MEMORANDUM AND ORDER
The above captioned action arises out of an automobile accident which occurred on February 26, 1982. On that date, an automobile operated by Peter M. Yacomes, Jr., collided with an automobile driven by Samuel J. Yeich. In addition to the operator of the Yacomes vehicle, the Yacomes car contained five (5) passengers: Pamela E. Greenwood, Thea E. Sheidy, Andrew C. Lengel, David J. Beck and Stephanie Yacomes. The occupants of the Yacomes vehicle were all minors. Samuel J. Yeich was the sole occupant of the car he operated. As a result of the collision, Pamela E. Greenwood, Thea E. Sheidy and Andrew C. Lengel were killed. Stephanie Yacomes, Peter Yacomes, Jr., David Beck and Samuel Yeich sustained personal injuries.
Following the accident, five (5) civil actions were commenced in the Court of Common Pleas of Berks County. Samuel Yeich and his wife initiated suit against Peter Yacomes, Jr., and Peter Yacomes, Sr., individually and t/d/b/a Pete Yacomes Chevron and/or Pete's Chevron. Actions were brought against both Yacomeses and Samuel Yeich by four (4) of the five (5) passengers in the Yacomes vehicle, either in their own right or on behalf of their estates. These actions have since been settled and discontinued pursuant to a number of releases, the terms of which shall be discussed hereinafter.
At the time of the accident, Peter Yacomes, Sr., was the named insured of four (4) insurance policies he had purchased from Federal Kemper Insurance Company. Policy No. R942898 is described as a "personal automobile insurance policy". Policy No. TOR98569 is described as a "garage liability policy". Policy No. RY940233 is described as a "commercial automobile insurance policy". Policy No. UF369880 is described as a "homeowners insurance policy". The car which was operated by Peter Yacomes, Jr., a 1971 Chevrolet Monte Carlo, was "listed" as an insured vehicle under the personal automobile insurance policy.
Pursuant to its duty to defend the Yacomeses in the state court actions under the personal automobile policy, Federal Kemper investigated the case, retained counsel and otherwise provided a defense prior to settlement. The state court actions were thereafter settled according to the terms of the aforementioned releases. In consideration for the release of its insureds, Federal Kemper tendered the policy limits of the personal automobile policy, i.e., $300,000.00. The releases provided that the five (5) plaintiffs in the state court actions specifically reserved their rights to proceed against any coverage which might be provided by the commercial automobile, garage liability or homeowners policies and, in this sense, the releases were conditional.
Federal Kemper had, in fact, prior to the execution of these releases, commenced this action pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaration that it has no duty to defend or indemnify Peter Yacomes, Sr., Peter Yacomes, Jr., or Sally Yacomes under the commercial automobile, garage liability or homeowners policies described above with regard to the injuries and deaths resulting from said automobile accident. The named defendants in this declaratory judgment action are: (1) Peter Yacomes, Sr., Peter Yacomes, Jr., and Sally Yacomes; (2) the named plaintiffs in the state court civil actions, Samuel and Alma Yeich, David J. Beck, Pamela E. Greenwood, Andrew C. Lengel and Stephanie Yacomes; and (3) Thea E. Sheidy, a passenger in the Yacomes vehicle, who was killed, but on whose behalf no state court civil action had been commenced at the time this suit was filed.
The matter was tried before this Court on May 7, 1986. The only factual dispute between the plaintiff and the defendants pertained to the nature and extent of communications between Peter Yacomes, Sr., and Michael Sisk, Federal Kemper's agent from whom Yacomes obtained his insurance. While Federal Kemper was the named plaintiff in this action, the parties properly proceeded on the premise that the defendants bore the burden of proof since it was their contention that additional coverage was provided by the commercial automobile policy and the garage liability policy.
The defendants do not dispute that, under the clear and unambiguous language of the commercial automobile and garage liability policies, Federal Kemper has no duty to defend or indemnify the Yacomeses. Rather, the defendants argue that this Court should reform the terms of these policies so as to, in essence, transform them into contracts providing the Yacomeses with coverage above and beyond that provided under the personal automobile policy, i.e., excess or umbrella coverage. The defendants advance three corollary arguments in support of their primary argument that this Court should rewrite the commercial automobile and garage liability policies.
First, the defendants argue that Michael Sisk, Federal Kemper's agent, erred when he unilaterally placed the 1971 Chevrolet Monte Carlo under the personal automobile policy as opposed to the commercial automobile policy. Peter Yacomes, Sr., testified during trial that he had simply conveyed to Sisk the make, model number, serial number and year of the car when he contacted Sisk to obtain coverage. He stated Sisk did not ask him and he did not tell Sisk whether he intended to use the automobile for pleasure, i.e., personal use, or for business purposes in connection with his garage operations. Peter Yacomes, Sr., also stated that he had, in fact, on occasions utilized the Monte Carlo in connection with his business to, e.g., pick up parts for automobiles he was servicing. It is undisputed that on the day of the accident, Peter Yacomes, Jr., was using the car strictly for personal reasons and was in no way performing any work for his father or in connection with the business. Michael Sisk testified that Peter Yacomes, Sr., had indeed discussed with him the manner in which the car would be used and that Yacomes had informed him that the car would be used mostly for personal purposes.
We conclude that we need not resolve the discrepancy between the testimony of these two men because we do not believe it creates an issue of fact material to our decision. Both the personal and commercial automobile policies contain identical per occurrence policy limits of $300,000.00. Thus, whether coverage was provided under the personal automobile policy or the commercial automobile policy is immaterial because under either policy Federal Kemper is legally obligated to indemnify the Yacomeses to the maximum limit of $300,000.00 per occurrence. Even assuming, arguendo, that Sisk negligently placed the Monte Carlo under the personal automobile policy instead of the commercial automobile policy, the result would be the same.
We find the defendants' argument in this regard to be unavailing.
Second, the defendants contend that this Court should reform the commercial automobile and garage liability policies in the manner described, i.e., as excess or umbrella coverage, based on Peter Yacomes, Sr.'s, "reasonable expectation" that such policies would provide additional coverage upon exhaustion of the limits of the personal automobile policy. We also find this argument to be without merit.
The "reasonable expectations" doctrine is but another in a line of theories certain courts have adopted to correct actual or perceived injustices resulting from the imbalance in bargaining power between the insurer and the insured and the fact that it is the insurer which drafts the standard insurance contract. The result of the application of any of these theories - unconscionability, contracts of adhesion or reasonable expectations - is the same, i.e., the creation of coverage where none had previously existed under the literal terms of the insurance contract. As initially conceived, the reasonable expectations doctrine was applied to specific terms of the policy. Thus, the doctrine was extremely similar, if not identical, to the ancient principle of the common law of contracts that the ambiguous terms of a contract were to be interpreted most strongly against the drafter, i.e., "contra proferentem ", Black's Law Dictionary, 5th Ed. Some would expand the concept of reasonable expectations even further so as to apply it to the entire transaction between the insurer and the insured rather than just a specific provision of the policy. Professor Keeton suggests such a result in the following statement:
First, as an ideal this principle incorporates the proposition that policy language will be construed as laymen would understand it and not according to the interpretation of sophisticated underwriters. Arguably that proposition should be regarded as a corollary of the principle of resolving ambiguities against the insurer. The principle of honoring reasonable expectations should be extended further, protecting the policyholder's expectations as long as they are objectively reasonable from the layman's point of view, in spite of the fact that had he made a painstaking study of the contract, he would have understood the limitation that defeats the expectation at issue.
Keeton, "Insurance Law Rights at Variance with Policy Provisions", 83 Harv. L Rev. 961, 967 (1970); see also, Anderson, "Reasonable Expectations and Insurance Contracts: What Should We Reasonably Expect from Judges?" For the Defense, April 1986, Vol. 28, No. 4, and authorities cited therein in which it is stated that the result of Keeton's proposal "is a transition from the use of reasonable expectations in interpretation of specific policy language to reasonable expectations based on the 'type' of policy purchased, and the status of the insured". In this case, the defendants seek to persuade us not that the doctrine of reasonable expectations should be applied to a specific term of the commercial automobile or garage liability policies, but rather that the concept should be applied to some nebulous conceptualization of the type of transaction which occurred between Peter Yacomes, Sr., and Federal Kemper, through its agent Michael Sisk.
We must look to the law of the State of Pennsylvania to determine whether its courts have embraced Keeton's theory since the jurisdiction of this Court is based upon the diversity of citizenship between the parties. The parties' primary dispute in this area is the proper interpretation to be given the Pennsylvania Supreme Court's decision in Standard Venetian Blind Co. v. American Empire Insurance, 503 Pa. 300, 469 A. 2d 563 (1983), which overruled the Pennsylvania Superior Court's decision in Hionis v. Northern Mutual Insurance Co., 230 Pa. Super. 511, 327 A. 2d 363 (1974). The Pennsylvania Superior Court in Hionis held that:
where a policy is written in unambiguous terms, the burden of establishing the applicability of the exclusion or limitation involves proof that the insured was aware of the exclusion and that the effect thereof was explained to him.