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Dobrowsky v. Hanover Insurance Co.

May 24, 1984

KARL HEINZ DOBROWSKY, INDIVIDUALLY AND T/A ALSTER TOOL CO., AND JOINTLY WITH RUTH GERDA DOBROWSKY, DEBTORS. KARL HEINZ DOBROWSKY, APPELLANT
v.
THE HANOVER INSURANCE CO.



On Appeal from the United States District Court for the Eastern District of Pennsylvania.

Adams and Becker, Circuit Judges, and Sarokin, District Judge.*fn*

Author: Adams

Opinion OF THE COURT

ADAMS, Circuit Judge:

Karl Heinz Dobrowsky, a Chapter 11 debtor, appeals from a judgment of the district court that affirmed an order of the bankruptcy court denying his claim for damages against the Hanover Insurance Co. (Hanover). The claim asserted under the Pennsylvania No-Fault Motor Vehicle Insurance Act*fn1 arises from injuries sustained by Dobrowsky in an automobile accident that occurred in 1981. The primary issue before us is whether the bankruptcy court employed an improper burden of proof in evaluating the medical evidence. We hold that it did and remand.

A.

On March 23, 1981, Dobrowsky was in an automobile accident in which he suffered head and back injuries. At the time of the accident Dobrowsky was insured under an automobile insurance policy issued by Hanover. Hanover paid all of Dobrowsky's medical expenses from March 23, 1981 until August 24, 1981 and furnished work-loss benefits from April 5, 1981 through August 21, 1981. In September, Hanover informed Dobrowsky that, retroactive to August 19, 1981, it would not honor his claims for no-fault benefits because it had determined that medical treatment was no longer indicated.

Responding to Hanover's decision to discontinue benefits, Dobrowsky filed a complaint on February 5, 1982, to recover benefits under the Pennsylvania no-fault insurance act. In his complaint, Dobrowsky alleged that: 1) he continued to receive needed medical treatment for injuries sustained in the March 23 accident and had incurred $5,252.00 in unreimbursed expenses, and 2) as a result of the accident, he had been unable to work through December 31, 1981, and therefore was entitled to $4,294.00 in additional work-loss benefits. To support these allegations, Dobrowsky asserted that, six months after the accident, he developed disabling symptoms including headaches, depression, fatigue, acute anxiety, blackouts, and general malaise for which he sought treatment from Dr. Arnold Sadwin, a board-certified neuropsychiatrist. Hanover denied any obligation to pay no-fault benefits accruing after August 19, 1981 and counterclaimed for overpayment of work loss benefits.

During a bench trial in the bankruptcy court, Dr. Sadwin testified that Dobrowsky exhibited symptoms of post-concussion syndrome which were precipitated by the head trauma sustained in the car accident. Drs. Harvey Lisgar and Gilber Kasirky, Dobrowsky's primary physicians, and other medical and psychological specialists called by Hanover, offered testimony, however, that contradicted both Dr. Sadwin's diagnosis and his theory of causation.

After reviewing all the medical testimony, the bankruptcy court found that Dobrowsky had "not met his burden of proving by unequivocal medical evidence that his alleged post-concussion syndrome and accompanying symptoms were caused by the March 23, 1981 accident." As a result, the bankruptcy court 26 Bankr. 319 denied Dobrowsky's claims against Hanover and granted Hanover's counterclaim for overpaid benefits.

Dobrowsky appealed this decision to the district court. The district court concluded that the bankruptcy court's determination was not clearly erroneous because "plaintiff did not sustain its burden of proof by a preponderance of the evidence that the injuries complained of after August 19, 1981 were caused by the accident. . . ."

B.

Although the parties did not question the bankruptcy court's jurisdiction over an insurance claim based on state law, we believe it appropriate to consider briefly the basis of that court's authority in this case. The predicate for the bankruptcy court's assumption of jurisdiction over the insurance claim was that Dobrowsky had earlier filed a Chapter 11 petition for reorganization in that court. Under the Bankruptcy Reform Act of 1978, the bankruptcy court was empowered to adjudicate all "civil proceedings . . . related to cases under Title 11." 28 U.S.C. ยงยง 1471(b) and (c) (1976 and Supp. III).

Effective December 23, 1982, however, the Supreme Court invalidated the jurisdiction of the bankruptcy courts over such "related" claims. Northern Pipe Line Co. v. Marathon Pipeline Co., 458 U.S. 50, 102 S. Ct. 2858, 73 L. Ed. 2d 598 (1982). In Northern Pipe Line, the Court held that the judicial power of the United States to adjudicate private common law rights, in that case the right to recover damages in a contract action, must be vested in courts whose judges enjoy the protection of Article III of the Constitution, including life tenure. Id. at 2871. The bankruptcy court's exercise of jurisdiction over a state law tort claim would appear to fall squarely within the prohibition of Northern Pipe Line.*fn2 Because the bankruptcy court, however, entered its order on December 20, 1982, three days before Northern Pipe Line went into effect, and because the Supreme Court ...


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