Appeal from the Order entered July 11, 1988 in the Court of Common Pleas of Lancaster County, Civil, at No. 1254 - 1987.
Peter J. Speaker, Harrisburg, for Donegal, appellant in No. 2147 and appellee in Nos. 2306 and 2348.
Maria Zulick, Verona, for Genway Corp., appellant in No. 2306 and appellee in Nos. 2147 and 2348.
Hugh M. Emory, Paoli, for The Pennsylvania Ins. Co., appellant in No. 2348 and appellee in Nos. 2147 and 2306.
Joseph Roda, Lancaster, for Long, appellee in Nos. 2147, 2306 and 2348.
Del Sole, Melinson and Hoffman, JJ.
[ 387 Pa. Super. Page 577]
Before us are three appeals arising from a declaratory judgment action commenced in the Court of Common Pleas of Lancaster County by the appellant in No. 2147 Philadelphia 1988, Donegal Mutual Insurance Company ("Donegal"). After all pleadings were filed, Donegal and defendants, Pennsylvania Insurance Guaranty Association ("PIGA") and, collectively, Genway Corporation, Jones Pontiac Company, and Jones Leasing Company ("Genway-Jones"), filed respective motions for summary judgment. Following oral argument, the trial court granted in part and denied in part the motions of Donegal and Genway-Jones and denied the motion of PIGA. It is from the trial court's order of July 11, 1988 disposing of these summary judgment motions that the instant appeals arise.
Donegal filed the declaratory judgment action to determine the obligations of the various parties and their insurers to provide insurance coverage or indemnification in connection with a motor vehicle accident. The accident resulted in the deaths of Lloyd E. Long and Joseph E. Hirst and serious personal injury to S. Kenneth Hertz, and is the subject of the civil action, Long v. Opel, No. 3340-1955, in the Court of Common Pleas of Lancaster County. In addition to Genway-Jones and PIGA, Donegal named as defendants to the declaratory judgment action, Lynn E.
[ 387 Pa. Super. Page 578]
Long, individually and as Administratrix of the Estate of Lloyd E. Long, deceased; S. Kenneth Hertz and Lisa Hertz, his wife; Cathleen C. Opel, Administratrix of the Estate of Joseph E. Hirst, deceased; J & J Electronics; Amos Myers; Elsie Myers, and the Bullfrog Inn, Inc.
The relevant facts are as follows. Joseph E. Hirst, deceased ("Hirst"), was one of two partners in a business known as J & J Electronics. Donegal issued an automobile insurance policy to the partnership and its partners effective November 8, 1984 to November 9, 1985. One clause of this policy provides in part: "For any covered auto [not owned by the insureds], the insurance provided by this policy is excess over any other collectible insurance."
On August 27, 1985, Hirst rented a car from appellee, Jones Leasing Company, pursuant to a written rental agreement. The car was owned by co-appellee, Genway Corporation, who in turn had purchased it from co-appellee, Jones Pontiac Company. Genway Corporation leased the car to Jones Leasing Company. The rental agreement provided in relevant part as follows:
1. In no event shall the vehicle be used, operated or driven . . . (e) by any person in violation of the motor vehicle code of the state in which such vehicle is then located, or (f) by any person while under the influence of alcohol or drugs . . . .
4. Lessor provides liability coverage for Customer . . . in accordance with the standard provisions of a Basic Automobile Liability Insurance Policy for bodily injury and property damage ($1,000,000 combined single limit for each occurrence) arising from the use of the Vehicle as permitted by this Rental Agreement. Customer being an insured under said policy agrees to comply with and be bound by all the terms, conditions and restrictions thereof which are hereby incorporated by reference herein and made a part of this Rental Agreement . . . . Said policy does not apply to any liability of Customer or the driver, or of the employer of either[,] with respect to bodily
[ 387 Pa. Super. Page 579]
injury, sickness, disease or death or damage to property caused directly or indirectly as the result of violation of this Rental Agreement. In the event that coverage is imposed, by operation of law, to the benefit of any person other than the Customer or any Authorized Operator described herein, then the limits of such coverage shall be the minimum requirements of the Financial Responsibility Law or other applicable statute of the state or other jurisdiction in which the accident occurred.
The Midland Insurance Company issued an automobile insurance policy to Genway Corporation with limits to One Million Dollars ($1,000,000) effective November 1, 1984 to November 1, 1985. An endorsement to this policy identified the named insured, in relevant part, as follows:
a. Genway Corporation, its licensees and any subsidiary companies as may now exist or as may hereafter be constituted.
b. Any lessees of such Company or Corporation but only to the extent that terms of any lease obligates Genway or its subsidiaries or licensees to provide such lessee such insurance as is afforded by the policy.
On August 31, 1985, four days after Hirst entered the rental agreement with Jones Leasing Company, the accident occurred which claimed the lives of Hirst and Mr. Long and which caused the injuries to Mr. Hertz. In the complaint filed in Long v. Opel, the plaintiffs, the Long estate and Mr. and Mrs. Hertz, allege that Hirst caused the accident and the resulting injuries while driving under the influence of alcohol.
By the time of the commencement of Long v. Opel and the filing of Donegal's declaratory judgment action, Midland Insurance Company had been declared insolvent by the Supreme Court of the State of New York. PIGA was therefore required to step in to back the Midland policy with Genway Corporation pursuant to the Pennsylvania Insurance Guaranty Association Act, 40 Pa.Stat.Ann. Section 1701.101 et seq. At issue, then, are the respective obligations
[ 387 Pa. Super. Page 580]
of Donegal, Genway-Jones,*fn1 and PIGA to provide coverage or indemnification to the Hirst Estate in the underlying civil action. With the basic facts not in dispute, Donegal, Genway-Jones, and PIGA filed motions for summary judgment.
Genway-Jones and PIGA deny that they owe coverage or indemnification to the Hirst Estate on the grounds that the liability of the Hirst Estate in Long v. Opel was caused by Hirst's operation of the rented vehicle while under the influence of alcohol in violation of the rental agreement. Donegal contends, however, that the clause in the rental agreement excluding insurance coverage when the vehicle is operated while under the influence of alcohol or drugs is void as against public policy, violative of the Motor Vehicle Financial Responsibility Law (75 Pa.Con.Stat.Ann. Section 1701 et seq.), and unconscionable. Donegal therefore argues that Genway-Jones is liable to provide up to One Million Dollars ($1,000,000) in coverage to the Hirst Estate in accordance with the rental agreement notwithstanding the exclusion clause. Donegal contends that Genway-Jones and PIGA are the primary insurers and Donegal the secondary insurer of the Hirst Estate in Long v. Opel, and Genway-Jones and PIGA contend that Donegal is the sole insurer against the liability of the estate. Genway-Jones also contends that even if the exclusion clause is stricken, it had satisfied its obligation to provide insurance coverage under the rental agreement by purchasing the Midland policy, and therefore the Hirst Estate has no further claim against it. PIGA concurs with this argument, and further asserts that if PIGA is found liable to the Hirst Estate because the exclusion clause is invalid and because Genway-Jones continues to be liable under the rental agreement,
[ 387 Pa. Super. Page 581]
PIGA is responsible only to provide the minimum financial requirements mandated by the Financial Responsibility Law. Even then, PIGA argues, Donegal is the primary insurer.
The trial court, after consideration of the parties' motions for summary judgment, held in pertinent part as follows:
that part of the rental agreement between Joseph E. Hirst, deceased, on one part and Defendants, Genway Corporation, Jones Pontiac Company, and Jones Leasing Company, on the other part, that purports to exclude the obligation of those Defendants to provide one million dollars ($1,000,000) in liability insurance coverage, if liability is caused directly or indirectly by operation of the vehicle while under the influence of alcohol or drugs, is against public policy and void;
that the Defendant, the Pennsylvania Insurance Guaranty Association, has the primary duty to indemnify the Estate of Joseph Hirst for the first three hundred thousand dollars ($300,000) in damages for which the Estate of Joseph E. Hirst may be held liable in the civil action [of Long v. Opel ], less the initial one hundred dollars ($100) in damages;*fn2
that the Plaintiff, Donegal Mutual Insurance Company, has the status of an excess insurer and it is obligated to indemnify the Estate of Joseph E. Hirst, pursuant to the Donegal policy, only after the Defendant, the Pennsylvania Insurance Guaranty Association, has first paid two hundred ninety-nine thousand nine hundred dollars ($299,900) in satisfaction of the claims asserted against the Estate of Joseph Hirst in the civil action [of Long v. Opel ]; and
that the Defendants, Genway Corporation, Jones Pontiac Company and Jones Leasing Company, are not obligated, pursuant to their rental agreement with Joseph E.
[ 387 Pa. Super. Page 582]
Hirst, deceased, to indemnify the Estate of Joseph E. Hirst; but, rather, their obligation pursuant to said rental agreement was to obtain a liability insurance policy covering Joseph E. Hirst, in accordance with the standard provisions of a Basic Automobile Liability Insurance Policy for bodily injury and property damage (with a $1,000,000, combined single limit for each occurrence) arising from use of the rented vehicle; and said Defendants satisfied that obligation by the purchase of the liability insurance policy from Midland Insurance Company, except that those Defendants may be liable to the Pennsylvania Insurance Guaranty Association for the amount of any applicable deductible under the Midland policy.
Donegal appeals from that portion of the order finding that Genway-Jones had satisfied its obligation to provide insurance coverage under the rental agreement by purchasing the Midland policy, arguing that the rental agreement requires Genway-Jones to be the primary provider of coverage to the Hirst Estate of up to One Million Dollars ($1,000,000) with contribution by PIGA as mandated by statute. Genway-Jones and PIGA appeal from that portion of the order voiding the clause excluding coverage for liability arising from the operation of the vehicle while under the influence of alcohol or drugs. These parties also argue that if this clause is found to be void, the rental agreement requires only that coverage for liability shall be the minimum coverage required by the Motor Vehicle Responsibility Law. Finally, Genway-Jones and PIGA argue that Donegal bears primary coverage for the claims asserted against the Hirst Estate in Long v. Opel.
The first issue before us concerns the validity of the provision in the rental agreement which denies insurance coverage for liability arising from the operation of the vehicle while under the influence of alcohol or drugs in violation of the agreement. Specifically, we must determine the validity of this provision at the time of the accident, for some months after the accident the legislature enacted a section of the Motor Vehicle Financial Responsibility
[ 387 Pa. Super. Page 583]
Law which invalidates in insurance policies all such provisions. Section 1724 of the Act, effective July 1, 1986, provides:
(a) General rule. Insurance benefits may not be denied solely because the driver of the insured motor vehicle is determined to be under the influence of drugs or intoxicating beverages at the ...