Court Opinion

ID: 9469786
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:49:14.390615+00
Date Added: 2024-06-11T17:41:34.167879
License: Public Domain

*374GIBBONS, Circuit Judge,
dissenting:
I would reverse the trial court’s decision imposing on an insured, having no responsibility for the underlying liability, an obligation to pay on behalf of another insured which was so responsible the deductible amount of the liability coverage. I agree with the majority that the question whether an insurance contract is ambiguous is a question of law for the court, and on that issue our review is plenary. The majority’s conclusion, however, that the policy in question is unambiguous is legal error. As written the policy may reasonably be interpreted in more than one way. That being so, the rule applicable to contracts generally would require a determination, as a matter of fact, of the actual intention of the parties. See Community College v. Community College, Society of the Faculty (PSEA/NEA), 473 Pa. 576, 592, 375 A.2d 1267, 1275 (1977). With insurance contracts, however, no such factual determination is required, because of the operation of the general rule of construction that ambiguities in a contract issued by a compensated risk underwriter are resolved in favor of the policyholder. See, e.g., Blocker v. Aetna Casualty & Surety Co., 232 Pa.Super. 111, 114, 332 A.2d 476, 478 (1975).
The policy, an insurance company printed form, adopts throughout the singular noun form in referring to the Insured. However, the use of a singular noun cannot be taken literally, because the insurer issued a policy, on its printed form, with two named insureds. The definition of Insured in Article III compounds the grammatical difficulty, because that definition makes a distinction between the named Insured (singular) and additional insureds (plural). There is, therefore, on the face of the policy a source of ambiguity. The definition of Insured refers to a singular Named Insured and to plural additional insureds, while the clause naming the policyholder lists two named insureds. The two named insureds are separate business entities, and despite the use of the singular “Named Insured” in the definition of Insured, it must have been intended that there be two separate classes of additional insureds. Each named insured engaged in its own business, and the partners, directors, officers and employees of each exposed each named insured to separate risk incidents which might produce a claim. With that understanding in mind, I turn to the deductible clause, which reads:
The deductible amount stated in the Declarations shall be applicable to each single claim and shall include loss payments and claim expense, whether or not loss payment is made.
If there was only one named insured the deductible clause would undoubtedly be unambiguous. It would mean that for each claim against that named insured growing out of the activities of its partners, directors, officers and employees a separate deductible amount applied. But here there are two named insureds, while the deductible clause refers to “each single claim.” Moreover, in the opening clause Northbrook Insurance Company “agrees with the Named Insured [singular], in consideration of the payment of the premium, the undertaking of the Insured [singular] to pay the deductible as described herein ...” to afford coverage.
The policy is subject to two distinct readings. The first reading, which to me is the far more plausible, is that despite the use of a single policy form the insurer has entered into distinct contractual undertakings with two distinct business entities. So read, the obligation to pay the deductible amount applies separately for each entity with respect to claims against it. The other reading, which the majority says is unambiguously compelled by the policy language, is that each separate entity undertook to be a cross guarantor of the obligation of the other to pay the deductible amount applicable to claims against the other. Not only do I disagree that such an undertaking unambiguously appears on the face of the policy; I find it a highly implausible interpretation.
In order to bolster that implausible interpretation the majority, citing Mellon Bank, N. A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1011-12, 1012 n.13 (3d Cir. 1980), asserts that in determining whether or not a written contract is ambiguous, the court *375can go outside the four corners of the contract to determine the intention of the parties. Mellon Bank does not stand for such a proposition. It authorizes a court, in considering whether or not a contract is susceptible to two or more reasonable interpretations, to consider evidence as to custom and trade usage, not evidence as to all the facts and circumstances. Only when the court determines the legal question of whether an integrated written agreement is susceptible of more than one meaning is it appropriate to look at all the evidence to determine the factual question of the actual intention of the parties. Mellon Bank, N. A. v. Aetna Business Credit, Inc., 619 F.2d at 1011. To read Mellon Bank as does the majority would be inconsistent with our en banc decision in Chuy v. Philadelphia Eagles Football Club, 595 F.2d 1265, 1271 (3d Cir. 1979), wherein we stated:
Under Pennsylvania law, the intent of the contracting parties is exclusively determined from the written instrument if its words are “clear and unambiguous.” Id. [Kennedy v. Erkman, 389 Pa. 651, 655, 133 A.2d 550, 552 (1957) ]; see East Crossroads Center, Inc. v. Mellon-Stuart Co., 416 Pa. 229, 205 A.2d 865 (1965); United Refining Co. v. Jenkins, 410 Pa. 126, 189 A.2d 574 (1963). However, when the language of the written contract is ambiguous, extrinsic or parol evidence is admissible to resolve the ambiguity. In re Herr’s Estate, 400 Pa. 90, 94, 161 A.2d 32, 34 (1960); Kennedy v. Erkman, supra; Castellucci v. Columbia Gas, Inc., 226 Pa.Super. 288, 292, 310 A.2d 331, 333 (1973). Although the interpretation of a written contract that is clear and unambiguous is for the court, Pines Plaza Bowling, Inc. v. Rossview, Inc., 394 Pa. 124, 145 A.2d 672, 676 (1958), once the court determines that parol evidence is pertinent to the construction of an ambiguous contract; [sic] it is for the jury to resolve the ambiguities and find the parties’ intent. Easton v. Washington County Insurance Co., 391 Pa. 28, 35-36, 137 A.2d 332, 336 (1957); Castellucci v. Columbia Gas, Inc., supra 226 Pa.Super. at 294, 310 A.2d at 334.
(footnote omitted). The majority also complains that “defendant did not use the opportunity to put forth extrinsic evidence to show that the terms of the contract are susceptible of differing meanings.” Maj. op., 371-372. Here, again, the majority is confusing the distinction between the legal issue of ambiguity on the face of an integrated written agreement and the factual issue of the intention of the parties if such ambiguity appears. The defendant was not required to submit such evidence because in deciding the initial question of ambiguity, except for evidence of custom or trade usage, resort to it would be improper. The majority argues further that the defendant failed “to introduce any evidence as to why it undertook to obtain a joint policy or regarding the circumstances and negotiations between the parties.” Maj. op., 372. The policyholder, however, was the defendant in the action. Faced with a claim on an ambiguous contract, it had no obligation to introduce any evidence. If there was an ambiguity, the party relying on the written agreement had the burden of establishing the intention of the parties. Moreover, a compensated risk underwriter attempting to carry that burden would have to overcome the legal rule that in an insurance contract ambiguities are resolved in favor of the policyholder.
The majority reasons further that “[b]y definition, there are two businesses listed as Named Insured; therefore, each is responsible, under the unambiguous terms of the policy, to pay the deductible.” Maj. op., 373. This is no more than an ipse dixit, assuming the very point in issue. Obviously each named insured is unambiguously required to pay some deductible. The question is, whose deductible, and the ambiguity is not eliminated by references to “the deductible” when several were contemplated. We can agree that “[a] provision of an insurance policy is ambiguous if reasonably intelligent men considering it in the context of the entire policy would honestly differ as to its meaning.” Celley v. Mutual Benefit Health & Accident Association, 229 Pa.Super. 475, 481-82, 324 A.2d 430, 434 (1974). Perhaps I do not qualify as reasonably intelligent; certainly I do differ as to what the policy means. The very fact that the majority must rely on extrinsic evidence, including *376the application, to support its “unambiguous” reading lends support to my conclusion that at least there is an ambiguity.
The majority’s reliance on Pennsylvania Manufacturers’ Association Insurance Co. v. Aetna Casualty & Surety Insurance Co., 426 Pa. 453, 233 A.2d 548 (1967), is also misplaced. That case involved a dispute over coverage of additional insureds, not named insureds. It tells us nothing about the proper interpretation of an obligation to pay a deductible, for only the Named Insured, not the additional insureds, has such an obligation.
Since the trial court initially determined that the contract was unambiguous, it made no finding with respect to the intention of the parties. Instead, it held that the contract unambiguously made each separate Named Insured a guarantor of the deductible obligation of the other. That holding is an error of law. On the present record I would reverse, for there is no evidence which would overcome the rule of construction that ambiguous insurance contracts are construed against the insurance company which issued them.