On Appeal from the United States District Court for the Eastern District of Pennsylvania; D.C. Civil Action No. 90-1266.
Stapleton, Greenberg, and Seitz, Circuit Judges. Greenberg, Circuit Judge, concurring.
In this diversity of citizenship, declaratory judgment action, appellee-plaintiff West American Insurance Company asks us to predict that the Supreme Court of Pennsylvania would not enforce the terms of a policy that West American wrote for appellant-defendant Suzanne Park. West American argues that section 1736 of the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL"), 75 Pa. Cons. Stat. Ann. § 1736 (Purdon supp. 1990), prohibits the aggregation or "stacking"*fn1 of uninsured/underinsured motorist coverage to exceed the liability coverage carried by the insured, a proposition upon which Pennsylvania courts have not authoritatively ruled. On cross-motions for summary judgment, the district court determined that the Supreme Court of Pennsylvania would so hold and entered judgment for West American. The district courts that have considered the issue are split.*fn2 Because we conclude that the Supreme Court of Pennsylvania would find West American estopped from challenging the legality of its own policy, we will reverse without considering whether the policy does in fact violate the MVFRL.
Factual Background and Contentions of the Parties
The following facts have been stipulated. On June 3, 1988, Suzanne Park was operating her husband's 1986 Mercury Topaz automobile when she was allegedly injured by an uninsured motorist. At that time the Mercury was insured under a West American policy which also covered her husband's 1983 Ford Escort. The policy had a limit of coverage for liability to third persons of $100,000 and also provided uninsured/underinsured motorist coverage of $100,000 for each vehicle. West American charged separate premiums for the uninsured/underinsured motorist coverage for each automobile.
After the accident, Suzanne Park initiated a claim against West American for uninsured motorist benefits. On February 22, 1990, West American, a California corporation with its principal place of business in California, commenced this action in the district court seeking a declaratory judgment against Park, a citizen of Pennsylvania, as to the limits of uninsured motorist coverage under the policy.
Park claims that she may stack the $100,000 worth of uninsured motorist coverage provided for each of the vehicles so that she may potentially recover up to $200,000 of uninsured motorist coverage benefits. West American asserts that section 1736 of the MVFRL prevents Park from stacking the uninsured motorist coverage benefits to exceed the maximum amount available to third parties under the liability portion of the policy, i.e., $100,000. Section 1736 states that:
The [uninsured/underinsured motorist] coverages provided under this subchapter may be offered by insurers in amounts higher than those required by this chapter but may not be greater than the limits of liability specified in the bodily injury liability provisions of the insured's policy.
75 Pa. Cons. Stat. Ann. § 1736 (Purdon supp. 1990). West American contends that although stacking is authorized by the policy, "in instances such as this case in which [the] stacking allowed by a policy would run afoul of the express statutory limitation of [section] 1736, the public policy behind the statute must prevail." Appellee's Brief at 17. Two intermediate Pennsylvania courts have indicated that section 1736 is intended to prevent
an insured from providing greater coverage, via uninsured/underinsured coverages, for himself and his additional insureds than the amount of coverage he provides for others injured through his negligence.
Tallman v. Aetna Cas. & Sur. Co., 372 Pa. Super. 593, 539 A.2d 1354, 1358-59 allocatur denied, 520 Pa. 607, 553 A.2d 969 (1988) (quoting Wolgemuth v. Harleysville Mut. Ins. Co., 370 Pa. Super. 51, 535 A.2d 1145, 1147 n. 3, allocatur denied, 520 Pa. 590, 551 A.2d 216 (1988)). The district court agreed with West American, and this appeal followed.
Subject Matter Jurisdiction and Standard of Review
West American and Park are citizens of different states and the amount in controversy exceeds $50,000. Thus, the district court had subject matter jurisdiction under 28 U.S.C. §§ 1332(a)(1) and 2201(a), and we have jurisdiction under 28 U.S.C. § 1291. Federal court jurisdiction exists even though the ultimate resolution of the dispute will come only in an arbitration proceeding to determine Park's damages. See Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-43, 57 S. Ct. 461, 463-65, 81 L. Ed. 617 (1937); Myers v. State Farm Ins. Co., 842 F.2d 705, 708 (3d Cir. 1988) (under Pennsylvania law, legal question of coverage properly decided by court before question of liability within that coverage is decided at arbitration). See also McNeese v. Board of Education for Community School Dist. 187, 373 U.S. 668, 673 n.5, 83 S. Ct. 1433, 1436, n.5, 10 L. Ed. 2d 622 (1963); Baltimore Bank for Cooperatives v. Farmers Cheese Cooperative, 583 F.2d 104, 111 (3d Cir. 1978). As the cross-motions for summary judgment were submitted on stipulated facts, only issues of state law remained for the district court to resolve and the standard of our review is plenary. Salve Regina College v. Russell, 113 L. Ed. 2d 190, 111 S. Ct. 1217, 1221 (1991); Compagnie Des Bauxites v. Insurance Co. of America, 724 F.2d 369, 371 (3d Cir. 1983).
West American claims that Park should be denied recovery on public policy grounds because section 1736 prohibitions insurers from offering uninsured/underinsured motorist coverage in excess of liability coverage. In other words, West American claims that it should be excused from fulfilling Park's reasonable expectations and its own obligations under the policy's plain language, because it violated the MVFRL.*fn3 Assuming that West American did violate the MVFRL, as it contends, we conclude that the courts of Pennsylvania would find it estopped from denying the existence of uninsured motorist coverage it in fact issued.
Pennsylvania insurance law incorporates principles of equitable estoppel. As one Pennsylvania court expressed it,
Reduced to its essence, equitable estoppel is a doctrine of fundamental fairness intended to preclude a party from depriving another of a reasonable expectation, when the party inducing the expectation knew or should have known ...