On Appeal From the United States District Court for the Eastern District of Pennsylvania; D.C. Civil No. 89-05838.
Sloviter, Becker and Weis, Circuit Judges.
Pursuing a claim under his employer's underinsured motorist coverage for injuries sustained in an accident occurring in the course of his employment, Robert O'Leary ("O'Leary") petitioned a state court to compel Liberty Mutual Insurance Co. ("Liberty Mutual") to appoint an arbitrator. The state court denied the petition on the ground that workmen's compensation is the exclusive remedy for injured employees by reason of § 303(a) of the Pennsylvania Workmen's Compensation Act. O'Leary and his wife Patricia ("the O'Learys") then brought the instant diversity action in the district court seeking damages under the same policy. The district court granted summary judgment for Liberty Mutual, in light of the state court's order, on grounds of res judicata and collateral estoppel. The O'Learys appealed. Although we will affirm the district court's collateral estoppel determination, the appeal raises intricate questions regarding the applicability of that doctrine, and of the impact thereon of § 28(2)(b) of the Restatement (Second) of Judgments, which concerns the effect of an intervening change in the law.
I. FACTS AND PROCEDURAL HISTORY
On April 24, 1986, while driving a vehicle owned by his employer, Perloff Brothers Inc. ("Perloff"), during the course of his employment, O'Leary was injured in a motor vehicle accident caused solely by the negligence of the other driver. Because his damages exceeded the coverage limits of the other driver's insurance policy, O'Leary made an underinsured motorist claim against Perloff's insurance carrier, Liberty Mutual.*fn1 When Liberty Mutual denied coverage, O'Leary made a demand for arbitration and selected an arbitrator pursuant to the requirements of the policy.*fn2 When Liberty Mutual failed to select its arbitrator, O'Leary filed a Petition to Compel Appointment of Arbitrator pursuant to 42 Pa. Cons. Stat. Ann. § 7305 (Purdon 1982) in the Court of Common Pleas of Montgomery County, Pennsylvania.
In its answer to O'Leary's petition, Liberty Mutual asserted that it was immune from liability to provide underinsured motorist benefits because, under Pennsylvania law, workmen's compensation is the exclusive remedy available for employees injured during the course and scope of their employment. See Pennsylvania Workmen's Compensation Act § 303(a), 77 Pa. Stat. Ann. § 481(a) (Purdon 1990).*fn3 Thus, Liberty Mutual argued, O'Leary's claim for coverage under Perloff's policy was barred as a matter of law and his petition to compel arbitration should be dismissed. The Court of Common Pleas agreed and entered an order denying O'Leary's petition, stating:
And now, this 9th day of May, 1989, after review
of the briefs, precedents and statutes and after
oral argument from both counsel, it is ordered
that plaintiff's petition to compel appointment
of arbitrators is hereby denied inasmuch as we
find this court has jurisdiction herein and that
plaintiff's instant claim for underinsured motorist
benefits brought against the defendant, plaintiff's
employer's insurer, for injuries sustained by
plaintiff while in the course and scope of his
employment is not within the ambit of the subject
arbitration provision as such claim is contrary
to Section 303(a) of the Pennsylvania Workmen's
Compensation Act, 77 P.S. § 481(a) and ...