September 4, 2014
TIMOTHY AND DEBRA CLARKE, H/W, Appellants
MMG INSURANCE COMPANY AND F. FREDERICK BREUNINGER & SON, INSURANCE, INC., Appellees
Argued May 21, 2014
Appeal from the Order of Common Pleas, Philadelphia County, Civil Division, No(s): 03407. Before PANEPINTO, J. and ALLEN, J.
Jillian A. S. Roman, Philadelphia, for appellants.
Brigid Q. Alford, Camp Hill, for MMG Insurance, appellee.
BEFORE: PANELLA, LAZARUS AND JENKINS, JJ. Judge Lazarus joins the Opinion. Judge Panella files Dissenting Opinion.
Appellants Timothy and Debra Clarke appeal from the order entered in the Philadelphia Court of Common Pleas denying their motion for partial summary judgment and granting MMG Insurance Company's (" MMG Insurance" ) cross-motion for partial summary judgment. We vacate and remand for further proceedings.
On April 16, 2012, Plaintiff-Appellant Timothy Clarke suffered serious and permanent injuries in a motor vehicle accident. Mr. Clarke was driving his motorcycle when a car turned in front of him, causing a collision that threw him from his motorcycle. Mr. Clarke suffered multiple injuries and was placed on life support for eleven days at Paoli Memorial Hospital. He underwent multiple surgical procedures before his release.
At the time of the accident, Mr. Clarke had two motor vehicle insurance policies in effect. American Modern Select Insurance Company issued the first for the motorcycle, and MMG Insurance Company issued the second for Mr. Clarke's two automobiles--not his motorcycle. Appellants had underinsured motorist (" UIM" ) coverage for the motorcycle through the American Modern Select Insurance policy. Mr. Clarke received payments of $25,000 from American Modern Select Insurance Company for his motorcycle policy and $100,000 from the other driver's insurance company. Those payments, however, proved insufficient to cover Mr. Clarke's financial losses from the accident.
Appellants then sought coverage under their insurance policy issued by MMG Insurance Co. -- specifically under the UIM coverage clause, which provided coverage in the amount of $300,000 per accident. MMG Insurance, however, denied the UIM claim, based on the " Household Exclusion" clause. MMG Insurance asserted that the Household Exclusion clause precluded coverage because the motorcycle involved in the accident was not a covered vehicle under the MMG Insurance policy, which only covered two automobiles owned by Appellants.
On October 24, 2012, Appellants filed their initial complaint and, on December 27, 2012, filed an amended complaint. Appellants' amended complaint named MMG Insurance Company and F. Frederick Breuninger & Son Insurance, Inc. (" Breuninger Insurance" ) as defendants. The
amended complaint sought declaratory relief against MMG Insurance (count I) and asserted claims of breach of contract (count II), negligence (count III), and breach of warranty (count IV) against both MMG Insurance and Breuninger Insurance.
On March 5, 2013, Appellants filed a motion for partial summary judgment on their claim for declaratory relief against MMG Insurance. MMG Insurance opposed the motion and, on April 3, 2013, filed a cross-motion for partial summary judgment. On April 16, 2013, the trial court denied both parties' motions. On April 25, 2013, Appellants filed a motion for reconsideration. On May 16, 2013, MMG Insurance opposed Appellant's motion for reconsideration. On August 1, 2013, upon a second review, the trial court denied Appellants' motion for reconsideration (and thus also their partial summary judgment motion) and granted Appellee MMG Insurance's cross-motion for partial summary judgment.
The trial court denied Appellants' motion on the grounds that " the policy language of the Household Exclusion clause clearly and unambiguously excludes the coverage sought by [Appellants], and because the Order is consistent with Pennsylvania public policy regarding Household Exclusion clauses." Trial Court Opinion, 12/30/13, at 4.
On September 12, 2013, Appellants filed a praecipe to settle, discontinue, and end all remaining claims against MMG Insurance and Breuninger Insurance. On the same day, Appellants filed a timely notice of appeal. Both Appellants and the trial court complied with Pennsylvania Rule of Appellate Procedure 1925.
Appellants raise the following issues for our consideration:
1. Where the language of the policy agreement between Appellee MMG Insurance Company and Appellants clearly and unambiguously excludes underinsured motorist coverage only where the injury is sustained while occupying a vehicle that has no underinsured motorist coverage, did the [t]rial [c]ourt err as a matter of law when it concluded MMG Insurance Company did not owe the Appellants underinsured motorist coverage for injuries sustained while occupying a vehicle which had underinsured motorist coverage?
2. Where the terms of an underinsured motorist exclusion used by MMG Insurance Company excluded coverage only for injuries that occurred in a vehicle that was not covered for underinsured motorist coverage, was it error for the [t]rial [c]ourt, in determining the intent of the parties to the agreement, to ignore the different language used by the insurer in the exclusion for uninsured motorist coverage which, by its terms, excluded coverage if the injuries occurred
in a vehicle which was not covered for uninsured motorist coverage under the MMG Insurance policy, and therefore the [c]ourt erred in its determination that Appellee MMG Insurance Company owed no underinsured motorist coverage to Appellants who were injured while occupying a vehicle which had underinsured motorist coverage?
3. In determining the intent of the policy agreement between Appellee MMG Insurance Company and Appellants, did the [t]rial [c]ourt err in examining and relying upon public policy rather than the plain language of the policy agreement, and therefore err in its determination that Appellee MMG Insurance Company owed no underinsured motorist coverage to Appellants who were injured while occupying a vehicle which had underinsured motorist coverage?
4. In the alternative, did the [t]rial [c]ourt err as a matter of law in denying Appellants' Motion for Partial Summary Judgment and granting the Appellee MMG Insurance Company's Cross-Motion for Partial Summary Judgment when it failed to construe the ambiguous language in the underinsured motorist coverage provision of the policy in favor of Appellants, which would entitle the Appellants to underinsured motorist coverage under their MMG Insurance Company policy?
Appellants' Brief at 5-6.
The interpretation of an insurance contract is a question of law. United Services Auto. Assoc. v. Elitzky, 358 Pa.Super. 362, 517 A.2d 982, 986 (Pa.Super.1986), appeal denied, 515 Pa. 600, 528 A.2d 957 (Pa.1987). The standard of review of questions of law is de novo, and the scope of review is plenary. Genaeya Corp. v. Harco Nat'l Ins. Co., 2010 PA Super. 33, 991 A.2d 342, 346 (Pa.Super.2010) (citing Buffalo Twp. v. Jones, 571 Pa. 637, 813 A.2d 659, 666 n.8 (Pa.2002)). Thus, in interpreting a contract, this Court need not defer to the trial court. United Services Auto. Assoc., 517 A.2d at 986.
Appellants' first two issues ask this Court to interpret the exclusionary language of the UIM Coverage provision in their insurance policy agreement with MMG Insurance. In their first issue on appeal, Appellants argue the language of the policy clearly and unambiguously covers Mr. Clarke's injuries sustained from the underinsured motorcycle involved in the accident up to $300,000.00. In their second issue on appeal, Appellants assert that the trial court erred in its interpretation of the policy by failing to give effect to all of its language. Specifically, Appellants allege the trial court erred when it treated the different exclusionary language used by the insurer in the Uninsured Motorist (" UM" ) coverage provision, which was not present in the UIM coverage provision, as surplusage. We agree.
When the language of a policy is clear and unambiguous, the court is bound to give effect to the policy and cannot interpret the policy to mean anything other than " what it says." Nationwide Mut. Ins. Co. v. Cummings, 438 Pa.Super. 586, 652 A.2d 1338, 1342 (Pa.Super.1994) (internal citations omitted). The " goal [of the Court in] interpreting an insurance policy . . . is to determine the intent of the parties as manifested by the language of the policy." Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888, 897 (Pa.2006) (internal citations omitted). Disputes over coverage must be resolved only by " reference to the  provisions of the policy" itself. Cohen v. Erie Indem. Co.,
288 Pa.Super. 445, 432 A.2d 596, 597 (Pa.Super.1981).
An insurance policy must be read as a whole, and not " in discrete units." Luko v. Lloyd's London, 393 Pa.Super. 165, 573 A.2d 1139, 1142 (Pa.Super.1990). Therefore, the two exclusions must be read together and construed according to the meaning of their words, " while at the same time giving effect to all of [the policy's] provisions." Masters v. Celina Mut. Ins. Co., 209 Pa.Super. 111, 224 A.2d 774, 776 (Pa.Super.1966).
" Our rules of construction do not permit words in a contract to be treated as surplusage . . . if any reasonable meaning consistent with the other parts can be given to it." Tenos v. State Farm Ins. Co., 716 A.2d 626, 631 (Pa.Super.1998). Indeed, if the court is " forced to choose between two competing interpretations of an insurance policy, we are bound, as a matter of law, to choose the interpretation which allows us to give effect to all of the policy's language." Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., 2007 PA Super. 403, 941 A.2d 706, 716 (Pa.Super.2007), appeal denied, 600 Pa. 734, 963 A.2d 471 (Pa.2008). A principle frequently applied as an aid in arriving at the policy's intention is that the mention of one thing implies the exclusion of another thing. See Rimpa v. Erie Ins. Exchange, 404 Pa.Super. 287, 590 A.2d 784, 787-90 (Pa.Super.1991) (interpreting the language of a statute) (citing Omodio v. Aetna Life and Cas., 384 Pa.Super. 544, 559 A.2d 570 (Pa.Super.1989)).
Here, the trial court disregarded the clear and unambiguous language of the UIM exclusion in the policy agreement when read in the context of the agreement as a whole. It also did not apply well-developed and fundamental principles of contractual interpretation or rules of construction.
To ascertain the intent of the parties to the policy agreement, we must examine the language of the insurance policy agreement as a whole, which requires reading the UIM exclusion and the UM exclusion together, and construing the words according to their reasonable meaning within the policy. See Millers Capital Ins. Co., 941 A.2d at 716; Masters, 224 A.2d at 776. The UIM coverage section excludes coverage for injuries sustained in vehicles " not insured for this coverage."  A plain reading of the UIM exclusionary language, standing alone, dictates coverage. The vehicle that Mr. Clarke was occupying was " insured for this coverage" because Appellants had UIM coverage for the motorcycle through a separate insurance policy issued by American Modern Select Insurance.
When the MMG Insurance policy, including the UM exclusion language, is examined as a whole, it becomes apparent that the decision to deny coverage was premised on a misreading of the terms of the UIM exclusion. The UIM exclusion provision relied upon by MMG Insurance
to deny coverage is actually missing exclusionary language that appears elsewhere in the MMG Insurance policy (namely, the UM exclusion provision). The trial court opined, " [the] policy, when read as a whole, clearly and unambiguously shows the intent of the parties to provide UIM coverage only for the two covered automobiles [listed on the MMG Insurance policy] and not for any other vehicles, such as the motorcycle." This reasoning, however, undermines the plain language of the exclusion, which does not require that the insured maintain the UIM coverage under the MMG insurance policy. See Cummings, 652 A.2d at 1342.
Any potential ambiguity implicated by the phrase " for this coverage" -- specifically, whether it refers to UIM coverage through any insurer or UIM coverage under the particular policy -- is resolved when viewed in light of the language of the UM exclusion in the same policy. The UM coverage clause excludes coverage for injuries sustained in vehicles " not insured for this coverage under this policy."  Thus, the lack of the phrase " under this policy" in the UIM exclusion clause when read in the context of the exclusionary language of UM coverage and, thus, the policy as a whole, dictates coverage because the motorcycle was insured for UIM coverage through another insurer. See Rimpa, 590 A.2d at 787-90.
Further, the missing language " under this policy" confirms that MMG Insurance understood how to exclude coverage for injuries occurring in vehicles not insured by MMG Insurance, and confirms that the policy intended to include UIM coverage as long as the Clarkes maintained first-tier UIM coverage through any insurer. Specifically, and in distinction to the UIM exclusions, the exclusions for UM coverage state that the policy only covered vehicles which were both " insured for this coverage" and when that coverage was " under this policy."
The phrase " under this policy" is not mere surplusage. If the UIM and UM exclusions were intended to have the same meaning, they would have the same language. See Cohen v. Erie Indem. Co., 14 Pa. D.& C. 3d 444, 448 affirmed, 288 Pa.Super. 445, 432 A.2d 596 (Pa.Super.1981) (insurance policy subsections would be similarly phrased if their intention were the same); Farmers Ins. Co. of Washington v. U.S.F. & G. Co., 13 Wn.App. 836, 537 P.2d 839, 842 (1975) (same); cf 101 Pa.Code § 15.141(b)(5) (guidelines for choice of words and phrases in legislative drafting) (" [u]se the same word throughout if the same meaning is intended and do not use the same word to denote different meanings" ). The exclusions do not have the same words; there is an additional element included in the UM exclusion. Thus, the parties did not intend the exclusions to have the same meaning. The parties utilized the phrase " for this coverage" and
did not include the specific exclusionary language " under this policy", and thereby purposefully excluded that term from the UIM household exclusion. The parties, therefore, intended to provide coverage if a first-tier UIM policy existed. Because Appellants contracted with another insurer for first-tier UIM insurance, a determination that they were also covered for UIM insurance under this policy gives effect to all of the language contained in the policy agreement.
Further, under the contractual interpretation maxim that the " mention of one thing implies the exclusion of another", a court may not add language to a provision, particularly where the language was contained in a separate provision but excluded from the provision at hand. See Madison Constr. Co. v. The Harleysville Mut. Ins. Co., 144, 451 Pa.Super. 136, 678 A.2d 802, 806 (Pa.Super.1996), affirmed, 557 Pa. 595, 735 A.2d 100 (Pa.1999). The trial court's interpretation of the policy added new, extrinsic language to the MMG Insurance policy--namely " under this policy" to the UIM exclusion. This was error.
Not only is the UIM exclusion different from the UM exclusion, the UIM exclusion is also different from the language typically used in insurance policies to disclaim coverage for vehicles not listed in the policy. " It is important to distinguish [an insurer-defendant's] exclusionary provision from  exclusion provisions found in many other insurance policies." Madison Constr. Co., 678 A.2d at 805. Pennsylvania courts have upheld household exclusions which specifically stated that the coverage is excluded for motor vehicles not insured for " coverage under this policy." See, e.g., Erie Ins. Exch. v. Baker, 601 Pa. 355, 972 A.2d 507 (Pa.2009). In all of the cases that upheld a household exclusion, the critical language -- " under this policy" -- merited the denial of UIM coverage and guided the court's interpretation of the policy as clearly and unambiguously excluding coverage. Id. In contrast, the MMG Insurance policy, by its plain language, does not exclude coverage for vehicles not covered for UIM coverage under that policy. Instead, the MMG Insurance policy excluded coverage for vehicles which did not maintain any UIM coverage under any policy. Because Appellants maintained first-tier UIM coverage through American Modern Select Insurance, they are entitled to UIM coverage under their second-tier MMG Insurance policy.
In their third issue on appeal, Appellants allege the trial court erred in examining and relying upon public policy rather than the plain language of the policy agreement. We agree.
" [W]hen the question is one of contract interpretation, public policy arguments are irrelevant." Municipality of Mt. Lebanon v. Reliance Ins. Co., 2001 PA Super. 177, 778 A.2d 1228, 1232 (Pa.Super.2001). Public policy concerns are always secondary to the " clear and unambiguous [terms of a] contract," which " must be given its plain meaning...." Eichelman, 551 Pa. at 564, 711 A.2d at 1008. Courts are bound to give effect to clear contractual terms and only examine public policy when enforcement of those terms " would be contrary to a clearly expressed public policy." Prudential Prop. & Cas. Ins. Co. v. Colbert, 572 Pa. 82, 813 A.2d 747, 752 (Pa.2002). By looking to public policy as a component of its interpretation of the MMG Insurance policy itself, the trial court failed to read, interpret, and apply the policy as it was written.
In Prudential v. Colbert, 572 Pa. 82, 813 A.2d 747, 752 (Pa.2002), the Court examined public policy concerns only after the plain meaning of the policy exclusion justified a denial of coverage. Id. (there was " no
dispute that, as a matter of contract interpretation, the ... policy exclusion would justify [the insurer] in denying coverage" ). Here, as discussed above, the plain meaning of the policy exclusion is clear and unambiguous, and thus must be given effect.
In their fourth issue on appeal, Appellants assert, in the alternative, that the language of the UIM exclusion creates ambiguity that requires the Court to construe the policy language against MMG Insurance. Because we find the exclusionary language of the UIM coverage provision clear and unambiguous, it is unnecessary to address this issue.
Order vacated. Case remanded. Jurisdiction relinquished.
Judge Lazarus joins the Opinion.
Judge Panella files Dissenting Opinion.
My esteemed colleagues in the Majority reverse the trial court's grant of summary judgment, concluding that the clear and unambiguous policy language of the contract between the Appellants and MMG grants the Appellants UIM coverage. I disagree and respectfully dissent.
The Majority sets forth the appropriate standard and scope of review. Where I differ is the application of the standard of review to the record before us. In particular, I disagree that the language in the UIM Exclusions section of the policy unambiguously supports an interpretation that MMG was providing coverage for vehicles not otherwise referenced by the policy. The Majority focuses on the absence of the phrase " under this policy" in the UIM Exclusions and contrasts its use in the UM Exclusions section of the policy. Conversely, I conclude that this policy uses the phrases " this coverage" and " this coverage under this policy" interchangeably.
For example, under " Part A-Liability Coverage," the policy states that MMG's duty to defend ends when the liability limits " for this coverage have been exhausted by payment of judgment for settlement." Similarly, under " Part B-Medical Payments Coverage; Limits of Liability," the policy provides that the " limit of liability shown in the Declaration for this coverage is our maximum limits of liability. . . ."  The Majority ignores these uses of the term, and instead focuses on the limited instances where " under this policy" is added to justify the application of the construction aid expressio unius est exclusio alterious, or " the mention of one thing implies the exclusion of another thing." However, this Court has specifically held that when interpreting contracts, " [t]his maxim merely expresses a rule of construction, and not a rule of substantive law; it is not to be invoked arbitrarily to bar reasonable inferences to the contrary, or when an examination of the entire transaction reveals a different or more inclusive intent." Ress v. Barent, 378 Pa.Super. 397, 548 A.2d 1259, 1262 (Pa. Super. 1988) (emphasis added).
The inappropriateness of the construction aid becomes apparent if we apply the Majority's reasoning to the aforementioned passages that similarly lack the additional " under this policy" language. In
short, we would be forced to conclude that MMG's duty to defend and limit of liability can be extended beyond the declared limits by policies the Clarkes had with other insurers. In theory, this interpretation could expand MMG's exposure under the policy to an unlimited amount. Our Supreme Court has concluded that such interpretations of policy exclusions are generally unreasonable and against public policy:
In light of the primary public policy concern for the increasing costs of automobile insurance, it is arduous to invalidate an otherwise valid insurance contract exclusion on account of that public policy. This public concern, however, will not validate any and every coverage exclusion; rather, it functions to protect insurers against forced underwriting of unknown risks that insureds have neither disclosed nor paid to insure. Thus, operationally, insureds are prevented from receiving gratis coverage, and insurers are not compelled to subsidize unknown and uncompensated risks by increasing insurance rates comprehensively.
Burstein v. Prudential Property & Cas. Ins. Co., 570 Pa. 177, 809 A.2d 204, 208 (Pa. 2002). Since the Majority's construction of the policy would leave MMG underwriting unknown risks, and providing gratis coverage depending only upon whether the Clarkes contracted with other insurers, I conclude that the Majority's interpretation is not a reasonable reading of the language of the policy.
A natural, reasonable interpretation following the plain language and meaning of the phrase " this coverage" requires no reference to other sections of the policy. Simply put, the very act of analogizing to similar, but not equivalent, language elsewhere in the document is an implicit finding that the term in question is ambiguous. There is no need to refer to different terms if the term under review is unambiguous. As noted, I find no ambiguity, but even if I did, I would reach the opposite conclusion: the only reasonable construction of the UIM clause is that reached by the trial court.
Furthermore, the Majority is correct to note that public policy concerns are always secondary to the " clear and unambiguous [terms of a] contract." See Eichelman v. Nationwide Ins. Co., 551 Pa. 558, 711 A.2d 1006, 1008 (Pa. 1998). They have also appropriately noted that this Court must give effect to clear contractual terms and only examine public policy when enforcement of those terms " would be contrary to a clearly expressed public policy." Prudential Prop. & Cas. Ins. Co. v. Colbert, 572 Pa. 82, 813 A.2d 747, 752 (Pa. 2002). Since I find that the term at issue unambiguously excludes the coverage sought by the Clarkes, there is no opportunity to address the public policy implications involved.
For all the aforementioned reasons, I respectfully dissent and would affirm the trial court's grant of summary judgment.