The opinion of the court was delivered by: MARSH
This diversity action was brought on September 24, 1964, by a Pennsylvania citizen, the Administrator of the Estate of Linda E. Kraus, deceased, against Allstate Insurance Company, an Illinois corporation with its principal place of business in a state other than Pennsylvania.
It was alleged that plaintiff is the assignee of Eugene V. Martin, Administrator of the Estate of Arthur H. Depew, of all claims or causes of action which Arthur H. Depew, or the Estate of Arthur H. Depew, deceased, has against Allstate; and that the "cause of action which has been assigned to plaintiff against the defendant" is based upon the following facts:
On July 25, 1957, at or about 9:30 p.m., on East Ohio Street, Pittsburgh, Allegheny County, Pennsylvania, John W. Kraus, Jr., Joan Kraus, John W. Kraus, Emily P. Kraus, Frank Panza, and Martha Panza were injured, and Linda E. Kraus was killed as a result of the use of the motor vehicle owned and operated by Arthur H. Depew. At that time, Depew was insured by an automobile liability policy issued by Allstate on November 9, 1956. Allstate was notified of the accident and the injuries and death "but refused to defend or represent Authur [sic] H. Depew." Suit was instituted at No. 622 October Term, 1959
in the Court of Common Pleas of Allegheny County, Pennsylvania, and judgments were entered in favor of the plaintiff Administrator and the injured parties against the Administrator of the Estate of Depew in the total amount of $20,000.
It was finally alleged (1) that Allstate "wrongfully refused to represent or defend Authur [sic] H. Depew in this law suit"; (2) that the lawsuit "which resulted in a verdict of $20,000.00 against Eugene V. Martin, Administrator of the Estate of Authur [sic] H. Depew, could have been settled within the policy limits of the said insurance policy"; (3) Allstate "is guilty of bad faith and breached its contract with plaintiff's assignee and as a result of said breach of contract and bad faith, plaintiff's assignee has a Judgment in excess of the limits of its policy to-wit the sum of $20,000.00, together with interest from February 5, 1964."
Because of the liberality accorded pleadings under the federal rules, we think plaintiff has sufficiently alleged that Allstate breached its three obligations under the policy of insurance, i.e., (1) its agreement to indemnify Depew's Estate against liability for the injuries and death involved; (2) its agreement to defend the insured against any suits arising under the policy, even if such suit is groundless, false or fraudulent;
and (3) its obligation as a fiduciary to act in good faith and with due care in representing the interests of the insured. If the insurer is derelict in this duty, it may be liable regardless of the limits of the policy for the entire amounts of the judgments secured against the insured.
See: Gedeon v. State Farm Mutual Automobile Ins. Co., 410 Pa. 55, 188 A.2d 320 (1963).
In answer to the operative facts, Allstate admitted only that it was Depew's insurer at the time of the occurrence wherein certain persons were injured, but averred that the harm "was the result [of] intentional and criminal conduct of Arthur H. DePew", and that the "protection provided by the policy of insurance did not include harm resulting from the insured's intentional conduct."
Pursuant to pretrial procedure the parties entered into a Stipulation of Facts (see Appendix). Briefly, the stipulated facts establish that on July 25, 1957, Allstate had in force and effect an automobile liability insurance policy covering Arthur H. Depew, now deceased; that Depew arranged a meeting with his estranged wife on that day at 9:30 p.m., in his automobile on East Ohio Street, a public thoroughfare, and then and there "intentionally detonated" an unknown quantity of dynamite which he had stolen from his employer Dravo Corporation
and had placed in his automobile, "thereby causing an explosion in the automobile completely destroying it, and killing his wife and himself." The means by which Depew detonated the dynamite is unknown. A pedestrian, Linda E. Kraus, the plaintiff's decedent, was also killed and several other pedestrians, who were plaintiffs in the state court action, were injured.
It was also stipulated that in the state court action, the law firm of Van Der Voort, Royston, Robb & Leonard, counsel for Allstate, entered its appearance on behalf of Eugene V. Martin, Administrator of the Estate of Arthur H. Depew. Subsequently, the state court granted this law firm leave to withdraw its appearance for the Estate:
"[Without] prejudice of any right claimed by interested parties to assert that Arthur H. Depew or his legal heirs or representatives or any persons claiming through him was entitled to coverage under a policy of automobile liability insurance issued to Arthur H. Depew by Allstate Insurance Company. Subsequently, Allstate Insurance Company did not participate or in any way defend Eugene V. Martin, administrator of the Estate of Arthur H. Depew."
Following non-jury adjudication, verdicts and judgments were entered against the Depew Estate, as follows: For John W. Kraus, Jr., Administrator of the Estate of Linda E. Kraus, $12,000; for John W. Kraus, et al., $5,000; and for Frank Panza, et ux., $3,000. Following the entry of the judgments, Depew's Administrator assigned all rights of the Depew Estate in its cause of action against Allstate to John W. Kraus, Jr., Administrator of the Estate of Linda E. Kraus, deceased. A specimen policy and a certified copy of the docket entries at No. 622 October Term, 1958B, in the Court of Common Pleas of Allegheny County, are attached as exhibits to the Stipulation of Facts.
The policy of insurance contained the following pertinent provision, whereby the defendant became obligated to " * * * pay for an insured all damages which the insured shall be legally obligated to pay because of bodily injury sustained by any person, and arising out of the ownership, maintenance or use * * * of the owned automobile * * *." The policy also contained an exclusion providing that the above liability clause did not apply to "bodily injury or property damage caused intentionally by, or at the direction of, the insured * * *." (See Appendix.)
After the Stipulation was filed, Allstate presented a Motion for Summary Judgment, requesting the court to dismiss the action for these reasons: First, the assignment is contrary to law; second, the assignor has no cause of action against the defendant in that (a) the assignor's liability did not arise from the operation, maintenance or use of an automobile, and was not therefore within the coverage of the defendant's policy, and (b) the defendant did not insure against liability created by the insured-assignor's intentional conduct, and excluded the same in its contract of insurance.
At the threshhold plaintiff contends that the defendant waived its right to raise the question of coverage and lost its defense because it did not act promptly in withdrawing its appearance in the state court action, citing Gross v. Kubel, 315 Pa. 396, 172 A. 649, 95 A.L.R. 146 (1934); Kelly v. Kass, 154 Pa.Super. 267, 35 A.2d 531 (1944). This contention has no merit. The facts show that the plaintiffs in the state court action issued a summons on July 22, 1958. On August 22, 1958, defendant's counsel entered a special appearance
for Depew's Administrator. On September 16, 1958, defendant's counsel petitioned the court to withdraw their appearance; a rule issued returnable October 6, 1958, on which day the plaintiffs filed an answer. On March 31, 1959, defendant's counsel ruled plaintiffs to file their complaint; on April 9, 1959, the complaint was filed and service accepted; and on June 22, 1959, the matter came on for argument, and, with the consent of counsel for plaintiffs, leave to withdraw was granted.
On these facts it is clear that defendant's counsel moved with dispatch to investigate and evaluate the claim and the disclaimer was made within a month after the suit was filed. The defendant did not participate in or control the defense. The plaintiffs in the state court action were not prejudiced by any defenses made by Allstate, for there were none. See: Gross v. Kubel, supra; Antone v. New Amsterdam Casualty Co., 335 Pa. 134, 6 A.2d 566 (1939); Orcutt v. Erie Indemnity Co., 114 Pa.Super. 493, 174 A. 625 (1934). In our opinion the defendant insurer did not waive its defense of no coverage merely by the entry of an appearance which was withdrawn by leave of court on a petition filed within a month.
The stipulated facts affirmatively show that the harm inflicted upon the plaintiffs in the state court action was caused by an intentional criminal act perpetrated by Depew, the named insured in the policy. For the reasons hereinafter expressed, it is our opinion that the insurer, Allstate, incurred no liability for breach of contract in refusing to defend or cover the liability of Depew's Estate. We think it was entirely justified in so refusing.
A contract of insurance must have a reasonable interpretation such as was probably in the contemplation of the parties when it was made. Ferry v. Protective Indemnity Co. of New York, 155 Pa.Super. 266, 38 A.2d 493 (1944), citing Humphreys v. National Benefit Ass'n, 139 Pa. 264, 277, 20 A. 1047, 11 L.R.A. 564 (1891); Kaufman v. Liberty Mutual Insurance Company, 264 F.2d 863, 865 (3d Cir. 1959). In determining the scope and effect of a policy of automobile liability insurance, the purpose of the contracting parties is properly considered in determining the effect of the insurance. Couch on Insurance 2d, vol. 12, § 45:5; Appelman, Insurance Law and Practice, vol. 7, § 4317. It is not even arguable that the intended purpose of Depew and the defendant insurer was to cover the use of his automobile as a lethal bomb while parked on a public thoroughfare. To read into the contract a coverage for ownership, maintenance or use of an automobile as a receptacle for explosive purposes would permit the imagination to hold sway and write into the policy terms never dreamed of by the parties. The effect would be the creation of a new contract. The rule requiring a policy to be construed most strongly against the insurer does not warrant a court in giving the words "ownership, maintenance or use" a strained or unnatural meaning in order to find coverage for innocent victims who are subjects of enormous sympathy. The harm inflicted on the pedestrians involved was not related to the ownership, maintenance or use of Depew's automobile, but to his criminal act.
The ownership, maintenance or use provision of the policy is qualified by the exclusion of coverage for intentional acts. When these terms are measured in accord with the understanding of persons of reasonable intelligence, they do not provide coverage for the uncontemplated use of the automobile as a chamber in which to commit murder and suicide by exploding dynamite. The use of the automobile at the time of the occurrence was not for any purpose within any reasonable contemplation of normal contracting parties. There can be no doubt that the policy in suit could not legally cover and was not intended to cover such conduct as Depew was guilty of, or to indemnify him of the consequences of his crime. Farm Bureau Mut. Automobile Ins. Co. v. ...