decided: April 13, 1978.
BETTY ADELMAN, APPELLEE,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, APPELLANT
James J. McCabe, Jr., Philadelphia, with him Joseph M. Hankins, Philadelphia, for appellant.
Arthur J. Seidner, Philadelphia, for appellee.
Watkins, President Judge, and Jacobs, Cercone, Price, Van der Voort and Spaeth, JJ. Watkins, former President Judge, and Hoffman, J., did not participate in the consideration or decision of this case.
[ 255 Pa. Super. Page 119]
On this appeal we are again faced with the question of whether an insurance company may contractually divide the uninsured motorist coverage in two or more automobile
[ 255 Pa. Super. Page 120]
insurance policies to prevent "stacking" or "pyramiding" of recovery.*fn1 Appellant contends that the lower court erred in refusing to modify the award of $20,000 to appellee following arbitration conducted pursuant to the Arbitration Act of 1927, 5 P.S. § 161 et seq.*fn2 We agree and therefore reverse
[ 255 Pa. Super. Page 121]
and remand for the entry of an award in the amount of $10,000.
Appellee, Betty Adelman, was injured in an automobile accident on June 28, 1974 when her 1966 Plymouth, which she was operating, was struck by an uninsured motorist. At the time of the accident both appellee's car and the 1970 Oldsmobile belonging to her husband were insured under separate policies issued by appellant, State Farm. Each policy provided uninsured motorist coverage of $10,000 for any one person injured in an accident as required by the Uninsured Motorist Act.*fn3 Appellee filed a claim for uninsured motorist coverage under both policies, requesting a total payment of $20,000.*fn4 Appellant maintained, however, that appellee was entitled to recover only under the policy covering her vehicle and the dispute was submitted to arbitration in accordance with the arbitration clause in the policies. See Record at 35a and 51a.
Following a hearing before a mutually agreed upon arbitrator on June 2, 1976, and the submission of written briefs, the arbitrator entered an award of $20,000 in favor of appellee. The decision, issued on June 17, 1976, clearly stated that the arbitrator had limited himself to the question of the interpretation to be given to the policy and considered Nationwide Mutual Insurance Co. v. Ealy, 221 Pa. Super. 138, 289 A.2d 113 (1972), to be the controlling authority. He determined, however, that the exclusion which we approved in Ealy did not exist in the State Farm policies in question. Appellant filed a timely motion to modify the award in the Court of Common Pleas of Philadelphia County, asserting that the arbitrator's award was contrary to law. The lower court entered an order denying the motion on October 20, 1976, and issued an opinion in support of that order on March 28, 1977.
[ 255 Pa. Super. Page 122]
Both the arbitrator and the trial judge based their decisions on the mistaken belief that the Ealy exclusion was not contained in the State Farm policies presently under scrutiny.*fn5 On the contrary, we clearly dealt in Ealy with the exclusion to the uninsured motorist coverage which prevented recovery by the named insured or his relatives for injuries sustained while occupying an insured-owned automobile not listed in the declarations of the policy.*fn6 The policies issued by appellant to appellee and her husband contain language nearly identical to that in Ealy. Exclusion (b) in Section III of the State Farm policies issued to Mr. and Mrs. Adelman provides that the uninsured motorist coverage does not apply
(b) to bodily injury to an insured while occupying or through being struck by a land motor vehicle owned by the named insured or any resident of the same household, if such vehicle is not an owned motor vehicle.
Record at 30a.
The only real difference between the Ealy exclusion and the one at issue is that in the latter the term "owned motor vehicle" is used rather than the term "insured land motor vehicle."*fn7 The definitions of these terms in the respective
[ 255 Pa. Super. Page 123]
policies are, however, nearly identical.*fn8 The lower court was, therefore, incorrect in holding that the Ealy exclusion was not present in the Adelmans' State Farm policies.
Having determined that the same exclusion is present here as in Ealy, we must examine Exclusion (b) to ascertain if it operates to prevent Mrs. Adelman from recovering under Mr. Adelman's policy. The interpretation of an insurance policy is, of course, a question of law for the court. Baldwin v. Magen, 279 Pa. 302, 123 A.2d 815 (1924). Courts, however, cannot rewrite the terms of the policy or give them a construction in conflict with the accepted and plain meaning of the language used. Pennsylvania Manufacturers Association Insurance Co. v. Aetna Casualty & Surety Insurance Co., 426 Pa. 453, 233 A.2d 548 (1967). When a word used in the exclusion under scrutiny is specifically defined in the definitions section of the policy, it is that definition which must control in determining the applicability of the exclusion. Great American Insurance Co. v. State Farm Mutual Automobile Insurance Co., 412 Pa. 538, 194 A.2d 903 (1963). Any ambiguous terms must be given a construction most favorable to the insured. Patton v. Patton, 413 Pa. 566, 198 A.2d 578 (1964); but "[a] provision of an insurance policy is ambiguous [only] if reasonably intelligent men on considering it in the context of the entire policy would honestly differ as to its meaning." Celley v. Mutual Benefit Health & Accident Association, 229 Pa. Super. 475, 481-82, 324 A.2d 430, 434 (1974).
[ 255 Pa. Super. Page 124]
Exclusion (b) in Mr. Adelman's policy is totally unambiguous.*fn9 It reads, with interpolations from the definitions section, as follows:
This insurance does not apply:
(b) to bodily injury to an insured*fn10 [Mrs. Adelman] while operating or through being struck by a land motor vehicle owned by the named insured [Mr. Adelman] or any resident of the same household [Mrs. Adelman], if such vehicle is not an owned motor vehicle [the motor vehicle described in the declarations of Mr. Adelman's policy]. (footnote added).
In other words, the uninsured motorist coverage provided by Mr. Adelman's policy on his 1970 Oldsmobile does not apply to Mrs. Adelman (or to any other relative residing in the same household) when she is driving any vehicle owned by her or her husband other than the 1970 Oldsmobile (the sole vehicle described in the declarations of Mr. Adelman's policy).*fn11 The question then becomes whether this unambiguous contractual limitation on uninsured motorist coverage is permissible under regulations promulgated by the Insurance Commissioner and under the Uninsured Motorist Act.
The regulations promulgated by the Insurance Commissioner provide that the extent of coverage under the uninsured motorist endorsement of an insurance policy shall be at least that provided by the sample form, which conforms
[ 255 Pa. Super. Page 125]
to the national standard form.*fn12 31 Pa.Code § 63.2. The sample form sets forth the following exclusion:
This endorsement does not apply:
(b) to bodily injury to an insured while occupying an automobile (other than an insured automobile) owned by a named insured or any relative resident in the same household, or through being struck by such an automobile . . .
31 Pa.Code § 63.2, Exhibit C at 184.
To this point the sample exclusion is virtually identical to Exclusion (b) in the State Farm policies with which we are concerned. The Insurance Commissioner's sample form goes on to state, however, that, "[T]his exclusion does not apply to the principal named insured or his relatives while occupying or if struck by an automobile owned by an insured named in the schedule or his relatives." Id.
Since the State Farm policies do not contain the latter clause,*fn13 it is necessary to ask whether the omission is fatal in this case. "Even though the policy does not exactly match the Commissioner's sample form, if the policy as applied to this case . . . has the same effect as the form, it should not be held in violation of the regulations under which the form was promulgated." Wilbert v. Harleysville Mutual Insurance Co., J. 132/76, slip opinion at 3. What then is the meaning of the omitted clause and, more particularly, of the words "insured named in the schedule?"*fn14
[ 255 Pa. Super. Page 126]
The first part of Exclusion (b), both in the State Farm policies and in the sample form, is relatively clear. It denies coverage to an insured who is occupying, or is struck by, any vehicle owned by the named insured or his relatives, other than the vehicle described in the declarations of the policy. The concluding portion of the paragraph, on the other hand, contains an exception to that exclusion. To paraphrase the exception, Exclusion (b) does not apply when the named insured or his relatives are riding in a vehicle owned by an insured named in the schedule (or his relatives) rather than one owned by a named insured (or his relatives). The term "insured named in the schedule," as used in the Commissioner's sample form, means a "designated insured."*fn15 There is no doubt that Exclusion (b) in Mr. Adelman's policy precludes Mrs. Adelman from applying the uninsured motorist coverage in her husband's policy to injuries which she sustained while occupying her own automobile. She is an "insured" under her husband's policy, but she was driving an automobile owned by her (a relative of the named insured, Mr. Adelman) which is not described in the declarations of Mr. Adelman's policy. The result would be no different if Exclusion (b) had contained the exception set forth in the Commissioner's sample form and the national standard form. Mrs. Adelman is not named in the schedule to Mr. Adelman's policy as a "designated insured." Obviously, therefore, her 1966 Plymouth could not be a vehicle owned by a "designated insured" and the exception to the exclusion does not come into play. The policy, as applied to the facts of this case, has exactly the same effect as the Commissioner's sample form. Exclusion (b) cannot, therefore,
[ 255 Pa. Super. Page 127]
be held in violation of the regulations promulgated by the Insurance Department. Even this conclusion does not end our inquiry. We must further consider whether the Commissioner's sample form itself contravenes the policies behind the adoption of the Uninsured Motorist Act.*fn16
"The legislative intent in enacting the uninsured motorist law therefore requires a liberal construction of the statute and a pronounced propensity . . . to find coverage unless equally strong legal or equitable considerations to the contrary are present." Sands v. Granite Mutual Insurance Co., 232 Pa. Super. 70, 80, 331 A.2d 711, 716-17 (1974). Any conditions or restrictions in the insurance policy in derogation of the statute's purpose are void as against public policy. Shamey v. State Farm Mutual Automobile Insurance Co., 229 Pa. Super. 215, 331 A.2d 498 (1974). Our Supreme Court has reiterated on several occasions that the Uninsured Motorist Statute is "'designed to give monetary protection to that ever changing and tragically large group of persons who while lawfully using the highways themselves suffer grave injury through the negligent use of those highways by others.'" Pattani v. Keystone Insurance Co., 426 Pa. 332, 338, 231 A.2d 402, 404 (1967), quoting Katz v. American Motorists Insurance Co., 244 Cal.App.2d 886, 53 Cal.Rptr. 669 (1966). Accord, Harleysville Mutual Casualty Co. v. Blumling, 429 Pa. 389, 241 A.2d 112 (1968). Does Exclusion (b) contravene the statute's purpose when it is used, as here, to prevent cumulation of coverage between two separately insured automobiles?*fn17 We think not.
[ 255 Pa. Super. Page 128]
The Pennsylvania Uninsured Motorist Act, Act of August 14, 1963, P.L. 909, as amended, 40 P.S. § 2000, provides that
(a) No motor vehicle liability policy of insurance . . . shall be delivered or issued . . . unless coverage is provided therein . . . in limits for bodily injury or death as are fixed from time to time by the General Assembly in section 1421 of article XIV of "The Vehicle Code," act of April 29, 1929 (P.L. 58), under provisions approved by the Insurance Commissioner, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles . . . .
The Vehicle Code, Act of April 29, 1959, P.L. 58, 75 P.S. § 1421,*fn18 established minimum liability coverage of $10,000 per person and $20,000 per accident. Thus, by its terms, the Uninsured Motorist Act requires only that uninsured motorist coverage be included in any automobile liability policy in an amount not less than that set forth in the Motor Vehicle Safety Responsibility Provisions of the Vehicle Code. The intent of the Act is, therefore, that an insured injured by an uninsured motorist be able to recover those damages which he would have received had the uninsured motorist maintained liability insurance. Bankes v. State Farm Mutual Automobile Insurance Co., 216 Pa. Super. 162, 168, 264 A.2d 197, 200 (1970). 7 Am.Jur.2d, Automobile Insurance § 135 (1963). The uninsured motorist endorsement fills the gaps left by compulsory liability insurance and financial responsibility legislation. Comment, The Financially Irresponsible Motorist: A Survey of State Legislation, 10 Vill.L.Rev. 545, 553 (1967). It provides a minimum amount of protection against losses caused by a negligent uninsured motorist by distributing the burden of loss among all owners of insured vehicles registered in the Commonwealth.
[ 255 Pa. Super. Page 129]
As we stated in Nationwide Mutual Insurance Co. v. Ealy, 221 Pa. Super. 138, 289 A.2d 113 (1972), allocatur denied, 221 Pa. Super. xliii, "[N]othing in the Uninsured Motorist Act precludes contractual exclusion of uninsured motorist coverage for unlisted, insured-owned vehicles as long as the exclusion does not seek to reduce the insured's coverage below that specified in the statute." In Ealy we distinguished both Harleysville Mutual Casualty Co. v. Blumling, 429 Pa. 389, 241 A.2d 112 (1968) and Bankes v. State Farm Mutual Automobile Insurance Co., 216 Pa. Super. 162, 264 A.2d 197 (1970). In Blumling our Supreme Court examined the "other insurance" clause in the policy and held it invalid because the insurer attempted to limit its liability under the policy purchased from it by Blumling to the difference between any recovery under the insurance policy of the vehicle he was driving (his employer's vehicle) and the $10,000 statutory recovery. Harleysville was thus attempting to circumvent the statute by, in effect, offering less uninsured motorist coverage under its policy than that required by the Uninsured Motorist Act.
In Bankes, the insurer argued that Exclusion (b) validly denied recovery to an insured who was operating an uninsured motorcycle owned by him and who sought to recover under a policy issued on his automobile. We rejected this attempt to deny uninsured motorist coverage completely and held that the exclusionary language used there impermissibly broadened that authorized by the Insurance Commissioner.*fn19
[ 255 Pa. Super. Page 130]
Certainly the Legislature was cognizant of the fact that, by fixing the amount of obligatory uninsured motorist coverage at the level specified in the financial responsibility law, motorists would occasionally suffer uncompensated injuries in excess of $10,000 at the hands of uninsured motorists. We fail to see why public policy would dictate that the owner of two or more vehicles is entitled to more coverage (by cumulating policies) than a person who owns only one vehicle, particularly when unambiguous contractual language is used to insulate the coverage on one vehicle from that provided by other insured vehicles owned by the insured or his family.
Nor are we persuaded by appellee's argument that since uninsured motorist insurance premiums were paid on both Mr. and Mrs. Adelman's automobiles, double coverage should be afforded in order to prevent the insured from being deprived of the consideration paid for the uninsured motorist coverage on the second vehicle. The insurer undertakes a considerable risk even if the exclusion is allowed, and the amount of the premium "presumably has been calculated in light of the exclusion." Motor Club of America Insurance Co. v. Phillips, 66 N.J. 277, 291, 330 A.2d 360, 368 (1974).*fn20
[ 255 Pa. Super. Page 131]
"Under each policy the insured is given the full protection required by the act." Nationwide Mutual Insurance Co. v. Ealy, 221 Pa. Super. 138, 143, 289 A.2d 113, 116 (1972).
We hold, therefore, as we did in Ealy, that under the circumstances of this case Exclusion (b) is not in contravention of the uninsured motorist law. An insurance company may contractually divide the uninsured motorist coverage in two or more automobile insurance policies issued to members of the same household in order to prevent cumulation of coverage.
Reversed and remanded for the entry of an award in favor of appellee in the amount of $10,000.