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March 9, 2000


The opinion of the court was delivered by: Katz, Senior District Judge.


Before the court are cross-motions for summary judgment submitted by the plaintiff and the defendant in this declaratory action pertaining to insurance coverage. Because the court finds that the insurance policy in question permits the defendant to recover both underinsured motorist benefits and liability benefits in some circumstances, the defendant's motion will be granted.

Stipulated Facts*fn1

On April 17, 1997, the defendant Leon Kubek was a passenger in an automobile driven by his wife, Marsha Kubek, which was involved in a collision with another vehicle driven by Nancy Moritz. The Kubeks' vehicle was covered by an insurance policy issued by Continental Insurance Company, the plaintiff. Moritz's vehicle was covered by an Allstate Insurance Company policy with bodily injury liability coverage of $100,000 per person. In March 1998, the Kubeks filed suit against Moritz in the Philadelphia County Court of Common Pleas. Moritz subsequently joined Marsha Kubek as an additional defendant.

Prior to any judicial determination of liability, the underlying action was settled. Allstate agreed to pay Leon Kubek $62,645 and Marsha Kubek $6,300 under its bodily injury liability coverage. Continental agreed to pay Leon Kubek $11,055 in bodily injury liability coverage under the Continental policy on behalf of Marsha Kubek. As part of the settlement, the Kubeks executed a General Release that released Nancy Moritz, Allstate Insurance Company, and Marsha Kubek from further claims. The General Release contained a provision stating,

Notwithstanding any other Provision herein to the contrary, it is expressly agreed that this Release shall not operate as a bar to any claim or cause of action Releasors may have against CNA Insurance Company for underinsured motorist benefits arising out of the subject motor vehicle accident of April 17, 1997.

General Release ¶ 10 (Stip. Facts Ex. B). Accompanying the General Release was a transmittal letter from the Kubeks' attorney that included the following,

As you will note, I have deleted CNA Insurance Company as a "released party" and added an additional paragraph to the Release concerning the claim of my clients against CNA for underinsured motorist benefits. These modifications preserve the UIM claim, which comports with our understanding in settling the third party action.

Transmittal Letter (Stip. Facts Ex. B).

Mr. Kubek now seeks underinsured motorist (UIM) benefits from Continental. In response, Continental filed this suit for a declaratory judgment that Mr. Kubek may not recover UIM benefits under its policy.


Continental argues that the so-called "family vehicle exclusion" included in its policy means that the vehicle owned by the Kubeks may not itself be considered an "underinsured vehicle" and that Mr. Kubek is therefore precluded from receiving UIM benefits. Mr. Kubek argues that the family vehicle exclusion is irrelevant because Ms. Moritz's automobile was the underinsured vehicle. Mr. Kubek contends that Continental is only entitled to a set-off for amounts paid by Allstate and Continental under their respective liability policies. He also argues that the terms of the release establish that he has a right to recover UIM benefits from Continental.

Pennsylvania has well-established rules regarding the interpretation of such coverage disputes. Ordinarily the court rather than the jury interprets the insurance contract with the goal of determining the intent of the parties as indicated by the language of the policy itself. See, e.g., Paylor v. Hartford Ins. Co., 536 Pa. 583, 640 A.2d 1234, 1235 (1994). When the language of the contract is unambiguous, the court must give effect to that language. See id.; Standard Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300, 469 A.2d 563, 566 (1983). A provision is ambiguous if "reasonably intelligent" people "on considering it in the context of the entire policy would honestly differ as to its meaning." Northbrook Ins. Co. v. Kuljian Corp., 690 F.2d 368, 372 (3d Cir. 1982) (citations omitted). Ambiguous language must be strictly construed against the insurer, see, e.g., Pempkowski v. State Farm Mut. Auto. Ins. Co., 451 West Page 506 Pa. Super. 61, 678 A.2d 398, 401 (1996), Standard Venetian Blind Co., 469 A.2d at 566, but the court should read policy provisions so as to avoid ambiguity and not twist the language or rewrite the contract to create doubts where none exist. See Northbrook Ins. Co., 690 F.2d at 372.

The policy provision on which Continental relies in arguing that Mr. Kubek may not recover UIM benefits is found in the "definitions" ...

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