Allstate Insurance Company v. Michael B. Gammon, 838 F.2d 73, 3rd Cir. (1988)

838 F.
2d 73
ALLSTATE INSURANCE COMPANY, Appellee,

v.
Michael B. GAMMON, Appellant.
No. 87-1302.
United States Court of Appeals,

Third Circuit.
Argued Nov. 5, 1987.
Decided Jan. 8, 1988.
Theodore P. Winicov (argued), Arnold H. Winicov, Yaskin and Winicov,

Philadelphia, Pa., for appellant.
Francis F. Quinn (argued), Madeline Baio Martin, Liebert, Short,
Fitzpatrick & Hirshland, Philadelphia, Pa., for appellee.
Before SLOVITER, BECKER, and COWEN * , Circuit Judges.
OPINION OF THE COURT
COWEN, Circuit Judge.
This appeal poses two questions for adjudication. First, was the insurance
company plaintiff entitled to a judicial, as opposed to an arbitrator's,
determination whether a claimant is a "person insured" under a particular
automobile insurance policy. Second, if the company has a right to a judicial
determination of this question, did the United States District Court have
jurisdiction to make that determination.1 Because we answer both questions in
the affirmative, we will affirm.
I.
2
On December 27, 1985, Michael B. Gammon was injured when an automobile

owned and operated by Michael Scott, an uninsured motorist, collided with a
parked tractor trailer. As a result of the accident, Gammon sought payment of
first party benefits and uninsured motorist benefits from Allstate Insurance
Company ("Allstate") pursuant to an insurance policy issued to Gammon's

stepfather, Leo Parks. Allstate refused to provide the benefits claimed by
Gammon, asserting that he was not a "person insured" under his stepfather's
policy. By letter dated April 14, 1986, Gammon demanded that Allstate submit
to arbitration the question of whether he is a "person insured" within the
meaning of the policy.
3
On June 3, 1986, Allstate commenced this action in the United States District
Court for the Eastern District of Pennsylvania seeking a declaratory judgment
that Gammon was not a "person insured" under Parks' insurance policy with
Allstate. Allstate contended that Gammon did not "reside" in Parks' household,
which was a necessary qualification for uninsured motorist benefits under the
policy.2
Gammon then filed a petition in the Pennsylvania Court of Common Pleas for
the appointment of an arbitrator.3 On June 23, 1986, this petition was removed
to the United States District Court and consolidated with Allstate's declaratory
judgment action.
Gammon moved for summary judgment on the theory that whether he was a
"person insured" under the insurance policy at issue can only be decided by
arbitration pursuant to the Pennsylvania Uniform Arbitration Act (the "Act"),
42 Pa.Cons.Stat.Ann. Sec. 7301 et seq. (Purdon 1982). Alternatively, if Allstate
is entitled to a judicial determination of that issue, Gammon argued that it can
only be decided by a Court of Common Pleas of the Commonwealth of
Pennsylvania. The district court rejected both of these arguments and denied
Gammon's motion.4
The case was called for trial before the district court on February 9, 1987, and
the jury was asked to determine whether Gammon was a "resident" of Parks'
household on December 27, 1985. The jury concluded that he was not. The
district court, by memorandum and order filed May 8, 1987, denied Gammon's
motion for Judgment N.O.V., in which he again argued that this dispute was
arbitrable or, alternatively, that the United States District Court lacked
jurisdiction.5 App. at 474. This appeal followed.
II.
A. Arbitrability
7
The first question we must address is if there is a right under Pennsylvania law
to a judicial determination of whether an individual is a "person insured" under
an automobile insurance policy, where the insurance policy requires that

disputes between the insurance company and a "person insured" be arbitrated.
We hold there is such a right.
8
It is well established under Pennsylvania law that a party against whom

arbitration is sought under an alleged agreement to arbitrate has a right to a
judicial determination of (1) whether the parties entered into an agreement to
arbitrate, and (2) whether the dispute at issue falls under the agreement. See,
e.g., Lincoln University v. Lincoln University Chapter of the Association of
University Professors, 467 Pa. 112, 119, 354 A.2d 576, 580 (1976);
Independence Development, Inc. v. American Arbitration, 460 Pa. 390, 392,
333 A.2d 781, 782-83 (1975). Indeed, the Pennsylvania courts have held that
an agreement to arbitrate is to be strictly construed, and not to be extended by
implication beyond its terms. Emmaus Municipal Authority v. Eltz, 416 Pa.
123, 125, 204 A.2d 926, 927 (1964); Cumberland-Perry v. Bogar and Bink, 261
Pa.Super. 350, 353, 396 A.2d 433, 434-35 (1978).
Allstate contends that Gammon is not a "person insured" under the policy it
issued to Parks, and that the issue need not be arbitrated because it is not a
dispute over the terms of the policy. We agree. In the policy, Allstate agreed to
arbitrate disputes, but only between a "person insured" and Allstate, and only
over the terms of the policy. Allstate's contention is one which goes to whether
Gammon is a person with whom it must arbitrate rather than a dispute over the
terms of the agreement. A judicial determination of Gammon's status as a
"person insured" was a prerequisite to arbitration. Allstate must arbitrate only if
it agreed to do so. It cannot be required to arbitrate the question whether it has
agreed to arbitrate. Consequently, we find that the district court correctly ruled
that Allstate had a right under Pennsylvania law to a judicial determination.
B. Jurisdiction
10
The second question presented by this appeal is whether the district court
properly assumed jurisdiction over this dispute. Gammon asserts that even if a
court need decide whether he was a "person insured" under the insurance
contract, the proper court to make this determination is a Court of Common
Pleas of the Commonwealth of Pennsylvania.
11
It is undisputed that the insurance policy at issue in this case incorporated by

reference the provisions of the Pennsylvania Uniform Arbitration Act, 42
Pa.Cons.Stat.Ann. Sec. 7301 et seq. (Purdon 1982).6 Two provisions of that Act
are relevant here.
12
Section 7304(a) of the Act states, in relevant part:
13the opposing party denies the existence of an agreement to arbitrate, the Court
If
shall proceed summarily to determine the issue so raised and shall order the parties
to proceed with the arbitration if it finds for the moving party. Otherwise, the
application shall be denied.
14
42 Pa.Cons.Stat.Ann. Sec. 7304(a) (emphasis added). Section 7318 of the Act

defines a number of terms used in other sections. It reads:
15
The following words and phrases when used in this subchapter shall have,
unless the context clearly indicates otherwise, the meanings given to them in
this section:
16
"Court." As used in this chapter means any court of competent jurisdiction of

this Commonwealth.
17
"Jurisdiction." The making of an agreement described in section 7303 (relating

to validity of agreement to arbitrate) providing for arbitration in this
Commonwealth confers jurisdiction on the courts of this Commonwealth to
enforce the agreement under this subchapter and to enter judgment on an award
made thereunder.
18
42 Pa.Cons.Stat.Ann. Sec. 7318.
19
The issue before this Court is whether the term "any court of competent
jurisdiction of this Commonwealth", as used in the Act, was intended to include
the United States District Court situated in Pennsylvania. We conclude that it
was.7
20
Both the courts of Pennsylvania and courts in other states have analyzed
language similar to the language of this statute, and concluded that the federal
courts are indeed "courts of the state" for jurisdictional purposes. In Meth v.
Commonwealth State Real Estate Comm., 14 Pa.Commw. 203, 321 A.2d 221
(1974), the court construed a statutory provision which required the revocation
of a real estate broker's license when the broker had been convicted of a felony
in a "court of competent jurisdiction of this or any other state". Id. at 206, 321
A.2d at 223. In holding that convictions in federal court were encompassed by
this provision, the Pennsylvania Commonwealth Court stated:
We find here that a Federal court comfortably fits into the statutory phrase "court of
21
competent jurisdiction of this or any other state". The United States District Court
for the Eastern District of Pennsylvania, a court of competent jurisdiction, is in
residence in Pennsylvania as the terminology clearly denotes.
22
Id. See also Town of Fairfax, Oklahoma ex rel Barringer v. Hubler, 23 F.Supp.
66, 69-70 (N.D.Okla.1938); Alliance Trust Company v. Hall, 11 F.Supp. 668,
671-72 (S.D.Idaho 1935).
23
It is particularly significant that the wording of the Pennsylvania Arbitration

Act has been changed since our decision in Monte v. Southern Delaware
County Authority, 321 F.2d 870 (3rd Cir.1963). In Monte, we construed what
was then section 178 of the Pennsylvania Arbitration Act. That section defined
references to "courts" to mean "the common pleas courts of the county having
jurisdiction of the parties or the subject matter." Id. at 873. While we construed
that language as limiting jurisdiction to the Courts of Common Pleas, as a
matter of statutory interpretation we find it significant that the prior specific
language has been amended to encompass "any court of competent jurisdiction
of this Commonwealth".
24
Gammon points to the decision of Bozzacco v. State Farm Insurance Company,

No. 85-1164 (E.D.Pa. May 30, 1986) (LEXIS, Genfed library, Dist file) in
support of his argument that the United States District Court lacked subject
matter jurisdiction. While Bozzacco does interpret the Act to deny federal
jurisdiction, we are not bound by that decision and do not find its reasoning to
be persuasive. Based on the available case law and the statutory history, we
conclude that the better reading of the Pennsylvania Uniform Arbitration Act
allows for concurrent jurisdiction in both the state courts of Pennsylvania and
the federal courts situated in Pennsylvania.
III.
25
In sum, we hold that where an insurance policy mandates that disputes between
a "person insured" and the company be arbitrated, and the company disputes
whether the claimant is a "person insured", Pennsylvania law permits the
company to seek a judicial determination of that issue. We also find that a
United States District Court situated in Pennsylvania is a "court of competent
jurisdiction of [the] Commonwealth" as that term is used in the Pennsylvania
Uniform Arbitration Act. We therefore will affirm. Costs taxed against the
appellant.
At the time this case was argued, Judge Cowen was a United States District
At the time this case was argued, Judge Cowen was a United States District
Judge for the District of New Jersey sitting by designation. On November 16,
1987 he entered on duty as a United States Circuit Judge
Gammon argues both that the trial court improperly denied his motion for
summary judgment, and that it improperly denied his motion for Judgment
N.O.V. Gammon's summary judgment motion asserted the same arbitrability
and jurisdiction arguments raised in this appeal, and his motion for Judgment
N.O.V. additionally asserted that the evidence presented was insufficient and
that the insurance policy was vague and ambiguous. We address only the
arbitrability and jurisdiction issues in this opinion. We find Gammon's other
arguments to be plainly without merit
The uninsured motorist provision of the insurance policy at issue, under the
heading "Persons Insured ", purports to cover "You and any relative who
resides in your household". (emphasis in original). Allstate did not dispute
Gammon's contention that he was a relative of Parks; rather, it argued that he
did not reside in Parks' household for the purpose of establishing insurance
coverage
Under "Definitions ", the policy states:
(3) "Resident " or "Reside "--mean the physical presence in your household
with the intention to continue living there. Unmarried dependant children
temporarily away from home shall be considered residents if they intend to
continue to live in your household.
(4) "You " or "Your "--mean the policyholder named on the declarations page
and that policyholder's resident spouse. (emphasis in original).
The uninsured motorist provision of the insurance policy provides:

The right to benefits and the amount payable will be decided by agreement
between the person insured and Allstate. If the person insured and we can't
agree, the decision will be made by arbitration. (emphasis in original).
The arbitration clause of the insurance policy reads:
If We Cannot Agree
Arbitration will take place as provided under the Pennsylvania Uniform
Arbitration Act. The arbitrators shall be selected as follows: You select one
arbitrator and we select another. The two arbitrators will select a third. If they
can't agree on a third arbitrator within 30 days, the Judge of the Court of Record
in the county of jurisdiction where arbitration is pending will appoint the third
arbitrator. You will pay the arbitrator you select. We will pay the one we select.
The expense of the third arbitrator and all other expenses of arbitration will be
shared equally. A decision agreed to by two of the arbitrators will be binding.
(emphasis in original).
4
Allstate Ins. Co. v. Gammon, 646 F.Supp. 55 (E.D.Pa.1986)
As noted supra, note 1, this Court finds the additional issues raised by
Gammon's motion for Judgment N.O.V. to be without merit
The district court, in ruling that it had jurisdiction over this dispute, did not find
it necessary to construe this Act. Instead, it reasoned that because Allstate did
not issue an insurance policy to Gammon it could not, for the purposes of
deciding this issue, be said to have an agreement to arbitrate any dispute it had
with Gammon. 646 F.Supp. at 59. The district court thus introduced a
distinction between the potential right of a person purchasing an insurance
policy to compel arbitration, and the non-existence of that right as to additional
persons insured under that policy. Although we foresee that such an approach
can be problematic, we affirm on different grounds, and need not address this
issue further in this case
We are aware that this statute, if it were interpreted to deny parties access to the
United States District Court without their consent, might well run afoul of the
Supremacy Clause, U.S. Const. art. VI, cl. 2. However, we need not address
this issue since we conclude that the statute was not intended to limit the
jurisdiction of the United States District Court

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838 F.

ALLSTATE INSURANCE COMPANY, Appellee,

United States Court of Appeals,

Theodore P. Winicov (argued), Arnold H. Winicov, Yaskin and Winicov,

On December 27, 1985, Michael B. Gammon was injured when an automobile

Company ("Allstate") pursuant to an insurance policy issued to Gammon's

an automobile insurance policy, where the insurance policy requires that

It is well established under Pennsylvania law that a party against whom

It is undisputed that the insurance policy at issue in this case incorporated by

Section 7304(a) of the Act states, in relevant part:

42 Pa.Cons.Stat.Ann. Sec. 7304(a) (emphasis added). Section 7318 of the Act

"Court." As used in this chapter means any court of competent jurisdiction of

"Jurisdiction." The making of an agreement described in section 7303 (relating

42 Pa.Cons.Stat.Ann. Sec. 7318.

It is particularly significant that the wording of the Pennsylvania Arbitration

Gammon points to the decision of Bozzacco v. State Farm Insurance Company,

The uninsured motorist provision of the insurance policy provides:

Allstate Ins. Co. v. Gammon, 646 F.Supp. 55 (E.D.Pa.1986)

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