Tonkovic v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 06 May 1987
• Citation: 513 Pa. 445,521 A.2d 920
• Parties: John TONKOVIC, III, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.
• Court: Pennsylvania Supreme Court

Page 920

521 A.2d 920

513 Pa. 445

John TONKOVIC, III, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.

Supreme Court of Pennsylvania.

Argued May 14, 1986.

Decided March 2, 1987.

Reargument Denied May 6, 1987.

Richard C. Angino, Joseph M. Melillo, Harrisburg, for appellant.

Richard H. Wix, Harrisburg, for appellee.

Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, HUTCHINSON, ZAPPALA and PAPADAKOS, JJ.

OPINION OF THE COURT

PAPADAKOS, Justice.

The issue presented by this appeal is whether Appellant, John Tonkovic, III, is bound by an exclusionary clause in an insurance contract, where such clause was unilaterally inserted by Appellee, State Farm Mutual Automobile Insurance Company, subsequent to Appellant's application and premium payment being accepted by Appellee, through its agent, for disability insurance coverage without any exclusion; and where such exclusion was neither explained to, nor accepted by, the Appellant.

The present controversy arose under the following facts: In July of 1979, Appellant applied for an insurance policy providing disability coverage offered by Appellee. It is undisputed that Appellant applied for coverage that would enable him to make his mortgage payments in the event of his injury, without regard to where such injury might occur, or whether Appellant might be eligible for worker's compensation benefits. The insurance agent from whom Appellant purchased the policy testified on cross-examination:

Q. When he [Appellant] came in to see you ... you knew why he wanted disability insurance, isn't that true?

A. When he came in, he stated to me that he wanted disability insurance for the mortgage on his home.

Q. The mortgage on his home, and when you filled out the original application, it was with the understanding that you were applying for insurance that would cover him whether or not he was eligible for workmen's compensation benefits, isn't that true?

A. That's correct. (N.T., pp. 85, 86.)

It is also undisputed that at the time of application for the policy, the Appellee's agent explained the significance of occupational classifications only in terms of premium costs, not scope of coverage. The agent so testified:

Q. Now it's true also, that you never told him [Appellant] the effects of the various classifications at that time, except that if you were classified as a Class 2 rather than something else, it would cost him less money, isn't that true?

A. That's correct, we were applying as Class 2.

Q. So that if you later told him that his classification had been changed, that would only mean to him that it would cost him a different amount of money, isn't that true?

A. That's correct. (N.T., p. 86).

Appellant was injured on the job on October 15, 1979, and received workers' compensation benefits. He filed a claim for disability benefits with Appellee and this claim was denied. Appellee explained that it had issued to Appellant a policy which classified Appellant as a Class 3 and specifically excluded coverage for injuries incurred in the work place for which workers' compensation benefits were available. Appellant had never seen this policy nor had Appellee ever communicated to Appellant that the coverage he had ordered and paid for had not been furnished.

Appellant instituted an action in assumpsit to recover benefits claimed pursuant to the coverage he had purchased.

At trial, Appellant testified that he never received the written policy and presented substantial evidence to support his claim. Appellant also averred that he was never advised of the variation between the policy for which he applied and that which was issued containing the exclusion. Appellee's agent testified that he delivered a copy of the amended contract to Appellant's home on Potatoe Valley Road on August 23, 1979, and introduced a receipt signed by Appellant and bearing the date of August 23, 1979. The agent also testified that he went over the policy with Appellant on August 23, 1979, and "went into" the modifications and restrictions in the policy. However, when asked whether he could specifically recall telling Appellant that if he were hurt on the job and could receive worker's compensation benefits, that Appellant would not be eligible for benefits under the policy, he replied:

A. No, I did not state that--what you just stated.

Q. What did you state?

A. I went over the exclusions in the policy with him which include workmen's compensation. (N.T., p. 87).

Both Appellant and his wife contradicted that testimony by showing that they did not purchase the home to which the agent claimed he delivered the policy, nor live in it until mid-September of 1979. Further, although Appellant identified the signature on the receipt as his own, he denied any recollection of signing the receipt or receiving a copy of the policy at that, or any other, time. Following the conclusion of testimony, when the case was submitted to the jury, the trial judge charged the jury as follows:

This is what the cases have said: the burden is upon the insurer, that would be State Farm, it would be the burden upon the insurer to establish the insured's, this would be Mr. Tonkovic, awareness and understanding of the exclusions. So, even though the initial burden in this case is with the plaintiff and it stays with the plaintiff, indeed, there is a burden upon the insurance company in this case to prove to you by a preponderance of the evidence, that Mr. Tonkovic was aware and understood the exclusion that existed here....

The question that is before you is the one single and unique issue: was this policy which was completed by State Farm Insurance Company, was it then presented to Mr. Tonkovic, and was he, in this particular case, made aware, and did he understand that if he had Workmen's Compensation then he was excluded from the disability benefits provided for in this policy. And that is the issue before you. Of course, most of this testimony did deal with it. (R. 155a).

Following the charge to the jury, counsel for Appellee excepted to the Court's charge which placed the burden of proof upon the insurer as to the enforceability of the exclusionary clause contained in the disability insurance policy issued by Appellee. The case was submitted to the jury with the above charge, and the jury returned a verdict in favor of the Appellant and against Appellee, Insurance Company. There were no specific findings requested or made by the jury.

Appellee's Motions for Judgment N.O.V. and for a New Trial were denied. ¹ A divided panel of the Superior Court, 337 Pa.Super. 123, 486 A.2d 512, reversed the judgment and remanded for a new trial, relying on our decision in Standard Venetian Blind v. American Empire Insurance Co., 503 Pa. 300, 469 A.2d 563 (1983). This appeal followed and we granted discretionary review. ²

Initially we note that we need not decide the issue of whether Venetian Blind, supra, requires retroactive application because of our determination that it is not applicable to the instant case. The essence of Appellant's argument is that this case is factually very different from Venetian Blind, and is not within the scope of that decision. We agree with Appellant that Venetian Blind is clearly distinguishable on its facts from the instant case. There, a self-employed businessman purchased a general liability policy on behalf of the company of which he was a partner. The policy provided personal injury and property damage liability coverage for all sums which the insured would be legally obligated to pay as damages and further provided that the insurance carrier had the right and the duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage up to the policy limits. The policy conspicuously displayed and sequentially listed the types of claims and losses which were excluded from the policy's coverage. When the insured (Venetian) subsequently submitted a claim, the insurer agreed to pay for the damage caused by Venetian's products, but refused to defend an assumpsit action for work performed by Venetian or to pay for damage caused to Venetian's products themselves. The insurer based its refusal on an exclusion provision which expressly excluded such losses from coverage under the policy. The insured admitted that, although he had received a copy of the policy, he never read it, because he had relied on the judgment of the insurance agency and that he had indicated to the agency that he wanted full coverage on everything he had.

The insurance policy issued, however, was what it purported to be, and what the insured purchased, a general liability policy. The purpose of a general liability policy is to protect an insured from claims made by third parties for injuries to their person or property resulting from the policyholder's negligence. In such a case, it is patently unreasonable for an insured to contend that he should be paid for his own property damage loss from a liability policy. Neither the negotiations for benefits nor the type of coverage sought would lead an insured to believe that a liability policy would provide insurance coverage on one's own property. Based on these facts and circumstances, we determined that the insured could not avoid the consequences of the exclusion provision by asserting that he failed to read the policy, or that he did not understand it.

Appellant argues that where one applies and pays for certain coverage in advance and the insurance carrier then unilaterally reduces and excludes the coverage desired, then the insurer should still have the responsibility to advise the insured that the coverage desired and paid for has been limited in the final policy. Contrary to the facts in Venetian Blind, Appellant here specifically requested a type of coverage that would have protected him in this instance, but was issued a policy quite different from that which he requested. Also contrary to...