should equal the liability limits of the policy, $500,000,
rather than the stated UIM limits, $35,000, because Cincinnati
failed to obtain his consent to the reduction in UIM coverage
in accordance with Pennsylvania law. This would entitle him to
$6,500,000 of UIM coverage.
Cincinnati's complaint alleges that it has no obligation
under the policy for two reasons. First, Herr violated the
policy provision requiring prompt notice of the accident by
waiting for about three years before submitting his claim.
Second, since the accident occurred during the course of Herr's
employment, his exclusive remedy is the Workmen's Compensation
Act. Alternatively, Cincinnati contends that, if Herr is
entitled to UIM coverage, that coverage should be the limits
stated on the declaration page, $35,000. Further, if stacking
were appropriate, the overall limit of recovery should be the
liability limits of the policy, $500,000.*fn2 Plaintiff also
requests that we declare on the basis of collateral estoppel
that Herr's recovery be limited by his judgment in the amount
of $275,821 against the tortfeasor in the state court
A. Workmen's Compensation As the Exclusive Remedy.
Cincinnati contends that Herr's claim for UIM coverage is
barred by the provision in the Pennsylvania Workmen's
Compensation Act providing that a worker's exclusive remedy
against his employer is under the Act. See 77 P.S. § 481(a)
(Purdon Pamphlet 1990-91). Cincinnati contends that it is
entitled to this protection as the insurance carrier for Herr's
employer. There is support in the case law for plaintiff's
position, principally Aetna Casualty & Surety Co. v.
Castagnola, 1989 WL 49523 (E.D.Pa.). But there are cases to the
contrary. See Ponzio v. Liberty Mutual Insurance Co., 1990 WL
27362 (E.D.Pa.). See also Travelers Indemnity Co. v. McGrath,
1990 WL 106730 (E.D.Pa.); P.I.E. Nationwide, Inc. v. Foga, 1990
WL 72946 (E.D.Pa.); American Motorists Insurance Co. v. Harris,
1990 WL 55375 (E.D.Pa.). The Pennsylvania Superior Court has
also held that an injured worker may claim both workmen's
compensation benefits and benefits from his employer's UIM
carrier. See Odom v. Carolina Casualty Insurance Co.,
394 Pa. Super. 283, 575 A.2d 631, appeal granted ___ Pa. ___,
582 A.2d 324 (1990); Chatham v. Aetna Life & Casualty Co.,
391 Pa. Super. 53, 570 A.2d 509 (1989), appeal granted, ___ Pa. ___,
584 A.2d 310 (Pa. 1990).
It is apparent from these opinions that the correct
resolution of the issue depends upon the impact of the
Pennsylvania Supreme Court's opinion in Selected Risks
Insurance Co. v. Thompson, 520 Pa. 130, 552 A.2d 1382 (1989)
upon its earlier opinion in Lewis v. School District of
Philadelphia, 517 Pa. 461, 538 A.2d 862 (1988). Compare
Castagnola, supra with Odom, supra.
While we are inclined to agree with those courts which have
held that worker's compensation is not the exclusive remedy, we
fortunately have the further assistance of a recent
Pennsylvania Supreme Court opinion
which was issued after briefing had been completed on the
cross-motions. The opinion clearly indicates that the supreme
court would permit recovery of both UIM benefits from
employer's automobile insurance carrier and worker's
In Azpell v. Old Republic Insurance Co., ___ Pa. ___,
584 A.2d 950 (1991), the appellant was a police officer injured in
the course of his employment. He received worker's compensation
benefits and sought uninsured motorist benefits from the
appellee, Old Republic Insurance Co., his employer's insurance
carrier. The appellee denied the claim but the appellant won in
arbitration. The superior court affirmed the trial court's
vacation of the arbitration award, holding that Lewis, supra,
left the appellee with only worker's compensation as his
The supreme court reversed on the ground that the lower
courts had no authority to review the merits of the arbitration
award under the Pennsylvania Uniform Arbitration Act, which the
policy provided would govern the resolution of disputes.
Significantly, however, the court stated the following in
connection with the merits:
Because of our disposition of this appeal, we need
not address appellant's second issue. However, it
is quite clear that Selected Risks Insurance Co. v.
Thompson, 520 Pa. 130, 552 A.2d 1382 (1989) is
controlling and that Appellant is entitled to
uninsured motorists benefits under the Motor
Vehicle Financial Responsibility Law.
Id. at ___ n. 1, 584 A.2d at 952 n. 1. Admittedly, this is
dictum but we think it is intended as a clear signal that an
injured worker is entitled to recover UIM benefits from his
employer's automobile carrier and that worker's compensation is
not his exclusive remedy.
B. Alleged Prejudice to Cincinnati.
Cincinnati next contends that Herr cannot recover under the
policy because he failed to notify it of his claim for more
than three years after his accident in violation of a policy
provision requiring prompt notification after an accident.
Cincinnati recognizes that Pennsylvania requires that the
company show actual prejudice to it before this provision may
be employed to bar coverage. See Brakeman v. Potomac Insurance
Co., 472 Pa. 66, 371 A.2d 193 (1977). It insists, however, that
prejudice is shown here because the notice did not give it
sufficient time to investigate whether there were any
independent witnesses who could contest the liability of the
underinsured motorist, any potential claims against third
parties, or other defenses. Plaintiff requests that we declare
the three year delay "presumptively prejudicial." (plaintiff's
supporting brief at p. 27). Its surreply brief provides
additional reasons arising from the trial in Adams County for
finding prejudice. Plaintiff asserts that the notice came only
three to four months before trial was to begin, giving it no
time to investigate the accident, participate in discovery, or
influence the strategy and direction of the defense of the
The defendants counter that, although there was no formal
notice, Cincinnati's agent was well aware of the accident
shortly after it happened and, in fact, coordinated Herr's
receipt of worker's compensation benefits. There was therefore
no late notice.
We need not assess the validity of defendants' position. It
is apparent that the company's argument is deficient as stated.
It fails to specify how the company was prejudiced by the
purported late notice and speaks only in generalities of the
concerns any insurance company would have when prompt notice
was not received. Its reference to the proceedings in Adams
County only highlights the weakness of the argument because, if
there was prejudice, the company should have been able to point
to something in the trial proceedings to support that claim.
Finally, its request that we declare a three year delay
"presumptively prejudicial" is directly counter to the
statement in Brakeman that late notice will not be sufficient
to show prejudice.
C. Waiver of Underinsured Motorist Limits Equal to Bodily
Cincinnati argues that Herr knowingly accepted UIM coverage
limits of $35,000 rather than the bodily injury liability
limits of $500,000 stated in the policy. Pennsylvania's Motor
Vehicle Financial Responsibility Law (the MVFRL), 75 Pa. C.S.
§ 1701 et seq., governs here. It mandates that the UIM limits
equal the bodily injury limits, see 75 Pa. C.S. § 1731, unless
the insured waives that coverage and accepts a lesser amount.
Id. at § 1734.*fn4
The MVFRL establishes one way that the company can show
waiver. 75 Pa. C.S. § 1791 provides that a company must supply
its insured with a standard notice at the time of the
application for insurance. The notice lists the coverages which
must be provided under Pennsylvania law, including amounts of
UIM coverage, and that higher and lower amounts of coverage
than those stated may be purchased. The notice further states
that the insured's signature on the notice "or [his] payment of
any renewal premiums evidences [his] actual knowledge and
understanding of the availability of these benefits and limits
as well as the benefits and limits you have selected." Id.
(brackets added). This notice in the statutory format was
attached to the policy in question in the instant case but was
not signed by Ronald Herr or any of the other named insureds.
It therefore cannot be used as a conclusive presumption of
Herr's knowledge of and waiver of his right to additional
coverage. See Prudential Property And Casualty Insurance Co. v.
Pendleton, 858 F.2d 930 (3d Cir. 1988).
Under these circumstances, courts have looked to prior
Pennsylvania law growing out of the waiver of uninsured
motorist benefits to determine when an insured has waived UIM
coverage. The germinal Pennsylvania case was Johnson v. Concord
Mutual Insurance Co., 450 Pa. 614, 300 A.2d 61 (1973). See
Byers v. Amerisure Insurance Co., 745 F. Supp. 1073 (E.D.Pa.
1990); Groff v. Continental Insurance Co., 741 F. Supp. 541
(E.D.Pa. 1990).*fn5 Generally, the company must show that the
purported waiver was knowing and intelligent. Groff, supra
(citing Concord Mutual, supra).
Cincinnati seeks to satisfy this standard by relying upon,
among other evidence, the deposition testimony of Frederick
Heitefuss, the Cincinnati broker who sold the instant policy,
and Suanne R. Rohrbaugh, who sold Ronald and Susan Herr their
automobile insurance for their personal car. The personal
policy was to have $300,000 bodily injury liability and limits
of $35,000 for uninsured and underinsured coverage.
Heitefuss testified that he explained the UIM coverage to
Ronald Herr at the time he sold the Cincinnati policy.
Rohrbaugh testified that at the time of the application and
issuance of the personal automobile policy on May 24, 1985,
Ronald Herr executed a form entitled a "supplemental auto
application" form. The form gave the applicant four choices
ranging from $35,000 to $300,000 for uninsured/underinsured
motorists coverage. The box for $35,000 had a check mark in it.
The form also contained the following language:
Pennsylvania law requires each automobile
liability policy to provide Uninsured/Underinsured
Motorists Coverage at limits equal to your
policy's Bodily Injury Liability limits. However,
you may select limits of Uninsured/Underinsured
Motorists Coverage lower than your Bodily Injury
Liability limits, but not less than the limits
required by the Pennsylvania Financial
Responsibility Law ($15,000/$30,000 Split Limit
Bodily Injury or $35,000 Single Limit).
She also testified that, although Herr had made a claim on the
policy for UIM coverage, he never complained about the limits.