*1 426 A.2d SCHOOL DISTRICT CENTRAL DAUPHIN v. COMPANY, Appellant. AMERICAN CASUALTY Supreme Pennsylvania. Court 1980.
Argued Feb. Decided 13, 1981. Reargument Denied March assignments respect to each of these and the briefs with record error. error and fine no reversible *2 Gribbin, Jr., York, Leo appellant. E. for Miller, David E. Lehman Thomas Harrisburg, and G. appellee. EAGEN, J., O’BRIEN, ROBERTS, NIX,
Before C. LARSEN, KAUFFMAN, FLAHERTY and JJ. THE COURT
OPINION OF ROBERTS, Justice. action, District appellee
In this School $529,000 carrier, seeks to recover from its insurance Appel- lant American the amount the district Casualty Company, its required decree of court has thus far been to return to an unlawful imposed the district whom against taxpayers tax. effective from Febru- policy, parties’
Under agrees appellant February of 1973 to ary period during that if District the School “[w]ith it as a result of or claims are made any claim [appel- during policy period, occurring Act Wrongful the terms of, in accordance with on behalf will lant] shall District all loss which School policy, of this pay.” legally obligated become proceed- in this consistently disputed “Loss,” the term only as follows: ing, is defined [(includ- which the Assured mean amount
“Loss shall are legally District members)] ing school board to, any not limited including, but obligated pay, required District which the amounts *3 Assured, for a claim to an indemnity as permitted Act Wrongful for a an Assured or claims made judg- damages, limited to but not be and shall include costs, and investigation cost of and ments, settlements costs of from such (excluding actions legal defense of defenses, employ- of officers or salaries and investigation body) other governmental District or ees of the School therefrom, costs of appeals proceedings claims or however, bonds, always, provided attachment or similar imposed by fines shall not include subject such of loss under uninsurable law, shall be deemed or matters which construed.” this shall be to which pursuant the law policy, for this of premium $3939 Dauphin paid Central claim of present includes the contends it now required which it sums $529,000 and further collection. unlawful tax result of the refund as a im- 19, .1974, Dauphin Central June By resolution dated persons “of all occupations of the on the value posed a tax who are District . . . Dauphin in Central residing Tax The Local or older.” See age eighteen (18) years 1257, 2, 31, 1965, as P.L. Act, December § Act of Enabling collection, levy After amended, 53 P.S. instituted proceedings district of the taxpayers certain challenging Dauphin County Pleas Court Common does the rec- resolution. Nowhere district’s validity notice of Dauphin gave appellant that Central ord indicate struck down pleas The court of common the proceedings. impose occupation sought as it the measure insofar who have not or and others housewives persons, on “retired directed . . .and gainful occupation in a engage do not Dauphin v. Central of refunds. Peifer payment 199, D. District, 97 70 & C.2d Dauph. court’s and the trial appeal took no Dauphin
Central return began the district final. Thereafter decree became who taxpayers collected to those unlawfully the tax funds 1943, 349, May under the Act of made refund claims amended, (1968).1 5566b as P.S. § an amount sought appellant then from collected and was illegally tax revenue it had equal to the By letter taxpayers. order to return to its required by court no position took the appellant dated May meaning parties’ within the “loss” had occurred Dauphin that advised Central policy. Appellant ‘loss’ can be insured. Our “it is if this event doubtful that matters says have which language definition does law pursu- uninsurable under the which shall be deemed are not to be shall be construed ant to which the ” considered of ‘loss.’ part amended, provides: as 1. The Act of any person corporation of this Commonwealth “Whenever pays paid paid, to be or causes has or caused to be or hereafter subdivision, directly treasury any political paid, into the *4 sort, any indirectly, voluntarily protest, of taxes or under fees, moneys penalties, which the to license fines or other cases, entitled; then, political legally in the not such subdivision is subdivision, filing upon proper political with the authorities of the payment, the the refund of them of a written and verified claim for make, public budget appropriations hereby of are directed to out of taxes, fees, funds, penalties, fines or other license refund of such legally moneys political not entitled. subdivision is to which the made, moneys a written claim shall not be unless Refunds of said involved, filed, political within two subdivision therefor is with the years payment thereof.” of 258
Upon appellant’s refusal to make payment, Central Dau- phin the present $529,000, filed action seeking the amount of tax so far refunds paid, “together with an addi- tional sum for further refund that claims be filed with ” paid by Dauphin] prior trial. . . . After a [Central trial, the court of nonjury pleas common judgment entered in of Dauphin. favor Central of panel A the Superior Court affirmed, 218, 271 Pa.Super. 892 (1979), A.2d and this Court allowance of granted appeal. relies heavily upon initial of portion policy’s clause, “loss” which defines a loss as “any amount which the Assured or School District are' legally ”
obligated axiomatic, . It pay. however, . . is that “[t]o determine agreement, an a writing must be as a interpreted whole, giving effect all its provisions.” Atlantic Richfield Co. Razumic, 366, v. 480 Pa. 390 A.2d The concluding portion of the “loss” clause specifically ex- cludes from the definition of loss those matters “which shall be deemed under pursuant uninsurable the law which this policy shall be construed.” Thus the writing makes clear that not every legal obligation is within the of scope present coverage. Expressly excluded from cover- age are those matters “deemed uninsurable.” ” general,
“In parties may contract as wish. . . . they Restatement (Second) Contracts Ch. (Unenforceability on Policy) Introductory Note, (Tent. Grounds Public 46p. .12, 1, 1977). time, however, Draft No. March At same freedom contract not “A promise is absolute. or other term of is agreement grounds unenforceable on of public if policy legislation that it provides is unenforceable if the in interest its clearly enforcement is outweighed aby public policy circumstances enforcement of 320(1)(When such terms.” Id. at a Term is Unenforceable on Policy). (Con Grounds Public also id. at See Favoring Public) (Tent.Draft struction No. March 1970). *5 this of Common
In the public our judgment, political subdivi permitting by wealth would be offended against “insurance” to purchase sion to use funds public refunding of taxes statutorily-mandated court-ordered Were taxing measure. Cen through collected an unlawful or any a school district prevail, tral position Dauphin’s reason, any, if to enact have little body other would taxing A district would able taxing measures. only lawful tax like the one unlawful measure subject citizens an its here, proceeds effect retain the imposed yet in recovering on the claimed simply by unlawful tax coverage. permits nor our case law statutory authority
Neither enactment of an unlawful device which a school district’s same of as district with the amount revenue provides the if the districts obtain revenues tax were lawful. School and legislative appropria- measures only taxing from lawful tions, proceeds. and insurance Where not unlawful taxation imposed, obliged is a district is taxing an unlawful measure return the collected unlawfully court and statute to order of paid funds to Refunds are to be “out taxpayer-claimants. ” 21, funds. . Act of budget public of . . appropriations too, 1943, 349, 1). note under the (supra P.L. as amended So of Act of Public School Code March amended, 631(6), a dis- 6-631(6)(Supp.l980), as 24 P.S. pay any trict and incur indebtedness refund may create “[t]o an of of taxes decreed order court. that, in Dauphin argues enacting its unlawful resolution, taxing good it acted in faith and it was amended, 631(6) as School Code of Section Public provides: may, any any “The board of school directors in school district in year, and incur indebtedness such school district create same, payable provided by and issue bonds to secure the as the act (Act 185), July No. known as the ‘Local Government Act,’ thereof, any Unit Debt amendment re-enactment following purposes: or all of the (6) To refund [*] [*] taxes decreed [*] [*] [*] an order [*] court....” a lawful failing pass taxing guilty only “negligence” *6 claims, fault, is Dauphin degree resolution. This coverage. scope policy within the “negligent,” were only Even if Central not be avoided by of the unlawful tax consequences contra coverage. Such an assertion assertion of insurance The validi statutory requirements. venes constitutional and good determined or bad of tax measures is not ty governmen negligence faith or or lack of negligence is a governmental the tax. Taxation imposing tal unit and statuto provisions constitutional function controlled strictly must of this function direction. The exercise ry controls. Ami statutory and See with constitutional comply 38, 41-42, (1971); 55 Kane, 279 A.2d don v. 444 Pa. Taxes, 427 Assessment and Revision v. Board for Madway 1 277 See also Pa.C.S. Pa. 233 A.2d 44 McQuillin, Municipal Corporations Ch. 1928(b)(3); 1979). (3d 44.13 & 44.16 ed. (Taxation), §§ not policy does public Because this Commonwealth’s just as to make unlawful taxation permit a school district taxation, it must be concluded as lawful revenue-productive to its return of monies that a subdivision’s political unlawful tax is uninsurable. taxpayers collected meaning no “loss” within Hence there has been Ac lies against appellant. and no claim policy insurance reversed, be Court must Superior the order of the cordingly, appellant. in favor of be entered and must judgment appellant. entered for judgment and Order reversed in the decision J., participate did not EAGEN, former C. of this case. and files a
LARSEN, J., of the Court joins Opinion opinion. concurring
KAUFFMAN, J., dissenting opinion. a files LARSEN, Justice, concurring. majority opinion.
I in the concur district school policy public offends First: It Even if an insur- tax refunds. purchase found, write could policy such willing ance company waste of tax would be a frivolous premium payments dollars. which policy provision the insurance agree
Second: I
pursuant
the law
under
excludes matters “uninsurable
to tax refunds.
applies
be construed”
which
shall
[the]
exclusion,
on this
the tax
relying
I
even without
submit that
following
for the
reasons:
refund is not covered
the terms
unambiguous,
is clear and
language
Where the
plain
their
and
given
of an
are to be
insurance contract
Manufacturers’ Associa
meaning. Pennsylvania
ordinary
Insurance
Casualty
Surety
tion
Co. v. Aetna
Insurance
Co.,
The
policy clearly
Pa.
233 A.2d
*7
If
is found that a
against “loss”.
it
unambiguously insures
some
and is
taxpayers
collected from
illegally
tax has been
funds will be collected
refunded,
necessary
in
any shortage
the
of the school district’s
taxpayers,
from other
since
source
funds
To claim that this resulted
taxpaying public.
is the
sense;
defy common
it
a “loss” to the school district would
ordinary meaning
would
and
“loss”.
disregard
plain
the
The
refund of taxes in this case
governs
statute which
amended,
349, 1, as
is the
72 P.S.
Act of
§
political
that whenever a
provides
5566b
This act
district) has
taxes to
(including
subdivision
a school
collected
entitled,
which
entitled to a
legally
any taxpayer
it is not
within
The
years.1
refund must make written claim
two
taxpayer
who does not make written
1. Under 72 P.S.
5566b the
However,
years
get
this
not
claim within two
cannot
a refund.
does
all,
belonged
after
that
the school district
and
indicate
funds
actually
merely
made
“losses”. The statute
refunds
were
strictly
prescribes
procedure
must be
adhered to.
a refund
which
political
construing
The
statute
not conclude that
cases
this
do
but
conclude that
subdivision owned
unclaimed funds
instead
statutory
procedure.
taxpayer
failed
observe the
refund
See:
District,
Township
Pittsburgh
Co.
Forward
366 Pa.
Coal
v.
Pictures,
(1951);
Box
v. Board of Finance
78 A.2d
Office
Inc.
Revenue,
(The
proce-
and
refund
Pa.
In dissent, his Mr. Justice Kauffman urges that refund is a “loss” because the policy defines “loss” in un usually broad terms as amount which “any the Assured or School District are legally obligated . . . ”. Despite terms, the broad there is absolutely no indication that a peculiar meaning be given fact, to the word “loss”. In examples which follow the definition are garden-variety “losses”: “damages, judgments, costs, settlements and cost of investigation and defense of legal actions ...” etc. The language of the does not require that an eccentric “loss”, meaning given to the word and permitting district to recover schopl the amount of the refunded taxes from the insurance company disregard would plain ordinary meaning rule set forth in Pennsylvania Manufac turers’ Association Insurance Co. v. Aetna Casualty Co., Surety Insurance supra.
KAUFFMAN, Justice, dissenting. This is appeal from an order of the Superior Court affirming an order of the Court of Common Pleas of Dau- phin County imposing liability upon appellant, American *8 Casualty Company, pursuant to express the language of its policy of insurance with the Central Dauphin School District (“School District”).1 1974,
In
District adopted
School
a resolution
imposing
occupations tax on all persons in the district eighteen years
of
age
14, 1975,
older.
March
On
the Court of Common
Pleas of Dauphin County declared the tax invalid as it
to persons not
in
engaged
gainful
a
occupation,
g.e.
applied
Dauphin
Casualty Company,
Central
1.
School District v. American
218,
Pa.Super.
Appellant’s policy District “Loss” directors and employees School The District “Wrongful Acts.”4 School resulting from their to required itself was extent it was only covered an “Assured’s” indemnify an “Assured” for loss caused Liberalization En- actions. The was amended policy dorsement, however, which extended the School District: or claims made claim are during policy period any
[I]f any Wrongful of as a result School District] [the the Insurer will period, Act occurring during in accordance with District], on of behalf School [the District the terms all loss which policy, of this (Emphasis sup- obligated pay. shall legally become plied) District, Dauph. 70 Pa.D v.
2. Peifer C.2d 35 & 22, 1975, representa- appellant’s authorized In a letter dated June stated of the Board on [the tive that “the action brings resolution], an error which enactment the tax amounted Wrongful The Act. action of the the act within our definition courts, and, in the was erroneous when tested Board therefore, found to be Wrongful of our Act meets the definition the action policy.” were, persons who now are or “Assureds”: “All 4. The defined employed and shall also include the School District shall appointed Board members of the student all elected teachers and Education, of the School District.” or School Directors Trustees *9 The District asserts that its policy covered the $529,000 payment it was obligated to make since its broad language by appellant provides drafted any incident Act” “Wrongful resulting of a in a “Loss.” Appellant, hand, argues on the other now that the School District neither committed a “Wrongful Act” nor sustained express unambiguous “Loss.” The and language to the conclusion that inexorably appellant leads agreed to District for indemnify the School all sums it was legally obligated response to tax refund claims.
I.
A contract of insurance
and,
must be read in its entirety,
when the language is clear and unambiguous, its terms must
given
their
and
plain
ordinary meaning. Pennsylvania
Manufacturers' Ass’n. Insurance Co. v. Aetna Casualty and
Surety
Co.,
Insurance
426 Pa.
“Wrongful is defined as follows: Wrongful Act shall mean actual or alleged errors or misstatement or statement misleading or act or omission or neglect or breach of duty by Assureds in the duties, of their discharge individually or collectively, any matter claimed against them reason solely by their being or been having during Assured this policy period. (Emphasis supplied)
Since this broad definition includes “any actual or alleged errors ... or act ... or neglect ... the Assureds [the school in the discharge of their duties individually directors] or collectively,” and since the Liberalization Endorsement covers any “Wrongful Act” which results in legal obliga- *10 to of a defective pay, adoption tion of the District School clearly ordinance and collection thereunder falls within the Act” as defined scope “Wrongful by parties in their agreement. written claims, however, that suf-
Appellant School District fered refunding no “Loss” in taxes collected improperly because this was not a loss within the ordinary meaning Here, however, policy by appellant that word. drafted defines “Loss”: expressly
Loss shall mean amount which the Assured or obligated including District are but not legally pay, [sic] to, any limited amounts which the School District bemay Assured, as required permitted pay indemnity to an for a claim or claims made an Assured for a Wrongful Act and shall include but not be limited to damages, costs, judgments, settlements and cost of inves- tigation and defense of legal pro- actions . . . claims or therefrom, ceedings appeals costs of attachment or bonds, however, similar such provided always, subject law, loss shall not include fines imposed by the or matters which shall be deemed uninsurable under the law pursu- ant to which this shall be construed. policy (Emphasis supplied)
Thus, the is whether the only question School District was under $529,000 legal obligation pay the which it refund- ed to housewives and retirees. As the Superior Court cor- noted, rectly district,
Appellee school virtue of by equity decree resolution, invalidating portions of the tax was obligated law to refund tax written money upon demand by exempt It is clear that the taxpayers.... school district was legally obligated pay the amounts demanded exempt and, taxpayers; under terms of the policy, such payment was defined as a loss.
271 Pa.Super. A.2d 895-6 Accordingly, I would hold that the School District has sustained a “Loss” within the unambiguous clear and definition. and collection of the defective tax
Since the enactment “Loss,” was a Act” which resulted in a as defined “Wrongful with the District policy, appellant’s agreement obligates it to the amount refunded.
II. tax refunds are uninsurable law Appellant argues (“Code”)5 specifi- because does not the Public School Code Thus, in appellant’s authorize this of insurance. cally type view, are excluded from because the refunds excludes matters uninsurable under definition of “Loss” Nothing suggests law. I the Code existing disagree. *11 insurance contracts set forth permissible that the list of exclusive, statutory prohibi- and I am aware of no therein is tion a school district of the type of the purchase the here under con- provided by insurance expressly sideration.
III.
that
argues
majority agrees,
Finally, appellant
contract as written would
enforcement
insurance
if the
Undoubtedly,
purpose
contravene
direct
public policy.
encourage,
were to
promote,
an insurance contract
sought indemnity
effect a violation of law or if the insured
intentional, fraudulent,
or her own
arising
for loss
from his
conduct,
reckless,
public policy
preclude
criminal
would
on Insurance 2d 39: 14 - 15
enforcement.
9 Couch
See
Fire and Marine Ins.
Security
Mineo v. Eureka
Cf.
However,
there
Co.,
75,
In its belief expressing to obtain revenues encourage taxing body contract will taxing unlawful measures and then enacting intentionally artificial- policy, majority under its insurance recovering A decision to enforce the clear creates a straw man. ly under the conditions here terms of this insurance contract such effect. It would neither presented would have no abuse of condone nor bad faith insurance con- encourage tracts that bad faith has not even been plain for the reason Moreover, who appellant, freely agreed here. suggested drafted, it is all the terms of the contract which free to rewrite future contracts to exclude the now assert- ed District. hold that is not violated public policy I would
Accordingly,
in this
and that
imposition
the insurance
case
give
would
effect to the
liability upon appellant
simply
unambiguous language
clear and
contract.
Supreme of Pennsylvania. Court
Argued Oct. 1980. Decided March