Appeal from the Order of Superior Court, dated December 21, 1984, at No. 456 Harrisburg 1983, Reversing the Orders of the Court of Common Pleas, Dauphin County, dated September 20, 1983 and November 9, 1983 at No. 3992 S. 1981., 337 Pa. Superior Ct. 123,
Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Hutchinson, J., concurs in the result. Flaherty and Zappala, JJ., file dissenting opinions.
The issue presented by this appeal is whether Appellant, John Tonkovic, III, is bound by an exclusionary clause in an insurance contract, where such clause was unilaterally inserted by Appellee, State Farm Mutual Automobile Insurance Company, subsequent to Appellant's application and premium payment being accepted by Appellee, through its agent, for disability insurance coverage without any exclusion; and where such exclusion was neither explained to, nor accepted by, the Appellant.
The present controversy arose under the following facts: In July of 1979, Appellant applied for an insurance policy providing disability coverage offered by Appellee. It is undisputed that Appellant applied for coverage that would enable him to make his mortgage payments in the event of his injury, without regard to where such injury might occur, or whether Appellant might be eligible for worker's compensation benefits. The insurance agent from whom Appellant purchased the policy testified on cross-examination:
Q. When he [Appellant] came in to see you . . . you knew why he wanted disability insurance, isn't that true?
A. When he came in, he stated to me that he wanted disability insurance for the mortgage on his home.
Q. The mortgage on his home, and when you filled out the original application, it was with the understanding that you were applying for insurance that
would cover him whether or not he was eligible for workmen's compensation benefits, isn't that true?
A. That's correct. (N.T., pp. 85, 86.)
It is also undisputed that at the time of application for the policy, the Appellee's agent explained the significance of occupational classifications only in terms of premium costs, not scope of coverage. The agent so testified:
Q. Now it's true also, that you never told him [Appellant] the effects of the various classifications at that time, except that if you were classified as a Class 2 rather than something else, it would cost him less money, isn't that true?
A. That's correct, we were applying as Class 2.
Q. So that if you later told him that his classification had been changed, that would only mean to him that it would cost him a different amount of money, isn't that true?
A. That's correct. (N.T., p. 86).
Appellant was injured on the job on October 15, 1979, and received workers' compensation benefits. He filed a claim for disability benefits with Appellee and this claim was denied. Appellee explained that it had issued to Appellant a policy which classified Appellant as a Class 3 and specifically excluded coverage for injuries incurred in the work place for which workers' compensation benefits were available. Appellant had never seen this policy nor had Appellee ever communicated to Appellant that the coverage he had ordered and paid for had not been furnished.
Appellant instituted an action in assumpsit to recover benefits claimed pursuant to the coverage he had purchased.
At trial, Appellant testified that he never received the written policy and presented substantial evidence to support his claim. Appellant also averred that he was never advised of the variation between the policy for which he applied and that which was issued containing the exclusion. Appellee's agent testified that he delivered a copy of the amended
contract to Appellant's home on Potatoe Valley Road on August 23, 1979, and introduced a receipt signed by Appellant and bearing the date of August 23, 1979. The agent also testified that he went over the policy with Appellant on August 23, 1979, and "went into" the modifications and restrictions in the policy. However, when asked whether he could specifically recall telling Appellant that if he were hurt on the job and could receive worker's compensation benefits, that Appellant would not be eligible for benefits under the policy, he replied:
A. No, I did not state that -- what you just stated.
A. I went over the exclusions in the policy with him which include workmen's compensation. (N.T., p. 87).
Both Appellant and his wife contradicted that testimony by showing that they did not purchase the home to which the agent claimed he delivered the policy, nor live in it until mid-September of 1979. Further, although Appellant identified the signature on the receipt as his own, he denied any recollection of signing the receipt or receiving a copy of the policy at that, or any other, time. Following the conclusion of testimony, when the case was submitted to the jury, the trial judge charged the jury as follows:
This is what the cases have said: the burden is upon the insurer, that would be State Farm, it would be the burden upon the insurer to establish the insured's, this would be Mr. Tonkovic, awareness and understanding of the exclusions. So, even though the initial burden in this case is with the plaintiff and it stays with the plaintiff, indeed, there is a burden upon the insurance company in this case to prove to you by a preponderance of the evidence, that Mr. Tonkovic was aware and understood the exclusion that existed here . . . .
The question that is before you is the one single and unique issue: was this policy which was completed by State Farm Insurance Company, was it then presented to Mr. ...