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State Farm Fire & Casualty v. Peco (A/K/A Peco Energy)

October 3, 2012

STATE FARM FIRE & CASUALTY COMPANY A/S/O GARY A. BENNETT AND DENNIS PAUL BENNETT, A/S/O ROBERT WINN, A/S/O JAMES AND MARION STOTZ, A/S/O MARK PETTIGROW AND JAMES WITEK, APPELLANT
v.
PECO (A/K/A PECO ENERGY), A UNIT OF EXELON ENERGY DELIVERY (A/K/A EXELON CORPORATION), APPELLEE



Appeals from the Orders Entered March 23, 2011, In the Court of Common Pleas of Philadelphia County, Civil Division, at No. 090401860.

The opinion of the court was delivered by: Shogan, J.:

J-A06040-12

BEFORE: GANTMAN, SHOGAN and WECHT, JJ.

OPINION BY SHOGAN, J.:

Appellant State Farm Fire and Casualty Company ("State Farm"), as subrogee to claims of its insured subrogors, Gary A. Bennett, Dennis Paul Bennett, Robert Winn, James and Marion Stotz, Mark Pettigrow and James Witek, appeals from the trial court's March 23, 2011 orders denying State Farm's Motion for Partial Summary Judgment and granting Appellee PECO's Motion for Partial Summary Judgment. On appeal, State Farm challenges the trial court's interpretation of the limitation of liability clause found in Rule 12.1 of PECO's public utility tariff as restricting the amount of recovery by State Farm. For the reasons that follow, we affirm in part and vacate in part.

The trial court set forth the procedural and factual history as follows:

Around August 10, 2008, a "dangerous and defective" surge of electricity passed though the subrogors' home electric meters and caused significant damage to their houses. Defendant, PECO Energy Company ("PECO") asserts that the surge came from a bolt of lightning that struck a PECO facility and affected many residences in the subrogors' area. Pursuant to the subrogor's [sic] insurance policies, State Farm became subrogated to their clients' claims and filed suit against PECO for allowing an uncontrolled surge of electricity to reach the subrogors' homes. The Complaint, filed April 17, 2009, contained the following counts: Count I, negligence; Count II, strict liability; Count III, breach of contract; and Count IV, breach of warranty.*fn1

In their Answer and New Matter, PECO asserted that Rule 12.1 of their Public Utility Tariff serves as a limitation of all of State Farm's claims. Rule 12.1 states in full:

12.1 LIMITATION ON LIABILITY FOR SERVICE

INTERRUPTIONS AND VARIATIONS.

The Company [PECO] does not guarantee continuous, regular and uninterrupted supply of service. The Company may, without liability, interrupt or limit the supply of service for the purpose of making repairs, changes, or improvements in any part of its system for the general good of the service or the safety of the public or for the purpose of preventing or limiting any actual or threatened instability or disturbance of the system. The Company is also not liable for any damages due to accident, strike, storm, riot, fire, flood, legal process, state or municipal interference, or any other cause beyond the Company's control.

In all other circumstances, the liability of the Company to customers or other persons for damages, direct or consequential, including damage to computers and other electronic equipment and appliances, loss of business, or loss of production caused by any interruption, reversal, spike, surge or variation in supply or voltage, transient voltage, or any other failure in the supply of electricity shall in no event, unless caused by the willful and/or wanton misconduct of the Company, exceed an amount in liquidated damages equivalent to the greater of $500 or two times the charge to the customer for the service affected during the period in which such interruption, reversal, spike, surge or variation in supply or voltage, transient voltage, or any other failure of supply in electricity occurs. In addition no charge will be made to the customer for the affected service during the period in which such interruption, reversal, spike, surge or variation in supply or voltage, transient voltage, or any other failure in the supply of electricity occurs. A variety of protective devices and alternate power supplies that may prevent or limit such damage are available for purchase by the customer from third parties.

State Farm filed a motion for summary judgment on January 17, 2011 seeking a determination that Rule 12.1 is void as against public policy and PECO's tariff defense does not apply to their claims of negligence, strict liability, and breach of contract. PECO filed a competing motion on January 20, 2011, arguing that the tariff should not be voided as against public policy and that all of State Farm's claims are limited by Rule 12.1. This Court agreed with PECO, and accordingly issued Orders on March 23, 2011. State Farm has filed motions to certify for interlocutory appeal the Order denying their motion and the Order granting PECO's motion.

On May 19, 2011, the trial court certified its orders for immediate appeal pursuant to Pa.R.A.P. 341(c). State Farm presents the following issues for this Court's consideration on appeal:

(a) Whether PECO's Tariff's Rule 12.1, which, according to express terms, purports to shield PECO from any liability whatsoever for any damages caused by its own negligent and/or liability-producing conduct, is an exculpatory clause that is void as against public policy as a matter of law.

(b) Whether PECO's Tariff applies to Plaintiff/Appellant's causes of action in strict liability because PECO did not specifically disclaim strict liability in its Tariff as required by Pennsylvania law.

Appellant's Brief at 6.

Our standard of review of a trial court's order granting or denying summary judgment is as follows:

A reviewing court may disturb the order of the trial court only where it is established that the court committed an error of law or abused its discretion. . .

In evaluating the trial court's decision to enter summary judgment, we focus on the legal standard articulated in the summary judgment rule. Pa.R.C.P. 1035.2. The rule states that where there is no genuine issue of material fact and the moving party is entitled to relief as a matter of law, summary judgment may be entered . . . [W]e will view the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party.

Murphy v. Duquesne Univ. of The Holy Ghost, 777 A.2d 418, 429 (Pa. 2001) (citations omitted). "When reviewing whether there are genuine issues of material fact, this Court's standard of review is de novo; we need not defer to determinations made by lower courts; and our scope of review is plenary." Gleason v. Borough of Moosic, 15 A.2d 479, 484 (Pa. 2011). Insofar as State Farm challenges the denial of its motion seeking summary judgment, we must view the record in a light most favorable to PECO, as the non-moving party.

While the trial court has provided a succinct recitation of the facts and procedural history of this action, the uninitiated reader would be served by a brief discussion of the legal posture of this matter. We begin by noting that this Commonwealth's Public Utility Commission ("PUC") plays a unique role in the regulation of public utilities (like PECO) in the Commonwealth.

Indeed, this Court has discussed previously the scope of the PUC's jurisdiction as follows:

The extent of the PUC's jurisdiction has been clearly outlined by the courts of this Commonwealth in the course of a long series of opinions. In Lansdale Borough v. Philadelphia Electric Co., 403 Pa. 647, 650-51, 170 A.2d 565, 567 (1961) the Supreme Court, after an extensive review of prior cases concerning PUC jurisdiction, concluded: 'Initial jurisdiction in matters concerning the relationship between public utilities and the public is in the PUC-not in the courts. It has been so held involving rates, service, rules of service, extension and expansion, hazard to public safety due to use of utility facilities, installation of utility facilities, location of utility facilities, obtaining, alerting, dissolving, abandoning, selling or transferring any right, power, privilege, service, franchise or property and rights to serve particular territory.' The exclusive regulatory jurisdiction conferred on the PUC in these areas permits evaluation and control of utility activities as they affect public service. No other entity can interfere with the commission's performance of its function by making additional or different requirements of a utility or by conducting an independent appraisal of a utility's service to the public.

The question of utility policy as it affects the public is not now before this court, nor is the determination of the reasonableness or adequacy of Bell's methods of providing service. This is an action for damages and the fact that the regulation of utility service is exclusively in the PUC's jurisdiction does not remove from the court's jurisdiction an action for damages based on a failure of service, any more than the PUC's power to promulgate safety regulations prohibits the courts from hearing a claim for personal injuries resulting from unsafe utility equipment. The commission's jurisdiction is limited to regulatory matters essential to utility service. The courts retain jurisdiction of a suit for damages based on negligence or breach of contract wherein a utility's performance of its legally imposed and contractually adopted obligations are examined and applied to a given set of facts.

Behrend v. Bell Tel. Co., 363 A.2d 1152, 1157-1158 (Pa. Super. 1976) (some citations omitted and emphasis added). Thus, the matter is properly before our courts. Id.

Turning to the matter in controversy, namely whether Rule 12.1 of PECO's tariff constitutes a valid limitation of liability,*fn1 we note that the Public Utility Code defines a utility's "tariff" as "All schedules of rates, all rules, regulations, practices, or contracts involving any rate or rates, including contracts for interchange of service...." 66 Pa.C.S.A. § 102. Our sister Court has explained tariffs as follows:

A tariff is a set of operating rules imposed by the State that a public utility must follow if it wishes to provide services to customers. It is a public document which sets forth the schedule of rates and services and rules, regulations and practices regarding those services. It is well settled that public utility tariffs must be applied consistently with their language. 66 Pa.C.S. § 1303. Public utility tariffs have the force and effect of law, and are binding on the customer as well as the utility. Pennsylvania Electric Co. v. Pennsylvania Public Utility Commission, 663 A.2d 281, 284 (Pa. Cmwlth. 1995).

PPL Elec. Utilities Corp. v. Pennsylvania Public Utility Com'n, 912 A.2d 386, 402 (Pa. Cmwlth. 2006) (emphasis added). With this as the legal backdrop, we proceed to discuss the merits of State Farm's issues on appeal.

In support of its first issue, State Farm claims that Rule 12.1 of PECO's tariff is exculpatory because it "expressly shields PECO from all liability for damages no matter their cause." Appellant's Brief at 11. Based on this Court's analysis and holding in DeFrancesco v. W. Pa. Water Company, 478 A.2d 1295 (Pa. Super. 1984) where we proscribe exculpatory clauses within a tariff as void against public policy, Appellant concludes that PECO's tariff is likewise void. Id. (citing DeFrancesco, 478 A.2d at 1306). We disagree.

Several years before its decision in DeFrancesco, this Court had occasion to review the limitation of liability provisions contained within a defendant telephone company's tariff. Behrend v. Bell Telephone Company, 363 A.2d 1152 (Pa. Super. 1976), vacated on other grounds, 473 Pa. 320, 374 A.2d 536 (1977). In Behrend, we were asked to determine whether the following tariff provision limiting Bell's liability was void as against public policy:

The liability of the Telephone Company for damages arising out of failure to comply with a customer's direction to install, restore or terminate service, or mistakes, omissions, interruptions, delays, or errors or defects in transmission, or failure or defects in the Telephone Company's equipment (facilities) occurring in the course of furnishing service and not caused by the negligence of the customer . . . shall in no event exceed an amount equivalent to the proportionate charge to the customer for the period of service during which such failure, mistake, omission, interruption, delay, or error or defect in transmission, or failure or defect in the Telephone Company's equipment (facilities) occurs.

The Telephone Company, except as provided herein, shall not be liable for damage claimed on account of errors in or omission from its directories nor for the result of the publication of such errors in the directory . . . . Claim for damages on account of interruptions to service due to errors in or omissions of directory listings will be limited to an amount equivalent to the proportionate charge for that part of the customer's service which is impaired, but not to exceed one-half the local service charges for the service items affected for the period from the date of issuance of the directory in which the mistake occurred to the date of issuance of a new directory containing the proper listing.

Behrend, 363 A.2d at 1163.

In concluding that the foregoing limitation of liability clause was valid and enforceable, we recognized the PUC's authority to determine the reasonableness of tariffs as well as its power to assess whether such provisions are "compatible with the [Public Utility C]ode and policies of the commission and consistent with its regulatory scheme." Behrend, 363 A.2d at 1166. Deferring to the PUC's authority, and observing that the tariff had been properly filed with the PUC, we held that the limitation of liability provisions must be enforced. Id.

Appellant correctly directs that this Court, in DeFrancesco, reached the opposite conclusion with respect to the defendant water company's limitation of liability clause found in its tariff. Appellant's Brief at 15.

However, in DeFrancesco, the Court was confronted with a limitation of liability clause patently different from that proffered in Behrend. Specifically, the ...


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