Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civ. No. 91-00163)
Before: Mansmann, Hutchinson and Rosenn, Circuit Judges.
Worldwide Underwriters Insurance Company initiated this declaratory judgment action, requesting a determination concerning the effect of its automobile policy's limitation of liability clause when members of an insured's family are involved in an accident. The district court, applying Pennsylvania law,*fn1 concluded that because the family limitation exclusion was both ambiguous and contrary to the reasonable expectation of the insured, the insured was entitled to the full benefits of the policy.
We will affirm the judgment of the district court, although on limited grounds. We conclude solely that the language of the exclusion is so unclear that an insured could not understand the liability limitations imposed upon its family members. Under Pennsylvania law, this vague language is construed against the policy maker and in favor of the insured.
Because we find that enforcement of this policy would be contrary to the insurance law of Pennsylvania, we need not reach the issue of whether the exclusion violates the underlying public policy and the terms of the Pennsylvania Motor Vehicle Financial Responsibility Law, a decision the Pennsylvania Superior Court reached in a case analyzing this identical clause.*fn2
The parties filed cross-motions for summary judgment in the district court and stipulated to the following relevant facts. On or about August 28, 1989, Gary Moros sustained injuries when he was involved in a motor vehicle accident as a passenger in a car. The motor vehicle, owned by Robert Brady, Sr., his uncle, and operated by Brady's son, Robert Brady, Jr., his cousin, collided with a Philadelphia City fire truck. Seeking compensation for these injuries, Moros initiated a lawsuit in the Court of Common Pleas of Philadelphia County against Robert Brady, Sr., Robert Brady, Jr. and the Philadelphia Fire Department, alleging that all three negligently caused him personal injury. At the time of the accident and for most of his life, Moros resided with the Bradys and continues to be a household member.
At the time of the accident, Brady's vehicle was insured by Worldwide Underwriters Insurance Company. Brady had applied for a policy which included bodily injury liability limits of $100,000 per person for a total of $300,000 per accident. The insurance policy issued describes "liability coverage" as follows: "[Worldwide] will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident." The declaration page, accompanying the policy mailed to Brady, reiterated the basic $100,000/$300,000 coverage Brady sought. This document, in its upper and lower left-hand corners, contained notations to indicate any "Endorsements and or/Attachments to Policy." Adjacent to this notation was a series of code numbers without explanation as to their meaning within the context of the policy.
The policy provided to Brady by Worldwide did contain an endorsement which is the focus of this litigation. This endorsement amended the basic $100,000/$300,000 coverage in this way:
We do not provide Liability Coverage for any person for bodily injury to you or any family member to the extent that the limits of liability for this coverage exceed the limits of liability required by the Pennsylvania Motor Vehicle Financial Responsibility Law of 1984. (Emphasis in original.)
The inclusion of this particular clause occurred after the Insurance Department of the Commonwealth of Pennsylvania wrote to Worldwide on January 21, 1987. On that date, the Insurance Department notified all licensed insurers writing motor vehicle liability insurance in Pennsylvania that any provision of a motor vehicle insurance policy which contained an intra-family exclusion from the mandatory liability coverage would be disapproved. The companies were informed, however, that exclusion from coverage for family member liabilities, limited specifically to the minimum amount required by the Pennsylvania Motor Vehicle Financial Responsibility Law, would be approved. In response, Worldwide amended its automobile policies to conform to the Insurance Department's new requirement concerning intra-family liabilities.
The specific language of this exclusion became an issue when Brady filed a claim under the policy for coverage relevant to Moros' accident. Worldwide informed Brady by letter that, under the terms of the policy issued to him, any recovery for Moros, a "family member" as defined by the policy issued by Worldwide, was limited to $15,000, i.e., the limit of liability described in the Motor Vehicle Financial Responsibility Law. Worldwide then initiated this action, requesting the district ...