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HAFER v. SCHAUER (ET AL. (03/15/68)

decided: March 15, 1968.

HAFER
v.
SCHAUER (ET AL., APPELLANT)



Appeal from judgment of Court of Common Pleas of Lebanon County, March T., 1963, No. 72, in case of Shirley A. Hafer, administratrix of estate of James H. Hafer, deceased v. Howard M. Schauer, Robert L. Smith and Leon R. Leibold, Jr.

COUNSEL

Bernerd A. Buzgon, with him Davis & Katz, for appellant.

L. E. Meyer, with him George Eves, and Meyer, Brubaker & Whitman, and Eves & Bear, for appellee.

Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Cohen. Dissenting Opinion by Mr. Justice Roberts. Mr. Justice Musmanno and Mr. Justice Eagen join in this dissenting opinion.

Author: Cohen

[ 429 Pa. Page 291]

This is an appeal by Erie Insurance Exchange as garnishee from an adverse judgment on the pleadings in proceedings instituted by appellee for execution with attachment. This litigation has its genesis in Wrongful Death and Survival actions brought by appellee against three defendants, none of whom are parties to the present action. On March 26, 1964, the jury returned verdicts of $100,000 in the survival action and $1,418.50 in the wrongful death action against two defendants, one of whom was insured by Erie against liability.

Following the rendition of the verdicts, Erie, in the name of its insured defendant, filed motions for severance and for new trials. The transcript of testimony and charge of the court were filed July 8, 1964 and on August 3, 1964, additional reasons in support of the motions were filed. Thereafter, the motions were withdrawn or abandoned, and on September 10, 1964, Erie forwarded plaintiff a check in the sum of $20,000, which represented the limit of policy coverage. On September 16, 1964, plaintiff returned the check with a demand for interest on the entire amount of the verdicts and a tender of costs. On October 7, 1964, Erie tendered checks in the amounts of $21,591.91 and $72.25. On October 12, 1964, these checks were returned. Finally, on November 12, 1964 Erie deposited with the prothonotary of the lower court checks in the sums of $21,591.91 and $72.25. Appellee did not enter judgments on the verdicts until April 13, 1965, on which date she also filed a praecipe for writ of execution with attachment and served a copy upon Erie as garnishee.

On May 20, 1965, plaintiff filed a motion for judgment on the pleadings in the attachment proceedings, which motion was granted by the court below. A judgment

[ 429 Pa. Page 292]

    was entered against Erie in the amount of $20,000 together with interest computed from March 26, 1964 upon the entire amounts of the verdicts to date of payment, together with all costs. Erie has appealed.

At the outset it must be noted that absent a situation wherein interest due plus the principal amount of a verdict exceed applicable policy limits of liability, the insurer is liable for any and all interest accruing from the date of the rendition of an adverse verdict to the entry of judgment thereon. In this respect, insurance carriers are subject to the identical liability for interest as any other party defendant who has received an adverse verdict. Act of April 6, 1859, P. L. 381, § 1, 12 P.S. § 781.

However, in the instant case, we are confronted with the issue of determining an insurer's liability for interest when the interest allegedly due and owing plus the principal amount of the verdict exceed the face amount of the liability coverage under the policy. In these instances only, it is sufficient to say that an insurer is not liable for any interest in excess of the policy limits of liability unless and to the extent it has contracted with its insured to do otherwise.

Erie's liability insurance contract with its insured provides that Erie shall pay in addition to the applicable limits of liability: "All expenses incurred by the Erie, all costs taxed against the Insured in any such suit and all interest on the entire amount of any judgment therein which accrues after entry of the judgment and before the Erie has paid or tendered or deposited in Court that part of the judgment which does not exceed the limit of the Erie's liability thereon. . . ." Plaintiff contends that neither (1) Erie's tender of the principal amount due nor (2) its tender of the principal amount plus fifty percent of interest on the entire amount of the verdicts plus fifty percent of the

[ 429 Pa. Page 293]

    costs satisfies its contractual obligation. We disagree.

The policy provides that Erie's liability for bodily injury caused to one person by the insured shall be limited to $20,000. It further provides that Erie shall pay "all interest on the entire amount of any judgment therein which accrues after entry of the judgment. . . ." The instant record discloses that judgment was not entered on the verdicts until April 13, 1965, on which date plaintiff commenced execution proceedings. However, long before entry of judgment, Erie had (1) tendered the policy limit, (2) tendered the policy limit plus interest on one-half of the entire amount of the verdicts plus one-half of the costs, and (3) paid into court the latter sums. Since Erie has complied with the terms of the policy and before the entry of judgment "paid or tendered or deposited in court that part of the judgment which [did] not exceed the limit of the Erie's liability," the court below erred in including in its judgment a requirement that Erie pay interest on the entire amount of the verdicts.

In holding that Erie has no liability for interest in excess of its policy limits, we are not unmindful of the legal principle requiring terms of an insurance policy susceptible of different interpretations to be construed in a manner most favorable to the insured. This principle is founded upon the doctrine that when an ambiguity exists in a written contract, the ambiguity must be resolved against the party drafting the contract. However, as regards the instant language, there can be no reasonable basis for differing interpretations. The policy in question makes Erie liable for interest on the entire amount of any ...


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