United Services Automobile Ass'n v. Shears

EAKIN, Judge:

United Services Automobile Association (“USAA”) appeals from the order entered by the Allegheny County Court of Common Pleas on April 24,1995. We reverse.

On February 22, 1990, Virginia resident Robert Balog’s 1989 Oldsmobile was stolen in Pittsburgh. Mr. Balog was a Virginia resident and the car was registered in Virginia, insured under a policy purchased from USAA and issued under the laws of Virginia. On February 23, 1990, appellee Randall Shears, Jr. was struck by the car. His injuries were severe and resulted in the amputation of his leg.

Appellee did not own a car, nor was he an insured under any other auto policy. He was eligible under the Assigned Claims Plan of Title 75,1 but the maximum amount of benefits available thereunder was inadequate to fully compensate him for the loss of his leg.2 Consequently, appellee turned to USAA, the insurer of the vehicle, to provide uninsured motorist benefits. However, under the policy issued in Virginia and in compliance with Virginia law, appellee was not an insured for purposes of uninsured motorist benefits.

USAA then filed a declaratory judgment action in Allegheny County, arguing it had no liability, contractual or otherwise, because appellee was not an insured person under the policy, and the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”) did not require non-residents to maintain coverage for uninsured motorist benefits when operating a vehicle in Pennsylvania. After appellee filed his answer, both parties moved for judgment on the pleadings.

The Honorable Maurice Louik did not rule on appellee’s motion, but denied USAA’s motion, announcing that USAA had a duty to provide coverage under its policy co-extensive with Pennsylvania law, and that the breach of USAA’s duty to provide this coverage was a tort. The order denying USAA’s motion for judgment on the pleadings was interlocutory, and the holding that recognized a new tort was not appealable. Thereafter, appellee filed a motion to compel arbitration of his uninsured motorist claim. The motion was assigned to the Honorable Robert Horgos. Judge Horgos ordered the matter be submitted to arbitration, and it is this order from which USAA appeals.

Although USAA presents five issues for our review, there are in essence only two: whether the order compelling arbitration is appealable, and whether the order is correct.

Pennsylvania Rule of Appellate Procedure 313 provides as follows:

(a) An appeal may be taken as of right from a collateral order of an administrative agency or lower court.
(b) A collateral order is an order separable from and collateral to the main cause of action where the right involved is too important to be denied review and the question presented is such that if review is postponed until final judgment in the case, the claim will be irreparably lost.

Pa.R.A.P. 313; see Pugar v. Greco, 483 Pa. 68, 394 A.2d 542 (1978).

*163Judge Horgos ruled that the matter be submitted to arbitration in accordance with the rules provided by the American Arbitration Association. USAA correctly points out that since the rules of the American Arbitration Association do not provide for a right of appeal, submitting to arbitration would have the effect of putting USAA out of court on the declaratory judgment action.

Rule 813 clearly makes the ruling appeal-able even though it is interlocutory. Without question, the order to compel arbitration is collateral to the main cause of action — the declaratory judgment action, which technically is still open since no final judgment was entered. Clearly, the question of whether a court may order an out-of-state insurer to submit to arbitration on a newly-created tort is an important one. Finally, going forward with the arbitration will result in the loss of appellate review, which means that USAA’s claim under the declaratory judgment action will be irreparably lost. Therefore, we find the order compelling arbitration is appeal-able.

The next question is whether the trial court was correct in requiring USAA to submit to arbitration. USAA issued a policy that contains no arbitration clause for uninsured motorist claims and does not define an uninsured pedestrian as an uninsured motorist. In accordance with Virginia law, appellee is not covered under the policy issued by USAA.3

In its order compelling arbitration, the trial court stated it was bound by the opinion of Judge Louik, who determined that, while USAA had no contractual obligation to appellee, a cause of action “sounding in tort” existed under the theory that USAA had a duty beyond the contractual one, which it had breached. Judge Louik stated that a Pennsylvania policy written pursuant to the MVFRL would extend coverage to a pedestrian like appellee and that, therefore, an insurer would have a contractual duty to provide benefits to him. He continued:

However, the question is whether the statute creates a cause of action in tort. That is, does the statute supercede the terms of a validly executed policy for insurance? Certainly the statute governs the underwriting of a policy. Does the statute, however, impose post-liability where, as here, the policy is a valid foreign policy yet the statute requires the meeting of an additional burden?
The Court can certainly impose [an] additional burden on an insurer when the public policy of its jurisdiction dictates so. Therein lies the importance of the MVFRL. For whether the statute requires the extension of uninsured motorist benefits is not the key factor here. Rather, the presence of the statute and its requirements indicates public policy. It is most evident that the drafters of the statute sought to protect the pedestrians walking on their streets. This Court, then, must afford that same protection to its citizens. While a Court cannot create a contractual burden, the Court can, and must, uphold strong public policy evidenced by statute by creating a common law cause of action sounding in tort.

(Trial Court Opinion, Louik, J., 1/28/94, at 3).

The crux of this position is that although USAA’s policy is contractually sound and legally valid both here and in Virginia, public policy dictates that out-of-state insurers who insure out-of-state drivers driving out-of-state-registered vehicles into Pennsylvania have a duty to provide the same types of protection to Pennsylvania residents as the MVFRL dictates. Accordingly, if out-of-state insurers breach this duty, they are subject to a cause of action in tort. We disagree.

All agree that USAA’s policy was valid under Virginia law and, as appellee was not *164an insured under that policy, USAA owed no contractual duty to him. All agree that the policy does not provide for arbitration on an uninsured motorist claim. Since there is no contractual duty owed to appellee, his claim may only properly go to arbitration if there is some reason to extend the provisions of the MVRFL to this appellee. The trial court found a reason — public policy — and created a tort. It then used this tort to send appellee’s claim to arbitration.

Appellee contends that the out-of-state endorsement contained in the policy issued by USAA entitles him to uninsured motorist coverage. The endorsement provides:

If, under the provisions of the motor vehicle financial responsibility law or the motor vehicle compulsory insurance law or any similar law of any state or province, a nonresident is required to maintain insurance with respect to the operation or use of a motor vehicle in such state or province and such insurance requirements are greater than the insurance provided by the policy, the limits of the company’s liability and the kinds of coverage afforded by the policy shall be as set forth in such law, in lieu of the insurance otherwise provided by the policy, but only to the extent required by such law and only with respect to the operation or use of a motor vehicle in such state or province; provided that the insurance under this provision shall be reduced to the extent that there is other valid and collectible insurance under this or any other motor vehicle insurance policy. In no event shall any person be entitled to receive duplicate payments for the same elements of loss.

Appellee’s reliance on this provision is misplaced. Nowhere in the MVFRL is there any provision requiring a non-resident to have greater uninsured motorist benefits on his vehicle when he comes into the Commonwealth, nor is there any MVFRL provision requiring a non-resident to conform to the uninsured motorist provisions of the Commonwealth. Insurance Co. of Pennsylvania v. Hampton, 441 Pa.Super. 382, 657 A.2d 976, alloc. denied, 542 Pa. 647, 666 A.2d 1056 (1995).

Appellee contends that the MVFRL demands that uninsured pedestrians be considered insured for purposes of the Assigned Claims Act. This too is misplaced.

A recent decision of this court offers guidance. In Frazier v. State Farm Mutual Ins. Co., 445 Pa.Super. 218, 665 A.2d 1 (1995), this court held that Frazier, an uninsured pedestrian who was struck by a stolen vehicle, was not eligible for uninsured motorist benefits from the owner’s insurer. State Farm had contended that Frazier did not meet the definition of a person eligible to receive those benefits under the policy. However, an arbitration hearing found' for Frazier on her claim for benefits, and a non-jury trial followed. The trial court upheld the arbitration finding and opined that even though the plain language of the policy precluded Frazier from receiving benefits, the court nonetheless felt mandated to award her benefits, based on our holding in Ector v. Motorists Ins. Cos., 391 Pa.Super. 458, 571 A.2d 457 (1990).

Ector was an uninsured pedestrian who was struck by an insured vehicle that had been stolen by an uninsured driver. The insurer denied Ector’s claims for uninsured motorists benefits. On appeal, this court agreed with Ector that Prudential Property and Casualty Ins. Co. v. Falligan, 335 Pa.Super. 195, 484 A.2d 88 (1984) was controlling and entitled him to benefits. In Falligan, we upheld the recovery of uninsured motorist benefits by an uninsured pedestrian who was injured by an insured auto driven by the insured’s son without permission. Falligan, however, was decided at a time when automobile insurance policies issued in Pennsylvania were governed by the No-Fault Act, since repealed and replaced by the MVFRL. The Falligan court relied on the articulated purpose of the No-Fault Act to provide “maximum feasible restoration,” which required insurers to provide uninsured motorist benefits to uninsured injured persons.

In following Falligan, the Ector court noted that the MVFRL did not contain any language analogous to the “maximum feasible restoration” language found in the No-Fault Act. Nevertheless, the court felt that the MVFRL should be liberally construed *165because of its status as a remedial financial responsibility act, and found the MVFRL “sufficiently analogous to require this court to follow our decision in Falligan.” Ector, 391 Pa.Super. at 466, 571 A.2d at 461.

In Frazier, however, we noted that an en banc panel of this court had limited Ector’s scope, holding that the “maximum feasible restoration” principle no longer exists in Pennsylvania law. In Jeffrey v. Erie Ins. Exchange, 423 Pa.Super. 483, 621 A.2d 635 (1993) (en banc), alloc. denied, 537 Pa. 651, 644 A.2d 736 (1994), we disagreed “with any implication in Ector that our responsibility to ‘liberally construe’ the ... MVFRL is as broad a judicial mandate to effectuate coverage as was the ‘maximum feasible restoration’ principle in the now defunct No-Fault Act.” Frazier, 445 Pa.Super. at 221, 665 A.2d at 3 (quoting Jeffrey, 423 Pa.Super. at 495 n. 5, 621 A.2d at 641 n. 5). In reversing the trial court in Frazier, we held that since the language of the policy in Frazier made it clear that Frazier did not fit the eligibility criteria for recovery of uninsured motorist benefits, she could not overcome that deficiency by relying on outdated theory.

The policy at issue in Frazier was issued under the laws of Pennsylvania on a car registered in Pennsylvania and involved in an accident in Pennsylvania. The clear language of the policy precluded Frazier from receiving uninsured motorist benefits, and this court declined to allow her to recover. In the instant case, equally clear language of a policy issued under the laws of Virginia on a car registered in Virginia that was involved in an accident in Pennsylvania precludes an uninsured pedestrian from receiving uninsured motorist benefits. While appellee would like us to ignore Frazier and find otherwise, we decline to do so. See Pempkowski v. State Farm Mutual Auto. Ins. Co., 451 Pa.Super. 61, 678 A.2d 398 (1996) (applying and following Frazier).

There is absolutely no basis upon which USAA may be required to submit to arbitration on the policy it issued; the plain language of the policy does not include appel-lee in its definition of an insured motorist.4 Under applicable precedent, when the plain language of a policy does not define an uninsured pedestrian as an individual eligible for uninsured motorist benefits, such pedestrian is not covered. See Frazier, supra.

The only way appellee could arbitrate his claim was if the court created a cause of action for him. The trial court obliged. We, however, decline to recognize the trial court’s ill-defined cause of action, however well-intentioned. While the trial court imposed upon USAA a duty to define an uninsured pedestrian as an insured for purposes of the MVFRL, no such duty exists either statutorily or at common law. The policy issued by USAA contained provisions for uninsured motorists in compliance with the laws of Virginia and Pennsylvania. USAA has no further obligation to provide uninsured motorist coverage to appellee, and, therefore, USAA is not required to submit this claim to arbitration. Accordingly, we reverse the order of the trial court.

Order reversed.

FORD ELLIOTT, J., dissents.

. 75 Pa.C.S. §§ 1751-1757; Act of February 12, 1984, P.L. 26, No. 11, § 3.

. Under 75 Pa.C.S. § 1754 of the Assigned Claims Plan, the maximum benefit available to appellee was $15,000, which included the $5,000 maximum medical benefit.

. The Virginia Insurance Code requires that uninsured motorist provisions be included in any motor vehicle insurance policy issued or delivered in Virginia, and defines "insured” as

[t]he named insured, and while resident of the same household, the spouse of the named insured, and relatives of either, while in a motor vehicle or otherwise, and any person who uses the motor vehicle to which the policy applies, with the express or implied consent of the named insured, and a guest in the motor vehicle to which the policy applies or the personal representative of any of the above.

Va.Code Ann. § 38.2-2206.

. The policy’s language nevertheless complies with Pennsylvania law because it covers a pedestrian, provided he or she is a named insured, or a spouse or resident-relative of either the named insured or a spouse of the named insured.