author: SUBERS, J.,

text:
    Mullins v. Montgomery Hospital

      C.P. of Montgomery County,
    no. 91-11129.

      Turrey Kepler, for plaintiffs.

      John Warner, for defendants.
    July 1, 1998
   SUBERS, J.,

This is an appeal from this court’s order entered on March 31, 1998 granting the defendants’ motion for judgment of non pros.

PROCEDURAL HISTORY

Christopher Mullins, David Godshalh, Patrick O’ Connor, John Seader and Armand Trecroce, plaintiffs, instituted this negligence action by filing a writ of summons on June 7, 1991. Subsequently, plaintiffs filed a complaint alleging that Montgomery Hospital, Arthur C. Hayes M.D. and Javier Reluz M.D., defendants, were negligent by failing to notify plaintiffs’ employer and the appropriate state agency that the plaintiffs’ coworker, Verna Campbell, was diagnosed at Montgomery Hospital on June 26, 1989 as having hepatitis. As a result, several of her co-workers, including the plaintiffs, contracted the infection. There was a lack of docket activity from May 1994 until May 1996 and as a result a notice to terminate for lack of docket activity for two years was sent to the plaintiffs, who then filed an active status certificate. On August 5, 1996, the defendants filed a motion for judgment of non pros. On April 3, 1997, following oral argument and review of the memorandum of law, this court entered an order granting the defendants’ motion for judgment of non pros. On May 1, 1997, the plaintiffs filed a notice of appeal which was subsequently withdrawn when plaintiffs realized the proper method to challenge a judgment of non pros is by a petition to open. This court filed an opinion expressing its reasons for granting the judgment of non pros on June 26, 1997.

The plaintiffs filed a petition to open the judgment of non pros on June 20, 1997. A response was filed by the defendants on July 25, 1997. On March 31, 1998, this court entered an order denying the plaintiffs’ petition to open the judgment of non pros. On April 9, 1998, plaintiffs filed a petition for reconsideration of the March 31,1998 order because of a recent decision, Jacobs v. Halloran, no. 18 E.D. appeal docket, 1997 (Pa. April 2, 1998), which held that the two-year presumption of prejudice must be abandoned and the delay must cause actual prejudice. Defendants filed a response to plaintiffs’ petition for reconsideration on May 4,1998 asserting actual prejudice as a result of the plaintiffs’ delay in prosecuting the case. A hearing was scheduled on plaintiffs’ petition for reconsideration on May 13, 1998. On April 29, 1998, the plaintiffs filed a notice of appeal from this court’s order denying the petition to open.

DISCUSSION

The plaintiffs raised 10 issues in their concise statement of matters complained of on appeal: (1) the trial court erred in granting the defendants’ motion for judgment of non pros because there was substantive docket activity in this case consisting of plaintiffs’ filing of an active status certification on June 12, 1996 coupled with forwarding of a trial praecipe to defendants’ counsel on July 22, 1996; (2) the trial court erred in granting the defendants’ motion for judgment of non pros because the defendants filed their motion for non pros after refusing to sign the trial praecipe; (3) the trial court erred in granting the defendants’ motion for judgment of non pros because defendants failed to prove actual prejudice; (4) the trial court erred in granting the defendants’ motion for judgment of non pros because the deposition of Robin A. Ryan indicated that there was no actual prejudice suffered by any of the defendants as a result of the delay; (5) the trial court erred in granting the defendants’ motion for judgment of non pros because defendants came to court with unclean hands in that the motion for judgment of non pros was only filed after defendants’ counsel refused to sign a trial praecipe; (6) the trial court erred in granting the defendants’ motion for judgment of non pros because plaintiffs indicated their willingness to proceed to trial by attemfiing to file a trial praecipe; (7) the trial court erred in granting the defendants’ motion for judgment of non pros because defendants did not file their motion for judgment of non pros until after they were requested to sign a trial praecipe; (8) the trial court erred in granting defendants’ motion for judgment of non pros in view of the decision in Jacobs v. Halloran, no. 18 E.D. appeal docket, 1997 (Pa. April 2, 1998); (9) the trial court erred in refusing to hear plaintiffs’ petition for reconsideration in view of the decision in Jacobs v. Halloran, no. 18 E.D. appeal docket, 1997 (Pa. April 2, 1998); (10) the trial court erred in refusing to grant plaintiffs’ petition for reconsideration and to fully develop a record pertaining to the issue of prejudice. The first seven issues raised by the plaintiffs were discussed in this court’s opinion dated June 25, 1997 and the analysis will not be repeated here. The only issue that still needs to be addressed is whether the decision in Jacobs v. Halloran, no. 18 E.D. appeal docket, 1997 (Pa. April 2, 1998) changes this court’s decision to grant the judgment for non pros. The decision in Jacobs abandoned the presumption of prejudice first enunciated in Penn Piping Inc. v. Insurance Company of North America, 529 Pa. 350, 603 A.2d 1006 (1992).

The decision in Jacobs does not alter this court’s decision in that this court finds the defendants showed actual prejudice. In the defendants’ petition for non pros, the defendants aver that the plaintiffs’ failure to prosecute this case has caused them prejudice. Further, prejudice was established at the deposition of Robin A. Ryan, the director of quality management for Montgomery Hospital, taken on November 15, 1996. In his deposition, Mr. Ryan testified that the defendants suffered prejudice as a result of the plaintiffs’ failure to prosecute this action with reasonable promptitude. Mr. Ryan testified as follows:

“Q. Okay. Can you tell me what prejudice the hospital has suffered as a result of a two-year delay?
“A. I think the biggest problem is, A, which people are still going to be around here to be able to speak to the issues and, B, what memory they can possibly have seven years later about such a relatively, uhm, small issue. It’s not like a bomb blew up in somebody’s room that everybody would remember. They would be my two biggest concerns.” (Deposition of Robin Ryan— p. 14.)

In addition, Mr. Ryan testified that some of the people who performed the lab studies on Verna Campbell are no longer at the hospital. (Deposition of Robin Ryan— pp. 20-21.) The testimony of Mr. Ryan demonstrates actual prejudice to the defendants in that witnesses who were involved in the medical care of plaintiffs’ coworker, Vema Campbell, are no longer working at the hospital. In addition, the alleged negligent care of Vema Campbell took place on June 26, 1989. It is now nine years later, which will greatly affect the ability of hospital personnel to recollect the treatment which was given to Ms. Campbell.

The court in Jacobs recognized that defendants may be prejudiced by undue delays in litigation in that memories fade, witnesses disappear and documents become lost or are destroyed. The court stated that it is unnecessary to presume prejudice because the defendant is free to present evidence of actual prejudice. The determination of whether the defendants suffered actual prejudice is to be made by the trial court and will not be disturbed absent an abuse of discretion. Prejudice has been defined as “any substantial diminution of a party’s ability to properly present its case at trial.” Jacobs at p. 10. Here, the court concluded that the defendant presented evidence of actual prejudice in the deposition of Mr. Ryan.

CONCLUSION

For the foregoing reasons, this court’s order entered on March 31, 1998 denying the plaintiffs’ petition to open judgment was proper and should be affirmed.

      . The appeal was filed prior to a decision on the petition for reconsideration. For the purpose of this appeal, the petition for reconsideration is deemed denied.

      . Plaintiffs’ appeal was filed before the court had an opportunity to hear the petition for reconsideration or schedule a hearing; therefore, the court no longer had jurisdiction to hear plaintiffs’ petition for reconsideration.


source: Caselaw Access Project

author: STENGEL, J.,

license: Public Domain

text:
    Mantia v. Northern Insurance Co. of New York

      C.P. of Lancaster County,
    no. 3849-1992.

      William E. Haggerty and Joseph F. Roda, for plaintiff.

      Bruce R. Morrison, for defendants.
    April 27, 1998
   STENGEL, J.,

The court has been asked to determine the proper statute of limitations to apply to an action for bad faith. The cause of action asserted by Mr. Mantia against defendants is based on 42 Pa.C.S. §8371, which provides:

“In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:
“(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3 percent.
“(2) Award punitive damages against the insurer.
“(3) Assess court costs and attorney fees against the insurer.”

The bad faith statute itself does not provide a statute of limitations. As of this writing, no state court in Pennsylvania has addressed the issue of the applicable statute of limitations.

Defendants contend that an action for bad faith under section 8371 sounds in tort and, thus, would be subject to a two-year statute of limitations under 42 Pa.C.S. §5524(7). Plaintiff argues that 42 Pa.C.S. §5527 applies to an action under §8371 and that the applicable period of limitations for such an action is six years.

There are, however, three cases from the United States District Court for the Eastern District of Pennsylvania which have addressed this very issue. In Nelson v. State Farm Mutual Automobile Insurance Co., C.A. no. 97-4653 (E.D. Pa. December 12, 1997), the federal court predicted that the Supreme Court of Pennsylvania would conclude that an action under section 8371 sounds in tort, and thus would be subject to a two-year statute of limitations under section 5524(7). Contrary to this position, two other judges have predicted that the Supreme Court would find that “an action under [section] 8371 is so steeped in both contract and tort law that the six-year statute of limitations should apply.” Nelson, slip op. at 6, citing Woody v. State Farm Fire and Casualty Co., 965 F. Supp. 691 (E.D. Pa. 1997), and Miller v. The Cincinnati Insurance Co., C.A. no. 97-1223 (E.D. Pa. July 9, 1997).

Defendants contend that section 8371 established a “new tort” to provide a remedy for insureds whose benefits are denied without good reason or explanation. Defendants’ position very closely mirrors the view advanced in Nelson, supra. Nelson cites essentially three reasons in support of using the two-year limitation period. Considered individually or cumulatively, these reasons do not convince me that an action under section 8371 sounds exclusively in tort.

The first reason given in Nelson is that “the history of ‘bad faith’ ” as a cause of action in Pennsylvania makes recognition of a “new tort” consistent and expected. In terms of Pennsylvania decisional law, Nelson primarily relies on D’Ambrosio v. Pennsylvania National Mutual Casualty Insurance Co., 494 Pa. 501, 431 A.2d 966 (1981), for the conclusion that first-party bad faith must be viewed as a tort. Actually, the court in D’Ambrosio held exactly the opposite. The Supreme Court held that the plaintiff could not bring an action in tort against the insurer because the facts alleged did not state a cause of action in tort. D’Ambrosio, 494 Pa. at 510, 431 A.2d at 971.

While the Pennsylvania Supreme Court recognized that California had been the first state to create this “new tort” in Gruenberg v. Aetna Insurance Co., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973) (en banc), the court declined to follow California’s lead in creating a new common-law cause of action for bad faith. Noting that California courts have been criticized for creating this “new tort,” the D ’Ambrosio court went on to quote one critic of the Gruenberg decision:

“The California courts have created this ‘new tort’ in an obvious attempt to afford more protection to insureds. However, it has not really been established that there is a need of this additional protection. . . . State insurance departments are intended to serve the public and handle complaints from insureds as to insurer practices on a regular basis. Likewise, state legislatures are capable of prohibiting what are considered to be unfair claims handling practices and of imposing penalties for violations.” D’Ambrosio, 494 Pa. at 507-508, 431 A.2d at 970, quoting Kircher, Insurer’s Mistaken Judgment — A New Tort?, 59 Marq.L.Rev. 775, 786 (1976). In an expression of agreement with this comment, the Supreme Court held:

“Surely it is for the legislature to announce and implement the Commonwealth’s public policy governing the regulation of insurance carriers. In our view, it is equally for the legislature to determine whether sanctions beyond those created under the [Unfair Insurance Practices] Act [40 P.S. §1171 et seq.] are required to deter conduct which is less than scrupulous.” D’Ambrosio, 494 Pa. at 508, 431 A.2d at 970.

Nelson notes that, while rejecting the creation of a new common-law cause of action for bad faith, the Pennsylvania Supreme Court in D’Ambrosio referenced three other state Supreme Court cases which recognized a common-law cause of action for bad faith sounding in tort: Bibeault v. Hanover Insurance Co., 417 A.2d 313 (R.1.1980); Anderson v. Continental Insurance Co., 85 Wis.2d 675, 271 N.W.2d 368 (1978), and Gruenberg, supra. The Supreme Court cited Gruenberg because “[i]n arguing for the reinstatement of his count in trespass, appellant [D’ Ambrosio] would have this court adopt the position of the Supreme Court of California which, in Gruenberg,” held that “bad faith” conduct may give rise to a cause of action in tort. D’Ambrosio, 494 Pa. at 505, 431 A.2d at 968.

Moreover, the D Ambrosio court noted that, in asking the court to recognize a new cause of action in tort for bad faith conduct, the plaintiff provided no factual support for the suggested cause of action and referred to Bibeault, supra, and Anderson, supra, in this way:

“[E]ven those jurisdictions which have recognized a cause of action for bad faith conduct have cautioned that ‘[i]f the claim is “fairly debatable,” no liability in tort will arise,’ Bibeault [supra] and that ‘a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and the defendant’s knowledge or reckless disregard of the lack of a reasonable basis for denying the claim. ’ Anderson [supra].”D ’Ambrosio, 494 Pa. at 510, 431 A.2d at 970.

These references by the Pennsylvania Supreme Court to Gruenberg, Bibeault and Anderson do not imply support for the creation of a “new tort” of first-party bad faith. If anything, the citations to these other courts demonstrate a lack of support for the creation of such a “new tort.”

Further, the comment by Christopher Hasson, The 1990 Pennsylvania Auto Insurance Law: An Analysis of “Bad Faith” and the “Limited Tort Option,” 29 Duq.L.Rev. 619, 630-31 (1991), cited in Nelson states:

“Taking yet another approach [to Gruenberg/Anderson], the Supreme Court of Pennsylvania explicitly denied the existence of the tort of first-party ‘bad faith’ in D’Ambrosio v. Pennsylvania National Mutual Casualty Insurance Company. In so doing, the D ’Ambrosio court rejected the Gruenberg decision and the tort created by its holding.” Vol. 29 at 629. (footnotes omitted)

Thus, the Gruenberg decision was clearly rejected by the D’Ambrosio court which refused to create the new tort of first-party “bad faith.” The “tort vs. contract” question was not before the Supreme Court of Pennsylvania, and the court did not, as Nelson infers, hold that if an action for insurer bad faith did exist, that action would have to be a tort.

Included in the Nelson court’s “history of ‘bad faith’” is a discussion of the legislation that followed the 1981 D’Ambrosio opinion. Nelson suggests, through the repeated use of the word “invitation,” that the Supreme Court in D’Ambrosio wanted the Pennsylvania Legislature to create a statutory cause of action for bad faith conduct in the handling of insurance polices. The legislature did enact such a statute in 1990 with the passage of section 8371. Indeed, federal courts and commentators have concluded that the passage of section 8371 was in response to the D’Ambrosio opinion. See slip op. at 11-12 and cases and comments cited therein. However, it does not follow that the legislature, in enacting the statute nearly 10 years later, intended to create a “new tort” as the California courts had done simply because Gruenberg was discussed in D Ambrosio. The Pennsylvania Supreme Court cited the California decision in Gruenberg because Mr. D’Ambrosio argued that the Supreme Court should adopt the position of the Supreme Court of California in Gruenberg. Moreover, the Supreme Court stated its decision in D Ambrosio in terms of “tort” law because the plaintiff had styled his claim as an action in tort.

Based upon this legislative and case law “history of ‘bad faith,’ ” the Nelson court concluded:

“[W]e believe that the Pennsylvania Supreme Court in D Ambrosio contemplated the creation of a tortious cause of action for bad faith, but explicitly left the creation of such an action to the discretion of the General Assembly. There is little doubt that §8371 owes its existence to D Ambrosio’s invitation.” Slip op. at 12.

We do not believe that the legal treatises cited by Nelson support the contention that the D Ambrosio court “contemplated the creation of a tortious cause of action for bad faith,” and that its opinion served as an “invitation” to the legislature to enact such a statutory cause of action.

Christopher Hasson in his comment, The 1990 Pennsylvania Auto Insurance Law: An Analysis of “Bad Faith” and the “Limited Tort Option,” supra writes:

“The D Ambrosio court . . . [held] there was no need to construct a first-party ‘bad faith’ tort. The court stated that such an action was unnecessary because the ‘legislature has already made dramatic, sweeping efforts to curb the bad faith conduct.’ ” 29 Duq.L.Rev. at 630. (footnote omitted)

These “dramatic, sweeping efforts” are contained in the Unfair Insurance Practices Act (“UIPA”). Joseph Decker in his article, Insurer Liability Under Pennsylvania’s Bad Faith Statute, 65 Pa.B.Ass’n.Q. no. 2 (April 1994), states:

“Although the [D’Ambrosio] court acknowledged the seriousness of bad faith conduct by insurers, it held that the provisions in the Pennsylvania Unfair Insurance Practices Act were sufficient to curb such conduct. The court stated: ‘There is no evidence to suggest, and we have no reason to believe, that the system of sanctions established under the Unfair Insurance Practices Act must be supplemented by a judicially created cause of action. ’ The court stated that the Pennsylvania Legislature should ‘determine whether sanctions beyond those created under the Act are required to deter conduct which is less than scrupulous.’ ” Id. at 47-48. (emphasis added)

The Supreme Court in D’Ambrosio clearly did not believe that the creation of a new tort was necessary to supplement the UIPA. Therefore, there was no “invitation” to the legislature.

The second reason given by the Nelson court is that recognition of the “new tort” is justified on the basis of “the nature of a bad faith cause of action.” The Nelson court states unequivocally that section 8371 is not exclusively contract based because the award of punitive damages is one of section 8371 ’s primary remedies. Slip op. at 4. It is well settled in Pennsylvania that punitive damages are not recoverable in an action for breach of contract. See AM/PM Franchise Assoc. v. Atlantic Richfield, 526 Pa. 110, 126, 584 A.2d 915, 927 (1990); Thorsen v. Iron and Glass Bank, 328 Pa. Super. 135, 143, 476 A.2d 928, 932 (1984). Nelson posits that the possibility of punitive damages for bad faith takes the cause of action out of the concept of a contract claim.

However, the recent decision of the Third Circuit Court of Appeals in Polselli v. Nationwide, 126 F.3d 524 (3rd Cir. 1997), highlights the “contractual” characteristics of a bad faith claim:

“[W]e conclude that since an insurer’s duty of good faith toward an insured is implicit in every insurance policy, an action to enforce that duty must necessarily ‘arise under’ that policy. There is no common law private remedy for bad faith conduct, but the Pennsylvania Supreme Court has long recognized that an insurer must act with the ‘utmost’ good faith toward its insured. In Romano v. Nationwide Mutual Fire Insurance Co., [435 Pa. Super. 545,] 646 A.2d 1228 (1994), the court concluded that an insurer’s duty of good faith exists because of the special relationship between an insurer and its insured and the very nature of the insurance contract. The insurer’s duty of good faith, therefore, is contractual and arises because the insurance company assumes a fiduciary status by virtue of the policy’s provisions which give the insurer the right to handle claims and control settlement.” Polselli, 126 F.3d at 530. (emphasis added) See also, Gray v. Nationwide Mutual Insurance Co., 422 Pa. 500, 223 A.2d 8 (1966).

Nelson does acknowledge that “an action under §8371 is factually linked to the underlying contractual duty of good faith and fair dealing upon which the insured can sue the insurer for breach of contract, . . . Slip op. at 13. Rather than recognizing that the bad faith claim contains elements of both tort and contract, Nelson insists on defining the cause of action as exclusively one or the other. The Nelson court concluded that “[b]ad faith is more akin to the former than to the latter.” Slip op. at 15. The Nelson opinion goes on to say:

“To determine whether a claim of bad faith has merit, one must look at the behavior of the insurer toward the insured and measure its reasonableness. See Klinger v. State Farm Mutual Automobile Insurance Co., 115 F.3d 230, 233 (3d Cir. 1997). . . . Such an inquiry into the reasonableness of the insurer’s behavior, to see whether it is perhaps more than mere negligence or bad judgment, . . . bears the classic earmarks of the law of torts.” Slip op. at 13-14 (citing W. Page Keeton et al., Prosser and Keeton on Torts Section 1, at 6 (5th ed. 1984)). Nelson concludes:

“[Tjorts concerns itself with standards of conduct that society imposes. Contracts concerns itself with promises the parties themselves make and exchange. Bad faith is more akin to the former than to the latter because it is precisely such an exogenous standard.” Slip op. at 15.
In its analysis of the nature of a bad faith cause of action, Nelson engages in a gratuitous “balancing” of the tort and contract characteristics of a bad faith action, which is not authorized by section 5527.
The question presented is not whether a bad faith action looks more like a tort action than a contract action. The question is whether a bad faith action “is subject to another limitation [other than section 5527].”

Section 5527 provides in pertinent part:

“Any civil action or proceeding which is neither subject to another limitation specified in this subchapter nor excluded from the application of a period of limitation by section 5531 (relating to no limitation) must be commenced within six years.” 42 Pa.C.S. §5527.

Nothing in the bad faith statutory language “subjects” the bad faith claim to a specific statute of limitations. The cause of action itself has elements of contract and of tort. Thus, as Judge Brody observed in Woody, “no explicit statute of limitations applies to a statute that can sound in many different causes of action each governed by a different limitations period.” 965 F. Supp. at 695. Where no specific statute of limitations applies, section 5527 controls. Therefore, such an action must be subject to the “catchall” statute of limitations under section 5527.

The final reason given by Nelson in support of the “new tort” theory is “the approaches taken by the heavy majority of other state supreme courts.” Nelson notes that “[a]t least 29 states which recognize a cause of action for bad faith have chosen to characterize the cause of action as a tort,” citing Douglas R. Richmond, The Two-Way Street of Insurance Good Faith: Under Construction, But Not Yet Open, 28 Loy.U.Chi.L.J. 95, 107 n.74 (1996). In fact, Mr. Richmond identifies 24 state supreme courts and 5 lower courts which have “apparently recognized the bad faith breach of a first-party insurance contract as a common-law tort.” Id. Nelson relies upon this “lopsided balance of state authority” for predicting that the Pennsylvania Supreme Court would also find that an action for bad faith under section 8371 is a tort. Slip op. at 17. Perhaps equally significant is the fact that 22 jurisdictions have either not found a cause of action for bad faith to sound exclusively in tort, have refused to recognize first-party bad faith in the first instance, or have not addressed the issue. Perhaps that is why the Woody court did not address the issue of how bad faith actions are characterized in other jurisdictions, an “omission” soundly criticized in Nelson.

As noted by Mr. Richmond, “Courts have reluctantly embraced first-party bad faith as an independent tort.” Douglas R. Richmond, The Two-Way Street of Insurance Good Faith: Under Construction, But Not Yet Open, supra, 28 Loy.U.Chi.L.J. at 107. Several state supreme courts have held that a cause of action for bad faith sounds exclusively in contract. See for example, Tackett v. State Farm Fire & Casualty Insurance Co., 653 A.2d 254, 264 (Del. 1995) (first-party bad faith is breach of contract); Pickett v. Lloyd’s, supra (first-party bad faith cause of action sounds exclusively in contract); Beck v. Farmers Ins. Exch., 701 P.2d 795, 798-800 (Utah 1985) (bad faith in the first-party context is a contract claim, albeit with expanded consequential damages); Fleming v. Allstate Insurance Co., supra (same). See also, A & E Supply Co. Inc. v. Nationwide Mutual Fire Insurance Co., 798 F.2d 669 (4th Cir. 1986), cert. denied, 479 U.S. 1091, 107 S.Ct. 1302, 94 L.Ed.2d 158 (1987) (Virginia law does not recognize the tort).

Other supreme courts have adopted a hybrid contract/tort theory. In Dailey v. Integon General Insurance Co., 331 S.E.2d 148 (N.C. 1985), for example, the North Carolina Supreme Court has created a tort for first-party bad faith situations but has limited its effect so as not to mirror the Gruenberg and Anderson tort. The tort claim, which had to accompany a contract claim, only allowed punitive damages, while the contract action provided compensatory damages.

Moreover, there are several states that have refused to recognize first-party bad faith altogether. See for example, Yuen v. American Republic Insurance Co., 786 F. Supp. 531, 533 (D.Md. 1992) (no first-party bad faith in Maryland); Taylor v. Blue Cross/Blue Shield of Michigan, 517 N.W.2d 864, 871 (Mich.Ct.App. 1995) (refusing to recognize first-party bad faith); and Washington v. Government Employees Insurance Co., 769 F. Supp. 383, 386-87 (D.D.C. 1991) (District of Columbia does not recognize bad faith in either third-party or first-party context); Marquis v. Farm Family Mutual Insurance Co., 628 A.2d 644, 652 (Me. 1993) (Maine does not recognize either third-party or first-party bad faith, instead allowing expanded general and consequential damages for an insurer’s breach of its contractual obligations).

Finally, there are some states, such as Pennsylvania, that have no common-law bad faith, but rather have a statutorily created cause of action. See for example, Mohr v. Dix Mutual County Fire Insurance Co., 143 Ill.App.3d 989, 97 Ill.Dec. 831, 493 N.E.2d 638 (1986); Duncan v. Andrew County Mutual Insurance Co., 665 S.W.2d 13 (Mo.App. 1983); Leonard v. Firemen’s Insurance Co. of Newark, N.J., 100 Ga.App. 434, 111 S.E.2d 773 (1959).

For these reasons, the discussion in Nelson does not convince me that an action under section 8371 sounds exclusively in tort and, thus, would be subject to a two-year statute of limitations under section 5524(7).

The Nelson court is critical of Judge Brody’s analysis in Woody because the decision is based mainly upon the Black’s Law Dictionary definition of “bad faith” which had been adopted by earlier decisions of the Third Circuit Court of Appeals and the Pennsylvania Superior Court. See Polselli v. Nationwide Insurance Co., 23 F.3d 747, 751 (3d Cir. 1994); Romano v. Nationwide Mutual Fire Insurance Co., 435 Pa. Super. 545, 646 A.2d 1228 (1994). In the absence of any statutory guidance within section 8371 itself, the courts have relied upon the “peculiar and universally acknowledged meaning” that the term “bad faith” has acquired in the insurance context:

“ ‘Bad faith’ on [the] part of [an] insurer is any frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith.” Woody v. State Farm, 695 F. Supp. at 693, citing Polselli, 23 F.3d at 751 (citing Black’s Law Dictionary at 139 (6th ed. 1990)).

It appears from this definition and from Judge Brody’s analysis that a bad faith claim can sound in either tort or contract. The fact that bad faith can be the result of fraudulent conduct would suggest a tort analysis. The fact that the definition of “bad faith” refers to the duty of good faith and fair dealing incorporates contractual concepts. Judge Brody concludes that the term “bad faith,” as interpreted under existing Pennsylvania law, encompasses actions by insureds that sound in both tort and contract. I agree with this analysis. Because the bad faith statute is sui generis, it is neither tort nor contract but embodies elements of each. That is, one bad faith claim may involve fraudulent conduct and be very similar to a tort action. Another may involve the violation of the duty of good faith and fair dealing and sound in contract. Therefore, the “catchall” statute of limitations should apply.

Woody relies upon the Pennsylvania Superior Court decision in Gabriel v. O’Hara, 368 Pa. Super. 383, 534 A.2d 488 (1987), where the court considered the applicable statute of limitations for actions brought under the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 Pa.C.S. §201-1 et seq. In Gabriel, the court noted that there was no specific statute of limitations provided under the UTPCPL, which it described as a sui generis statute. The Gabriel court further noted that because UTPCPL claims can involve fraudulent conduct as well as breach of contract, two different statute of limitations periods could apply, depending on the nature of the conduct alleged. The Gabriel court noted the need for consistency in cases brought under the UTPCPL and held that the six-year (“catchall”) limitation period under 42 Pa.C.S. §5527(6) governed actions under the UTPCPL. 368 Pa. Super, at 395, 534 A.2d at 494.

A similar problem exists with suits under section 8371. While some could involve allegations of tortious or fraudulent conduct and others could involve allegations of breach of contract, conceivably different statutes of limitations could apply. A need for consistency in bad faith suits is as compelling as the need for consistency under the UTPCPL. This court, therefore, agrees with Judge Brody in Woody that, because the Pennsylvania Legislature has provided no explicit limitations period for bad faith claims brought under 42 Pa.C.S. §8371, these claims should be subject to the six-year catchall limitations period.

Furthermore, the Pennsylvania Supreme Court recognized the sui generis nature of a claim for bad faith in D’Ambrosio by holding that there was no common-law remedy for insurer bad faith. If, as the Nelson court held, the bad faith conduct of an insurer toward its insured was analogous to a common-law tort, then the Supreme Court would have held that the plaintiff could bring an action in tort against the insurer. Indeed, if insurer bad faith is not sui generis, there would be no need for a statute because an insured would be able to sue the insurer under a common-law cause of action.

Like the court in Woody, the Eastern District Court predicted in Cincinnati Insurance that the Pennsylvania Supreme Court would conclude that an action under section 8371 is so steeped in both contract and tort law that the six-year statute of limitations should apply. In reaching its conclusion, the court in Cincinnati Insurance relied heavily upon Woody’s logic, as well as the recent decision of the Third Circuit Court of Appeals in Klinger v. State Farm Mutual Automobile Insurance Co., 115 F.3d 230 (3rd Cir. 1997). In Klinger, the Third Circuit stated:

“The obvious design of [section 8371] is, first, to place [the insureds] in the same economic position they would have been in had the insurer performed as it promised, by awarding attorney’s fees as additional damages; and second, to punish [the insurer] for giving primacy to its own self-interest over that of the [insureds] by awarding punitive damages.” Id. at 236.

Thus, Cincinnati Insurance concluded that section 8371 is “primarily compensatory” in nature and, therefore, found that the “catchall” provision of section 5527 was “the most closely analogous limitations provision.” C.A. no. 97-1223 at n.l.

We agree with the analysis set forth in Woody and Cincinnati Insurance and conclude that the six-year statute of limitations set forth in section 5527 applies to a bad faith action under section 8371.

Even if the Nelson court is correct in its prediction that the Pennsylvania Supreme Court would define a cause of action pursuant to section 8371 as one sounding solely in tort and, therefore, subject to a two-year statute of limitations under section 5524(7), plaintiff’s claims are not time-barred. Plaintiff filed a motion to amend his complaint to add a bad faith claim in December 1993. Defendants requested an extension of time to respond to the motion and entered into settlement negotiations with plaintiff. The motion to amend was eventually resolved by the court on December 6, 1996, and plaintiff was granted leave to amend his complaint to add a bad faith claim. In response, defendants raised the defense of the statute of limitations.

When a defendant’s conduct is continuing in nature, the statute of limitations is tolled while that conduct continues. Dellape v. Murray, 651 A.2d 638, 640 (Pa. Commw. 1994). Under plaintiff’s no-fault insurance policy with defendant, defendant had a continuing obligation to pay plaintiff’s medical bills related to the accident as those bills were received. Every time a bill was submitted by plaintiff, he was making a claim. Every time payment was refused by defendant, it acted in bad faith. Plaintiff continued to submit his medical bills to defendant until June 1996. Defendant continued to deny payment of those bills until June 1996 and has refused to pay interest on overdue bills to the present date. Thus, the statute of limitations on plaintiff’s bad faith claim did not begin to run until at least June 1996, which was within two years of the commencement of this bad faith action, that is, December 1996.

Because the bad faith conduct which forms the basis for plaintiff’s claim is an ongoing phenomenon rather than a discreet act, and is alleged to have entered into the limitations period, we find the complaint pleads a continuing bad faith sufficient to toll the statute. Any bad faith conduct alleged to have occurred before December 1994 is not time-barred, in the event that our appellate courts find that the two-year statute applies.

Accordingly, we enter the following:

ORDER

And now, April 27, 1998, upon consideration of defendants’ motion for judgment on the pleadings, the briefs filed by the parties, and oral argument of counsel, it is hereby ordered that said motion is denied.

      .42 Pa.C.S. §5524(7) provides for a two-year statute of limitations for actions involving: “[a]ny other action or proceeding to recover damages for injury to person or property which is founded on negligent, intentional, or otherwise tortious conduct or any other action or proceeding sounding in trespass, including deceit or fraud, except an action or proceeding subject to another limitation specified in this subchapter.”

      . 42 Pa.C.S. §5527 provides in pertinent part:
      “Any civil action or proceeding which is neither subject to another limitation specified in this subchapter nor excluded from the application of a period of limitation by section 5531 (relating to no limitation) must be commenced within six years.”

      . InD’Ambrosio, theplaintiff/insured, Anthony D’Ambrosio, filed a two-count complaint, one in assumpsit and the second in trespass. In the assumpsit count, the insured averred that his motor boat, which was covered by the defendant insurance company, was damaged in a storm. The plaintiff claimed the insurer breached the insurance contract by not honoring the claim relating to the damages to the plaintiff’s boat. In the plaintiff’s count in trespass, the plaintiff alleged that the insurer “summarily denied” the plaintiff’s claim for the damages to his boat, stating only that the claim was “improper.” In addition, the insurer allegedly refused to disclose to the insured what facts or information it relied upon for its denial of coverage. Based on this alleged “bad faith” conduct, the plaintiff sought punitive damages and damages for emotional distress, in addition to compensatory damages for the property damage claim. Id. at 502, 431 A.2d at 967. The trial court dismissed the insured’s claim for bad faith on the insurer’s demurrer, and a divided Superior Court affirmed.

      . There are, however, several states that have adopted a bad faith cause of action as contractual and have allowed a broader range of damages which may include punitives. See for example, Pickett v. Lloyd’s, 621 A.2d 445, 452 (NJ. 1993), and Fleming v. Allstate Insurance Co., 106 A.D.2d 426, 482 N.Y.S.2d 519 (1984).

      . It is interesting to note than in DiSalvatore v. Aetna Casualty & Surety Co., 624 F. Supp. 541 (D.N J. 1986), a federal court predicted that the highest court in the state of New Jersey would conclude that a bad faith action sounds in tort. In fact, as acknowledged by Nelson, the Supreme Court of New Jersey has held just the opposite in Pickett v. Lloyd’s, supra. Slip op. at 15.

      . Mr. Decker states in his article, Insurer Liability Under Pennsylvania’s Bad Faith Statute, supra: “Numerous states, including Pennsylvania, rejected the idea of first-party bad faith, using various rationales to support their disagreement with the California Supreme Court’s holding in Gruenberg.” 65 Pa.B.Ass’n.Q. at 47.

      . Meaning, in plain words, “unique.”


author: WETTICK, J.,

text:
    In re Ieraci

      C.P. of Allegheny County,
    no. GD98-8445.

      David J. Watson, for petitioner.

      Tyler J. Smith, for respondent.
    September 15, 1998
   WETTICK, J.,

These proceedings at GD98-8445 were commenced by a May 20, 1998 filing of a petition for issuance of a subpoena. The petition contained the following allegations: Petitioner was injured during the scope and course of his employment as an ironworker with American Bridge Company. Counsel for petitioner is investigating potential third-party civil actions. In order to properly investigate petitioner’s claims, it is necessary for petitioner’s counsel to inspect the job file generated by or in the possession of American Bridge Company, including accident reports, witness statements, photographs, contract documents, correspondence, minutes of safety meetings, and any other materials relevant to the circumstances surrounding petitioner’s injury. American Bridge Company has refused petitioner’s request to inspect these materials and petitioner’s counsel is severely prejudiced by denial of access to the requested materials.

On May 21, 1998, petitioner obtained a court order from another judge of this court authorizing petitioner’s counsel to serve a subpoena on the custodian of records of American Bridge Company requesting production and/or inspection of the documents described in the petition. This order of court was obtained ex parte. Shortly thereafter, petitioner’s counsel obtained from the prothonotary, pursuant to Pa.R.C.P. 234.2, a subpoena to attend and testify in the form prescribed by Rule 234.6. The subpoena, which ordered the custodian of records of American Bridge to attend a June 30, 1998 deposition and to bring the documents described in the petition for issuance of a subpoena, was served pursuant to Rule 234.2(b).

American Bridge has filed a motion to quash the subpoena that is the subject of this opinion and order of court. It is the position of American Bridge Company that the subpoena must be quashed as a matter of law because a subpoena cannot be obtained unless an action or other proceeding is pending before the court.

Petitioner contends that he commenced an action or proceeding at GD98-8445 through the filing of the petition for issuance of a subpoena. Consequently, he was entitled to use a subpoena commanding the custodian of records of American Bridge Company to produce records at a deposition pursuant to the Rules of Civil Procedure governing depositions and discovery (Pa.R.C.P. 4001 et seq.). Petitioner cites Rule 4001 which provides that the rules of this chapter apply “to any civil action or proceeding at law or in equity” and Rule 234.1(b)(2) which permits a subpoena to be used to command a person to produce documents or things at the taking of a deposition “in an action or proceeding pending in the court.”

The difficulty with petitioner’s position is that a civil action or proceeding at law or in equity cannot be commenced through the filing of a petition for issuance of a subpoena. An action at law or in equity may be commenced only by filing with the prothonotary a praecipe for a writ of summons or a complaint. Pa.R.C.P. 1007, 1501.

Under the Pennsylvania Rules of Civil Procedures, discovery is not permitted until an action at law or in equity has been properly commenced. In Cole v. Wells, 406 Pa. 81, 177 A.2d 77 (1962), a common pleas court dismissed an action in equity seeking discovery from the executor of a decedent’s estate of the facts and circumstances having to do with the execution of a will offered for probate. The discovery was sought to garner information for a will contest. The Pennsylvania Supreme Court affirmed the dismissal of the complaint, stating that “discovery must not be allowed unless it is sought as a proceeding ancillary to a pending action and in the appropriate forum.” Id. at 91, 177 A.2d at 82.

In response to the plaintiff’s contention that he was entitled to obtain discovery through the commencement of an equity action upon a showing of a need for this information, the Supreme Court stated:

“To a suitor seeking discovery two methods are open: either under the Act of 1836, as extended, or under Rules 4001 et seq. of Pa.R.C.P. It is far from clear on this record which method appellant has chosen. . . . It is clear beyond doubt that the equitable power of a court of common pleas should not be exercised, under the Act of 1836, supra, in aid of discovery unless there is an action brought and pending. Absent such action brought and pending, discovery cannot be had. Pa.R.C.P. 4001(a) also makes evident that depositions can be taken only in connection with a pending action: ‘The rules of this chapter apply to any civil action or proceeding at law or in equity brought in or appealed to any court which is subject to these rules.’ (Emphasis supplied.)” Id. at 87-88, 77 A.2d at 79-80. (footnote and citations omitted)

Also see, Commonwealth v. Polak, 438 Pa. 67, 69, 263 A.2d 354, 356 (1970) (“The essence of a subpoena’s function is to aid the court in the resolution of litigation, so if there is no formal proceeding pending before the court there can be no legitimate reason to issue a subpoena.”); Commonwealth v. McEnany, 446 Pa. Super. 609, 620, 667 A.2d 1143, 1149 (1995) (citations omitted) (“Appellant correctly observes that a ‘prerequisite to the issuance of a subpoena [is] that there be some preexisting matter or cause pending before the court’”); and Cohen v. Pelagatti, 342 Pa. Super. 626, 632-33, 493 A.2d 767, 770 (1985) (“if there is no formal proceeding pending before the court[,] there can be no legitimate reason to issue a subpoena . . .[; t]he object of a subpoena ... is the production of evidence to be used . . . before the court[ — i]t is not the object of [a subpoena] to require the production of books and papers ... as a bill of discovery . . . .”). Also see, 6 Standard Pa. Practice 2d §34.6 at 337 (1994) (footnotes omitted) (“The discovery rules do not permit discovery in aid of contemplated litigation; there is no pre-action discovery.”).

For these reasons, I enter the following order of court quashing the subpoena served on American Bridge Company to produce records at a deposition pursuant to Pa.R.C.P. 4007.1:

ORDER

On September 15, 1998, it is hereby ordered that the subpoena served upon American Bridge Company to attend and testify is quashed.

      . This opinion considers only petitioner’s contention that the discovery which he seeks is permitted under the Rules of Civil Procedure.


author: WOOD, J.,

text:
    McCarthy v. Bainbridge

      C.P. of Chester County,
    no. 92-08969.

      William C. Archbold Jr., for plaintiffs.

      Mark T. Riley and Joan Orsini-Ford, for defendants.

      Lise Luborsky, for Pa. Property and Casualty Insurance Guaranty Assn.
    October 8, 1998
   WOOD, J.,

In this matter, I am called upon to decide whether or not a claimant, against the Pennsylvania Property and Casualty Insurance Guaranty Association, whose claim arises out of the insolvency of a medical malpractice insurer, must deduct from that claim amounts received from a life insurance company. I conclude that the claimant need not do so.

In 1991, plaintiff’s decedent allegedly received improper care at the hands of defendant physicians, and thereafter died. As a result of the death of plaintiff’s decedent, his family received $548,000 in life insurance.

In addition, the plaintiff’s family brought a wrongful death and survival action against defendants, and the matter was referred to PIC Insurance Group Inc. for defense. On January 19, the parties settled the case for $200,000. On January 21, PIC was declared insolvent, and a liquidator appointed. Under the terms of the relevant statutes, the claim was then assigned to the Pennsylvania Property and Casualty Insurance Guaranty Association, which we have all referred to in short as PIGA.

PIGA exists by the authority of a statute, P.L. 1005, no. 137, adopted December 12, 1994, to become effective in 60 days. This statute was an amendment to earlier statutes, and is set forth in 40 P.S. §991.1801 et seq. 40 P.S. §991.1817 reads as follows:

“Any person having a claim under an insurance policy shall be required to exhaust first his right under such policy. For purposes of this section, a claim under an insurance policy shall include a claim under any kind of insurance, whether it is a first party or third party claim, and shall include, without limitation, accident and health insurance, workers’ compensation, Blue Cross and Blue Shield and all other coverages except for policies of an insolvent insurer. Any amount payable on a covered claim under this Act shall be reduced by the amount of any recovery under any other insurance.”

PIGA claims that it is entitled, under the language quoted above, to offset the $584,000 of life insurance which the plaintiff family received against the $200,000, which it now claims, and that therefore no amount is due the family under the settlement which they achieved with PIC.

The statutory authority governing such claims is set forth in 40 P.S. §991.1801 through §1820. This statute replaces prior legislation which PIGA and the defendants appear to acknowledge did not allow a setoff for life insurance. Indeed, their position is that by rewriting section 17 to refer to “any kind of insurance,” the legislature intended to include life insurance among the appropriate setoffs. Plaintiffs respond by pointing out that at the time the amendatory statute was adopted, members of our State House of Representatives were assured that the changes in legislation affected other matters, and would not “make it more difficult for a customer to get a refund of his premium or get his claims paid.”

The legislation itself, among other things, sets up a Pennsylvania Property and Casualty Insurance Guaranty Association, and requires every “insurer” to join the association. “Insurer” is defined in section 1802 as “[a]ny insurance company, association or exchange which is licensed to write and is engaged in writing within the Commonwealth, on a direct basis, property and casualty insurance policies.” The entire statute appears to address the problems concerned with the insolvency of property and casualty insurance companies, and not with the subject of insurance generally.

The Statutory Construction Act, 1 Pa.C.S. §§1921 and 1922, requires that I interpret statutes so as to give effect to the intention of the legislature, and avoid absurd results. I am persuaded from reading the statute and its legislative history that the legislature did not intend for life insurance to be used as an offset against a casualty claim. When section 1817 gives a list of the kinds of insurance that qualify as “any kind of insurance,” it is a list of the types of insurance that are used to compensate for casualty loss. In a sense, I suppose life insurance is the ultimate casualty loss, but I see it as different: Everyone dies, but everyone does not have the kind of things happen which give rise to claims under accident and health insurance, workers’ compensation, and things of that sort.

Life insurance is a common form of insurance, and surely the legislature would have referred to it by name had they wanted to include it. The legislature did, for instance, in the definitions under section 1802, specifically exclude life insurance from the definition of a “property and casualty insurance policy.”

The Statutory Construction Act also tells me that I may not disregard the letter of a statute under pretext of pursuing its spirit. 1 Pa.C.S. § 1921(b). However, I am satisfied that a fair reading of the definitions section of the governing legislation and particularly the definitions of “insurer” and “property and casualty insurance policy,” make it clear that when the legislature said “any kind of insurance,” they meant to say any kind of property or casualty insurance.

ORDER

And now, October 8, 1998, I will grant the petition to enforce settlement agreement, and direct the respondents to complete the settlement agreement achieved between the parties and PIC Insurance in this case.


author: FEUD ALE, P.J.,

text:
    Slaby v. Nationwide Insurance

      C.P. of Northumberland County,
    no. CV-96-348.

      L. Ullman, for Nationwide Insurance.

      M. Welker, for Slaby.
    August 13, 1997
   FEUD ALE, P.J.,

The factual essence of this case is an insurance bad faith claim by plaintiff against defendant. On June 26, 1993, plaintiff was involved in a motor vehicle accident when Helen Henderson allegedly failed to stop at a stop sign and collided with plaintiff’s vehicle. Both plaintiff and Ms. Henderson were insured by defendant Nationwide. After the accident, plaintiff received medical treatment and sent the bills directly to defendant for payment under the first party provisions of her policy. In early 1994, defendant sought a peer review organization review of the reasonableness and necessity of plaintiff’s continued treatment. Plaintiff alleges that the PRO reports indicated that plaintiff’s treatment was medically necessary and that defendant still refused to pay. Defendant, apparently, has a different interpretation of the PRO reports.

Defendant filed the instant preliminary objections to plaintiff’s amended complaint. In reviewing preliminary objections, all facts that are well-pleaded, material, and relevant are considered as true. Additionally, the court may draw any reasonable inferences from those facts. In order to sustain a demurrer, it is essential that the face of the complaint indicates that its claims may not be sustained and that the law will not permit a recovery. If there is any doubt, the demurrer should be overruled. Mellon Bank N.A. v. Fabinyi, 437 Pa. Super. 559, 650 A.2d 895 (1994).

Through its preliminary objections, defendant argues that plaintiff is solely limited to the remedies provided in Pennsylvania’s Motor Vehicle Financial Responsibility Law, specifically, 75 Pa.C.S. §1797. Section 1797 of the MVFRL provides a mechanism to review the medical necessity of claims submitted to an insurer and applies, in certain instances, when an insured seeks first party benefits from their insurer. As we understand the process, when a dispute occurs over the medical necessity of an insured’s treatment, the insurer has two options. The insurer can either refuse to pay the claim outright or submit the claim to a PRO for review. If an insurer simply refuses to submit the claim to a PRO, an unsatisfied insured can proceed directly to court for redress. If the insurer submits a claim to the PRO, an unsatisfied insured can request reconsideration of the PRO determination or appeal to the court. 75 Pa.C.S. §1797; Terminato v. Pennsylvania National Insurance Co., 538 Pa. 60, 645 A.2d 1287 (1994); M.S. Hershey Medical Center v. State Farm Insurance, 21 D.&C.4th 62, 68 (Franklin County 1992) (although section 1797 does not expressly authorize an appeal to the court from a PRO determination, such an interpretation has been adopted based on due process grounds). Although only persuasive authority, it appears that the issue addressed in Hershey has not been specifically addressed by a higher court. However, Hershey’s holding still continues to be implied in this area of the law. See Terminato, supra.

Under the MVFRL, if the court determines that an insurer refused to pay for treatment that was medically necessary, the insurer must pay the amount of the claim “plus interest at 12 percent, as well as the costs of the challenges and all attorney fees.” 75 Pa.C.S. §1797(b)(6). If the insurer chose not to submit the claim to a PRO and in so doing its behavior is deemed to be “wanton,” the insured shall be subject to payment of treble damages. 75 Pa.C.S. § 1797(b)(4).

Plaintiff argues in the alternative that she is entitled to seek damages under the MVFRL and/or the more expansive damages provided in 42 Pa.C.S. §8371. Under section 8371, if a court determines that an insurer acted in bad faith, the court may:

“(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3 percent.
“(2) Award punitive damages against the insurer.
“(3) Assess court costs and attorney fees against the insurer.”

Defendant argues that section 1797 specifically and exclusively provides a remedy if plaintiff can substantiate her allegations. Defendant contends that section 1797 is the exception to a more general statutory remedy provided by section 8371. The legislature has provided the following guidance when a general and a specific statute both appear to be applicable to the same matter:

“Whenever a general provision in a statute shall be in conflict with a specific provision in the same or another statute, the two shall be construed, if possible, so that effect may be given to both. If the conflict between the two provisions is irreconcilable, the specific provisions shall prevail and shall be construed as an exception to the general provision, unless the general provision shall be enacted later and it shall be the manifest intention of the General Assembly that such general provision shall prevail.” 1 Pa.C.S. §1933.

In this case, however, we do not share defendant’s view and we are able to reconcile the MVFRL and 42 Pa.C.S. §8371. In reviewing case law concerning the co-application of these statutes, it appears that no higher court has addressed the specific issue presented before us. That particular issue is whether an insurer who is alleged to have misused the PRO process can be made to pay damages provided by section 8371. We find that public policy requires that the insurer can be held liable for damages under section 8371, including punitive damages, if they abuse the very process that was enacted to shield them.

Although it has no precedential value, Barnum v. State Farm Mutual Auto Insurance Co., 430 Pa. Super. 488, 635 A.2d 155 (1993), reversed and remanded without opinion, 539 Pa. 673,652 A.2d 1319 (1995), comes closest to addressing how the MVFRL and 42 Pa.C.S. §8371 are to be applied when both, arguably, appear to apply. In Bamum, Leroy Barnum was injured in an accident and submitted medical bills to be paid under his first party coverage with State Farm. State Farm questioned the necessity of Bamum’s medical bills and submitted them to a PRO. The PRO determined that some of Barnum’s medical treatment was unnecessary and State Farm refused to pay. Barnum then initiated a civil action to recover damages allowed under section 8371.

State Farm filed preliminary objections in the nature of a demurrer and argued that (1) Bamum failed to exhaust his statutory remedies because his did not request reconsideration of the PRO review and (2) that section 8371 was not applicable for a claim which arose under the MVFRL. In addressing the first issue, the Supreme Court, in Terminato v. Pennsylvania National Insurance Co., supra, held that the doctrine of exhaustion of administrative remedies does not apply to the PRO procedure. Shortly thereafter, in accord with Terminato, Bamum was reversed and remanded without opinion. In so doing, the Supreme Court provided no guidance concerning the Superior Court’s determination of the co-application of the MVFRL and section 8371, and the issue remains as to whether the Supreme Court would sustain or overrale the Superior Court’s determination.

The Superior Court in Bamum noted the following concerning the workability of the MVFRL:

“The peer review process provides a strong incentive for insurance carriers to route disputed claims through this alternate dispute resolution process. Where the insurer denies a claim without first obtaining a PRO evaluation, the claimant may immediately commence a court action. If the court finds in favor of the claimant, the insurer becomes liable, in addition to the amount of the claim, for counsel fees, costs, and interest at the rate of 12 percent. Moreover, if the court finds that the insurer acted wantonly in denying a claim, treble damages may be awarded. Conversely, if the insurer uses the peer review process, its potential liability is limited to the amount of the claim plus interest.” Id. at 493, 635 A.2d at 157.

We find implied in the last quoted sentence regarding limiting the insurer’s potential liability the requirement that the insurance company must properly use the peer review process as a prerequisite to gaining a benefit from lowered liability.

There is case law supporting the proposition that the Supreme Court of Pennsylvania would decide the co-application of MVFRL and section 8371 in the same manner as did the Superior Court, i.e., that the MVFRL provides the exclusive remedy. Gemini Physical Therapy v. State Farm Mutual Automobile Insurance Co., 40 F.3d 63 (3d Cir. 1994). In that, Gemini cites the Superior Court’s opinion in Bamum as persuasive authority, however, the Supreme Court’s reversal of Barnum may lead one to question the correctness of Gemini and its progeny as a predictor of Pennsylvania law.

Nonetheless, even assuming that our Supreme Court would accept the logic of Barnum as the law in Pennsylvania, we believe that Bamum is factually distinguishable from the instant case. As we read Bamum, it appears that the Superior Court presumed that the insurance company used and followed the PRO in good faith. This being the case, we would agree that the MVFRL would be the applicable statute and the insurance company would be shielded from punitive damages provided in section 8371.

In our case, however, plaintiff alleges that defendant acted in bad faith by not following the PRO recommendation. More specifically, plaintiff alleges that the PRO reports indicate that the majority of plaintiff’s treatment was medically necessary, but that defendant still refused to pay plaintiff’s claims. It is also noteworthy to point out that Nationwide insures both parties who were involved in the underlying accident and that the plaintiff in this case has filed a lawsuit alleging negligence against the other party. Plaintiff would like us to infer that defendant is financially motivated to keep plaintiff’s medical expenses to a minimum. By making it difficult for plaintiff to get treatment, plaintiff may be unable to show a jury in the negligence case that she actively sought medical treatment and the true nature and extent of her injuries. This, most likely, would lower defendant’s exposure in the negligence case. Based upon these facts, we are able to reconcile the MVFRL and section 8371 in the following manner.

We find that the MVFRL is not the exclusive remedy when an insured is alleged to have used the PRO process in bad faith. It goes against our concept of fundamental fairness that an insurance company could simply submit a disputed claim to a PRO, engage in either self-serving or intolerable behavior and, at the most, only be made to pay 12 percent interest, costs, and attorney’s fees. Reading the plain language of 75 Pa.C.S. § 1797(b)(4), the insured may not even be able to recover treble damages in this case. M.S. Hershey Medical Center v. State Farm Insurance, supra at 68 (treble damages are only available if the insurer does not use the PRO process).

At least one jurisdiction has held that section 8371 is designed to protect the insured from bad faith on behalf of the insurer whether or not the insurer uses the PRO process. Pierce v. State Farm Insurance Co., 27 D.&C.4th 464, 470 (Lackawanna County 1994). Although Pierce would appear to hold that punitive damages would be available if the insurer acts in bad faith by not submitting a claim to a PRO, that issue is not before us for a determination. See also, Signor v. United States Fidelity and Guaranty Co., 115 Dauph. 279 (1995) (“some misconduct on the part of the insurance company [that occurred] before the bills were submitted to the PRO” may be sufficient for punitive damages under section 8731).

We believe our interpretation of the law as applied to the facts of this case delicately balances the interests of the insured and the insurer in accord with public policy considerations. We interpret the interplay between the MVFRL and section 8731 to be the following. If the insurer uses the PRO process properly, its liability is limited to the amount of the claim with 12 percent interest, costs and attorney’s fees. If the insurer does not use the PRO process, its liability may be limited to three-times that of using the PRO process. See Hershey, Signor, Pierce, supra. However, if the insurer misuses the PRO process, its liability is heightened to the amount of the claim with interest at the prime rate plus 3 percent, costs, attorney’s fees, and punitive damages.

The above interpretation protects the insurer if it properly uses the PRO process. Through treble damages, it encourages the insurer to use the PRO process. Most significantly, if the insurer abuses the PRO process, it can be punished by being subjected to, among other things, punitive damages.

We rule summarily on defendant’s remaining preliminary objections.

For the foregoing reasons, we enter the following:

ORDER

And now, August 13, 1997, after consideration of briefs and oral argument of counsel, we enter the following:

(1) Defendant’s preliminary objection to Count III as to whether the MVFRL is the exclusive remedy in this case is hereby denied.
(2) Defendant’s preliminary objection to Counts I and II as to whether this court can assume equity jurisdiction is hereby denied.
(3) Defendant’s preliminary objection to Count IV as to whether plaintiff has set forth sufficient pleading for fraud, misrepresentation, and deceit is hereby denied.
(4) Defendant’s preliminary objection to Count V as to whether plaintiff can recover under the Code of Professional Responsibility is hereby granted.


author: KUHN, J.,

text:
    Terhorst v. Kiessling

      C.P. of Adams County,
    no. 96-S-220.

      Thomas R. Campbell, for plaintiffs B. Craig Black, for defendant.

      Robert L. McQuaide, for additional defendant.
    August 14, 1998
   KUHN, J.,

On March 13, 1996, plaintiffs, Kelly A. and Brian L. Terhorst, filed a complaint in negligence against defendant, Walter Kiessling. On May 17, 1996, defendant filed a complaint against additional defendant, Jolene Shorb. Atrial in this matter is scheduled for the term beginning September 14,1998. Both plaintiffs and defendant have filed motions in limine.

STATEMENT OF FACTS

The relevant facts are alleged as follows: On April 17, 1995, Kelly Terhorst, plaintiff, was driving westbound on U.S. Route 30. The car in front of plaintiff was stopped waiting to make a left-hand turn. Defendant was driving in the same direction as plaintiff but failed to stop behind her thereby hitting the rear of plaintiff’s car. Additional defendant was also traveling westbound on U.S. Route 30 and failed to stop behind defendant causing defendant’s vehicle to again strike plaintiff’s car. Plaintiff suffered injuries as a result of these impacts.

LEGAL DISCUSSION

“A motion in limine is a procedure for obtaining a ruling on the admissibility of evidence prior to or during trial, but before the evidence has been offered.” Meridian Oil and Gas Enterprises Inc. v. Penn Central Corp., 418 Pa. Super. 231, 239, 614 A.2d 246, 250 (1992), alloc. denied, 534 Pa. 649, 627 A.2d 180 (1993). “The purpose of a motion in limine is twofold: (1) to provide the trial court with a pretrial opportunity to weigh carefully and consider potentially prejudicial and harmful evidence; and (2) to preclude evidence from ever reaching a jury that may prove to be so prejudicial that no instruction could cure the harm to the defendant, thus reducing the possibility that prejudicial error could occur at trial which would force the trial court to either declare a mistrial in the middle of the case or grant a new trial at its conclusion.” Commonwealth v. Noll, 443 Pa. Super. 602, 605-606, 662 A.2d 1123, 1125 (1995), alloc. denied, 543 Pa. 726, 673 A.2d 333 (1996). (citations omitted) The admissibility of evidence is a matter addressed to the sound discretion of the trial court and should not be overturned absent an abuse of discretion. Whyte v. Robinson, 421 Pa. Super. 33, 38, 617 A.2d 380, 383 (1992).

Plaintiff argues in her motion in limine that a limited tort election form, executed by plaintiff Brian L. Terhorst, should not be admitted into evidence as proof that plaintiff may not pursue noneconomic damages. Plaintiff claims she was not a signatory to this limited tort release and as “first named insured” cannot be bound by her husband’s release. This argument is not supported by the statute. Section 1705 specifically states:

“(b) Application of tort options.— . . .
“(2) The tort option elected by a named insured shall apply to all insureds under the private passenger motor vehicle policy who are not named insureds under another private passenger motor vehicle policy —” 75 Pa.C.S. § 1705(b)(2). (emphasis added)

The term “insured” is defined in subsection (f) as follows:

“(f) Definitions. — As used in this section, the following words and phrases when used in this section shall have the meanings given to them in this subsection unless the context clearly indicates otherwise:
‘Insured. ’ Any individual residing in the household of the named insured who is:
“(1) a spouse or other relative of the named insured; or
“(2) a minor in the custody of either the named insured or relative of the named insured.
‘Named insured. ’Any individual identified by name as an insured in a policy of private passenger motor vehicle insurance.” 75 Pa.C.S. § 1705(f).

The statute makes no distinction between “first named insured,” as used by plaintiff, and “named insured” and plaintiff cites to no case law supporting such a distinction. The statutory language clearly sets forth that any “named insured” in the policy may elect the tort option. The statute goes on to state that such an election is applicable to all insureds, including, as in the case at hand, the named insured’s spouse. Thus, the election of limited tort options is applicable to plaintiff and is admissible into evidence.

Defendant has also filed a motion in limine arguing that evidence of plaintiff’s medical expenses is inadmissible under 75 Pa.C.S. §1722. The record does not presently contain sufficient facts to allow this court to determine if the evidence in the case at hand is admissible. Thus, this issue will await disposal until after the parties have attended a second pretrial conference.

Accordingly, the attached order is issued.

ORDER

And now, August 14,1998, plaintiffs’ motion in limine is denied. Disposition of defendant’s motion in limine is deferred until after the parties attend a second pretrial conference.

      . The factual background presented in plaintiff’s brief suggests that the form signed by plaintiff Brian Terhorst did not contain proper notice under the Motor Vehicle Financial Responsibility Law (“MVFRL”). However, there is no further discussion of this issue and it is not a part of plaintiff’s motion in limine. Therefore, this court will not address it.

      . There is no evidence that there is any other private passenger motor vehicle policy in effect.


text:
    Garrity v. Nowicki

      C.P. of Bucks County,
    no. AO6-93-63720-E-18.

      Lynn Z. Gold-Bikin, for plaintiff.

      Miriam Reimel, for defendant.
    September 8, 1998
   LAWLER,J.,

PlaintiffMargaret A. (Nowicki) Garrity, Wife, appeals our order of July 1, 1998, finding her in contempt of court for violating the terms of an agreed court order which directed her to name Robert E. Nowicki, Husband, as a beneficiary on $50,000 worth of life insurance.

BACKGROUND

The parties were divorced on February 16, 1995. N.T. 6/10/98 at 11; exhibit P-1. By agreed order of the same date, the parties entered into a property settlement agreement, which was incorporated into the divorce decree. Id. With respect to naming Husband as beneficiary on Wife’s life insurance policies, the agreement provided:

“Wife agrees to name Husband as a beneficiary on $50,000 worth of life insurance policies. Wife will determine which policies that beneficiary destination [sic] will apply to.” Exhibit P-1; N.T. 2/16/95 at 7-8.

Subsequently, the parties agreed that Husband was to be named irrevocable beneficiary on $50,000 worth of Wife’s life insurance policies. N.T. 6/10/98 at 37.

At the time of the agreement on February 16, 1995, Wife had three life insurance policies:

(1) A $100,000 State Farm whole life policy [policy no. LF-0922-6734] naming the parties’ children as beneficiaries. N.T. 6/10/94 at 15, 38.
(2) A $30,000 State Farm 10-year term policy [policy no. LF-0766-14455]. N.T. 6/10/98 at 15.
(3) A $35,000 State Farm 10-year term policy [policy no. LF-1412-9780]. N.T. 6/10/98 at 14.

After the divorce, Wife changed the beneficiary on the $100,000 whole life policy [policy no. LF-0922-6734], designating Husband as a revocable partial beneficiary to the extent of $50,000. Exhibit P-2; N.T. 6/10/98 at 38. She also named him as irrevocable sole beneficiary on the $30,000 policy [policy no. LF-0766-14455]. N.T. 6/10/98 at 40. Finally, she named him as an irrevocable partial beneficiary to the extent of $20,000 on the $35,000policy [policy no. LF-1412-9780]. N.T. 6/10/98 at 40, 68-69.

On or about January 8, 1998, Husband learned that the second policy [policy no. LF-0766-14455 for $30,000] had lapsed in December of 1997 due to nonpayment of premiums. N.T. 6/10/98 at 21, 47. As a result, Husband was named irrevocable beneficiary only to the extent of $20,000 (i.e. on policy no. LF-1412-9780), and Wife fell $30,000 short of the required $50,000 in life insurance policies naming Husband irrevocable beneficiary.

Consequently, on March 4, 1998, Husband filed a petition for special relief for the enforcement of property settlement agreement and contempt of court. In her answer, Wife admits that the policy lapsed as a result of her failure to pay the premiums. See answer at ¶¶6-7; N.T. 6/10/98 at 48. She, however, argues that, under the agreement, she had no obligation to maintain the policies, as Husband was obliged to maintain the policies. Id. at ¶7.

We held a hearing on June 10, 1998. The testimony revealed that at the time of the hearing, Wife had three life insurance policies in force. N.T. 6/10/98 at 39. They are:

(1) The $100,000 State Farm whole life policy [policy no. LF-0922-6734] naming Husband as revocable partial beneficiary to the extent of $50,000.
(2) The $35,000 State Farm term policy [policy no. LF-1412-9780] naming Husband irrevocable partial beneficiary to the extent of $20,000. N.T. 6/10/98 at 48, 66, 68-69.
(3) A $50,000 whole life policy with Life and Health of America naming Husband as the revocable beneficiary. N.T. 6/10/98 at 49, 50, 54.

By order dated July 1, 1998, we found Wife in contempt of court as a result of her breach of the agreement’s provision requiring her to name Husband as an irrevocable beneficiary on $50,000 worth of life insurance policies. In that order, we provided that Wife could purge herself of the contempt by (1) executing the necessary documents with the insurer to ensure that life insurance policy no. LF-1412-9780, with a death benefit of $35,000, was in full force and to ensure that Husband was named irrevocable sole beneficiary; (2) by executing the necessary documents to amend the beneficiary designation on life insurance policy no. LF-0922-6734 to name Husband irrevocable primary beneficiary with a death benefit of $15,000; and (3) to execute forms naming Husband “special billing party” to enable him to receive notice when Wife failed to timely pay the premiums on the two specified policies or when the policies were otherwise diminished. We also ordered that, if Wife fails to timely pay the premium on the specified policies and Husband pays that premium, Husband shall deduct from his next alimony payment to Wife the amount of the premium he paid plus an additional $100 for each premium paid.

ISSUES

In her amended concise statement of matters complained of on appeal, Wife cites the following five errors:

“(1) The trial court erred by ordering plaintiff to maintain specific insurance policies naming defendant as beneficiary, contrary to the agreed court order dated February 16, 1995 that expressly gives plaintiff the ability to unilaterally ‘determine which policies’ to obtain on defendant’s behalf.
“(2) The trial court erred in ordering plaintiff to execute forms required by State Farm Insurance Company for purposes of naming defendant as ‘special billing party,’ resulting in an unnecessarily invasive and overly intrusive infringement of plaintiff’s privacy in a manner not afforded under the agreed order.
“(3) The trial court erred in ordering plaintiff to pay for the insurance on defendant’s behalf, despite the fact that the agreed order never required plaintiff to pay for the costs to obtain or maintain any life insurance on defendant.
“(4) The trial court erred in ordering that defendant may deduct the amount of any premium not paid by plaintiff for life insurance on behalf of defendant from plaintiff’s next alimony payment, ‘plus an additional $100 for each payment as necessary,’ thus penalizing plaintiff for nonpayment of something she was never obligated to pay in the first instance.
“(5) The trial court erred in ordering that the insurance policies maintained by plaintiff on defendant’s behalf may ‘not be pledged as collateral for any loan, or otherwise encumbered or reduced in value,’ thereby imposing conditions on plaintiff that were never set forth in the agreed order.”

DISCUSSION

(1) We did not err in ordering Wife to maintain specific insurance policies naming Husband as beneficiary.

Wife claims that, because the agreement gave Wife the right to unilaterally “determine which policies” to obtain on Husband’s behalf, we erred in directing her to maintain the two specified policies on behalf of Husband. See amended statement of matters complained of on appeal. We disagree.

The agreement gave Wife the right to determine on which policies she would designate Husband as beneficiary so long as Wife named husband as a beneficiary on $50,000 worth of life insurance policies. Exhibit P-1 at 7-8. When Wife allowed policy no. LF-0766-14455 for $30,000 to lapse, Wife was in breach of the agreement. Subsequent to the lapse, which occurred in December of 1997 [N.T. 6/10/98 at 47], Wife did not take steps to designate Husband as irrevocable beneficiary on other policies to make up for the $30,000 shortfall caused by the lapse. Although Wife did take out a new insurance policy with Life and Health of America, in which she named Husband as a beneficiary for the amount of $50,000, that beneficiary designation was revocable and thus failed to satisfy Wife’s obligations under the agreement as amended.

By the hearing on June 10, 1998, Wife had not made up for the $30,000 shortfall with respect to naming Husband irrevocable beneficiary, despite having had six months to do so. Wife also testified that she wanted to change the beneficiary designation on the $35,000 State Farm policy [policy no. LF-1412-9780] from her Husband to her children — despite the fact that she was in violation of the agreement. N.T. 6/10/98 at 55. Accordingly, we did not err by requiring Wife to make up for the $30,000 shortfall by directing her to name Husband as irrevocable sole beneficiary for the full amount of $35,000 on policy no. LF-1412-9780 and irrevocable primary beneficiary to the extent of $15,000 on policy no. LF-0922-6734.

(2) Our order that Wife name Husband as “special billing party” was not an unnecessarily invasive and overly intrusive infringement of Wife’s privacy.

Wife contends that we erred in ordering her to execute the necessary forms to name Husband as “special billing party.” See amended statement of matters complained of on appeal. Designation as a “special billing party” permits Husband to receive notice whenever Wife fails to timely pay the premiums on the policies. N.T. 6/10/98 at 22-23. Such designation would enable Husband to be informed whenever the policy is in danger of lapsing. Id. Wife argues that so designating Husband would result “in an unnecessarily invasive and overly intrusive infringement of plaintiff’s privacy in a manner not afforded under the agreed order.” See amended statement of matters complained of on appeal.

At the hearing, Wife asserted that naming Husband as “special billing party” would be an invasion of her privacy because he would have access to her bills for her health insurance, car insurance, homeowners insurance and other life insurance policies. N.T. 6/10/98 at 45. However, our order made clear that Husband was the “special billing party” only as to the two specified life insurance policies. Wife’s failure to abide by the agreement by allowing one of the policies to lapse necessitated our giving Husband the right to receive notice whenever Wife failed to pay the premium on the two specified policies so that in the future he could prevent those policies from lapsing. Our order limited Husband’s right to receive notices to the two specified life insurance policies necessary to comply with the agreement. Thus, Husband is not entitled to notice of Wife’s failure to pay any other insurance premiums. Accordingly, there will no invasion of Wife’s privacy as to those other policies.

As to the two specified life insurance policies, any invasion of Wife’s privacy has been necessitated by Wife’s failure to abide by the agreement. On or about November 27, 1997, Wife received a notice from the insurance company that the dividends could no longer pay the premiums on policy no. LF-0766-14455. N.T. 6/10/98 at 46. When Wife did not pay the premiums, the policy lapsed in December of 1997. N.T. 6/10/98 at 47. By the time Husband learned that the premiums had not been paid and that the policy had lapsed, it was too late to have it reinstated. Rather than risk Wife’s nonpayment of future premiums and a lapse in coverage, we directed that Husband receive notice of any unpaid premiums so that he could protect his interest. Any privacy interest that Wife may have in not having the bills sent to Husband is outweighed by Husband’s interest in ensuring that additional life insurance policies do not lapse.

(3) We did not err in ordering Wife to pay the insurance premiums.

Wife claims that we erred in ordering her to pay for the insurance premiums on the specified policies designating Husband as beneficiary. She argues that the agreement did not require Wife to pay for, obtain or maintain any life insurance on Husband. See amended statement of matters complained of on appeal.

The agreement provides, “Wife agrees to name husband as a beneficiary on $50,000 worth of life insurance policies.” Although it does not explicitly state that Wife is to pay the premiums on the policies, the parties’ conduct subsequent to that agreement demonstrates that both parties understood the agreement as requiring Wife to maintain the policies.

Prior to the divorce, Husband paid the premiums on Wife’s three life insurance policies. N.T. 6/10/98 at 16. After the divorce, notices that the premiums were due were sent to Wife, and Husband did not receive any notices concerning the premiums. N.T. 6/10/98 at 17-18, 44. Wife never asked the insurer to send the notices to Husband. Id. Wife made at least “a couple of payments.” N.T. 6/10/98 at 42. Then she paid the premiums through dividends. N.T. 6/10/98 at 42, 70. She made the payments after speaking to her lawyer. N.T. 6/10/98 at 56. Wife maintained the lapsed $30,000 State Farm term policy until November of 1997. She has maintained the $35,000 State Farm term policy at least up to June 10, 1998, the date of the hearing. Prior to December of 1997, Wife did not inform Husband that she had stopped paying the premiums on the $30,000 policy. N.T. 6/10/98 at 18. Nor did she ask Husband to pay the premiums. N.T. 6/10/98 at 43.

On or aboutDecember 21,1997, Wife asked Husband if there was a way she could continue to protect Husband’s life insurance interests without paying the premiums, as she did not want to pay the premiums. N.T. 6/10/98 at 19, 57. Wife stated that she knew she would be violating the terms of the agreement and did not want to be held in contempt. N.T. 6/10/98 at 74. Although Wife suggested that she could make Husband a beneficiary of her estate, Husband was not agreeable and was not willing to give up his interest in the life insurance policies pursuant to the agreement. N.T. 6/10/98 at 20-21, 57. Neither during that conversation nor previously did Wife tell Husband that it was her position that, under the terms of the agreement, she did not have to pay the premiums. N.T. 6/10/98 at 43.

Also, when Husband learned on January 8, 1998 that one of the policies had lapsed, he asked to be made a special billing party whereby he would receive notice of any unpaid premiums. N.T. 6/10/98 at 45. However, Wife refused because she considered it an invasion of her privacy. Id. That Wife would consider it an invasion of her privacy for Husband to receive notice of an unpaid premium indicates that she believed it was her responsibility to pay the premium.

Finally, in January of 1998, Wife applied for an additional $50,000 whole life policy with Life and Health of America, designating Husband as beneficiary. N.T. 6/10/98 at 49. That policy was issued in March of 1998. Id. Wife testified that she applied for the policy when she realized that the parties were not going to resolve the payment of the premium. N.T. 6/10/98 at 49. Wife has paid the $170 monthly premiums on that policy from the date it was issued up to the date of the hearing. N.T. 6/10/98 at 51-52. Accordingly, the parties’ conduct reflected their view that Wife was responsible for the maintenance of the policies.

(4) We did not err in permitting Husband, in the event Wife fails to timely pay a premium, to pay the premium and deduct the amount of the premium plus an additional $100 from Wife’s next alimony payment.

Wife asserts that we erred in permitting Husband, in the event Wife fails to timely pay a premium, to pay the premium and deduct the amount of the premium plus an additional $100 from Wife’s next alimony payment for each unpaid premium. She contends that our order penalizes Wife for “nonpayment of something she was never obligated to pay in the first instance.” See amended statement of matters complained of on appeal.

We disagree for four reasons. First, as discussed under section 3, supra, Wife was obligated to maintain the insurance policies. Second, our order was necessitated by Wife’s failure to maintain the requisite amount of insurance. Third, the additional $100 to be deducted will not significantly reduce Wife’s income. Wife receives $4,300 per month in alimony and earns approximately $26,000 per year as a travel agent. N.T. 6/10/98 at 25,51-52. Finally, this provision will encourage Wife to comply with the court’s order.

(5) We did not err in ordering that the specified policies may not be pledged as collateral or otherwise encumbered or reduced in value.

Wife claims that we erred in ordering that the specified insurance policies may “not be pledged as collateral for any loan, or otherwise encumbered or reduced in value----” She asserts that our order imposed conditions that were not part of the agreement. See amended statement of matters complained of on appeal.

Again we disagree. We entered that order because of Wife’s failure to maintain one of the life insurance policies pursuant to the agreement, allowing the policy to lapse. Wife also testified as to her financial straits. Accordingly, our order was proper to ensure that Wife complies with the agreement.

For the foregoing reasons, pursuant to 23 Pa.C.S. §3502(e), we entered our order of July 1, 1998.

      . Wife also filed a counterclaim against Husband, seeking payment of her attorney fees on the ground that Husband’s petition was frivolous, meritless and for the purpose of harassment. In our order of July 1, 1998, we denied Wife’s counterclaim, and Wife has not appealed that decision.

      . When Wife realized that the parties were not going to settle this matter, in January of 1998, Wife changed the beneficiary on this policy from her children to Husband. N.T. 6/10/98 at 49. However, that beneficiary designation is revocable. N.T. 6/10/98 at 50.

      . The parties’ children were 32 and 36 years of age at the time of the hearing. N.T. 6/10/98 at 58.


author: CORBETT, J.,

text:
    Mitchell v. Remsky

      C.P. of Lackawanna County,
    no. 98-CV-77.

      Daniel W. Munley, for plaintiff.

      Patricia J. Larson and Robert E. Smith, for defendants.
    June 17, 1998
   CORBETT, J.,

Before the court are the preliminary objections of all defendants to the plaintiff’s complaint. In reviewing preliminary objections all material facts set forth in the complaint as well as all inferences reasonably deducible therefrom. Santiago v. Pennsylvania National Mutual Casualty Insurance Co., 418 Pa. Super. 178, 184, 613 A.2d 1235, 1238 (1992). Therefore, this court will accept the facts as pled in the plaintiff’s complaint as true.

This action is a wrongful death and survival action which arises out of the sale of alcoholic beverages to a person under the age of 21. Plaintiff alleges on March 20,1997, Thomas Mitchell entered the Convenient Food Market located at 410 North Main Street in Old Forge. At the Convenient, plaintiff’s decedent, Thomas Mitchell, purchased four 25 ounce cans of “Fosters” beer from a store employee by the name of Thomas Remsky. Despite the fact that law requires liquor licensees to demand proof of age prior to selling alcoholic beverages, plaintiff alleges defendant Remsky did not see and/or was not shown proof of Thomas Mitchell’s age. It is undisputed at the time he purchased the beer at issue that Mr. Mitchell was under the age of 21 years.

After leaving the defendant Convenient’s premises, plaintiff’s decedent consumed at least a portion of the beer that was furnished to him by defendant Remsky. Thereafter, plaintiff’s decedent entered a 1985 Ford LTD and proceeded to operate that vehicle on South Main Street in the Borough of Taylor at approximately 11:50 p.m. Plaintiff’s complaint alleges that defendant Officer Rawlings, while operating a Taylor Police Department vehicle, followed decedent’s car and then began a high speed chase down South Main Street. Plaintiff’s complaint alleges because of this high speed chase, plaintiff’s decedent was caused to be involved in a motor vehicle accident which caused his untimely death.

Both the plaintiff and the defendants have briefed their respective positions, and this court heard arguments on June 2, 1998. This matter is now ripe for decision.

DISCUSSION

Generally, the standard in a court’s determination of prehminary objections is whether it is clear and free from doubt from all of the facts pleaded that the pleader will be unable to prove facts legally sufficient to establish a right to relief. Bower v. Bower, 531 Pa. 54, 611 A.2d 181 (1992). Moreover, preliminary objections which would result in the dismissal of the cause of action should be sustained only in cases that are clear and free from doubt. Id.

In the instant case, all defendants have filed preliminary objections to plaintiff’s complaint. This court will address each set in turn.

I.

First are the preliminary objections of defendants, Thomas Remsky and Alan R. Skoritowski, individually and t/a/d/b/a Convenient Food Mart. Plaintiff has agreed to withdraw all claims for loss of the decedent’s society, comfort and companionship. Additionally, plaintiff has agreed to file an amended complaint for wrongful death which complies with 42 Pa.C.S. §8301(a). The preliminary objection regarding striking the “gross, wanton and/or reckless” language from plaintiff’s complaint is denied. The final two preliminary objections concern language in plaintiff’s complaint at paragraphs 38(j), 48(j) and 58(j) and plaintiff’s request for punitive damages.

The preliminary objection concerning the language of 38(j), 48(j) and 58(j) is granted and the language in those paragraphs is stricken from plaintiff’s complaint. The language in those paragraphs is as follows:

“Such other acts of negligent conduct, careless conduct and gross, wanton and reckless conduct as shall be discovered during the course of proper discovery under the applicable Pennsylvania Rules of Procedure.”

The aforementioned language represents an improper attempt by the plaintiff to preserve all unpleaded theories of liability against the moving defendants. See Connor v. Allegheny General Hospital, 501 Pa. 306, 310-11, 461 A.2d 600, 602 (1983). Since these paragraphs do not provide defendants with a clear, concise statement, these paragraphs are stricken.

The preliminary objection concerning striking the request for punitive damages is denied. Punitive damages may be awarded for conduct that is outrageous because of the defendant’s evil motive or his reckless indifference to the rights of others. Martin v. Johns-Manville Corp., 508 Pa. 154, 494 A.2d 1088 (1985). In assessing punitive damages, the trier of fact can properly consider the character of the defendant’s act, the nature and extent of the harm to the plaintiff that the defendant caused or intended to cause and the wealth of the defendant. Id. The function of punitive damages is to deter and punish egregious behavior. Id. Defendants in this case filed preliminary objections to plaintiff’s claims for punitive damages in the nature of a demurrer. “It is well settled law that a preliminary objection in the nature of a demurrer is not to be sustained and the complaint dismissed unless ‘the law says with certainty that no recovery is possible.’ ” Reinford v. Conrail, 46 Pa. Cornrnw. 167, 169, 405 A.2d 1151, 1152 (1979). “[I]f there is any doubt as to whether the demurrer should be sustained, such doubt should be resolved in favor of refusing to enter it.” Id.

In the case at bar, the plaintiff requests punitive damages because she alleges that plaintiff’s decedent was served alcohol when he was under 21 years of age. Plaintiff has also alleged that the employee knew or should have known that plaintiff’s decedent was under the age of majority at the time he purchased the alcohol. This court is accepting all well-pleaded facts as true and at this stage of this case, this court feels it is premature to dismiss the claim for punitive damages. If defendant’s employee knew Thomas Mitchell was under 21 and still served him alcohol, this conduct is not only intentional, but also shows a reckless indifference. Therefore, this court will allow the claim for punitive damages to continue.

II.

Next are the preliminary objections of defendants Borough of Taylor Police Department and Officer Rawlings to plaintiff’s complaint. These defendants allege that plaintiff’s complaint should be dismissed in toto because she is statutorily barred under the express language of the Tort Claims Act. Section 8541 of the Tort Claims Act states:

“Except as otherwise provided in this subchapter, no local agency shall be liable for any damages on account of an injury to a person or property caused by any act of the local agency or an employee thereof or any other person.” 42 Pa.C.S. §8541.

Accordingly, under section 8541, the Borough of Taylor Police Department and Officer Rawlings are immune from liability unless the conditions set out in 42 Pa.C.S. §8542(a) are met: First, the damages sought must be recoverable under common law or a statute creating a cause of action absent the defenses provided in the Tort Claims Act. Second, plaintiff’s claims must be based on negligent acts that are within one of the eight exceptions listed in 42 Pa.C.S. §8542(b). The eight exceptions to governmental immunity provided in section 8542(b) are:

(1) vehicle liability;
(2) care, custody or control of personal property;
(3) real property;
(4) trees, traffic controls and street lighting;
(5) utility service facilities;
(6) streets;
(7) sidewalks; and
(8) care, custody or control of animals.

Based on plaintiff’s complaint, the only exception that she may fall under is (1) vehicle liability. Under the express language of the “vehicle” exception:

“[T]he local agency shall not be liable to any plaintiff that claims liability under this subsection if the plaintiff was, during the course of the alleged negligence, in flight or fleeing apprehension or resisting arrest by a police officer----” 42 Pa.C.S. §8542(b)(l). (emphasis added)

Plaintiff contends that it is clear from the intention of the Act (b)(1) that liability can be imposed upon a municipal defendant for the negligent operation of a motor vehicle. She argues the issue then becomes whether or not, according to the case of Jones v. Chieffo, 700 A.2d 417 (Pa. 1997), there are genuine issues of material fact for a jury to consider. She argues that the court in Jones concluded that a municipality’s percentage of negligence is a question to be determined by a jury. Id. However, what plaintiff fails to note is that the court in Jones held that a governmental party is not immune from liability when its negligence, along with a third party’s negligence, causes the harm at issue. Additionally, neither in Jones or any other case cited by plaintiff is recovery allowed where injury is to the person fleeing from police. What Jones and the cases cited therein involved were injuries to third parties when the police were chasing fleeing vehicles. The fleeing vehicle or police were then involved in accidents with innocent third parties. The case of Jones and all the cases cited therein are very distinguishable from the case at bar.

In the case at bar, there is no question Thomas Mitchell was trying to flee from police. Thus, the Borough of Taylor and Officer Rawlings cannot be held liable as suit is barred by the Torts Claims Act, and the plaintiff does not fit in any one of the eight exceptions.

ORDER

And now June 17, 1998 it is hereby ordered and decreed that the preliminary objections of defendants, Thomas Remsky and Alan R. Skoritowski, individually and t/a/d/b/a Convenient Food Mart, are hereby granted in part and denied in part consistent with this opinion.

It is further ordered that the preliminary objections of the defendants Borough of Taylor Police Department and Officer Rawlings are hereby granted, and plaintiff’s complaint is dismissed with prejudice.