filed: May 11, 1984.
PETER FLAMINI, APPELLANT,
GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION
No. 2630 PHILADELPHIA, 1982, Appeal from the Order of the Court of Common Pleas, Civil Division, of Delaware County, No. 80-17491.
John M. Kenney, Media, for appellant.
Roger J. Harrington, Philadelphia, for appellee.
Cavanaugh, Montemuro and Hester, JJ.
[ 328 Pa. Super. Page 408]
This is an appeal from a Judgment and Order of the Court of Common Pleas, Delaware County, Pennsylvania, which modified an arbitration panel's award to appellant based on a fleet vehicle policy of insurance issued by appellee, General Accident Fire and Life Assurance Corporation (hereinafter, General Accident) to appellant's employer, Upper Darby Township. The issue before us is whether an employee can cumulate or "stack" the uninsured motorist coverage under his employer's fleet vehicle insurance policy.
The facts are undisputed and are as follows. On May 11, 1978, appellant was employed as a police officer for Upper Darby Township, Delaware County, Pennsylvania. On this date, while on duty and seated in a police vehicle owned by the Township, appellant sustained bodily injuries when the vehicle in which he was seated was struck by a hit and run
[ 328 Pa. Super. Page 409]
vehicle.*fn1 At the time of the accident, appellee General Accident was the insurance carrier for the fleet of vehicles owned by Upper Darby Township and used by its police department.
The insurance policy in question is a single policy covering 175 vehicles. The policy provides uninsured motorist coverage with limits of liability of "fifteen thousand dollars each person/thirty thousand dollars each accident". The limits of liability section provides:
III. LIMITS OF LIABILITY
Regardless of the number of (1) persons or organizations who are insureds under this policy, (2) persons who sustain bodily injury, (3) claims made or suits brought on account of bodily injury, or (4) highway vehicles to which this policy applies,
(a) The limit of liability stated in the declarations as applicable to "each person" is the limit of the company's liability for all damages because of bodily injury sustained by one person as the result of any one accident and, subject to the above provision respecting "each person", the limit of liability stated in the declarations as applicable to "each accident" is the total limit of the company's liability for all damages because of bodily injury sustained by two or more persons as the result of any one accident.
Upper Darby Township paid a premium for this uninsured motorist coverage of $4.00 for each vehicle for an annual total of $760.00 for the fleet of 175 vehicles.*fn2
Pursuant to its interpretation of the policy, General Accident offered appellant the amount of $15,000.00. This amount reflected General Accident's belief that this was the maximum benefit due under the uninsured motorist provision of its contract with Upper Darby Township. Appellant refused to accept this offer in full settlement of his claim,
[ 328 Pa. Super. Page 410]
contending instead that he was entitled to cumulate or "stack" the uninsured motorist coverage of each of the 175 vehicles under the fleet policy. As a result of the impasse, appellant requested arbitration by the American Arbitration Association, pursuant to the following paragraph contained in the subject policy:
If any person making claim hereunder and the company do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured highway vehicle because of bodily injury to the insured, or do not agree as to the amount of payment which may be owing under this insurance, then, upon written demand of either, the matter or matters upon which such person and the company do not agree shall be settled by arbitration, which shall be conducted in accordance with the rules of the American Arbitration Association unless other means of conducting the arbitration are agreed to between the insured and the company, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Such person and the company each agree to consider itself bound and to be bound by any award made by the arbitrators pursuant to this insurance.
On January 25, 1980, General Accident filed a Complaint in Equity in the Court of Common Pleas of Philadelphia County, seeking an injunction to stop the proposed arbitration. In its complaint, General Accident contended that the arbitration proceedings were unnecessary because its outstanding offer of $15,000.00 was the extent of its obligation under the policy and the maximum which the arbitrators could award under the circumstances. Appellant filed preliminary objections to the complaint raising the question of venue and citing the arbitration clause as the exclusive remedy for resolving the dispute. By an order of February 6, 1980, the Honorable Harry A. Takiff denied General Accident's request for injunctive relief and ordered the
[ 328 Pa. Super. Page 411]
parties to proceed "to arbitration of American Arbitration Association Case No. 1420001280J."
General Accident did not file an appeal from Judge Takiff's order. Instead, General Accident filed another Complaint in Equity seeking a mandatory injunction that the arbitration of appellant's claim proceed under the Arbitration Act of 1927*fn3 then in effect. Appellant filed an answer to General Accident's complaint requesting that it be dismissed and alleging that the issues raised in it had been finally litigated before Judge Takiff. The lower court, Judge Doty, dismissed General Accident's complaint and in its opinion explained that "this court will not undertake to assume control over a matter which was originally heard by another judge of this jurisdiction." Although there was no extensive discussion, Judge Doty supported his decision by reference to the doctrine of res judicata and the policy against forum or judge shopping. However, no decision on the question whether the arbitration was to be governed by the rules of common law or by the Arbitration Act of 1927 was reached.*fn4
[ 328 Pa. Super. Page 412]
On September 17, 1980, a hearing was held before a three-member arbitration panel pursuant to the rules of the American Arbitration Association. On October 29, 1980, the arbitration panel awarded appellant $175,000.00, the total amount of appellant's actual loss. The panel permitted appellant to "stack" the uninsured motorist coverage of $15,000.00 per person per accident available under the fleet policy and multiply that amount by the 175 vehicles owned by Upper Darby Township and covered under the policy, limited however, to appellant's actual loss. Upon its consideration of appellant's petition to confirm the award, the lower court modified the amount of the award to $15,000.00, since it found an error of law committed by the panel in permitting appellant to "stack" the uninsured motorist coverage of his employer's fleet policy. This appeal followed.
Preliminarily, appellant contends that the lower court erred in finding the arbitration in question subject to the Arbitration Act of 1927, 5 P.S. § 161 et seq.*fn5 Appellant argues that the award was rendered at common law with all its incidents of formality of award and narrow power of court review. Runewicz v. Keystone Insurance Co., 476 Pa. 456,
[ 328 Pa. Super. Page 413383]
A.2d 189 (1978); Harwitz v. Adams, 406 Pa. 539, 178 A.2d 617 (1962).*fn6
The lower court ruled that the arbitration was governed by the Arbitration Act of 1927 based on § 16 of the Act which provides:
State and Municipal Contracts
The provisions of this act shall apply to any written contract to which the Commonwealth of Pennsylvania, or any agency or subdivision thereof, or any municipal corporation or political division of the Commonwealth shall be a party. (Emphasis added) 5 P.S. § 176.*fn7
Pursuant to subsection (d) of § 11 of the Act which permits the court to modify or correct an award found to be against the law,*fn8 the lower court modified the arbitration award from $175,000.00 to $15,000.00 since it found the "stacking" of coverage in the circumstances presented to be against the law of Pennsylvania.
In construing § 16 of the Arbitration Act (5 P.S. § 176), our courts have consistently held that in contracts
[ 328 Pa. Super. Page 414]
containing arbitration clauses to which the Commonwealth, its agencies, municipal corporations or political divisions are parties, the application of the Act is mandatory and non-waivable. See Pennsylvania Turnpike Commission v. Sanders & Thomas, Inc., 461 Pa. 420, 336 A.2d 609 (1975); John A. Robbins Co. v. Airportels, Inc., 418 Pa. 257, 210 A.2d 896 (1965); Acchione v. Commonwealth, 347 Pa. 562, 32 A.2d 764 (1943); Seaboard Surety Co. v. Commonwealth, 345 Pa. 147, 27 A.2d 27 (1942); Philadelphia Housing Authority v. Turner Construction Co., 343 Pa. 512, 23 A.2d 426 (1942); J.M. Davis Co. v. Shaler Township, 332 Pa. 134, 2 A.2d 708 (1938).
Appellant concedes that while private parties may contract for common law arbitration, the Commonwealth, its agencies, municipal corporations or political divisions may not do so. See Pennsylvania Turnpike Commission v. Sanders & Thomas, Inc., supra; John A. Robbins Co. v. Airportels, Inc., supra. However, appellant submits that the purpose of § 16 of the Arbitration Act of 1927 is to prevent the Commonwealth, its agencies, municipal corporations and political divisions from limiting their rights on appeal in matters affecting their important interests which first are submitted to arbitration for resolution. He urges Upper Darby Township has no interest in the outcome of the case since it is not a party to the litigation; consequently, the application of the Act in the circumstances of this case would not further the purported purpose of § 16. Appellant's argument has a certain plausability to it but we are convinced that the Act applies in this case.
[ 328 Pa. Super. Page 415]
The insurance policy in question was entered into between General Accident and Upper Darby Township, a political division of the Commonwealth. The language of § 16 only requires Upper Darby Township to be a party to the contract in order for the Act of 1927 to apply. See Pennsylvania Turnpike Commission v. Sanders & Thomas, supra; John A. Robbins Co. v. Airportels, Inc., supra; Acchione v. Commonwealth, supra; Seaboard Surety Co. v. Commonwealth, supra; Philadelphia Housing Authority Page 415} v. Turner Construction Co., supra; J.M. Davis Co. v. Shaler Township, supra. This fact alone is sufficient to convince us that the Act applies. However, there are further reasons.
Appellant, injured while occupying a Township police vehicle covered under the subject policy, derives his claim only from his status as a third party beneficiary of the uninsured motorist provision in the policy. Although appellant is a "person making claim" under the arbitration provision, he is not a party to the contract and has sacrificed nothing to secure his contract right. As such, appellant's contract right in the policy is subject to any limitations imposed by law or inherent in the policy. See, Restatement (Second) Contracts § 309 comment a, c, § 313 (1981); See also Clayton v. National Electric Products Corporation, 421 Pa. 375, 219 A.2d 595 (1966); Rivers v. Delaware Valley Mutual Casualty Co., 196 Pa. Super. 475, 175 A.2d 87 (1961); Miller v. Travelers Insurance Company, 143 Pa. Super. 270, 17 A.2d 907 (1941).
Furthermore, language of the arbitration provision in the subject policy calling for arbitration to be conducted in accord with the rules of the American Arbitration Association and lacking specific reference to the Arbitration Act of 1927 has been found to mean that the arbitration was at common law in cases involving contracting private parties. See Runewicz v. Keystone Insurance Co., supra; Wingate Construction Co. v. Schweizer Dipple, Inc., 419 Pa. 74, 213 A.2d 275 (1965). The language in the arbitration provision in question in those cases also provided that the parties were to be bound by the award, which is inconsistent with the broad judicial review permitted under the Arbitration Act of 1927. Runewicz v. Keystone Insurance Co., supra; Wingate Construction Co. v. Schweizer Dipple, Inc., supra. On the other hand, our courts have consistently held that the imperative language of § 16 mandates its application when the Commonwealth, its agencies, municipal corporations or political divisions are parties to the contract, even though the subject arbitration provision contains language
[ 328 Pa. Super. Page 416]
to the effect that the award is final and does not make reference to any statutory remedy. See Acchione v. Commonwealth, supra; Philadelphia Housing Authority v. Turner Construction Co., supra; Seaboard Surety Co. v. Commonwealth, supra; J.M. Davis Co. v. Shaler Township, supra.
While it is true that these cases involve the Commonwealth or one of its political divisions, as a party to both the litigation and to the contract containing the arbitration provision brought into question, § 16 only requires that the Commonwealth or its political divisions be a party to the contract. Moreover, if we assume as correct appellant's construction of the purpose of § 16 i.e., to limit the Commonwealth and its political divisions from contracting away the right of broad judicial review in matters affecting their interests (for our own examination of the legislative history of the Act of 1927 fails to reveal such express purpose) we believe Upper Darby Township has an important interest in the outcome of the case even though it is not a party to the litigation.
Upper Darby Township paid a total premium of $760.00 for coverage of its 175 vehicles. The coverage on the fleet policy provides uninsured motorist coverage for each vehicle in the amount of "15 thousand per person, 30 thousand per accident." "Stacking" of the coverage under appellant's theory would in effect push the contractual limits of uninsured motorist insurance coverage up to the amounts of 2.6 million dollars per person/ 5.25 million dollars per accident. Such increased exposure to risk by General Accident could lead to greater expenditure of public monies by the Township, assuming, not unreasonably, that the increased exposure to risk would be passed onto the governmental unit in the form of greater insurance costs. It would be reasonable to find that the legislature intended to preserve a broad scope of judicial review for just the situation presented here.
Thus, we are constrained to conclude that under the Arbitration Act of 1927, a political division of the Commonwealth
[ 328 Pa. Super. Page 417]
is not permitted to contract for common law arbitration. See, e.g., Pennsylvania Turnpike Commission v. Sanders & Thomas, supra. It may not do so indirectly, or for that matter inadvertently. We therefore hold that the lower court did not err in applying the Arbitration Act of 1927 since it had before it a public contract containing a provision to arbitrate.
The issue squarely before us is whether an employee who was injured while occupying a vehicle owned by his employer and who was insured under the employer's fleet insurance policy may cumulate or "stack" the uninsured motorist coverage on each of the insured vehicles. The lower court ruled that appellant could not and therefore modified the initial award of $175,000.00 to $15,000.00.
The identical question was recently addressed by the Pennsylvania Supreme Court in Utica Mutual Insurance Co. v. Contrisciane, 504 Pa. 328, 473 A.2d 1005 (1984). Therein, the decedent was killed while operating an automobile owned by his employer. The executrix of the decedent's estate filed an action for uninsured motorist benefits against Utica Mutual Insurance Company (hereinafter Utica), the motor vehicle insurer for the decedent's employer. The fleet policy issued by Utica insured fifteen vehicles with limits of liability of $15,000.00 each person/$30,000.00 each accident. The executrix sought to cumulate, or "stack," the uninsured motorist benefits under the multiple coverages. The lower court permitted cumulation of coverage under the fleet policy, and this Court affirmed. Utica Mutual Insurance Co. v. Contrisciane, 312 Pa. Super. 549, 459 A.2d 358 (1983).
The Pennsylvania Supreme Court reversed, holding that a person who is insured only because of his status as an occupant in a vehicle insured under a fleet policy may not stack coverages. Both the policy in Utica and in the case sub judice contained the standard provision approved for use by the Pennsylvania Insurance Commissioner in policies in Pennsylvania, which specifically provided the following regarding "Persons Insured" under the policy:
[ 328 Pa. Super. Page 418]
Each of the following is an insured under this insurance to the extent set forth below:
(a) the named insured and any designated insured and, while residents of the same household, the spouse and relatives of either;
(b) any other person while occupying an insured highway vehicle; and
(c) any person, with respect to damages he is entitled to recover because of bodily injury to which this insurance applies sustained by an insured under (a) or (b) above.
The insurance applies separately with respect to each insured, except with respect to the limits of the company's liability.
The Supreme Court categorized the above classifications as "class one", "class two", and "class three" coverage.
In denying multiple coverage, that Court stated:
decedent's entitlement to coverage was predicated on his occupation of the vehicle at the time of the accident: a "class two" type of coverage. A claimant whose coverage is solely a result of membership in this class has not paid premiums, nor is he a specifically intended beneficiary of the policy. Thus, he has no recognizable contractual relationship with the insurer, there is no basis upon which he can reasonably expect multiple coverage. (footnote omitted)
Id., 312 Pa. Superior Ct. at 552, 459 A.2d at 361. The Supreme Court found no basis upon which to allow the decedent's estate to stack the insurance limits applicable to the other vehicles. Recovery under the Utica policy was limited to the $15,000.00 coverage applicable to the vehicle being operated by the decedent at the time of the accident.
The Utica decision serves as binding precedent for the case at bar. Appellant did not pay premiums on the fleet vehicle policy insurance under which he seeks to cumulate coverages, nor did he have any recognizable contractual relationship with the insurer. The policy was issued
[ 328 Pa. Super. Page 419]
to and paid for by his employer, Upper Darby Township. Appellant was not a named insured or a designated insured of the policy; rather, his entitlement to uninsured motorist benefits under the subject policy rested upon "class two" coverage. Consequently, just as the decedent's estate in Utica was denied the right to cumulate the uninsured motorist limits for the fleet policy, we can find no basis to permit appellant to stack the multiple coverages in the policy challenged herein.
Judgment holding General Accident liable and modifying appellant's award to $15,000.00 is affirmed.