NO. 774 PHILADELPHIA, 1980, Appeal from the Judgment of the Court of Common Pleas, Civil Action-Law, of Lancaster County, at No. 100 March Term, 1978.
Alvin B. Lewis, Jr., Lancaster, for appellant.
Richard L. Kearns, Harrisburg, for Royal, appellee.
Anthony Schimaneck, Lancaster, for Adams, et al., appellees.
Hester, Cavanaugh and Van der Voort, JJ. Hester, J., files a dissenting statement.
[ 309 Pa. Super. Page 235]
This appeal is another in a long series of appeals involving the Pennsylvania No-Fault Motor Vehicle Insurance Act, 40 P.S. 1009.101, et seq. (Hereafter referred to as the No-Fault Act). The instant appeal raises a very novel question: does a No-Fault policy remain in effect after the listed insured vehicle is no longer owned by the named insured and he has failed to make the required premium payments. To properly frame this issue, it is first necessary to gain an insight into the factual development of this case.
Kenneth Adams, a minor, co-owned with his father (Mr. Adams) a Chevrolet, which he sold on March 17, 1977. His insurance carrier was so notified. Subsequently, Adams purchased a 1969 Fiat,*fn1 his mother Marion Adams (Mrs. Adams) was listed as co-owner; and he acquired insurance through the Gross Agency. The initial payment was tendered and accepted. The Automobile Insurance Plan assigned this policy to Royal Indemnity; the policy period was from May 9, 1977 to May 9, 1978. The premium installments due on July 9, 1977, August 9, 1977, and September 9, 1977, were never paid. In August 1977, Adams sold his
[ 309 Pa. Super. Page 236]
Fiat; he did not advise either the Gross Agency or Royal Indemnity of such sale. On September 26, 1977, Adams was injured while riding as a passenger in a vehicle operated by Peter Hellinger. The Hellinger vehicle, as well as two owned by Mr. and Mrs. Adams were insured by Aetna Life and Casualty Insurance Company (hereafter referred to as Aetna).
The day after the accident, Royal Indemnity informed Adams that it was canceling his policy with Royal Indemnity, effective October 12, 1977. On January 4, 1978, Royal sent a premium amendment notice to the Adams; the notice also stated that the policy had been cancelled October 12, 1977. Marion Adams sent a check to Royal for the amount due which was accepted and cashed. Royal later refunded the sum explaining it had been accepted in error. While investigating Mrs. Adams claim on behalf of her son, Kenneth Adams, Aetna discovered the existence of the Royal Indemnity policy. The September 26, 1978 accident came to Royal Indemnity's attention by way of the Gross Agency when such agency learned of it while dealing through another agency. Thereafter Marion Adams, prompted by inquiries from Royal Indemnity filed a claim on her son's behalf, with Royal Indemnity. Royal Indemnity denied the claim and petitioned for a declaratory judgment to determine which insurer should pay Adams' basic loss benefits. The lower court found for Royal Indemnity and against Aetna and this appeal followed.
Section 204 of the Act, 40 P.S. § 1009.204 states:
(a) Applicable Security -- The security for the payment of basic loss benefits applicable to an injury to:
(2) an insured is the security under which the victim or deceased victim is insured;
An insured is defined by § 1009.103 as
(A) an individual identified by name as an insured in a contract of basic loss insurance complying with this act; and
[ 309 Pa. Super. Page 237]
(B) a spouse or other relative of a named insured, a minor in the custody of a named insured, and a minor in the custody of a relative of the named insured if --
(i) not identified by name as an insured in any other contract of basic restoration insurance complying with this Act; and
(ii) in residence in the same household with a named insured.
When the above is applied to the parties at hand, the following situation results, Aetna as insurer of Mr. and Mrs. Adams is also insurer of Kenneth Adams, unless he is the identified named insured in another policy, which he was if the Royal Indemnity policy was in effect on September 26, 1977. The issue we must decide is straightforward: was the Royal Indemnity policy in effect on September 26, 1977, however the resolution of the issue is elusive. The lower court found that the fact that the insured vehicle was no longer owned by the insured was controlling and held that the Royal Indemnity Policy, was no longer in effect.
Appellant-Aetna views the current controversy as being two fold:
I. Does the sale of the motor vehicle named in a no-fault insurance policy automatically terminate the whole policy?
II. May a no-fault insurance policy be terminated by the company during its stated term without giving notice to the insured in accordance with the policy and statutory provisions?
The No-Fault Act does not address itself to the problem at hand. However in resolving this matter we must keep in mind the purposes of No-Fault. Section 1009.102(b) provides:
Therefore, it is hereby declared to be the policy of the General Assembly to establish at reasonable cost to the purchaser of insurance, a Statewide system of prompt
[ 309 Pa. Super. Page 238]
and adequate basic loss benefits for motor vehicle accident victims and the survivors of deceased victims.
"Victim" is then defined as an individual who suffers an injury arising from the maintenance or use of a motor vehicle, § 1009.103.
Looking to the policy between Royal Indemnity and Adams we find that the policy contains three different coverages. Part A, liability coverage reads:
We will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident. We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted.
"Covered person" as used in this Part means:
1. You or any family member for the ownership, maintenance or use of ...