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FRED S. JAMES & CO. v. COMMONWEALTH PENNSYLVANIA (07/17/79)

decided: July 17, 1979.

FRED S. JAMES & CO., INC., OF PENNSYLVANIA, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, BOARD OF ARBITRATION OF CLAIMS, COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF GENERAL SERVICES AND MILLER'S MUTUAL INSURANCE COMPANY, RESPONDENTS



Appeal from the Order of the Board of Arbitration of Claims in case of Miller's Mutual Insurance Company v. Commonwealth of Pennsylvania, Department of General Services v. Fred S. James and Company, Inc. of Pennsylvania, Docket No. 499.

COUNSEL

Clyde W. McIntyre, with him Delano M. Lantz, and, of counsel, McNees, Wallace & Nurick, for petitioner.

John L. Sweezy, Assistant Attorney General, with him Theodore A. Adler, Chief Counsel, and Gerald Gornish, Attorney General, for respondent.

President Judge Bowman and Judges Wilkinson, Jr., Mencer, Rogers, Blatt, DiSalle and MacPhail. Judges Crumlish, Jr. and Craig did not participate. Opinion by Judge DiSalle.

Author: Disalle

[ 44 Pa. Commw. Page 290]

This petition for review raises the question of the jurisdiction of the Board of Arbitration of Claims (Board) over Fred S. James & Company, Inc. (Appellant), an "additional defendant" in a suit brought by Miller's Mutual Insurance Company (Miller) against the Commonwealth of Pennsylvania, Department of General Services (Commonwealth).

Miller's suit was instituted on November 30, 1976, to recover an amount allegedly owing to it for the earned but unpaid premium on a thirty-day fire insurance binder covering certain Commonwealth-owned

[ 44 Pa. Commw. Page 291]

    properties from October 1, 1976, to November 28, 1976. This action occurred after the Commonwealth, on October 28, 1976, attempted to cancel the binder retroactively. Miller refused the retroactive cancellation, claiming that it had performed its obligations under the contract, and had become legally responsible for risks of loss to the insured properties, and that the Commonwealth had accepted the benefit of the protection of such insurance.

On August 16, 1977, the Commonwealth, after its motion for allowance of joinder was approved by the Board, joined Appellant as an additional defendant. In so doing, the Commonwealth averred that Appellant, by reason of having been the broker for an insurance company which had issued a policy of insurance to the Commonwealth covering the same properties for the preceding year, owed certain fiduciary duties to the Commonwealth. These duties were allegedly tortiously breached when Appellant failed to disclose certain information to the Commonwealth relating to Appellant's purported involvement as reinsurance broker on the coverage ultimately offered by Miller. The Commonwealth further averred that Appellant and Miller unlawfully conspired to fix prices for insurance coverage on the properties in violation of Section 5(a)(4) of the Unfair Insurance Practices Act, Act of July 22, 1974, P.L. 589, as amended, 40 P.S. § 1171.5(a)(4). Thereafter, Appellant filed preliminary objections to the joinder raising questions of jurisdiction and including a demurrer. The Board dismissed the preliminary objections and certified that the dismissal of the preliminary objections involved a controlling question of law. Appellant then filed for permission to appeal to this Court which was granted on May 5, 1978.*fn1 We reverse.

[ 44 Pa. Commw. Page 292]

Section 1 of the Act of May 20, 1937 (Act), P.L. 728, as amended, 72 P.S. § 4651-1, created the "Board of Arbitration of Claims" and provided that "the duty of [the Board] shall be to arbitrate claims against the Commonwealth arising from contracts entered into by the Commonwealth."*fn2 (Emphasis added.) It is apparent, therefore, that the jurisdiction of the Board is limited in scope. Pennsylvania Turnpike Commission v. Sanders & Thomas, Inc., 461 Pa. 420, 336 A.2d 609 (1975). We have repeatedly recognized the limited nature of the Board's jurisdiction, but have also held that the Commonwealth may compel third parties to be brought into the proceedings. After service has been effectuated, however, these third parties may raise, through preliminary objections, any cognizable jurisdictional argument. General State Authority v. J. C. Orr & Son, Inc., 17 Pa. Commonwealth Ct. 433, 332 A.2d ...


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