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GEDEON v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY. (01/21/63)

January 21, 1963

GEDEON, APPELLANT,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.



Appeal, No. 160, March T., 1962, from judgment of Court of Common Pleas of Washington County, Feb. T., 1958, No. 420, in case of Louis T. Gedeon v. State Farm Mutual Automobile Insurance Company. Judgment affirmed; reargument refused March 9, 1963.

COUNSEL

Paul A. Simmons, with him Hirsch & Hirsch, for appellant.

Francis H. Patrono, with him Patrono and Edwards, for appellee.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen, O'brien and Keim, JJ.

Author: Cohen

[ 410 Pa. Page 57]

OPINION BY MR. JUSTICE COHEN

An automobile liability insurance policy was issued to appellant by appellee-insurance company on May 18, 1955, insuring him against liability for bodily injury to one person in the amount of $10,000. On August 11, 1955, while the said automobile was being driven by appellant, it was involved in an accident in which appellant's wife, a passenger in the car, was killed. Appellant subsequently qualified as administrator of his wife's estate and, in such representative capacity, instituted suit under the Wrongful Death Act naming himself as defendant-tortfeasor.*fn1 Appellee refused to defend this action on the grounds that the policy was not in force on the day of the accident, and, even if it were, indemnity for liability to members of the insured's household was specifically excluded from the policy's coverage. Appellant did not hire substitute counsel nor did he spend other funds in defense of the wrongful death action. Trial resulted in a verdict of $51,318.90 in favor of appellant as administrator.

Appellant in his individual capacity then instituted the present action of assumpsit claiming the $51,318.90 judgment as the damages resulting from appellee's breach of its covenant to defend him. The case was heard by a judge sitting without a jury and judgment entered for the appellee. After argument before the court en banc, this judgment was affirmed by a divided court with the majority setting forth three separate reasons for its decision: (1) that the policy was not in force on the day of the accident because of a failure to pay premiums; (2) that even if the policy were in force, obligations to members of the insured's household were specifically excluded from coverage; (3) that even if there were a breach of appellee's contractual

[ 410 Pa. Page 58]

    obligation to defend, appellant had shown no damages resulting from such breach. Because we agree with the court below on the third of these grounds, we need not determine the correctness of their rulings on the first two grounds.

Under a typical automobile liability insurance policy, such as the one before us, the insurer undertakes three distinct types of obligations, each of which involves different elements of proof to establish breach thereof, and from the breach of which different measures of recovery result.*fn2 In the first place, the insurer agrees to indemnify against liability for personal or property damage and to indemnify against certain kinds of property damage to the automobile itself. In order to establish breach of this promise to indemnify, the insured must demonstrate that the policy covers the particular risk in ꫧ겶⨧. The amount of recovery for breach of this obligation is usually determined by the terms of the policy.

Secondly, the insurer agrees to defend the insured against any suits arising under the policy "even if such suit is groundless, false, or fraudulent." Since the insurer thus agrees to relieve the insured of the burden of defending even those suits which have no basis in fact, our cases have held that the obligation to defend arises whenever the complaint filed by the injured party may potentially come within the coverage of the policy. See Cadwallader v. New Amsterdam ...


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