author: CERCONE, Judge:

text:
    542 A.2d 72
    JEWELCOR JEWELERS AND DISTRIBUTORS, INC. and Jewelcor, Incorporated, v. Paul J. CORR, Raymond L. Croft, James A. Flick, Jr., William F. Grauer, Edward W. Kay, Neill R. Schmeichel, Robert J. Seider, William J. Stone, Homer E. Ullman and John W. Wilchek, a Partnership t/a Ernst & Whinney, Appellants.
    Superior Court of Pennsylvania.
    Argued Sept. 9, 1987.
    Filed April 11, 1988.
    Reargument Denied June 6, 1988.

      Jack Kaufman, Allentown, for appellants.
    Marvin Comisky, Philadelphia, for appellees.
    Before CIRILLO, President Judge, and POPOVICH and CERCONE, JJ.
   CERCONE, Judge:

This is an appeal from the order of the Court of Common Pleas of Luzerne County entered December 19, 1986 granting appellees’ Motion for New Trial.

On March 25, 1977, appellees Jewelcor, Inc. (referred to herein as “Jewelcor”) and its wholly owned subsidiary Jewelcor Jewelers and Distributors, Inc. (formerly known as Granjewel Jewelers and Distributors, Inc., and referred to herein as “Granjewel”) initiated this civil action by filing a complaint, which was subsequently amended on September 28, 1977. The amended complaint asserted that appellant Ernst & Ernst, an accounting partnership, (now known as Ernst & Whinney; and referred to herein as “E & W”) was negligent, grossly negligent and breached its oral contract with Granjewel in the conduct of E & W’s audit of Granjewel’s first yearly financial statements and in the issuance of the resultant report and opinion letter. The amended complaint also asserted that Jewelcor, the holding company of Granjewel, was harmed, as a third party beneficiary, by E & W’s actions. Jewelcor alleged that it had relied on E & W’s audit of Granjewel in its financial decision making and as a result of this reliance on the inaccurate audit, Jewelcor allegedly lost millions of dollars.

The relationship of Jewelcor with Granjewel is based on the following history: in October 1972, Jewelcor, a company in the catalog jewelry business, entered into a joint venture agreement with W.T. Grant (referred to herein as “Grant”), a retail chain store operation, to form Granjewel, a corporation that would operate a chain of retail catalog showrooms. Jewelcor and Grant operated Granjewel under their agreement until September 1975, when their joint venture was terminated and Granjewel became a wholly-owned subsidiary of Grant. Jewelcor subsequently purchased, from Grant, Granjewel’s stock, making Granjewel a wholly-owned subsidiary of Jewelcor. Shortly thereafter this suit was filed. The claims in this case relate to E & W’s audit of Granjewel’s financial statements for the year ending January 31, 1974 (referred to herein as “1974 audit”).

On March 14, 1984 the jury, by means of special interrogatories, rendered its verdict in favor of E & W and against Granjewel and Jewelcor. On March 22, 1984 appellees filed a Motion for New Trial. After receiving oral argument, the motions court granted appellees’ motion citing six separate errors committed at trial. This appeal from the grant of a new trial by E & W followed.

Appellants have raised six issues on appeal. We will address each claim with the understanding that, in reviewing an order granting a new trial, we must examine all the evidence presented at trial “to determine whether the verdict was arbitrary or capricious or whether it was against the weight of the evidence, or whether there was clearly error of law or palpable abuse of discretion in the rulings of the court below.” Gonzalez v. United States Steel Corp., 248 Pa.Super. 95, 108, 374 A.2d 1334, 1341 (1977), aff'd, 484 Pa. 277, 398 A.2d 1378 (1979). See also, Carnicelli v. Bartram, 289 Pa.Super. 424, 433 A.2d 878 (1981); Sindler v. Goldman, 256 Pa.Super. 417, 389 A.2d 1192 (1978).

I.

The first claim to be addressed is whether the motions court erred in finding that the trial court had erred in allowing E & W to call an expert witness who contradicted testimony by former E & W employees who had been called to testify by E & W. The motions court concluded that the testimony by E & W’s former employees constituted judicial admissions which could not be subsequently contradicted by another witness called by the defense.

A judicial admission is an express waiver made in court or preparatory to trial by a party or his attorney, conceding for the purposes of the trial, the truth of the admission. It has the effect of a confessory pleading, in that the fact is thereafter to be taken for granted, so that the opposing party need offer no evidence to prove it and the party by whom the statement was made is not allowed to disprove it. See 9 Wigmore, Evidence § 2588 (Chadbourn Rev.1981). It is axiomatic that a judicial admission cannot be contradicted by the party that made it. See Tops Apparel Mfg. Co. v. Rothman, 430 Pa. 583, 244 A.2d 436 (1968); 9 Wigmore, supra, at § 2590 (“The vital feature of a judicial admission is universally conceded to be its conclusiveness upon the party making it, i.e., the prohibition of any further dispute of the fact by him and of any use of evidence to disprove or contradict it.” (emphasis in original)). As stated in Tops, “Pennsylvania has followed this rule since Wills v. Kane, 2 Grant 60, 63 (Pa.1853), where the court insisted: Where a man alleges a fact in a court of justice, for his advantage, he shall not be allowed to contradict it afterwards. It is against good morals to permit such double dealing in the administration of justice.’ ” Tops, 430 Pa. at 587-88 n. 8, 244 A.2d at 438 n. 8.

At trial, E & W called as witnesses Mr. Krauss and Mr. Pincus, both former employees of E & W. Each witness admitted to errors in the 1974 financial statements amounting to $775,000.00. The motions judge concluded that the witnesses’ testimony constituted judicial admissions by E & W and that the trial court erred in permitting E & W’s subsequent expert witnesses to contradict those admissions.

E & W contends that the testimony of a former employee does not constitute a judicial admission and that the trial court did not err in permitting an expert witness offered by E & W to contradict the former employees’ testimony on the same subject. Therefore, E & W contends, the motions court erred in granting a new trial on this issue.

It is clear that the testimony of Mr. Krauss could not have constituted a judicial admission because Mr. Krauss was a nonparty witness whose testimony could not bind E & W. At the time Mr. Krauss was called to the stand, his employment relationship with E & W had been severed for well over two years. It is black letter law that “the testimony of one who is merely called as a witness for a party but who does not stand in privity with him may never be considered an admission by the party.” P.L.E. Evidence § 155; McDermott v. Hoffman, 70 Pa. 31, 19 P.L.J. 133 (1871). Since Mr. Krauss was no longer employed by E & W, he was not in privity with E & W and his testimony did not constitute a judicial admission.

We further find that the testimony of both Krauss and Pincus did not constitute judicial admissions as their testimony was not advantageous to E & W. It was uncontested at trial that in 1975 a Granjewel employee discovered what he suspected to be errors in the 1974 audit. He brought this information to the attention of E & W and, in fact, E & W’s 1975 audit appears to show the fact of error in the 1974 audit. At trial, Krauss and Pincus acknowledged that errors had become apparent in 1975. However, neither admitted that E & W had been negligent in the conduct of the 1974 audit. Rather, they each offered an explanation for the apparent errors.

A principle element of a “judicial admission” is that the fact has been admitted for the advantage of the admitting party. The admissions here were only an acknowledgement of the fact that errors were detected in the 1974 audit. E & W did not contest that fact. Its defense was that the errors were caused by Granjewel’s own negligence. The testimony by E & W’s experts explained the source of the discrepancies in the 1974 audit and provided a factual basis for E & W’s claim that the errors were a result of Granjewel’s negligence. The testimony by Krauss and Pincus was not the type of unequivocal testimony necessary to be considered a conclusive judicial admission and does not consist of the kind of “double dealing” against which this rule of evidence was intended to protect.

In accordance with the foregoing, we find that the motions court erred in holding that the testimony of Krauss and Pincus consisted of judicial admissions which could not be explained or contradicted by further defense testimony. The trial court was correct when it permitted E & W to call an expert witness to contradict or explain that testimony. Therefore, a new trial is not warranted on this basis.

II.

E & W next contends that the motions court erred in concluding that Thomas Mulea, a juror, may have tainted the jury’s deliberations by failing to disclose his prior adversarial relationship with appellees’ counsel.

Objection to the presence of an individual juror cannot be raised “after the jury has been sworn except in those cases where a defendant has been intentionally misled or deceived by the juror or the opposite party.” Commonwealth v. Aljoe, 420 Pa. 198, 205, 216 A.2d 50, 54 (1966) (citations omitted). See also, Commonwealth ex rel. Fletcher v. Cavell, 395 Pa. 134, 149 A.2d 434 (1959), cert. denied, 361 U.S. 847, 80 S.Ct. 102, 4 L.Ed.2d 85 (1959).

During voir dire, Mulea failed to disclose that he had been a plaintiff in an equity action in which two of the defendants had been represented by a member of a firm representing appellees in the case sub judice and that he had been a defendant in a related action in which judgment had been entered against him shortly prior to the commencement of the trial in the instant matter below. The equity action involved a stockholders’ dispute in a company formed and partially owned by Mulea. The later action involved judgment being entered against him on a loan guaranteed by the Small Business Administration.

Appellees Jewelcor and Granjewel aver that this nondisclosure was intentional and prejudiced their right to an unbiased jury. E & W asserts that the nondisclosure was inadvertent and, moreover, that appellees’ counsel knew at the time of voir dire that Mulea had been a plaintiff in the previously mentioned equity litigation. Thus, E & W contends, since appellees’ counsel had knowledge of Mulea’s background during voir dire, appellees’ right to an unbiased jury was not prejudiced and a new trial should not have been granted on this basis.

There is ample evidence to support E & W’s contention that appellees’ counsel knew, during voir dire, of Mr. Mulea’s prior adversarial position. First, there was an index card which appellees’ counsel used during voir dire which referred to Mulea’s prior suit. Second, there was a memorandum sent to appellees’ co-counsel from his partner which informed co-counsel of Mulea’s possible adverse interest. Finally, appellees admit they had had knowledge of the prior equity action during voir dire in their brief on appeal.

We cannot permit appellees to raise an objection after trial to an issue which should have been raised during voir dire. “Having known of the possible disqualification of a juror and gambled on the verdict or any result which might follow, appellant cannot now complain.” Morrissey v. Commonwealth, Department of Highways, 440 Pa. 71, 79, 269 A.2d 866, 870 (1970) (quoting Cohen v. Redevelopment Authority, 425 Pa. 441, 443, 229 A.2d 744, 745 (1967)).

Appellees assert that they were deceived by Mulea’s nondisclosure and that even had they known of the prior equity litigation, they were not aware of a related action which resulted in a confession of judgment against Mr. Mulea just two weeks before voir dire commenced. Appellees aver that had they known of that most recent confession of judgment, they “would not have permitted him to become part of the jury .because of the bias he may have acquired against any plaintiff because of this summary procedure.” We cannot allow this technical claim of non-information by the appellees to be used to set aside a long and thorough trial. Both actions involving Mulea arose out of the same series of transactions. Appellees had full knowledge of Mulea’s involvement with the legal system. The argument they use with regard to the confession of judgment would have applied with equal force to his involvement in the equity action. Appellees made an informed decision during voir dire not to challenge Mulea on this basis and we will not now let them raise this claim as a last ditch effort to retry the case they failed to prove the first time around. Appellees’ claim that they were “deceived” by these factors rings hollow.

Therefore, we conclude it was error for the motions court to grant a new trial on the basis that a juror withheld information during voir dire.

III.

Another reason given by the motions court in support of its order for a new trial was its conclusion that the jury answered more interrogatories than were necessary which evidenced jury confusion.

It is clear from the answers to special interrogatories that the jury did consider and answer questions which were made moot by previous answers. However, as we stated in Daley v. John Wanamaker, Inc., 317 Pa.Super. 348, 464 A.2d 355, (1983):

... if the verdict is supported by evidence, it must be permitted to stand where there is nothing to suggest that the jury was in any way guided by partiality, prejudice, mistake or corruption. Stoughton v. Kinzey, 299 Pa.Super. 499, 445 A.2d 1240 (1982). Therefore, it is the duty of the court to enforce the jury’s verdict unless the circumstances cry out for judicial interference. Prather v. H-K Corp., 282 Pa.Super. 556, 423 A.2d 385 (1980); Stoughton, supra.

Id., 317 Pa.Superior Ct. at 352, 464 A.2d at 358.

Although the jury did answer questions made moot by previous questions, the answers to these moot questions were not inconsistent with the previous answers. The pertinent interrogatories are as follows:

Granjewel v. Ernst & Whinney
3. Was Ernst & Whinney negligent in the performance of its audit of the Granjewel financial statements for fiscal year ended January 31, 1974?
Yes_2_ No 10
If your answer to Interrogatory No. 3 is “Yes”, proceed to Interrogatory No. 4; if your answer to Interrogatory No. 3 i[s] “No”, then do not answer any of the following Interrogatories regarding the claims of Granjewel?
4. Was Ernst & Whinney’s negligence the legal cause of the damages suffered by Granjewel?
Yes_0_ No 12
If your answer to Interrogatory No. 4 is “Yes”, proceed to Interrogatory No. 5; if your answer is “No”, then do not answer any of the following Interrogatories concerning the claims of Granjewel.
5. Was Granjewel contributorily negligent with respect to the audit of the Granjewel financial statements for fiscal year ended January 31, 1974?
Yes 12 No 0
If your answer to Interrogatory No. 5 is “Yes”, then proceed to Interrogatory No. 6. If your answer to Interrogatory 5 is “No”, what is the amount of damages suffered by Granjewel?
6. Do you find that Ernst & Whinney was grossly negligent to Jewelcor in the performance of its audit of the Granjewel financial statements for fiscal year ended January 31, 1974?
Yes 0 No 12
Jewelcor Inc. v. Ernst & Whinney
3. Do you find that Ernst & Whinney was negligent to Jewelcor in the performance of its audit of Granjewel’s financial statements for fiscal year ended January 31, 1974?
Yes 2 No 10
If your answer to Interrogatory No. 3 is “Yes”, then proceed to Interrogatory No. 4; if your answer to Interrogatory No. 3 is “No”, then do not answer any of the following Interrogatories regarding the claims of Jewel-cor.
4. Was the negligence of Ernst & Whinney the legal cause of the damages suffered by Jewelcor?
Yes_ No_
If your answer to Interrogatory No. 4 is “Yes”, proceed to Interrogatory No. 5; if your answer to Interrogatory No. 4 is “No”, then do not answer any of the following Interrogatories regarding the claims of Jewelcor.
5. Was Jewelcor contributorily negligent with respect to the audit of Granjewel financial statements for fiscal year ended January 31, 1974?
Yes 12 No 0
If your answer to Interrogatory No. 5 is “Yes”, then proceed to Interrogatory No. 6; if your answer to Interrogatory No. 5 is “No”, what is the amount of the damages suffered by Jewelcor?
$-
6. Do you find that Ernst & Whinney was grossly negligent to Jewelcor in the performance of its audit of the Granjewel financial statements for fiscal year ended January 31, 1974?
Yes_0_ No 12
If your answer to Interrogatory No. 6 is “Yes”, then proceed to Interrogatory No. 7; if your answer to Interrogatory No. 6 is “No”, then do not answer any of the following Interrogatories regarding the claims of Jewel-cor.
7. Was the gross negligence of Ernst & Whinney the legal cause of the damages suffered by Jewelcor?
Yes 0 No 12

The answers to all of the interrogatories were consistently in favor of E & W. By answering more questions than needed in support of their decision to exonerate E & W, the jury did not commit the type of egregious error which would cry out for judicial interference. The jury simply answered more questions than were necessary. It was, as E & W phrased it, “mere surplusage”.

Therefore, it was error for the motions court to grant a new trial on the basis of jury confusion.

IV.

The fourth basis upon which the motions court concluded that a new trial should be had in this case was its conclusion that the trial court had erred in precluding testimony by one of appellees’ expert witnesses proffered on rebuttal.

E & W called Dr. Davidson, an expert witness, to testify on the issue of damages. Desiring to rebut this testimony, appellees offered their own expert witness, Dr. Rachman. The trial court excluded Rachman’s testimony by sustaining E & W’s objection.

It is within the discretion of the trial court to exclude the testimony of expert witnesses. Houston v. Canon Bowl, Inc., 443 Pa. 383, 278 A.2d 908 (1971); Walasavage v. Marinelli, 334 Pa.Super. 396, 483 A.2d 509 (1984). It is also within the discretion of the trial judge to deny a request to offer rebuttal evidence. Municipal Publications, Inc., v. Snyder, 322 Pa.Super. 464, 469 A.2d 1084 (1983).

The facts are undisputed that only after E & W presented its case in chief did it receive notice of appellees’ intention to call Rachman for rebuttal even though he had been present during the trial and had been retained by appellees prior to trial. Appellees notified E & W that they intended to call Rachman as a rebuttal witness three days prior to the day he was offered as a witness. E & W objected, contending that this notice failed to afford it sufficient time to prepare for the testimony. Further, E & W argued that appellees had been subject to continuing interrogatories requiring them to supplement their answers with regard to any expert witness expected to testify which they had failed to answer until the last minute.

Considering the circumstances, especially the short period of time in which E & W had to prepare for cross-examination, we cannot find that the trial court abused its discretion in excluding Rachman’s testimony. We do not agree with the motions court conclusion that the trial court abused its discretion in precluding Rachman’s testimony.

V.

E & W next argues that the motions court erred in concluding that certain of the trial court’s jury instructions were incorrect and required a new trial.

In their motion for new trial, appellees alleged, inter alia, that the trial court had erred in its charge to the jury by instructing on the contributory negligence of Gran-jewel and Jewelcor; instructing on E & W’s liability to Jewelcor ás a third party beneficiary to the contract between E & W and Granjewel; and in charging that E & W could be found liable to Jewelcor for negligence only if the jury determined that E & W intended, at the commencement of the audit, that Jewelcor would rely upon the report.

In determining the standard to be applied to determine an accountant’s liability, the motions court properly cited and relied upon National Surety Corp. v. Lybrand, 256 App. Div. 226, 9 N.Y.S.2d 554 (1939), which states the following principles applicable to accountants’ liability cases and which sets forth the appropriate standard for utilizing the defense of contributory negligence in accounting litigation:

“We are ... not prepared to admit that accountants are immune from the consequences of their negligence because those who employ them have conducted their own business negligently____ Accountants, as you know, are commonly employed for the very purpose of detecting defalcations which the employer’s negligence has made possible. Accordingly, we see no reason to hold that the accountant is not liable to his employer in such cases. Negligence of the employer is a defense only when it contributed to the accountant’s failure to perform his contract and to report the truth----”
[B]y way of illustration, if it were found that the members of the [employing firm] had been negligent in connection with the transfer of funds which occurred at about the time of each audit and that such negligence contributed to the [auditors’] false reports it would be a defense to the action for it could then be said that the [auditors’] failure to perform their contracts were attributable, in part at least, to the negligent conduct of the firm.

Id. at 235-36, 9 N.Y.S.2d at 563.

The motions court concluded that the issue of Granjewel’s contributory negligence was properly placed before the jury because E & W had presented evidence which showed that Granjewel’s internal inventory had been miscalculated by Granjewel employees and because there were questions of fact concerning Granjewel’s officer’s alleged discovery of errors in the internal inventory and his failure to inform E & W of those errors in a timely manner.

Where contributory negligence is an issue in a case, clear instructions are required; it is incumbent upon the trial judge to explain to the jury what facts constitute contributory negligence under the circumstances of the case. Commonwealth of Pennsylvania, Department of Highways v. Eldridge, 408 Pa. 391, 184 A.2d 488 (1962). In addition to instructions pertinent to the burden of proof relative to contributory negligence, the trial court’s charge provided as follows:

Contributory negligence of a Plaintiff is a defense only when it contributed to the Defendants’ failure to perform its contract and report the truth. If you find that the Plaintiffs were contributorily negligent, then you must determine whether their conduct was a substantial factor in bringing about their loss. If you answer in the affirmative on both questions, that is, if you find the Plaintiffs were negligent and that their conduct was a substantial factor in causing their losses, your verdict must be for the Defendant on the negligence theory.

This instruction appears to conform to Pennsylvania Suggested Standard Jury Instructions (Civil) 3.03, Pa.SSJI (Civ) 3.03, and with the principles of New York law. See National Surety, supra, and Shapiro v. Glekel, 380 F.Supp. 1053 (S.D.N.Y.1974).

Since we are in agreement with the motions court that there were issues of material fact concerning the negligence of Granjewel, the question of whether the possible negligence of Granjewel contributed to E & W’s failure to perform the contract and report the truth was properly submitted to the jury.

However, the motions court also concluded this evidence would not support a conclusion that Jewelcor had been contributorily negligent and, therefore, that issue had been improperly placed before the jury. The motions court concluded that the contributory negligence instructions failed to distinguish between Jewelcor and Granjewel and the corporations were “lumped” together. Finding that Jewelcor had not participated in any capacity in the audit of Granjewel’s inventory for the year 1974, the motions court opined that it was error to charge on the issue of contributory negligence as to Jewelcor. While this may be true, the error is harmless. Jewelcor’s claim against E & W rests on the claim that E & W negligently conducted the 1974 audit for Granjewel and the jury clearly determined that E & W had not been negligent in that audit. See Answers to Interrogatories, infra at 11-12. Accord: Whitton v. H.A. Gable Co., 331 Pa. 429, 200 A. 644 (1938) (“[A]s the jury found no negligence on the part of appellee [defendant below] the question of contributory negligence passes out of the case, and any error in the charge in this respect would not have been prejudicial.” Id., 331 Pa. at 432, 200 A. at 646.). See also, Dean v. Trembley, 185 Pa.Super. 50, 137 A.2d 880 (1958) (same rationale). Therefore, this is no basis upon which to grant a new trial.

VI.

The final question for us to consider with regard to the jury instructions is whether the trial court erred in its instructions as to E & W’s duty toward Jewelcor Inc., as a third party beneficiary, to perform the audit with due care. As we stated before, Jewelcor’s claim against E & W rests on the claim that E & W breached its contract with Gran-jewel by negligently conducting the 1974 audit and the jury, based on accurate jury instructions and interrogatories, clearly determined that E & W had not been negligent in that audit. It is undisputed that the rights of an alleged third party beneficiary may arise no higher than the rights of the parties to the contract and that they are vulnerable to the same limitations which may be asserted between the promisor and the promisee. Williams v. Paxson Coal Company, 346 Pa. 468, 31 A.2d 69 (1943); Zimnisky v. Zimnisky, 210 Pa.Super. 266, 231 A.2d 904 (1967). As we previously concluded, this claim of error is rendered moot by the fact that E & W was found to be not negligent as to Granjewel in the conduct of the 1974 audit.

Pennsylvania courts consistently decline to review allegations or error which have been rendered moot or harmless due to the jury’s special findings or verdict. See, Price v. Yellow Cab Co., 443 Pa. 56, 60-61, 278 A.2d 161 (1971); Dean v. Trembley, supra. We agree with appellant’s argument that a new trial is not necessary to correct alleged errors concerning issues that were irrelevant to the jury’s verdict.

CONCLUSION

For the reasons stated herein, the December 19, 1986 order granting plaintiffs’/appellees’ motion for a new trial is hereby reversed. Case remanded for reinstatement of jury’s verdict. Jurisdiction relinquished.

      . A second judge replaced the trial judge for the purpose of hearing the Motion for New Trial.

      . Subsequent to the 1974 and 1975 audits, Mr. Pincus became a partner of E & W and apparently continued in such capacity at the time of trial.

      . We note a concomitant rule of evidence which supports our conclusion as to this issue. That is, a party, whose admissions have been offered against him, may offer any evidence which serves as an explanation for his former assertion of what he now denies to be the fact. See 4 Wigmore, Evidence § 1050.

      . The motions court did specifically conclude that the record reflects testimony on material issues which was conflicting and but was sufficient to support a verdict for either of the parties.

      . This conclusion is further supported by the fact that Dr. Rachman was called to testify on the issue of damages. As the jury ultimately concluded that E & W was not negligent in its performance of the Granjewel audit, any erroneous instruction on the issue of. damages is moot and certainly cannot be the basis for the grant of a new trial.


source: Caselaw Access Project

author: MONTEMURO, Judge:

license: Public Domain

text:
    542 A.2d 81
    Elsie PERRY and Charles DiFerdinando as Parents and as Natural and Appointed Guardians of Joseph DiFerdinando an Incompetent v. MIDDLE ATLANTIC LUMBERMENS ASSOCIATION and State Mutual Life Assurance Company of America (Insurance & Pension Division). Appeal of STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA.
    Superior Court of Pennsylvania.
    Argued Jan. 22, 1988.
    Filed April 12, 1988.
    Reargument Denied June 9, 1988.

      George G. O’Brien, Philadelphia, for appellant.
    Roger J. Harrington, Philadelphia, for appellees.

      Before CIRILLO, President Judge, and McEWEN and MONTEMURO, JJ.
   MONTEMURO, Judge:

Appellant, State Mutual Insurance Company, appeals from an order granting summary judgment in favor of appellees, Elsie Perry and Charles DiFerdinando, acting as appointed guardians of Joseph DiFerdinando. We affirm, but base our decision on a rationale different from that adopted by the trial court.

This matter was heard as a case stated on a stipulation of facts. Joseph DiFerdinando was employed as a laborer by Hatboro Lumber and Fuel Company (Hatboro). Hatboro was a member of the Middle Atlantic Lumbermens Association Group Trust (MALA). Appellant, State Mutual Insurance Company, issued a group insurance policy to the trustees of MALA. Pursuant to this policy Joseph DiFerdinando, as an employee of Hatboro, became an insured on February 1, 1981. All of DiFerdinando’s premiums were paid by Hatboro. On March 8, 1981, DiFerdinando was totally disabled as the result of an automobile accident. At that time he ceased active employment with Hatboro. Hatboro continued to pay premiums on the policy up to December 31, 1981, but on that date ceased paying premiums. DiFerdinando was never notified of his possible rights to convert his group policy to an individual policy. However, the parties agree that DiFerdinando’s employment with Hatboro ended no later than December 31, 1981. Appellant paid medical benefits under the policy up to and including December 31, 1982, with the exception of $13,271.57, and has made no further payments.

Appellant and appellees filed cross motions for summary judgment on the stipulated facts. The trial court granted appellees’ motion for summary judgment, finding that cessation of active service because of disability was excluded from the termination provisions of the policy. As a result, the court concluded that appellant was required to compensate DiFerdinando for medical expenses incurred over a year after his employment had ended. The trial court also found that DiFerdinando had provided adequate proof of loss to satisfy the policy provision. This timely appeal followed.

Initially we note that our standard of review in cases awarding summary judgment is plenary. Thornburgh v. Lewis, 504 Pa. 206, 209, 470 A.2d 952, 954 (1983). Summary judgment may be granted “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Pa.R.C.P. 1035. In considering a motion for summary judgment, the trial court is bound to follow several firmly established principles. Specifically, the court must examine the entire record in the light most favorable to the nonmoving party. The court’s sole function is to determine whether there is an issue of fact to be tried and not to decide issues of fact. Finally, the court must resolve all doubts as to the existence of a genuine issue of fact against the party moving for summary judgment. See Taylor v. Tukanowicz, 290 Pa.Super. 581, 586, 435 A.2d 181, 183 (1981); Schacter v. Albert, 212 Pa.Super. 58, 62, 239 A.2d 841, 843 (1968).

The first issue raised by appellant is whether DiFerdinando’s insurance coverage terminated under the termination provision of the policy so that the extended loss provision of the policy was triggered, requiring appellant to compensate DiFerdinando only for those expenses incurred within one year from the date of termination of insurance. Resolution of this question rests upon the legal effect of certain language contained in the “Termination of Insurance” provision of the insurance policy. The relevant provisions are as follows:

TERMINATION OF INSURANCE. The insurance in force on the Employee automatically terminates on the first to occur of the termination events:
(3) the termination of the Employee’s employment. Cessation of active service (other than for disability) in the class of employees eligible for insurance is deemed termination of employment except that if active service ceases because the employee is pensioned, retired, temporarily laid-off or granted leave of absence, his employment is deemed to continue if the premium for his insurance is paid until the end of the insurance month next following the insurance month in which he ceases active service.
Major Medical Insurance — Period of Extended Loss Sickness or Injury. If as a result of sickness which commences or an accident which occurs while the insurance hereunder is in force, any covered person is totally disabled on the date of termination of insurance, a period of extended loss will be established for such sickness or injury provided benefits became payable during the period of total disability.

Any period of extended loss will terminate

(a) on the date of termination of total disability, or
(b) twelve months after termination of insurance,

(emphasis added).

The policy provides that insurance coverage “automatically terminates” upon “the termination of employment.” Appellant argues that because the parties stipulated that DiFerdinando’s employment ended no later than December 31, 1981, his insurance coverage terminated on that date and appellant was only required to compensate DiFerdinando for expenses incurred up until December 31, 1982 under the extended coverage provision of the “sickness and injury” clause.

Appellees counter by arguing that the termination provisions of the policy distinguish between “termination of employment” and “cessation of active service.” They argue that the parenthetical language contained in the termination provision exempts cessation of active service caused by disability from being deemed termination of employment under the policy. As a result, appellees claim that DiFerdinando’s insurance has not terminated, that the extended loss provision was not triggered, and that appellant owes him $45,000, which is the amount of medical bills incurred after December 31, 1982.

Both appellees and the trial court read the termination and extended loss provisions to mean that DiFerdinando’s insurance coverage continues indefinitely until his disability ceases, even though his employment has been terminated and premium payments have been discontinued. We disagree with this interpretation.

In Brown v. Carnegie-Illinois Steel Corp., 168 Pa.Super. 380, 77 A.2d 655, aff'd, 368 Pa. 166, 81 A.2d 562 (1951), we construed a termination provision much like the provisions presented in this case. The group policy provision in Brown provided:

The insurance of any employee shall automatically cease upon the occurrence of any of the following events: (a) the termination of this policy, (b) the cessation of premium payments on account of such employee’s insurance hereunder, (c) the thirty first day following the termination of his employment in the classes of employees insured hereunder. Cessation of active work by an employee shall be deemed to constitute termination of his employment except that, an employee absent from work because of disability due to injury or sickness or on account of lay-off or leave of absence will, subject to the continuance of premium payments on account of such employee’s insurance, be regarded as still in the employment of the employer during the period of such disability, lay-off or leave of absence until the effective date of the discontinuance of such employee’s insurance as entered on the employer’s records____ At the end of the respective periods mentioned above or upon the effective date of the discontinuance of the employee’s insurance as entered on the employer’s records, as provided above, the employee’s insurance hereunder shall terminate automatically unless he shall have returned to active work.

With respect to the foregoing provision, a six-judge panel of this court stated:

The contract provides that the insurance coverage is terminated 31 days after cessation of work by an employe, subject to certain exceptions which are entirely for his benefit. The policy is silent on the subject of permanent disability but does provide that an employe absent from work because of disability due to injury or sickness will still be regarded as an employe. We agree with appellee that the intent of that provision is to protect the employe in the case of temporary illness or injury but not to continue his status as an employe, when permanently disabled until death. The termination of that status on the books of the employer terminates the interest of the former employe in the group insurance.

Id., 168 Pa.Superior Ct. at 384, 77 A.2d at 657.

Just as in Brown, supra, we believe that the termination and sickness and injury provisions in this case convey an intent to continue the status of a person who ceases active service due to disability as an employee, until such time as the employer elects to sever permanently the employment relationship. See Annotation, Termination of Coverage under Group Policy with Regard to Termination of Employment, 68 A.L.R.2d 8, 72-73 (1959). While the provisions in the present policy are the product of extremely poor draftmanship and by no means as succinct as those contained in Brown, supra, we believe that the effect of these provisions is clear. The primary purpose of a group insurance policy like the one in question is “to supply low cost insurance for protection of workmen while actually employed.” See Kelly v. Montour Railroad Company, 195 Pa.Super. 587, 592, 171 A.2d 632, 634 (1961) (emphasis added) (quoting Brown, supra). A careful reading of the language contained in the termination provision in question indicates that when an employee ceases active service due to disability, his status as an employee continues indefinitely unless and until the employer takes some affirmative step demonstrating that his employment has been terminated. See Jones v. Metropolitan Life Insurance Company, 156 Pa.Super. 156, 163, 39 A.2d 721, 725 (1944). Employees who cease active service for reasons other than disability will be treated as if they were terminated prior to the date of actual termination, with the exception of those who cease acti service as a result of pension, retirement, temporary lay-off or leave of absence. Those employees who cease active service for the foregoing reasons are deemed to continue as employees for coverage purposes if the premiums are paid until the end of the insurance month following the month in which they cease active service. However, employees who cease active service because of disability are entirely excluded from the clause’s operation by virtue of the parenthetical language. Those who are incapable of actively serving due to disability will not be treated as if terminated prior to the date of actual termination. Instead, their employment status will continue unconditionally until the employer severs the employment relationship. The purpose of this arrangement is evident. There are many times when an employee will be temporarily disabled and granted a leave of absence without pay. Common sense dictates that in such a case “neither the insurance company, the employer, or the employee contemplate the cancellation or termination of the insurance only to be revived with all the attendant bookkeeping expense and trouble when the employee returns to his labor.” Prudential Insurance Company of America v. Sweet, 253 Ky. 643, 646-647, 69 S.W.2d 748, 749-750 (1934). The parenthetical language, excluding active service due to disability from being deemed termination of employment, serves a dual purpose. On the one hand, it gives the employer time to evaluate the status of an injured employee and determine whether the employee will eventually recover and return to work. At the same time, the disabled employee remains fully covered until the employer takes action evidencing an intent to finally terminate the employment relationship. Generally, the question of whether the employer has elected to finally terminate the employment relationship depends upon whether the employer’s acts and the attendant circumstances demonstrate an intention to treat the interruption of the employee’s work as temporary or permanent. See Equitable Life Assurance Society v. Larocco, 68 F.2d 451 (3d Cir.1933). The employer’s refusal to pay further premiums is a factor evidencing an intent to permanently terminate the employment relation. Hanaieff v. Equitable Life Insurance Society, 371 Pa. 560, 92 A.2d 202 (1952).

In the instant case, the stipulation of facts reveals that Hatboro ceased paying premiums for DiFerdinando’s insurance on December 31, 1981. The parties also stipulated that DiFerdinando’s employment terminated no later than December 31, 1981. Consequently, it is undisputed that the employment relationship between Hatboro and DiFerdinando was permanently severed no later than December 31, 1981. The termination of DiFerdinando’s employment “automatically” terminated his insurance coverage as of December 31, 1981. On the date his insurance terminated, it is undisputed that DiFerdinando was totally disabled. Because he was “totally disabled on the date of termination of insurance”, his coverage was extended for an additional period even though he was no longer employed. Under the extended coverage clause, the period of extended coverage ends on the date the disability ends or twelve months after the termination of insurance, whichever occurs first. See Guardian Life Insurance Company v. Zerance, 505 Pa. 345, 479 A.2d 949 (1984) (construing a similar medical insurance termination provision and extended loss provision to operate in this fashion). Here, the twelve month extended coverage expired on December 31, 1982.

Although the termination and extended loss provisions in question provided coverage only up until December 31, 1982, we nevertheless find that appellant is liable for expenses incurred after that date because of the lack of notice to DiFerdinando of the termination of his insurance coverage and his attendant statutory privilege to apply for a policy of individual insurance upon termination of his group coverage. Pennsylvania insurance law provides that an insured under a group policy of insurance shall be given the opportunity to convert his group policy to an individual policy upon application and payment of an initial premium within thirty-one (31) days after the date of termination of group coverage. 40 P.S. § 756.2(d)(1). Upon application, subject to the exceptions contained in 40 P.S. § 756.2(d)(6), the group insurer is required to issue an individual policy without evidence of the insurability of the insured. 40 P.S. § 756.2(d)(2). In order that the insured may exercise his option to convert, the legislature imposed a notice provision requiring either the group policyholder, who is normally the employer, or the insurer, to provide written notice to the insured of the option to convert his group insurance policy to an individual policy upon the termination of group coverage. 40 P.S. § 756.2(d)(19). The legislative history behind the bill requiring a conversion privilege in certain group accident and sickness policies, and notification of termination of group coverage, reveals that it was designed to protect terminated employees from being unknowingly can-celled under a group policy and subjected to personal liability for substantial medical expenses. On the third consideration of the bill before the House of Representatives, the purpose of the bill was aptly summarized by Representative Taylor as follows:

Mr. Speaker, this is probably one of the greatest reforms in the insurance business in the last half century in this state. It has been long overdue.
This bill is designed to make sure that the people who are covered under group hospitalization policies, when that group certificate is cancelled, that the individual certificate holders are notified. This is something that has been going on for too many years, too long. I would urge everyone to support this piece of legislation because it is long overdue and it really is a major reform in the insurance industry.

House Journal p. 4639 (May 12, 1976) (statement of Rep. Taylor).

The specific language of 40 P.S. § 756.2(d)(19), requiring written notice of the conversion privilege, provides as follows:

A notification of the conversion privilege shall be included in each certificate of coverage.
Each certificate holder in the insured group shall be given written notice of such conversion privilege and its duration within fifteen days before or after the date of termination of group coverage, provided that if such notice be given more than fifteen days but less than ninety days after the date of termination of group coverage, the time allowed for the exercise of such privilege of conversion shall be be extended for fifteen days after the giving of such notice. If such notice be not given within ninety days after the termination of group coverage, the time allowed for the exercise of such conversion privilege shall expire at the end of such ninety days. Written notice by the contract holder given to the certificate holder at his last known address, or written notice by the insurer mailed to the certificate holder at the last address furnished to the insurer by the contract holder, shall be deemed full compliance with the provisions of this clause for the giving of notice. A group contract issued by an insurer may contain a provision to the effect that notice of such conversion privilege and its duration shall be given by the contract holder to each certificate holder upon termination of his group coverage.

40 P.S. § 756.2(d)(19). This provision unequivocally imposes a joint obligation on the insurer and the group policy holder to notify the insured of his conversion privilege. In the event that the insured is not provided with written notice of the termination of insurance or his option to convert to a policy of individual insurance within ninety (90) days from the termination of group coverage, the insurer remains liable under the group policy until such notice is provided to the insured. Additionally, when notice is sent more than ninety (90) days from termination of group coverage, the time for the exercise of the privilege provided in the policy is extended for ninety (90) days. See Harris v. St. Christopher’s Hospital for Children, 291 Pa.Super. 451, 436 A.2d 203 (1981) (holding that coverage under a group life insurance policy was extended beyond the period provided in the policy because of failure to comply with the statutory notice of conversion privilege); see also Olkowski v. Prudential Insurance Company of America, 597 F.Supp. 1197 (E.D.Pa.1984) (where insurer did not notify insured of policy’s pending termination and conversion privilege, insurer remained liable for medical expenses). This interpretation effectuates the legislature’s intent of protecting the insured, who runs the risk of incurring personal liability for substantial medical expenses in the event that he is not aware that his coverage has lapsed. See Poch v. Equitable Life Assurance Society of United States, 343 Pa. 119, 22 A.2d 590 (1941).

We recognize that one commentator urges that the consequences of failure to notify of termination of insurance coverage and the attendant conversion privilege is merely an extension of the time period within which to exercise the privilege. See Best, Notice by Insurers of Termination of Group Coverage in Pennsylvania, 90 Dick.L. Rev. 101 (1985) (citing cases). We believe, however, that this interpretation undermines the legislative intent behind the conversion privilege. Were we to construe the statutory notice provision to merely extend the period for exercising the privilege, rather than coverage, in the event of non-compliance, there would be no incentive whatsoever for either the insurer or the group policyholder to notify the insured of his conversion option. Indeed, both the insurer and the employer could sit back on their heels until the expiration of the ninety (90) day period following the termination of group coverage and face no consequences for their inaction. It is an elementary principle of statutory construction that the legislature is presumed not to intend an absurd or unreasonable result. See 1 Pa.C.S.A. § 1921; Schaefer v. Hilton, 473 Pa. 237, 373 A.2d 1350 (1977). The legislative mandate that an insured be provided with an opportunity to convert his group policy to an individual policy presupposes that the insured be placed on notice of such an option. In order to ensure that he is aware of the conversion privilege, the legislature imposed a joint obligation on the insurer and the group policyholder to notify the insured of the termination of group coverage and the attendant conversion rights. Consequently, we hold that where an insured is not provided with notice of the termination of group coverage and possible conversion rights within ninety (90) days from the termination of group coverage, the insurer remains liable for medical expenses incurred up until the time such notice is given. When notice is given outside the ninety (90) day period, the insured is provided with an additional ninety (90) days within which to apply for a converted policy of individual insurance. The insurer may then seek contribution from the group policyholder for any liability incurred for the failure to provide notice.

While the parties to this action have not briefed or argued the consequences of the lack of notice of termination of coverage and attendant conversion privileges, we believe that our decision, in addition to effectuating the legislature’s intent, is in accord with Pennsylvania Supreme Court precedent. Our supreme court has stressed the importance of providing notice of cancellation of group coverage, although not specifically addressing the statutory requirement of notice of the conversion privilege. In Guardian Life Insurance Company v. Zerance, supra, our supreme court was faced with the question of the propriety of the termination of medical insurance benefits under a group policy similar to the one at bar. In finding that benefits were properly terminated, the court noted that termination of coverage must be consistent with the terms of the policy and that the insured must be given notice of intended cancellation of the group coverage. Id. 505 Pa. at 350, 479 A.2d at 952, (citing Poch v. Equitable Life Assurance Society of United States, supra).

In Poch, the named beneficiary of a group policy instituted an action to recover unpaid total and permanent disability benefits which had allegedly accrued during the insured’s lifetime. In finding that the insured remained covered because of the lack of notice of the termination of coverage, the court reasoned:

Upon review of the authorities, and upon reason as well, our conclusion is that, under a group policy like that now before us, the insured employee must be regarded as a party to the contract at least to the extent that the group policy cannot be cancelled or any of its effective provisions eliminated, by either the employer or insurer, except in a manner provided by the policy, without giving such employee notice of the intended cancellation or modification, so that he may timely exercise any conversion privilege which may be available to him under the terms of the policy, or, where such privilege is not given, in order that he may seasonably obtain similar insurance protection on his own account elsewhere; further that in the absence of such notice, an agreement of cancellation or modification like that entered into between the Association and the Society is, as to such employee, legally ineffective to relieve the insurance company from liability under the original policy.

Poch, 343 Pa. at 128, 22 A.2d at 594 (emphasis added). Consequently, we believe that both the legislature and the Pennsylvania Supreme Court have expressed a clear dictate that in the event an insured under a group policy of major medical insurance is not notified of the termination of group coverage and the attendant conversion privileges, the insurer will remain liable under the original policy for expenses incurred.

The present record is devoid of evidence that DiFerdinando was notified that his group coverage under the extended benefits clause would terminate as of December 31, 1982. Moreover, the parties have stipulated that DiFerdinando was never notified of the possible privilege of converting to an individual policy of insurance upon the expiration of his group coverage. As a result, we believe that the trial court properly held appellant liable for medical expenses incurred by DiFerdinando after December 31, 1982.

Appellant also claims that it is not obligated to pay DiFerdinando $13,271.57 in medical expenses incurred prior to the termination of his insurance because of failure to comply with the “proof of loss” provision of the policy. This provision provides as follows:

PROOFS OF LOSS. Written proof of loss must be furnished to the Company, in the case of claim for loss for which the policy provides any periodic payment contingent upon continuing loss, within ninety days after the termination of the period for which the Company is liable, and in the case of claim for any other loss, within ninety days after the date of such loss. Failure to furnish such proof within the time required shall not invalidate nor reduce any claim if it was not reasonably possible to give proof within such time, provided such proof is furnished as soon as reasonably possible.

Appellant claims that it was not presented with proof of loss of the $13,271.57 in medical expenses until June 17, 1986, and should therefore not be required to compensate appellee for these expenses. The trial court found that appellant received adequate notice of DiPerdinando’s total and permanent disability. We agree with this finding.

Pennsylvania appellate courts have generally held that substantial compliance with such proof of loss provisions, rather than strict literal compliance, is all that is required. Fishel v. Yorktown Mutual Insurance Company, 254 Pa. Super. 136, 385 A.2d 562 (1978). In Albert v. Mutual Benefit Health and Accident Association, Omaha, 350 Pa. 268, 38 A.2d 321 (1944), our supreme court articulated the purpose behind a proof of loss provision:

'The purpose of a provision for notice and proofs of loss is to allow the insurer to form an intelligent estimate of its rights and liabilities, to afford it an opportunity for investigation, and to prevent fraud and imposition upon it.’

Id., 350 Pa. at 277, 38 A.2d at 324-325.

Moreover, where it appears that the insured has not substantially complied with the proof of loss provisions in the policy, the insurer is required to prove that it suffered prejudice as a consequence of the breach. See Brakeman v. Potomac Insurance Company, 472 Pa. 66, 371 A.2d 193 (1977). In Brakeman, the court explained the desirability of imposing a prejudice requirement on insurers as follows:

[a] reasonable notice clause is designed to protect the insurance company from being placed in a substantially less favorable position than it would have been if timely notice had been provided, e.g., being forced to pay a claim against which it has not had an opportunity to defend effectively____ Where the insurance company’s interests have not been harmed by late notice ... the reason behind the notice condition in the policy is lacking, and it follows neither logic nor fairness to relieve the insurance company of its obligations under the policy in such a situation.

Id., 472 Pa. at 75, 371 A.2d 197 (citations omitted). Thus, the primary reason behind the Brakeman Prejudice requirement is to guard against forfeiture in the absence of good reason. Id.

While appellant may not have received the actual medical bills for the $13,271.57 in expenses that DiFerdinando incurred until June 16, 1986, it did have notice that appellant was totally disabled by December 18, 1981. DiFerdinando was injured on March 7, 1981. On March 18, 1981, DiFerdinando’s attorney sent notice of the incident to Hatboro, who acknowledged receipt of the notice on March 20, 1981. In addition, appellees submitted a “Notice of Permanent and Total Disability” to appellant on December 18, 1981 and a “Statement of Claim” form on April 13, 1982. We believe that the efforts of appellees’ reflect substantial compliance with the proof of loss provision in question. However, even if we were to find that they had not substantially complied with the provision, we would be constrained to conclude that appellant has failed to demonstrate the requisite prejudice necessary to absolve them from liability under the policy.

Accordingly, we find that the trial court properly granted summary judgment in favor of appellees.

Order affirmed.

        . We note that while the termination provision could be more carefully drafted, we do not believe that the provision is rendered ambiguous by the positioning of the parenthetical language, as appellant urges. In Metzger v. Clifford Realty Corp., 327 Pa.Super. 377, 386, 476 A.2d 1, 5 (1984), we stated:
      A contract is not ambiguous if the court can determine its meaning without any guide other than a knowledge of the simple facts on which, from the nature of the language in general, its meaning depends; and a contract is not rendered ambiguous by the mere fact that the parties do not agree upon proper construction.
      Because we do not believe that the provision in question is patently ambiguous, we need not resort to the principle that ambiguous provisions are construed against the drafter of the policy.

      . Implicit in the stipulation that his employment was terminated no later than December 31, 1981, is that DiFerdinando was aware that his employment had been permanently terminated as of that date. Compare Jones v. Metropolitan Life Insurance Company, supra (For purpose of termination proviso, until an employee is clearly informed that he is discharged, the employment relation is not terminated).

      . The group policy in question contained such a provision.

      . We note that Section 756.2(d)(19), provides a mechanism by which an insurer may protect itself against such liability. The group policy can be drafted in a manner which places the obligation to notify the individual certificate holders solely upon the group policyholder.

      . Although Brakeman was decided in the context of automobile liability insurance, this court has extended the prejudice requirement to other types of insurance. See Judge v. Celina Mutual Insurance Company, 303 Pa.Super. 221, 449 A.2d 658 (1982) (Brakeman rule applies to fire insurance policy). Similarly, federal courts have consistently extended Brakeman to other contexts. See Insurance Company of America v. Compagnie Des Bauxites De Guinea, 794 F.2d 871 (3d Cir.1986) (Brakeman extended to loss of production policy); see also Del Boring Tire Service v. Federal Emergency Management Agency, 496 F.Supp. 616 (W.D.Pa.1980) (Brakeman rule applies to case involving flood insurance). We see no reason why Brakeman should not apply to a policy of major medical insurance.

      . The stipulation does not reveal if Hatboro forwarded this notice to appellant. As a result we can not say when or if appellant received this notice.


author: BECK, Judge: BROSKY, Judge,

text:
    542 A.2d 90
    AM/PM FRANCHISE ASSOCIATION, Salvatore Miluzzo, Robert J. Williams, Robert E. Recotta, Paul Hastings and Thomas E. Doyle, Appellants, v. ATLANTIC RICHFIELD COMPANY, Appellee.
    Superior Court of Pennsylvania.
    Argued Dec. 3, 1987.
    Filed April 14, 1988.
    Reargument Denied June 13, 1988.

      Sol H. Weiss, Philadelphia, for appellants.
    James D. Coleman, Philadelphia, for appellee.
    Before CIRILLO, President Judge, and BROSKY and BECK, JJ.
   BECK, Judge:

The named plaintiffs claim to be representatives of a class comprised of over 150 gasoline dealers in Pennsylvania and New York who were franchised under agreements with defendant Atlantic Richfield Company. Plaintiffs brought a breach of warranty action against Atlantic Rich-field, including counts alleging fraud and breach of the duty of fair dealing. The gravamen of the complaint is that the introduction by Atlantic Richfield of Oxinol as a blending agent in ARCO brand gasoline caused the dealers to lose profits because of a decreased sales volume caused by customer dissatisfaction with the gasoline. Atlantic Rich-field filed preliminary objections in the nature of a demurrer to plaintiffs’ complaint. Atlantic Richfield claimed that the damages sought by plaintiffs, i.e., lost profits caused by the loss of customer satisfaction, are not recoverable as a matter of law in Pennsylvania. The trial court agréed and dismissed the action. We hold that such damages are not recoverable as a matter of. law in the present case and, therefore, affirm the order of the lower court.

As a preliminary matter, the trial court notes in its opinion that the action had not yet been certified as a class action. This lack of formal certification does not affect the finality of the order entered below or of the status of this case on appeal. Rule 1707 of the Pennsylvania Rules of Civil Procedure provides that a motion for certification as a class action is to be filed thirty days after the pleadings are closed or after the last required pleading was due. Pa.R. Civ.R. 1707(a). The class determination is postponed until after the close of the pleadings to ensure that the class proponent is presenting a nonfrivolous claim capable of surviving preliminary objections. Janicik v. Prudential Insurance Co. of America, 305 Pa.Super. 120, 451 A.2d 451 (1982). The Rule thus conserves valuable time and resources by postponing the certification determination until it is clear that the action will proceed. To require that such a determination must be made before the plaintiffs may appeal from an order sustaining preliminary objections in the nature of a demurrer would be superfluous. A certification of a class action does not join parties not yet in action. Rather, the class is in the action until properly excluded. Bell v. Beneficial Consumer Discount Co., 465 Pa. 225, 348 A.2d 734 (1975). The action is to be treated as a class action for the purpose of preliminary objections and also on the subsequent appeal of an order which sustains those objections and dismisses the complaint. Sherrer v. Lamb, 319 Pa.Super. 290, 466 A.2d 163 (1983). Therefore, this case is properly before this Court.

Plaintiffs’ basic contention is that a retail dealer who must purchase all of his goods from one seller may recover lost profits as his compensatory damages when the seller delivers a defective or unmerchantable product for sale by the dealer. Plaintiffs had a franchise agreement with Atlantic Richfield which provided that each plaintiff dealer would purchase ARCO brand gasoline from Atlantic Rich-field and resell it to the general public at a “markup.” In the 1970’s and 1980’s, Atlantic Richfield implemented a number of controversial and revolutionary marketing practices. All of these novel practices, except for the one at issue, resulted in increased sales and profits to the retail dealer. In their complaint, plaintiffs acknowledge and even praise Atlantic Richfield for its business judgment in introducing these practices. However, the gravamen of the complaint is that one of these practices, the introduction of Oxinol as a blending agent in the gasoline, did not result in the same success as did the other practices. Plaintiffs contend that the Oxinol blended gasolines were not of the high quality which Atlantic Richfield represented them to be, and that the gasoline actually harmed automotive systems. Once the public became aware of the possibility that the Oxinol blended gasoline was harmful to automobiles, according to plaintiffs, consumers stopped buying gasoline from the ARCO retail dealers. Allegedly, sales volume decreased dramatically.

Plaintiffs frame their complaint in counts alleging breach of warranty, breach of the implied duty to deal fairly, and fraudulent misrepresentation. The compensatory damages sought in all of the counts are based upon lost profits resulting from the alleged decrease in sales volume caused by the loss of customer satisfaction. This case does not involve a situation in which the dealer alleges that he had to pay a consumer for an injury to the consumer’s automobile caused by the gasoline, nor is there an allegation that the dealers had to sell each gallon at a loss or a reduced price. Each gallon delivered to plaintiffs by Atlantic Richfield was sold to consumers at customary prices. Plaintiffs are basically contending, not that they were unable to sell gasoline delivered to them, but, that they would have sold more gasoline during the time period in question if Oxinol had not been added to the gasoline.

Preliminary objections in the nature of a demurrer should be sustained where it is shown that upon the facts pleaded recovery is not permitted by law. Clevenstein v. Rizzuto, 439 Pa. 397, 266 A.2d 623 (1970). Under the facts pleaded by plaintiffs, Pennsylvania law permits no recovery. Recovery for loss of profits under Pennsylvania law is allowed where such loss was caused by a plaintiff’s inability to use property damaged, destroyed or withheld by defendant’s wrongful conduct. See Kosco v. Hachmeister, Inc., 396 Pa. 288, 152 A.2d 673 (1959); Neville Chemical Co. v. Union Carbide Corp., 422 F.2d 1205, 1226 (3rd Cir.1970). However, the Pennsylvania Supreme Court has consistently distinguished lost profits in a situation where those losses are consequential damages accompanying another kind of economic injury from this type of speculative loss of potential customers.

The Pennsylvania Supreme Court has held that losses stemming from customer alienation, whether those losses are characterized as either “lost profits” or loss of good will,” cannot be ascertained with reasonable certainty and are not recoverable as a matter of law. In the seminal case of Michelin Tire Co. v. Schultz, 295 Pa. 140, 145 A. 67 (1929), decided under the Uniform Sales Act, the defendant was a Michelin tire dealer who refused to pay for tires he purchased from Michelin for resale. The dealer alleged that the tires were defective in that they were not of the quality asserted by Michelin. In his counterclaim, the dealer alleged a loss of profits he could have made on sales to customers who took their business elsewhere. The Court ruled that the counterclaim failed as a matter of law. All of the tires in question were in fact sold by the dealer to consumers. That the dealer would have made more sales but for the breach of warranty was regarded as too speculative and not a proper measure of damages. The true measure of damages for the breach would have been the difference between the value of the goods as warranted and as actually delivered. Michelin, 295 Pa. at 144, 145 A. at 68.

Although Michelin was decided under the Uniform Sales Act, the same result would be obtained under the Uniform Commercial Code. 13 Pa.Cons.Stats.Ann. § 1101 et seq. (Purdon 1984). The measure of damages for breach of warranty under the Code is “the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.” 13 Pa.Gons.Stat.Ann. § 2714(b). Plaintiffs make no claim that the value of each gallon of gasoline which they in fact purchased from Atlantic Richfield had a value less than that of the gasoline if it contained no Oxinol. The Pennsylvania Supreme Court in Harry Rubin & Sons, Inc. v. Consolidated Pipe Co. of America, 396 Pa. 506, 153 A.2d 472 (1959), again refused to expand the scope of damages to include recovery for the loss of customer good will. In Rubin, the buyer of plastic hoops which were not delivered attempted to recover as consequential damages the loss of profits he would have made had not his customers become dissatisfied. The Court concluded that permitting recovery for the loss of good will in such situations would result in abolishing the limit of recovery of such damages in cases in which defective goods are sold. Rubin, 396 Pa. at 513, 153 A.2d at 477.

In Kassab v. Central Soya, 432 Pa. 217, 246 A.2d 848 (1968), the Pennsylvania Supreme Court again reiterated this rule in a fact pattern quite similar to the one at hand. The defendant in Kassab sold cattle feed to the plaintiff, which feed contained an additive which caused miscarriages in cows and sterility in bulls. Defendant had knowlédge that the plaintiff raised the cattle for their breeding qualities. Plaintiffs claimed as damages the diminution in value of cattle actually affected by the defective feed. The Court, in allowing these damages, carefully distinguished them from a “recovery for loss of good will to a business caused by community knowledge that seller’s defective products were once used or sold by that business.” Kassab, 432 Pa. at 237, n. 12, 246 A.2d at 857, n. 12 (emphasis added). Again, the Court branded the latter measure of damages as too speculative.

Plaintiffs are, in effect, trying to recover for a risk of doing business. Any retail dealer who sells one brand of product exclusively is naturally dependent to some extent on the marketing practices of the franchisor. As is evident in plaintiffs’ complaint where the plaintiffs lauded other marketing practices of Atlantic Richfield, some such practices are more successful than others. If recovery is allowed for customer dissatisfaction under the instant set of circumstances, then retail dealers would be able to recover whenever the franchisor develops a new product or modifies an old product which, for whatever reasons, does not sell very well. The dealers would share in all the successes and would be able to sue for recovery for the failures. The franchisor, meanwhile, would lose twice: once when the decrease in sales occurs, and again when it must make up for the lost profits of the franchisees.

The speculative nature of the damages at issue are particularly evident in this case. The purported class contains some 150 dealers. Even if a given dealer in that class can prove a decline in sales, other factors capable of affecting customer demand must be considered. Such factors include the following: the dealer’s retail price policy, traffic patterns in the area, the dealer’s hours of operation, the quality of the service, the appearance of the dealership, competition in the neighborhood, other services offered by competitors, and other services provided by the dealers (including the convenience stores and the quality of their operation). Isolating the decline in reputation from such factors would amount to speculation.

Plaintiffs’ final two claims are also without merit. Plaintiffs contend that the complaint stated a valid cause of action for breach of the duty of good faith and fair dealing and for misrepresentation. However, in the misrepresentation count, plaintiffs failed to aver the alleged fraud with particularity as required. Pa.R.Civ.Proc. 1019(b). The averments merely alleged that the dealers justifiably relied upon information, supplied by Atlantic Richfield, which Atlantic Richfield should have known was false.

In the remaining counts, plaintiffs seem to be trying to convert this contract action into a tort action so that they can recover punitive damages. It is not clear from the complaint or appellant’s briefs whether recovery is sought under a tort or contract theory. Plaintiffs fail to adequately define the elements of this new tort they seem to be creating. Rather, plaintiffs simply allege that Atlantic Richfield breached its duty of fair dealing in contractual relations by misrepresenting the nature and quality of the gasoline with Oxinol. However, this duty arises, not under tort law, but under contract law. The Uniform Commercial Code as enacted in Pennsylvania provides that “[ejvery contract or duty within this title imposes an obligation of good faith in its performance or enforcement.” 13 Pa.Cons. Stat.Ann. § 1203. The Restatement (Second) of Contracts, section 205 also imposes such a duty on the parties to a contract. See Atlantic Richfield v. Razumic, 480 Pa. 366, 377, 390 A.2d 736, 742 (1978). Since we have held that the damages alleged by plaintiffs are speculative and unrecoverable as a matter of law, plaintiffs have again failed to state cause of action.

Therefore, we hereby affirm the order of the lower court dismissing the plaintiffs action.

BROSKY, J., files a dissenting opinion.

BROSKY, Judge,

dissenting:

I must respectfully dissent from the majority, which characterizes appellants’ claim as one for loss of good will. I view appellants’ claim as a request for lost profits occasioned by appellee’s delivery of an unmerchantable product. I am of the opinion that the question of damages should have been permitted to go to the jury. Accordingly, the demurrer should not have been granted.

In support of my position, I would compare appellants’ situation to that of the plaintiff in Kassab v. Central Soya, 432 Pa. 217, 246 A.2d 848 (1968). In that case, the defendant sold defective cattle feed to the plaintiff, which caused miscarriages in cows and sterility in bulls. Plaintiff raised the cattle for breeding purposes, and therefore, claimed as damages, the profits lost as a result of the diminution in value of cattle actually affected by the defective feed.

In allowing the damages the court said:

It does not matter whether the cattle lost value because they, in fact, could not reproduce, or because no one in the community would buy them out of a reasonable fear that the stilbestrol they ate might cause reproductive disorders. For, if either be true, it can fairly be said that Appellant’s property has been damaged due to the feed sold by Appellees.

Id., 432 Pa. at 236-37, 246 A.2d at 857.

In differentiating between lost profits and loss of good will, the court in Kassab stated:

Recovery for the diminution in value of specific property caused by a refusal of the buying community to assign a market value to that property equal to what it was worth prior to its being affected by the seller’s defective product must not be confused with recovery for loss of good will to business caused by community knowledge that the seller’s defective products were once used or sold by that business. Since the loss of good will cannot be measured by the diminution in value of any specific property belonging to the aggrieved buyer, unlike the present case, such good will loss is too speculative and hence not a compensable element of damages under such a 2-715 of the Code, (citations omitted).

Id. at 237 n. 12, 246 A.2d at 857 n. 12.

Likewise, in the case sub judice, appellants were unable to sell as much gasoline when it became known publicly that the gasoline was defective. During that period, sales plummeted. Appellants are only seeking the profits lost during the period when the defective gasoline was used. They do not claim that good will was lost such that they were unable to sell non-defective gasoline.

While the majority labels appellants’ loss as “speculative”, I would disagree. Although calculating damages may have been a problem in the past, and in certain cases, may still be a problem, I cannot see that it presents a problem here. Even in an instance where damages were denied as being too speculative, the court recognized that the future could bring considerable changes. In Neville Chemical Co. v. Union Carbide Corp., 422 F.2d 1205 (3d. Cir.1970), the court stated:

This is not to say we approve the Pennsylvania view or believe it will be the Pennsylvania position in the future. Considering the advances made in techniques of market analysis and the use of highly sophisticated computers it may be that lost profits of this nature are no more speculative than lost profits from the destruction of a factor or hotel, and perhaps Pennsylvania will reconsider the reason for its rule in a future case. We are nonetheless required to apply the current rule in Pennsylvania.

Id. at 1227-28.

Further, a comparison of the business profits before and after the delivery of the unmerchantable gasoline should prove to be enlightening. See, Bolus v. United Penn Bank, 363 Pa.Super. 247, 525 A.2d 1215 (1987).

Thus, I would, as the court did in Kassab, supra, remand the cause to afford appellants an opportunity to demonstrate the amount of damages sustained as a result of appellee’s delivery of an unmerchantable product.

      . Arco Chemical Company and Atlantic Refining and Marketing Corporation ("ARMC”) are named defendants in this action, but the plaintiffs have stipulated that their complaint against these defendants should be withdrawn. The named plaintiffs are members of an association which was itself named a plaintiff. However, the plaintiffs have agreed that the association itself had no standing to sue and have voluntarily dismissed the association as a plaintiff.

      . The federal courts in Pennsylvania have also held that Pennsylvania law does not allow recovery for losses caused by customer dissatisfaction. See Neville Chemical Co. v. Union Carbide Corp., 422 F.2d 1205 (3rd Cir.), cert. denied, 400 U.S. 826, 91 S.Ct. 51, 27 L.Ed.2d 55 (1970); Argo Welded Products v. J.T. Ryerson, 528 F.Supp. 583 (E.D.Pa.1981).