new tort theories that would undermine traditional contract rules. The policy expressed in Glazer is an enlightening guide in performing the delicate task described by Judge Adams with respect to diversity cases.
As noted, defendants' argument begins with the premise that a duty of good faith and fair dealing is an implied term in all contracts as a matter of Pennsylvania law. For purposes of this case, that can be assumed to be true. See generally Diamon v. Penn Mutual Fire Insurance Co., 247 Pa.Super. 534, 550-52, 372 A.2d 1218, 1226-27 (1977); Daniel B. Van Campen Corp. v. Building and Construction Trades Council, 202 Pa.Super. 118, 122, 195 A.2d 134, 136-37 (1963). But it is a broad jump from that premise to the conclusion that breach of this duty should be separately actionable in tort merely because the duty is imposed by law rather than by consensual agreement of the parties. Not every breach of a legal duty is actionable in tort. See, e.g., Manning v. Andy, 454 Pa. 237, 310 A.2d 75 (1973) (per curiam); Frederick L. v. Thomas, 578 F.2d 513, 517 (3d Cir. 1978) (discussing Pennsylvania law); Benjamin v. Global Collection Agency, 71 Pa.D. & C.2d 56, 66-67 (C.P. Del. Cnty. 1974). Defendants have cited no Pennsylvania cases imposing tort liability in the situation at bar. It is true that contract obligations have been held to give rise to tortiously actionable duties under Pennsylvania law. See, e.g., Evans v. Otis Elevator Co., 403 Pa. 13, 168 A.2d 573 (1961) (person who has contract with owner to inspect its freight elevator has duty to perform the contractual undertaking in such a manner that third persons will not be injured thereby and may be sued in tort by third person for breach of that duty). Generally, this has occurred with respect to matters beyond the scope of the contract, however E.g., personal injury to persons not parties to the contract, as in Evans. See generally Prosser, Supra, §§ 92-93. Where, as in this case, the injury that occurs is within the scope of the contract itself, the policy of maintaining the distinction between tort and contract actions applies with much greater force. The injury for which defendants seek redress in the counterclaim is purely economic and is compensable in an action on the contract itself. I do not believe that Pennsylvania would superimpose tort law on that contract action merely to allow recovery of punitive damages for breach of the implied contract term.
The cases cited by defendants are readily distinguishable. In Papieves v. Kelly, 437 Pa. 373, 263 A.2d 118 (1970), a case which had nothing to do with contract breach, the Pennsylvania Supreme Court held that a plaintiff could recover for the tort of intentional infliction of mental distress; no such tort claim is alleged in this case. Hanke v. Global Van Lines, Inc., 533 F.2d 396 (8th Cir. 1976), and W. W. Coal Co. v. Pennsylvania National Mutual Casualty Insurance Co., 75 Pa.D. & C.2d 621 (C.P. Somerset 1975), merely stand for the proposition that where the factual events on which the plaintiff sues give rise to claims in both tort and contract, the measure of the plaintiff's tort recovery is not limited by the concomitant assertion of the contract claim. Of course, the issue under consideration in this case is whether the facts alleged do indeed give rise to both tort and contract claims.
In Meyer v. Nottger, 241 N.W.2d 911 (Iowa 1976), the Supreme Court of Iowa held that damages for emotional distress could be awarded for breach of a contract to perform funeral services and that recovery for the tort of intentional infliction of mental distress could be had in the same case. Meyer does not aid defendants' position, but the decision is significant for its straightforward recognition of the fact that not all contracts are the same and that certain contracts should be treated according to different rules than others, depending on the nature and character of the subject matter with which they deal or the relationship between the parties. See 241 N.W.2d at 920-21. That common sense reasoning points to the principal factor distinguishing the other cases relied upon by defendants: they deal with a special type of contract, an insurance policy. As Judge Huyett recently observed, "the Pennsylvania courts clearly recognize insurance contracts as presenting special considerations which require the imposition of unique duties upon the insurer." Myers & Watters Co. v. E. I. duPont deNemours & Co., Civil No. 76-1253, slip op. at 5 (E.D.Pa., April 25, 1978). In Pennsylvania, as in other states, the insurance industry is subject to pervasive regulation and many insurance policy terms are imposed by statute.
In addition, "insurance contracts continue to be contracts of adhesion, under which the insured is left little choice beyond electing among standardized provisions offered to him, even when the standard forms are prescribed by public officials rather than insurers." R. Keeton, Insurance Law § 6.3(a), at 350-51 (1971), Quoted in Diamon v. Penn Mutual Fire Insurance Co., 247 Pa.Super. 534, 551 n. 8, 372 A.2d 1218, 1226 n. 8 (1977). As a result, the Supreme Court of Pennsylvania has modified its application of traditional contract rules to insurance policies, explaining in Brakeman v. Potomac Insurance Co., 472 Pa. 66, 371 A.2d 193 (1977)
"The rationale underlying the strict contractual approach reflected in our past decisions is that courts should not presume to interfere with the freedom of private contracts and redraft insurance policy provisions where the intent of the parties is expressed by clear and unambiguous language. We are of the opinion, however, that this argument, based on the view that insurance policies are private contracts in the traditional sense, is no longer persuasive. Such a position fails to recognize the true nature of the relationship between insurance companies and their insureds. An insurance contract is not a negotiated agreement; rather its conditions are by and large dictated by the insurance company to the insured. The only aspect of the contract over which the insured can "bargain' is the monetary amount of coverage. And, as we have recognized, notice of accident provisions, such as that with which we are concerned instantly, are uniformly found in liability insurance policies. Meierdierck v. Miller, (394 Pa. 484, 486, 147 A.2d 406, 408 (1959)). Indeed, a review of the cases indicates that often the policies express the condition in identical language. . . . Thus, an insured is not able to choose among a variety of insurance policies materially different with respect to notice requirements, and a proper analysis requires this reality be taken into account." 472 Pa. at 72-73, 371 A.2d at 196 (footnote omitted).