United States District Court, M.D. Pennsylvania
July 1, 2005.
NATIONWIDE INSURANCE COMPANY, Plaintiff,
SHARON CHIAO and CHARLES P. CHIAO, Defendants.
The opinion of the court was delivered by: JOHN E. JONES, District Judge
MEMORANDUM AND ORDER
THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:
Pending before the Court are cross-motions for Summary Judgment
filed by Plaintiff Nationwide Insurance Company ("Nationwide" or
"Plaintiff") and by Defendants Sharon and Charles P. Chiao
("Defendants"). (Rec. Docs. 10 and 13). Following briefing by the
parties, we held oral argument on the Motions on May 13, 2005.
The Motions are now ripe for our review. Diversity jurisdiction
in this Court is proper pursuant to 42 U.S.C. § 1332.
For the following reasons, we will grant the Defendants' Motion
for Summary Judgment and deny Plaintiff's Motion for Summary Judgment. STANDARD OF REVIEW:
Summary judgment is appropriate if "there is no genuine issue
as to any material fact and . . . the moving party is entitled to
judgment as a matter of law." Fed .R. Civ. P. 56(c); see also
Turner v. Schering-Plough Corp., 901 F.2d 335, 340 (3d Cir.
1990). The party moving for summary judgment bears the burden of
showing "there is no genuine issue for trial." Young v.
Quinlan, 960 F.2d 351, 357 (3d Cir. 1992). Summary judgment
should not be granted when there is a disagreement about the
facts or the proper inferences which a fact finder could draw
from them. Peterson v. Lehigh Valley Dist. Council,
676 F.2d 81, 84 (3d Cir. 1982).
Initially, the moving party has a burden of demonstrating the
absence of a genuine issue of material fact. Celotex Corporation
v. Catrett, 477 U.S. 317, 323 (1986). This may be met by the
moving party pointing out to the court that there is an absence of evidence
to support an essential element as to which the non-moving party will bear
the burden of proof at trial. Id. at 325.
Federal Rule of Civil Procedure 56 provides that, where such a
motion is made and properly supported, the non-moving party must
then show by affidavits, pleadings, depositions, answers to
interrogatories, and admissions on file, that there is a genuine
issue for trial. Fed.R.Civ.P. 56(e). The United States Supreme Court has commented that this requirement is tantamount to the
non-moving party making a sufficient showing as to the essential
elements of their case that a reasonable jury could find in its
favor. Celotex Corp., 477 U.S. at 322-23.
It is important to note that "the non-moving party cannot rely
upon conclusory allegations in its pleadings or in memoranda and
briefs to establish a genuine issue of material fact." Pastore
v. Bell Tel. Co. of Pa., 24 F.3d 508, 511 (3d Cir. 1994)
(citation omitted). However, all inferences "should be drawn in
the light most favorable to the non-moving party, and where the
non-moving party's evidence contradicts the movant's, then the
non-movant's must be taken as true." Big Apple BMW, Inc. v. BMW
of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert.
denied, 507 U.S. 912 (1993) (citations omitted).
Still, "the mere existence of some alleged factual dispute
between the parties will not defeat an otherwise properly
supported motion for summary judgment; the requirement is that
there be no genuine issue of material fact." Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in
original). "As to materiality, the substantive law will identify
which facts are material." Id. at 248. A dispute is considered
to be genuine only if "the evidence is such that a reasonable
jury could return a verdict for the nonmoving party." Id. STATEMENT OF MATERIAL FACTS:
The facts of this case are, in the main, undisputed.*fn1
On December 8, 1998 Defendant Sharon Chiao was a passenger in a
1990 Plymouth Voyager owned and operated by Chiao's coworker
Janet K. Wilkinson ("Wilkinson") that was involved in a serious
accident. At the time of the accident the two women were both
employees of the Pennsylvania State University and were returning
from Reading, Pennsylvania to their homes in Schuylkill County,
Pennsylvania where they had traveled for an employer-sponsored
The incident occurred when Wilkinson's attention to the road
temporarily lapsed as she put out her cigarette. When Wilkinson's
attention refocused on the road, she saw a vehicle stopped for a
school bus immediately in front of her minivan. In an attempt to
avoid a collision with the stopped vehicle, Wilkinson swerved to
the right towards an embankment. The vehicle hit the embankment
and flipped over. Passenger Sharon Chiao suffered significant and
life-altering personal injuries.
Following the incident, the Chiaos asserted a claim against
Wilkinson, who was insured by the Progressive Insurance Company.
In settlement of the Chiaos' claim, Progressive paid her the
entire $15,000 value of Wilkinson's policy. In addition, Sharon Chiao's employer has paid her workers'
compensation benefits pursuant to the Pennsylvania Workmen's
Compensation Act, codified at 77 Pa. Cons. Stat. § 1 et seq.
At the time of the incident, Chiao was herself insured by the
Defendant. In addition to a standard automobile insurance policy,
Chiao had purchased an underinsured motorist ("UIM") insurance
policy (the "UIM Policy") from the Plaintiff, an optional
coverage in Pennsylvania, against which Chiao has now asserted a
claim as a result of the accident. Nationwide filed this action
seeking a declaratory judgment that it need not pay Chiao for her
injuries because she is not "due [payment] by law" as per the
terms of the UIM Policy. (Cmplt. ¶ 13, Rec. Doc. 1). The UIM
Policy is governed by the Pennsylvania Motor Vehicle Financial
Responsibility Law, codified at 75 Pa. Cons. Stat. § 1701 et
The question before the Court is a succinct and unresolved
question of Pennsylvania law: whether an automobile insurer must
provide coverage to an insured who has purchased supplemental UIM
insurance when the insured was injured solely by a co-employee's negligence.*fn2
A. Choice of Law
When a federal district court is presented with an unresolved
question of state law, it must resolve the question by predicting
how the state's supreme court would decide the issue. See
Travelers Indem. Co. v. DiBartolo, 131 F.3d 343, 348 (3d Cir.
1997). We apply Pennsylvania law to this action, because
Pennsylvania's choice of law rules provide that courts apply the
insurance laws of the state in which the policy was delivered.
See Frog, Switch & Mfg. Co. v. Travelers Ins. Co.,
193 F.3d 742, 746 (3d Cir. 1999). It is undisputed that the Policy was
delivered to the Chiaos at their home in Pennsylvania, and
therefore we shall apply the Commonwealth's statutory and common
law to this case. Furthermore, we apply Pennsylvania law as it
stood on December 8, 1998, the date of Sharon Chiao's accident.
See Gokalp v. Pennsylvania Mfrs.' Assoc. Ins. Co.,
719 A.2d 1033 (Pa. 1998).
B. The Applicable Statutory Sections
Pennsylvania courts have long debated the intersection of
workers' compensation and automobile insurance laws, and a review
of the relevant case law and statutes is necessary to the resolution of the parties'
Under Pennsylvania's MVFRL law:
Underinsured motorist coverage shall provide
protections for persons who suffer injury arising out
of the maintenance or use of a motor vehicle and are
legally entitled to recover damages therefore from
owners or operators of underinsured motor
vehicles. . . .
75 Pa. Cons. Stat. § 1731(c) (emphasis added).*fn3
1731 also makes underinsured motorist insurance coverage optional
for drivers in Pennsylvania.*fn4
The parties differ in their
interpretation of how we are to read "legally entitled to
recover" in light of the following provisions of the WCA.
First, the WCA creates an exclusivity provision for employers:
The liability of an employer under this Act shall be
exclusive and in place of any and all other
liability to such employee, his legal
representative, husband or wife, parents, dependents,
next of kin or anyone else otherwise entitled to
damages in any action at law or otherwise on account
of an injury or death. . . . 77 Pa. Cons. Stat. § 481(a) (emphasis added) (the "exclusivity
provision"). This exclusivity has been extended to co-employees:
If disability or death is compensable under this
action, a person shall not be liable to anyone at
common law or otherwise on account of such disability
or death for any act or omission occurring while such
person was in the same employ as the person disabled
or killed, except for intentional wrong.
Id. § 72 (the exclusivity provision) (the "co-employee immunity
provision"). Thus, both employers and co-employees are themselves
immune from suit when an employee is harmed in an accident. As
previously noted, the dispute before us lies at the intersection
of these two WCA provisions and the rights of an insured under
Pennsylvania requires two insurance policies to be in existence
for an insured to receive coverage from his or her underinsured
motorists policy. See Wolgemuth v. Harleysville Mut. Ins.
Co., 535 A.2d 1145, 1149 (Pa.Super.Ct. 1988) ("The language of
the [MVFRL] statute itself suggests that underinsurance motorist
coverage requires the existence of at least two applicable
policies of motor vehicle insurance."); see also 75 Pa. Cons.
Stat. § 1731. Here, obviously the Chiaos' own UIM Policy is in
play. We must now determine whether Wilkinson's auto insurance
policy is also implicated in the dispute.
As previously noted, Progressive, Wilkinson's insurance
carrier, settled with the Chiaos for $15,000, the coverage limit on Wilkinson's
insurance policy. The Defendants argue that Nationwide should be
estopped from arguing that the policy applies due to Progressive
having settled with the Chiaos. Nationwide contends that this is
an irrelevant consideration because Progressive was immune from
suit, and we should not speculate as to its motives in deciding
to settle with the Chiaos. However, for purposes of the
Wolgemuth requirement of two policies, we need not resolve that
dispute, and find simply that the presence of Wilkinson's policy
alone is sufficient. In Nationwide Ins. Co. v. Cosenza, the
court said "there are two policies at play the liability policy
of [the individual who caused the accident] and the liability
policy of the [plaintiff]." 258 F.3d 197, 209 (3d Cir. 2001).
Similarly here, Nationwide cannot argue that Wilkinson's policy
is not, at least, "at play" since, if we hold in the Chiaos'
favor, it will no doubt claim a credit for the $15,000 paid to
the Defendants by Progressive.*fn5 Id.
C. Interpretation of Disputed Insurance Contracts
When interpreting an insurance contract, we are to be guided by
two main principles of interpretation. Riley, 352 F.3d at 807. The first
is that "a clear and unambiguous contract provision must be given
its plain meaning." Id. (citing Burstein v. Prudential Prop.
& Cas. Ins. Co., 809 A.2d 204, 206 (Pa. 2002). The second, is
that "contract provisions will not be enforced if to do so would
be contrary to a clearly expressed public policy." Id.
1. Plain Meaning of the UIM Policy
We will, as we must, look first at the plain meaning of
Nationwide's contract with the Chiaos. The UIM Policy the
Defendants purchased from the Plaintiff states, in relevant part:
YOU AND A RELATIVE
We will pay compensatory damages, including
derivative claims, which are due by law to you or a
relative from owner or driver of an underinsured
motor vehicle because of bodily injury suffered by
you or a relative. Damages must result from an
accident arising out of the: (1) ownership; (2)
maintenance; or (3) use of the underinsured motor
(Endorsement 2358 Underinsured Motorists Coverage; Rec. Doc. 13
Ex A at 1) (emphasis added). The parties dispute the meaning of
"due by law" as it applies to the circumstances before us.
Nationwide argues that under various provisions of the WCA, the
Chiaos would not be entitled to recover under the Policy because
they were legally unable to recover payment directly from
Wilkinson. We must determine whether the Chiaos' inability to
recover directly from Wilkinson means that their claims are not "due by law," and thus that they are
precluded from recovering under the UIM Policy issued by
First, Nationwide presents us with no precedent by which we can
interpret the "due by law" language in the UIM Policy. In fact,
the language of the MVFRL states that underinsured motorist
coverage applies when parties are "legally entitled to recover"
from the owner of an underinsured vehicle. Nationwide sees no
difference between "legally entitled to recover" in the MVFRL and
"due by law" in the UIM Policy. While "legally entitled to
recover" has developed a specific meaning under the MVFRL, we are
presented with no evidence that "due by law" is anything other
than legal boilerplate used by Nationwide in its insurance
policies.*fn6 As discussed in more detail below, we will not
apply such vague language to limit the available coverage to the
Plaintiffs in the light of the policies behind the MVFRL.
Second and notably, the circumstance at issue is not
contemplated within the UIM Policy's eight enumerated coverage
exclusions. The UIM Policy states that:
This coverage does not apply to:
1. Use of any motor vehicle by an insured to carry
persons or property for a fee. Motor vehicles used in
shared-expense car pools are not considered as
carrying persons for a fee.
2. Use of any motor vehicle by an insured without the
3. Punitive or exemplary damages.
4. Directly or indirectly benefit any workers'
compensation or disability benefits carrier, or any
person or organization qualifying as a "self-insurer"
under a workers' compensation, disability benefits,
or similar law.
5. Bodily injury suffered while occupying or struck
by a motor vehicle owned by you or a relative, but
not insured for auto liability coverage under this
6. Bodily injury suffered while occupying a motor
vehicle owned by you or a relative but not insured
for Underinsured Motorists coverage under this
policy; nor to bodily injury from being hit by any
such motor vehicle.
7. Noneconomic loss of any insured who has elected
"Limited Tort" in accordance with the Pennsylvania
Motor Vehicle Financial Responsibility Law
8. Bodily injury of any insured if the insured
settles, without our written consent, with a liable
Id. at 2.*fn7
Nationwide contends that the enumerated
exceptions in the UIM Policy cannot possibly comprehend every
conceivable occurrence in which coverage would not comply.
However, it has presented us with no evidence that the UIM
Policy's drafters were forced to curtail this list for fear that
it would become overly long and otherwise burdensome. In fact,
counsel for Nationwide was unable to inform the Court of any
other exclusions not on this list in which coverage would not be available to an insured, save for the bar to coverage
which it argues here.
2. The Policy and Clearly Established Public Policy
Because the UIM Policy does not expressly address the issue
before us, we must now turn to an examination of the public
policy underlying the interplay of the WCA and the MVFRL. At the
outset of this analysis, we note that the MVFRL was amended in
1993 by what is known as Act 44. Despite Nationwide's claim to
the contrary, Pennsylvania courts have consistently held that Act
44 does not preclude the right of insureds to seek payment from
both workers' compensation and automobile insurance policies.
See Gardner v. Erie Ins. Co., 722 A.2d 1041, 1044 (Pa.
1999).*fn8 As we find that the UIM Policy is not clear, we move to the
second step in interpreting an insurance contract public
policy. Although important, we are not to be swayed by vague
references to public policy, but rather "[p]ublic policy is to be
ascertained by reference to the laws and legal precedents and not
from general considerations of supposed public interest."
Eichelman v. Nationwide Ins. Co., 711 A.2d 1006, 1009 (Pa.
1998). At the outset of this portion of our analysis, we note that
"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." Cosenza, 258 F.3d at 207
(quoting Kmonk-Sullivan v. State Farm Mut. Ins. Co.,
746 A.2d 1118, 1121 (Pa.Super.Ct. 1999), aff'd 788 A.2d 955 (Pa.
2001)). We now proceed to examine the relevant public policies
under both the WCA and the MVFRL.
a. Public Policy and the MVFRL
The MVFRL contains no explicit mention of legislative intent,
its purpose or public policy. Cosenza, 258 F.3d at 208
(citing Marroquin v. Mutual Benefit Ins. Co., 591 A.2d 290,
293 (Pa. 1991)). Nonetheless, courts in Pennsylvania have agreed
that the MVFRL is a remedial statute which is consistently
construed in favor of "indemnifying victims of accidents for harm
they suffer on Pennsylvania highways." Id. (internal citations
As it pertains to underinsured motorist insurance,
"Pennsylvania courts are unanimous that the legislative intent
underlying the MVFRL was to establish a liberal compensatory
scheme of underinsured motorist protection." Id. (citing
Kmonk-Sulllivan, 746 A.2d at 1123; Marroquin,
591 A.2d at 293). The purpose of underinsured motorist insurance is to
protect "an insured from a negligent driver of another vehicle
who causes injury to the insured, but through no fault of the insured, lacks adequate insurance coverage to compensate the
insured for his or her injuries." Id. (citing Eichelman,
711 A.2d at 1008) (emphasis added). Because underinsured motorist
insurance is optional in Pennsylvania, "courts have been
especially attentive to the fact that UIM coverage is purchased
`to protect oneself from other drivers whose liability insurance
purchasing decisions are beyond one's control.'" Id. (citing
Eichelman, 711 A.2d at 1008). Clearly, the Chiaos, who
purchased the optional coverage, have not been adequately
compensated following the incident due to circumstances beyond
Despite these clear statements about underinsured motorist
insurance, Nationwide contends that the actual policy evinced by
the General Assembly behind the MVFRL is cost-containment. In
support thereof, it cites to Donnelly v. Bauer, which explained
that "the repeal of the No-Fault Motor Vehicle Insurance Act, 40
[Pa. Const. Stat.] § 1009.101, and the simultaneous enactment of
the MVFRL, reflected a legislative concern for the spiralling
[sic] consumer cost of automobile insurance and the resultant
increase in the number of uninsured motorists driving on public
highways." 720 A.2d 447, 452 (Pa. 1998) (internal quotations
omitted). Nationwide also cites to Caron v. Reliance Ins. Co.,
an opinion authored by then-Superior Court Judge Berle Schiller
(now a judge on the United States District Court for the Eastern
District of Pennsylvania), in which Judge Schiller stated that "one of the major considerations that
prompted the passage of the MVFRL [was] the rapidly escalating
cost of automobile insurance." 703 A.2d 63, 69 (Pa.Super.Ct.
1997) (citing Jeffrey v. Erie Ins. Exchange, 621 A.2d 635
(Pa.Super.Ct. 1993) (en banc)).
We do not disagree with Nationwide that the General Assembly
adopted the MVFRL, in part, to control the escalating costs of
automobile insurance. However, we do not agree that this is a
paramount consideration in our resolution of the instant case.
First, Nationwide fails to show how a ruling in the Defendants'
favor would result in a significant increase in the cost of
insurance. Notably, Nationwide has not presented testimony,
affidavits, expert reports, or any other form of tangible
evidence by which we could find that insurance costs would, in
fact, increase. Second, insofar as there is a cost to insurers
for providing coverage in this situation, we believe that it is
already accounted for in the additional premium paid by consumers
for the optional UIM coverage.
Third, a ruling in Nationwide's favor could have an effect
opposite to mere cost containment and actually create a windfall
for insurance carriers. The Pennsylvania Supreme Court, in
Selected Risks Ins. Co. v. Thompson, explained that the
availability of collateral sources of payment, such as a workers'
compensation award that precluded payment of otherwise due
insurance benefits would result in a windfall for insurance carriers:
The rationale of these courts is varied but certain
common themes emerge: first, uninsured motorist
coverage is paid for by a separate premium, and to
give the uninsured motorist carrier a set-off based
on the fortuitous existence of a collateral source
would result in a windfall to the carrier; second,
uninsured motorist coverage is mandated by statute
and any variations from that statutory mandate should
come from the legislature; third, workmen's
compensation only covers a fraction of what tort
damages would cover, (e.g. workmen's compensation
does not provide 100% of wage loss coverage, nor pain
and suffering, nor other consequential damages) and a
dollar-for-dollar set-off does not recognize this
reality; and fourth, there is no public policy
against an individual purchasing additional uninsured
motorist coverage to protect himself and his family
against the shortfall which could result from a
dependency on workmen's compensation benefits.
552 A.2d 1382, 1388 (Pa. 1989) (emphasis added). The Chiaos
purchased this extra insurance to cover precisely the
circumstance which arose here, that is, to protect themselves
when the coverage of another motorist was grossly insufficient to
compensate them for any injuries Sharon Chiao sustained.
Fourth, the courts have also paid little attention to whether
an insurer had a right of subrogation against an immune
tortfeasor. In Kmonk-Sullivan, the court found irrelevant an
insurers inability to subrogate against a tortfeasor who was an
immune government actor. 746 A.2d at 1125. Only when a plaintiff
"took some action that destroyed the insurers' subrogation
rights, such as settling with the tortfeasor" was the lack of
subrogation relevant. Id. Here, Wilkinson has taken no action to destroy Nationwide's right to subrogation. Rather, she
is simply immune under Pennsylvania law. This immunity is not
relevant to a determination of whether Nationwide is liable here.
See, e.g., Boyle v. State Farm Auto Ins. Co., 456 A.2d 156,
162 (Pa.Super.Ct. 1983) (holding that an insurers inability to
subrogate against a tortfeasor due to an elapsed statute of
limitations did not alter the insurers' obligation to provide
coverage). We therefore find that while an important
consideration in certain cases, the Commonwealth's policy of
cost-containment is not relevant in the determination of whether
an insured, injured by a co-employee, can claim underinsured
motorist insurance while also receiving workers' compensation.
Regardless of cost-containment policies, we note that the
Pennsylvania Supreme Court has found that there is "a correlation
between premiums paid by the insured and the coverage [that] the
claimant should reasonably expect to receive." Id. (citing
Eichelman, 711 A.2d at 1010) (other internal citations
omitted)). Most relevant to the inquiry in the case sub
judice, the Supreme Court has also said that, "[a]llowing
insurers to evade payment of UIM benefits. . . ., where the
insured has paid a premium to procure UIM coverage, would be
against public policy." Id. (quoting Kmonk-Sullivan,
746 A.2d at 1124, 1126)). At oral argument, it became clear to the
Court that coverage for Sharon Chiao's injuries sustained on
December 8, 1998 is exactly the type of coverage the Plaintiffs expected
to receive from their purchase of the UIM Policy. We believe that
is commonsensical for purchasers of optional UIM insurance to
expect to be covered in the situation before the Court, absent a
clear exclusion within the UIM Policy which would prevent
activation of the coverage.
Finally, we note that our determination is consistent with the
guide that in "close or doubtful cases" we are to find that the
MFVRL intends to cover the underinsured motorist.
Kmonk-Sullivan, 746 A.2d at 1123.
b. Public Policy under the WCA
There are also several relevant public policy considerations
related to the WCA that we must examine. As the Pennsylvania
Supreme Court succinctly explained in Sporio v. Workmen's
Compensation Appeal Bd. (Songer Const.):
The [Workmen's Compensation] Act is remedial in
nature and its purpose is to benefit the workers of
this Commonwealth. The Act is to be liberally
construed to effectuate its humanitarian objectives.
In addition, borderline interpretations of the Act
are to be construed in the injured party's favor.
717 A.2d 525
, 528 (Pa. 1998) (citing Harper & Collins v.
Workmen's Compensation Appeal Bd. (Brown), 672 A.2d 1319, 1321
(Pa. 1996)) (emphasis added); see also Gardner,
722 A.2d at 1047 (applying the Harper & Collins WCA principles to an
underinsured motorist case). These general precepts are clearly reflected in the specific
policies pertaining to the co-employee immunity and employer
exclusion provisions. The courts have explained that the purpose
of the exclusivity provision is to allow workers to "obtain . . .
more efficient and expeditious statutory remedy of [workers'
compensation] to the exclusion of a suit against his employer.
This does not mean that he has given up the right to seek redress
from an unrelated third party." Boris v. Liberty Mut. Ins. Co.,
515 A.2d 21, 24 (Pa.Super.Ct. 1996).
With the public policy concerns attending both the MVFRL and
the WCA in mind, we can now apply them to the case sub
judice. See Paylor, 640 A.2d at 1240 ("the enforceability
of an exclusion [to insurance coverage] is dependent upon the
factual circumstances presented in each case").
D. Application of MVFRL and WCA Public Policies to the UIM
Although many courts have determined that a simultaneous
recovery of workers' compensation and UIM insurance is possible,
we have located only three cases which have in any way addressed
the precise issue before us. Specifically, two state court cases
have discussed this issue, while one federal court addressed this
issue in the pre-Act 44 context.
In the first state case, Love v. Nationwide Mutual Ins. Co.,
a county Court of Common Pleas held that "section 205 of the
Workmen's Compensation Act prevents [a] plaintiff from recovering uninsured motorist
benefits under the at fault co-employee's insurance policy."
42 Pa. D. & C. 4th 394, 397 (Cambria Cty. Feb. 3, 1999). This
one-page opinion relies solely on decisions by appellate courts
in North Dakota and Oregon and fails to address any of the clear
policy reasons as previously noted that support Pennsylvania's
insurance and workers' compensation statutes. See id.
(citing Cormier v. Nat'l Farmers Union Property & Casualty
Co., 445 N.W.2d 644 (N.D. 1989) and Cope v. West American Ins.
Co., 785 P.2d 1050 (Or. 1990)).*fn9 As we are neither bound
by the decision in Love nor persuaded by its limited reasoning,
we will not adopt its holding because we predict that the
Pennsylvania Supreme Court would engage in a more thorough
analysis as it did in its most analogous case, Gardner.
722 A.2d at 1041.*fn10 The second state court to discuss this issue was the
Pennsylvania Supreme Court via dicta in Gardner. Id. In
Gardner, the plaintiff, Lorren Gardner, was injured in a 1994
hit-and-run accident while driving a coworker's vehicle. He had a
UIM policy with the defendant, Erie Insurance Company, which
refused to pay his claim. The Court held:
that an employee receiving workers' compensation
benefits for injuries sustained in an automobile
accident involving a co-employee's vehicle and
arising out of wrongful third-party conduct is not
precluded by the [Workmen's Compensation] Act from
seeking underinsured motorist benefits from the
co-employee's insurance carrier.
Id. at 1048 (emphasis added). Thus, in Gardner, the tort was
committed by an anonymous third party, while in the instant case,
the tort was committed by the underinsured co-employee. Lest we
simply adapt this holding to the case at bar, we note that the
following footnote was set forth by the Gardner court:
The question whether the recovery of underinsured
motorist benefits should be permitted where the claim
arises out of the negligence of the co-employee is
not before us. We note, however, that many
jurisdictions have found that the tort immunity of a
co-employee means that the injured employee is not
`legally entitled to recover' from the co-employee
and therefore, as a contractual matter, may not recover pursuant to an underinsured motorist
Id. (internal citations omitted) (emphasis added). In essence,
Nationwide submits that we should cease our inquiry at the point
of this footnote, and accordingly requests that we apply what is
obviously dicta as if it were the holding of the Pennsylvania
Supreme Court, while disregarding the rest of the Gardner
opinion. We decline to do so, and rather will apply the more
extensive and carefully reasoned logic that the Gardner Court
itself used to reach its previously cited holding as it pertains
to the intersection of workers' compensation and underinsured
motorist insurance. See DiBartolo, 131 F.3d at 348 n. 9 ("a
federal court should be circumspect in surrendering its own
judgment concerning what the state law is on account of dicta.")
(internal citations omitted); see also Abraham v. Raso,
183 F.3d 279
(3d Cir. 1999) (in analyzing an underinsured motorist
case, the court disregarded dicta it believed to be
"ill-conceived, poorly supported, and [that did] not accurately
reflect the position of the . . . Supreme Court").*fn11
Gardner reiterates that the purpose of UIM insurance is to
"protect an `insured . . . from the risk that a negligent driver
of another vehicle will cause injury . . . and will have
inadequate coverage to compensate for the injuries caused by his negligence." Nationwide Mut. Ins. Co. v. Riley, 352 F.3d 804,
806-07 (3d Cir. 2003) (quoting Paylor v. Hartford Ins. Co.,
640 A.2d 1234, 1235-36 (Pa. 1994) (other internal citations
omitted)). Allowing the Chiaos to recover UIM benefits in the
instant case necessarily means that they will be more adequately
compensated for the injuries caused by the Wilkinson accident.
Finally, we must address an analogous unpublished opinion from
our colleague Judge Schiller, which recently addressed the
convergence of underinsured motorist insurance and workers'
compensation. See Holland v. GEICO General Ins. Co., 2001 WL
1818099 (E.D. Pa. Dec. 5., 2001) (Schiller, J.). In Holland,
Judge Schiller held that the plaintiff, injured by her
co-employee, could recover underinsured motorist benefits despite
the ability to also recover workers' compensation benefits.
Although factually similar to the instant case, the accident in
Holland occurred prior to Act 44's enactment in 1993.
Nonetheless, Judge Schiller applied several of the aforestated
public policies to the interplay between workers' compensation
and the MVFRL as we do now. These policies militate in favor of
the uncompensated Chiaos.
First and as previously noted, Judge Schiller focused on the
"liberal compensatory scheme" intended by the MVFRL. Id. at
*4-5. He then reviewed the plethora of state court decisions in
which the exclusivity provision of the WCA was found not to prohibit recovery of both underinsured motorist
insurance and workers' compensation. Id.
Second and in accordance with the determination in Holland,
we find no evidence that the WCA either expressly prohibits, or
that its public policy leads us to interpret that it prohibits,
recovery by an insured against her insurer in this situation. As
Judge Schiller explained, there is simply no "reason to extend
the immunity protecting co-employees recognized in Apple[v.
Reichert, 278 A.2d 482 (Pa. 1971)] to an injured individual's
personal U[I]M insurance carrier. Neither the plain terms of the
Workers' Compensation Act nor the policies behind it support [the
insurer's] interpretation." Id. at *7. Additionally, a
Pennsylvania Superior Court has elsewhere noted that the
exclusivity provision is:
a realization that the employee cannot "have his cake
and eat it, too"; he obtains the more efficient and
expeditious statutory remedy [of workers'
compensation] to the exclusion of a suit against his
employer. This does not mean he has given up the
right to seek redress from an unrelated third party.
Boris v. Liberty Mut. Ins. Co., 515 A.2d 21, 24 (Pa.Super.Ct.
1996). Insofar as workers' compensation is concerned, we find
Nationwide to be an "unrelated third party" which was not
intended to be protected by the WCA. Id. Nationwide is not at
all affected by the policies that encourage speedy repayment to
injured employees by their employers. Rather, Nationwide sold the
Chiaos the UIM Policy so that they would be covered in the event that a
tortfeasor in an automobile accident lacked sufficient insurance
to compensate them for their injuries. See Holland, 2001 WL
1818099 at * 6 ("insurance companies may not cloak themselves in
the employee's immunity under the Workmen's Compensation Act")
(citing Warner v. Continental/CNA Ins. Co., 688 A.2d 177, 183
(Pa.Super.Ct. 1996); see also Heckendorn v. Consolidated
Rail Corp., 465 A.2d 609 (Pa. 1983) (holding that there is no
role for the employer in an action by an employee against a third
party, making workers' compensation policies all but
Third, just as Nationwide cannot find protection under the WCA,
we similarly find that there is none available under the MVFRL.
As previously noted, the MVFRL instructs that we construe
insurance policies in favor of the insured. We can find no
similar policy that militates in favor of protecting an insurer
under the circumstances of this case.
In the final step of our analysis, we must go one step further
than Holland, and predict what the Pennsylvania Supreme Court
would do in a post-Act 44 circumstance, since as noted Holland
arose before the effective date of the Act. Judge Schiller
explained that: This case is unusual in that it is predicated upon
the MVFRL in 1991 when both sections 1735 and 1737
were in force. . . . This court has not been called
upon to decide how the Supreme Court would decide
rule in a similar situation post-repeal of 1735 and
1737. I have balanced the applicable policies at play
in 1991, and although a close question, I construe
the term `legally entitled to recover' in favor of
Id. at *9 (citing Cosenza, 258 F.3d at 208).*fn13 As
previously, noted, Act 44 did not evince a change in the courts'
interpretation of whether dual recovery is possible, rather it
merely altered subrogation rights of workers' compensation and
automobile insurance carriers. To restate the Third Circuit's
language in DiBartolo:
Understood in this broader context, the repeal of
Section 1735 like the repeal of Section 1737 did
not affect the ability of employees to recover both
workers' compensation and uninsured motorist
benefits. Indeed, the repeal of Section 1735
permitted the injured employee to recover more from
these sources, although the workers' compensation
carrier may ultimately be the beneficiary by the
use of its subrogation lien of any double recovery.
DiBartolo, 131 F.3d at 348; see also Gardner,
722 A.2d at 1047 ("the ability of employees to obtain dual recovery of
workers' compensation and uninsured motorist benefits was
judicially recognized and independent of Sections 1735 and
1737."). Since the relevant case law clearly indicates that the
General Assembly did not intend to alter an employees' right to underinsured
motorist and workers' compensation benefits, and since we adopt
the reasoning of Holland in pre-Act 44 cases, we must rule in
the Chiaos' favor.
The relevant precedent from the Pennsylvania courts
overwhelmingly indicates to us that the Pennsylvania Supreme
Court would determine that the policy behind underinsured
motorist insurance, namely that UIM insurance is purchased to
protect "individuals injured by a tortfeasor with inadequate
insurance coverage," requires insurers to compensate their
customers when injured by an underinsured co-employee.
Kmonk-Sullivan, 746 A.2d at 1123. For these reasons, we will
grant Defendants' Motion for Summary Judgment as we hold that
Plaintiff must satisfy its obligation under the UIM Policy.
THEREFORE, IT IS HEREBY ORDERED THAT:
1. Plaintiff Nationwide Insurance Company's Motion
for Summary Judgment (Rec. Doc. 10) is DENIED.
2. Defendants Sharon and Charles P. Chiaos' Motion
for Summary Judgment (Rec. Doc. 13) is GRANTED.
3. Defendants Sharon and Charles P. Chiao shall be
permitted to receive underinsured motorist benefits
pursuant to their motor vehicle insurance contract with the Plaintiff Nationwide
Insurance Company for the injuries resulting from the
December 8, 1998 motor vehicle accident involving
Janet Wilkinson and Defendant Sharon Chiao.
4. The Clerk is directed to close the file on this