Court Opinion

ID: 9711545
Source: CourtListenerOpinion
Date Created: 2023-08-26 04:34:05.988823+00
Date Added: 2024-06-11T18:23:05.800541
License: Public Domain

KAUFFMAN, Justice,
dissenting.
This is an appeal from an order of the Superior Court affirming an order of the Court of Common Pleas of Dauphin County imposing liability upon appellant, American Casualty Company, pursuant to the express language of its policy of insurance with the Central Dauphin School District (“School District”).1
In 1974, School District adopted a resolution imposing an occupations tax on all persons in the district eighteen years of age or older. On March 14, 1975, the Court of Common Pleas of Dauphin County declared the tax invalid as it applied to persons not engaged in a gainful occupation, e. g. *263housewives and retirees,2 and imposed a legal obligation upon the School District to refund the amounts paid by those housewives and retirees who submitted written claims in accordance with the Act of May 21, 1943, P.L. 349, § 1, as amended, 72 P.S. § 5566b. Pursuant to this order, the School District made payments totalling $529,000, and promptly sought reimbursement for this amount from appellant under its policy. Conceding that adoption of the defective tax was a “Wrongful Act” as defined by the policy, appellant nevertheless denied the claim on the ground that refund of illegally collected taxes was not a “Loss” as contemplated thereunder.3
Appellant’s initial policy provided protection for the school directors and employees of the School District for “Loss” resulting from their “Wrongful Acts.”4 The School District itself was covered only to the extent it was required to indemnify an “Assured” for loss caused by an “Assured’s” actions. The policy was amended by a Liberalization Endorsement, however, which extended coverage to the School District:
[I]f during the policy period any claim or claims are made against [the School District] as a result of any Wrongful Act occurring during the policy period, the Insurer will pay on behalf of [the School District], in accordance with the terms of this policy, all loss which the School District shall become legally obligated to pay. (Emphasis supplied)
*264The School District asserts that its policy covered the payment of the $529,000 it was obligated to make since its broad language drafted by appellant provides coverage for any incident of a “Wrongful Act” resulting in a “Loss.” Appellant, on the other hand, now argues that the School District neither committed a “Wrongful Act” nor sustained a “Loss.” The express and unambiguous language of the policy leads inexorably to the conclusion that appellant agreed to indemnify the School District for all sums it was legally obligated to pay in response to tax refund claims.
I.
A contract of insurance must be read in its entirety, and, when the language is clear and unambiguous, its terms must be given their plain and ordinary meaning. Pennsylvania Manufacturers' Ass’n. Insurance Co. v. Aetna Casualty and Surety Insurance Co., 426 Pa. 453, 233 A.2d 548 (1967). Even if genuine ambiguities did exist, they must be resolved in favor of the insured and against the drafter of the contract. Mohn v. American Casualty Co., 458 Pa. 576, 326 A.2d 346 (1974); Treasure Craft Jewelers, Inc. v. Jefferson Insurance Co. of New York, 583 F.2d 650 (3rd Cir. 1978). “Wrongful Act” and “Loss” are specifically defined by the policy in clear and unambiguous words, and must, therefore, be applied as contractually defined.
“Wrongful Act” is defined as follows:
Wrongful Act shall mean any actual or alleged errors or misstatement or misleading statement or act or omission or neglect or breach of duty by the Assureds in the discharge of their duties, individually or collectively, or any matter claimed against them solely by reason of their being or having been Assured during this policy period. (Emphasis supplied)
Since this broad definition includes “any actual or alleged errors ... or act ... or neglect ... by the Assureds [the school directors] in the discharge of their duties individually or collectively,” and since the Liberalization Endorsement covers any “Wrongful Act” which results in a legal obliga*265tion of the School District to pay, adoption of a defective tax ordinance and collection thereunder clearly falls within the scope of “Wrongful Act” as defined by the parties in their written agreement.
Appellant claims, however, that the School District suffered no “Loss” in refunding taxes improperly collected because this was not a loss within the ordinary meaning of that word. Here, however, the policy drafted by appellant expressly defines “Loss”:
Loss shall mean any amount which the Assured or School District are [sic] legally obligated to pay, including but not limited to, any amounts which the School District may be required or permitted to pay as indemnity to an Assured, for a claim or claims made against an Assured for a Wrongful Act and shall include but not be limited to damages, judgments, settlements and costs, cost of investigation and defense of legal actions . . . claims or proceedings and appeals therefrom, costs of attachment or similar bonds, provided always, however, such subject of loss shall not include fines imposed by the law, or matters which shall be deemed uninsurable under the law pursuant to which this policy shall be construed. (Emphasis supplied)
Thus, the only question is whether the School District was under a legal obligation to pay the $529,000 which it refunded to housewives and retirees. As the Superior Court correctly noted,
Appellee school district, by virtue of the equity decree invalidating portions of the tax resolution, was obligated by law to refund tax money upon written demand by exempt taxpayers.... It is clear that the school district was legally obligated to pay the amounts demanded by exempt taxpayers; and, under the terms of the policy, such payment was defined as a loss.
271 Pa.Super. 218, 412 A.2d 892, 895-6 (1979). Accordingly, I would hold that the School District has sustained a “Loss” within the clear and unambiguous policy definition.
*266Since the enactment and collection of the defective tax was a “Wrongful Act” which resulted in a “Loss,” as defined by the policy, appellant’s agreement with the School District obligates it to pay the amount refunded.
II.
Appellant argues that tax refunds are uninsurable by law because the Public School Code (“Code”)5 does not specifically authorize this type of insurance. Thus, in appellant’s view, refunds are excluded from coverage because the policy definition of “Loss” excludes matters uninsurable under existing law. I disagree. Nothing in the Code suggests that the list of permissible insurance contracts set forth therein is exclusive, and I am aware of no statutory prohibition of the purchase by a school district of the type of insurance expressly provided by the policy here under consideration.
III.
Finally, appellant argues and the majority agrees, that enforcement of the insurance contract as written would contravene public policy. Undoubtedly, if the direct purpose of an insurance contract were to promote, encourage, or effect a violation of law or if the insured sought indemnity for loss arising from his or her own intentional, fraudulent, reckless, or criminal conduct, public policy would preclude enforcement. See 9 Couch on Insurance 2d 39: 14-15 (1962). Cf. Mineo v. Eureka Security Fire and Marine Ins. Co., 182 Pa.Super. 75, 125 A.2d 612 (1956). However, there is not a scintilla of evidence of bad faith on the part of the School District in entering into or attempting to enforce the insurance contract. Nothing in this record indicates, nor does appellant even suggest, that the School District was motivated by anything but good faith and the public interest. That being the case, I would apply ordinary principles of contract interpretation and enforce the contract as written by appellant.
*267In expressing its belief that enforcement of this insurance contract will encourage a taxing body to obtain revenues by intentionally enacting unlawful taxing measures and then recovering under its insurance policy, the majority artificially creates a straw man. A decision to enforce the clear terms of this insurance contract under the conditions here presented would have no such effect. It would neither condone nor encourage bad faith abuse of insurance contracts for the plain reason that bad faith has not even been suggested here. Moreover, appellant, who freely agreed to all the terms of the contract which it drafted, is free to rewrite future contracts to exclude the coverage now asserted by the School District.
Accordingly, I would hold that public policy is not violated by the insurance policy in this case and that the imposition of liability upon appellant would simply give effect to the clear and unambiguous language of the insurance contract.

. Central Dauphin School District v. American Casualty Company, 271 Pa.Super. 218, 412 A.2d 892 (1979).

. Peifer v. Central Dauphin School District, 97 Dauph. 199, 70 Pa.D & C.2d 35 (1975).

. In a letter dated May 22, 1975, appellant’s authorized representative stated that “the action of the Board on June 19, 1974, [the enactment of the tax resolution], amounted to an error which brings the act within our definition of Wrongful Act. The action of the Board was found to be erroneous when tested in the courts, and, therefore, the action meets the definition of Wrongful Act of our policy.”

. The policy defined “Assureds”: “All persons who were, now are or shall be employed by the School District and shall also include student teachers and all elected or appointed members of the Board of Education, Trustees or School Directors of the School District.”

. Act of March 10, 1949, P.L. 30, 24 P.S. § 1-101 et seq.