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ERIE INDEMNITY COMPANY v. COAL OPERATORS CASUALTY COMPANY (01/07/71)

decided: January 7, 1971.

ERIE INDEMNITY COMPANY, APPELLANT,
v.
COAL OPERATORS CASUALTY COMPANY, APPELLANT



Appeals from judgments of Court of Common Pleas of the Fifty-Ninth Judicial District, Elk County Branch, April T., 1968, No. 374, in case of Erie Indemnity Company v. Coal Operators Casualty Company.

COUNSEL

John F. Potter, with him John H. Cartwright, John R. Fernan, and MacDonald, Illig, Jones & Britton, for plaintiff.

Gary H. McQuone, with him Rose, Schmidt and Dixon, for defendant.

Bell, C. J., Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Eagen. Mr. Justice Cohen took no part in the decision of this case.

Author: Eagen

[ 441 Pa. Page 263]

An automobile, operated by Joseph Kreckle, was involved in a one-car accident. Thomas G. DeLullo, the owner of the vehicle, was a passenger in the automobile at the time and suffered injuries which caused his death. The Administrator of DeLullo's Estate sued Kreckle in trespass seeking damages, and at trial won a jury award totaling $18,650.*fn1

Prior to the accident, Coal Operators Casualty Company (Coal) issued an automobile liability insurance policy which provided, inter alia, coverage for any person operating the DeLullo vehicle with the owner's consent. The policy contained a provision limiting liability for bodily injury to $10,000 for each person. Also, prior to the accident Erie Indemnity Company (Erie) issued an automobile liability insurance policy covering Kreckle while operating an automobile not owned by him. Both Coal and Erie entered an appearance on behalf of Kreckle in the suit instituted by DeLullo's representative, but prior to trial Coal withdrew its appearance when Kreckle refused to sign a non-waiver agreement. At trial Kreckle was defended by Erie alone.

In a subsequent action instituted by the Administrator of DeLullo's Estate against Coal and Erie seeking payment of the verdict recovered against Kreckle, judgments were entered against Coal in the amount of $10,000 and against Erie in the sum of $8,650.*fn2 These judgments were unappealed and paid by the judgment debtors.

[ 441 Pa. Page 264]

Erie then instituted the present action in assumpsit seeking to collect the monies it expended in the defense and payment of the DeLullo claim. In relevant part, the complaint alleged that Coal violated its obligation under its policy covering Kreckle, because it acted in bad faith (1) in not defending Kreckle in the DeLullo suit; and (2) in refusing to contribute the sum of $10,000 or the limit of its liability under the policy in a settlement of the DeLullo suit prior to trial.*fn3 Erie also asserted that in view of an express subrogation clause in its policy covering Kreckle, it was the real party in interest and vested with the right to assert any claim the insured could make against Coal for violation of its policy.

Coal filed an answer to Erie's complaint denying any breach of its policy with Kreckle and that it ever acted with bad faith. Several facts were asserted to support its actions in not defending Kreckle in the DeLullo suit and in its refusal to pay the full amount of its policy limit in settlement of the action. Coal also asserted a counterclaim against Erie, alleging the latter's conduct precluded its participation in the defense of Kreckle.

Erie filed an answer to Coal's counterclaim and then filed a motion for summary judgment under Rule 1035 of the ...


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