No. 80-2-259, Appeal from the Order of the Superior Court at No. 229 March Term, 1978, dated October 19, 1979, affirming the Judgment of the Court of Common Pleas of Dauphin County at No. 1700 September Term, 1975, dated September 29, 1978.
Leo E. Gribbin, Jr., York, for appellant.
David E. Lehman and G. Thomas Miller, Harrisburg, for appellee.
Eagen, C. J., and O'Brien, Roberts, Nix, Larsen, Flaherty and Kauffman, JJ. Eagen, former C. J., did not participate in the decision of this case. Larsen, J., joins the Opinion of the Court and files a concurring opinion. Kauffman, J., files a dissenting opinion.
In this action, appellee Central Dauphin School District seeks to recover $529,000 from its insurance carrier, Appellant American Casualty Company, the amount the district by decree of court has thus far been required to return to its
taxpayers against whom the district imposed an unlawful tax.
Under the parties' insurance policy, effective from February of 1973 to February of 1976, appellant agrees
"[w]ith the School District that if during the policy period any claim or claims are made against it as a result of any Wrongful Act occurring during the policy period, [appellant] will pay on behalf of, in accordance with the terms of this policy, all loss which the School District shall become legally obligated to pay."
"Loss," the only term consistently disputed in this proceeding, is defined as follows:
"Loss shall mean any amount which the Assured [(including school board members)] or School District are legally obligated to pay, including, but not limited to, any amounts which the School District may be required or permitted to pay as indemnity to an Assured, for a claim or claims made against an Assured for a Wrongful Act and shall include but not be limited to damages, judgments, settlements and costs, cost of investigation and defense of legal actions (excluding from such costs of investigation and defenses, salaries of officers or employees of the School District or any other governmental body) claims or proceedings and appeals therefrom, costs of attachment or similar bonds, provided always, however, such subject of loss shall not include fines imposed by the law, or matters which shall be deemed uninsurable under the law pursuant to which this policy shall be construed."
Central Dauphin paid a premium of $3939 for this policy, coverage it now contends includes the present claim of $529,000 and any further sums which it may be required to refund as a result of the unlawful tax collection.
By resolution dated June 19, 1974, Central Dauphin imposed a tax on the value of the occupations "of all persons residing in Central Dauphin School District . . . who are eighteen (18) years of age or older." See The Local Tax Enabling Act, Act of December 31, 1965, P.L. 1257, § 2, as amended, 53 P.S. § 6902 (1972). After levy and collection,
certain taxpayers of the district instituted proceedings in the Court of Common Pleas of Dauphin County challenging the validity of the district's resolution. Nowhere does the record indicate that Central Dauphin gave appellant notice of the proceedings. The court of common pleas struck down the measure insofar as it sought to impose an occupation tax on "retired persons, housewives and others who have not or do not engage in a gainful occupation . . .," and directed payment of refunds. Peifer v. Central Dauphin School District, 97 Dauph. 199, 70 D. & C.2d 35 (1975).
Central Dauphin took no appeal and the trial court's decree became final. Thereafter the district began to return the tax funds unlawfully collected to those taxpayers who made refund claims under the Act of May 21, 1943, P.L. 349, § 1, as amended, 72 P.S. § 5566b (1968).*fn1
Central Dauphin then sought from appellant an amount equal to the tax revenue it had illegally collected and was required by court order to return to its taxpayers. By letter dated May 22, 1975, appellant took the position that no "loss" had occurred within the meaning of the parties' insurance policy. Appellant advised Central Dauphin that
"it is doubtful if this event can be insured. Our 'loss' definition does have language which says that matters which shall be deemed uninsurable under the law pursuant to which the policy shall be ...