Court Opinion

ID: 9752694
Source: CourtListenerOpinion
Date Created: 2023-08-28 18:29:09.981451+00
Date Added: 2024-06-11T07:27:21.068269
License: Public Domain

WIEAND, Judge:
May a materialman maintain a direct action against a reinsurer who has contracted with the surety on a contractor’s bond to insure any loss which the surety may be called upon to pay? The trial court held that such an action could not be maintained and sustained preliminary objections in the nature of a demurrer to the materialman’s second amended complaint. We affirm.
H. Rupert & Sons, Inc., (Rupert) entered a written contract to perform work for the Bloomsburg Sewer Authority. Schuylkill Products, Inc., the appellant herein, was a materialman who supplied sewer pipe to Rupert. In this action, appellant alleged that Rupert was indebted to it for materials sold and delivered in the amount of $7,407.
Prior to the commencement of work, Rupert delivered to the Authority a public works contractor’s bond,1 with surety, *39providing security for costs of labor and materials. The co-sureties on that bond were United Bonding Insurance Company and Prudence Mutual Casualty Company. An affidavit attached to the bond recited:
That Treaties of (automatic) Reinsurance now exist between the Prudence Mutual Casualty Company and certain other surety companies by which the liability assumed by said Company under the Bond above described, is Reinsured in accordance with the following percentages, or in the following “Limits of Availability” (or, by Specific Facultative Reinsurance):
Reinsurers and Participants Amount Available Amount Reinsured
1) International Fidelity-Ins. Co. Newark, New Jersey $ 62,300.00 $ 42,000.00
2) Allegheny Mutual Casualty Company Meadville, Pennsylvania 110,000.00 63.000. 00
3) United Bonding Insurance Company Indianapolis, Indiana 100,000.00 60.000. 00
4) Home Owners Insurance Company Minneapolis, Minnesota 130,000.00 60,000.00
5) Prudence Mutual Casualty Company Chicago, Illinois 110,350.00 63.000. 00
6) Emmco Insurance Company South Bend, Indiana 2,900,000.00 180,000.00
7) Wisconsin Surety Company Madison, Wisconsin 48,000.00 42.000. 00
One of the defendants named in appellant’s second amended complaint was International Fidelity Insurance Company. It caused preliminary objections in the nature of a demurrer to be filed on the grounds that it was a reinsurer whose contract was with a surety. However, it had no contract with and no obligation to pay appellant.2 The trial court agreed, and this appeal followed.
*40In order to sustain preliminary objections in the nature of a demurrer and dismiss the complaint without leave to amend, “it must appear with certainty that, upon the facts averred, the law will not permit recovery by the plaintiff.” Harley Davidson Motor Co., Inc. v. Hartman, 296 Pa.Super. 37, 41, 442 A.2d 284, 285-286 (1982) quoting Schott v. Westinghouse Electric Corp., 436 Pa. 279, 282, 259 A.2d 443, 445 (1969). Accord: Otto v. American Mutual Insurance Company, 482 Pa. 202, 205, 393 A.2d 450, 451 (1978); Longo v. Rago, 287 Pa.Super. 509, 510, 430 A.2d 1006, 1007 (1981).
Appellant contends that a reinsurer on a surety bond issued under the Public Works Contractors’ Bond Law is a proper party defendant in an action by an unpaid supplier. The law is clear, however, that there is no right of direct action against a reinsurer by any party except the reinsured. “[T]he ordinary contract of reinsurance operates solely between reinsured and reinsurer, and creates no privity whatever between reinsurer and the persons originally insured, the contract of insurance and that of reinsurance remain totally distinct and unconnected, and reinsurer is in no respect liable, either as surety or otherwise, to reinsured’s policyholders; and accordingly they have no right of action against reinsurer on the contract of reinsurance, nor have they any right of action against reinsurer to reform the policy.” 46 C.J.S., Reinsurance, § 1232.
The rule in Pennsylvania is in accord: “Re-insurance is properly applied to an insurance effected by one underwriter with another, the latter wholly or partially indemnifying the former against the risks which he has assumed; that is to say, after an insurance has been effected, the insurer may have the subject of insurance re-insured to him by some other. There is in such case, however, no privity between the original insured and the re-insurer; the latter is *41in no respect liable to the former, as a surety or otherwise, the contract of insurance and of re-insurance being totally distinct and disconnected.” Appeal of Goodrich, 109 Pa. 523, 529, 2 A. 209, 211 (1885) (emphasis supplied).
This view is shared almost unanimously by the courts of other jurisdictions which have considered actions by an insured against a reinsurer. See Morris and Company v. Skandinavia Insurance Co., 279 U.S. 405, 408, 49 S.Ct. 360, 361, 73 L.Ed. 762 (1929); Citizens Casualty Company of New York v. American Glass Company, 166 F.2d 91, 94 (7th Cir. 1948); Taggart v. Keim, 103 F.2d 194, 197-198 (3rd Cir. 1939); United States to the Use of Colonial Brick Corp. v. Federal Surety Co., 72 F.2d 964, 967 (4th Cir. 1934), cert. denied, 294 U.S. 711, 55 S.Ct. 508, 79 L.Ed. 1245 (1935); American Cast Iron Pipe Co. v. Statesman Insurance Co., 343 F.Supp. 860 (D.Minn.1972); Appeal of Goodrich, supra; Fontenot v. Marquette Casualty Co., 258 La. 671, 247 So.2d 572 (1971); In Re Security General Insurance Co., 82 S.D. 47, 140 N.W.2d 676 (1966); Winneshiek Mutual Insurance Asso. v. Roach, 257 Iowa 354, 366, 132 N.W.2d 436, 444 (1965); Crozier v. Lenox Mutual Insurance Asso., 252 Iowa 1176, 1181, 110 N.W.2d 403, 406 (1961); Melco System v. Receivers of Trans-America Insurance Co., 268 Ala. 152, 157-158, 105 So.2d 43, 46-47 (1958); Appeal of Schunk, 231 Minn. 219, 222-223, 43 N.W.2d 104, 108-109 (1950); Pink v. American Surety Company, 283 N.Y. 290, 28 N.E.2d 842 (1940); American Bonding Co. v. American Surety Co., 127 Va. 209, 218, 103 S.E. 599, 602 (1920); Moseley v. Liverpool & London & Globe Insurance Co., 104 Miss. 326, 337, 61 So. 428, 430 (1913); Vial v. Norwich Union Fire Insurance Society, 257 Ill. 355, 357, 100 N.E. 929, 930 (1913); Barnes v. Hekla Fire Insurance Co., 56 Minn. 38, 40, 57 N.W. 314, 314 (1893). See also 19 Couch on Insurance 2d § 80.66; 13 A. Appleman, Insurance Law and Practice §§ 7681, 7694; Annotation, Who May Enforce Liability of Reinsurer, 103 A.L.R. 1485-(1936).
We perceive neither practical nor policy reason for altering this rule in cases of reinsurers who contract with *42sureties on contractors’ bonds. The appellant, a material-man, cpntracted with Rupert, the contractor, and is protected by the bond, with sureties, which the contractor filed. The contract of reinsurance was between one of the sureties and appellee and, in the absence of language creating rights in third persons, vested no rights in appellant. Thus, appellant cannot maintain the present action against appellee, a reinsurer.
Appellant argues in the alternative that International Fidelity Insurance Company should be estopped from asserting its status as a reinsurer rather than a co-surety on the bond. This requires that we review the history of the proceedings in the court below.
Appellant’s original complaint was filed on June 26, 1974. It contained an incorrect averment that the attached bond had been executed by appellee as co-surety with' United Bonding Insurance Company. Despite the fact that an examination of the bond would have disclosed that it had not been executed by appellee, the answer contained an admission that appellee had executed the bond as co-surety. Appellee’s defense, set forth in “new matter,” was the statute of limitations of one year contained in the Public Works Contractors’ Bond Law at 8 P.S. § 197.3 The error was discovered during a pre-trial conference. Appellee thereafter requested and was granted leave of court to withdraw its answer and file preliminary objections nunc pro tunc. Appellant then requested and received leave to file an amended complaint. An amended complaint was filed, and preliminary objections thereto were argued and sustained with leave to appellant to file another amended complaint. See Schuylkill Products, Inc. v. H. Rupert & Sons, Inc., 13 D. & C.3d 324 (Columbia Co. 1980).
When the second amended complaint was filed, with copy of bond and affidavit attached, it contained an averment that appellee was estopped from asserting that it was not a co-surety and merely a reinsurer. In support of this conclu*43sion, appellant alleged that appellee’s counsel had advised appellant that appellee was a principal surety. It was also alleged that appellant had relied thereon and had failed to discover that appellee was not a signatory to the bond. Preliminary objections were again sustained, this time without leave to file further amended pleadings.
An “estoppel arises when one by his acts, representations, or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts.” In Re Estate of Tallarico, 425 Pa. 280, 286, 228 A.2d 736, 741 (1967) quoting Northwestern National Bank v. Commonwealth, 345 Pa. 192, 196, 27 A.2d 20, 23 (1942) (emphasis supplied). However, “[a]n estoppel does not arise where both parties are ignorant of the truth; the statement upon which an estoppel may be based must have been made with a fraudulent purpose.” Maurer v. International Union United Automobile, Aerospace and Agricultural Implement Workers of America, 487 F.Supp. 731, 738 (M.D.Pa.1979) (applying Pa. law) (citations omitted). Moreover, “[tjhere can be no equitable estoppel where the complainant’s act appears to be rather the result of his own will or judgment than the product of what defendant did or represented. The act must be induced by, and be the immediate or proximate result of, the conduct or representation, which must be such as the party claiming the estoppel had a right to rely on. The representation or conduct must of itself have been sufficient to warrant the action of the party claiming the estoppel. If notwithstanding such representation or conduct he was still obliged to inquire for the existence of other facts and to rely on them also to sustain the course of action adopted, he cannot claim that the conduct of the other party was the cause of his action and no estoppel will arise .... [A] party may not properly claim that an estoppel arises in his favor from his own ommission or mistake.” Northwestern National Bank v. Commonwealth, supra 345 Pa. at 197, *4427 A.2d at 23 (emphasis supplied). Accord Goodwin v. Hartford Life Insurance Company, 491 F.2d 332, 334 (3rd Cir. 1974) (applying Pa. law); American Kitchen Foods Incorporated v. Hersch Cold Storage Company, 435 F.Supp. 1127, 1132-1133 (W.D.Pa.1977) on reconsideration 449 F.Supp. 34 (W.D.Pa.1978); In Re Estate of Watt, 409 Pa. 44, 65-66, 185 A.2d 781, 792 (1962); Cerami v. Dignazio, 283 Pa.Super. 424, 436-437, 424 A.2d 881, 888 (1980); Livingston v. Livingston, 275 Pa.Super. 285, 292, 418 A.2d 724, 728 (1980); Cheltenham National Bank v. Snelling, 230 Pa.Super. 498, 504, 326 A.2d 557, 560 (1974), cert. denied, 421 U.S. 965, 95 S.Ct. 1955, 44 L.Ed.2d 453 (1975).
In the instant case, appellant had attached a copy of the contractor’s performance bond to its initial complaint. That copy readily disclosed upon even cursory examination that appellee had not signed the bond and was not a principal surety but only a reinsurer. Appellant could not properly rely upon alleged conclusory averments of appellee’s counsel when it had in its possession the written contract which disclosed that appellee was not a principal party. In this action, therefore, it cannot establish a “lack of knowledge and of the means of knowledge of the truth as to the facts in question.” Goodwin v. Hartford Life Insurance Company, supra at 334, quoting In Re Estate of Watt, supra 409 Pa. at 65-66, 185 A.2d at 792. Finally and significantly, with the means available to determine the true facts and proceed accordingly, appellant is unable to show prejudice. The trial court correctly held that appellee was not estopped from asserting in preliminary objections its status as a reinsurer. That status was obvious from the documents attached to appellant’s second amended complaint.
The judgment is affirmed.
JOHNSON, J., files a concurring opinion.
SPAETH, J., files a dissenting opinion.

. See Public Works Contractors’ Bond Law, Act of December 20, 1967, P.L. 869, § 1, 8 P.S. § 191 et seq.

. Although the second amended complaint contained an averred conclusion that International Fidelity Insurance Company was a co-surety, the copy of the bond and attached affidavit which were attached to the complaint establish beyond peradventure of a doubt that appellee was a reinsurer and not a co-surety. In cases of such contradictions, it is the attached documents which are controlling. See Eberhart v. Nationwide Mutual Ins. Co., 238 Pa.Super. 558, 564 *40n.6, 362 A.2d 1094, 1097 n.6 (1976); Framlau Corp. v. County of Delaware, 223 Pa.Super. 272, 277, 299 A.2d 335, 338 (1972); McCoy v. Home Insurance Co., 170 Pa.Super. 38, 42, 84 A.2d 249, 251 (1951). See also Goodrich-Amram 2d § 1019(h):2.

. This section was repealed by the Act of April 28, 1978, P.L. 202, No. 53, § 2(a) [1413], effective June 27, 1978.