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decided: October 17, 1988.


Appeal from Order of the Superior Court dated January 21, 1986 at No. 2811 Philadelphia 1984, Affirming the Order of the Court of Common Pleas of Philadelphia County dated October 9, 1984, at No. 1019 May Term, 1978. 354 Pa. Super. 622, 508 A.2d 337 (1986)


Allen L. Feingold, Philadelphia, for appellant.

Alan Greenberg, John Cannon, III, Philadelphia, for appellee.

Nix, C.j.,*fn* and Larsen, Flaherty, McDermott, Zappala, Papadakos, and Stout, JJ. Zappala, J., files a concurring opinion. Larsen, J., files a concurring and dissenting opinion. Flaherty, J., concurs in the result.

Author: Nix

[ 519 Pa. Page 423]


The appellants herein, who were co-plaintiffs in a tort action against a motorist who had become uninsured because of the insolvency of his liability carrier, seek reversal of an order by the trial court dismissing their lawsuit. The trial court predicated its order on the fact that the plaintiffs had received payments pursuant to the uninsured motorist coverage in the automobile insurance policy of one of their group. The court reached a legal conclusion that the settlement was such as would preclude the plaintiffs from obtaining any further recovery under The Pennsylvania Insurance Guaranty Association Act, and, for that reason, precluded them from proceeding against the alleged tortfeasor.

When the Superior Court, by a memorandum opinion, 354 Pa. Super. 622, 508 A.2d 335 affirmed the trial court's order, the appellants petitioned us for further review. We granted the petition because of an obvious need to address the narrow question of law actually involved.

[ 519 Pa. Page 424]

This case arose from an accident involving two automobiles, one a car owned and operated by a Mrs. Lois Bethea, and the other a vehicle owned and operated by a Mr. Delmus Forbes. With Mrs. Bethea in her car were several passengers. When the accident occurred, May 5, 1977, Mrs. Bethea was insured by Government Employees Insurance Company ("GEICO"); and Mr. Forbes was insured by Safeguard Mutual Insurance Company ("Safeguard").

In 1978, all of the persons who were in the Bethea vehicle at the time of the accident joined in a trespass action against Delmus Forbes, asserting that he was responsible for the accident. In that suit, filed in the Court of Common Pleas of Philadelphia County, each of the plaintiffs sought damages for personal injury. Lois Bethea also included a claim for damage to her car. While that action was pending, Mr. Forbes' liability insurer, Safeguard, was declared insolvent. The company was subsequently dissolved pursuant to an order of the Commonwealth Court, dated April 12, 1982.

In view of the insolvency and dissolution of Safeguard, the plaintiffs in the action against Forbes made claims against GEICO, under the uninsured motorist provision in Lois Bethea's policy with that company. GEICO eventually settled those claims, but for a total sum that was less than the applicable limits under Bethea's policy.

The insolvency of Safeguard brought into operation the provisions of The Pennsylvania Insurance Guaranty Association Act ("Insurance Guaranty Act"), Act of November 25, 1970, P.L. 716, as amended, 40 P.S. § 1701.101 et seq. That statute was enacted to give a measure of protection to policyholders and claimants who are faced with financial loss because of the insolvency of certain carriers of property and casualty insurance. Section 102(1) of the Act, 40 P.S. § 1701.102(1). To implement that purpose, the statute established the Pennsylvania Insurance Guaranty Association ("Association"), and charged it with the obligation of paying "covered claims" under property and casualty policies issued by insurers that become insolvent. Section 201

[ 519 Pa. Page 425]

    of the Act, 40 P.S. § 1701.201. The Association becomes a statutory insurer in place of the insolvent carrier to the extent of its obligation on covered claims. 40 P.S. § 1701.201(b)(1)(ii). In that connection, the Association has "all rights, duties, and obligations of the insolvent insurer as if that insurer had not become insolvent." Id.

The Association's duty to pay claims is, of course, subject to conditions, not the least of which is the requirement set forth in section 503(a) of the Act. That provision states the following:

Non-duplication of recovery

Any person having a claim against an insurer under any provision in an insurance policy other than a policy of an insolvent insurer which is also a covered claim, shall first be required to exhaust his right under such policy. Any amount payable on a covered claim under this act shall be reduced by the amount of any recovery under such insurance policy.

40 P.S. § 1701.503(a) (emphasis added).

In its general effect, the import of the first sentence in the above provision is clear: Even if a claim is one otherwise covered by the Insurance Guaranty Act, a person's right to obtain relief under the statute does not arise unless or until he has exhausted such rights as he has, with respect to the "covered claim," under an insurance policy other than the one issued by the insolvent. An obvious example of such a situation is where a person has been negligently injured in an automobile accident, and, being unable to obtain payment from the insolvent insurer of the tortfeasor, may look to the uninsured motorist provision in his own insurance policy or in some other applicable policy.

Because the Association statutorily succeeded to the role of insurer in place of the insolvent Safeguard, it also incurred the latter's duty of defending Delmus Forbes in the tort action against him. In the context of defending Forbes, the Association moved the trial court to order the case "discontinued and ended." The Association's argument in support of its motion began with the following

[ 519 Pa. Page 426]

    premise: that the plaintiffs, by settling with Lois Bethea's insurer for less than the policy limits of her uninsured motorist coverage, had failed to "exhaust" their rights under that policy, and thus, by force of the "exhaustion" requirement in section 503(a) of the Insurance Guaranty Act, they could not successfully pursue a claim under that statute. Based on that premise, the Association arrived at a conclusion that the plaintiffs lost the right to proceed further against defendant Delmus Forbes. The trial court embraced that reasoning and, accordingly, entered an order terminating the lawsuit. The Superior Court, affirming with a seven-line opinion, cited no authority for the result reached.

The appellants argue that their uninsured motorist settlement with GEICO, regardless of whatever legal effect it might have under the Insurance Guaranty Act, did not bar them from continuing with their tort action against Delmus Forbes. We agree.

It is axiomatic that, in a common law tort action, the tortfeasor is liable for all injury caused by his negligence or other unlawful conduct. E.g., Pavorsky v. Engels, 410 Pa. 100, 188 A.2d 731 (1963); Menarde v. Philadelphia Transportation Co., 376 Pa. 497, 103 A.2d 681 (1954); Offensend v. Atlantic Refining Co., 322 Pa. 399, 185 A. 745 (1936). It is also a fundamental, general principle that a plaintiff in such an action is entitled to compensation from the tortfeasor to the full extent of the injury sustained. E.g., Incollingo v. Ewing, 444 Pa. 299, 307, 282 A.2d 206, 228 (1971); Corcoran v. McNeal, 400 Pa. 14, 161 A.2d 367 (1960). It is clearly within the realm of possibility that Mr. Forbes, the alleged tortfeasor in the instant matter, injured the plaintiffs to an extent that exceeded the uninsured motorist coverage in the GEICO policy. Therefore, the plaintiffs' settlement under that policy cannot deprive them of the legal right to seek full compensation from the tortfeasor, even if the effort presents little or no prospect for

[ 519 Pa. Page 427]


With regard to the above point, the "Uninsured Motorist Act"*fn2 itself is instructive. Section 1(d) of that statute provides, in part, as follows:

In the event of payment to any person under the coverage required by this section, the insurer making such payment shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury for which such payment is made, including the proceeds recoverable from the assets of the insolvent insurer.*fn3

(Emphasis added.)

This statutory language is a clear indication that a person receiving payment pursuant to uninsured motorist coverage retains the right to proceed to judgment against the tortfeasor.

In view of what we have said, the trial court's order dismissing the plaintiffs' tort action was palpably erroneous. The Association's role in the case was strictly in terms of defending the alleged tortfeasor with respect to the claims against him; it ...

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