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FEDERAL KEMPER INS. CO. v. REAGER

November 6, 1992

FEDERAL KEMPER INSURANCE CO.
v.
ERICA REAGER



The opinion of the court was delivered by: BY THE COURT; JAMES T. GILES

 GILES, J.

 November 6, 1992

 I. INTRODUCTION

 Plaintiff Federal Kemper Insurance Company ("Kemper") filed a complaint for declaratory judgment with this court on June 25, 1992. Jurisdiction is based upon diversity of citizenship.

 In June, 1991, defendant Erica Reager ("Reager") was injured while a passenger in a car driven by Kerry Darkes ("Darkes"). Reager has asserted that the accident occurred as a result of Darkes' negligence, and that Darkes' insurance was insufficient to compensate Reager for her injuries. At the time of the accident, Reager's mother, Karen Reager, was the holder of a motor vehicle insurance policy issued by plaintiff Kemper ("the Policy"). The Policy included underinsured motorist ("UIM") benefits. Reager claims to be an insured under the Policy, and has presented a UIM claim to Kemper.

 At the time of the accident, Reager owned an automobile and was insured for the operation of that automobile under a policy issued to her by Nationwide Insurance Company ("Nationwide"). As required by Pennsylvania law, see 75 Pa.C.S. § 1731, Nationwide offered uninsured/underinsured motorist coverage to Reager, but she rejected it. Kemper argues that Reager's rejection of UIM coverage under her Nationwide policy now disqualifies her from receiving UIM benefits through any motor vehicle insurance policy under which she might be considered an insured. Kemper brought this declaratory judgment action seeking an interpretation of the Policy which compels a declaration that Kemper is not required to provide UIM benefits to Reager.

 Reager has filed a motion to dismiss the complaint. She argues that the insurance policy under which UIM benefits are sought contains a provision mandating arbitration as the exclusive method by which the dispute between her and Kemper is to be resolved. She argues that the question presented by the declaratory judgment complaint is properly decided by arbitration under the terms of the policy. Because we agree with defendant, we grant her motion to dismiss.

 II. DISCUSSION

 The insurance policy between plaintiff and defendant's mother, under which defendant makes her claim, provides uninsured/underinsured motorist coverage. In the Policy, Kemper agrees to "pay only compensatory damages which an insured is legally entitled to recover from the owner or operator of either an uninsured motor vehicle or an underinsured motor vehicle. . . because of bodily injury. . . sustained by an insured; and caused by an accident." Policy Number R 0590116, attached as Exhibit A to plaintiff's Complaint for Declaratory Judgment (boldface in original).

 Reager claims to be an insured under this policy as a family member of the named insured, *fn1" and has filed a UIM claim with Kemper, seeking to recover compensation for the injuries she allegedly incurred as a result of Darkes' negligence. Kemper responded to Reager's claim by filing the instant declaratory judgment action in this court. Kemper maintains, and seeks to have this court declare, that Reager is not entitled to recover UIM benefits. Kemper argues that when Reager declined UIM coverage on her own Nationwide policy, she also rejected UIM coverage under her mother's Kemper policy.

 Reager has filed a motion to dismiss Kemper's complaint. Her motion to dismiss does not address the merits of Kemper's claim that she has waived UIM coverage, and the merits of that claim are not now before the court. Instead, Reager argues that the Policy under which she makes her claim contains an arbitration clause which mandates arbitration as the method by which her claim must be resolved. Reager concludes that Kemper's complaint, which seeks to have this court decide the claim, must therefore be dismissed. *fn2"

 Both parties agree that the Policy contains an arbitration clause which states, in pertinent part:

 ARBITRATION

 A. If we and an insured do ...


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