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STATE FARM MUT. AUTO. INS. CO. v. WALKO

July 6, 2000

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, PLAINTIFF,
V.
RICHARD WALKO AND SHARON WALKO, DEFENDANTS.



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

MEMORANDUM

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.

Background

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.

Defendants subsequently filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) asserting that this court lacks subject matter jurisdiction.*fn1 The magistrate recommends that the defendants' motion to dismiss be denied. The defendants have filed objections to the report and recommendation bringing the case to its present posture. After a careful review of the matter, we find that the defendants' objections should be sustained.

Standard of Review

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 vehicle; and

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. ...

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