author: BECK, Judge:

text:
    520 A.2d 480
    Samuel RAPPAPORT, Appellant, v. Elias H. STEIN & Leon Silverman and Theodore Snyder.
    Superior Court of Pennsylvania.
    Argued Sept. 18, 1986.
    Filed Jan. 28, 1987.

      Jerome J. Verlin, Philadelphia, for appellant.
    Stuart H. Savett, Philadelphia, for Stein, appellee.
    Jeffrey B. Albert, Philadelphia, for Snyder, appellee.
    Before CIRILLO, President Judge, and BECK and JOHNSON, JJ.
   BECK, Judge:

This is an appeal from an interlocutory order entered by the court below in the exercise of its broad supervisory powers as a court of equity presiding over the winding up of five dissolved partnerships and one joint tenancy. The order appealed from states:

AND NOW, this 14th day of February, 1986 it is hereby
ORDERED
that, commencing on March 17, 1986, Lanard & Axilbund, Inc. shall take all reasonable and appropriate steps to sell the real estate properties of the various partnerships.

Appellant, Samuel Rappaport, one of the partners, contends on appeal that this order (the “February Order”) effectively appoints Lanard & Axilbund as the liquidating receiver of the partnerships and is, therefore, appealable as of right under Pennsylvania Rule of Appellate Procedure 311(a)(2). Pa.R.A.P. 311(a)(2). This rule grants an appeal as of right from an interlocutory order

... confirming, modifying or dissolving or refusing to confirm, modify or dissolve an attachment, custodianship, receivership or similar matter affecting the possession or control of property.

Id.

Assuming the appealability of the February Order, Appellant seeks reversal thereof on the grounds that its entry was procedurally flawed and that no receiver should have been appointed in this case because of the absence of evidence of waste or dissipation of partnerships assets.

Appellees, Elias H. Stein, Leon Silverman and Theodore Snyder, the remaining partners, counter by interpreting the February Order as the appointment of Lanard and Axilbund not as a receiver, but merely as a real estate broker. Appellees contend that interpreting the February Order in this manner mandates the conclusion that it is a non-appeal-able interlocutory order because it neither constitutes the appointment of a receiver nor involves a matter affecting the possession or control of property.

We agree with appellee’s construction of the February Order and on that basis decide that it is not appealable. Accordingly, we quash the appeal for lack of jurisdiction.

We were recently called upon to review an earlier and related order entered by the trial court in the instant action. Rappaport v. Stein, 351 Pa.Super. 370, 506 A.2d 393 (1985) (allocatur granted 511 Pa. 334, 513 A.2d 391). In considering this matter, we briefly recited the factual background of this case in a manner that is equally sufficient for purposes of this Opinion. We stated:

Beginning in 1973, appellant Rappaport entered into a series of partnership agreements with Stein, Silverman and Snyder, appellees, for the purpose of purchasing real estate for investment. Appellant is an experienced real estate investor and property manager; appellees are attorneys and businessmen.
From the beginning, appellant was the moving force behind the real estate activities of all of the partnerships. He negotiated purchases, sales and leases, managed properties, provided for maintenance, restoration and repair of the properties, and advanced large sums of money to operate the enterprises. Appellees failed to make substantial monetary contributions or to participate in management. By 1979, the parties argued over their various roles in the enterprises, and the partnerships were effectively dissolved as of October 1979.
Appellant filed this action to wind up the affairs of the partnerships since the acrimony between the partners prevented an amicable termination. The parties have not yet finished accounting for the dealings of the partnerships and terminating the enterprises.
On January 28, 1985, the trial judge entered an order removing appellant from his de facto position as the manager of all the properties of the partnerships:
AND NOW, this 28th day of January, 1985, the Court enters an interlocutory Order appointing the firm of Lanard & Axilbund to manage the properties held by the entities involved in this litigation commencing February 1, 1985. Lanard & Axilbund shall have the authority to collect rents, make ordinary repairs, pay taxes, insurance, utility bills and other routine and ordinary expenses, rent properties as vacancies occur, and perform all the routine and customary functions of a real estate management firm pending further Orders of this Court; provided, however, that Lanard & Axilbund has no authority to sell or encumber the properties, to use assets of the entities for purchase of other properties or to enter into contracts for extensive renovation or alteration of the properties.
This appeal is from this order.

Id., 351 Pa.Superior Ct. at 373-374, 506 A.2d at 395.

As the foregoing indicates, on January 28, 1985, the trial court appointed Lanard & Axilbund to serve as real estate manager for the partnership properties (the “January Order”). In appealing from the January Order, Appellant Rappaport contended that it alone constituted the appointment of a receiver and was, thus, appealable under Rule 311(a)(2). Id., 351 Pa.Superior Ct. at 375, 506 A.2d at 395. This Court quashed the appeal, holding that the January Order only gave Lanard & Axilbund a “limited management function” that was “not the ‘possession or control of property’ which justifies an exception to the nonappealability of interlocutory orders.” Id., 351 Pa.Superior Ct. at 375, 506 A.2d at 395-6.

The February Order presently before us admittedly expands the function of Lanard & Axilbund. Unlike the January Order, it directs Lanard & Axilbund to “take all reasonable and appropriate steps to sell” the properties. In contrast, the January Order prohibited Lanard & Axilbund from selling the properties. (R. 131a). Despite this expansion of the powers of Lanard & Axilbund, we do not construe the February Order as the appointment of a receiver. As appellees persuasively argue, the February Order does not specifically appoint Lanard & Axilbund as a receiver, nor was its entry accompanied by the procedural safeguards that the Rules of Civil Procedure provide for the appointment of a receiver. Pa.R.C.P. 1533.

In fact, the February Order merely directs Lanard & Axilbund to take steps to sell the property. Since Lanard & Axilbund is in the real estate brokerage business, we assume that the trial court now intends Lanard & Axilbund to do precisely what it would customarily do as to any other property Lanard & Axilbund is involved in selling, i.e. list the property for sale and market the property aggressively. In this instance, the only difference is that Lanard & Axilbund will be acting under the continuing supervision of the court. There is no suggestion in the February Order that Lanard & Axilbund has now been given the power actually to consummate the sale of the properties with no further involvement of the court. Nothing in the February Order indicates that title to the properties is anywhere other than in the partnerships, as it had been prior to entry of the order.

Additionally, we note that the February Order does not enjoin any of the partners themselves from seeking to market the properties. Our review of the record reveals that no one of the partners has ever functioned as a liquidating partner charged with the sole responsibility and given the exclusive power to sell partnerships properties. Given that fact, after dissolution, all the partners retained the power to take actions necessary to wind up the partnerships’ affairs. 59 Pa.Cons.Stat.Ann. §§ 355, 359 (1986); North Star Coal Co. v. Teodori, 442 Pa. 583, 586, 277 A.2d 154, 156 (1971). In this case, of course, since the winding up was being conducted under the supervision of the court, such actions would have to be taken under such supervision. In fact, the court below has repeatedly urged the partners to agree on a plan for disposition of the properties or to present to the court any offers for the purchase of the properties they can secure. (R. 9a, 88a, 130a, 137a). We do not read the Court’s one-line February Order as having impliedly divested the partners of these rights.

In contrast, if indeed the court intended to appoint a liquidating receiver to dispose of the properties and had specifically directed the receiver to sell them (or if at any time in the future the court below decides that such an appointment and order would be appropriate), the receiver would expressly be given the actual power to consummate the sales of the partnership properties and the partners themselves would retain no control or possession thereof. As the Supreme Court noted in Wood v. Wood, 312 Pa. 374, 167 A. 600 (1933), for purposes of winding up a partnership, the partnership continues with title in either the liquidating partner or, in a case where a liquidating receiver has been appointed, in the receiver. Id., 312 Pa. at 380, 167 A. at 602.

The hallmark of any receivership, whether designed to permit the continuation and rehabilitation of an ongoing business or to liquidate a dissolved business, is the removal of all possession and control from the owners of the business and the transfer thereof to the receiver, who acts as the officer of the appointing court. Warner v. Conn, 347 Pa. 617, 619, 32 A.2d 740, 741 (1943); Shipler v. New Castle Paper Products Corp., 293 Pa. 412, 143 A. 182 (1928); Commonwealth ex rel. Appellant v. Overholt, 23 Pa.Super. 199 (1903). The receiver may be ordered by the appointing court to sell the properties of the business of which the receiver has possession and, in that event, the sale is deemed to be a judicial sale. Bogosian v. Foerderer Tract Committee, Inc., 264 Pa.Super. 84, 96, 399 A.2d 408, 414 (1979).

Because of the foregoing divestiture of control and possession that results from the appointment of a receiver, our rules of civil procedure governing actions in equity, including partnership dissolution actions, impose stringent requirements on receivers and on courts appointing them. Pa.R.C.P. 1533. These safeguards are obviously designed to protect the owners of the business, for whose ultimate benefit the receiver acts.

Here, there was no need to impose these requirements on Lanard & Axilbund or to protect the partners from a possible breach of duty by Lanard & Axilbund because they have no power to act in a way that would harm the partners. As we interpret the February Order, no sale can be consummated without court approval and presumably all the partners would have a right to object to any such sale. Moreover, the partners themselves each retain the right to market the properties and present prospective buyers to the court.

Having established that Lanard & Axilbund is not a receiver, and that the February order is not appealable on that ground, we now turn to the alternative, catch-all provision of Rule 311(a)(2) which makes appealable certain orders “affecting the possession or control of property.” We find this portion of the rule equally inapplicable to the February Order.

Given our interpretation of the order set forth above, neither the partners’ possession or control of the partnership properties has been affected by the entry of the order. Of course, the partners’ possession and control of their properties has already been affected by the dissolution of the partnerships and the winding up process conducted under the supervision of the court. However, the February Order standing alone does not affect that possession and control. Lanard & Axilbund’s exercise of its new power to act as broker with regard to the properties alone does not disturb the degree of possession and control the partners had retained prior to the entry of the February Order.

Appellant contends that since the February Order directs the sale of the properties, even excluding consideration of the role of Lanard & Axilbund, it affects the partners’ possession and control. We disagree. The order only directs Lanard & Axilbund to take steps; i.e. to attempt to market the properties. It does not approve any specific sale over the objection of any partner. It does not preclude the partners coming to any agreement among themselves as to any other disposition of the partnership properties which they could submit for the approval of the court. Of course, as we have recently stated, both “[t]he language of the Uniform Partnership Act, 59 Pa.C.S.A.Sec. 360(a) and the general rule favors a liquidation and cash distribution in the absence of an agreement to do otherwise.” Hankin v. Hankin, 302 Pa.Super. 295, 300, 448 A.2d 1049, 1051 (1981). But the February Order standing alone does not make a final determination as to the ultimate disposition of the properties, nor does it actually order the sale of anything.

Although we have found it extremely difficult to divine precisely what the trial court intended by the entry of the February Order, largely because the Order itself is made in summary language and the accompanying Opinion of the trial court is not sufficiently detailed, we find that the February Order represents merely the appointment of Lanard & Axilbund as a broker to assist in the winding up of the subject partnerships. As such, it constitutes an exercise of the court’s broad supervisory powers over the winding up of a partnership. See Hankin v. Hankin, 319 Pa.Super. 147, 465 A.2d 1272 (1983), rev’d in part on oth. grds., 507 Pa. 603, 493 A.2d 675 (1985). The order does not constitute the appointment of a receiver nor does it presently affect the possession or control of the properties.

We quash the appeal for lack of jurisdiction.

      . The court below has made no distinction in the manner in which it has dealt with the dissolution and winding up of the joint tenancy as opposed to the five partnerships. (R. 12a). This apparently results from the fact that the partners themselves have conducted the joint tenancy in the same manner as the partnerships.

      . Appellant also challenges his removal as manager of the partnership properties. Since this challenge is really directed to a prior order of the trial court in this matter which is not on appeal before us now, we could not consider this challenge even were we to find that we have jurisdiction over this appeal. See footnote 3 infra.

      . Our Supreme Court has granted allocatur in that case. However, our opinion in that case addressed two consolidated appeals: one from the January Order and one from an unrelated order in another action between these parties. The Supreme Court granted allocatur only as to the second, unrelated matter.
      We note additionally that although we have already quashed appellant Rappaport’s appeal from the January Order and despite the fact that the January Order is not now on review before us, Appellant's Brief contains numerous attacks on the advisability of both the February and January Orders. Indeed, the Conclusion of the Brief expressly requests that both Orders be vacated. We emphasize that only the February Order is presently on-appeal and we will address ourselves only to it.

      . On August 28, 1986, after the filing of this appeal but before argument, the court below entered its Final Revised Opinion in this case. This opinion basically resolves the accounting issues between the parties. Accompanying the opinion is an Order entered August 28, 1986 directing Lanard & Axilbund to “list all partnership properties for sale on October 1, 1986, unless prior thereto to the parties agree to a plan for division of the partnership assets.” By Order dated March 10, 1986, the court had stayed the operation of the February Order pending determination of this appeal or further order of the court below. Apparently, the August 28 Order lifts this stay. Presumably to assist us in our disposition of this appeal, counsel provided this Court with copies of the August 28 Opinion and Order at argument. However, since these documents do not form a part of the record in this case, we will not consider them.


source: Caselaw Access Project

author: TAMILIA, Judge:

license: Public Domain

text:
    520 A.2d 485
    George BARR, Individually as the Assignee of Charles L. Kershner, J.C. Ayers and Co. and Its Successor, J.C. Ayers, Inc., Charles L. Kershner, Individually and on Behalf of J.C. Ayers Co. and Its Successor, J.C. Ayers, and Co. and Its Successor, J.C. Ayers, Inc. v. GENERAL ACCIDENT GROUP INSURANCE COMPANY OF NORTH AMERICA and Its Successor, Cigna Corp., George Cramer, Individually and trading as Boyle and Cramer. Appeal of George BARR, Individually and as Assignee of Charles L. Kershner, J.C. Ayers and Co. and Its Successor, J.C. Ayers, Inc.
    Superior Court of Pennsylvania.
    Argued Nov. 19, 1986.
    Filed Jan. 28, 1987.

      Richard A. Stanko, Media, for appellants.
    Robert B. Mulhern, Jr. and Michael O. Kassak, Philadelphia, for Boyle, appellee.
    Before CAVANAUGH, OLSZEWSKI and TAMILIA, JJ.
   TAMILIA, Judge:

On July 18, 1979, appellant/Barr, while in the course of his employment, severed his hand on a paper cutting machine. A sheet metal guard for the machine had been manufactured and installed by J.C. Ayers and Company in 1973.

At the time of installation, Ayers had liability coverage including “Complete Operation” coverage with Insurance Company of North America. In 1975, Ayers’ insurance coverage was transferred by George Cramer, a licensed insurance agent, to General Accident Group.

When appellant instituted an action against Ayers in 1980, the company notified Cramer, who submitted the claim to General Accident Group. The insurance company undertook Ayers’ defense subject to a reservation of rights and, in October of 1982, denied coverage on the basis that the policy did not include “Complete Operations” coverage. The insurance company asserted it had never been requested to provide such coverage and had not charged for such.

In May 1983, Barr entered into an agreement with Ayers whereby Barr would hold Ayers free from any liability, for the settlement amount of $250,000. Ayers did not admit liability or fault and Barr further agreed to seek recovery of the amount from the insurance companies and agents who had policies with Ayers. All of Ayers’ rights against the insurance carriers were then assigned to Barr who brought suit individually and, as an assignee of Ayers against General Accident and Cramer, alleging a failure to obtain proper insurance coverage for Ayers.

On October 21, 1984, before the trial was to begin, appellee/Cramer presented a motion in limine asserting that the court should find the assignment invalid or, if valid, only to the amount of any out-of-pocket defense costs incurred by Ayers. Appellee also sought judgment in his favor or, in the alternative, requested the court order that Barr prove his liability case against Ayers before proceeding against him.

Appellant requested a continuance of the trial date and on November 20, 1985, filed a petition to amend the complaint alleging a reformed settlement agreement. Under the terms of the new agreement, Barr entered judgment against Ayers for the $250,000 on November 14, 1985. He also agreed not to take any action to execute on the judgment but to seek satisfaction solely from any proceeds obtained from the insurance companies. In order for Barr to pursue these claims, Ayers assigned all of their rights to recover against their insurance companies and the insurance brokers, agents or representatives who were contracted to provide coverage.

The court denied the petition to amend, finding the effect of the new agreement was the same as the original in that Ayers was still insulated from liability and thus had no right to seek reimbursement for the judgment amount from the insurance companies. Concluding that the amendment would not advance Barr’s position, the motion was denied. This appeal followed.

Appellant makes two arguments on appeal. First, he maintains the Order is final and appealable because it puts him out of court on his claim. Second, he contends the settlement agreement was valid and the assignment by Ayers of its rights against Cramer and General Accident Group does not extinguish the claim against those parties.

Appellee/Cramer asserts the Order is not appealable and that the liability of Ayers to Barr must be proved prior to proceeding to the issues in this case. Appellee/Cramer also argues that the statute of limitations bars the amendment.

The resolution of the issues raised hinge on our determination of whether a plaintiff can agree to enter judgment against an insured and also agree not to enforce the judgment directly against the insured in exchange for the assignment of the insured’s rights against his insurance company and their agents. We think such an agreement is valid and the assignee can seek recovery of the judgment amount in an action against the insurance company and their agents for failure to provide adequate coverage and failure to defend.

The lower court held that a contract for insurance is analagous to a contract for indemnification and since an indemnitee is not entitled to recover until he has made payment or suffered actual loss, the agreement in the present case resulted in Ayers, the indemnitee, being insulated from having to pay anything. Thus Barr, as assignee, had no right to recover the agreed damages.

We do not agree with the court’s analysis. Although a contract for insurance is basically a contract of indemnity, contracts for indemnity are not contracts for insurance. Brotherton Construction Co. v. Patterson-Emerson-Comstock, 406 Pa. 400, 178 A.2d 696 (1962) citing Pennsylvania R.R. Co. v. Roydhouse, 267 Pa. 368, 110 A. 277. The principles applicable to enforcement of contracts of indemnification are not always appropriate when an insurance policy is at issue. A general liability insurance policy may require the insurer to defend when a showing of potential liability is made, whereas an indemnification clause may come into play only when the insured has made a showing of an actual loss. It is particularly inappropriate to generally catagorize insurance policies as indemnity contracts and base a decision on application of indemnity rules when the issue appellant is attempting to litigate is the scope of the policy and the responsibility of the insurance company and its agents to provide proper coverage.

We believe the supplemental agreement entered into by the parties is valid and gives the assignee a right to seek recovery of the judgment amount from the insurance companies and their agents.

The basis of our decision is the court’s ruling in Gray v. Nationwide Insurance Co., 422 Pa. 500, 223 A.2d 8 (1966). In Gray, the appellant brought suit against an insured for personal injuries resulting from an auto accident. The insurance company undertook the defense and a $15,000 verdict was returned in Gray’s favor. The insurer paid the entire policy coverage with interest and costs which amounted to $5,236.67. Gray then sought the balance from the insured party who assigned his rights against his insurance company to Gray with the agreement that regardless of the outcome, any obligation of the insured to Gray would be satisfied. Gray then brought suit as assignee against the insurer, claiming the company had refused to settle in good faith and seeking reimbursement for the entire amount of the judgment.

The court, in Gray, addressed the issue of whether or not the insured was required to pay to Gray the balance due on the judgment as a prerequisite to a cause of action against the insurance company and determined it was not. The court stated:

‘Despite some conflict in earlier cases, the weight of authority is that it is not necessary for the insured to allege that he has paid or will pay a judgment in excess of the policy limits in an action against the insurer for breach of its duty to act in good faith. Lee v. Nationwide Mut. Ins. Co., 286 F.2d 295 (4th Cir.). Wessing v. American Indem. Co., D.C., 127 F.Supp. 775; Alabama Farm Bureau Mut. Cas. Ins. Co. v. Dalrymple, [270 Ala. 119, 116 So.2d 924]; Farmers Ins. Exch. v. Henderson, 82 Ariz. 335, 313 P.2d 404; Brown v. Guarantee Ins. Co., 155 Cal.App.2d 679, 319 Pa.2d 69, 66 A.L.R.2d 1202; Henke v. Iowa Home Mut. Cas. Co., 250 Iowa 1123, 97 N.W.2d 168; Southern Fire & Cas. Co. v. Norris, supra [35 Tenn.App. 657, 250 S.W.2d 785]. See Murray v. Mossman, 56 Wash.2d 909, 355 P.2d 985.’ Jenkins v. General Accident Fire & Life Assurance Corporation, [349] Mass. [699], 212 N.E.2d 464, 467 (1965). See also: Burton v. State Farm Mutual Automobile Insurance Company, 335 F.2d 317 (5th Cir.1964); Sweeten v. National Mutual Insurance Company of D. C., 233 Md. 52, 194 A.2d 817 (1963). Three very sound reasons justify the adoption of this “non-payment” view: (1) such view prevents an insurer from benefiting from the impecuniousness of an insured who has a meritorious claim but cannot first pay the judgment imposed upon him; (2) such view negates the possibility that the insurer would be “ * * * less responsive to its trust duties where the insured is able to pay the excess judgment. Were payment the rule, an insurer with an insolvent insured could unreasonably refuse to settle, for, at worst, it would only be liable for the amount specified by the policy. To permit this would be to impair the usefulness of insurance for the poor man.” Note, 27 U.Pitt.L.Rev. 726, 728 (1966); (3) such view recognizes that the fact of entry of the judgment itself against the insured constitutes a real damage to him because of the potential harm to his credit rating; See, generally, Note, 27 U.Pitt.L.Rev. 726 (1966); Note, 60 Mich.L.Rev. 517 (1962); Keeton, Liability Insurance and Responsibility for Settlement, 67 Harv.L.Rev. 1136 (1954).

Gray, 422 Pa. at 505, 223 A.2d at 10.

The practice of assigning claims for bad faith refusal to settle is widespread and the view that such claims are assignable is accepted in a majority of jurisdictions. 12 A.L.R.3d 1158. A minority of states permit the injured plaintiff to sue the insurer directly, without the benefit of an assignment for reasons of public policy. 63 A.L.R.3d 627.

Although Gray dealt with the assignment of rights based on a failure to settle, the reasons for allowing an assignment are equally applicable here where an insurer denies coverage and refuses to defend. The insured left to fend for himself should be able to negotiate a settlement which will protect his interests. If the injured party cannot acquire the right to bring suit against the insurer, he will not be willing to enter into such a settlement agreement. The injured party likewise would be hampered by a prepayment rule for as was stated in Gray if the insured is insolvent there would be no need for the insurance company to act, if the only cause of action available requires payment of a judgment before it is actionable. The injured party would thus be able to recover only from the insured and if the insured is insolvent, he would be unable to pay and would have little incentive to seek payment from the insurance company.

Further, support for our position is found in Alfiero v. Berks Mutual Leasing Co., 347 Pa.Super. 86, 500 A.2d 169 (1985), where an excess coverage insurance carrier refused to defend and was ultimately sued by the injured plaintiff as assignee of the insured. In exchange for the assignment, the assignee agreed not to expose the assets of the insured to sale to satisfy the unpaid judgment.

The insurance company maintained that because the plaintiff agreed not to seek satisfaction from the insured, he has effectively been released from further liability. The court rejected this argument, finding that the plaintiff did not agree to release the insured from further liability but agreed to seek recovery of an agreed debt from a specific asset, i.e. the contractual rights owed to the insured by the insurer. Alfiero, supra, 347 Pa.Superior Ct. at 90, 500 A.2d at 171.

In Alfiero, a declaratory judgment was entered against the insurance company, as to the duty to defend, before the settlement agreement was reached. Appellee/General Accident argues that the triggering event in Alfiero which permitted the negotiation of settlement was repudiation of coverage. They want to allow this, however, only where, as in Alfiero, the insurers responsibility to defend has already been determined prior to settlement. Under appellees theory, the insurer, absent a declaratory judgment, would be able to deny coverage and then insist that before the issue of whether such a denial is proper may be raised, the insured must have liability imposed, judgment entered and payment made to the plaintiff. We think the insured should be allowed, as soon as the insurer denies coverage, to protect its interest by negotiating a settlement. The only valuable asset the insured may have is its cause of action against the insurer and the insured should be able to assign this right to the injured party to protect itself from further liability.

We think the entry of judgment in the present case is also significant. The court, in Gray, recognized that entry of judgment constitutes a real harm because of the potential effect on the insured’s credit rating. In addition, courts have cited factors such as damage to reputation and loss of business opportunities as real harm suffered by entry of judgment. 63 A.L.R.3d 622. In reliance on this perceived harm, prepayment of judgment has been rejected as a criteria to enabling an insured to bring suit. Likewise, the assignee, as holder of the rights of the assignor, should not have to demonstrate payment on the judgment before a cause of action arises.

Additionally, we think a prepayment rule is inappropriate for it fails to encourage an insurer to respond to its duty to the insured while rewarding the opposite when the insured is believed to be insolvent and unable or unwilling to challenge the actions of the insurance company. Under these circumstances, the injured party is left without a means of recovery and the insurance company insulated from liability.

It should also be noted that a prepayment rule could encourage multiplicity of lawsuits where a partial payment is made to the judgment creditor and the insured seeks recovery of that amount from the insurer. Each time a payment is made, the insured can then seek recovery based on that payment. See 63 A.L.R.3d at 632. We do not think this is in the best interest of judicial economy nor does it provide appropriate relief to the injured party.

Finally, in support of our decision, we look again to the rationale in Gray for allowing the assignment of rights against an insurer without the insured having satisfied the judgment. The court stated:

The main public policy reason against the result we reach, ... is that it will foster fraud and collusion between the insured and the injured claimant. We disagree____ The possibility of collusion between a judgment holder and an insured is no way increased by an assignment. If the insured’s liability on the judgment is not affected by the assignment, the interests of the parties are similarly unaffected. Whether the action would be brought in the name of the policy-holder or in the name of the assignee, the policy-holder would be intent upon relieving himself of the excess judgment, and the assignee would be seeking to secure the balance due him. If the insured’s liability is terminated by the assignment, as in the present case, the possibility of collusion is more remote. Having been relieved of the judgment, the insured no longer has any pecuniary interest in the outcome of the litigation. Gray v. Nationwide Mutual Insurance Co., 207 Pa.Super. [1] at 10, 11, 214 A.2d [634] at 639. (Dissenting opinion by Hoffman, J., in which Ervin, P.J., and Watkins, J., joined.)
Permiting an insured to assign his claim to the injured claimant would put the claimant on more of an equal footing with the insured’s insurance company in settlement negotiations without tipping the balance against an insurer who could still refuse to settle in good faith.

Gray, supra, 422 Pa. at 510-511, 223 A.2d at 12-13.

Having concluded that the assignment arising from the supplemental agreement is valid and would allow the assignee to seek recovery of the settlement amount, we must address the issue of whether the Order denying amendment of the complaint is appealable.

“In ascertaining what is a final appealable order ... we must look beyond the technical effect of the adjudication to its practical ramification.” Praisner v. Stocker, 313 Pa.Super. 332, 459 A.2d 1255 (1983) citing Jackson v. Moultrie, 288 Pa.Super. 252, 431 A.2d 1033 (1981). “The finality of an order is a conclusion which can be reached only after an examination of its ramifications.” Praisner, supra, 313 Pa.Superior Ct. at 337, 459 A.2d at 1258, citing Pugar v. Greco, 438 Pa. 68, 394 A.2d 542 (1978). When an Order so restricts the pleader as to virtually put him out of court on the cause of action he seeks to litigate, it is a final appeal-able Order. Trevellini v. West Realty Co., 289 Pa.Super. 84, 432 A.2d 1062 (1981).

In the present case, the denial of appellant’s petition to amend would have limited the damages recoverable to the out-of-pocket defense costs. Because we think the amendment, if allowed, would clearly permit appellant to seek recovery of the $250,000 judgment entered against Ayers, denial of the petition to amend constitutes an appeal-able Order. Although appellant would not technically be out of court, the practical result is that he would not be able to seek recovery of damages to which he claims entitlement.

The next issue we must address is the propriety of the Order denying appellant’s petition to amend their complaint.

The court determined that the change did not alter the ability of Barr as assignee to recover any more than he would under the original complaint and refused to allow amendment.

The decision to grant or deny a petition to amend a pleading is a matter of judicial discretion. It is established, however, that amendments to pleadings should be liberally allowed so as to insure a determination of cases on their merits. Gutierrez v. Pennsylvania Gas and Water Co., 352 Pa.Super. 282, 507 A.2d 1230 (1986); Gallo v. Yamaha Motor Corp. U.S.A., 335 Pa.Super. 311, 484 A.2d 148 (1984). “Amendments should be allowed with great liberality at any stage of the case unless they violate the law or prejudice the rights of the opposing party.” Gutierrez, supra, 352 Pa.Superior Ct. at 286, 507 A.2d at 1232 (citations omitted).

Pa.R.C.P. 1033 provides:

Rule 1033. Amendment
A party, either by filed consent of the adverse party or by leave of court, may at any time change the form of action, correct the name of a party or amend his pleading. The amended pleading may aver transactions or occurrences which have happened before or after the filing of the original pleading, even though they give rise to a new cause of action or defense. An amendment may be made to conform the pleading to the evidence offered or admitted.

(Emphasis added).

In the present case, the appellant sought to amend the pleading by including a new agreement which involved entry of judgment against Ayers. We previously discussed our disagreement with the lower court that indemnity principles are applicable in this situation and concluded that appellant would have a cause of action as assignee of Ayers’ rights under the amended complaint. We must thus conclude that the court abused its discretion in refusing to allow the amended complaint.

In so holding, we reject appellee/Cramer’s argument that the amended complaint is barred by the statute of limitations. Although this may be true, if a new cause of action was asserted, such is not the case here. The cause of action is based on the alleged failure of the insurance company to defend and the failure of the insurance company and its agents to provide the proper coverage. This was not changed at all by the proposed amendment and the question of whether the statute of limitations has run is not at issue.

We will finally comment on the issue of Ayers’ liability to appellant/Barr. Appellee/Cramer maintains that this liability must be proven before proceeding to the issue in this case. In response to this contention, we look to the decision of this Court in Ridgeway Court Inc. v. James J. Canavan Ins., 348 Pa.Super. 136, 501 A.2d 684 (1985). In Canavan, an individual injured on his job site brought suit against two corporate owners. A settlement was reached between the parties and judgment entered against the corporations in the amount of $1,250,000. There was only $100,000 in insurance available, which was paid to the injured party. As part of the settlement, the corporations assigned their claim against their insurance broker for failure to provide adequate coverage. In exchange, the corporations were relieved from further liability regardless of the outcome of the assignees action against the insurance broker. The question of" whether the liability of the corporations to the injured party must be established was raised and the Canavan Court, relying on Martinque Shoes Inc. v. New York Progressive Wood Heel Co., 207 Pa.Super. 404, 217 A.2d 781 (1966), held that proof of liability must be provided in the professional negligence trial. We think the underlying liability is thus an issue which can be raised by appellees, but there is no requirement that a separate prior litigation be held, rather the issue is a proper one in this action. See also Brakeman v. Potomac Insurance Co., 236 Pa.Super. 320, 344 A.2d 555 (1975) affirmed with directions 472 Pa. 66, 371 A.2d 193 (1977).

Having discussed the issues raised by the parties and finding the lower court improperly refused to allow appellant to amend his complaint, the Order denying the petition to amend is reversed. The case is remanded to allow amendment of the complaint and for the case to proceed. Jurisdiction Relinquished.

      . A hearing was conducted November 29, 1983 on the settlement agreement and the court held the amount was fair and reasonable.

      . We are not called upon here to decide whether the court’s determination, that under the original agreement only defense costs are recoverable, is proper.

      . We did not refer to Canavan in our discussion of the assignees rights to recover the judgment amount because that issue is not discussed therein.


author: MONTEMURO, Judge:

text:
    520 A.2d 491
    COMMONWEALTH of Pennsylvania v. Timothy Scott REESE, Appellant.
    Superior Court of Pennsylvania.
    Argued Sept. 16, 1986.
    Filed Jan. 29, 1987.

      Frank W. Nocito, Wilkes-Barre, for appellant.
    Before CIRILLO, President Judge, MONTEMURO and JOHNSON, JJ.
   MONTEMURO, Judge:

This is an appeal from judgment of sentence entered following appellant’s jury conviction for possession of a prohibited offensive weapon, specifically a device commonly referred to as brass knuckles.

Appellant has presented us with six issues. In view of our disposition of the first of these, we need not address the others.

Appellant contends that the weapon he stands convicted of possessing was illegally seized and should have been suppressed. The knuckles were obtained by police while executing a search warrant of an apartment belonging to one Tina Cosgrove, an associate of appellant’s.

The warrant, which had been issued pursuant to police information that Cosgrove was involved in drug sales from the apartment, listed as its objectives controlled substances, drug paraphernalia and records relating to sales. At the time of the search, appellant was a visitor to the apartment, and although named in the affidavit of probable cause, was not mentioned as a target of the search.

When police entered the premises, appellant and Cos-grove were in the kitchen. On the back of a chair some 4 feet from where appellant stood was draped a black leather jacket. Without first ascertaining its ownership, police reached into the pockets, discovering the knuckles. Appellant, upon inquiry, acknowledged possession of the jacket and was placed under arrest.

There is no question but that a “search warrant issued for the premises or effects of a particular person cannot be extended by police officers to include a search of things not belonging to or under the control of that person.” Commonwealth v. Zock, 308 Pa.Super. 89, 95, 454 A.2d 35, 38 (1983).

The trial court based its determination as to the admissibility of the knuckles on a finding that because the jacket was not identified prior to the search, the police had “every right to assume it was within the scope of the warrant and to search it to determine whether it contained any contraband.” (Trial Court Opinion at 4). In support, Commonwealth v. Wheatley, 266 Pa.Super. 1, 402 A.2d 1047 (1979), and Commonwealth v. Sellers, 236 Pa.Super. 191, 344 A.2d 689 (1975), are cited. Wheatley involved a factual pattern virtually identical to the one before us, but with one crucial variant — the appellant in Wheatley was a known resident of the searched premises. This is sufficient under the law to render it inapposite authority. Commonwealth v. Platou, 455 Pa. 258, 312 A.2d 29 (1973). In Sellers this court held that officers serving a warrant are obligated “to inspect areas and objects which [are] apparently part of the premises covered by the warrant and under the control of [the occupant].” Id., 236 Pa.Superior Ct. at 195, 344 A.2d at 691. The question was whether a woman found nude in a bed in the house to be searched was a casual visitor so as to render her belongings immune from search. We concluded that because the woman’s clothing was in the bedroom and because she received mail at that address, her presence in the house was more than fortuitous. The divergence from the case at bar is obvious, and the distinctions disqualify Sellers as applicable precedent.

In Commonwealth v. Eichelberger, 352 Pa.Super. 507, 508 A.2d 589 (1986), this court, albeit in a different context, reiterated Mr. Justice Stewart’s observation in Coolidge v. New Hampshire, 403 U.S. 443, 474, 91 S.Ct. 2022, 2042, 29 L.Ed.2d 564 (1971), that “once a line has been drawn which establishes the reasonableness of a police intrusion, ‘there is often not a great deal of difference between the situations closest to it on either side’ ”. Eichelberger, 352 Pa.Superior Ct. at 515, 508 A.2d 594.

In this instance the minutiae of the circumstances surrounding examination of the jacket all argue the conclusion that it belonged not to Cosgrove, but to appellant, and could not have been “logically determined ... [to be] part of the general contents of the room.” Zock, supra, 308 Pa.Superior Ct. at 95, 454 A.2d 38. Specifically, we note that appellant not Cosgrove was asked about ownership of the jacket. It seems clear from the record that police anticipated its belonging not to the apartment and its residents, Cosgrove and her three children, but to appellant, of whose status they were already aware, viz. the affidavit.

The facts of this case place it on the wrong side of Justice Stewart’s line. Accordingly, we vacate the judgment of sentence.

      . 18 Pa.C.S.A. § 908.

      . Appellant also assigns error to the court’s denial of his sequestration motion, of his motion in limine and of certain requested points for charge. He objects as well to certain of the jury instructions.


author: CAVANAUGH, Judge:

text:
    520 A.2d 493
    METAL BANK OF AMERICA, INC., Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, Pennsylvania Manufacturers Insurance Company and Liberty Mutual Insurance Company v. FEDERAL INSURANCE COMPANY and Home Insurance Company v. GREAT AMERICAN INSURANCE COMPANY and American National Fire Insurance Company, the Hartford Accident & Indemnity Company and U.S. Fire Insurance Company, Appellees.
    Superior Court of Pennsylvania.
    Argued Oct. 1, 1986.
    Filed Jan. 30, 1987.

      John Mattioni, Philadelphia, for appellant.
    Robert R. Reeder, Philadelphia, for Insurance Co. of North America, appellee.
    Marjorie E. Greenfield, Philadelphia, for Liberty Mut. Ins., appellee.
    Melvin R. Shuster, Philadelphia, Home Ins. Co., appellee.
    Before CAVANAUGH, McEWEN and BECK, JJ.
   CAVANAUGH, Judge:

The appellant, Metal Bank of America, Inc., commenced a declaratory judgment action in April, 1983 against Liberty Mutual Insurance Company, Insurance Company of North America, and Pennsylvania Manufacturers Association Insurance Company. The Insurance Company of North America joined as additional defendants The Home Insurance Company and Federal Insurance Company. Subsequently, Home Insurance Company joined as additional defendants Great American Insurance Company, American National Fire Insurance Company and the Hartford Accident and Indemnity Company. Several other insurance companies were also joined as additional defendants.

In its declaratory judgment action, the appellant sought indemnification for investigation costs, attorneys fees and other expenses it incurred in defending a law suit brought in 1980 against Metal Bank, its parent corporation and two individual defendants, by the United States Environmental Protection Agency (EPA). It also sought reimbursement for all expenditures made by it in defense of the litigation and expenditures incurred arising from remedial actions taken by Metal Bank to satisfy an agreement which was reached with EPA in settlement of the litigation against it.

The appellees, Insurance Company of North America, Home Insurance Company and Liberty Mutual Insurance Company filed motions for summary judgment which were granted by the court below, DiBona, J. The appellant’s motions for summary judgment were denied and it has appealed to this court.

A motion for summary judgment should be granted where the pleadings, discovery and affidavits reflect no genuine issue of material fact. Loyal Christian Benefit Association v. Bender, 342 Pa.Super. 614, 493 A.2d 760 (1985); Pa.R.C.P. 1035(b). A summary judgment should only be entered in those cases which are clear and free from doubt. Weiss v. Keystone Mack Sales, Inc., 310 Pa.Super. 425, 456 A.2d 1009 (1983). The court must accept as true all well-pleaded facts in the plaintiff’s pleadings, and give the plaintiff the benefit of all reasonable inferences to be drawn therefrom. Spain v. Vincente, 315 Pa.Super. 135, 461 A.2d 833 (1983). However, a prima facie showing by the party seeking summary judgment, i.e., the production of enough evidence to demonstrate such party’s entitlement to a judgment if evidence were uncontroverted at trial, shifts the burden of producing evidence to the party opposing the motion. In such circumstances summary judgment should be granted to the moving party unless the opposing party offers competent evidence admissible at trial showing that there is a genuine issue of material fact. Community Medical Services, Inc. v. Local 2665, 292 Pa.Super. 238, 437 A.2d 23 (1981).

In the instant case, it was established that Liberty Mutual Insurance Company had policies of insurance in effect which extended coverage to the appellant from August 1, 1968 to January 1, 1971 under a comprehensive general liability policy and from July 20, 1968 to January 1, 1971 under an excess liability policy. Home Insurance Company issued two policies to the appellant. Coverage under the first policy began on January 1, 1969 and ended on January 1, 1970. Coverage under the second policy began on September 30, 1973, and ended on January 1, 1975. The policies issued by both companies provided that notification of injuries or damages which would involve coverage under the policies had to be given as soon as practicable after the occurrence or event covered by the policy took place.

The underlying event which allegedly triggered responsibility on the part of the insurance companies occurred in or about August of 1972 when the Coast Guard notified the appellant that it was responsible for an oil spill on the Delaware River caused by a rupture in an underground storage tank. In October, 1972 the appellant wrote to the Chief of Compliance, Department of Environmental Resources and denied that it was violating any rules of the Department of Environmental Resources but stated “While denying any violation as mentioned above, we do agree that industrial housekeeping at that location can be improved and we have accordingly taken the following action ...” The letter went on to describe in detail the action Metal Bank was taking concerning the prevention of discharge of pollutants. The letter concluded “Please be assured of our strong interest in preventing any conditions that might give rise to any pollution incidents in the future.” On November 1, 1972 the chief of Marine Safety Division of the United States Coast Guard wrote to Metal Bank of America stating inter alia: “A report has been received by this office that oil in harmful quantity was allegedly discharged into the navigable waters of the United States on 3 August 1972 from your facility at Philadelphia, Pennsylvania ... Section 11(b)(5) of the Act [The Federal Water Pollution Control Act of 1956], states, in part, that the owner or operator of a facility or vessel from which oil is knowingly discharged shall be assessed a civil penalty of not more than $10,000.00 for each offense.”

On May 13, 1973 the Chief of the Water Quality Branch, Delaware River Basin Commission, wrote to the appellant as follows:

On April 4, 1973 and again on May 1, 1973 we received reports that oil from the Metal Bank plant created oil pollution incidents on the Delaware Stiver. We understand that a pile of transformers is stored on or near the river bank and that oil from these transformers may cause additional incidents.
Will you please explain how your plant recovers waste oil, where the oil is finally disposed of and what steps you have taken or plan to take to prevent oil spills and oil leaking from plant property.

During the period from 1973 to 1980 investigations were undertaken by the Federal Environmental Protection Agency and the Pennsylvania Department of Environmental Resources. Various governmental agencies made demands on Metal Bank of America during these years. Metal Bank engaged in various and extensive negotiations with EPA relating to the seepage into the Delaware River. In its complaint for declaratory judgment the appellant contends that an underground tank which it owned sustained a leak prior to 1972 and ruptured in 1972 and this was the source of the oil seepage onto its property and ultimately into the Delaware River. Finally, in April, 1980, EPA filed a complaint against Metal Bank in the United States District Court for the Eastern District of Pennsylvania claiming damages in excess of $2,000,000.00 caused by the discharge of hazardous waste by Metal Bank into the Delaware River from 1968 to 1973. Metal Bank defended this action by its own attorneys for two years without any notice whatsoever to the appellees.

Liberty Mutual Insurance Company was not notified of the action by the EPA against Metal Bank until February, 1982. In May, 1982 Metal Bank notified The Insurance Company of North America for the first time of the occurrence giving rise to its claim against its insurance carrier. Home Insurance Company did not know of the events giving rise to possible liability on its part until INA served Home Insurance Company with its complaint joining Home Insurance Company as an additional defendant in the action.

In July, 1982, the appellant wrote to INA sending copies of the pleadings involved in the suit against it, among other documents. The letter stated inter alia:

We have proceeded with extensive discovery in this matter and have conducted substantial investigations into the underlying facts and circumstances of the case.
The claim arose out of a sudden and unexpected pollution incident that occurred in 1972. When that spill incident occurred, certain remedial actions were taken by Metal Bank under the directions of U.S. Coast Guard personnel. It was believed at the time that the actions taken had remedied the situation.
Unfortunately, it was later learned that a pool of PCB’s had accumulated underground at the site in question. This pool lay in relative repose until 1972 and, after that “clean up” in repose until 1977. At that time another pollution incident is alleged to have occurred. The present litigation relates back to the 1969-72 problems.
The government’s primary assertion of liability at this time is based upon a claim or contention that unless the remedial action is completed there remains the potential for a large sudden discharge or release of polluting PCB’s into the environment.
The original position by the government, if fully implemented would have cost $15 to $30,000,000.00. While I do not have accurate figures available to me, I believe it is estimated that the actual “settlement” being negotiated will probably not exceed $500,000.00 in cost. The actions are underway at the site. Work has not been completed. The settlement Stipulation has not been signed by the government. The U.S. Magistrate handling the case, Edwin E. Naythons, has urged the government to approve the Stipulation.
We recognize that the notice to you of this claim is late. However, we believe that there is no prejudice inasmuch as our files are open to you for your review, the results appear to be reasonably favorable in terms of the liability and exposure in the case, and coverage under the policy reasonably certain. Furthermore, legal fees and expenses have been kept in line largely as a result of our agreement to represent Metal Bank at a reduced hourly rate. We will provide you copies of all bills rendered to Metal Bank which are detailed and describe activities reasonably precisely upon your request.
At this time, in behalf of the Metal Bank of America, Inc., we request that you accept responsibility under the applicable policy or policies of insurance and agree to pay all expenses for liability for remedial action, costs, counsel fees and expenses.

The underlying event which formed the basis of the appellees’ liability as insurance carriers occurred no later than 1973. Certainly, by then Metal Bank was fully aware that the state and federal governments felt that it was responsible for polluting the Delaware River. In 1972 the appellant denied liability for any unlawful contamination of the environment but outlined the steps it was taking to correct the situation. Extensive and unsuccessful negotiations took place between the EPA and Metal Bank prior to the EPA suit against Metal Bank in 1980. Even then, the appellees were not notified of the legal action against Metal Bank. It was not until some two years after the litigation commenced in the United States District Court, that Metal Bank notified its insurance carriers. The appellant does not contend that it gave timely notice to the appellees concerning the underlying occurrence of the pollution or of the suit against it by EPA in 1980. As noted above, it recognized that its notice was late. However, it contends that the court erred in determining as a matter of law that the appellees were prejudiced as a result of the untimely notice.

At one time the provisions in an insurance policy that the insurer must be notified as soon as practicable after the occurrence of the event covered by the policy were strictly enforced and late notice to the insurer would release it from its contractual obligations even where the insurance company was not prejudiced. Meierdierck v. Miller, 394 Pa. 484, 147 A.2d 406 (1959). See also August v. Stasak, 492 Pa. 550, 424 A.2d 1328 (1981). The rule was changed in the often cited case of Brakeman v. Potomac Insurance Company, 472 Pa. 66, 371 A.2d 193 (1977) which held that late notice to an insurance company releases the insurer from its obligations under the policy only where it has been prejudiced by the untimely notice.

We must view Brakeman, supra in the framework of its factual situation. In that case, a 17 year old youth, David Baker, was operating his father’s automobile and was involved in an accident with a motorcyclist on March 3, 1970. Baker did not notify his insurance carrier until October 6, 1970 after he was told by the attorney for the motorcyclist that suit was being instituted. The Supreme Court directed a new trial to determine if the insurance company had been prejudiced by the untimely notice. The Court stated at 472 Pa. 74, 75, 371 A.2d 197:

The purpose of a policy provision requiring notice of an accident or loss to be given within a certain time is to give the insurer an opportunity to acquire, through an adequate investigation, full information about the circumstances of the case, on the basis of which, it can proceed to disposition, either through settlement or defense of the claim. Farmers National Bank v. Employers Liability Assurance Corp., supra [414 Pa. 91, 199 A.2d 272 (1964) ]; Hachmeister, Inc. v. Employers Mutual Liability Insurance Co., 403 Pa. 430, 169 A.2d 769 (1961); Jeannette Glass Co. v. Indemnity Insurance Co. of North America, supra [370 Pa. 409, 88 A.2d 407 (1952) ]; Bartels Brewing Co. v. Employers’ Indemnity Co., 251 Pa. 63, 95 A. 919 (1915); 8 J. Appleman, Insurance Law and Practice § 4732 (1962). Such a requirement protects the insurance company from fraudulent claims, as well as invalid claims made in good faith, by allowing the insurance company to gain early control of the proceedings. Since the insurance company has the advantage of a trained legal and investigatory staff, which is unavailable to the average insured, the notice requirement normally operates to benefit the insured as well as the insurance company.

In Brakeman, a 17 year old youth did not notify his insurance carrier for some 7 months after the accident but did so immediately after being told that suit against him was being commenced. In the instant case, we have an insured which for almost 10 years participated in negotiations with the federal and state governments over an alleged oil spill. At the termination of complex negotiations it was finally sued in 1980 by the EPA for damages in excess of $2,000,000.00. During the legal proceedings it was represented by its own counsel who defended the appellant in the legal action. It was not until ten years after the original oil spill and two years after protracted litigation commenced that the insured even advised the insurers that it was having any problems. We are dealing with a sophisticated insured, advised by counsel for many years, which had done nothing to alert its insurance carriers that they may be exposed to substantial liability caused by the polluting of public waters by the insured.

The instant case does not turn, however, on the sophistication, or lack thereof, on the part of the insured as to whether proper notice was given to the insurer. The test is whether untimely notice, as in this case, has prejudiced the insurers. We agree that the court below properly determined as a matter of law that the insurers were prejudiced. The insurers did not have an opportunity to investigate the facts or participate in the defense of the action against Metal Bank. In the letter of May 25, 1982 counsel for Metal Bank notified INA that Metal Bank had been sued two years earlier by the Environmental Protection Agency. Counsel stated:

The Complaint states a claim for an amount in excess of Two Million Dollars allegedly in payment for restitution and reimbursement of costs incurred by plaintiff, and costs and expenditures which the insured may be legally obligated to pay to remedy damages caused to government property from the accidental discharge of a hazardous waste from the insured’s property (located at Cottman Avenue and Milner Street) to the Delaware River, during the insured years 1968 through to 1973.
Through the determined and continued efforts of its attorneys, your insured has been able to reduce the liability sum to a fraction of the originally stated claim.

The letter indicates that a settlement was already a fait accompli, and the insurers, who were being called upon to provide funds for the settlement had no opportunity to control the proceedings or in any way protect themselves. As noted in Brakeman, supra, the reason for timely notice to the insurer is to enable it to gain early control of the proceedings and to give it an opportunity to investigate and acquire information about the case. All of this was denied to the insurers in 1982, as the facts were stale and the litigation had been in progress for some two years. Litigation involving EPA and Metal Bank was very complicated and involved many defendants. Metal Bank of America as a third party plaintiff sought to join Monsanto Corporation, Consolidated Edison Company of New York and Public Service Electric & Gas Company of New Jersey in 1981 as third party defendants. The appellees did not know of this and did not participate in the decision, which may have had great significance in the litigation. Nor did appellees have a voice in deciding to join others as third party defendants. In any event, the insurers did not “gain early control of the proceedings,” as required by Brakeman, supra. In fact, the appellees were unaware of the proceedings until two years after they commenced.

In Gerrard Realty Corp. v. American State Insurance Company, 89 Wis.2d 130, 277 N.W.2d 863 (1979) a real estate broker had an “Errors and Omissions Policy” requiring notice to its insured “as soon as practicable” after the occurrence of an insurable event. The broker was sued for fraud, and 22 months after commencement of the action resulting in judgment against it, the real estate broker sued its insurer to recoup the amount of the judgment against it and legal fees. The lower court entered summary judgment in favor of the insurer and the Supreme Court of Wisconsin affirmed. The court stated at 89 Wis.2d 145, 277 N.W.2d 871:

As a result of the appellant’s belated notice, the respondent was denied an opportunity to investigate, defend or settle the Millers’ claim. Thus, we agree with the trial court that as a matter of law the respondent was prejudiced by not receiving notice of the Millers’ action until after the completion of the trial against the Goldsmiths, Rogness and the appellant and thus coverage was properly denied.

In our case, the appellant alone conducted extensive investigations, retained counsel, defended the litigation and attempted to work out a settlement agreement. These were matters in which the appellees should have participated, if they are going to be called upon to pay the very substantial costs of settlement and counsel fees.

The law of Maryland is similar to Pennsylvania and requires proof not only that an insured failed to provide the requisite notice to the insurance company, but that the insurer suffered actual prejudice by the insured’s failure to comply with the policy requirements. In Washington v. Federal Kemper Insurance Company, 60 Md.App. 288, 482 A.2d 503 (1984) an insured brought a declaratory judgment proceeding against an insurance company where the insured had been sued and defended with its own counsel. It was not until after a verdict was entered against the insured, that the insurance company was notified of the action. The lower court entered judgment for the insurer in the declaratory judgment proceedings brought by the insured and the appellate court affirmed on the basis that the company had been prejudiced by being deprived of its opportunity to defend the litigation. In the instant case not only were the insurers denied the opportunity to defend claims against the appellant, but the passage of time over so many years could result only in dimming memories and the shifting of relationships between individuals and Metal Bank. At least two supervisory personnel of Metal Bank at the Cottman office died during the intervening years between 1972 and 1982. Even the President of Metal Bank testified that he could not remember many events pertaining to the case because of the passage of time. A former plant manager of Metal Bank could not be found and Metal Bank could furnish no information as to his whereabouts other than its belief that he was living somewhere in France.

As noted above, the insurers were not given an opportunity to make their own investigation of the many problems and this was prejudicial. The facts of this case are similar to those in Colonial Gas Energy System v. Unigard Mutual Insurance Co., 441 F.Supp. 765 (N.D.Cal.1977). In Colonial Gas, supra, the insured, was a lessee of a liquid natural gas tank, and became aware of a possible problem with the tank. It promptly gave notice to the owner and emptied the tank. Following an inspection and tests, repairs were made. The tank was then refilled and restored to operation. The insured then gave notice to its insurer of a possible claim. As in this case, the insured conceded the notice was late. The court found a breach of the obligation to give notice “as soon as practicable” and that as a result of the late notice the insurer suffered substantial prejudice. The court stated at 441 F.Supp. 769-70:

Having made its own investigation, plaintiff precluded defendant from making any investigation into the matters which are material to the dispute, such as whether the leak was localized at a particular pipe and whether there was significant incidence of rust or corrosion or, as plaintiff claims, only defective welding.

We are not persuaded by the appellant’s argument that the insurers were not prejudiced by the untimely notice. The appellant argues that 1977 was “the earliest point in time that the insured was required to provide notice.” Even assuming that the appellant was not required to give notice of the events on which it based its claim until \1977, the appellees were nevertheless prejudiced by delay oAfive years in receiving notice. During these five years \the insurers were precluded from the extensive investigations, negotiations and litigation which occurred, and the appellees were given no opportunity to control the situation or even participate.

Having determined that the court below properly decided that the appellees were prejudiced by the untimely notice given them, we need not rule on the second issue raised by the appellant which it states as follows:

Does the record, viewed in the light most favorable to the Plaintiff, contain any evidence that there was property damage and, therefore, an “occurrence” during the applicable periods of insurance coverage to create at a minimum a genuine issue of fact precluding summary judgment in favor of the insurers?

The court below determined that an insurable occurrence did not take place during the time in which the various policies were in force. However, we do not reach this issue as the insurers had no obligation under the policies because of the prejudice they suffered.

The appellant states the final issue as follows:

Whether Liberty Mutual and Insurance Company of North America, by their failure to defend the insured against the underlying complaint which on its face stated a cause of action potentially within the scope of the policies without first obtaining a judicial determination that the underlying claim was not covered, are estopped from denying coverage? (Emphasis added)

The appellant states that this question was not answered by the court below. The reason for this is that the issue of estoppel was not raised below. The appellant in its memorandum of law in opposition to Liberty Mutual Insurance Company’s motion for summary judgment argued that:

By its failure to defend the insured on the underlying action, Liberty Mutual breached its obligation under the insurance contract and is therefore, liable to indemnify the insured for costs incurred in the remedial action and to reimburse it for all cost and expenses incurred in defending the action.

In Metal Bank’s reply memorandum to Liberty Mutual’s supplemental memorandum of law, it was argued that Liberty Mutual breached its duty to defend. In Metal Bank’s memorandum of law in opposition to the motions for summary judgment by Home Insurance Company and The Insurance Company of North America it does not raise the issue of estoppel. On appeal, Metal Bank raises for the first time the issue that Liberty Mutual and Insurance Company of North America are estopped from denying coverage because they did not obtain a judicial determination that the underlying claim was not covered by the policies. In the court below the appellant did not raise the issue that the insurers should have obtained a judicial determination that they had no obligations under the policy. Issues not raised in the trial or hearing court are not properly preserved for appellate review and will not be considered. Kovach v. General Telephone Co. of Pennsylvania, 340 Pa.Super. 144, 489 A.2d 883 (1985); Cherry v. Willer, 317 Pa.Super. 58, 463 A.2d 1082 (1983); Durkin v. Equine Clinics, Inc., 313 Pa.Super. 75, 459 A.2d 417 (1983); O’Malley v. Peerless Petroleum, Inc., 283 Pa.Super. 272, 423 A.2d 1251 (1980); Pa.R.A.P. 302(a). The issue that the appellees are estopped from denying coverage for failing to obtain a judicial determination that the underlying claim was not covered, not having been properly issued below is waived.

Orders affirmed.

      . The appellant did not produce the insurance policy under which it attempted to impose liability on The Insurance Company of North America. However, it was established by affidavit that all comprehensive general liability policies issued during the applicable period by INA would have contained language that required notice to the company or its authorized agent as soon as practicable after the event giving rise to liability by the insurer.

      . The appellant’s complaint for declaratory judgment alleged, inter alia:

      5. In or around 1968 until 1972, Metal Bank used the Cottman Avenue site to process recycled transformers and to drain and temporarily store oil from transformers. Metal Bank employees would drain the oil by allowing it to flow onto a concrete platform which was slanted toward the center. At the center was a hole which allowed the oil to flow into an underground holding tank. The oil tank developed a leak prior to 1972 and in 1972 the tank ruptured allowing the oil to seep through a previously filled area and eventually into the Delaware River.
      6. Plaintiff, Metal Bank, in 1972 discontinued its practice of collecting oil from transformers and storing it in the underground tank and it has cleaned the tank and filled it with cement material.
      7. Metal Bank has expended as of October 28, 1982, more than $340,000.00 in costs for clean up of oil in 1973, equipment, contractors, hired labor, administration, consultants and legal services.

      . Our court refused to extend the rationale of Brakeman supra to the situation where the policy required proof of loss within 60 days of the loss and commencement of suit on the policy within 1 year after the loss, where neither of the conditions were met by the insured. See Petraglia v. American Motorist Insurance Company, 284 Pa.Super. 1, 424 A.2d 1360 (1981) which affirmed the grant of summary judgment in favor of the insurer where the policy requirements were not met even in the absence of a showing of prejudice to the insurer.

      . With respect to prejudice to the insurer the court below very appropriately noted:
      It is clear that Metal Bank’s late notice to the insurance carrier not only prejudiced the insurance carrier by depriving it of the opportunity to investigate the underlying action, it has also severely prejudiced the insurance carrier’s ability to defend the claim brought by the EPA and to defend the present claim being brought for indemnification and expenses. It also cannot be disputed that evidence has been dissipated and disappeared and that the passage of time has resulted in the unavailability of witnesses and the fading of memories.

      . Mr. Levin, President of Metal Bank, testified concerning the stored transformers which were intimately involved in the pollution as follows:
      Q. Do you know any of the people who were responsible, not do you know any of the people who did the actual or physical removal of the inner core of the transformer from the outer case?
      A. It may be of record. I don’t know.
      Q. That is your response, you don’t know any of the people?
      A. I don’t know. At this point I don’t remember. Your are asking me to remember something that took place 16 years ago and I don’t remember.
      Q. Did you ever observe — did you ever go onto Metal Bank’s Cottman Avenue site?
      A. Yes.
      Q. How often did you go onto the site?
      A. I don’t know how often I went there.
      Q. Could you give me a guess, five times?
      A. Ma’am, I was there 31 years____
      Q. What would be the occasions on which you went to the Cottman Avenue site?
      A. I don’t know what occasion. I was there 31 years and certainly I was at that property.

        Q. Now, I take it that prior to that date [August 3, 1972], you personally knew of no spill into the river originating from that site, is that correct?
      A. That’s right.
      Q. Now, do you know as well that no one else from Metal Bank knew of such a spill?
      A. I can’t speak for anyone else at Metal Bank.
      Q. Did you ever make an inquiry among other Metal Bank employees to find out if they had any knowledge of such a spill?
      A. I don’t remember if I discussed it with them or not.
      Q. You don’t know whether you did?
      A. I don’t remember.
      Q. Do you know whether anyone else made such an inquiry?
      A. I don’t know what anyone else did.

      . In its lengthy memorandum of law in opposition to Liberty Mutual Insurance Company’s motion for summary judgment, Metal Bank stated at page 47:
      Ordinarily the insurer which breaches its duty to defend the action is estopped from denying coverage, and is likewise obligated to indemnify the insured for the liability subsequently incurred either by way of judgment or settlement. Ripepi v. American Insurance Companies, supra, [349 F.2d 300 (3rd Cir.1965) ], at 303; Pacific Indemnity Co. v. Linn, supra, [590 F.Supp. 643 (E.D.1984)], at 651, n. 8; Capital Indemnity Corp. v. St. Paul Fire & Marine Ins. Co., 357 F.Supp. 399 (W.D.Wis.1972); Arcas [Arcos] v. American Mutual Liability Ins. Co., 350 F.Supp. 380 (E.D.Pa.1972), aff’d 485 F.2d 678 (3d Cir.1973).
      Appellant also states the same argument in its appellate brief, pages 97-98 at the conclusion of part III of its argument which is captioned as follows:
      III. BY THEIR FAILURE TO DEFEND THE INSURED ON THE UNDERLYING ACTION, INA AND LIBERTY MUTUAL BREACHED THEIR OBLIGATION UNDER THE INSURANCE CONTRACT AND ARE THEREFORE LIABLE TO INDEMNIFY THE INSURED FOR COSTS INCURRED IN THE REMEDIAL ACTION AND TO REIMBURSE IT FOR ALL COSTS AND EXPENSES INCURRED IN DEFENDING THE ACTION.

        This argument does not go to the issue of estoppel raised in the third statement of questions involved.


author: CIRILLO, President Judge:

text:
    520 A.2d 502
    Joseph LINKER, Appellant, v. CHURNETSKI TRANSPORTATION, INC.
    Superior Court of Pennsylvania.
    Argued Oct. 28, 1986.
    Filed Jan. 30, 1987.

      Jerome L. Cohen, Wilkes-Barre, for appellant.
    Donald T. Rogers, Wilkes-Barre, for appellee.
    Before CIRILLO, President Judge, and.ROWLEY and BECK, JJ.
   CIRILLO, President Judge:

This is an appeal from an order of the Court of Common Pleas, Luzerne County, denying appellant’s motion to remove a nonsuit entered at trial. We reverse and remand.

Appellant Joseph Linker initiated suit against appellee Churnetski Transportation (Churnetski) as a result of an automobile accident. In response to appellee’s expert interrogatories, appellant responded as follows: “Dr. G.W. Klem, Kingston, Pa. See report attached.” No report was attached; only bills and extracts of the office record were attached to appellant’s answers. Approximately ten months later, on May 18, 1983, appellee Churnetski made a request for documents, including “reports of any and all experts who are expected to testify at trial.” Appellee received no response to this request.

Dr. Klem subsequently died, and in November of 1984 appellant began treatment with Dr. Rogers. Treatment continued until January 27, 1986, the date of trial.

Appellant’s answers to appellee’s interrogatories were never supplemented to inform appellee that Dr. Rogers would testify as an expert at trial. Appellant did identify Dr. Rogers by name as an expert witness at the January 28, 1985 pretrial conference, but no expert report was supplied to appellee. A copy of Dr. Roger’s expert report was given to appellee’s counsel on January 28, 1986, the second day of trial. This report, which was mailed by Dr. Rogers to appellant’s counsel, was post-marked January 23, 1986.

The trial court, pursuant to the discovery rules, precluded the doctor’s testimony. See Pa.R.Civ.P. 4003.5(b) and 4019(i). Appellant’s motion for a continuance was denied by the trial court. As a result of the sanction, appellant was unable to meet the threshold requirements for his cause of action and a compulsory non-suit was entered against him. Appellant’s motion to remove the non-suit was denied.

Appellant presents the following issues for our review: (1) is providing the name of an expert witness to defense counsel by way of pre-trial memorandum sufficient notice under the discovery rules; and (2) must the party requesting sanctions show prejudice in order to completely preclude expert testimony.

The purpose of the discovery rules is to prevent surprise and unfairness and to allow a fair trial on the merits. See Kaminski v. Employers Mutual Casualty Co., 338 Pa. Super 400, 487 A.2d 1340 (1985). When expert testimony is involved, elimination of surprise becomes even more critical since attorneys will not have the requisite knowledge to effectively rebut the unexpected testimony. Id.

The Kaminski court noted that “[b]y allowing for early identity of expert witnesses and their conclusions, the opposing side can prepare to respond appropriately instead of trying to match years of expertise on the spot.” Kaminski, 338 Pa.Super. at 408, 487 A.2d at 1344-45 (quoting Sindler v. Goldman, 309 Pa.Super. 7, 12, 454 A.2d 1054, 1056 (1982)) (emphasis ours).

In the instant case, appellant contends that his identification of Dr. Roberts by name in the pre-trial memorandum was sufficient notice. We disagree.

Pennsylvania Rule of Civil Procedure 4003.5 provides in part:

Rule 4003.5. Discovery of Expert Testimony. Trial Preparation Material
(a) Discovery of facts known and opinions held by an expert, otherwise discoverable under the provisions of Rule 4003.1 and acquired or developed in anticipation of litigation or for trial, may be obtained as follows:
(1) A party may through interrogatories require
(a) any other party to identify each person whom the other party expects to call as an expert witness at trial and to state the subject matter on which the expert is expected to testify and
(b) the other party to have each expert so identified by him state the substance of the facts and opinions to which the expert is expected to testify and a summary of the grounds for each opinion. The party answering the interrogatories may file as his answer a report of the expert or have the interrogatories answered by his expert. The answer or separate report shall be signed by the expert.
(b) If the identity of an expert witness is not disclosed in compliance with subdivision (a)(1) of this rule, he shall not be permitted to testify on behalf of the defaulting party at the trial of the action. However, if the failure to disclose the identity of the witness is the result of extenuating circumstances beyond the control of the defaulting party, the court may grant a continuance or other appropriate relief, (emphasis ours).

The explanatory note to Rule 4003.5 states:

With respect to the expert expected to be called, discovery of facts known and opinions held by him, acquired or developed in anticipation of litigation or for trial, may be obtained as follows:
(1) First, the inquirer can by interrogatories require his opponent to disclose the identity of expert witnesses he expects to call at trial. The opponent must not only identify such experts but also state the subject matter on which each is expected to testify, (emphasis ours).

The rule embodied in subsection (b) above is restated in Rule 4019:

(i) A witness whose identity has not been revealed as provided in this chapter shall not be permitted to testify on behalf of the defaulting party at the trial of the action. However, if the failure to disclose the identity of the witness is the result of extenuating circumstances beyond the control of the defaulting party, the court may grant a continuance or other appropriate relief.

Pa.R.Cir.P. 4019(i) (emphasis added).

Rule 4007.4 imposes a continuing obligation on an answering party to supplement his responses to interrogatories. The explanatory note to Rule 4007.4 points out that this obligation is automatic with respect to persons to be called at trial as expert witnesses. See Pa.R.Civ.P. 4007.4, Explanatory Note — 1978. See also Royster v. McGowen Ford, Inc., 294 Pa.Super. 160, 439 A.2d 799 (1982) (responding party is under an affirmative duty to supplement responses to expert interrogatories).

In the instant case appellant failed to comply with the requirements of the aforementioned discovery rules. Appellant began treatment with Dr. Rogers in 1984, and had well over two years to supplement his responses to appellee’s interrogatories. In addition, it is difficult to conceive of the possibility that appellant’s attorney waited over two years to make his decision to use Dr. Rogers as an expert at trial, or that the physician’s report would take this long to prepare. Further, we find no “extenuating circumstances,” nor does appellant allege any, that would excuse him from these requirements. See Pa.R.Civ.P. 4003.5(b), supra.

Appellant next contends that there must be a-showing of prejudice to the appellee in order for a court to completely preclude Dr. Rogers’ testimony. We agree.

In Gill v. McGraw Electrical Company, 264 Pa.Super. 368, 382, 399 A.2d 1095, 1102 (1979) [en banc), we noted the following four factors to be considered in determining whether or not a witness should be precluded for failure to comply with discovery rules:

(1) the prejudice or surprise in fact of the party against whom the excluded witnesses would have testified,
(2) the ability of that party to cure the prejudice,
(3) the extent to which waiver of the rule against calling unlisted witnesses would disrupt the orderly and efficient trial of the case or of other cases in the court,
(4) bad faith of [sic] willfulness in failing to comply with the court’s order.

309 Pa.Super. at 15 n. 8, 454 A.2d at 1058 n. 8.

Appellee’s counsel pointed out that Dr. Levitt, who had previously examined Mr. Linker, had no opportunity to review Dr. Roger’s report. Dr. Levitt’s deposition testimony was to be presented on behalf of appellee Churnetski. Dr. Levitt was unavailable to testify at trial, and therefore could not respond to Dr. Roger’s opinion.

In completing the Gill analysis, the trial court found there was little chance of curing this prejudice because of Dr. Levitt’s unavailability and inability to respond to Dr. Levitt’s opinion. In addition, the court found that waiving the rule against calling unlisted witnesses would, of necessity, disrupt the orderly and efficient trial of this case and others on the trial list. Finally, the court found no bad faith or willfulness on the part of appellant or his counsel.

In the absence of bad faith or willful disobedience of the rules, the most significant considerations are the importance of the witness’ testimony and the prejudice, if any, to the party against whom the witness will testify. Feingold v. Southeastern Pennsylvania Transportation Authority, 339 Pa.Super. 15, 22, 488 A.2d 284, 288 (1985), aff'd, 512 Pa. 567, 517 A.2d 1270 (1986).

It is clear that Dr. Roger’s testimony is critical; without it, appellant has no case. It is also clear that appellee was prejudiced. Thus we are met with a serious dilemma which is not easily resolved. Under Rule 4003.5(b), the court must “balance the facts and circumstances of each case to determine the prejudice to each party.” See Feingold, supra, 512 Pa. at 573, 517 A.2d at 1273.

We recognize that appellant, as the responding party, was under an affirmative duty to supplement his responses. However, Dr. Rogers was listed as an expert witness in the January, 1985 pre-trial memorandum. From that time until the time of trial in January of 1986, one year later, there is a gap in the discovery process. Appellee’s counsel did not file a motion to compel discovery on behalf of Churnetski. We question appellee’s counsel’s claim of surprise. We question also counsel’s failure to request a continuance so as to avoid any prejudice to his client.

When an attorney is derelict in his duties, the unfortunate consequences will fall on the client. Mr. Linker, as a result of his counsel’s violation of discovery rules, was unable to present his claim for trial. Appellee Churnetski, however, was more fortunate; Churnetski counsel’s failure to pursue discovery might be viewed as a favorable trial tactic in this situation. This situation, however, is clearly not what the Civil Procedure Rules Committee intended.

We recognize that the imposition of an order compelling discovery is not a prerequisite to the trial court’s authority to impose an appropriate sanction. Griffin v. Tedesco, 355 Pa.Super. 475, 513 A.2d 1020 (1986). As stated in the explanatory note to Rule 4019, “Subdivision (a)(viii) is a blanket authorization to the court to enter a sanction order whenever there is a failure to make discovery or to obey an order of the court.” Explanatory Note to Rule 4019— 1978 Civil Procedure Rules Committee (emphasis added). See also Crance v. Sohanic, 344 Pa.Super. 526, 496 A.2d 1230 (1985) (sanctions may be imposed where there is a disregard of a discovery order or an obligation stated in the rules of civil procedure) (emphasis added).

In practice, however, sanctions for failure to respond to discovery requests are generally not imposed until there has been a refusal to comply with a court order directing compliance. See, e.g., Griffin v. Tedesco, 355 Pa.Super. 475, 513 A.2d 1020 (1986); Simpson v. Allstate Ins. Co., 350 Pa.Super. 239, 504 A.2d 335 (1986); Miller Oral Surgery, Inc. v. Dinello, 342 Pa.Super. 577, 493 A.2d 741 (1985); Brunetti v. Southeastern Pennsylvania Transportation Authority, 329 Pa.Super. 477, 478 A.2d 889 (1984).

In addition, we note that Rule 4009(a)(2) clearly contemplates that where there is no response to a request for production of documents, the appropriate motion for the requesting party to make is a motion for an order under Rule 4019(a) to compel production. See Explanatory note to Rule 4009 — 1978 Civil Procedure Rules Committee. A hearing on the motion protects both parties. If the hearing court determines the reason for noncompliance is without merit, a court order compelling discovery “would serve as a warning that if there is future non-compliance, sanctions will be imposed.” Griffin, 355 Pa.Super. at 482, 513 A.2d at 1024.

We find that the delicate balancing of the importance of Dr. Roger’s testimony and the prejudice to appellee weighs in appellant’s favor. Given the circumstances and the severity of the sanction imposed in this case, we find that the trial court abused its discretion in precluding Dr. Roger’s testimony. Compare Kemp v. Qualls, 326 Pa.Super. 319, 473 A.2d 1369 (1984) (trial court’s decision permitting expert to testify was upheld where, even though there had been late disclosure of expert witness’ identity, appellant had thirteen days to investigate expert and no real prejudice was shown); Nowosielski v. Kryzosiak, 280 Pa. Super. 243, 421 A.2d 703 (1980) (defendant’s failure to include copy of physician’s report as required by local rule did not warrant exclusion of physician’s testimony in view of lack of prejudice).

Accordingly, we reverse the trial court’s order denying appellant’s motion to remove the non-suit entered in appellee’s favor. We also reverse the court’s order imposing sanctions, and remand for a new trial.

Orders reversed. Case remanded. Jurisdiction is relinquished.