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Government Employees Insurance Co. v. Benton

argued: August 16, 1988.

GOVERNMENT EMPLOYEES INSURANCE COMPANY
v.
BENTON, ERNEST, APPELLANT IN NO. 88-1175; BENTON, ERNEST, APPELLANT IN NO. 88-1176 V. GOVERNMENT EMPLOYEES INSURANCE COMPANY



Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civil Nos. 87-2014, 87-2177.

Stapleton and Mansmann, Circuit Judges, and Fisher, District Judge.*fn*

Author: Mansmann

Opinion OF THE COURT

MANSMANN, Circuit Judge.

At issue is whether the Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa. Cons. Stat. Ann. § 1701 et seq., (Purdon 1984)(effective October 1, 1984), which mandates underinsured motorist coverage, affects policies of insurance applied for prior to the effective date yet not actually received by the insured until sometime thereafter. We must interpret the meaning of the statute's usage of the words "delivery", "issued", and "issued for delivery" in the context of delineating the scope of coverage of an automobile insurance policy.

Relying upon procedures outlined under the Pennsylvania Automobile Insurance Plan and principles of statutory construction, we conclude that the insurer issued its policy for delivery prior to the effective date of the Financial Responsibility Law. The policy's terms are therefore controlled by the new law's predecessors, the now-repealed No-Fault Motor Vehicle Insurance Act, Pa. Stat. Ann. tit. 40, § 1009.101 et seq. (Purdon 1974), and the unrepealed Uninsured Motorist Act, Pa. Stat. Ann. tit. 40, § 2000 et seq. (Purdon 1963) which do not provide for underinsurance coverage. The district court order granting summary judgment in favor of the insurance company, denying underinsured motorist insurance coverage to the insured, will be affirmed.

I.

On September 28, 1984, Jean Brisco, in conjunction with the purchase of a motor vehicle, applied to the Pennsylvania Automobile Insurance Plan for automobile insurance through a broker. The Automobile Insurance Plan, also known as the assigned risk plan, was created pursuant to § 1009.108 of the No-Fault Act to assure that individuals who were unable to obtain insurance through conventional means would be provided the necessary coverage and benefits afforded by that statute.*fn1

The application for insurance which Brisco completed included the following language:

Coverage under this evidence of automobile insurance is effective from the effective date and time stated thereon. This evidence of automobile insurance will terminate immediately upon the issuance of the policy applied for. . . .

At the bottom of the application, above the insurer broker's and Brisco's signatures, was the stated effective date of the application -- September 28, 1984, at 9:00 a.m. On this date, the No-Fault Act was still in operation.

Sometime in the next two weeks Brisco received a policy and an insurance card from the insurer designated under the Automobile Insurance Plan to provide her with coverage, Government Employees Insurance Company ("GEICO"). Brisco later discarded both the policy and the ID card. It is undisputed that the written terms of the policy did not contain underinsured motorist coverage.

On November 8, 1984, Brisco's father, Ernest Benton, while a pedestrian, was struck by an automobile.*fn2 The operator of the vehicle which struck Benton was insured by Erie Insurance Company. To compensate for the injuries sustained in the accident, Benton received a $15,000.00 settlement in release for his claim against both the driver and Erie Insurance Company.

Finding this settlement amount inadequate, Benton filed a motion in a Pennsylvania state court to compel appointment of an arbitrator and to compel arbitration to determine his rights, specifically, his entitlement to underinsured motorist coverage under the insurance policy issued by GEICO. The case was removed to the federal district court where GEICO petitioned for a declaratory judgment that it had no obligation to provide underinsurance motorist coverage to Benton. In its petition GEICO claimed that underinsured motorist coverage was not required by the No-Fault Act and was not provided for in the policy issued to Brisco. The issues were joined and to a certain extent discovery proceeded.*fn3

On February 19, 1988, the district court entered orders granting summary judgment in favor of GEICO and dismissing Benton's petition to compel appointment of an arbitrator and to compel arbitration. The district court, holding that Pennsylvania law governed the case, summarily decided that the Financial Responsibility Law was not applicable to the policy issued by GEICO to Brisco. Benton has appealed and we now have jurisdiction pursuant to 28 U.S.C. § 1291.

Since the basic facts are uncontested, we exercise plenary review over the legal conclusions supporting the district court's grant of summary judgment in favor of GEICO. Adams v. Gould, Inc., 739 F.2d 858 (3d Cir. 1984). The specific legal question involved is one of statutory construction, i.e., what are the meanings of the words "delivered", "issued", and "issued for delivery" as utilized in the Financial Responsibility Law? Questions of statutory construction also invoke our power of plenary review. Chrysler Corporation v. First National Bank and Trust Company of Washington, 746 F.2d 200 (3d Cir. 1984).

II.

On September 28, 1984, when Brisco applied to the Automobile Insurance Plan, the Pennsylvania Motor Vehicle No-Fault Insurance Act was in effect. At that time, under the Uninsured Motorist Act, all insurance policies issued in Pennsylvania were required to include uninsured motorist coverage. Pa. Stat. Ann. tit. 40, § 2000(a). Underinsured motorist coverage, however, was not mandated. Votedian v. General Accident Fire and Life Assurance Corp., 330 Pa. Super. 13, 478 A.2d 1324 (1984). Benton concedes that if the No-Fault Act is applicable to the present policy, then no underinsurance motorist coverage is due to him.

On October 1, 1984, the Financial Responsibility Law became the law in Pennsylvania. Underinsured motorist coverage was now required. 75 Pa. Cons. Stat. Ann. § 1731(a). The Supplemental Provisions of the Financial Responsibility Law provide that the law applies to insurance policies issued or renewed after the October 1, 1984 effective date. Section 11 of the Supplemental Provisions of the Act of February 12, 1984, P.L. 53, No. 12, 1984 Pennsylvania Legislative Service 129; 75 Pa. Cons. Stat. Ann. § 1701, note. Accord Brack v. Allstate Ins. Co., 666 F. Supp. 703 (M.D. Pa. 1986).

The primary basis of Benton's appeal is that underinsured motorist coverage occurs here by operation of law. To justify entitlement to this coverage, Benton relies on § 1731(a) of the Financial Responsibility Law. This section states that after October 1, 1984, "no motor vehicle liability insurance policy shall be delivered or issued for delivery in this Commonwealth without underinsured motorist coverage." According to Benton, because Brisco did not receive physical possession of the policy from GEICO until after the effective date of the Financial Responsibility Law, the GEICO policy must provide the now-required underinsured motorist coverage.

Discerning which of the Pennsylvania statutes dictates the coverage afforded by the policy here may involve a two-step analysis. First, we must determine when coverage under the GEICO policy became effective. If coverage became effective after October 1, then clearly the Financial Responsibility Law would govern. If, however, the policy was in effect prior to October 1, 1984 and governed by the No-Fault Act, we must decide whether the actual receipt of the policy after October 1 transforms the policy into one subject to the provisions of the Financial Responsibility Law.

Since Brisco's application for insurance was initiated through the assigned risk plan, we begin by examination of the Pennsylvania Automobile Insurance Plan and the role it plays in determining the effective date of coverage of the insurance policy.

Ill.

Section 12 of the Pennsylvania Automobile Insurance Plan outlines the procedures through which insurance companies participating in the assigned risk plan provide coverage to those ...


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