The opinion of the court was delivered by: D. Brooks Smith, District Judge.
Before the Court at this time is plaintiff Aetna Casualty and Surety
Company's Motion to Amend Judgment (docket no. 22A), which seeks judgment
in Aetna's favor, notwithstanding a jury's verdict in favor of defendant
State Farm Mutual Automobile Insurance Co. Aetna sought indemnification
from State Farm for a claim that it paid under its uninsured motorist's
coverage after State Farm disclaimed liability coverage to the alleged
driver of a State Farm insured automobile. After review of
the record, the Court denies Aetna's motion.
The circuits are split on the question whether the standard for review
of a motion for j.n.o.v. in a diversity matter is dictated by federal
procedural law or state substantive law. Compare Miles v. Tennessee River
Pulp and Paper Co., 862 F.2d 1525 (11th Cir. 1989) (federal); Foster v.
Ford Motor Co., 616 F.2d 1304 (5th Cir. 1980) (federal); Oldenburg v.
Clark, 489 F.2d 839 (10th Cir. 1974) (federal); with J.C. Wyckoff &
Assoc. v. Standard Fire Ins. Co., 936 F.2d 1474 (6th Cir. 1991) (state
law); Fort Howard Paper Co. v. Standard Havens, Inc., 901 F.2d 1373 (7th
Cir. 1990) (state law). The Third Circuit has held that there is no
difference between federal and Pennsylvania law on this point. Vizzini
v. Ford Motor Co., 569 F.2d 754, 757-58 (3d Cir. 1977). It is necessary
therefore to "determine whether, as a matter of law, the record is
critically deficient of that minimum quantum of evidence from which a
jury might reasonably afford relief." id. (citation omitted).
The evidence presented at trial showed that on August 8, 1987, Milton
R. Seiler was struck by an automobile and killed while walking across a
roadway in Allegheny County's South Park. Mr. Seiler had uninsured
motorist's coverage through a policy issued by Aetna. The automobile
which struck Seiler was driven by Mona Dobbins, and was leased by Ms.
Dobbins' employer, the Brookline Social Club.*fn1 The automobile was
insured by State Farm with liability limits of $100,000/$300,000.
Ms. Dobbins left the scene of the accident after striking Seiler
without identifying herself, and was later charged with several motor
vehicle code offenses, including homicide by vehicle. 75 Pa.C.S. §
3732 (Purdons 1991 Supp.). Ms. Dobbins retained an attorney to defend
herself in the criminal prosecution. When State Farm investigators
investigating the death of Mr. Seiler requested a statement from her
concerning the accident, Ms. Dobbins referred them to her attorney, who
advised State Farm that she would not give any statement to State Farm
because of its potential to incriminate her. The criminal defense
attorney did tell State Farm's representative that he was willing to have
Ms. Dobbins interviewed by a defense attorney retained by State Farm who
could advise State Farm whether it owed a duty to defend and indemnify
Ms. Dobbins in any civil action. State Farm rejected this option.
Criminal charges against Ms. Dobbins were ultimately dismissed or
withdrawn because of insufficient evidence identifying her as the driver
of the vehicle which struck Mr. Seiler. Because the charges were not
disposed of after jeopardy attached they could have been refiled against
Ms. Dobbins until the statute of limitations ran on August 8, 1989. See
42 Pa.C.S. § 5552(a) (Purdons 1991 Supp.). Compare the current
statute of limitations, id., § 5551(5).
The representative of Mr. Seiler's estate filed a civil suit against
Ms. Dobbins in December, 1987. State Farm had sent Ms. Dobbins a
reservation of rights letter on August 24, 1987, and did not appoint
counsel to defend her in the civil suit. Ms. Dobbins' criminal defense
attorney may have entered an appearance in that suit, but because Ms.
Dobbins was judgment proof she had no great concern for the outcome of
that action. N.T. 204-05. Mr. Seiler's estate obtained a default judgment
against Ms. Dobbins on February 21, 1989. On March 20, 1989, and March
27, 1989, State Farm sent letters to Ms. Dobbins, denying coverage under
its liability policy issued to the Brookline Social Club and refusing to
defend or indemnify her because of her refusal to cooperate with State
At trial, State Farm defended its disclaimer of coverage for Ms.
Dobbins on two grounds: (1) that Ms. Dobbins was not a permissive user of
the automobile and (2) that Ms. Dobbins breached the cooperation clause
of State Farm's policy. State Farm's lack of permissive use defense was
based on the rather weak evidence of a statement at the coroner's inquest
shortly after the accident by Frank Torchia, the owner of the Brookline
Social Club, that implied that Ms. Dobbins was not permitted to drive the
vehicle at the time of the accident. N.T. 130, 133, 180; See N.T. 260.
The jury properly rejected this theory of defense.
The jury found, however, that Ms. Dobbins had breached her duty to
cooperate with State Farm and that State Farm had suffered substantial
prejudice as a result. With respect to the breach of the cooperation
clause defense, Pennsylvania law provides that for a disclaimer of
coverage to be valid the insurer must prove (1) that the putative insured
breached its duty to cooperate in the insurer's investigation and defense
of a claim, and (2) that the insurer suffered substantial prejudice as a
result. Paxton National Ins. Co. v. Brickajlic, 513 Pa. 627, 522 A.2d 531
(1987); Brakeman v. Potomac Insurance Company, 472 Pa. 66, 371 A.2d 193
(1977); Cameron v. Berger, 336 Pa. 229, 7 A.2d 293 (1939). State Farm's
defense on this point was that the evidence of the identity of the driver
and the comparative negligence of Mr. Seiler were disputed issues and the
absence of any statement by the alleged driver of the vehicle which
struck Mr. Seiler materially impaired State Farm's ability to defend
against any civil claim by the Seiler estate. The Court charged the jury
on this defense, N.T. 311-12, and repeated the instruction on the
definition of substantial prejudice at the request of the jury. N.T.
Aetna first seeks a ruling that as a matter of law Ms. Dobbins has a
Fifth Amendment privilege against self incrimination which excuses her
from any contractual duty to cooperate in the investigation of defense of
a civil claim. Aetna submits in support only Wojna v. Merchants Ins.
Group, 119 Misc.2d 734, 464 N.Y.S.2d 664, 666 (1983) and 2423 Mermaid
Realty v. New York Property Ins., 142 A.D.2d 124, 534 N.Y.S.2d 999
(1988). Not only is neither case binding authority, neither is persuasive
authority because the rationale offered in Wojna — that a third
party should not be deprived of liability coverage by an insured's failure
to cooperate — is inapplicable here. Aetna seeks indemnity for a
claim paid to the Seiler estate, not subrogation to a claim by the Seiler
estate against State Farm. The Seiler estate has been compensated and its
interest in liability coverage protected by Pennsylvania's mandatory
uninsured motorist's coverage.
More importantly, Aetna's argument that a Fifth Amendment privilege
trumps the insurance policy's duty to cooperate requirement falls of its
own weight. A person may not be penalized for asserting the Fifth
Amendment privilege against self incrimination, but that does not mean
that if a person refuses to make a statement in a civil proceeding that
the failure to provide evidence may not have adverse consequences. See
Peiffer v. Lebanon School District, 848 F.2d 44 (3d Cir. 1988). In
Peiffer, a school board refused to grant a school district employee a
postponement of a disciplinary hearing pending the disposition of criminal
charges against the employee arising out of the same incident. The Court
of Appeals held that the facts that the employee chose to remain silent
and that the evidence presented without his statement led the school
district to discharge him did not permit the conclusion that the
employee's Fifth Amendment rights were violated. To the same effect, the
Ninth Circuit held in Sherman v. Babbitt, 772 F.2d 1476 (9th Cir. 1985),
that a motorist's criminal conviction for failure to give proof of
financial responsibility upon request by a police officer did not violate
the Fifth Amendment. That Court stated:
"The statute does not compel Sherman to produce an insurance certificate
but gives him the choice to comply or to refuse and face the attendant
penalties." 772 F.2d at 1478 (emphasis in original). It is also settled
law that a civil litigant's assertion of the Fifth Amendment permits an
adverse inference against the litigant with respect to the matter for
which the privilege is claimed. See Hudak v. Woods, 743 F. Supp. 374, 377
(W.D.Pa. 1990) (Lee, J.). Aetna advances no persuasive reason why an
assertion of the Fifth Amendment should expose the person claiming the
privilege to adverse consequences in judicial proceedings but give blanket
immunity to the claimant in other contexts.
As the Supreme Court stated in United States v. Rylander, 460 U.S. 752,
759, 103 S.Ct. 1548, 1553, 75 L.Ed.2d 521 (1983), allowing a litigant to
be held in civil contempt despite his asserting the Fifth Amendment
privilege as a defense to responding to questions concerning compliance
with an IRS subpoena:
That the defendant faces such a dilemma demanding a
choice between complete silence and presenting a
defense has never been thought an invasion of the
privilege against compelled self-incrimination.
(quoting Williams v. Florida, 399 ...