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Philadelphia Electric Co. v. Aetna Casualty & Surety Co.

October 5, 1984

PHILADELPHIA ELECTRIC COMPANY, APPELLANT,
v.
AETNA CASUALTY & SURETY CO.
AND
MCCLOSKEY & COMPANY
v.
ALEXANDER & ALEXANDER AND HARRY J. WATSON



On appeal from the Order of the Court of Common Pleas of Philadelphia County, Pennsylvania, November Term, 1977 No. 1526.

Wieand, Olszewski and Popovich, JJ.

The opinion of the court was delivered by: Olszewski, Judge

Argued July 10, 1984

Reargument Denied Dec. 17, 1984

OPINION

In this appeal we are called upon to determine whether the lower court erred in finding that the Philadelphia Electric Company's (PECO's) insurance claim was barred by its failure to properly notify its insurer, Aetna Casualty & Surety Company (Aetna), of the accident within a reasonable time.*fn1 Since we have determined that Aetna was on notice of the accident shortly after its occurrence, we therefore reverse.

The rather long and complex factual background of the case reveals that in January of 1964, McCloskey & Company (McCloskey) entered into a contract with the Pennsylvania Department of Transportation (PennDot) to construct a certain segment of Interstate I-95. Since a portion of the work to be performed involved PECO's facilities, PennDot required as a condition precedent to the contract, that McCloskey obtain liability insurance for and on behalf of PECO.

In order to fulfill this necessary requirement, McCloskey approached its regular insurance carrier, Aetna, and purchased a policy in which it and PECO were designated as the named insureds.*fn2

Shortly after obtaining coverage, McCloskey began construction on the interstate. On May 13, 1966, Herman Love, an employee of McCloskey, was severly injured when his jackhammer struck an underground conduit owned by PECO. As a result of this mishap, Mr. Love promptly instituted a worker's compensation claim with Aetna, McCloskey's worker's compensation carrier.

While this worker's compensation action was pending, Mr. Love also filed a personal injury action against PECO for damages sustained from the same mishap. At that time, PECO, unaware of the existence of the McCloskey-Aetna policy, did not notify Aetna of its responsibility to assume the defense of the matter. However, PECO did join McCloskey as a third-party defendant claiming indemnity for any damages owed Mr. Love on account of the accident. McCloskey thereafter promptly notified Aetna to defend the matter in its behalf pursuant to the McCloskey-Aetna policy.

Shortly before the trial was set to commence, PECO's claim department discovered that Aetna was responsible under the McCloskey-Aetna policy to defend the Love personal injury action in its behalf. In January, 1975, PECO therefore served a written notice requesting representation. Aetna refused to defend or accept any of the liability flowing from the accident, stating that PECO breached the insurance contract by failing to provide Aetna with timely notice of the accident.

In May of 1975, the Love trial was held after which judgment was entered solely against PECO in the amount of $250,000. Nearly two years later, PECO instituted an assumpsit action against Aetna alleging that Aetna breached its duty under the McCloskey-Aetna policy by not defending the Love matter on its behalf. PECO urged the court to order Aetna to indemnify it for the $250,000 Love judgment. The lower court, per Honorable Paul M. Chalfin, J., however refused PECO's request on the theory that PECO's late notice relieved Aetna of all responsibility under the policy. In his opinion, Judge Chalfin refused to find that Aetna was on constructive notice of the accident despite the fact that Aetna had participated in the third-party indemnity action against PECO.*fn3 The court subsequently entered its findings and judgment in favor of Aetna and against PECO.

After exceptions were dismissed, this appeal followed in which PECO argues that the lower court erred in refusing to find Aetna in constructive notice of the accident when Aetna had in fact: (1) handled the McCloskey-Love worker's compensation claim, and (2) been notified of the accident when it ...


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