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decided: December 2, 1987.


Appeal from the Order of the Superior Court of January 16, 1986 and of March 31, 1986 at No. 506 Pittsburgh 1983, affirming the Order entered on February 17, 1983 in the Court of Common Pleas of Allegheny County, Pennsylvania Civil Division at No. GD 77-06055, Nix, C.j., and Larsen, Flaherty, McDermott, Zappala and Papadakos, JJ. Zappala, J., concurs in the result. Former Hutchinson, J., did not participate in the consideration or decision of this case.

Author: Larsen

[ 516 Pa. Page 577]


This appeal from a declaratory judgment raises the question of whether the appellant Erie Insurance Exchange (Erie), insurer under an automobile liability policy, or the appellee Transamerica Insurance Company (Transamerica), insurer under a homeowner's policy, has the duty to defend and to pay any damages recovered in the actions brought against Bobby Gilbert and Joyce Gilbert, his wife (herein-after Gilberts), the insured. The lawsuits against the Gilberts*fn1 arise out of a mishap involving a visitor's automobile unwittingly set in motion by Erin Gilbert, the 3 1/2 year old son of the Gilberts.*fn2 The Allegheny County Common Pleas Court held that the appellant, Erie, was solely responsible for coverage under the provisions of the automobile liability policy issued to the Gilberts. The Superior Court panel (Spaeth, P.J., Brosky and Olszewski, JJ., with Spaeth dissenting) affirmed the lower court order.*fn3 We disagree and, now reverse.

In this declaratory judgment action, the parties agreed to the factual background that gave rise to the underlying lawsuits filed against the Gilberts. That factual background was presented to the lower court upon a stipulation of facts which established the following:

[ 516 Pa. Page 578]

On March 19, 1976, Landis Robinson, a life insurance agent in the employ of New York Life Insurance Company, Inc., drove to the home of the Gilberts located on Broadhead Street in the City of Pittsburgh. Ms. Robinson parked her automobile on Broadhead Street directly across from the Gilberts' residence. Broadhead Street is a hill and the Robinson vehicle was facing downhill.

Ms. Robinson was admitted to the Gilberts' home where she commenced a conversation with Joyce Gilbert. While Ms. Robinson and Mrs. Gilbert were talking, Ms. Robinson permitted Erin Gilbert to gain possession of the keys to her automobile. The youngster left the house, taking the car keys with him. Young Erin Gilbert apparently was able to enter into the unattended Robinson vehicle and somehow set the car in motion.*fn4 Once in motion the automobile rolled down Broadhead Street. The runaway vehicle struck two children as it travelled down the hill. One of the children (Ronald Craighead, Jr.) was injured by the vehicle; the other child (Kevin J. Robinson) was killed. Both parties in this appeal acknowledge that the incident occurred away from the premises of the Gilberts.

At the time of the accident the Gilberts owned an automobile which was insured under an automobile liability policy issued by the appellant, Erie. The Gilberts were also insured under a homeowner's policy issued by the appellee, Transamerica. Transamerica does not dispute that except for a policy exclusion relating to claims arising out of the use of motor vehicles, (set out infra.), there would be coverage under its policy.

Along with others, the Gilberts were sued by the parties who suffered damages because of the injuries and death that were a result of the vehicle set in motion by young Erin Gilbert. After the Gilberts executed a reservation of rights agreement, the appellant Erie caused appearances to be entered on their behalf in the lawsuits filed against them

[ 516 Pa. Page 579]

    and proceeded to defend each action. The appellee, Transamerica, refused to enter an appearance for the Gilberts and declined to participate in any way in the litigation.

In both the personal injury action and the death claim a settlement was negotiated on behalf of the Gilberts.*fn5 Erie takes the position that the entire cost of defense and the duty to pay the whole settlement sum in each action is the obligation of the appellee, Transamerica. Transamerica, on the other hand, argues that since the alleged injuries and damages arose out of the use of an automobile, the exclusion provisions of the homeowner's policy specifically exclude coverage thereunder.

The question of whether Erie, the automobile liability carrier, or Transamerica, the homeowner's carrier, is responsible for payment of the settlement sum and the cost of defending the suits against the Gilberts, necessarily begins with a consideration of the relevant provisions of the respective insurance policies. In the Erie policy, the pertinent provision is found in the "insuring agreements" and it provides as follows:

I. Coverage A -- Bodily Injury Liability: To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accidents and arising out of the ownership, maintenance or use of the automobile. (Emphasis supplied.)

In the Transamerica policy, the relevant language is contained in the policy exclusions and is as follows:

This policy does not apply:

     a. to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading ...

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