required by law to be an INSURED while using an AUTO covered by this Coverage Part within the scope of YOUR permission.

Universal Policy at 33.

Universal proffers several theories to support its claim that the trial court's decision was an error of law. First, Universal argues that Ms. Hill was not a person "required by law to be an INSURED" because she does not fall within the definition of the term "insured" that is provided in § 1702 of the Motor Vehicle Financial Responsibility Law ("MVFRL"), 75 Pa.C.S. § 1701 et seq. That definition reads as follows:

"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.

It is beyond dispute that Ms. Hill was not an insured as that term is defined in § 1702. Nevertheless, our analysis does not end there. Section 1702 explains that "[t]he following words and phrases when used in this chapter [i.e., the MVFRL] shall have the meanings given to them in this section unless the context clearly indicates otherwise ..." (emphasis added). The statute does not indicate that the definition of "insured" offered there is also meant to serve as the explanation of who is "required by law to be an insured" under a policy such as that issued by Universal in this case. Conversely, the Universal policy does not indicate that who is "required by law to be an insured" is to be determined by reference to § 1702 of the MVFRL. In fact, the persons denoted as insureds in § 1702 (named insureds and relatives residing in their households) are essentially included in the definition given in the auto hazard section of the Universal policy. If the phrase "[a]ny other person ... required by law to be an insured" is to have any meaning at all, therefore, it cannot be limited to those persons specified in § 1702.

As support for its argument, Universal cites this Court's opinion in Stout v. Universal Underwriters Insurance Company, 320 Pa.Super. 240, 467 A.2d 18 (1983). In that case, appellants sought to recover damages for injuries suffered in 1970 when the automobile in which they were traveling was struck by an automobile driven by one Clyde Jones and owned by Hamilton Buick & Pontiac, Inc., which had lent the automobile to Jones while his mother's vehicle was being repaired. Appellants had sued Jones and obtained verdicts in their favor. When the judgments entered against Jones went unpaid, however, appellants filed an action against Universal, Hamilton Buick's insurer. Appellants asserted that the "garage liability" portion of the Universal policy extended coverage to Jones. This Court rejected their argument, concluding that Jones was not an insured under the policy but rather that the policy covered the hazard to the insured (i.e., Hamilton Buick) of renting a vehicle to a customer whose car was being repaired.

Universal suggests that we apply the reasoning used in that case to the facts of the present one. We decline to do so. We note, first, that the opinion is a plurality, one member of the three-member panel having concurred in the result and a second having taken no part in the case. Accordingly, the opinion is not binding upon us.

Moreover, Stout was not decided under the MVFRL but under the Motor Vehicle Safety Responsibility Act, 75 P.S. § 1277.1 et seq. (repealed). The Act did not require compulsory insurance on the part of the owner or operator of a motor vehicle, but instead aimed to ensure financial responsibility after an accident had occurred. Consequently, the automobile hazard section of the Universal policy at issue did not refer to other persons "required by law to be insured." We conclude, therefore, that this Court's decision in Stout does not resolve the issue before us.

Finally, Universal directs us to the following provision in the garage portion (Part 500) of the policy:

EXCLUSIONS--This insurance does not apply to:

. . . . .

(h) INJURY arising out of the ownership, maintenance, repair, use, loading or unloading of any[ ]

(1) AUTO, while:

. . . . .

(iii) leased or rented by YOU to others, except to:

. . . . .

(2) YOUR customers for a term of two months or less when it temporarily replaces the CUSTOMER'S AUTO....

Universal Policy at 33-35. Without more, this provision indicates that coverage extends to injury arising out of the use of an automobile leased or rented by Kinley's Subaru to a customer...