ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, D.C. Civil No. 87-5271
Gibbons, Chief Judge, Higginbotham, Circuit Judge, and Roth, District Judge.*fn*
Metropolitan Property and Liability Insurance Company appeals from an order dismissing its complaint for declaratory and injunctive relief against Phyllis A. Streets, administratrix of the estate of Martin Streets, with respect to Mrs. Streets' claim for uninsured motorist benefits for Martin, her deceased son. Metropolitan sought a declaration (1) that the residency requirements of the policy were not met at the time of the accident, and (2) that the limits of liability on the policy, if residency requirements were met, are $15,000 per person and $30,000 per accident. In Mrs. Streets' claim, she contended that the residency requirements were satisfied, and that the limit of liability is $300,000. She moved pursuant to Fed. R. Civ. P. 12(b) to dismiss Metropolitan's complaint on the ground that a policy provision required arbitration of both claims.*fn1 The district court judge to which the case was assigned held that both disputed issues were arbitrable, and dismissed the complaint. Other judges in the Eastern District of Pennsylvania, dealing with identical arbitration clauses in Metropolitan's automobile insurance policies, have reached the opposite conclusion.*fn2 We conclude that the court erred in holding that the dispute over policy limits and residency are arbitrable, and remand for a judicial resolution of those issues.
Martin Streets was fatally injured on March 26, 1985 when a motorcycle on which he was a passenger collided with a motor vehicle. Mrs. Streets claims that neither vehicle and neither driver was insured. At the time of the accident Mrs. Streets was insured under a Metropolitan policy containing an uninsured motorist endorsement as follows:
We will pay bodily injury damages, caused by an accident, which you and any relative are legally entitled to collect from the owner or driver of . . . an uninsured highway vehicle. . . . The amount of damages we will pay is subject to the provisions of our limits of liability.
The term "relative" is defined in the policy as follows:
"Relative" means, if resident in the same household as the named insured:
(b) any person related to the named insured by blood, marriage or adoption, including a minor in custody of the named insured, spouse or such related person, whether or not temporarily residing elsewhere.
Martin Streets is Mrs. Streets' son. Metropolitan claims, however, that at the time of the accident he was not a minor in her custody and was not a resident of the same household with her.
The coverage sheet of the policy issued to Mrs. Streets reflects the minimum uninsured motorist policy limits permitted under the Pennsylvania Motor Vehicle Responsibility Law: $15,000 per person and $30,000 per accident. The policy was a renewal policy, and she paid her renewal premium for the relevant policy period. The original policy contained a $300,000 limit for liability coverage and $15,000/$30,000 in uninsured motorist coverage. The renewal policy had identical limits. Mrs. Streets contends, however, that because of sections 1731 and 1734 of the Pennsylvania Motor Vehicle Financial Responsibility Act, which were enacted about one month after her original policy was issued, Metropolitan was obliged to unilaterally increase her uninsured motorist coverage to an amount equal to her liability coverage.*fn3 Metropolitan, on the other ...