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STOUMEN v. PUBLIC SERV. MUT. INS. CO.

September 14, 1993

ELLEN STOUMEN, administratrix of the Estate of LISA KNOWLES, Deceased
v.
PUBLIC SERVICE MUTUAL INSURANCE COMPANY



The opinion of the court was delivered by: BY THE COURT; HERBERT J. HUTTON

 HUTTON, J. September 14, 1993

 Presently before the Court are the plaintiff's Motion for Partial Summary Judgment, defendant's response, and the parties' supplemental memoranda.

 I. FACTUAL BACKGROUND

 On January 15, 1989, Lisa Knowles was a passenger in an automobile involved in an accident, wherein she suffered injuries. At the time of the accident, Ms. Knowles was insured under two separate insurance policies issued by Allstate Insurance Company ("Allstate"). Each of these policies contained $ 15,000 limits for both general liability coverage and uninsured/underinsured motorist coverage. Before her death from unrelated causes on January 1, 1992, Ms. Knowles settled her liability and underinsurance claims against Allstate for $ 30,000, the combined amount due her under each policy.

 Prior to the accident, Ellen Stoumen, the mother of Ms. Knowles, obtained a personal catastrophe liability insurance policy ("umbrella policy") from Public Service Mutual Insurance Company ("PSM"). This policy contained a stated limit of $ 1,000,000 for third-party bodily injury liability coverage. In addition, the policy also contained uninsured/underinsured motorist coverage with a stated policy limit of $ 35,000. With respect to this latter coverage, the policy required that any amounts received by the insured under any other insurance policies be deducted from the stated policy limit.

 After Ms. Knowles' death, Ms. Stoumen submitted a claim under the underinsured motorist provision of her umbrella policy on her daughter's behalf, seeking compensation for Ms. Knowles' excess damages. To determine the extent of its liability, and in accordance with the policy's express terms, the defendant deducted the amounts received by Ms. Knowles under her Allstate policies from the maximum coverage allowed by Ms. Stoumen's umbrella policy. In applying this formula, the insurance company determined that its liability under the policy was $ 5,000, and it offered this amount to plaintiff in settlement of her claim. The plaintiff rejected this offer, and instituted this action.

 II. DISCUSSION

 When this Court sits in diversity, it must apply the substantive law of the state in which it is located. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 82 L. Ed. 1188, 58 S. Ct. 817 (1938). "When interpreting state law, a federal court is bound by the decision of the highest state court." In re Kirkland, 915 F.2d 1236, 1238 (9th Cir. 1990). "In the absence of such a decision, a federal court must predict how the highest state court would decide the issue using intermediate appellate court decisions, decisions from other jurisdictions, statutes, treaties, and restatements as guidance." Id. at 1239.

 
No motor vehicle liability insurance policy shall be delivered or issued for delivery in this Commonwealth, with respect to any motor vehicle registered or principally garaged in this Commonwealth, unless uninsured motorist and underinsured are offered therein ....

 75 Pa. Cons. Stat. Ann. § 1731 (1993). This statute also requires insurance companies to obtain written waivers of uninsured/underinsured coverage from insureds who do not wish to carry such coverage. "If the insurer fails to produce a valid rejection form, uninsured or underinsured coverage, or both, as the case may be, under that policy shall be equal to the bodily injury liability limits." § 1731(c)(1). The defendants admit that they did not obtain plaintiff's waiver of uninsured motorist coverage when they issued her the umbrella policy. (See Defendant's Answer at P 17). Accordingly, the plaintiff claims that pursuant to § 1731(c)(1), Ms. Knowles' uninsured motorist coverage under plaintiff's umbrella policy is $ 1,000,000, the equivalent amount of the policy's coverage for third-party bodily injuries.

 The defendant on the other hand argues that insofar as umbrella policies are not automobile insurance policies under Pennsylvania's Motor Vehicle Code, § 1731 is inapposite to the instant action. In other words, the defendant claims that it bore no duty to obtain signed waivers of coverage from the plaintiff. Thus, the resolution of this case turns on the very narrow question of whether an umbrella policy is a "motor vehicle liability insurance policy" for purposes of § 1731.

 Although the Pennsylvania Supreme Court has yet to address this issue, the issue has been confronted by numerous other courts, which have reached conflicting results. In her brief, the plaintiff attempts to reconcile these conflicting decisions. She observes that there are two types of uninsured motorist statutes: "minimum coverage" statutes and "full coverage" statutes. "Minimum coverage" statutes require motorists to maintain a minimum level of uninsured motorist insurance. The ostensible legislative policy underlying this type of statute is a desire to provide the injured motorist with the same level of protection that he would have otherwise received had the uninsured motorist carried the minimum level of insurance. In contrast, "full coverage" statutes require that an insured's underinsurance coverage equal his bodily injury liability insurance. These types of statutes purportedly evince a legislative desire to provide motorists with the fullest extent of insurance coverage possible. The plaintiff claims that in states which have adopted "full coverage" statutes, courts hold that umbrella policies are automobile insurance policies for purposes of the uninsured motorist statute. See also Lisa K. Gregory, "Excess" or "Umbrella" ...


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