United Services Auto. Ass'n v. Elitzky

• Decision Date: 13 November 1986
• Citation: 358 Pa.Super. 362,517 A.2d 982
• Parties: UNITED SERVICES AUTOMOBILE ASSOCIATION v. Nathan M. ELITZKY and Judy Elitzky, H/W and Honorable Joseph C. Bruno. Appeal of Nathan ELITZKY and Judy Elitzky, H/W. UNITED SERVICES AUTOMOBILE ASSOCIATION, Appellant, v. Nathan M. ELITZKY and Judy Elitzky, H/W and Honorable Joseph C. Bruno.
• Court: Pennsylvania Superior Court

Page 982

517 A.2d 982

358 Pa.Super. 362

UNITED SERVICES AUTOMOBILE ASSOCIATION v. Nathan M. ELITZKY and Judy Elitzky, H/W and Honorable Joseph C. Bruno.

Appeal of Nathan ELITZKY and Judy Elitzky, H/W.

UNITED SERVICES AUTOMOBILE ASSOCIATION, Appellant, v. Nathan M. ELITZKY and Judy Elitzky, H/W and Honorable Joseph C. Bruno.

Superior Court of Pennsylvania.

Argued Sept. 16, 1986.

Filed Nov. 13, 1986.

Stephen A. Scheuerle, Philadelphia, for appellant (at 424) and appellee (at 611).

Larry R. McDowell, Philadelphia, for appellant (at 611) and appellee (at 424).

Ellen Q. Suria, Philadelphia, for Bruno, appellee.

Before CIRILLO, President Judge, and MONTEMURO and HOFFMAN, JJ.

CIRILLO, President Judge:

This is an appeal and cross-appeal from a declaratory judgment entered by the Court of Common Pleas of Philadelphia County. We reverse.

Appellant, United Services Automobile Association ("United") brought an action for declaratory judgment requesting a decree that it had no duty to indemnify or to provide a defense for appellees, Nathan and Judy Elitzky, in an action filed against them by appellee, the Honorable Joseph C. Bruno, Judge of the Court of Common Pleas of Philadelphia County. Judge Bruno's complaint states that from September 9, 1980 until October 4, 1983, Judy Elitzky was a litigant in certain proceedings in the Orphans' Court Division of the Court of Common Pleas of Philadelphia County over which Judge Bruno presided. The complaint also alleges that during the course of this litigation, the Elitzkys wrote numerous letters which were sent to Judge Bruno, Jack Anderson, the Hon. Charles Klein, Edward G. Rendell, Esq., the District Attorney of Philadelphia, Leroy Zimmerman, Esq., the Attorney General of Pennsylvania, and Marvin L. Block, Esq., in which the Elitzkys stated that Judge Bruno was involved in a "behind the scenes arrangement to circumvent discovery," was believed by "federal officials" to be "a participant in the coverup of the criminal activity of trustees," was guilty of "judicial corruption," attempted to "fix" a case, and had an "improper relationship" with a party to the case and with the law firm of Wolf, Block, Schorr and Solis-Cohen. Judge Bruno has denied all of these allegations.

The complaint contains three counts. Count 7 is entitled "Malicious Defamation" and seeks compensatory damages from the Elitzkys for the allegedly defamatory statements made by them. Paragraph 24 of the complaint states in pertinent part:

At the time of the publication of the letter of September 23, 1983, defendants knew that the statements, inferences and innuendos impugning the integrity of plaintiff contained in that letter were entirely false or, if not, their failure to determine the accuracy of the letter was in utter and reckless disregard of its truth or falsity....

Count II of the complaint is entitled "Intentional Infliction of Emotional Injury" and in paragraph 33, Judge Bruno alleges that:

Defendants published the false and groundless charges against plaintiff as described in this complaint with no legitimate purpose, but rather with the purpose of intentionally inflicting emotional distress upon plaintiff.

Count III is entitled "Punitive Damages" and seeks recovery for the alleged "malicious, intentional and reckless conduct of defendants...."

The Elitzkys purchased a homeowner's insurance policy from appellant United in November, 1979 which was still in force at the time of the acts alleged in Judge Bruno's complaint. The policy provided coverage for "damages because of bodily injury and property damages" subject to the following exclusionary clause:

1. Coverage E--Personal Liability and Coverage F--Medical Payments to others do not apply to bodily injury or property damage.

a. Which is expected or intended by the insured.

United disclaimed coverage under the policy for the acts alleged in Judge Bruno's complaint and in March, 1984, United filed the instant action seeking a declaratory judgment. Upon conclusion of a trial without jury, the court entered a decree that United need not provide coverage but the court refused to rule on the indemnity issue, holding that it was not yet ripe for judicial resolution. The court held that the Elitzkys' need for indemnity may never arise because Judge Bruno may not prevail in his suit. Though the court denied United's request for declaratory relief concerning its obligation to indemnify the Elitzkys, it did so without prejudice to the company's right to seek such relief should a judgment eventually be secured by Judge Bruno.

The court found that the alleged injuries for which Judge Bruno sought compensation were covered by the policy provisions relating to "bodily injury" and "property damage." However, the court then stated that Judge Bruno's causes of action were exclusively based upon intentional tort theories and therefore were excluded from coverage under the policy as damage or injury "intended or expected by the insured." Therefore, the court concluded that United had no duty to defend the Elitzkys in the action brought by Judge Bruno.

At trial, the court granted United's motion in limine seeking to bar the Elitzkys from introducing any testimony or other evidence in connection with their understanding of the coverage provided by the policy and any alleged representations made to them concerning that coverage. The court ruled that such testimony was impermissible because the policy exclusions were clear and unambiguous.

Appellees, the Elitzkys, present three issues for our review: (1) whether the trial court erred in determining that United is not required to defend the Elitzkys in the action brought by Judge Bruno; (2) whether the trial court erred in not affirmatively determining that United was obligated to indemnify the Elitzkys should Judge Bruno receive a judgment against them; and (3) whether the trial court erred in granting United's motion in limine.

United argues that the trial court erred in not affirmatively deciding that it will have no duty to indemnify the Elitzkys even if Judge Bruno receives a judgment against them.

The obligation of an insurer to defend an action against the insured is fixed solely by the allegations in the underlying action. Cadwallader v. New Amsterdam Casualty Co., 396 Pa. 582, 152 A.2d 484 (1959); Vale Chemical Co. v. Hartford Acc. & Indem., 340 Pa.Super. 510, 490 A.2d 896 (1985). As long as the complaint comprehends an injury which may be within the scope of the policy, the company must defend the insured until the insurer can confine the claim to a recovery that the policy does not cover. Vale, 340 Pa.Super. at 518, 490 A.2d at 900.

Therefore, in order to decide whether United must defend the Elitzkys in the action brought by Judge Bruno, we must determine whether the injuries alleged by Judge Bruno are potentially within the coverage of the Elitzkys' policy. In order to make that determination we must interpret the insurance contract itself. The construction of a writing is a question of law over which this court need not defer to the finding of the trial court. Erie Ins. Exchange v. Transamerica Ins. Co., 352 Pa.Super. 78, 83, 507 A.2d 389, 392 (1986). However, we must remember that it is a contract which we are interpreting and that we must do so in light of the parties' reasonable expectations. Standard Venetian Blind Co. v. Am. Empire Ins., 503 Pa. 300, 469 A.2d 563 (1983).

The standards to be applied in reviewing such a contract are well settled. First, the words included in the instrument must be given their ordinary meaning. Erie, at 83, 507 A.2d at 392. Second, ambiguous terms in an insurance policy should be construed against the insurer. Id. Third, a term is ambiguous only "if reasonably intelligent men on considering it in the context of the entire policy would honestly differ as to its meaning." Id. Fourth, the parties true intent must be determined not only from the language but from all the surrounding circumstances. Id.

Even if coverage is not excluded by the terms of the policy it may be excluded as violative of the public policy of Pennsylvania. Nationwide Mutual Ins. Co. v. Hassinger, 325 Pa.Super. 484, 489, 473 A.2d 171, 173 (1984). In Hassinger, we held that it is against the public policy of this state to provide insurance for certain intentional acts. This ruling is based on the common law adage that a person should not profit from his wrongful acts. Id. The Hassinger court defined intent by relying on the Restatement (Second) of Torts, § 8A. The court held that intent means that the actor desired to cause the consequences of his act or that he acted knowing that the consequences were substantially certain to result. Id. at 493, 473 A.2d at 175. The court stated that intent may also be transferred from the intended victim to another. Id.

Resolution of the first issue hinges on interpretation of the words "intended" and "expected" as used in the Elitzkys' insurance contract. We will apply the foregoing principles to each term separately.

Contemporary liability insurance policies generally exclude coverage for injury or damage intended by the insured. See Annot., 31 A.L.R. 4th 957. Understandably, insurance companies do not want to allow a person to insure against harms he may intentionally and unlawfully cause others. This is a corollary of the idea that insurance is meant to cover only fortuitous losses. See Keeton, Insurance Law 291 (1971). However, courts have been unable to reach a consensus as to the correct interpretation of the word intended when it appears in such an exclusionary clause. Some courts have held that the exclusion is inherently ambiguous while other courts have found it to be clear and unambiguous as a matter of law. See Cowan v. Insurance Co. of North America, 22 Ill.App.3d 883, 318 N.E.2d 315 (1st Dist.1974) (clause is ambiguous); Transamerica Ins. Co. v. Thrift-Mart, Inc., 159 Ga.App. 874, 285 S.E.2d 566 (1981) (clause is clear...