The opinion of the court was delivered by: Munley, District Judge.
Before the court for disposition is the report and
recommendation of Magistrate Judge Raymond J. Durkin which
recommends that the defendants' motion to dismiss be denied. The
defendants, Richard Walko and Sharon Walko, have filed objections
to the report and recommendation. The matter has been fully
briefed and is thus ripe for disposition. For the reasons that
follow, the objections will be sustained, and the motion to
dismiss will be granted.
Defendant Sharon Walko was involved in an automobile accident
on June 17, 1997. At the time of the accident, she was driving a
motor vehicle owned by her husband, Defendant Richard Walko. The
vehicle was insured through Plaintiff State Farm Mutual
Automobile Insurance Company. Two other vehicles owned by Richard
Walko were also insured with the Plaintiff. Plaintiff alleges
that each policy provided for stacking underinsured motorist
coverage in the amount of $15,000.00 per person and $30,000 per
occurrence. Plaintiff has paid the Walkos $45,000 in underinsured
motorist coverage, which it alleges is the total owed under the
three policies (that is $15,000 for each of the three vehicles).
Defendants claim that they are actually entitled to a total of
$150,000 and are thus still owed $105,000 from the plaintiff. The
defendants requested arbitration under their insurance policy to
adjudicate the claim. Plaintiff, however, filed the instant
declaratory judgment action wherein it seeks to have the court
declare that State Farm is not obligated to provide additional
underinsured motorist coverage to the defendants for the June 17,
1997 accident. In addition, the plaintiff filed a motion to stay
arbitration which was granted by Magistrate Judge Durkin.
In disposing of objections to a magistrate's report and
recommendation, the district court must make a de novo
determination of those portions of the report to which objections
are made. 28 U.S.C. § 636(b)(1)(C); see also Henderson v.
Carlson, 812 F.2d 874, 877 (3d Cir. 1987). The court may accept,
reject, or modify, in whole or in part, the findings or
recommendations made by the magistrate. The judge may also
receive further evidence or recommit the matter to the magistrate
with instructions. Id.
In the instant case, the parties are apparently in agreement
that Pennsylvania state law governs the substantive liabilities
of the parties. "Under Pennsylvania law, the determination of
whether an issue must be submitted to arbitration depends on two
factors: (1) whether the parties entered into an agreement to
arbitrate, and (2) whether the dispute falls within the scope of
that agreement." Id. at 46. The question presented here is
whether the dispute falls within the scope of the agreement as it
is uncontested that the parties have in fact entered into an
arbitration agreement. Further, any ambiguities in the policy
must be resolved against the insurance company. Brennan v.
General Accident Fire & Life Assurance, Corp., 524 Pa. 542,
574 A.2d 580 (1990).
The insurance policy at issue provides as follows:
Deciding Fault and Amount — Coverages U, U3, W and W3
Two questions must be decided by agreement between
the insured and us:
1. Is the insured legally entitled to collect
compensatory damages from the owner or driver of an
uninsured motor vehicle or underinsured motor
2. If so, in what amount?
If there is no agreement, these two questions shall
be decided by arbitration at the request of the
insured or us. The arbitrators' decision shall be
limited to these two questions. The arbitrators shall
not award damages under this policy which are in
excess of the limits of liability of this coverage as
shown on the declarations page. ...