No. 3060 October Term 1978, Appeal from the Order of the Court of Common Pleas of Philadelphia County, December Term, 1975, No. 1275.
James McCabe, Philadelphia, for appellant.
Maurice M. Green, Philadelphia, for appellee.
Spaeth, Hester and Cavanaugh, JJ.
[ 283 Pa. Super. Page 219]
This is an appeal from a judgment entered in an action in assumpsit against the Pennsylvania Insurance Guaranty Association. The issues are of first impression and require interpretation of the non-duplication of recovery provisions of the Pennsylvania Insurance Guaranty Association Act, Act of Nov. 25, 1970, P.L. 716, No. 232, Art. I § 101 et seq., 40 P.S. § 1701.101 et seq.
On June 7, 1968, an automobile driven by Arthur Davis was involved in a collision with an automobile driven by J. H. Patton. The collision occurred at an intersection in Philadelphia. James Sands was a passenger in the Davis automobile and was badly hurt in the collision, incurring damages of at least $26,671.78.
Davis had liability and uninsured motorist coverage in the amount of $10,000 with Hawkeye Security Insurance Co.
[ 283 Pa. Super. Page 220]
Patton was uninsured. Sands had uninsured motorist coverage in the amount of $10,000 with Granite Mutual Insurance Co. Sands did not bring an action in trespass against either Davis or Patton. He did, however, make the following three claims.
First, Sands claimed, and received, reimbursement of his hospital expenses from the Associated Hospital Service of Philadelphia in the amount of $6,671.28.
Second, Sands made a claim against Hawkeye under Davis's uninsured motorist coverage; he was entitled to make this claim because Davis's policy with Hawkeye provided protection against damages suffered in a collision with an uninsured motorist not only to Davis himself but also to his passenger. Hawkeye paid Sands $10,000 -- the full amount of the uninsured motorist coverage -- in consideration of Sands executing a release of all claims against Hawkeye.
Finally, Sands made a claim against Granite under his own uninsured motorist coverage. When Granite refused to pay this claim, Sands sued Granite and recovered a verdict of $10,000. On Granite's appeal, we affirmed. Sands v. Granite Mutual Ins. Co., 232 Pa. Super. 70, 331 A.2d 711 (1974).
In the meantime, Granite had been declared insolvent. Sands applied to the Pennsylvania Insurance Guaranty Association for payment of the amount of his verdict against Granite -- $10,000 -- with interest from January 23, 1973, which was the date on which the verdict was returned. When the Guaranty Association refused payment, Sands brought the present action against the Association. A panel of arbitrators entered an award in favor of Sands in the amount of $9,900 (under the Pennsylvania Guaranty Association Act, the Association is not obliged to pay the first $100 of any claim, 40 P.S. § 1701.201(b)(1)(i)). The Association appealed, and after a trial without a jury, the lower court entered a verdict for Sands in the amount of $9,900 with interest from December 26, 1975, which was the date on which Sands filed his amended complaint against the Association. The Association filed exceptions, and when these were dismissed, it filed this appeal.
[ 283 Pa. Super. Page 221]
On appeal, the Association argues that it need not pay Sands because he has failed to exhaust insurance coverage available to him with a solvent insurer, namely, Hawkeye, and also because he has already recovered from the Associated Hospital Service and Hawkeye amounts that together exceed his claim against the Association. The Association also argues that if Sands is entitled to a recovery, it cannot be required to pay any interest on that recovery.
During the last two decades a series of studies conducted by legislatures, scholars, and industry associations revealed the serious social harm that results from insurance companies becoming insolvent. See e. g., Hearings on S.Res. 40 Before the Subcomm. on Antitrust and Monopoly of the State Comm. on the Judiciary, 89th Cong., 1st Sess. pt. 12 (1965); Hearings on S.Res. 40 Before the Subcomm. on Antitrust and Monopoly of the Senate Comm. on the Judiciary, 91st Cong., 1st Sess. pt. 15 (1969); D. Olson, Insolvencies Among Automobile Insurers: Advisory Report to the Division of Industry Analysis, Bureau of Economics, Federal Trade Commission for the Department of Transportation (1970); 1 Proceedings of the National Association of Insurance Commissioners 52 (1963). In response, the National Association of Insurance Commissioners drafted the "State Post-Assessment Insurance Guaranty Association Model Bill." See Official N.A.I.C. Model Insurance Laws, Regulations and Guidelines, V. II. at 540-1 et seq. As of March 1978, forty states had adopted an insurance guaranty act that was substantially similar to the N.A.I.C. Model Bill. See Model Bill, supplement. The Pennsylvania Guaranty Association Act, supra, 40 P.S. § 1701.101 et seq., is the Pennsylvania version of the Model Bill.
By virtue of the Act, the Pennsylvania Guaranty Association comprises every property and casualty insurance carrier in this state; their membership is a condition of their authority to write insurance policies within the State. 40 P.S. § 1701.201(a). The purposes of the Act are:
[ 283 Pa. Super. Page 222]
(1) To provide a means for the payment of covered claims under certain property and casualty insurance policies, to avoid excessive delay in the payment of such claims, and to avoid financial loss to claimants or ...