United States District Court, M.D. Pennsylvania
February 23, 2004.
ALLSTATE INSURANCE COMPANY, Plaintiff
PAMELA E. LEITER, Administratrix of The Estate of BRENT A. LEITER, deceased, Defendant
The opinion of the court was delivered by: JOHN E. JONES, District Judge
MEMORANDUM AND ORDER
This is Motion for Judgment on the Pleadings filed by the plaintiff,
Allstate Insurance Company ("Plaintiff" or "Allstate"), which seeks a
declaratory judgment pursuant to 28 U.S.C. § 2201 et. seq.,
that it is not obligated to pay underinsured motorist benefits to the
Estate of Brent A. Leiter pursuant to an insurance policy issued to
Charles D. Leiter.
This Court has jurisdiction based on diversity of citizenship, pursuant
to 28 U.S.C. § 1332.
For the reasons that follow, we hold that Allstate is not obligated to
pay benefits to the Estate of Brent A. Leiter. Accordingly, we shall
grant the motion for
judgment on the pleadings.
Allstate initiated this action on June 9, 2003, by filing a declaratory
judgment complaint. On July 17, 2003, Allstate filed a motion for
judgment on the pleadings and supporting brief. The defendant, Pamela E.
Leiter, Administratrix of the Estate of Brent A. Leiter ("Defendant"),
filed a brief in opposition to Allstate's motion on July 25, 2003. This
matter became ripe for disposition on August 4, 2003, when Allstate filed
a reply brief in support of its motion.
STANDARD OF REVIEW:
"After the pleadings are closed but within such time as not to delay
the trial, any party may move for judgment on the pleadings."
Fed.R.Civ.P. 12(c). In considering a motion for judgment on the pleadings, we
must accept all factual averments as true and must draw all reasonable
inferences in favor of the non-moving party. See U.S. Fidelity and
Guar. Co. v. Tierney Assoc., Inc., 213 F. Supp.2d 468, 469(M.D.
Pa. 2002)(citins Society Hill Civic Association v. Harris,
632 F.2d 1045, 1054(3d Cir. 1980)). "A party moving for judgment on the
pleadings under Rule 12(c) must demonstrate that there are no disputed
material facts and that judgment should be entered as a matter of law."
Id. (citing Jablonski v. Pan American World
Airways, Inc., 863 F.2d 289, 290-01(3d Cir. 1988); see
Institute for Scientific Info., Inc. v. Gordon & Breach,
Science Publishers, Inc., 931 F.2d 1002, 1005 (3d Cir 1991)).
Here, there is no dispute as to the facts alleged within the Complaint
and Defendant agrees that no additional facts need be disclosed in order
to resolve the issues before us.
STATEMENT OF RELEVANT FACTS:
On March 11, 2001, Brent A. Leiter ("Decedent" or "Leiter") and Andrew
J. Guizio ("Guizio") were occupants of a Chevrolet Baretta owned by Brent
Leiter which was involved in a one car motor vehicle accident. Both men
died as a result of injuries sustained in the accident.
The Chevrolet Baretta, along with three other automobiles, was covered
by an insurance policy issued to Charles D. Leiter, Brent Leiter's
father, by Allstate. The policy provides for $100,000.00 of bodily injury
liability insurance coverage, for $100,000.00 of underinsured motorist
coverage and for stacking of the vehicles insured under the policy.
Subsequent to the accident, the Pennsylvania State Police conducted an
investigation regarding which occupant of the car was driving at the time
of the accident. The investigation was inconclusive. The Administratrixes
of the Estates of Brent A. Leiter ("the Estate of Leiter") and Andrew J.
Guizio ("the Estate of
Guizio") each presented claims of bodily injury liability insurance
coverage to Allstate claiming that they were entitled to the proceeds of
the policy covering the vehicle. The Estate of Leiter insisted that
Guizio was driving at the time of the accident and the Estate Guizio
argued that Leiter was driving at the time of the accident.
On April 8, 2002, in light of its position as a mere stakeholder in the
dispute between the Estate of Leiter and Estate of Guizio, Allstate filed
a complaint in interpleader against both the Estate of Leiter and the
Estate of Guizio, tendering its $100,000 bodily injury limit of liability
to the Court. The Estates were able to reach a mediated settlement in the
action and agreed that the Estate of Leiter would receive $57,500 from
the liability insurance policy, and that the Estate of Guizio would
receive $42,500 from the policy.
After the settlement was reached, the Estate of Leiter presented a
claim to Allstate for underinsured motorist ("UIM") benefits from the
same policy that the Estate had received $57,500 in liability insurance
benefits. Allstate denied the claim and this lawsuit ensued.
Allstate seeks a judgment from this Court that the Estate of Leiter is
not entitled to UIM benefits under the policy it issued to Charles Leiter
vehicle occupied by Decedent at the time of the accident does not
meet the definition of an "underinsured auto." We assume for purposes of
this motion, as have the parties, that Guizio was the driver of the
vehicle owned by Decedent at the time of the accident and that Guizio was
driving the vehicle with Decedent's permission. As such, Guizio was
insured for liability as a permissive operator of the vehicle.
(See Compl. Ex A at 5).
Because we are exercising diversity jurisdiction over this claim, we
must apply the substantive law of the state in which we sit. See
Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78(1938). We will,
therefore, apply Pennsylvania law as it applies to insurance coverage. In
interpreting the terms of an insurance contract, the court must "attempt
to effectuate the intent of the parties as manifested by the language of
the written instrument . . . [and must] generally enforce the clear,
unambiguous terms of the policy." Nationwide Mut. Ins. Co. v.
Cosenza, 258 F.3d 197, 206(3d Cir. 2001)(internal citations
omitted). While the insured bears the burden of establishing coverage
under an insurance policy, the insurer carries the burden of
"establishing the applicability of an exclusion in an insurance
The relevant provisions of the insurance policy provide as follows:
An underinsured auto is:
A motor vehicle which has bodily injury
liability protection in effect at the time of the
accident, but its limit for bodily injury
liability is less than the damages the insured
person is legally entitled to recover.
An underinsured auto is not:
2. A motor vehicle insured for bodily
injury liability under Part 1 of this policy.
4. A A motor vehicle owned by, or
furnished or available for the regular use of
you or any resident
(Compl. Ex. A at 14)(emphasis in original). We refer to the
exclusions cited above as the "dual recovery exclusion" and the "family
car exclusion", respectively.
As to the dual recovery exclusion, Part 1 of the policy refers to
coverage for Automobile Liability Insurance, Bodily Injury Liability and
Property Damage. There is no dispute that the vehicle that Decedent
occupied at the time of the accident was insured for bodily injury
liability under Part 1 of the policy. Because this is the case, we hold
that the vehicle occupied by Decedent at the time of the accident does
not qualify as an underinsured auto under the Allstate policy.
With regard to the family car exclusion within the policy, the parties
agree that Decedent was the son of and resided in the same home as the
named insured of
the Allstate policy. As such, Decedent fit the definition of a
resident relative at the time of the accident. Based on the fact that the
Chevrolet Baretta was owned by a resident relative, the family car
exclusion provision of the policy also precludes a finding that the
vehicle involved in the accident qualifies as an underinsured auto.
In the Answer to the Complaint, Defendant asserts that she is not
seeking UIM benefits for the vehicle involved in the accident, but is
instead seeking benefits for the three remaining vehicles covered by the
Allstate policy. (See Def.'s Answ. Compl. ¶ 25). Thus,
Defendant appears to concede that under both cited policy exclusions, the
Chevrolet Baretta in particular does not qualify as an underinsured
vehicle. There is, in other words, no dispute that the clear and
unambiguous terms of the policy bar recovery of UIM benefits for the
vehicle involved in the accident. Defendant's argument with regard to the
entitlement to benefits consists instead of the following: that the
Estate of Leiter is entitled to UIM benefits for the three vehicles that
were not involved in the one car accident, and alternatively, that even
if the terms of the policy preclude a finding that the Estate is entitled
to UIM benefits for those vehicles, the exclusions set forth in the
Allstate policy are contrary to public policy and should be invalidated.
Initially, we reject Defendant's argument that the terms of the policy
entitle Defendant to UIM benefits for the three vehicles which were not
involved in the
accident. To reiterate, the dual recovery provision of the policy
excludes motor vehicles insured for bodily injury liability under Part 1
of the Allstate policy from the definition of underinsured autos. The
three vehicles and the Chevrolet Baretta were each insured under the same
Allstate policy, and in accordance with the MVFRL, each vehicle was
specifically covered for third party liability. See
75 Pa. C.S.A. §§ 1786(a), 1702. Therefore, the three vehicles, like the
Baretta, do not qualify as underinsured autos under the clear and
unambiguous term of policy.
We turn then to consider Defendant's argument that the dual coverage
exclusion within the Allstate policy is void against public policy as
expressed by the Pennsylvania Motor Vehicle Financial Responsibility Law
("MVFRL"), 75 Pa. C.S.A. §§ 1701, et seq. "Contract
provisions [that] are not in accord with public policy and are not
advantageous to the insured are particularly subject to a finding of
invalidity." Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197,
207(3d Cir. 2001) (quoting Kmonk-Sullivan v. State Farm
Mut. Ins. Co., 746 A.2d 1118, 1123(Pa. Super. 1999)). Even clear and
unambiguous contract language may be invalidated if conflicts with an
applicable statute. See id. (citing
Kmonk-Sullivan, 746 A.2d at 1121). In determining whether an
insurance contract provision violates public policy, the Pennsylvania
Supreme Court has stated the following:
Public policy is to be ascertained by reference to
the laws and legal
precedents and not from general considerations
of supposed public interest. As the term "pubic
policy" is vague, there must be found definite
indications in the law of the sovereignty to
justify the invalidation of a contract as contrary
to that policy . . . Only dominant public policy
would justify such action. In the absence of a
plain indication of that policy through long
governmental practice or statutory enactments, or
of violations of obvious ethical or moral
standards, the Court should not assume to declare
contracts . . . contrary to public policy. The
courts must be content to await legislative
Burstein v. Prudential Property & Casualty Ins. Co.,
809 A.2d 204, 207 (Pa. 2002) (quoting Eichelman v.
Nationwide Ins. Co., 711 A.2d 1006, 1008(Pa. 1998)).
The Pennsylvania Supreme Court has, on numerous occasions, expressed
the public policy underlying the MVFRL as follows:
The repeal of the No-Fault Act and the enactment
of the MVFRL reflected a legislative concern for
the spiraling consumer cost of automobile
insurance and the resultant increase in the number
of uninsured motorists driving on the public
highways. The legislative concern for the
increasing cost of insurance is the public policy
that is to be advanced by statutory interpretation
of the MVFRL. This reflects the General Assembly's
departure from the principle of `maximum feasible
restoration' embodied in the now defunct No-Fault
Burstein, 809 A.2d at 207(internal citations omitted).
Inasmuch as the overriding concern of the legislature has been identified
as that of the addressing the increasing costs of insurance for
consumers, the Pennsylvania Supreme Court has stated that this concern
"functions to protect insurers against forced underwriting of unknown
risks that insureds have neither disclosed nor paid to insure. Thus,
insureds are prevented from receiving gratis coverage, and insurers
are not compelled to subsidize unknown and uncompensated risks by
increasing insurance rates comprehensively." Id. at 208.
With reference to the rationale behind UIM coverage in particular, the
Pennsylvania Superior Court has explained that
[t]he purpose of underinsurance motorist coverage
is to protect the insured (and his additional
insureds) from the risk that a negligent driver of
another vehicle will cause injury to the insured
(or his additional insureds) and will have
inadequate liability coverage to compensate for
the injuries caused by his negligence . . . The
language of the statute itself suggests that
underinsurance motorist coverage requires the
existence of at least two applicable
policies of motor vehicle insurance. See
75 Pa. C.S.A. § 1731(c). Thus, the statute
contemplated one policy applicable to the vehicle
at fault in causing the injury to the claimant and
which is the source of liability coverage (which
is ultimately insufficient to fully compensate the
victim), and a second policy, under which the
injured claimant is either an insured or a covered
person. It is the second policy which the statute
contemplates as the source of underinsured
motorist coverage, where the liability coverage
provided by the first policy of insurance is
insufficient to fully compensate the claimant for
Kelly v. Nationwide Ins. Co., 606 A.2d 470, 474(
Pa. Super. 1992)(quoting Wolgemuth v. Harlevsville Mut. Ins.
Co., 535 A.2d 1145, 1149(Pa. Super. 1988)); see also
Cosenza, 258 F.3d at 209. Recognizing that liability insurance is
the most expensive form of insurance coverage in Pennsylvania and seeking
to prevent insureds from converting less expensive UIM insurance into the
liability insurance, Pennsylvania courts have repeatedly held that
in cases involving single tortfeasor accidents, dual recovery of UIM
benefits and liability benefits under the same contract are
impermissible. See Cosenza, 258 F.3d at 211 (citing
Pempkowski v. State Farm Mutual Auto Inso. Co., 678 A.2d 398,
403(1996); Wolgemuth, 535 A.2d 1145 (Pa. Super. 1988);
Newkirk v. USAA, 597 A.2d 1153 (Pa. 1990); Sturkie v.
Erie, 595 A.2d 152 (Pa. Super. 1991); Caldararo v. Keystone Ins.
Co., 573 A.2d 1108 (Pa. Super. 1990); Cooperstein v. Liberty
Mut. Fire Ins. Co., 611 A.2d 721 (Pa. Super. 1992)). This is so
because "[t]he rationale behind UIM insurance is inapplicable in single
tortfeasor cases, where injured parties can ensure that they have
adequate coverage simply by purchasing adequate liability insurance."
Id. at 212. Indeed, "in single tortfeasor cases the dual
recovery exclusion actually promotes the goals of the MVFRL by barring
unlawful conversion of UIM coverage to liability coverage." Id.
at 214. Here, where Defendant is attempting to recover UIM and liability
coverage under the same policy for a single car accident involving a
single tortfeasor, we hold that the dual recovery exclusion within the
Allstate policy does not violate the public policy of the MVFRL.
Our position is supported by the Pennsylvania Superior Court's holding
in Kelly. In Kelly, Clara and Edward Kelly were named
policyholders on a single
Nationwide policy covering two vehicles. Clara was injured while an
occupant in a one car accident when her husband lost control of one of
the vehicles covered by the policy. Clara was able to recover the maximum
amount of liability coverage on the vehicle involved in the accident.
Thereafter, Clara sought to recover benefits under the UIM coverage of
the same policy, asserting that the benefits were available on the
non-accident vehicle. Nationwide rejected Clara's claim for benefits
under a dual recovery exclusion in the insurance contract. The lower
court granted Nationwide's motion for judgment on the pleadings and an
appeal to the Superior Court followed.
In challenging the lower court's holding that the dual recovery
exclusion provision of the policy did not violate public policy, Clara
Kelly argued that the provision should be invalidated because "in
substantive terms her factual position is identical to that of a separate
policyholder." Kelly, 606 A.2d at 474(internal quotation marks
omitted). The Superior Court rejected Clara Kelly's argument and found
that because the claimant and her tortfeasor husband had the ability to
purchase that amount of liability coverage they thought was appropriate,
"[t]he exclusion in the . . . policy [was] in perfect accord with the
purpose of underinsured coverage as elucidated in Wolgemuth: to
protect the injured claimant against the risk that a tortfeasor over whom
the claimant has no control purchases an inadequate
amount of liability coverage." Id. at 476.
We believe that the facts before us are on point with those in
Kelly: Decedent "was injured in a single vehicle accident while
a passenger in a car driven by a person also insured under the policy,
and [Decedent's Estate] seeks to recover UIM benefits under the same
policy from which [it has already] received liability benefits."
Id. at 476(emphasis omitted).
Defendant attempts to distinguish the Kelly case by arguing
that here, neither Decedent nor the named insured had control over the
amount of insurance coverage purchased by Guizio, the professed
tortfeasor.*fn2 We agree with Plaintiff that this argument is without
merit. Charles Leiter, the named insured, had control over the amount of
liability coverage purchased for vehicles covered under the Allstate
policy. As a resident of the same household as the named insured,
Decedent met the definition of an insured person under the Allstate
policy. (See Compl. Ex. A at 5). Guizio, a permissible operator
of the insured vehicle, likewise qualified as an insured person under the
policy. (See Compl. Ex. A at 5). The effect of the foregoing is
that in having control over the amount of liability coverage purchased
for the vehicle involved in the accident, Charles Leiter also had
control over the liability insurance available to Guizio and Decedent at
the time of the accident. In insuring the vehicle he owned under his
father's policy, Decedent must, at a minimum, be charged with
constructive knowledge of the amount of liability insurance recoverable
under the policy. Had the bodily injury coverage been unsatisfactory to
Decedent, he certainly could have elected to insure his vehicle under a
separate policy.*fn3 This, he did not do.
The fact that both Decedent, the injured party, and Guizio, the
presumed tortfeasor, did not have direct control over the amount of
liability coverage available under the Allstate policy for the subject
vehicle therefore operates as a distinction without a difference in this
case. It was certainly foreseeable and within the reasonable
contemplation of Charles Leiter, the named insured, and Decedent, the
owner of the subject vehicle, that injuries or death could befall
individuals by reason of the operation of a vehicle insured under the
subject Allstate policy via the negligence of a third-party authorized
user. Charles Leiter and Decedent had the
ability to assess that risk and purchase the amount of liability
coverage they believed to be adequate. We believe it would be against the
public policy goals of the MVFRL for either the Leiter's or Decedent's
Estate to declare Guizio underinsured under circumstances clearly
demonstrating that they themselves placed Guizio in that category. The
Estate seeks to convert the more cheaply obtained underinsured benefits
provided under the Allstate policy to more expensive liability coverage
also provided therein. This violates the spirit, if not the letter, of
Because we find that the dual recovery exclusion operates to prevent
Defendant from recovering UIM benefits under the Allstate policy, and
because we hold that the exclusion does not violate the public policy
expressed in the MVFRL, we need not reach the issue of whether the family
car exclusion violates public policy. We conclude then that Estate of
Brent A. Leiter is not entitled to receive underinsured motorist benefits
under the policy of insurance issued to Charles D. Leiter and shall
accordingly grant Plaintiff's motion for judgment on the pleadings.
NOW, THEREFORE, IT IS ORDERED THAT:
1. Plaintiff's Motion for Judgment on the
Pleadings (doc. 6) is granted. The Estate of
Brent A. Leiter is not entitled to receive
underinsured motorist benefits under the policy
of insurance issued to Charles D.