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MCCLAY v. REYNOSO

May 15, 1986

ANDREW J. McCLAY and MARJORIE J. McCLAY, individually and in their own right, and ANDREW J. McCLAY, Administrator of the Estate of BARBARA L. McCLAY
v.
JUAN FRANCISCO REYNOSO, a/k/a FRANK REYNOSO and KEMPER GROUP, d/b/a FEDERAL kEMPER INSURANCE COMPANY



The opinion of the court was delivered by: BECHTLE

 Presently before the court are cross-motions for summary judgment. For the reasons stated herein, defendant/garnishee Kemper Group, d/b/a Federal Kemper Insurance Company's ("Kemper") motion will be granted and plaintiffs' motion will be denied.

 FACTS

 In the early morning hours of October 16, 1982, a 1979 Opel automobile was traveling south on Finland Road in West Rockhill Township, Bucks County, Pennsylvania, when it went off the highway and hit a tree. The car had two occupants, Barbara L. McClay ("McClay") and Juan Francisco Reynoso ("Reynoso"). McClay was killed in the accident. Reynoso survived.

 The parents of McClay, on their own behalf, and McClay's father, Andrew McClay, as administrator of the estate of McClay, brought a lawsuit for wrongful death against Reynoso on October 12, 1984. Kemper provided a defense for Reynoso. *fn1" The principle issue in this trial was whether Reynoso or McClay was driving the Opel at the time of the accident. On the one hand, Reynoso contended that he was the passenger and McClay was the driver. At the scene of the accident Reynoso told Investigating Police Officer William McGlinchey and Chief of Police Frederick Crean, Jr. ("Crean") that McClay was the driver. The following day at the police station Reynoso restated to Crean that McClay was the driver. These statements were included in police reports. Again, on March 4, 1985, Reynoso told Kemper, which had assumed the defense of the lawsuit against Reynoso, that McClay was driving at the time of the accident. The March 4, 1985 statement was taped with Reynoso's permission. Again, at his deposition on March 17, 1985, and at trial in September, 1985, Reynoso maintained that McClay was the driver of the car.

 The case was tried before a jury in September, 1985, and on October 1, 1985, the jury, finding that Reynoso was the driver and was negligent, rendered a verdict and judgment for plaintiffs. The judgment was molded to a total sum of $ 266,290.29. On November 4, 1985, plaintiffs filed a writ of execution and interrogatories on Kemper. By filing these documents plaintiffs initiated this lawsuit against Kemper for breach of its duty of good faith.

 Plaintiffs' position is that Kemper did not investigate, consider, and settle plaintiffs' claim in good faith. Kemper was contacted several times by plaintiffs' attorneys to settle the claim against Reynoso. In particular, Robert Rosen, Esquire ("Rosen") contacted Kemper by telephone and letter on August 29, 1983, September 23, 1983, and October 14, 1983. On each of those occasions Rosen made demand for full payment of the policy limits on the uninsured motorist coverage and the full wage loss. Kemper did not respond to any of these offers until March 7, 1985, when Kemper offered to settle the case against Reynoso for $ 15,000.00, the amount of the full wage loss policy limits.

 The court does not know the extent of Kemper's effort to find Reynoso between the time of the accident and March 4, 1985, when Kemper took the recorded statement. The court believes that Reynoso would not have been easy to find as the record suggests that Reynoso did not seem to have a stable residence. Nevertheless, the court will assume for purposes of Kemper's motion that Kemper did not make a serious attempt to locate Reynoso until March, 1985.

 Kemper, moving for summary judgment, argues that under Pennsylvania law the duty of good faith extends only between the insurance company and the insured. Here, the insurance policy issued by Kemper only covered the Opel. Under the policy, if McClay was driving, she was covered by the policy under the uninsured motorist provision. If Reynoso was driving, he was a permissive user and was covered as an additional insured. Kemper asserts that since Reynoso was the insured and since Reynoso has consistently maintained that he was driving, Reynoso could not now sue Kemper for breach of good faith. As a result, according to Kemper, plaintiffs, who stand in the shoes of Reynoso as equitable subrogees, cannot maintain an action against Kemper for breach of good faith.

 DISCUSSION

 A motion for summary judgment must be granted if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

 Pennsylvania recognizes a claim for bad faith against insurance companies. Cowden v. Aetna Casualty & Surety Co., 389 Pa. 459, 134 A.2d 223 (1957). Underlying the bad faith claim is the principle that, arising from the insurance contract, there is a contractual duty between the insurer and the insured to act in good faith. Gray v. Nationwide Mutual Insurance Co., 422 Pa. 500, 223 A.2d 8 (1966).

 Recently the United States Court of Appeals for the Third Circuit declared that in Pennsylvania the duty of good faith is between only the insured and the insurer. Puritan Insurance Co. v. Canadian Universal Insurance Co., 775 F.2d 76 (3d Cir. 1985). In that case the insured bore no risk of liability. The risk was carried by the insured's primary insurer and the insured's excess insurer. The primary insurer and the insured wanted to try the case. The excess insurer, who bore the risk of the lion's share of liability, wanted to settle the case. The case was tried and the jury awarded plaintiff $ 1,413,152.25. The case was later settled for $ 1,350,000.00. The excess insurer was, thus, liable for $ 850,000.00. Subsequently, the excess insurer ...


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