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GERMANTOWN SAVINGS BANK v. CITY PHILADELPHIA (07/07/86)

COMMONWEALTH COURT OF PENNSYLVANIA


decided: July 7, 1986.

GERMANTOWN SAVINGS BANK, APPELLANT
v.
CITY OF PHILADELPHIA, APPELLEE. I.C.S. CORPORATION, APPELLANT V. CITY OF PHILADELPHIA, APPELLEE

Appeals from the Orders of the Court of Common Pleas of Philadelphia County, in cases of Germantown Savings Bank v. City of Philadelphia, No. 5803 May Term, 1983 and I.C.S. Corporation v. City of Philadelphia, No. 897 September Term, 1982.

COUNSEL

Stephen A. Cozen, with him, Vincent R. McGuinnes, Jr., Miles A. Jellinek and Michael P. Meehan, Cozen, Begier & O'Connor, for appellants.

Denise D. Colliers, Deputy City Solicitor, with her, Barbara W. Mather, City Solicitor, for appellee.

President Judge Crumlish, Jr., Judges Rogers, Craig, MacPhail, Doyle, Barry and Colins. Opinion by Judge MacPhail.

Author: Macphail

[ 98 Pa. Commw. Page 510]

The sole issue presented for our disposition in these consolidated appeals is whether Section 8553(d) of the Political Subdivision Tort Claims Act (Act), 42 Pa. C.S. § 8553(d) is unconstitutional as violative of equal protection. For the reasons which follow, we hold that Section 8553(d) of the Act is constitutional.

The facts are not in dispute. I.C.S. Corporation and Germantown Savings Bank (Appellants) brought separate subrogation actions against the City of Philadelphia (City) alleging that the City's negligence in inspecting and maintaining certain fire hydrants caused the hydrants to rupture and destroy Appellants' property.*fn1

[ 98 Pa. Commw. Page 511]

The trial court determined that the City was not liable for any damages to the extent Appellants were compensated for their injuries by insurance. The court further held that the insurance companies had no right to subrogation, quoting Aetna Casualty and Surety Co. v. Borough of Hamburg, 22 Pa. D. & C. 3d 454, 458 (1982): "the political subdivision's liability for damages is statutorily limited and therefore it is not obligated to pay plaintiff's insured. Certainly, plaintiff's right under subrogation rises no higher than the right of its insured." Trial court opinion at 2-3.*fn2

Section 8553 of the Act provides, in pertinent part:

§ 8553. Limitations on damages

(a) General rule. -- Actions for which damages are limited by reference to this subchapter shall be limited as set forth in this section.

(c) Types of losses recognized. -- Damages shall be recoverable only for:

(6) Property losses.

[ 98 Pa. Commw. Page 512]

(d) Insurance benefits. -- If a claimant receives or is entitled to receive benefits under a policy of insurance other than a life insurance policy as a result of losses for which damages are recoverable under subsection (c), the amount of such benefits shall be deducted from the amount of damages which would otherwise be recoverable by such claimant.

It is Appellants' position that Section 8553(d) of the Act violates the equal protection clauses of the Pennsylvania and United States Constitutions by unlawfully discriminating between classes of litigants and tortfeasors. Appellants argue that it is unlawful, and thereby unconstitutional, for plaintiffs-against-the government whose losses are privately insured to be treated in one way, while those plaintiffs-against-the government who do not have insurance are treated in another.*fn3

Preliminarily, we note that "one bears a heavy burden when he seeks to establish that a statute is constitutionally defective. Legislation will survive such an attack absent a showing that it ' clearly, palpably, and plainly violates the Constitution,'. . . and any uncertainty must

[ 98 Pa. Commw. Page 513]

    be resolved in favor of its validity." Lyles v. City of Philadelphia, 88 Pa. Commonwealth Ct. 509, 512, 490 A.2d 936, 939 (1985) (quoting Daly v. Hemphill, 411 Pa. 263, 271, 191 A.2d 835, 850 (1963) (emphasis in original)). Our Supreme Court has held that it is not per se violative of the equal protection clause for the Commonwealth to treat different classes in different ways. Singer v. Sheppard, 464 Pa. 387, 402, 346 A.2d 897, 904-905 (1975) (footnotes omitted):

Our inquiry, however, cannot conclude with the discovery of unequal treatment. . . . Except where an invidious discrimination against a suspected class is at issue or a fundamental right burdened, 'a legislative classification must be sustained unless it is "patently arbitrary" and bears no rational relationship to a legitimate governmental interest.' Frontiero v. Richardson, 411 U.S. 677, 683, 93 S.Ct. 1764, 1768, 36 L.Ed 2d 583 (1973).

We must determine the appropriate standard of judicial review to be applied in reviewing this equal protection challenge. There are three different types of legislative classifications calling for three different analyses:

The highest level, known as strict scrutiny, applies to legislative classifications infringing upon fundamental rights, such as free speech, and to those which are inherently suspect because they inordinately burden a group of citizens traditionally victimized by discrimination, for instance racial minorities. . . . Under this scrutiny, a classification will not pass constitutional muster unless it is necessary to advance a compelling state interest. . . . The next level, termed middle-level or intermediate scrutiny, applies to classifications affecting less fundamental rights,

[ 98 Pa. Commw. Page 514]

    such as commercial speech, and to classifications which are not quite so suspect, such as gender. . . . When this test applies, a classification must serve an important government interest and be substantially related to the achievement of that interest. . . . The third level, employing the least scrutiny, is the rational relationship test. It applies to all other legislative classifications, for example those implicating economic rights. This minimal scrutiny upholds classifications unless they are patently arbitrary and lack any rational relationship to a legitimate government interest.

Lyles, 88 Pa. Commonwealth Ct. at 515-16, 490 A.2d at 940-41 (citations omitted).

Appellants argue that they have been denied the fundamental right of access to the courts and that strict scrutiny applies, or, at the very least, intermediate scrutiny. We disagree. Strict scrutiny applies only if the right infringed upon derives from the Constitution, Plyler v. Doe, 457 U.S. 202 (1982). Our state Supreme Court has held that there is no fundamental right to sue the Commonwealth or its political subdivisions under either the United States or Pennsylvania Constitutions. James v. Southeastern Pennsylvania Transportation Authority, 505 Pa. 137, 477 A.2d 1302 (1984); Carroll v. County of York, 496 Pa. 363, 437 A.2d 394 (1981). Since the restriction imposed by Section 8553(d) of the Act does not create a suspect classification nor infringe upon a fundamental right, strict scrutiny is inappropriate.

Whether intermediate scrutiny is appropriate depends upon whether an important interest has been affected by the classification, and whether sensitive, though not suspect, classifications have been made. James. In James, the plaintiff-appellee claimed that the notice provisions of the Metropolitan Transportation Authorities

[ 98 Pa. Commw. Page 515]

Act*fn4 violated his equal protection rights because if he did not comply with the notice provisions, he would be unable to bring his suit against the Commonwealth. The court made the following observations:

Although it may be argued that James' liberty is not affected by this classification, since he was at liberty to sue the Commonwealth had he complied with the notice requirement, it is, nevertheless true that James' important interest in access to the courts to sue the Commonwealth in cases where the Commonwealth has consented to suit, has been restricted. Superior Court, therefore, was correct in determining that an intermediate or heightened scrutiny standard of review is appropriate.

James, 505 Pa. at 146-47, 477 A.2d at 1306. Appellants insist that their "important interest" in access to the courts has been restricted by Section 8553(d) of the Act. Appellants herein, however, are not denied access to the courts by Section 8553(d) of the Act -- they are deprived only of the economic right to "full" compensation, i.e., subrogation.*fn5 The appropriate level of scrutiny under the equal protection clause to be applied to the matter herein, therefore, is the rational relationship test. See Lyles.

[ 98 Pa. Commw. Page 516]

We now turn to the relationship between the purpose behind the Act and the classes created and objected to. The Act provides political subdivisions, in this case the City, with immunity from suits except for those injuries resulting from eight separately described causes, and limits the extent of the political subdivision's liability when one of the eight exceptions applies. As noted in a prior decision of this Court, the purpose of the Act was "to stabilize the political subdivision's ability to obtain insurance coverage by defining the risks to be covered." Robson v. Penn Hills School District, 63 Pa. Commonwealth Ct. 250, 255, 437 A.2d 1273, 1276 (1981). In assessing a similar equal protection challenge to the Sovereign Immunity Act,*fn6 we noted that:

A balance must be struck between unlimited potential liability and the need for fiscal security. Full monetary responsibility for the tortious conduct of [the Commonwealth's] agencies and employees involves the risk of an intolerable tax burden. . . . The legislature legitimately may take steps to preserve sufficient public funds to guarantee that the government will be able to continue to provide those services which it believes benefits the citizenry.

Lyles, 88 Pa. Commonwealth Ct. at 517, 490 A.2d at 941, quoting Picariello v. Commonwealth, 54 Pa. Commonwealth Ct. 252, 257, 421 A.2d 477, 480 (1980). The limit on awards recoverable by claimants*fn7 against political subdivisions assures "that the Commonwealth will not be required to process and defend various litigation

[ 98 Pa. Commw. Page 517]

    brought against it in areas where risk management is totally uncertain. . . ." Carroll, 496 Pa. at 369, 437 A.2d at 397, quoting the Report of the Joint State Government Commission on Sovereign Immunity, May 1978 at 10.*fn8

In sum, Section 8553(d) of the Act requires a plaintiff who is compensated for injuries from insurance companies to deduct this amount of compensation from the amount of compensation he would otherwise be entitled to recover in his claim asserted against the political subdivision. We hold that classifying plaintiffs who receive insurance benefits differently from those plaintiffs who will not receive insurance benefits is rationally related to the legitimate government interest in clearly defining the extent to which a political subdivision is at financial risk.*fn9 We conclude that Section 8553(d) of the Act is not violative of equal protection.

[ 98 Pa. Commw. Page 518]

Order

The order of the Court of Common Pleas of Philadelphia County in the above-captioned matter is hereby affirmed and the case remanded to the Court of Common Pleas of Philadelphia County for further proceedings.

Jurisdiction relinquished.

Disposition

Orders affirmed. Case remanded to Court of Common Pleas of Philadelphia County.


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