Opinion
CIVIL ACTION NO. 03-4801
November 13, 2003
MEMORANDUM
Plaintiff Sentry Select Insurance Company ("Sentry") filed the instant action seeking a declaratory judgment concerning the coverage limit of underinsured motorist benefits available to Defendants Douglas S. Fleming ("Fleming") and Shirley Fleming (collectively the "Defendants"). Presently before the Court is the Defendants' Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), or, in the alternative, Defendants' Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 56. For the reasons that follow, Defendants' Motion for Summary Judgment will be granted.
1. BACKGROUND
This case arose out of a November 10, 1995 accident that occurred while Fleming, owner of Doug's Towing, Inc., was towing a disabled vehicle. Fleming allegedly suffered serious personal injuries when he was struck by flying debris and thrown into the air after a vehicle operated by Brian Dolan ("Dolan") struck Fleming's tow truck. As a result of the accident, Fleming pursued a claim against Nationwide Insurance Company ("Nationwide"), Dolan's insurance carrier. Subsequently, Nationwide settled Fleming's claim for $25,000, the liability coverage limit under Dolan's insurance policy.
At the time of the accident, John Deere Transportation Insurance ("John Deere") (now Sentry Select) had issued a policy of commercial automobile coverage to Doug's Towing, Inc. ("Sentry Policy"), which insured the tow truck that Fleming was operating when the accident occurred. The Sentry Policy provided underinsured motorist ("UIM") benefits as part of its coverage. After the accident, Fleming sought UIM benefits from Sentry due to the limits of Dolan's insurance coverage.
Thereafter, a dispute arose between Sentry and Fleming concerning the extent of UIM coverage available pursuant to the Sentry Policy. As a result of this dispute, Fleming made written requests that the matter be submitted to arbitration pursuant to the Sentry Policy. The Sentry Policy contains the following provisions relating to arbitration:
a. If we and an "insured" disagree whether the "insured" is legally entitled to recover damages from the owner or driver of an "underinsured motor vehicle" or do not agree as to the amount of damages, either party may make a written demand for arbitration. Each party will select an arbitrator. The two arbitrators will select a third. If they cannot agree within 30 days, either may request that selection be made by a judge of a court having jurisdiction. Each party will pay the expenses it incurs and bear the expenses of the third arbitrator equally.
b. Arbitration shall be conducted in accordance with the Pennsylvania Uniform Arbitration Act. Unless both parties agree otherwise, arbitration will take place in the county in which the "insured" lives. Local rules of law as to arbitration procedure and evidence will apply. A decision agreed by two of the arbitrators will be binding.
(Pl.'s Resp. to Defs.' Mot. to Dismiss or Mot. for Summ. J., Ex. A).
Sentry did not agree to arbitration and instead filed the Declaratory Judgment Complaint at issue in this case. Sentry seeks a declaratory judgment that the Sentry Policy provides a UIM coverage limit of $35,000 in relation to the aforementioned accident on November 10, 1995. Sentry's position is that the plain language of the Sentry Policy sets a UIM benefit limit of $35,000. In contrast, the Defendants' position is that the UIM benefit limit is the $750,000 liability limit in the Sentry Policy because Sentry allegedly failed to obtain a written request from Fleming for lower UIM limts as required by the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL"). See 75 Pa. Cons. Stat. Ann. § 1734. The Defendants have filed the instant Motion to Dismiss, arguing that pursuant to the language of the arbitration clause in the Sentry Policy, this coverage dispute concerns the "amount of damages" they are entitled to recover. Since the Defendants have demanded arbitration, they argue this matter is within the exclusive jurisdiction of arbitrators pursuant to the language of the arbitration clause. Consequently, the Defendants claim that this insurance coverage dispute should not be before this Court.
2. STANDARD OF REVIEW
As previously stated, Defendants' have filed a Motion to Dismiss pursuant to Rule 12(b)(6) or alternatively a Motion for Summary Judgment in accordance with Rule 56. The Court will treat the instant Motion as one for Summary Judgment since the Sentry Policy was not attached to the Declaratory Judgment Complaint. Moreover, the arbitration clause in the Sentry Policy, which is critical to the Court's disposition of the instant Motion, was not referenced or quoted in the Declaratory Judgment Complaint. Thus, the Sentry Policy and its accompanying arbitration clause qualify as "matters outside the pleading" and necessitate that the instant Motion be treated as one for Summary Judgment.
Rule 12(b) provides the following:
[i]f, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given a reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
FED. R. CIV. P. 12(b). Both parties have agreed that the instant Motion may be treated as one for Summary Judgment and have been given a reasonable opportunity to present additional pertinent materials. Thus, since the Court must examine the language of the Sentry Policy to dispose of the Motion at issue, the Court will rule on the Motion as one for Summary Judgment. The Court notes that the Sentry Policy is the only matter outside the pleading that the Court needs to consider in ruling on the instant Motion. Moreover, the Court's ultimate conclusion in this matter would be the same even if decided pursuant to Rule 12(b)(6).
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper "if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law."Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The moving party has the initial burden of informing the court of the basis for the motion and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). An issue is genuine only if there is a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party. Anderson, 477 U.S. at 249. A factual dispute is material only if it might affect the outcome of the suit under governing law. Id. at 248.
To defeat summary judgment, the non-moving party cannot rest on the pleadings, but rather that party must go beyond the pleadings and present "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e). Similarly, the non-moving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir. 1989) (citing Celotex, 477 U.S. at 325 (1986)). Further, the non-moving party has the burden of producing evidence to establish prima facie each element of its claim. Celotex, 477 U.S. at 322-23. If the court, in viewing all reasonable inferences in favor of the non-moving party, determines that there is no genuine issue of material fact, then summary judgment is proper. Id. at 322; Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 83 (3d Cir. 1987).
3. DISCUSSION
The Court will apply Pennsylvania law in construing the language of the Sentry Policy because this is a diversity action. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-79 (1938). A court's determination of whether a dispute is within the scope of an arbitration clause is a matter of contract interpretation. Brennan v. Gen. Accident Fire Life Assurance Corp., 524 Pa. 542, 548-50, 574 A.2d 580, 583-84 (1990). According to Pennsylvania law, the determination of whether an issue must be sent to arbitration depends on two factors: (1) whether the parties made an agreement to arbitrate, and (2) whether the dispute falls within the scope of that agreement. Rocca v. Pa. Gen Ins. Co., 358 Pa.Super. 67, 70, 516 A.2d 772, 772-73 (1991). The only issue the Court must resolve is whether the coverage issue raised by the parties falls within the scope of the arbitration clause in the Sentry Policy.
The Pennsylvania Supreme Court has directed that arbitration clauses should be "construed broadly" since "public policy favors arbitration."Borgia v. Prudential Ins. Co., 561 Pa. 434, 443, 750 A.2d 843, 849 (2000). Moreover, arbitration panels are given broad authority to resolve claim disputes. Brennan, 574 A.2d at 583. Lastly, any ambiguities in an insurance policy are resolved against the insurance company that drafted the agreement. Nationwide Ins. Co., v. Patterson, 953 F.2d 44, 47 (3d Cir. 1991). In light of these basic principles and similar cases applying Pennsylvania law, the Court finds the instant dispute between the Defendants and Sentry falls within the ambit of the arbitration clause in the Sentry Policy.
The arbitration clause in the Sentry policy provides that either party may make a demand for arbitration if there is a disagreement concerning "whether the `insured' is legally entitled to recover damages from the owner or driver of an `underinsured motor vehicle' or if the parties "do not agree as to the amount of damages. . . ." (Pl.'s Resp. to Defs.' Mot. to Dismiss or Mot. for Summ. J., Ex. A). In Brennan, the Pennsylvania Supreme Court examined an insurance arbitration clause nearly identical to the provision at issue in this case. In that case, the insurance company attempted to reduce the underinsured motorist claim of its insured by the amount the insured received from the liability insurance of another carrier. Brennan, 574 A.2d 580, 581-82. The case made it to the Pennsylvania courts after an arbitration panel ruled in favor of the insured. Id. The insurance company argued that the issues relating to coverage were outside the arbitrator's authority. Id. The Pennsylvania Supreme Court upheld the arbitrators' decision and held that the dispute was within the arbitration provision because there was no specific language precluding the arbitrators from reaching the question. Id. at 583. The Court emphasized that there was "no limit to the jurisdiction of the arbitrators over what issues may be submitted" and that the "dispute, in it broadest sense, involve[d] a disagreement as to the amount of damages which [the insured] would and could possibly receive under the policy."Id.
The arbitration clause in Brennan stated: "[i]f we and the covered person disagree whether that person is legally entitled to recover damages from the owners or operator of an underinsured motor vehicle, or do not agree as to the amount of damages, either party may make a written demand for arbitration." Brennan, 574 A.2d at 582.
The Court of Appeals for the Third Circuit ("Third Circuit") has emphasized that "following the decision in Brennan, the vast majority of district court decisions applying Pennsylvania law have held that questions concerning the extent of coverage under an insurance policy are within the scope of an arbitration clause unless there is language in the clause that explicitly excludes coverage issues from the scope of arbitration." Nationwide, 953 F.2d at 47 (3d Cir. 1991). Moreover, Pennsylvania courts have interpreted Brennan broadly in finding that disputes related to the existence and extent of insurance coverage were within the scope of arbitration clauses similar to the instant provision in the Sentry Policy. Baverso v. State Farm Ins. Co., 407 Pa.Super. 164, 168-69, 595 A.2d 176, 178 (1991) (holding that issue of whether son was an "insured" under his mother's underinsured policy was within scope of arbitration provision that called for arbitration when there were disputes over fault and amount); Lamar v. Colonial Penn Ins. Co., 396 Pa.Super. 527, 529-30, 578 A.2d 1337, 1338-39 (1990) (finding that issue of whether coverage limits should be increased due to insurer's alleged failure to provide insured with sufficient information to make an informed choice as to coverage was within the scope of arbitration provision).
In the instant case, for numerous reasons the Court finds that the coverage issue that underlies the parties' dispute falls within the scope of the arbitration clause in the Sentry Policy. First, the broad language of the arbitration clause covers the parties' dispute. The central issue in the dispute is whether the Defendants are entitled to a higher level of benefits because of Sentry's alleged failure to obtain a written request for lower UIM limits in violation of the MVFRL. As in Brennan, this dispute in its `broadest sense . . . involves a disagreement as to the amount of damages which [the insured] would and could possibly receive under the policy.'Brennan, 542 A.2d at 583.
Second, there is no exclusionary language in ths arbitration clause of the Sentry Policy that specifically excludes this coverage issue relating to damages. As previously discussed, courts applying Pennsylvania law have held that questions concerning the extent of coverage are within the ambit of an arbitration provision unless there is specific language that explicitly precludes coverage issues from the scope of arbitration.Nationwide, 953 F.2d at 47; Baverso, 595 A.2d at 178 (stating that "if [the insurance company] wished to exclude this particular issue from arbitration, it could have drafted clear exclusionary language to that effect"). In the instant case there is no language that excludes any UIM coverage issues from the scope of arbitration.
Finally, the Court rejects Sentry's argument that this dispute is subject to judicial review since it centers upon whether a particular policy provision is contrary to a legislative mandate. Warner v. Cont'l/CNA Ins. Co., 455 Pa.Super. 295, 302, 688 A.2d 177, 181 (1996). Numerous courts applying Pennsylvania law have rejected this argument in construing similar broad arbitration clauses, notwithstanding the fact that the ultimate coverage dispute was based on whether an insurance company violated provisions of the MVFRL. Hartford Ins. Co. v. Green, No. 01-2123, 2002 WL 596837, at *1-2 (3d. Cir. Apr. 18, 2002) (finding that based on the broad jurisdictional scope of Brennan, UIM dispute was an issue for arbitration, notwithstanding insured's central argument that the insurer violated notice provisions of the Pennsylvania Motor Vehicle Financial Responsibility Law); The Hartford Ins. Co. v. O'Mara, 123 F. Supp.2d 834, 837 (E.D. Pa. 2000) (holding that coverage dispute was within the broad scope of automobile policy's arbitration clause despite the fact that insured was challenging that the insurer's uninsured/underinsured motorist selection form was invalid pursuant to the MVFRL); Universal Underwriters Ins. Co., v. Tennis, No. 96-4551, 1996 WL 601678, at *1-2 (E.D. Pa. Oct. 17, 1996) (dismissing case and directing the parties to arbitrate their dispute according to broad arbitration clause even though the heart of the dispute was whether there was a valid waiver of UIM benefits pursuant to the MVFRL). This case law supports the Court's finding that the broad arbitration provision in Sentry's policy encompasses the instant dispute despite the fact that the Defendants' central argument is that they are entitled to enhanced benefits because Sentry allegedly failed to obtain a written request for uninsured benefits as required by the MVFRL.
In summary, the Court finds that the instant dispute falls within the ambit of the broad arbitration clause in Sentry's Policy. The ultimate dispute in this case centers around the "amount of damages" that the Defendants can recover pursuant to the Sentry Policy, and therefore, falls within the scope of the arbitration clause. Notably, even if the Court found the arbitration clause language to be ambiguous in relation to this issue, that ambiguity would be strongly construed against Sentry as the insurer that wrote the policy. Additionally, there is no language in the arbitration clause that explicitly excludes disputes concerning any coverage issues. Specifically, there is no language that eliminates UIM coverage issues from the scope of arbitration proceedings. Finally, the case law is clear that this matter is appropriate for arbitration.
4. CONCLUSION
For the reasons set forth above, the Court concludes that the instant dispute falls within the scope of the arbitration clause in the Sentry Policy and is therefore appropriate for arbitration. Accordingly, the Court will grant the Defendants' Motion for Summary Judgment.
An appropriate Order follows.
ORDER
AND NOW, this 13th day of November, 2003, upon consideration of the Defendants' Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), or, in the alternative, Defendants' Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 56 (Doc. No. 2), and the Response and Reply thereto, it is hereby ORDERED that the said Motion for Summary Judgment is GRANTED.