replacing vehicle until the insured had parted with the ownership and possession of the replaced vehicle. Under the law as reviewed in Filaseta and the facts as we have found them, we hold that Cunnard's 1958 Plymouth was a replacement vehicle within the meaning of the Nationwide policy and was a covered automobile.
Having found that the 1958 Pontiac was a replacement automobile covered under Cunnard's Nationwide policy, we also find that Nationwide was negligent in its investigation and denial of coverage to Cunnard. Nationwide knew or should have known based upon a reasonable investigation that Cunnard had retired the 1960 Plymouth for mechanical reasons, that it was not inspected, that it had not been driven and that he intended to and did use the 1958 Pontiac as a replacement vehicle. Nationwide also knew or should have known that the law as presented in Filaseta would allow coverage as a replacement vehicle even though the insured continued in ownership and possession of the described vehicle contra to the position taken in Nationwide's denial of coverage letters of December 22, 1970 and July 16, 1971. Nationwide further was not justified in relying without more thorough investigation upon a statement written by the adjustor that the adjustor had Cunnard sign within one week after the accident while Cunnard was still in the hospital in a body cast and was in pain and under sedation.
In our memorandum and order of November 4, 1977 in ruling upon Nationwide's motion to dismiss this action we held that a secondary insurer has a cause of action against the primary insurer for wrongful refusal to provide coverage. To hold otherwise would put an undue strain on Pennsylvania's uninsured motorist statute, 42 P.S. § 2000, for it would enable the primary insurer to impose severe financial burdens on the secondary insurer whose presence is now all but inevitable under the uninsured motorist statute simply by denying the existence of coverage. It is for this reason that although no Pennsylvania cases have been cited to us as authority for this position, we believe the Pennsylvania courts, if faced with the question would so hold. To do otherwise would in effect reverse the roles of the primary and secondary insurer and reduce the likelihood of a primary insurer acknowledging its coverage. We find support for this position in the factually analogous case of Indiana Lumbermen's Mutual Insurance Company v. State Farm Mutual Automobile Insurance Company, 511 S.W.2d 713 (1973). In that action the defendant insurance company denied liability coverage to its insured because the insured was operating a temporary substitute automobile while the described automobile was mechanically inoperable. The court determined that under the terms of the policy the denial of coverage was improper. The court also found that as a result of the denial of liability coverage by the Defendant State Farm Mutual, the plaintiff, Indiana Lumbermen's Mutual was forced to pay uninsured motorist damages to the injured claimant. The court determined that the uninsured motorist insurer plaintiff had a right of indemnity against the defendant because the defendant was primarily liable to pay damages caused by the negligence of its insured and had improperly denied coverage.
The fact that Plaintiff did not file a declaratory judgment action is not a defense in this matter. So too could Nationwide have filed a declaratory judgment action. After the demand was rightfully made for arbitration, Plaintiff was unable to stay the arbitration proceedings for a declaratory judgment action to be filed. St. Paul Mercury Insurance Company v. American Arbitration Association, 425 Pa. 548, 229 A.2d 858 (1967); Hartford Insurance Group v. Kassler, 227 Pa.Super. 47, 324 A.2d 521 (1974).
Plaintiff is entitled to recover the entire amount of its damages and is not limited to any policy limit which the Defendant may have had in effect with its insured, William Cunnard. Because of the Defendant's wrongful denial of coverage, the Plaintiff was forced to defend the uninsured motorist claim for "stacked" coverage. Plaintiff's right of indemnification is based upon the fact that the Defendant wrongfully denied coverage when it was the primary carrier and should have paid the obligation. Under Pennsylvania law, where the wrongful acts of the Defendant have involved the Plaintiff in litigation with others or placed him in such relations with others as to make it necessary to incur costs and expenses to protect his interests, such costs and expenditures should be treated as legal consequences of the original wrongful act. Orth v. Consumer's Gas Co., 280 Pa. 118, 121, 124 A. 296 (1924). That portion of the counsel fees incurred as a result of defending the underlying action are recoverable although those incurred in the indemnification action are not. Boiler Engineering and Supply Co. v. General Controls, Inc., 443 Pa. 44, 277 A.2d 812 (1971).
Section 76 of the Restatement of Restitution also supports Plaintiff's position. It provides:
"A person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity from the other, unless the payor is barred by the wrongful nature of his conduct."
The rationale of Section 76 of the Restatement of Restitution has been adopted by the Pennsylvania courts. See, Employers Mutual Liability Insurance Company of Wisconsin v. Melcher, 378 Pa. 598, 107 A.2d 874 (1954); Potoczny v. Vallejo, 170 Pa.Super. 377, 85 A.2d 675 (1952). Pursuant to Section 80 of the Restatement of Restitution, this is a case where the person who has discharged the duty which as between himself and another should have been performed by the other and is entitled to indemnity. That person should receive reimbursement limited to the amount of his net outlay properly expended because the payor became a party to the transaction through the fault of the other.
The Defendant has raised the question of the statute of limitations. The applicable statute of limitations with respect to indemnification then in effect was six years found in 12 P.S. § 31. The statute of limitations begins to run from the time judgment is entered or when Plaintiff finally pays the obligation or more than his share of it. Wnek v. Boyle, 172 Pa.Super. 222, 92 A.2d 701 (1952). All payments were made and the judgment was entered on or after February 16, 1973 and this suit was filed on January 14, 1977.
CONCLUSIONS OF LAW
1. The Court has jurisdiction of the subject matter of this case and the parties hereto by reason of the provisions of 28 U.S.C. § 1332.
2. The 1958 Pontiac operated by William Cunnard and which was involved in the accident of December 6, 1970, replaced the 1960 Plymouth and as such was a "newly acquired automobile" within the terms of the policy of insurance issued by Defendant, Nationwide Mutual Insurance Company.
3. Nationwide Mutual Insurance Company's denial of coverage to William Cunnard was wrongful, and the investigation conducted by Nationwide was negligent.
4. Aetna Casualty and Surety Company's expenditures in the amount of Thirty-Two Thousand Four Hundred Two Dollars and Seventy-Three Cents ($ 32,402.73) representing uninsured motorist payments and the defense of the uninsured motorist claim, were proximately caused by Defendant, Nationwide Mutual Insurance Company's wrongful denial of coverage.
5. The fact that Plaintiff did not file a declaratory judgment action is no defense in this matter.
6. Plaintiff is entitled to recover the entire amount of its damages and is not limited to the policy limit in effect between the Defendant and its insured.
7. This action was filed within the relevant statute of limitations.
8. A secondary insurer, such as the Plaintiff, has a cause of action against the primary insurer for wrongful refusal to provide coverage.
9. The Defendant must indemnify the Plaintiff in the amount of Thirty-Two Thousand Four Hundred Two Dollars and Seventy-Three Cents ($ 32,402.73).
© 1992-2004 VersusLaw Inc.