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ROBERT C. NAGLE v. ALLSTATE INSURANCE COMPANY (06/02/86)

SUPERIOR COURT OF PENNSYLVANIA


submitted: June 2, 1986.

ROBERT C. NAGLE, APPELLANT,
v.
ALLSTATE INSURANCE COMPANY

Appeal from the Order of the Court of Common Pleas, Civil Division, of Berks County at No. 5237 Equity 1984.

COUNSEL

Donald F. Smith, Jr., Reading, for appellant.

James M. Lillis, Reading, for appellee.

Wickersham, Johnson and Watkins, JJ.

Author: Wickersham

[ 358 Pa. Super. Page 84]

In July of 1976 plaintiff-appellant Robert C. Nagle was injured in an accident when he was attempting to attach an automobile to a tow truck. The automobile was struck from behind by a vehicle operated by one Jeffrey T. Shealer, an employee of Tecnad Enterprises. The vehicle operated by Shealer was owned by Larry J. Weller, but was allegedly being operated without permission.

Appellant, who was at the time a member of his father's household (Charles F. Nagle) requested uninsured motorist benefits from appellee Allstate Insurance Company, which insured Charles's vehicles.*fn1 Allstate refused to submit to arbitration or to appoint an arbitrator, and denied any uninsured motorist benefits to appellant. The lower court, by the Honorable W. Richard Eshelman, denied a petition to compel Allstate to submit appellant's claim for uninsured motorist benefits to arbitration.*fn2 This appeal followed, and the issue is stated as:

III. Whether Robert C. Nagle is entitled to have his claim for uninsured motorist benefits arbitrated as

[ 358 Pa. Super. Page 86]

    provided by the insurance contract despite his having entered into settlement without the consent of the uninsured motorist insurer?

Brief for Appellant at 3.

In his memorandum opinion dated March 12, 1986 Judge Eshelman gives us the further facts:

Plaintiff responded by commencing the within action in equity by writ of summons against defendant. Plaintiff then filed a petition to compel arbitration. Defendant alleged in its motion to dismiss plaintiff's petition, which accompanied defendant's answer to the petition, that settlements were entered into by plaintiff with Weller and Tecnad without defendant's consent thereby precluding uninsured motorist coverage under the Uninsured Motorist Act, 40 P.C.S.A. Sec. 2000(e)(2). In plaintiff's answer and new matter in response to defendant's motion to dismiss, plaintiff admitted that he entered into agreements of settlement for one thousand dollars each with Weller and Tecnad after naming them as co-defendants with Shealer in an action of trespass arising from this accident (i.e., No. 127 August 1978, Berks County), and that plaintiff had prosecuted the action in trespass to judgment against Shealer for two hundred thousand dollars. Defendant had neither consented to the action in trespass against Shealer, Weller and Tecnad nor to plaintiff's settlement of claims against Weller and Tecnad.

After argument and consideration of briefs filed, the court denied plaintiff's petition to compel arbitration and granted defendant's motion to dismiss plaintiff's petition. Upon praecipe by plaintiff, judgment was entered in the within action based on the final order entered January 2, 1986. Plaintiff argues that the court committed error by failing to compel arbitration because the insurance contract, which is the basis of this action for uninsured motorist benefits, provides that a disagreement as to the right to receive benefits is to be submitted to arbitration.

Lower ct. op. at 2.

Judge Eshelman then concluded that:

[ 358 Pa. Super. Page 87]

The uninsured motorist benefits coverage required by the Uninsured Motorist Act does not apply to "bodily injury sustained by the insured with respect to which the insured or his representative shall, without the written consent of the insurer, make any settlement with or prosecute to judgment any action against any person who may be legally liable therefor." 40 P.C.S.A. Sec. 2000(e)(2). The Pennsylvania Superior Court has held that this section precludes recovery of uninsured motorist benefits from the insurer if the insured enters into a settlement without the insurer's consent. Cotton v. Insurance Company of North America, [344 Pa. Super. 602,] 497 A.2d 254 (1985). Admittedly the Cotton case did not involve a request for arbitration but rather a claim under the Pennsylvania Assigned Claims Plan. However, the legal principle involved in Cotton is equally applicable to the present case. It is undisputed that the plaintiff entered into settlements with Weller and Tecnad, who may have been legally liable for bodily injuries sustained by plaintiff. "The conclusion is therefore inescapable that [plaintiff's] settlement precluded them from receiving '[t]he coverage required by [the Uninsured Motorist Act].'" Id., 344 Pa. Superior Ct. at 604, 497 A.2d at 255.

By virtue of his settlements with Weller and Tecnad, and prosecution of his claim against Shealer to judgment, plaintiff was precluded from receiving coverage under the uninsured motorist clause of his policy due to 40 P.C.S.A. Sec. 2000(e)(2). Therefore there was no issue to submit to arbitration. Accordingly plaintiff's petition to compel arbitration was properly denied.

Lower ct. op. at 3-4.

In Cotton v. Insurance Co. of North America, 344 Pa. Super. 602, 497 A.2d 254 (1985), speaking through former President Judge Spaeth, we said:

This appeal is from an order granting summary judgment. Appellants were uninsured passengers in an uninsured motor vehicle when it collided with an insured

[ 358 Pa. Super. Page 88]

    motor vehicle. Upon application to the Pennsylvania Assigned Claims Plan, appellee was designated appellants' assigned obligor. Subsequently, without appellee's knowledge, appellants entered into a settlement agreement with the driver of the insured vehicle. The trial court held that under the Uninsured Motorist Act, 40 P.S. § 2000(e)(2), appellants' settlement precluded their recovery of uninsured motorist benefits from appellee. We agree, and therefore affirm.

The Uninsured Motorist Act provides in part:

(e) The coverage required by this section does not apply:

(2) To bodily injury sustained by the insured with respect to which the insured or his representative shall, without the written consent of the insurer, make any settlement with or prosecute to judgment any action against any person who may be legally liable therefor. 40 P.S. § 2000(e)(2).

Appellants were to have received uninsured motorist benefits from appellee. Thus appellee was to have provided "[t]he coverage required by this section." It is undisputed that appellants entered into a settlement with an insured driver, i.e., with a "person who may [have been] legally liable" for the "bodily injure[ies] sustained by the insured[s]." The conclusion is therefore inescapable that appellants' settlement precluded them from receiving "[t]he coverage required by [the Uninsured Motorist Act]." See 1 Pa.C.S. § 1921(b) ("When the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under pretext of pursuing its spirit."). See also In re Fox's Estate, 494 Pa. 584, 431 A.2d 1008 (1981); Salvado v. Prudential Property and Casualty Insurance Co., 287 Pa. Super. 304, 430 A.2d 297 (1981).

Appellants argue that despite the plain words of the statute, they are entitled to receive uninsured motorist coverage because, in their view, the statute is meant to

[ 358 Pa. Super. Page 89]

    preclude settlements with uninsured motorists only. Appellants reason that such an interpretation would not prejudice appellee's subrogation rights, and they rely upon cases that have held that only settlements with uninsured motorists are precluded.

In its opinion, the trial court, per DOTY, J., noted that the purpose of section 2000(e)(2) is to protect the subrogation rights of the insurer. We agree and are unable to understand appellants' argument that the construction they urge would not prejudice appellee. If appellee had paid appellants uninsured motorist benefits, it would then have been entitled to seek recovery of the amounts so paid from the drivers involved in the accident. In attempting that recovery it would no doubt have been confronted by the insured motorist's refusal to pay anything more on the ground that as a result of a joint tortfeasor release between him and appellants, he had been "forever discharge[d]" "from any and all actions, causes of action, claims, demands . . . ." arising out of the accident. While it is true that appellee might still have sued the uninsured motorist, we may assume that its chance of recovering from the uninsured motorist would be less than its chance of recovering from the insured motorist.

Id., 344 Pa. Superior Ct. at 603-04, 497 A.2d at 254-55.

We agree with Judge Eshelman that Cotton*fn3 controls the instant case. While it appears that appellant's

[ 358 Pa. Super. Page 90]

    claim for uninsured motorist benefits must ultimately fail, he still contends that the lower court should have referred his claim to arbitration. Cotton did not involve a request for arbitration and is thus of little benefit to our determination of whether arbitration should have been compelled.

Appellant's argument seems to be bolstered by our recent decision in McGinley v. Allstate Insurance Co., 352 Pa. Super. 139, 507 A.2d 420 (1986). In that case, the insureds were injured in a motor vehicle accident and wished to make a claim pursuant to the uninsured motorist coverage of their policy with Allstate. They filed a petition for appointment of an arbitrator, which was denied by the lower court. Our court reversed, holding that the lower court's denial of the insured's petition to name an arbitrator was improper following the showing of a valid contract of insurance between the parties which contained an agreement to arbitrate the application or construction of the uninsured motorist clause.

We held in McGinley that the question of whether an arbitrator should have been appointed was controlled by 42

[ 358 Pa. Super. Page 91]

Pa.C.S. § 7304.*fn4 "[Section 7304] is clear. Uninsured motorist claims, if agreement cannot be reached by the parties, must be submitted to statutory arbitration . . . . When the parties have agreed to resolve all disputes by arbitration, arbitration is the procedure which must be followed." Id., 352 Pa. Superior Ct. at 143, 507 A.2d at 422, quoting Cunningham v. Prudential, 340 Pa. Super. 130, 134-35, 489 A.2d 875, 878 (1985).

The arbitration clause in McGinley and the arbitration clause in the instant case differ in one important aspect, however. Instantly, the arbitration clause states in pertinent part:

If We Cannot Agree

If we or you don't agree on your right to receive any damages or the amount, then upon the written request of either the disagreement will be settled by arbitration.

Arbitration will take place under the rules of the American Arbitration Association unless we or you object. Then, you'll select one arbitrator and we will select another. The two arbitrators will select a third. If they can't agree on a third arbitrator within 30 days, the judge of the court of record in the county of jurisdiction where arbitration is pending will appoint the third arbitrator.

[ 358 Pa. Super. Page 92]

    is a matter for arbitration); National Grange Mutual Insurance Co. v. Kuhn, 428 Pa. 179, 236 A.2d 758 (1968) (all disputes arising under uninsured motorist coverage are covered by arbitration agreement and should be determined by arbitration); White v. Concord Mutual Insurance Co., 296 Pa. Super. 171, 442 A.2d 713 (1982), aff'd, 500 Pa. 103, 454 A.2d 982 (1982) (questions under uninsured motorist clause with an arbitration provision are within exclusive jurisdiction of arbitrators); Reinhart v. State Automobile Insurance Association, 242 Pa. Super. 18, 363 A.2d 1138 (1976) (same); Webb v. United Services Automobile Association, 227 Pa. Super. 508, 323 A.2d 737 (1974) (same). Accordingly, we reverse the order of the court below.

Order reversed and case remanded for proceedings consistent with this opinion. Jurisdiction is relinquished.

Disposition

Order reversed and case remanded for proceedings consistent with this opinion. Jurisdiction is relinquished.


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