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filed: August 14, 1981.


No. 1767 October Term, 1979, Appeal from Order of the Court of Common Pleas, Trial Division, Civil Section, of Phila. County, July Term 1978, No. 4929.


Joseph Mellace, Philadelphia, for appellant.

Gerard Bruderle, Philadelphia, for appellee.

Spaeth, Brosky and Hoffman, JJ.

Author: Spaeth

[ 290 Pa. Super. Page 29]

This is an appeal from an order granting summary judgment. Appellant, Gary Zepp, claims benefits under a nofault automobile insurance policy issued by appellee to his father, James Zepp. The lower court acknowledged that there was an "unresolved question of fact concerning whether

[ 290 Pa. Super. Page 30]

    or not the payments sought by [appellant] are in fact 'overdue' under the Act*fn1 and whether or not they have been properly rejected by [appellee]." It nevertheless granted summary judgment because it calculated that even if the payments had been improperly refused, appellee still did not owe appellant anything. Since we find the lower court's calculation in error, we reverse.

The lower court found that based on its interpretation of the policy, appellant had been overpaid on his work loss claim by $134.35. The court then assessed interest against appellant at the rate of 18% from the day after the last day included in the work loss period until the time the suit was started, increasing the amount appellant owed appellee to $183. The amount of unpaid medical bills claimed in appellant's complaint was $409.49. By reducing this amount by a $250 deductible, the court found that the most appellee could owe appellant would be $159.49. Since this was less than the amount the court had determined appellant owed appellee, the court entered judgment in favor of appellee and against appellant.

The court's assessment of 18% interest against appellant was improper. Section 106(a)(2) of the No-fault Act, 40 P.S. § 1009.106(a)(2), provides that when no-fault benefits are not paid on time by the insurance company, they bear interest at 18%. The Supreme Court has held that this high rate -- three times the normal legal rate of 6% -- reflects a legislative determination that prompt payment of no-fault benefits is of particular importance and is to be encouraged. Hayes v. Erie Insurance Exchange, 493 Pa. 150, 425 A.2d 419 (1981). Nothing indicates any intention by the legislature to apply this rate to overpayments erroneously made by an insurance company.*fn2

[ 290 Pa. Super. Page 31]

In addition, the court's assumption that the amount of unpaid medical bills claimed in appellant's complaint should be reduced by a $250 deductible is unsupported by the record.

Section 203 of the No-fault Act, 40 P.S. § 1009.203, provides as follows:

(b) The owner or operator of a motor vehicle may elect to provide for security in whole or in part for the payment of basic loss benefits through a program, group, contract or other arrangement that would pay to or on behalf of the victim or members of his family residing with him or the survivor of a deceased victim, allowable expense, loss of income, work loss, replacement services loss and survivors loss. In all such instances, each contract of insurance issued by an insurer shall be construed to contain a provision that all basic loss benefits provided therein shall be in excess of any valid and collectible benefits otherwise provided through such program, group, contract or other arrangement as designated at the election of the owner or operator which shall be primary.

(c) An insurer providing basic loss benefits and tort liability in accordance with the provisions of subsection (b) above shall reduce the cost of such contract of insurance to reflect the anticipated reduction in basic loss benefits payable by the insurer by reason of the election of the owner or operator to provide substitute security.

The regulations of the Insurance Department implementing this section, 31 Pa. Code § 66.53, further provide:

(b) Insurers providing basic loss benefits and tort liability coverage shall make available an option to have Basic Loss Benefits Coverage pay only those amounts not paid by a program, group, contract, or other arrangement which provides security for either of the following:

(1) Professional medical treatment and care.

[ 290 Pa. Super. Page 32]

(2) Work loss coverage for the insured. A named insured who elects one or both such options shall be afforded an appropriately reduced premium in accordance with the rates filed with the Insurance Commissioner.


(1) Basic loss benefit insurers may require the named insured to sign a sworn affidavit certifying the existence of such coverage and reasonable information as to the extent of such coverage. Insurers may also require the named insured to give reasonable notice of termination of such coverage to permit proper rating of coverage under this section. If no named insured has such coverage in effect at the time an accident occurs and the named insured has not previously notified the insurer, a $250 deductible for professional medical treatment and care, or a two week waiting period for work loss, or both, as appropriate, shall apply, but only against the named insured.

The memorandum of law attached to appellee's motion for summary judgment includes exhibits that indicate that appellant's father, the policyholder, had chosen the option provided by § 203(b) and had received a reduction in premium as mandated by § 203(c).*fn3

However, appellant's complaint does not indicate appellant's relationship to James Zepp, nor whether appellant

[ 290 Pa. Super. Page 33]

    was a passenger or a driver, nor whether the automobile named in the policy issued to James Zepp was involved in the accident. Although appellee's motion for summary judgment alleges that James Zepp is appellant's father, and this is admitted by the answer, nothing of record establishes whether appellant was a member of his father's household or could be considered a "named insured" under the terms of the policy issued to his father. Also, while appellee's motion for summary judgment and the lower court's opinion both assume that James Zepp did not have the required collateral insurance in force, neither is that fact established of record.*fn4

It is therefore apparent that the unresolved issues of fact regarding the amount of appellant's medical expenses and whether appellee properly rejected appellant's claim may not be avoided by the calculation resorted to by the lower court.


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