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FRANK GURNICK v. GOVERNMENT EMPLOYEES INSURANCE COMPANY (06/13/80)

SUPERIOR COURT OF PENNSYLVANIA


filed: June 13, 1980.

FRANK GURNICK, APPELLANT,
v.
GOVERNMENT EMPLOYEES INSURANCE COMPANY

No. 1247 October Term, 1979, Appeal from the Order of the Court of Common Pleas of Philadelphia County, Trial Division-Law, No. 5450 September Term, 1978.

COUNSEL

Allen L. Feingold, Philadelphia, for appellant.

Marcy B. Tanker, Philadelphia, for appellee.

Price, Watkins and Hoffman, JJ. Hoffman, J., files a dissenting opinion.

Author: Price

[ 278 Pa. Super. Page 438]

Appellant appeals from an order of the court of common pleas sustaining appellee's preliminary objections and thereby dismissing the second count of appellant's three-count complaint. This case presents the question whether a claimant under Pennsylvania's No-fault Motor Vehicle Insurance Act*fn1 may recover punitive damages from the insured's insurance company for failure to pay his claim promptly. We hold that such damages are not recoverable under the Act and therefore affirm the order of the court of common pleas.

The pertinent facts are as follows. Appellant filed a three-count complaint in assumpsit and trespass against appellee. Count I of the complaint alleged that appellant

[ 278 Pa. Super. Page 439]

    was riding as a passenger in a car insured by appellee when he sustained injuries as a result of an automobile accident. Appellant further alleged that when presented with his claim for medical expenses and lost wages resulting from the accident, appellee refused to make payment. Appellant therefore requested that the court grant him compensatory damages in excess of $10,000 as well as penalties, attorney's fees, interest and costs.

Counts II and III of the complaint, although inartistic in form, both requested punitive damages in excess of $10,000 as well as penalties, attorney's fees and costs. Count II was based on the theory that appellee's refusal to pay appellant's claim constituted a willful, wanton and malicious breach of contract. Count III sought recovery apparently on the basis of intentional infliction of emotional distress. In this regard, appellant asserted that appellee instituted a course of conduct designed to harass and frustrate him.

Appellee filed preliminary objections in the nature of a demurrer to Counts II and III and contended that punitive damages were not available to appellant under a breach of contract theory and that the No-fault Act provided appellant's exclusive remedy. The court of common pleas, per order of the Honorable James R. Cavanaugh, sustained appellee's preliminary objections to Count II of the complaint, thereby dismissing that count, but denied appellee's preliminary objections to Count III of the complaint. In a subsequent opinion supporting this order, Judge Cavanaugh concluded that appellant's action for punitive damages was not cognizable under the No-fault Act and that the general rule in Pennsylvania prohibits recovery of punitive damages in a breach of contract action.

On appeal,*fn2 appellant contends that Judge Cavanaugh erred in sustaining appellee's preliminary objections

[ 278 Pa. Super. Page 440]

    to Count II. In support of this argument, appellant contends that a cause of action for punitive damages is permitted by common law and has not been eliminated by the No-fault Act. We disagree.

It is hornbook law that punitive damages generally are not recoverable in breach of contract actions. See 22 Am.Jur.2d Damages § 245 (1965); 5 Corbin on Contracts § 1077 (1964); 25 C.J.S. Damages § 120 (1966); C. McCormick, Law of Damages § 81 (1935). Pennsylvania has long followed this general rule. See Hoy v. Gronoble, 34 Pa. 9, 75 A.D. 628 (1859). Jurisdictions are divided, however, on the question whether the general prohibition against punitive damages in contract actions applies to disputes involving insurance policies. See 20 Appleman, Insurance Law and

[ 278 Pa. Super. Page 441]

Practice § 11255 (1963, Supp. 1977); Annot., 47 A.L.R.3d 314 (1973). Few jurisdictions, however, have addressed the issue in the context of a no-fault automobile statute.

In the case of Haagenson v. National Farmers Union Property and Casualty Company, Minn., 277 N.W.2d 648 (1979), the plaintiff sued his insurance company for punitive damages for its "bad faith and malicious" refusal to pay no-fault benefits. In reversing the jury's award of punitive damages, the Minnesota Supreme Court concluded that in the absence of specific statutory provisions, extra-contract damages are not recoverable for breach of contract except in exceptional cases in which the breach is accompanied by an independent tort. Even in this regard, the court concluded, a malicious or bad faith motive in breaching a contract does not convert a contract action into a tort action. Because the Minnesota no-fault automobile act (Minn.Stat.Ann. § 65B.41 et seq.) did not contain provisions specifically allowing extra-contract damages, but only provided for an interest penalty (10% per annum) for overdue benefits, the Minnesota Supreme Court concluded that punitive damages were not recoverable.

One no-fault jurisdiction which appears to be receptive to the practice of allowing punitive damages for refusal to pay benefits is Utah. Even there, however, the Utah Supreme Court has not ruled specifically that punitive damages are recoverable, but has only intimated so. See Jones v. Transamerica Insurance Co., Utah, 592 P.2d 609 (1979).

Pennsylvania's No-fault Act, similar to Minnesota's, does not make specific provision for the assessment of punitive damages against an insurance company that refuses to pay overdue benefits, but the Act does impose an interest penalty (18% per annum) on overdue no-fault benefits. 40 P.S. § 1009.106(a)(2).*fn3 In addition, the Act provides for the

[ 278 Pa. Super. Page 442]

    assessment of attorney's fees against the insurance company under certain circumstances. 40 P.S. § 1009.107.*fn4 We conclude that the above cited provisions provide the exclusive remedies for a claimant under the Act and that the trial court properly sustained appellee's preliminary objections to Count II of appellant's complaint. Although this court generally has been liberal in allowing recovery of benefits under the Act, see, e. g., Heffner v. Allstate Insurance Co., 265 Pa. Super. 181, 401 A.2d 1160 (1979), an interpretation which includes punitive damages for willful refusal to pay benefits would be an inappropriate exercise of legislative power. Under the Statutory Construction Act of 1972, 1

[ 278 Pa. Super. Page 443]

Pa.C.S. § 1501 et seq., "When the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit." Id. at § 1921(b). The language of the No-fault Act is clear regarding what remedies are available to appellant. If the legislature intended to provide for punitive damages in situations in which insurance companies willfully refuse to pay no-fault benefits, it easily could have so provided. Such an expectation is not unreasonable. Other states, e. g., Illinois, Ill.Rev.Stat.1971, ch. 73, pars. 1065.150-1065.163,*fn5 have provided for such remedies in their respective insurance codes.

We note, additionally, that the result reached in the instant case is consistent with decisions of the federal district court and Pennsylvania's trial courts. See, e. g., O'Shanick v. Allstate Insurance Co., 431 F.Supp. 382 (W.D.Pa.1977); Jolley v. Nationwide Insurance Co., 7 Pa.D. & C.3d 797 (C.P.Phila.1978).*fn6

Accordingly, the order of the court of common pleas is affirmed.

HOFFMAN, Judge, dissenting:

Because I believe that we do not have jurisdiction to reach the merits of this appeal, I dissent. For the reasons which follow, I would quash the appeal.

First, I agree with the majority that the order appealed from is interlocutory. Additionally, the majority correctly notes that this appeal is not authorized by any statute, and that the trial court did not certify the appeal to our Court pursuant to section 702(b) of the Judicial Code, 42 Pa.C.S.

[ 278 Pa. Super. Page 444]

§ 702(b).*fn1 Nevertheless, the majority declares that "under our broad discretionary power of review, we have elected to entertain the instant appeal." Majority op. at 444 n.2. In so holding, the majority has ignored the long established principle that because our Court derives its jurisdiction and powers solely from statute, no right of appellate review exists in our Court unless expressly authorized by statute. See, e. g., Commonwealth v. Harris, 409 Pa. 163, 171, 185 A.2d 586, 590 (1962); Bell Appeal, 396 Pa. 592, 598, 152 A.2d 731, 734 (1959); Commonwealth v. Guardiani, 226 Pa. Super. 435, 437, 310 A.2d 422, 423-24 (1973).

Section 503(a) of the Appellate Court Jurisdiction Act of July 31, 1970,*fn2 provided in Part: "The failure of an appellee to file an objection to the jurisdiction of an appellate court . . . shall, unless the appellate court shall otherwise order, operate to perfect the appellate jurisdiction of such appellate court . . . ." Pursuant to this provision, our Court held that although an appeal from an interlocutory order was not authorized by law and the trial judge did not certify the issue as a controlling issue of law, we have discretionary power to entertain the appeal if appellee did not object to our jurisdiction. See, e. g., Commonwealth v. Bennett, 236 Pa. Super. 509, 345 A.2d 754 (1975); McConnell v. Schmidt, 234 Pa. Super. 400, 339 A.2d 578 (1975); Commonwealth v. Rucco, 229 Pa. Super. 247, 324 A.2d 388 (1974). Accordingly, if Section 503(a) governed this case, I would agree with the majority that we have jurisdiction to hear this appeal. This

[ 278 Pa. Super. Page 445]

    appeal, however, was filed after the Judicial Code went into effect.

Section 704 of the Judicial Code provides in part:

(a) General rule. -The failure of an appellee to file an objection to the jurisdiction of an appellate court within such time as may be specified by general rule, shall, unless the appellate court otherwise orders, operate to perfect the appellate jurisdiction of such appellate court . . . .

(b) Exception. -Subsection (a) shall not apply to any defect in the jurisdiction of an appellate court which arises out of:

42 Pa.C.S. § 704. A plain reading of section 704 demonstrates that under the Judicial Code an appellate court no longer has the discretion to hear an appeal from an interlocutory order which has not been authorized by law or certified by the trial court under section 702(b). Any doubt regarding the intent of the Legislature is dispelled by the official source note accompanying section 704, which states that section 704(b)(2) was intended to overrule Commonwealth v. Bennett, supra.*fn3 Accordingly, because no statute authorizes this appeal, it should be quashed.*fn4


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