*1 JOHNSON, Appellant, Ann Leslie George Mutual BEANE and Auto L. Company, Appellees.
Insurance Pennsylvania. Supreme Court of Argued Dec. 1995. Aug.
Decided *2 Harrisburg, for L.A. Johnson. Angino, Richard C. for G.L. Beane and State Shipman, Harrisburg, F. Lee *3 Farm Mutual. ZAPPALA, NIX, FLAHERTY, C.J., and
Before MONTEMURO, PAPADAKOS, CAPPY, CASTILLE, JJ. OPINION ZAPPALA, Justice. payment requires
This us to determine the effect of case her underin- an accident victim from own injured received claims the victim has on any sured motorist carrier herein, we hold For the reasons enumerated tortfeasor. particu- for a injured party fully compensated when carrier, right to sue her lar loss her underinsurance law, the underin- extinguished. By operation tortfeasor to to sue tortfeasor acquires surance carrier paid it its insured. recover the amount a better complex A factual scenario allows recitation 25, August understanding of the case. On George and L. Beane were Appellee Leslie Ann Johnson liability in an accident. Beane admitted involved automobile Auto Mutual Insur- company, Appellee insurance but his (State Auto), Company, policy anee refused to settle for the $25,000. limit went to trial on case the issue of $200,000 damages jury and the returned a verdict $175,000 Appellant’s requested favor. from her carrier, (Erie).1 underinsured motorist Erie Insurance Group, agreement No and Appellant was reached filed a Petition to Compel Underinsured Motorist Arbitration. meantime, 13, 1987,
In on July trial ruled court on post-trial Beane’s motions and reducing ordered a remittitur $75,000 or, the verdict to if alternatively, the remittitur was accepted, granting Beane’s motion for a new trial. No appeal was taken and praecipe filed enter 30,1987. July $25,000 State Auto Appellant agreed limit. with Erie for settle the remaining $50,000 of the judgment and executed a Release and Agreement which states in pertinent part: 1)
... payment, consideration of such agree I as follows: subrogate Exchange/Erie Insurance Insurance Company to my right recovery against any person or party legally liable to me the amount of 2) above; purpose noted that I payment have will not any separate make with give any settlement nor separate release to or person parties who caused or alleged to caused me the above loss mentioned or 3) accident; my Rovner, attorneys, Angino authorize & P.C., proceed with a bad action against State faith/excess Auto; 4) cooperate prosecuting said action. my
It is understanding that agreed Erie has to advance *4 any out-of-pocket expenses reasonably necessary prose- to cute action against State Auto and if faith/excess action said is successful Erie has to agreed pay pro its rata of share fees attorneys expenses per contingent as agreement fee Angino Rovner, entered into & P.C. and myself---- $50,000 thereafter received the from Erie. Al-
though initially join Erie to intended with in bring- $100,000 purchased had coverage of underinsured motorist per vehicle. Auto, not to it decided against action State ing a bad faith By February letter of further. pursue matter understanding Erie its Appellant’s counsel advised requested subrogation its interest waiving that Erie was was immediately understanding him if his Erie advise that to did the letter. respond incorrect. commenced the instant “bad subsequently Auto, insurer, State against action” Beane’s garnishment
faith
$50,000
interest based
plus
a
of Execution for
by filing Writ
Beane,
Auto
naming State
existing
against
upon
judgment
had
that
Auto
acted
Appellant alleged
as
State
garnishee.2
procedure
State Auto does
is
for such a
2. There
no basis in law
Beane,
money
possession
assets
nor does it have
its
not owe
obligation and
belonging Beane.
Auto fulfilled its contractual
policy.
nothing
of its
is therefore
in the hands
the limits
There
bring
garnishment.
an
subject
is
Beane’s
State Auto which
debt,
unliquidated
an
for bad faith
to settle is not a
but
action
refusal
alleged
contingent upon proof
State Auto had
The
claim.
debt
duty
failing to settle.
breached some
to Beane in
originat-
concept
garnishment
of a
faith
action”
We assume the
“bad
Botens,
(3rd Cir.1968).
case
Shaw
bad faith in
with Beane
settle
claim
by
to
the
policy
for the
limits.3
Auto filed a motion for summary
denied,
judgment
the
court
finding
which
trial
there were
fact
genuine
jury weigh
issues material
for a
to
determin-
judgment
Gray
improperly
creditor. The Shaw court
extended
assignment
circumstances where an actual
of the cause of action from
judgment
judgment
the
debtor
not
to the
creditor has
occurred.
expressly assigned
Beane
could
his bad
faith
Ins, Co.,
500,
pursuant to
v. Nationwide Mut.
422 Pa.
A.2d 8
223
successful,
(1966).
merely
Had
suit been
would have
judgment
executed
proceed-
on the
rather than initiated a
ing.
however,
Curiously,
objected
proceedings
State Auto never
to the
grounds.
these
Although
validity
challenge
3.
State Auto
the
did
of the action on
grounds,
precluded
deciding
these
and we are thus
from
the case on
basis,
SEPTA,
Reilly
204, 214-15,
by Reilly
this
v.
Pa.
507
489 A.2d
1291,
(1985),
question
judgment
1296
a
whether
creditor can in fact
bring
judgment
a civil
bad
action
a
debtor’s
insurer
duty
latter
no
the
owes
to the
creditor
has
no contractual
otherwise,
relationship
authority, statutory
with her.
There
no
or
sanctioning such a cause of action.
remedy
Pennsylvania
There is no common law
faith on the
Co.,
680,
part
Terletsky
Prop.
insurers.
Prud.
& Cas. Ins.
649 A.2d
688,
108,
(1994). However,
Pa.Super.
Pennsylvania legis-
437
124
the
8371,
statutory remedy
a
§
lature created
in 42 Pa.C.S.
which became
1,
July
Although
provision
inapplicable
effective on
this
enactment,
alleged
prior
instant case since the
bad faith occurred
to its
legislature,
it is
promulgating
relevant
establish that the
when
statute,
provide
bad faith
did
party
for a third
action.
only
providing
statute in this Commonwealth
for a
direct
tortfeasor,
injured
party against
alleged
an
third
insurer
24, 1933,
987,
117,
May
provides
§
§
Act of
P.L.
40 P.S.
for such
solely upon
bankruptcy
insolvency
direct action
or
of the insured
only
exceeding
for an amount not
limits.
Moreover, Appellant
satisfy
requirements
being
does not
designated
party beneficiary
obligation
as
third
insurer's
to act
See,
Liederbach,
good
(1983).
Guy
faith.
The Court affirmed vich, Judge McEwen concurring Johnson Judge with was The lead held that because dissenting. opinion exchange full of the verdict amount remitted paid Erie, Erie right recovery acquired subrogating her majority Auto. The pursue against State a inapplicable rule since also found the collateral source already favor had rendered and judgment Appellant’s been from did not diminish receipt payment her her underinsurer the amount to which she was entitled. Judge Johnson found that the concurring opinion, his to Erie on the basis against subrogated State Auto was judgment, paid
that Erie had the entire remainder of regardless “agreement” whether the between right. Erie would have also conferred the dissented, noting McEwen Judge Erie from a payment by Beane not satisfied since the was a claim source. concluded that would have collateral He against any subsequently monies recovered subrogation (Beane). from the tortfeasor (Appellant) its insured rule first the collateral source contends from the benefiting Auto from Beane prohibits argues she from Erie. that a tortfea- received She payments enjoy sor should the benefits a for which the injured victim separate premium.
The collateral source rule from provides payments collateral source shall diminish the damages otherwise wrongdoer. from the See generally, recoverable Beechwoods Service, Flying Inc. v. Al Corp., Hamilton Contracting principle A.2d 350 behind collateral source rule is it better for the wronged plaintiff potential receive a windfall than a tortfeasor to responsibility relieved of for the wrong. be Although reaffirm the source collateral rule general, we it inapplicable find to the instant case *7 liability tortfeasor’s is not being $25,000 reduced. When the Auto, limit paid by outstanding was the $75,000 $50,000. of By $50,000 was reduced to accepting the Erie, from Appellant underinsurance benefits did not reduce liability. the amount of the tortfeasor’s Beane is still liable $50,000. The question becomes to whom is he liable. we not dealing Because are with situation the liability where of a tortfeasor being reduced or the extinguished, collateral source rule does not apply. must next
We determine whether can com mence further the tortfeasor. The Superi- or Court held that owing there was no debt from Beane fully had been compensated Erie. agree. Specifically, agree We with Judge Johnson’s concurring opinion regardless which held that of language contained the Release and Agreement, Appellant’s claim passed to Erie of virtue the fact Erie remainder of judgment. of goal subrogation is to place the burden upon person
the debt who should bear it. The equitable of subrogation doctrine subrogee places precise position rights of the one to whose he subrogated. Allstate Clarke, 196, Insurance Company Pa.Super. 201, 364 527 1021, A.2d 1024 As now subrogee, Erie stands
457
recover the
an action to
may pursue
of Appellant
shoes
to Appellant
is of no moment
it
It
paid Appellant.
amount
recovery.
its
pursue
right
if
decides not to
proposition
for the
by Appellant
upon
The cases relied
against the tortfea-
an action
subrogor may still maintain
Phila-
Service
Hospital
Associated
distinguishable.
sor are
(1979),
Pustilnik,
600,
of remitted she has the the Superior affirming the Court dismissal order the ingly, hereby affirmed. Appellant’s garnishment action is PAPADAKOS, J., in decision of this participate did not the case.
GAPPY, J., concurring opinion. files a MONTEMURO, J., in result.* concurs the * sitting by designation. Mr. Justice Montemuro is
458
CAPPY, Justice, concurring.
I concur in result by Majority offered the and write separately myself disassociate from the discussion con- tained within footnotes two and Specifically, three. I am by troubled in lengthy discussion these footnotes concern- ing issues never raised in this case.
This steadfastly Court has refused to questions “review raised, tried, were neither nor trial considered court.” Swartz, (1995) 369, Dollar Bank v. Pa. 540 657 1242 A.2d SEPTA, (citing Reilly by Reilly 204, 214-215, v. Pa. 507 489 (1985).) 1291, footnotes, 1296 In these Majority, view, my makes errors and draws conclusions about unsettled areas of law.
For example, in two footnote claims Majority “[tjhere is no basis in law faith [bad ” Op. p. at action].... this Although Court has never addressed this not issue does now have opportunity address it raised, here because the issue type recognized has been lower courts our Com See, Reed, monwealth. e.g., Pa.Super. Shearer (1981). Thus, A.2d 635 the statement is “no there basis in law” for this plainly action is Majority’s inaccurate. The statement footnote three that is no common law “[t]here remedy in Pennsylvania for bad faith part on insurers” Granted, is also an incorrect assessment law. a common law action for bad faith based tort law was rejected by our Court. D v. Pennsylvania 'Ambrosio National Mutual Casu alty Insurance Company, 494 Pa.
Yet,
decades,
for almost four
recognized
a common
law action for bad faith
sounding
contract.
Cowden
Aetna Casualty
Surety
Company,
134 A.2d
(1957)
(recognizing action against
insurance
limits).
company failure to settle within
Furthermore, I
am
Majority’s disposition
troubled
these footnotes of certain issues on which this
Court has
spoken
two,
For
definitively.
example, Majori-
footnote
Co.,
ty
cites
v. Nationwide Mutual Insurance
*9
422 Pa.
(1966)
that an actual
proposition
for the