text:
    578 A.2d 492
    The HARFORD MUTUAL INSURANCE COMPANY, Appellant, v. Douglas P. MOORHEAD and Marlene B. Moorhead, His Wife, Individually and Trading and Doing Business as Presque Isle Wine Cellars, George A. Stevens and Carla Stevens, His Wife Joseph Bordonaro and Rebecca Bordonaro, His Wife, Trading and Doing Business as Bordonaro’s Fruit Stand, Ralph Gagliordi, Crosby & Baker Wine Makers Ltd., and Oak Barrel Wine Crafts, Oregon Specialty Co., Gateway Hardware Company, Sesol France and Schenley Distillers, Inc., Appellee.
    Superior Court of Pennsylvania.
    Argued Dec. 6, 1989.
    Filed July 25, 1990.

      Michael S. Jan Janin, Erie, for appellant.
    William J. Kelly, Erie, for Douglas and Marlene Moor-head, appellees.
    Before DEL SOLE, KELLY and HESTER, JJ.
   KELLY, Judge:

In this opinion we are called upon to decide whether under a comprehensive general liability insurance policy, the duty to defend an insured from liability in a civil suit where the insured is sued on the basis of a “negligent failure to warn” is removed by a “Products Hazard” exclusion. We find that the duty to defend exists in this action, and affirm.

The underlying facts of this appeal were accurately set forth in the trial court opinion as follows:

The Moorheads operate a business known as Presque Isle Wine Cellars in North East, Pennsylvania, one of which business purposes is to sell wine making supplies, including a product called a sulphur strip. At some point it is alleged that Joseph Bordonaro, doing business as Bordonaro’s Fruit Stand, purchased a supply of these sulphur strips from the Moorheads with the intent of resale. He, in turn, sold these strips to a customer, George Stevens, along with other supplies for making wine, which included one or more old wooden whiskey barrels. The sulphur strips purchased are apparently used in the wine making process to kill bacteria in or otherwise make ready the grape fermenting vessel. The strips are first ignited and then placed inside of the vessel to perform their task. When Stevens, on his own property, ignited his sulphur strips and placed them in the former whiskey barrel, the flames from the sulphur strip ignited preexisting explosive alcohol vapors within the barrel, causing the barrel to explode. As a result of this explosion, pieces of the barrel were blown in a number of direction's, one of which was toward Ralph Gagliordi, an invitee of Stevens and Plaintiff in the Lawrence County action, who was struck and severely injured on the lower part of his leg.
The Moorheads have, as a result of their alleged sale of sulphur strips to Bordonaro, been joined as Additional Defendants to the underlying action which they assert entitles them to be defended by The Harford Mutual Insurance Company, ... as their insurer. They have at all relevant times been insured under a comprehensive general liability policy issued by The Harford covering their business operations.

Trial Court Opinion at 1-3.

Subsequently, Harford filed a declaratory judgment action seeking a determination of whether the insurance policy issued to the Moorheads covered the liability which may be incurred as a result of the instant suit, and derivatively, whether or not Harford owed a duty to defend the Moor-heads in the underlying litigation. Each party thereafter filed summary judgment motions. The trial court agreed with the Moorheads and entered judgment in their favor. Harford later filed this timely appeal.

At the outset, we note that in reviewing orders granting summary judgment, our scope of review is limited. This Court has previously summarized the appropriate standard as follows:

A motion for summary judgment may properly be granted only 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 a judgment as a matter of law. In passing upon a motion for summary judgment, the court must examine the record in the light most favorable to the nonmoving party. Moreover, it is clear that to survive a motion for summary judgment, the non-moving party may not rely merely upon the controverted allegations of the pleadings, but must set forth specific facts by way of affidavit, or in some other way as provided by the rule, demonstrating that a genuine issue exists.

Kerns v. Methodist Hospital, 393 Pa.Super. 533, -, 574 A.2d 1068, 1069-70 (1990); Salerno v. Philadelphia Newspapers, 377 Pa.Super. 83, 88-9, 546 A.2d 1168, 1170-71 (1988) (citations omitted); Pa.R.C.P. 1035(d). Mindful of this standard, we turn to Harford’s appeal.

Instantly, Harford contends that summary judgment was improperly granted because the policy established no duty to cover or defend the Moorheads for the precise claim asserted in the underlying litigation. Specifically, Harford maintains that the “Products Hazard” exclusion contained in the subject policy was intended to exclude coverage of an action brought against the insureds which alleged injuries sustained as a result of products sold by the Moorheads. Harford construes the exclusion to preclude coverage of “products liability” actions, and argues that despite the fact that the complaint contains only allegations of “negligence,” the essence of the underlying complaint is one of products liability. Essentially, Harford contends that the decision to phrase the instant complaint under the guise of negligence was an exercise of mere semantical gamesmanship designed to circumvent the intent of the “Products Hazard” exclusion.

In response, the Moorheads argue that the terms of the instant “Products Hazard” exclusion do not unambiguously exclude a claim that the insured was negligent in failing to provide warnings or instructions. The Moorheads submit that the allegations of the instant complaint charge them with negligent conduct only, and as such, coverage and defense should be provided. The trial court embraced the Moorhead’s arguments.

I. Duty to Defend

An insurer’s duty to defend the insured is dependent upon the derivative question of coverage. It is well established that while an insurer is not required to defend an insured in every claim brought against it, an insurer must defend in any suit in which there exists actual or potential coverage. Gene’s Restaurant v. Nationwide Ins., 519 Pa. 306, 308, 548 A.2d 246, 246 (1988); Gideon v. State Farm Mutual Automobile Ins. Co., 410 Pa. 55, 58, 188 A.2d 320, 321-22 (1963); Techalloy Co. v. Reliance Ins. Co., 338 Pa.Super. 1, 8, 487 A.2d 820, 824 (1984); see also D’Auria v. Zurich Ins. Co., 352 Pa.Super. 231, 234, 507 A.2d 857, 859 (1986). The terms of the policy must be compared to the nature of the allegations of the complaint, and a determination made as to whether, if the allegations are sustained, the insurer would be obligated to incur the expense of the judgment. Gene’s Restaurant, supra, 548 A.2d at 246; see also Springfield Tp., et al. v. Indemnity Ins. Co. of North America, 361 Pa. 461, 64 A.2d 761 (1949); Donegal Mutual Ins. Co. v. Ferrara, 380 Pa.Super. 588, 552 A.2d 699 (1989); D’Auria v. Zurich Ins. Co, supra; Vale Chemical Co. v. Hartford Acc. & Indem., 340 Pa.Super. 510, 490 A.2d 896 (1985); Eastcoast Equipment Co. v. Maryland Casualty Co., 207 Pa.Super. 383, 218 A.2d 91 (1966).

A. Terms of the Policy

The policy the Moorheads purchased from Harford to protect themselves from potential lawsuits, commonly referred to as a comprehensive general liability insurance policy, provides that coverage shall extend to “all sums which the insured shall become legally obligated to pay as damages because of (a) bodily injury, or (b) property damage to which this insurance applies....” Policy rider at L6395(a) (Ed. 1-73). This broad declaration of coverage is limited, however, by exclusions found elsewhere in the policy, to wit:

It is agreed that such insurance as is afforded by the bodily injury liability coverage does not apply to bodily injury or property damage included within the completed operation hazard or the products hazard.

Policy rider GL21 04-0766 (emphasis added). The latter of these exclusions is more specifically defined in a separate paragraph as follows:

“Products Hazard” includes bodily injury and property damage arising out of the named insured’s products or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs away from premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others.

Endorsement MP 00 90 (Ed. 07 77) (emphasis added). No other definitions of or references to the “Products Hazard” exclusion are offered.

In interpreting this policy, we must remember that foremost among insurance laws regarding the reviewing court’s determination of policy coverage, remain the general rules of policy construction. To promote stability and predictability between parties in a contractual relationship, the common law has assigned to the courts the task of interpreting the intent of the parties. DiFabio v. Centaur Ins. Co., 366 Pa.Super. 590, 593, 531 A.2d 1141, 1142 (1987). Words of an insurance policy which are unambiguous and clearly reflect the intent of the parties should be construed according to their plain and ordinary meaning, and we should give effect to that language. See Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385 (1986); Standard Venetian Blind Co. v. American Empire Ins., 503 Pa. 300, 469 A.2d 563 (1983); Pennsylvania Manufacturers’ Assn. Ins. Co. v. Aetna Casualty and Surety Ins. Co., 426 Pa. 453, 233 A.2d 548 (1967). However, overly-subtle or technical interpretations may not be used to defeat reasonable expectations of insureds. See Huffman v. Aetna Life and Cas. Co., 337 Pa.Super. 274, 486 A.2d 1330 (1984). Thus, where reasonably intelligent people could differ as to the meaning of a contractual provision, the term may properly be characterized as ambiguous. Loomer v. M.R.T. Flying Service, Inc., 384 Pa.Super. 244, 247, 558 A.2d 103, 105 (1989); Musisko v. Equitable Life Assurance Society, 344 Pa.Super. 101, 496 A.2d 28 (1985). In light of the “manifest inequality of bargaining power between an insurance company and a purchaser of insurance,” see Standard Venetian Blind, supra, 469 A.2d at 567, ambiguities must be resolved contra proferentem, or against the insurer as drafter of the agreement. DiFabio v. Centaur, supra, 531 A.2d at 1142; see also Rusiski v. Pribonic, 511 Pa. 383, 515 A.2d 507 (1986).

The instant dispute revolves around the interpretation of a provision which has been construed by this Court previously. In Friestad v. Travelers Indemnity Co., 260 Pa.Super. 178, 393 A.2d 1212 (1978), this Court was faced with the question of whether coverage under a similar comprehensive general liability insurance policy was precluded by an identical “Products Hazard” exclusion where an insured was sued for negligently installing a furnace. Friestad, supra, 393 A.2d at 1213. Writing for the majority, in a comprehensive opinion which traced the historical and evolutionary distinction between several typical policy exclusions, Judge Cercone reasoned that as “the principal thrust of a products hazard [coverage] is the insured’s manufacture or sale of a product,” id. 393 A.2d at 1213 n. 2, “it is more preferable by far to define the products hazard in terms of products liability law, and apply the exclusion only when a product, rather than a service, is the cause in fact of damages or injury to a third person.” Friestad, supra, 393 A.2d at 1217. Thus, Judge Cercone concluded, where the insureds are sued merely for negligently servicing a product, the “Products Hazard” exclusion would not apply. Id., 393 A.2d at 1217.

Numerous courts in other jurisdictions have reached similar conclusions in interpreting the language of the common “Products Hazard” exclusion found herein. The Arizona Court of Appeals, faced with a similar question of the applicability of the exclusion in Brewer v. Home Ins. Co., 147 Ariz. 427, 710 P.2d 1082 (1985), cogently summarized many of the leading cases on point, and concluded:

The foregoing cases establish the following principles. Products Hazard coverage is intended to protect the manufacturer or seller of goods from claims for injury and damage arising out of the use of the insured’s products. The risk which is being insured is that the product will not perform in the manner expected. If the product works as it is supposed to, but through other negligence the insured’s product causes injury or damage, there is no coverage. Thus, where Products Hazard coverage is excluded, the insurer is not responsible for the failure of the insured’s products or goods to work as anticipated.

Id., 710 P.2d at 1086 (emphasis added) (citing Viger v. Commercial Ins. Co., 707 F.2d 769 (3d Cir.1983) (“Products Hazard” exclusion applicable where complaint alleged failure to warn of contaminated fish); Buckeye Union Ins. Co. v. Liberty Solvents & Chemicals Co., 17 Ohio App.3d 127, 477 N.E.2d 1227 (1984) (“Products Hazard” exclusion not applicable where complaint alleged negligent mishandling of waste product, not defective condition of product itself); K-C Mfg. Co. v. Shelby Mut. Ins. Co., 434 So.2d 1004 (Fla.Dist.Ct.App.1983) (“Products Hazard” exclusion appli cable where complaint alleged failure to warn of defective nature of go-cart); Aetna Cos. & Sur. Co. v. Richmond, 76 Cal.App.3d 645, 143 Cal.Rptr. 75 (1977) (“Products Hazard” exclusion not applicable where complaint alleged negligent and careless adjustment of ski bindings); Templet v. Goodyear Tire & Rubber Co., 341 So.2d 1248 (La.Ct.App.1976)) (“Products Hazard” protection not available where complaint alleged seller failed to warn of dangers associated in mounting a tire from the wrong side of the rim); Cooling v. United States Fid. & Guar. Co., 269 So.2d 294 (La.Ct.App.1972) (“Products Hazard” exclusion not applicable where complaint alleged failure to warn of need for using safety devices with products)); see also LaBatt Co. v. Hartford Lloyd’s Ins. Co., 776 S.W.2d 795 (Tex.App.1989) (“Products Hazard” exclusion applicable where complaint alleged failure to warn of dangerous chemical contained in food).

We find the Brewer court’s conclusion supported by relevant cases, and consistent with this Court’s holding in Friestad. Alleged negligence which does not involve the sale of a defective product is of a type which “occurs occasionally in the course of business and is a risk for which businesses buy general coverage.” Cooling v. United States Fid. & Guar. Co., supra, 269 So.2d at 297. To construe a “Products Hazard” exclusion to apply in a suit later brought against an insured where the product sold was not the cause of the damage, but was merely an incidental instrumentality through which the damage was done, would defeat the purpose of purchasing such a policy by rendering meaningless much of the stated coverage. See Florida Farm Bureau Mutual Insurance Co. v. Gaskins, 405 So.2d 1013, 1015 (Fla.Dist.Ct.App.1981). Thus, we conclude, as did this Court in Friestad, that the “Products Hazard” exclusion applies only when a product, rather than a service, is the alleged cause in fact of damages or injury to a third person.

B. Nature of the Complaint

The pleadings in the underlying litigation include the following allegations in Count I of the complaint entitled “Negligence.”

10. Some or all of the wine making equipment, including sulphur strips, which original defendant Ralph Gagliordi used on September 26, 1985, had been purchased by original defendants Joseph and Rebecca Bordonaro, t/d/b/a Bordonaro’s Fruit Stand, from additional defendants Marelen B. Moorhead and Douglas P. Moorhead, her husband, t/d/b/a Presque Isle Wine Cellars.
11. Either as part of the same transaction by which the additional defendants supplied the wine making equipment, including sulphur strips, to original defendants Joseph and Rebecca Bordonaro, or as part of a promotion, the additional defendants also supplied in 1985-1986 catalog, which purported to give instructions on the proper use of sulphur strips for the purpose of inhibiting molds and bacteria. In turn, original defendant Joseph Bordonaro based the instructions he gave original defendant Gagliordi upon the contents of this catalog. ...
12. The incident related in the plaintiff’s amended complaint, and any resultant damages, were in no way due to the negligence of original defendant Ralph Gagliordi, but were due solely and proximately to the negligence, willfulness, wantonness and recklessness of the additional defendants, Marlene B. Moorhead and Douglas P. Moorhead, her husband, t/d/b/a Presque Isle Wine Cellars generally and in the particulars alleged in paragraph 13 A-R of plaintiff’s amended complaint, which particulars are hereby incorporated by reference.

Plaintiff’s Complaint Against Additional Defendants at 3-4 (emphasis added). The trial court, in reviewing the nature of this complaint, found,

The tort claims being made against the Moorheads as Additional Defendants in the Lawrence County action are clearly based upon alleged acts of negligence on their part in not ensuring that the terminal user of the sulphur strips was provided with detailed and adequate information as to their use in the form of warnings and/or instructions. The Moorheads quite correctly point out that there are no allegations whatsoever in the original complaint that the sulphur strips themselves were defective or that they malfunctioned.
Thus, the crux of the Lawrence County action as it relates to the Moorheads is a claim of negligent failure to warn.

Trial Court Opinion at 5 (emphasis added).

Harford, on the other hand, suggests the instant complaint should be construed under the rubric of “products liability” and not “negligence.” Harford argues that although the plaintiff has alleged “negligence” in his complaint, the failure to instruct as to the proper use or to warn as to the dangers of improper use of a product are common elements of proof involved in establishing that a product is “defective” and therefore “unsafe,” and thus the instant complaint is merely a “defective product” claim repackaged semantically to evade the “product hazard” exclusion.

It is true, as Harford urges, that a product may be rendered “defective” because it lacks necessary warnings or instructions which the seller should have supplied. In the landmark decision Webb v. Zern, 422 Pa. 424, 220 A.2d 853 (1966), the theory of strict liability was adopted with regard to defective products in Pennsylvania. In Berkebile v. Brantly Helicopter Corporation, 462 Pa. 83, 337 A.2d 893 (1975), a plurality of our Supreme Court observed that under strict liability:

A “defective condition” is not limited to defects in design or manufacture. The seller must provide with the product every element necessary to make it safe for use. One such element may be warnings and/or instructions concerning use of the product. A seller must give such warnings and instructions as are required to inform the user or consumer of the possible risks and inherent limitations of his product. Restatement (Second) of Torts § 402A, comment h. If the product is defective absent such warnings, and the defect is a proximate cause of the plaintiffs injury, the seller is strictly liable without proof of negligence.... Where warnings or instructions are required to make a product non-defective, it is the duty of the manufacturer to provide such warnings in a form that will reach the ultimate consumer and inform of the risks and inherent limits of the product. The duty to provide a non-defective product is non-delegable....

Id., 337 A.2d at 902-903 (citations omitted). Three years later, in Azzarello v. Black Brothers Co., Inc., 480 Pa. 547, 391 A.2d 1020 (1978), a majority of our Supreme Court adopted the position taken by the Berkebile plurality, thus removing any doubt as to the viability of a claim alleging a failure to warn under the auspices of strict liability. Since that time, a multitude of cases alleging strict liability in tort for the failure to adequately instruct or to warn have been recognized under the theory included in § 402A of the Restatement (Second) of Torts. See e.g. Mackowick v. Westinghouse Electric Corporation, — Pa. —, 575 A.2d 100 (1990); Sherk v. Daisy-Heddon, Etc., 498 Pa. 594, 450 A.2d 615 (1982); Toth v. Economy Forms Corp., 391 Pa.Super. 383, 571 A.2d 420 (1990); Walton v. Avco, 383 Pa.Super. 518, 557 A.2d 372 (1989); Ellis v. Chicago Bridge & Iron Co., 376 Pa.Super. 220, 545 A.2d 906 (1988); Carrecter v. Colson Equipment Co., 346 Pa.Super. 95, 499 A.2d 326 (1985); Fravel v. Suzuki Motor Co. Ltd., 337 Pa.Super. 97, 486 A.2d 498 (1984); Dambacher by Dambacher v. Mallis, 336 Pa.Super. 22, 485 A.2d 408 (1984); Pegg v. General Motors Corp., 258 Pa.Super 59, 391 A.2d 1074 (1978); Sny der v. City of Philadelphia, 129 Pa.Cmwlth. 89, 564 A.2d 1036 (1989).

However, it is also true, as the Moorheads counter, and as the complaint avers, that a seller or supplier of products may be deemed “negligent” as well for failing to provide adequate warnings or instructions which a reasonable seller or supplier would have. See Wissman v. General Tire Co., 327 Pa. 215, 217, 192 A. 633, 634 (1937) (citing Rosebrock v. General Electric Co., 236 N.Y. 227, 140 N.E. 571 (1923) (finding liability where defendant negligently supplied chattels likely to be dangerous for the use for which they were supplied); Bisson v. John B. Kelly, Inc, 314 Pa. 99, 170 A. 139 (1934) (finding liability where defendant negligently manufactured chattels likely to be dangerous for the use for which they were supplied); Griffith v. Atlantic Refining Co., 305 Pa. 386, 157 A. 791 (1931) (same). Indeed, there exist at least five sections in the Restatement (Second) of Torts, i.e. §§ 388, 392, 394, 395, and 398, which could arguably be used as a vehicle to establish negligence in failing to instruct or warn. Moreover, each of these sections, notwithstanding amenability to expression under products liability theories, have been cited with approval by the courts of this Commonwealth in negligence actions. See e.g. Thomas v. Arvon Products Co., 424 Pa. 365, 370, 227 A.2d 897, 900 (1967) (citing § 388); Thomas v. Ribble, 404 Pa. 296, 299-300, 172 A.2d 280, 282 (1961) (same); Dunn v. Atlantic Refining Company, 391 Pa. 65, 69, 137 A.2d 262, 264 (1958) (same); Foley v. Pittsburgh-Des Moines Co., 363 Pa. 1, 29-38, 68 A.2d 517, 529-32 (1949) (citing §§ 388, 394, and 395 and collecting authorities); Scurfield v. Federal Laboratories, 335 Pa. 145, 150, 6 A.2d 559, 561 (1939) (citing §§ 394, 395, & 398); Gray v. H.C. Duke & Sons, Inc., 387 Pa.Super 95, 110-12, 563 A.2d 1201, 1209-10 (1989) (citing § 388); Herleman v. Trumbauer Auto Sales, 346 Pa.Super 494, 497-98, 499 A.2d 1109, 1110 (1985) (same); Trimpey Tire Sales and Service Inc. v. Stine, 266 Pa.Super. 91, 93, 403 A.2d 108, 109 (1979) (citing § 395); Lambert v. PBI Industries, 244 Pa.Super. 118, 126, 366 A.2d 944, 950 (1976) (same); McKenna v. Art Pearl Works, Inc., 225 Pa.Super. 362, 367-68 n. 3, 310 A.2d 677, 680 n. 3 (1973) (citing §§ 388, 392); Ostrowski v. Crawford Door Sales Co. of Scranton, 207 Pa.Super. 424, 429-30, 217 A.2d 758, 761 (1966) (citing § 388); Labick v. Vicker, 200 Pa.Super. 111, 116-18, 186 A.2d 874, 877-78 (1962) (citing §§ 388, 392).

The difficulty in determining the nature of the instant complaint lies in the fact that in the “failure to warn” context, the theories of strict liability (in proving the product defective) and negligence (in proving the seller acted unreasonably), appear to overlap. As expressed by a recent panel of this Court,

Although there is contrary language in some decisions, most authorities have been forced to concede that in practice a determination of the adequacy of warnings can be made only by borrowing from negligence concepts. Thus, Dean Keeton has written:
[A] product may be defective as marketed because of a failure to adequately warn, or a failure to use proper means to warn about a risk or hazard related to the way the product was designed____ [Liability is imposed on the ground that the seller or manufacturer failed adequately to warn about some risk or hazard, or failed adequately to instruct about how to avoid the risk or harm. Under this approach, the product is allegedly defective as marketed because of the failure to properly present it to purchasers and users.
Notwithstanding what some courts have said, in establishing this ground of recovery, the plaintiff in most states must prove negligence in the failure to warn properly. There will be no liability in these cases without a showing that the defendant knew or should have known of the risk or hazard about which he failed to warn. Moreover, there will be no liability unless the seller or manufacturer failed to take the precautions that a reasonable person would take in presenting the product to the public.
Although this ground of recovery is sometimes referred to as strict liability, it is really nothing more than a ground of negligence liability better described as the sale of a product in a defective condition.

Remy v. Michael D’s Carpet Outlets, 391 Pa.Super. 436, 445-446, 571 A.2d 446, 451 (1990) (per Wieand, J.) {quoting W. Keeton, The Meaning of Defect in Products Liability Law—A Review of Basic Principles, 45 Mo.L.Rev 579, 586-587 (1980)); see also Ellis v. Chicago Bridge & Iron Co., 376 Pa.Super. 220, 232-33, 545 A.2d 906, 912-13 (1988); Dambacher by Dambacher v. Mollis, 336 Pa.Super. 22, 65-90, 485 A.2d 408, 430-443 (1984) (Wieand, J., dissenting); Gallagher, Rise of the Phoenix, 16 Toledo Law Review 1053, 1074 (1985).

In light of the virtually inextricable relationship between the torts, one panel of this Court has even declared that for the purposes of the collateral estoppel issue identity requirement, an allegation of a failure to warn can be construed under both the principles of negligent conduct and defective product strict liability so as to give a finding on one theory collateral estoppel effect. Day v. Volkswagenwork v. Aktiengesellschaft, 318 Pa.Super. 225, 237-38, 464 A.2d 1313, 1319 (1983) (holding that federal ruling that as a matter of law there was “no liability for a failure to warn” precluded relitigation in the state court under either the theories of strict liability under § 402A or negligence). Similarly, prior to Berkebile, our Supreme Court rejected a claim that a new cause of action for product liability/failure to warn had been injected into a negligence/failure to warn suit after the statute of limitations period for the strict liability had expired, and explained:

Appellant’s claim under § 402A was clearly implicit in his allegations of negligence in the design and manufacture of the crane. The principle of strict liability in tort adds nothing to Kuisis’ theory of how the accident occurred; it operates merely to simplify his proof problem by eliminating the issue of negligence from the case---- Assuming arguendo that two different causes of action are involved here, for purposes of the statute of limitations, both were stated in the original complaint.

Kuisis v. Baldwin-Lima-Hamilton Corporation, 457 Pa. 321, 325, 319 A.2d 914, 918 (1974).

Nonetheless, whatever similarities may be said to exist in practice, the “ ‘Pennsylvania Supreme Court, perhaps more than any other state appellate court in the nation, has been emphatic in divorcing negligence concepts from product liability doctrine.’ ” Remy v. Michael D’s Carpet Outlets, supra, 571 A.2d at 452 (quoting Staymates v. ITT Holub Industries, 364 Pa.Super. 37, 45, 527 A.2d 140, 144 (1987)). This Court has previously held, after observing, inter alia, our Supreme Court’s reluctance to apply theories of contributory negligence to actions based on strict liability in McCown v. International Harvester Co., 463 Pa. 13, 342 A.2d 381 (1975),

... it [McCown ] provides a clear indication of the direction the Court was taking with respect to its product liability doctrine. At a minimum, the Court made apparent its firm belief that negligence concepts did not belong in product liability cases. This has been the theme of several opinions by the Court in an effort to differentiate or police negligence concepts from developing concepts of product liability law. See, e.g. Azzarello v. Black Brothers Co., Inc., 480 Pa. 547, 391 A.2d 1020 (1978); Berkebile v. Brantly Helicopter Corp., 462 Pa. 83, 337 A.2d 893 (1975).

Staymates v. ITT Holub Industries, supra, 527 A.2d at 143 (quoting Bike v. American Motors Corp., 101 F.R.D. 77, 80 (E.D.Pa.1984)).

Several courts have attributed our Supreme Court’s strict segregation of thought as grounded in the traditional view that strict liability is “product-oriented” while negligence is “conduct-oriented.” See Sherk v. Daisy-Heddon, etc., 498 Pa. 594, 613, 450 A.2d 615, 625 (1982) (Larsen, J., dissenting); Kuisis v. Baldwin-Lima-Hamilton Corp., supra, 319 A.2d at 918 & n. 8 (citing Saracina v. Cotoia, 417 Pa. 80, 85, 208 A.2d 764, 767 (1965); Polk v. Western Bedding Co., 145 Pa.Super. 142, 147, 20 A.2d 845, 847 (1941)); Snyder v. City of Philadelphia, supra, 564 A.2d at 1039 n. 5 (citing Freund v. Cellofilm Properties, Inc., 87 N.J. 229, 432 A.2d 925 (1981); cf. Gallagher, supra, at 1074. Regardless of motivation or analytical justification, the fact remains that Pennsylvania courts consistently analyze the negligence/failure to warn and strict liability/failure to warn causes of action separately, treating conduct-related counts apart from product-related counts. See Wenrick v. Schloemann-Siemag Aktiengesellschaft, 523 Pa. 1, 564 A.2d 1244 (1989); Baldino v. Castagna, 505 Pa. 239, 478 A.2d 807 (1984); Incollingo v. Ewing, 444 Pa. 263, 282 A.2d 206 (1971); Toth v. Economy Forms Corp., supra, 571 A.2d 420; Smith v. Linn, 386 Pa.Super. 392, 563 A.2d 123 (1989); Ellis v. Chicago Bridge & Iron Co., supra, 545 A.2d at 917; Binder v. Jones & Laughlin Steel Corp., 360 Pa.Super. 39, 520 A.2d 863 (1987); Carrecter v. Colson Equipment Co., supra, 499 A.2d 326; Fravel v. Suzuki Motor Co., Ltd., supra, 486 A.2d 498; Dambacher by Dambacher v. Mollis, supra, 485 A.2d 408; Pegg v. General Motors Corp., supra, 391 A.2d 1074.

Accordingly, we find that where, as here, a claim is brought under the auspices of a “negligent failure to warn,” it is appropriate to view the complaint as one charging improper conduct, and not one of making a defective product, despite arguable similarities between such claims. The fact that the same facts could have given rise to a product related claim is irrelevant; nothing in our prior case law suggests that such claims must be asserted under strict liability theories rather than negligence theories. Indeed, there appears at this time to be no restriction even requiring an election between theories; rather, both may be pursued in a single suit. See Sherk v. Daisy-Heddon, etc., 285 Pa.Super. 320, 334-35, 427 A.2d 657, 663-64 (1981), reversed on other grounds, 498 Pa. 594, 450 A.2d 615 (1982) (plaintiff may choose to sue under either theory); Pa.R.Civ.R. 1020(a).

C. Coverage

Having previously determined that the “Products Hazard” exclusion in the instant policy precludes coverage of claims alleging as the cause in fact of injuries a product, not a service, and having previously determined that the instant claim alleges as the cause in fact of the injuries conduct, not a product, we find the “Products Hazard” exclusion inapplicable herein. The broad declaration of coverage clearly provides for coverage of claims which are not excluded, and thus we hold that Harford will have to cover the instant claim if it is successfully maintained.

We note that in other jurisdictions, not bound by our Supreme Court’s “emphatic divorce of negligence and strict liability concepts,” several courts have nonetheless found that the “Products Hazard” exclusion does not apply to “failure to warn” claims. For example, in Chancler v. American Hardware Mut. Ins. Co., 109 Idaho 841, 712 P.2d 542 (1985), the Supreme Court of Idaho overruled a lower court’s decision that the exclusion was applicable to a claim alleging failure to provide information about maximum weight loads for a crane. The Idaho Supreme Court explained:

[T]he Court of Appeals placed itself in a needless dilemma of determining whether Christensen’s claim is one sounding in strict products liability or in negligence. Nothing precludes it from sounding in both theories. So long as the necessary proof is presented, [the plaintiff] may prevail on either claim.
* * He * * #
[The “Products Hazard” exclusion] does not clearly and precisely exclude claims grounded in negligence. What the exclusion does at best, and this in a rather inartful manner, is deny coverage only for claims grounded in strict products liability. We reach this conclusion by noting the following: The “products hazard” definition is defined as an injury “arising out of the named insured’s products....” Nowhere does it purport to exclude injuries arising out of negligent conduct, and we decline to so expand the definition. We therefore hold that insofar as [the underlying plaintiff] has made out a claim for negligence, and he has, Chancler’s policy does not exclude coverage pursuant to the “products hazard” exclusion.

Id., 712 P.2d at 547-48; see also Scarborough v. Northern Assur. Co. of America, 718 F.2d 130 (5th Cir.1983) (“Products Hazard” exclusion not applicable where complaint alleged negligent failure to warn of dangers associated with the use of sand during sandblasting operations) (relying on Cooling v. United States Fid. & Guar. Co., supra, 269 So.2d 294).

Thus, other courts have found that the “Products Hazard” exclusion is simply too ambiguous to preclude coverage of a “negligence/failure to warn claim.” Essentially, such holdings represent the view that “failure to warn” claims fall within an ambiguous boarder region wherein “product liability/failure to warn” claims and “negligence/failure to warn” claims overlap, and that for an insurance company to exclude coverage of this special class of actions, it must do so explicitly. This position is perhaps best expressed by the Louisiana Court of Appeals, in one of the earliest and most often quoted cases in this area:

The definitions of products hazard and completed operations hazard do not mention omissions or failure to warn when there is no affirmative duty [imposed by the insurer] to do so. The definitions of products hazard do include injuries arising out of representations or warranties. But the converse, the failure to represent is not included in these definitions. If the parties intended to limit the liability of the insurer by excluding coverage for omissions and failure to warn when there is no affirmative duty to warn, the insurer could have so provided.

Cooling, supra, 269 So.2d at 297-98. (Emphasis added).

We agree with this analysis. As this Court has previously explained:

Precise definition is particularly important in cases in which an insured purchases a comprehensive general liability policy to protect a business which entails the use of potentially harmful substances possessing debilitating qualities of unknown parameters. In that instance, the insurance company providing coverage should take extra care to assure that the policy leaves no room for question, at peril of being forced to pay for greater coverage than anticipated. Delaware County Construction Co. v. Safeguard Ins. Co., 209 Pa.Super. 502, 509, 228 A.2d 15, 18 (1967).

Techalloy Co. v. Reliance Ins. Co., supra, 487 A.2d at 824. While we find that the instant exclusion clearly precludes claims which allege the product was defective for failing to include instructions or warnings, the best that can be said for this exclusion with regard to negligent failure to warn claims is that reasonable men could differ as to its proper scope. See Loomer v. M.R.T. Flying Service, Inc., supra, 558 A.2d at 105.

To hold in favor of Harford, here, would require this Court to find that a failure to warn negligence claim, which ostensibly asserts negligence in failing to reasonably instruct or warn, is essentially a product liability claim for failure to properly manufacture (with necessary warnings) and was intended to be excluded by the Products Hazard exclusion. The problem for Harford is that failure to warn claims are not essentially negligence claims or essentially product liability claims. Rather, they are essentially both and fall in a region of analytical overlap between two commonly distinct theories of liability. As the drafter of the contract, it was incumbent upon Harford to expressly include that region of overlap in the exclusion if that was its intent.

Insurance companies may avoid exposure to “failure to warn negligence” liability by unequivocally including such claims within a redrafted “Products Hazard” exclusion. The instant policy does not unequivocally provide to the insured any indication that such a claim would not be covered. Accordingly, we must hold against the insurance company as drafter of the provision. See Standard Venetian Blind, supra, 469 A.2d at 566.

II. Conclusion

For the foregoing reasons, we find that the trial court was correct in holding that as a matter of law, the “Products Hazard” exclusion contained in the policy the Moor-heads purchased from Harford does not apply. Consequently, Harford would be obligated to cover any judgment entered against the Moorheads should the underlying suit be successfully maintained. Accordingly, we hold Harford owes the Moorheads a duty to defend them in that suit.

Order AFFIRMED.

DEL SOLE, J., concurs in the result.

      . Restatement (Second) of Tort § 402A provides:
      “(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
      (a) the seller is engaged in the business of selling such a product, and
      (b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.
      (2) The rule stated in Subsection (1) applies although
      (a) the seller has exercised all possible care in the preparation and sale of his product, and
      (b) the user or consumer has not brought the product from or entered into any contractual relation with the seller.”
      Restatement (Second) of Torts, § 402A (1965).

      . § 388 Chattel Known to be Dangerous for Intended Use
      One who supplies directly or through a third person a chattel for another to use is subject to liability to those whom the supplier should expect to use the chattel with the consent of the other or to be endangered by its probable use, for physical harm caused by the use of the chattel in the manner for which and by a person for whose use it is supplied, if the supplier
      (a) knows or has reason to know that the chattel is or is likely to be dangerous for the use for which it is supplied, and
      (b) has no reason to believe that those for whose use the chattel is supplied will realize its dangerous condition, and
      (c) fails to exercise reasonable care to inform them of its dangerous condition or of the facts which make it likely to be dangerous.

      (Emphasis added).

      . § 392. Chattel Dangerous for Intended Use
      One who supplies to another, directly or through a third person, a chattel to be used for the supplier’s business purposes is subject to liability to those for whose use the chattel is supplied, or to those whom he should expect to be endangered by its probable use, for physical harm caused by the use of the chattel in the manner for which and by persons for whose use the chattel is supplied
      (a) if the supplier fails to exercise reasonable care to make the chattel safe for the use for which it is supplied, or
      (b) if he fails to exercise reasonable care to discover its dangerous condition or character, and to inform those whom he should expect to use it.

        (Emphasis added).

      . § 394. Chattel Known to be Dangerous
      The manufacturer of a chattel which he knows or has reason to know to be, or to be likely to be, dangerous for use is subject to the liability of a supplier of chattels with such knowledge.

      . § 395. Negligent Manufacture of Chattel Dangerous Unless Carefully Made
      A manufacturer who fails to exercise reasonable care in the manufacture of a chattel which, unless carefully made, he should recognize as involving an unreasonable risk of causing physical harm to those who use it for a purpose for which the manufacturer should expect it to be used and to those whom he should expect to be endangered by its probable use, is subject to liability for physical harm caused to them by its lawful use in a manner and for a purpose for which it is supplied.
      (Emphasis added).

      . § 398. Chattel Made Under Dangerous Plan or Design
      A manufacturer of a chattel made under a plan or design which makes it dangerous for the use for which it is manufactured is subject to liability to others whom he should expect to use the chattel or to be endangered by its probable use for physical harm caused by his failure to exercise reasonable care in the adoption of a safe plan or design.
      (Emphasis added).

      . See also Conti v. Ford Motor Co., 578 F.Supp. 1429, 1434 (E.D.Pa. 1983).

      . Relying on Inductotherm Corp. v. New Jersey Manufacturers Casualty Insurance Co., 83 N.J.Super. 464, 200 A.2d 358 (N.J.Law.Div.1964) (where “service” consists only of furnishing information about a product and its limitations, similar “Products Hazard” exclusion applies) (expressly not followed by Eastcoast Equipment v. Maryland Casualty Co., supra, 218 A.2d 91), the lower court in Chancler determined that such an allegation did not claim as the cause in fact of the injuries a “service” distinguishable from the product. Chancler v. American Hardware Mut. Ins. Co., 107 Idaho 953, 955, 694 P.2d 1301, 1303 (1985) (citing Friestad, supra ).


source: Caselaw Access Project

author: HUDOCK, Judge: DEL SOLE, Judge,

license: Public Domain

text:
    578 A.2d 503
    Michael E. MANOLAKIS, Appellant, v. TRANSAMERICA INSURANCE COMPANY, Corporation, Appellee.
    Superior Court of Pennsylvania.
    Argued March 21, 1990.
    Filed July 27, 1990.
    Petition for Allowance of Appeal Granted Jan. 4, 1991.

      Larry D. Wohnhas, Pittsburgh, for appellant.
    Judy Thomas, Pittsburgh, for appellee.
    Before CAVANAUGH, DEL SOLE and HUDOCK, JJ.
   HUDOCK, Judge:

This is an appeal from an order granting judgment on the pleadings in favor of Appellee, Transamerica Insurance Company, and against Appellant, a named insured under the Transamerica policy. The trial court concluded that Appellant was seeking to “stack” the benefits under the Transamerica policy with those he obtained under a policy issued by Allstate Insurance Company. Because stacking is prohibited under Section 1717 of the Motor Vehicle Financial Responsibility Law, (“MVFRL”), 75 Pa.C.S.A. § 1701 et seq., the trial court entered judgment on the pleadings.

This action was precipitated by an automobile accident which caused Appellant to suffer certain injuries. At the time of the accident, Appellant was the named-insured on two policies of automobile insurance, both covering the vehicle he owned and operated at the time of the accident. A policy issued by Allstate provided first-party medical coverage of $10,000 and income loss coverage of $50,000. The second policy issued by Transamerica contained limits of $100,000 for medical expenses and $15,000 for loss of income.

Appellant sought to recover first-party benefits against Transamerica by the filing of a Complaint. Transamerica in response filed an Answer and New Matter alleging that, as a result of the same accident, Appellant had made application to Allstate for its limits of first-party medical and wage loss coverage, and had recovered these $10,000 and $50,000 limits. Because of this payment, Transamerica alleged that under § 1717(2) of the MVFRL, Appellant was not entitled to receive benefits under its policy. Appellant’s Reply admitted that Allstate paid its policy limits for medical and wage loss benefits arising out of this accident, but denied that this recovery fully compensated Appellant for the losses he sustained in the accident. Transamerica filed a Motion for Judgment on the Pleadings which the court granted. The trial court concluded that Appellant was seeking to “stack” the benefits available under the two separate policies, and ruled that the benefits could not be increased by such “stacking” under § 1717(2) of the MVFRL.

The section of the MVFRL which the trial court utilized in reaching its decision speaks directly to stacking. It states:

§ 1717. Stacking of benefits
First party benefits shall not be increased by stacking the limits of coverage of: ...
(2) multiple motor vehicle policies covering the individual for the same loss.

Appellant acknowledges that this case does concern multiple motor vehicle policies which provide him with coverage for the same loss. Although the situation is as described in subsection (2), Appellant claims that he is not violating the provisions of § 1717 because he is not seeking to “stack” the limits of these coverages. Appellant claims that where there are two sources for payment of first-party benefits and these sources are of equal priority under § 1713(b) of the MVFRL, both sources are required to make a pro rata payment of the total loss sustained by the insured, the pro rata share being determined by policy limits, and that this procedure does not constitute the “stacking” prohibited by § 1717. We disagree.

Section 1713(b), relied on by appellant, provides as follows:

(b) Multiple sources of equal priority—The insurer against whom a claim is asserted first under the priorities set forth in subsection (a) shall process and pay the claim as if wholly responsible. The insurer is thereafter entitled to recover contribution pro rata from any other insurer for the benefits paid and the cost of processing the claim ...

From this, Appellant concludes that Allstate would not have fulfilled its obligation until the Transamerica policy limits were also exhausted, notwithstanding that Allstate had already paid its medical benefits limit of $10,000 and income loss benefits of $50,000. In effect, Appellant contends that Allstate, as the insurer against whom the claim was first asserted, has the obligation to pay the claim “as if wholly responsible”, without regard to any policy limit, and then it may seek contribution from Transamerica.

We do not read § 1713(b) as creating rights against any carrier in excess of the limits of its own policy. The section provides a procedure for processing claims where there are multiple sources of equal priority, putting the burden on the first source against whom the claim is asserted, and then giving that first source pro rata contribution rights against other equal priority sources, subject always to contractual limits of liability. To adopt Appellant’s argument would require rewriting the contract of the parties and implying an obligation on the part of the first carrier to make the insured whole no matter what its policy limits, but allowing it contribution from other equal priority sources. This we decline to do. When Allstate paid its policy limits, it fulfilled its obligation and extinguished Appellant’s claim for first-party benefits.

The argument of Appellant would also emasculate the clear language of 75 Pa.C.S.A. § 1717 which prohibits stacking. A similar argument was made and rejected by our Court in Laguna v. Erie Insurance Group, 370 Pa.Super. 308, 536 A.2d 419 (1988). The plaintiff there was the named insured in a policy with Federal Kemper Insurance Co., (“Kemper”), with medical benefit limits of $10,000. The insured was involved in an accident which resulted in medical expenses in excess of $10,000. Kemper paid the $10,000 limit of its coverage. The insured then claimed under a separate policy issued by Erie Insurance Group, (“Erie”), to his wife, but which covered him also. The medical benefit limits of this policy were $100,000. This Court affirmed the grant of summary judgment in favor of Erie. There, as here, the insured conceded the validity of § 1717, but contended that he was not trying to “stack” coverages because he was not seeking duplicate benefits for the same loss. Rather he contended that the same loss was not involved in his claims against the two carriers. He contended that he did not seek recovery against Erie for the $10,000 in medical bills which was covered by Kemper, and that Erie was liable for those medical bills which remained unpaid after the exhaustion of the Kemper policy limits. Our Court rejected this interpretation of “loss”, and instead declared that “loss” refers to the physical injury suffered by the insured. “Where the insured is involved in a single accident which necessitates medical treatment for injuries suffered in the accident, all medical expenses incurred are part of the 'same loss’ for purposes of determining the applicability of Section 1717.” Laguna, at 314, 536 A.2d at 422.

If it is unfair to require an insured to choose carefully when submitting a claim against several insurers, or if anti-stacking legislation is unfair, relief must come from the Legislature, not the courts.

In summary, we hold that where a claim for first party benefits is made against one of several carriers of equal priority under 75 Pa.C.S.A. § 1713, and that carrier makes payment which exhausts the limits of its coverage, a claim for first-party benefits against another carrier of equal priority for losses incurred as the result of injuries sustained in the same accident is precluded.

Judgment affirmed.

DEL SOLE, J., files a dissenting opinion.

BEFORE: CAVANAUGH, DEL SOLE and HUDOCK, JJ.

DEL SOLE, Judge,

dissenting.

I dissent from the Majority’s decision to affirm the trial court’s grant of Judgment on the Pleadings in favor of Appellee, Transamerica Insurance Company, and against Appellant, a named insured under the Transamerica policy. I do not believe that Appellant was seeking to “stack” the benefits under the Transamerica policy with those he obtained under a policy issued by Allstate Insurance Company. Because Appellant did not seek to add the total benefits available under one policy to the total benefits available under a second policy, but instead sought contribution from two carriers providing coverage under separate policies, he was not engaged in “stacking” and did not violate the provisions of 75 Pa.C.S.A. § 1717.

The concept of stacking as been part of our jurisprudence for a number of years. In Harleysville Mutual Casualty Co. v. Blumling, 429 Pa. 389, 241 A.2d 112 (1968), the court sought to determine whether anti-stacking clauses violated the purpose behind the Uninsured Motorist Act. The court, which permitted such recovery, described stacking.

We do hold, however, ... that where the loss exceeds the limits of one policy, the insured may proceed under other available policies up to their individual limits or to the amount of the actual loss.
Id. at 395-396, 241 A.2d at 115.

Thus, stacking, as the term implies, is the piling of benefits available under separate policies until they total the amount of the loss or the policy limits. In this case if Appellant were permitted to recover the $10,000 of medical expense benefits provided under the Allstate policy and the $100,000 available under the Transamerica policy for a total of $110,-000, he would be stacking benefits in violation of § 1717. However Appellant may receive some coverage under each policy without engaging in stacking by collecting benefits in a pro rata fashion. This contribution is what Appellant desires and should be able to achieve under the MVFRL.

The ability to collect pro rata contributions from both Allstate and Transamerica should be permitted in this case because both carriers are at equal priority levels. Section 1713 of the MVFRL sets forth the priority levels for collection of multiple sources of benefits. It provides, in relevant part:

§ 1713 Source of benefits
(a) General rule.—Except as provided in section 1714 (relating to ineligible claimants), a person who suffers injury arising out of the maintenance or use of a motor vehicle shall recover first party benefits against applicable insurance coverage in the following order of priority: (1) For a named insured, the policy on which he is the named insured.

Appellant was a named insured under both the Allstate and the Transamerica policies, thus both carriers are at the same priority level with regard to a claim by Appellant for first party benefits. Subsection (b) of section 1713 refers to situations where there exist multiple sources at the same priority level. It states:

(b) Multiple sources of equal priority.—The insurer against whom a claim is asserted first under the priorities
set forth in subsection (a) shall process and pay the claim as if wholly responsible. The insurer is thereafter entitled to recover contribution pro rata from any other insurer for the benefits paid and the costs of processing the claim____

Under this section, had Appellant initially applied to recover benefits from Transamerica it would have been required to pay up to the $100,000 policy limits for the medical expenses which Appellant was able to prove he incurred. Section 1713(b) would then permit Transamerica to recoup up to $10,000 from Allstate for its pro rata share. In this case, however, Appellant made his first claim against Allstate, the insurer with the lower medical coverage limits. Allstate did as required and paid the claim as if wholly responsible up to the limits of its coverage, $10,000 for medicals and $50,000 for income loss. Since Allstate provided a greater amount of coverage than Transamerica for income loss, it would be able to seek contribution from Transamerica for its pro rata share up to $15,000. The trial court found that in this situation Transamerica would not be responsible for any contribution for medical expenses because such recovery would amount to stacking. I disagree.

As I have stated, and as section 1713(b) demonstrates, recovery from more than one carrier at the same level of priority does not constitute stacking, if each carrier contributes their pro rata share. In Laguna v. Erie Ins. Group, 370 Pa.Super. 308, 536 A.2d 419 (1988), the court recognized the ability to recover from more than one source if each is at the same priority level. The Laguna court also found that such contribution is not available where there exist insurers at different priority levels. The court remarked:

The provision of § 1713(b) regarding procedures to be followed in the event of multiple sources of coverage is limited to sources of equal priority. Since the statute explicitly treats the issue of multiple sources of coverage among insurers of equal priority, its silence regarding insurers at different priority levels indicates that contribution in this context is not an issue. The logical interpretation of the limitation of § 1713(b) to insurers at an equal priority level is that insureds are not entitled to benefits from multiple sources at different priority levels.

Id. at 536 A.2d 421.

Although section 1713(b) details what is to occur when a claim is first made against one of multiple parties responsible at the same level, it presupposes that the first claim is made against the carrier which is providing the greater coverage. In a situation such as this where one carrier is providing greater medical expense coverage and another is providing greater income loss coverage, what course should the insured take? Which coverage should the insured seek to obtain first at the risk of losing the other coverage? I believe that the statute did not intend to create such a dilemma with such a potentially inequitable result. It would be arbitrary to limit an insured’s recovery to the limits of the policy to which the first application was made when there exist more than one policy at the same priority level. It should make no difference whether the insured proceeds against the carrier with the higher limits first, second or third as long as each carrier contributes to the insured their pro rata share so that the insured in compensated up to the limits of the highest coverage he or she purchased. In a case such as this, Allstate would be responsible for Vio of Appellant’s medicals up to $10,000 with Transamerica responsible for paying up to $90,000 or 9/io of the established medical expenses. Likewise if a wage loss claim was established at or over $50,000, Appellant could seek 3/io of the recovery from Transamerica up to $15,000 and Vio or $35,000 from Allstate. Such recovery is not stacking since the policy limits are not added one on top of the other, but rather are combined, each in a proportionate share, to provide the insured with the maximum limits of coverage which he or she purchased in a single policy.

In the case before us, Appellant purchased two policies at equal priority levels; one providing coverage of $100,000 for medical expenses, another providing $10,000 for the same expenses. In my view, Appellant is entitled to seek to recover the full amount of coverage which he purchased, $100,000. Since Allstate has already paid Appellant its $10,000 share, Transamerica may remain responsible up to $90,000 for medical expenses. With regard to income losses, Allstate has paid its $50,000 limits and may seek contribution from Transamerica for its $15,000 policy limits. The result I suggest does what § 1713(b) was designed to do and permits an insured to recover the full amount of the highest coverage available from multiple insurers at the same priority level, while not jeopardizing the insured’s recovery based upon his or her election of against which carrier the claim is first presented.

In conclusion I would hold that the trial court erred in entering a Judgment on the Pleadings. I would reverse and remand this matter for further proceedings.

      . It may be that Appellant’s decision was carefully considered. The first policy of Allstate, while containing a lower medical benefit limit, did contain a much higher income loss benefit than the policy issued by Transamerica. It may be that Appellant decided that income loss benefits were likely to be the major item of expense and he chose to claim against Allstate first for that very reason.


author: HOFFMAN, Judge: JOHNSON, Judge,

text:
    578 A.2d 508
    MOREHALL CONTRACTING CO., INC., Appellant, v. BRITTANY ESTATES LIMITED PARTNERSHIP.
    Superior Court of Pennsylvania.
    Argued May 3, 1990.
    Filed Aug. 3, 1990.

      Henry J. Costa, Jr., Norristown, for appellant.
    Nancy P. Brennan, Paoli, for appellee.
    Before DEL SOLE, JOHNSON and HOFFMAN, JJ.
   HOFFMAN, Judge:

This appeal is from an order granting the preliminary objections in the form of a demurrer of appellee, Brittany Estates (“Brittany”), and dismissing the mechanics’ lien complaint of appellant, Morehall Contracting Co., Inc. (“Morehall”), which had been filed in connection with a contract to perform certain grading and excavation work. Appellant claims that the trial court erred in dismissing its complaint on the ground that the work appellant performed for appellee did not constitute an “improvement” to property under the Mechanics’ Lien Law of 1963. For the following reasons, we agree with appellant that the trial court erred in granting Brittany’s preliminary objections, and, accordingly, we reverse the order below and remand for proceedings consistent with this opinion.

Morehall was a subcontractor to Chesterdale Construction Company, which in turn was general contractor at a construction project known as Brittany Estates. Brittany Estates is a townhouse and condominium development located in Caernarvon Township, Berks County. Morehall’s complaint alleged that, pursuant to a written contract with Chesterdale, dated September 27, 1988, Morehall performed a significant amount of construction work at the site of the development, including excavation and grading of the property in preparation for the construction of several housing units. Subsequent to its completion of work on the contract, Morehall failed to secure full payment from Brittany. Morehall therefore filed a Mechanics’ Lien Claim against Brittany on February 24, 1989. On April 10, 1989, Morehall filed a “Complaint to obtain judgment on its Mechanics’ Lien Claim”, and Brittany filed Preliminary Objections thereto on May 9, 1989. On June 9, 1989 the Court of Common Pleas issued an order sustaining Brittany’s Preliminary Objections, but permitting Morehall to file an amended complaint. On July 3, 1989, Morehall filed an Amended Mechanics’ Lien Claim and Amended Complaint. Brittany filed Preliminary Objections to the Amended Complaint on July 19, 1989. Oral argument was held on August 21, 1989, and in an order dated September 11, 1989, the court sustained Brittany’s Preliminary Objections and dismissed Morehall’s amended complaint. This timely appeal followed.

Our scope of review to a challenge to the sustaining of a preliminary objection in the form of a demurrer is well-settled:

A demurrer can only be sustained where the complaint is clearly insufficient to establish the pleader’s right to relief. Firing v. Kephart, 466 Pa. 560, 353 A.2d 833 (1976). For the purpose of testing the legal sufficiency of the challenged pleading a preliminary objection in the nature of a demurrer admits as true all well-pleaded, material, relevant facts, Savitz v. Weinstein, 395 Pa. 173, 149 A.2d 110 (1959); March v. Banus, 395 Pa. 629, 151 A.2d 612 (1959), and every inference fairly deducible from those facts, Hoffman v. Misericordia Hospital of Philadelphia, 439 Pa. 501, 267 A.2d 867 (1970); Troop v. Franklin Savings Trust, 291 Pa. 18, 139 A. 492 (1927). The pleader’s conclusions or averments of law are not considered to be admitted as true by a demurrer. Savitz v. Weinstein, supra.
Since the sustaining of a demurrer results in a denial of the pleader’s claim or a dismissal of his suit, a preliminary objection in the nature of a demurrer should be sustained only in cases that clearly and without a doubt fail to state a claim for which relief may be granted. Schott v. Westinghouse Electric Corp., 436 Pa. 279, 259 A.2d 443 (1969); Botwinick v. Credit Exchange, Inc., 419 Pa. 65, 213 A.2d 349 (1965); Savitz v. Weinstein, supra; London v. Kingsley, 368 Pa. 109, 81 A.2d 870 (1951). If the facts as pleaded state a claim for which relief may be granted under any theory of law then there is sufficient doubt to require the preliminary objection in the nature of a demurrer to be rejected. Packler v. State Employment Retirement Board, 470 Pa. 368, 371, 368 A.2d 673, 675 (1977); see also Schott v. Westinghouse Electric Corp., supra [436 Pa.] at 291, 259 A.2d at 449.

Mudd v. Hoffman Homes for Youth, Inc., 374 Pa.Super. 522, 524-25, 543 A.2d 1092, 1093-94 (1988) (quoting County of Allegheny v. Commonwealth, 507 Pa. 360, 372, 490 A.2d 402, 408 (1985)).

The Mechanics’ Lien Law of 1963 provides that:

Every improvement and the estate or title of the owner in the property shall be subject to a lien, to be perfected as herein provided, for the payment of all debts due by the owner to the contractor or by the contractor to any of his subcontractors for labor or materials furnished in the erection or construction, or the alteration or repair of the improvement, provided that the amount of the claim, other than amounts determined by apportionment under section 306(b) of this act, shall exceed five hundred dollars ($500).

49 Pa.S.A. § 1301. The definitional section of the Mechanics’ Lien Law further provides, in relevant part, that:

The following words, terms and phrases when used in this act shall have the meaning ascribed to them in this section, except where the context clearly indicates a different meaning:
(1) “Improvement” includes any building, structure or other improvement of whatsoever kind or character erected or constructed on land, together with the fixtures and other personal property used in fitting up and equipping the same for the purpose for which it is intended.
******
(10) “Erection and construction” means the erection and construction of a new improvement or of a substantial addition to an existing improvement or any adaptation of an existing improvement rendering the same fit for a new or distinct use and effecting a material change in the interior or exterior thereof....
******
(12) “Erection, construction, alteration or repair” includes:
(a) Demolition, removal of improvements, excavation, grading, filling, paving and landscaping, when such work is incidental to the erection, construction alteration or repair....

49 Pa.S.A. § 1201. This Court has noted that the definition of “erection, construction, alteration or repair” contained in § 1201(12)(a) “was intended to declare existing decisional law [allowing mechanics liens to attach] with respect to such work upon the ground ... which is incidental to the erection, construction, alteration or repair of an improvement, as compared to such work when it is performed independently of any erection, construction, alteration or repair of an improvement, in which latter case no lien is allowed.” Sampson-Miller Assoc. Cos., v. Landmark Realty Co., 224 Pa.Super. 25, 30, 303 A.2d 43, 45 (1973) (quoting Comment—Joint State Gov’t Commission, 1964 Report, 49 P.S. § 1201(1), (12)) (emphasis added).

Appellant’s Amended Complaint states, in relevant part, that:

[P]laintiff furnished labor and materials used in the erection and/or construction of an improvement, namely, a housing development known as “Brittany Estates”, in that plaintiff furnished said labor and materials to perform the following erection and/or construction, as defined in the Mechanics’ Lien Law of 1963, 49 P.S. Sec. 1201(12)(a) and/or (c): topsoil stripping; earth grading; grading for building pads, including but not limited to the sample units and sales center; construction of a temporary roadway to permit contractors’ access to complete erection and/or construction of the aforesaid sample units and sales center; and erection and/or construction of a storm detention basis and related site work necessary to and a component part of the storm sewer system of the aforesaid housing development.

See Appellant’s Amended Complaint to Obtain Judgment upon Mechanics’ Lien Claim at 2. (R. at 7). In granting appellee’s preliminary objections and dismissing appellant’s complaint, the court reasoned that appellant failed to state a claim under the Mechanics’ Lien Law because “plaintiff’s allegations of work performed consist of erosion control and of earthwork as categorized in the contract ... unrelated to the erection or construction, alteration or repair, of an improvement to property as defined in the Mechanics’ Lien Law.” See Opinion, November 9, 1989 at 5-6. More specifically, the trial court apparently held that this allegation was insufficient as a matter of law because appellant had failed to allege that: (1) the work it performed was connected to the construction of any “improvement” on the property; and (2) “improvements” in fact had been erected at Brittany Estates. See id. After carefully reviewing the record, we cannot agree that the complaint “clearly and without a doubt” failed to allege that the work performed was related to an “improvement”.

The above-quoted averments, if accepted as true (see Mudd v. Hoffman, supra), would tend to establish that appellant performed significant groundwork in preparation for the construction of housing and administrative structures in Brittany Estates. Under the language of § 1201 and Sampson-Miller, supra, if construction has actually taken place in Brittany Estates, then the groundwork that appellant performed would constitute “erection, construction, repair or alteration of an improvement” for Mechanics’ Lien purposes. The key question, then, is whether these above-mentioned factual averments show that any construction actually took place at Brittany Estates. The answer to this question is unclear because the language of the complaint gives rise to two equally plausible interpretations. The first possible interpretation is that the language above is merely a general reference to the development plan of Brittany Estates, containing no averment that structures were actually constructed on the site. This is the interpretation relied upon by the court below. The second interpretation, however, is that the language means what it literally states: i.e., that appellant performed work “used in the erection and construction of ... a housing development known as Brittany Estates.” We recognize that the court’s interpretation of the complaint is plausible, and that the complaint may not be as specific as it could, or should be. However, because reasonable minds might differ regarding the interpretation of this language, we cannot hold that appellant has “clearly and without a doubt” failed to allege sufficient facts to establish his right to relief. The trial court, therefore, erred in granting appellee’s preliminary objections and dismissing appellant’s complaint.

For the foregoing reasons, we reverse the order of the lower court and remand for proceedings consistent with this opinion.

Order reversed. Case remanded. Jurisdiction relinquished.

JOHNSON, J., files a dissenting opinion.

JOHNSON, Judge,

dissenting:

I respectfully dissent. A mechanics’ lien for improvements to property attaches to the structure only, even if the work performed is preparation work not done to the structure itself. A complaint under the Mechanics’ Lien Law must allege that a structure exists. In neither the original nor the amended complaint did Morehall allege that structures existed on the property. Therefore, the trial court properly granted Brittany’s preliminary objections.

Morehall performed ground preparation clearly intended for the construction of housing units. Morehall filed a mechanics’ lien claim and a complaint against Brittany Estates. The complaint described the work done in terms of preparation for construction, but it did not allege that buildings were subsequently built. See the excerpt from the complaint, Judge Hoffman’s Opinion at 269-270. The trial court sustained Brittany Estates’ preliminary objections on the grounds that the labor performed was not the erection, construction, alteration or repair of an improvement to property as required by the Mechanics’ Lien Law, codified at 49 P.S. 1101 et seq, because the existence of a building was not alleged.

The right to a mechanics’ lien arises pursuant to the Mechanics’ Lien Law:

Every improvement and the estate or title of the owner in the property shall be subject to a lien, to be perfected as herein provided, for the payment of all debts due by the owner to the contractor ... for labor or materials furnished in the erection or construction, or alteration or repair of the improvement....

49 P.S. § 1301. An improvement means “any building, structure or other improvement of whatsoever kind or character erected or constructed on land ...” 49 P.S. § 1201.

Thus, the remedy of a mechanics’ lien is created for the purpose of securing priority of payment for work performed or materials furnished.in erecting or repairing a building. As a lien, it is a claim or charge upon realty, rather than merely against the owner, and therefore, proceedings for its enforcement are in the nature of proceedings in rem. See 23 P.L.E. Mechanics’ Liens § 1. “The proceeding here is against the building, and being in rem the lien must appear by the record ...” Hunter v. Lanning, 76 Pa. 25 (1874).

Reasoning from this principle, our Court in Sampson-Miller Associated Companies, Inc., v. Landmark Realty Co., 224 Pa.Super. 25, 303 A.2d 43 (1973), determined that a mechanics’ lien cannot attach to work preliminary to construction if a building was never built. First, the court set forth that the Mechanics’ Lien Law represents a special remedy in favor of a unique class of creditors and thus a court should review mechanics’ lien claims with a strict construction of the statute. Sampson-Miller, 224 Pa.Super. at 26-27, 303 A.2d at 43. As in the present case, the lien claimant had done site preparation work. The work done in Sampson-Miller was almost exactly like the work done in the present case; it involved clearing, excavating and grading of the land, installation of storm sewers, sanitary sewers, paving, curbing and seeding. The court interpreted 49 P.S. § 1301, quoted above, in conjunction with the definitions provided in 49 P.S. § 1201 to determine whether the lien could attach to realty absent a building.

The court, dismissing the plaintiff’s complaint, held that “In no case ... has a lien been allowed for work on land alone where no building or permanent structure is erected.” Sampson-Miller, 224 Pa.Super. at 31, 303 A.2d at 46. As with any element of any cause of action, facts in support of the requirement that a structure exist must be alleged in the complaint. At a minimum, a pleader must set forth concisely the facts upon which his cause of action is based. Pa.R.C.P. 1019(a), 42 Pa.C.S.; Line Lexington Lumber & Millwork Co. v. Pennsylvania Publishing Corp., 451 Pa. 154, 301 A.2d 684; Johnson v. General Motors Corp., 349 Pa.Super. 147, 502 A.2d 1317 (1986), appeal denied 514 Pa. 639, 523 A.2d 346 (1987). This is especially true with the material facts, those which are essential to show the liability sought to be enforced. See 2 Goodrich-Amram 2d § 1019(a):2 (1976). That a building exists is a material element of a mechanics’ lien claim.

Morehall makes two arguments to this court, both of which fail. First, he argues that the work done is covered under the Mechanics’ Lien Law because the nature of the work is building preparation work. The decision in Sampson-Miller, discussed above, disposes of this argument. Second, Morehall argues that, under the substantial compliance principle, his complaint is sufficient. Underlying this argument is the fundamental misconception that in order to plead a sufficient cause of action under the Mechanics’ Lien Law, one need only plead what is enumerated in 49 P.S. § 1503, “Contents of Claim”: the name and address of the party claimant, whether he files as contractor or subcontractor, the name and address of the owner or reputed owner, date of completion of the work, a detailed statement of labor and materials furnished and a description of the property upon which the lien shall be placed that is sufficient for identity of that property.

A line of cases interpreting section 1503’s requirements hold that so long as the filing of the lien gives sufficient notice to furnish “some data by which, in case of dispute, they may be enabled to ascertain the truth,” Tesauro v. Baird, 232 Pa.Super. 185, 189, 335 A.2d 792, 793 (1975), the doctrine of substantial compliance will temper the strict construction requirement for a statutory cause of action.

However, in the present case substantial compliance with the § 1503 notice requirement is not at issue. Rather, we are presented with the threshold issue of whether Morehall has alleged a material element of a claim under the Mechanics’ Lien Law so as to be able to invoke the statutorily created remedy at all. I would hold that it has not. The substantial compliance principle has never been applied to establish whether the essential element of whether a building exists has been pleaded. I therefore do not agree with Judge Hoffman’s conclusion that the complaint is good on the basis that it did not “clearly and without a doubt” fail to allege that the work performed was related to an improvement. I would rely, rather, upon the basic rule of law that a court should review mechanic’s lien claims with a strict construction of the statute. Sampson-Miller, supra.

Following a hearing pursuant to 49 P.S. § 1505, see Site Improvements, Inc., v. Central and Western Chester County Industrial Development Authority, 293 Pa.Super. 1, 5, n. 5, 437 A.2d 960, 962 n. 5. (1981), the trial court dismissed the complaint and sustained preliminary objections because the rem in this in rem action was not alleged and that therefore the complaint did not state a cause of action. I would agree.

Morehall’s complaint alleges that they did ground preparation work for buildings. Neither the complaint nor the amended complaint states that buildings were ever built. Exhibits (such as photographs) attached to a claim may be considered part of the pleading, Marchak v. McClure, 108 A.2d 77, 176 Pa.Super. 381 (1928), but no such exhibits were attached. Brittany’s preliminary objections averred that the work performed was not incident to construction of an improvement to property as defined in 49 P.S. § 1301. Morehall responded to the preliminary objections simply by saying that their description of the work as work preliminary to building was sufficient. The trial court correctly concluded that because “plaintiff has not specifically alleged anywhere in its amended mechanics’ lien claim or amended complaint that any building or structure was in fact erected or constructed or equipment was in fact installed on the property by anyone,” Opinion, November 9, 1989 at 6, the complaint failed under the Mechanics’ Lien Law.

It is to be remembered that the Mechanics’ Lien Law provides a special remedy that is additional, concurrent and cumulative and does not derogate from any other available remedies. Halowich v. Amminiti, 190 Pa.Super 314, 154 A.2d 406 (1959). Morehall may always proceed against Brittany in assumsit, as the statute of limitations has not yet run.

For all the foregoing reasons, I would affirm the decision of the trial court.

      . 49 Pa.S.A. § 1101 et seq. Appellant also argues that the court below erred in dismissing its complaint because: (1) there is no statutory requirement that appellant allege that actual construction took place at Brittany Estates in order to state a claim; (2) the court failed to direct the parties to conduct discovery in order to determine whether construction had taken place at Brittany Estates; and (3) the court failed to accept photographs and affidavits documenting the progress of construction at Brittany Estates. Because of our disposition of appellant’s first claim, we need not address these issues.