negligence, and damages, and awarded Mr. Seiler's estate $156,000. Aetna
thereafter filed this action, seeking indemnity from State Farm for the
full $156,000 it paid to the estate.
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 U.S. 78, 84 [90
S.Ct. 1893, 1897, 26 L.Ed.2d 446] (1970)).
Aetna's argument would not only be contrary to the principle that the
Fifth Amendment is a "shield against self-incrimination", Rylander, 460
U.S. at 758, 103 S.Ct. at 1552, and not a "sword whereby a claimant
asserting the privilege would be freed" id., from discharging duties
imposed by otherwise valid policies, it would make the Fifth Amendment a
peculiarly single-edged sword which would allow Mona Dobbins' silence to
be used in the civil liability action against her financial interest, see
Penfield v. Venuti, 589 F. Supp. 250, 254-57 (D.Conn. 1984), but not in
the civil indemnity action in which she has no interest. Aetna's argument
that Ms. Dobbins' Fifth Amendment privilege excuses her breach of the
contract as a matter of law is rejected.
A more cogent argument can be made by Aetna that State Farm did not
carry its burden of showing that it was substantially prejudiced by Ms.
Dobbins' failure to cooperate. Aetna argues that State Farm could have
(1) appointed a criminal defense attorney for Ms. Dobbins who, protected
by the attorney-client privilege, could have taken a statement from Ms.
Dobbins concerning her operation of the vehicle that struck Mr. Seiler;
(2) entered a defense in the civil action by the Seiler estate under a
reservation of rights and then moved to stay the civil proceedings until
the statute of limitations had run; or (3) obtained information from a
variety of other sources, including Joseph Balestra of the Brookline
Social Club, and James Coyle, an eyewitness to the accident.*fn2
Aetna's initial argument, which it advanced at trial in its examination
of State Farm's claims manager, N.T. 187-89, is based on an erroneous
view of the attorney-client privilege. Aetna suggests that State Farm
could easily have appointed an attorney to defend Ms. Dobbins who would
have been able to inform State Farm of "her side of the story." N.T.
187. The act of disclosing that information to State Farm would have been
a breach of the privilege, however, as State Farm's representative
pointed out to counsel for Aetna. N.T. 188. Even Aetna's more limited
argument, that the criminal defense counsel could have informed State
Farm in summary form whether the civil claim against Ms. Dobbins by the
Seiler estate should be defended, suffers from the same flaw that it
necessarily exposes the content of Ms. Dobbins' confidential statement.
Aetna's hypothetical appointed attorney could advise State Farm that the
claim needed to be defended if and only if Ms. Dobbins admitted
driving. Although it would be an ambitious prosecutor who would build the
prosecution against Ms. Dobbins based on an investigation of the basis of
the insurance claims manager's decision, no defense counsel could
ethically give a claims manager information which would create that
risk. See N.T. 209-10.
Aetna's second argument, that State Farm could have entered an
appearance for Ms. Dobbins under a reservation of rights and moved to stay
the civil action against Ms. Dobbins until the statute of limitations had
run, also does not suffice to overturn the jury's verdict as a matter of
law. Aetna argues here, as it did at trial, that State Farm's stewardship
of Ms. Dobbins' defense was inadequate and it was seeking from the outset
to disclaim coverage to Ms. Dobbins, not to determine whether it had a
fair duty to represent her. The argument, however, is one which the jury
Aetna's argument that as a matter of law the Court of Common Pleas of
Allegheny County would have been required to stay the civil action
pending the running of the statute of limitations is plainly wrong.
First, as a reductio ad absurdum, Aetna's argument would require the
perpetual stay of the action if Ms. Dobbins had been charged with
voluntary manslaughter (or today, if charged with vehicular homicide).
See 42 Pa.C.S. § 5551 (Purdons 1981), and id., § 5551(5)
(Purdons 1991 Supp.). Second, the authority cited by Aetna does not
support the proposition that a stay of the action against Ms. Dobbins
would have been constitutionally required. Wehling v. CBS, 608 F.2d 1084,
1087-89, rehearing denied, 611 F.2d 1026 (5th Cir. 1979), and Paul
Harrigan & Sons, Inc. v. Enterprise Animal Oil Co., 14 F.R.D. 333
(E.D.Pa. 1953), go only so far as to establish the permissibility of a
partial stay of discovery. The Fifth Circuit emphasized, on the petition
for rehearing in Wehling v. CBS, 611 F.2d 1026, 1027, that it did not
stay the trial of the lawsuit, nor prevent the use of the sanction of
dismissal against the plaintiff who had sought the stay if the stay
proved prejudicial to the defendant. Finally, Aetna introduced no evidence
from which the jury could have concluded as a matter of fact that there
was a likelihood that a motion to stay would have been successful.
This judge finds Aetna's third argument, that Ms. Dobbins' statement
was merely cumulative of other available evidence, more persuasive.
Whether Ms. Dobbins' refusal to make any statement in connection with the
investigation of Mr. Seiler's death impaired State Farm's defense of the
claim against her or whether State Farm could have obtained from James
Coyle, Carolyn Meadows, and persons associated with the Brookline Social
Club, all of the information it needed for the defense of the claim by
the Seiler estate is, however, quintessentially a question of fact. The
jury found that the effect of Dobbins' refusal was to substantially
prejudice State Farm's investigation and defense. Their decision, while of
doubtful correctness, cannot be said to be irrational or devoid of
support in the record. See N.T. 148-52; 170-76. The motion for judgment
n.o.v. is denied.