United States District Court, M.D. Pennsylvania
November 8, 2005.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Plaintiff
TRACEY CHRZAN, Individually and as Executrix of the Estate of Stanley Chrzan, deceased Defendant.
The opinion of the court was delivered by: JOHN JONES III, District Judge
THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:
Pending before the Court is a Motion to Dismiss Complaint for
Declaratory Judgment ("the Motion") (doc. 6) filed by Defendant
Tracey Chrzan, Individually and as Executrix of the Estate of
Stanley Chrzan ("Defendant"). For the reasons that follow,
Defendant's Motion is granted.
The Plaintiff, State Farm Mutual Automobile Insurance Company
("Plaintiff" or "State Farm") initiated this action by filing a
complaint against Defendant in the United States District Court
for the Middle District of Pennsylvania on July 21, 2005. Jurisdiction is proper in this
Court pursuant to 28 U.S.C. § 1332 as the parties are of diverse
citizenship and the amount in controversy is over $75,000.
In the Complaint, Plaintiff seeks a declaration that it is not
liable for any underinsured motorist coverage under any State
Farm Policy for the accident of November 19, 2002.
On August 30, 2005, Defendant filed the instant Motion pursuant
to Fed.R.Civ.Pro. 12(b)(6) and 12(b)(1). The Motion has been
fully briefed by the parties and is therefore ripe for
STANDARD OF REVIEW:
In considering a motion to dismiss pursuant to
Fed.R.Civ.Pro. 12(b)(6), a court must accept the veracity of a plaintiff's
allegations. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974);
see also White v. Napoleon, 897 F.2d 103, 106 (3d Cir.
1990). In Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996), our
Court of Appeals for the Third Circuit added that in considering
a motion to dismiss based on a failure to state a claim argument,
a court should "not inquire whether the plaintiffs will
ultimately prevail, only whether they are entitled to offer
evidence to support their claims." Furthermore, "a complaint
should not be dismissed for failure to state a claim unless it
appears beyond doubt that the plaintiff can prove no set of facts
in support of his claim which would entitle him to relief." Conley
v. Gibson, 355 U.S. 41, 45-46 (1957); see also District Council
47 v. Bradley, 795 F.2d3 310 (3d Cir. 1986).
In contrast, "a Rule 12(b)(1) motion may be treated as either a
facial or factual challenge to the court's subject matter
jurisdiction." Gould Elecs., Inc. v. United States,
220 F. 3d 169, 178 (3d Cir. 2000) (citing Mortenson. v. First Fed. Sav.
and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977)). "In
reviewing a facial attack, the court must only consider the
allegations of the complaint and the documents referenced therein
and attached thereto, in the light most favorable to the
plaintiff." Id. (citing PBGC v. White, 998 F. 2d 1192, 1196
(3d Cir. 1993)). In reviewing a factual attack, the court may
consider evidence outside the pleadings. Id. (citing Gotha
v. United States, 115 F. 3d 176, 178-179 (3d Cir. 1997)). The
parties' motion papers and briefs indicate that this motion is a
facial attack on this Court's jurisdiction, and therefore we will
consider only the pleadings, and do so in the light most
favorable to the Plaintiff.
This action arises out of a motor vehicle accident which took
place on November 19, 2002 in Clifford Township, Susquehanna
County, Pennsylvania. (Rec. Doc. 1 at 2). Stanley Chrzan was
operating a vehicle owned by him when he was struck by a vehicle owned by The Cook Brothers Companies,
Inc., d/b/a Triple Cities Mack Sales and Service, and operated by
Jason T. Holbert. ("Holbert") (Rec. Doc. 1 at 2). Stanley Chrzan
died as a result of injuries sustained in the accident. Holbert
was at fault for the accident. (Rec. Doc. 1 at 2).
At the time of the accident, the vehicle owned by Cook Brothers
and operated by Holbert was insured under two insurance policies
that provided liability coverage for the accident. One policy
provided $500,000.00 (five hundred thousand dollars) in primary
liability coverage and the other provided $5,000,000.00 (five
million dollars) in excess liability coverage. (Rec. Doc. 1 at
2). Also, on the date of the accident, decedent Stanley Chrzan
was an insured under two policies of automobile insurance issued
by Plaintiff, providing a total of $150,000 in underinsured
motorist coverage ("UIM coverage").
A lawsuit filed by Defendant proceeded to a binding assessment
of damages before the Honorable Trish Corbett of the Lackawanna
County Court of Common Pleas. By Order dated September 1, 2004,
Judge Corbett found in favor of the Defendant in the amount of
$1.8 million dollars. The lawsuit was ultimately settled in
exchange for payment under the two applicable liability policies
totaling $1.275 million dollars, comprising the entire balance of
the primary liability limits of $500,000 (five hundred thousand
dollars), and the balance from the excess liability coverage. Thus, it is not disputed that the primary
liability limits were exhausted, but the excess liability limits
were not. Moreover, an issue exists as to whether Defendant
properly obtained State Farm's consent to settle with the
tortfeasor. These circumstances give rise to the instant dispute.
Defendant argues that her Motion must be granted because this
Court does not have jurisdiction over this matter pursuant to the
applicable State Farm insurance policy. Defendant argues that the
issues of (1) whether a vehicle is an underinsured vehicle under
the Motor Vehicle Financial Responsibility Law ("MVFRL") and (2)
whether Defendant's claim for underinsured benefits is in
violation of the exhaustion and "consent to settle" provisions of
the policy must be decided by an arbitrator as provided by the
Defendant's automobile insurance policy with State Farm.
"Arbitrability depends upon the intention of the contracting
parties as expressed in the chosen language." Metropolitan
Property and Liability Ins. Co. v. Streets, 856 F.2d 526, 528
(3d. Cir. 1988). The policy language largely at issue reads:
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 arbitrator's decision shall be
limited to these two questions.
(Rec. Doc. 1, Ex. A at 3). Under the State Farm policy,
underinsured motorist coverage does not apply unless "all bodily
injury liability bonds and polices that apply" have been
exhausted. Further, the "consent to settle" clause in the State
Farm policy prohibits the application of underinsured motorist
coverage if a claimant settles, without State Farm's consent,
with any person or organization who may be liable for the bodily
injury. (Rec. Doc. 1, Ex. A at 5).
To resolve the instant motion, we must decide whether or not it
is within the jurisdiction of an arbitration panel to decide
whether a vehicle is an underinsured motor vehicle. Our reading
of the applicable case law reveals the existence of a precedent
among the Pennsylvania courts, both federal and state, to submit
disputes arising under uninsured motorist policy clauses to
arbitration, which logically extends to situations involving
underinsured coverage. We shall summarize the cases that guide
our decision today.
In National Grange Mutual Insurance Company v. Kuhn,
428 Pa. 179 (1968), the Pennsylvania Supreme Court held that it was the
province of an aribtrator to decide the question of whether a
party to a motor vehicle accident was uninsured. In Kuhn, the
policy at issue contained an arbitration clause with language
similar to the clause presently before the Court. In pertinent
part, the clause in Kuhn provided for arbitration if the
claimant and the carrier did not agree that the claimant was
"legally entitled to recover damages from the owner or operator
of an uninsured highway vehicle." Kuhn, 428 Pa. at 182. The
Supreme Court agreed with Appellant's conclusion that "any
dispute arising under the uninsured motorist coverage must be
submitted to arbitration." Id. at 183.
Following the Kuhn decision, the Pennsylvania Superior Court
held that "the only time a court will resolve an issue arising
under an uninsured motorist clause with an arbitration provision
is when a particular portion of the clause is challenged as being
contrary to a constitutional, legislative or administrative
mandate, or as being against public policy, or as being
unconscionable." Gross v. State Farm Insurance Company,
1986 U.S. Dist. LEXIS 27253 (E.D. Pa. 1986) (citing White v. Concord
Mutual Insurance Company, 296 Pa. Super 171, 175 (1982)). No
such challenge exists in the case at bar.
The United States District Court for the Eastern District of
Pennsylvania dealt with a similar legal issue to the case sub
judice in Travelers Indemnity Co. v. Eleanor Greenfield, Administratrix, et al., 1990 U.S. Dist.
LEXIS 498 (E.D. Pa. 1990). The District Court held that the
question of whether the vehicle at issue was uninsured was
arbitrable, and not within the jurisdiction of the District
Court. The policy language at issue in Travelers is strikingly
similar*fn1 to the language at issue in the case sub
judice, stating, in pertinent part, "If we and an insured
disagree whether the insured is legally entitled to recover
damages from the owner or driver of an uninsured motor vehicle or
do not agree as to the amount of damages, either party may make a
written demand for Arbitration." Id. at *10. The Court likened
the Travelers arbitration provision to the provision in Kuhn,
holding that "such clauses commit all issues to arbitration
absent specific contractual language or other compelling evidence
to the contrary." Id.
It is our opinion that the question of whether the vehicle
driven by Holbert is underinsured should not to be decided by
this Court, but rather must be properly decided before a panel of
arbitrators, recognizing that arbitrators are likely to be highly
skilled and experienced lawyers who will undoubtedly have the
ability to decide the legal questions presented. Whether
Defendant's claim for underinsured benefits is in violation of the exhaustion and consent to settle
provisions of the State Farm policy are logical sub-parts to the
larger analysis of whether the vehicle driven by Holbert is
underinsured and therefore these are proper issues to be decided
by arbitration. As previously noted, we apply Pennsylvania law in
deciding this matter, and are thus guided by the strong precedent
of the courts of the Commonwealth in arriving at this decision.
We will finally note that the evident purpose of arbitration
clauses in insurance policies is to alleviate the costs of
litigation by utilizing alternative dispute resolution. As such,
it is only logical for us to read policy provisions such as those
at issue here in a way which favors the implementation of
arbitration to settle disputes of this type. Having drafted
language which imposes arbitration upon its insured in nearly
every conceivable dispute, we find State Farm's argument that it
should be excused from that requirement in this instance to be
unavailing. Indeed, it appears to us to be a version of forum
shopping which we will not countenance, and accordingly we will
enter judgment for the Defendant.
NOW, THEREFORE, IT IS HEREBY ORDERED:
1. Defendant's Motion (doc. 6) is GRANTED.
2. This case is REFERRED to arbitration, as outlined
in the applicable policy. 3. The complaint (doc. 1) is DISMISSED.
4. The Clerk of Court is directed to close the file
on this case.
© 1992-2005 VersusLaw Inc.