Court Opinion

ID: 9727620
Source: CourtListenerOpinion
Date Created: 2023-08-26 13:45:23.910248+00
Date Added: 2024-06-11T18:25:40.825821
License: Public Domain

*428ZAPPALA, Justice,
concurring.
I agree with the majority that the Appellants’ action against the Appellee should be reinstated so that they may pursue their negligence claim against the Appellee; however, I would also address the issue of whether the Appellants’ settlement of the uninsured motorist claims for less than the coverage limits precludes recovery under the Pennsylvania Insurance Guaranty Association Act, 40 P.S. § 1701.101 et seq. I would hold that the settlement of the uninsured motorist claims for less than the limits of coverage is a failure to exhaust the claimants’ rights under the policy which precludes recovery under the Act.
The Pennsylvania Insurance Guaranty Association was not created to establish an alternate source of payment for claims arising out of an automobile accident. It was intended to replace the coverage which an insured had obtained, but which became unavailable due to the insurer’s insolvency. "Ultimately, the Association is the insurer for an insurer.
Contemplating that financial insolvency of an insurer would expose an insured to the same economic risk he had purchased protection from, the legislature developed a statutory scheme to avoid that unfortunate result. Intending the Association to be , a stopgap measure, the legislature provided that a claimant who could seek recovery under a policy other than that of the insolvent insurer must first exhaust his right under such policy. 40 P.S. § 1701.503(a). This provision reflects the legislature’s intent that fiscally solvent insurers, which are contractually obligated to pay a claim, be the primary source of payment.
The Association’s resources were not intended to be used unless the coverage provided by the solvent insurers was: (1) less than that provided by the insolvent insurer, and (2) inadequate to cover the damages sustained by the claimant. The legislative scheme provided that the Association would be the last resort for payment of a claim. By requiring that solvent insurers who had received premiums pay such claims first, the legislature sought to ensure that the Asso*429ciation would not provide coverage for risks for which those insurers had contracted and been compensated.
I concur with the analysis of the Washington Court construing the identical provision under its law in Prutzman v. Armstrong, 90 Wash.2d 118, 579 P.2d 359 (1978). The court stated,
The act makes available a source of funds for payment to claimants of insurers which later become insolvent, only to the extent that the claimant has no other source of insurance proceeds from which to recover for his losses. It does not provide a claimant with an alternative source of proceeds equal to the insolvent insurer’s coverage limits less whatever amount he may have unilaterally agreed to accept in settlement of claims under other insurance policies.
90 Wash.2d at 122, 579 P.2d at 362.
To hold otherwise would destroy that well-conceived scheme. I disagree with Justice Larsen’s analysis in his concurring and dissenting opinion that the legislature’s purpose was to avoid excessive delay in the payment of claims. The delay in payment of claims foreseen by the legislature was that which would result from the stay of proceedings against the insolvent insurer. The potential delay due to litigation resulting from defending an action either as to liability or damages was not the legislative concern in creating the Association. The payment or settlement of a claim of an injured party is not automatic upon request or by initiation of a lawsuit legardless of whether the claim is made to the solvent insurer or to the Association. The fallacy of that reasoning is easily demonstrated by the fact that the Association itself may defend against the injured party’s claim.
While it is true that under Justice Larsen’s view that settlement between a claimant and his own insurer would be encouraged, it would be at a loss to the Association. Justice Larsen’s view would provide the incentive to encourage settlement for less than the bargained for coverage for which premiums were paid. Under his analysis, a claimant *430and his insurance company could negotiate for payment of less than the claimant’s damages, knowing that the Association will be responsible for the remainder. At that point, the claimant and his insurer have a community of purpose. Neither party could lose. That would be an absurd result.
It would be meaningless to impose a “good faith” requirement upon the settlement proceedings. Other than actual proof of collusion between the insurer and the claimant, an unlikely and impossible burden, the claimant could not be shown to be acting in bad faith in accepting an offer of settlement.
The safeguard of the Association was intended for an insured whose insurer becomes insolvent and a claimant seeking damages with no other sources of recovery. I would not extend that protection to solvent insurers, contrary to the legislative intent.