Brown v. Candelora

DEL SOLE, Judge,

dissenting:

Because I cannot accept the Majority’s conclusion that the result it reaches is compelled by previous expressions of view by our supreme court and public policy, I respectfully dissent. I would rule that Appellants could bring a garnishment action based on a claim of bad faith and breach of contract against the tortfeasor’s insurer, even absent a written assignment from the tortfeasor.

Both this court and the trial court relied upon the Pennsylvania Supreme Court’s decision in Johnson v. Beane, 541 Pa. 449 , 664 A.2d 96 (1995) to conclude that Appellants had no standing to bring a bad faith garnishment action against Nationwide absent an actual assignment of a bad faith claim from the insured to Appellants. Critical to a decision in this case is an interpretation of our supreme court’s decision in Johnson v. Beane. Id. In Johnson , an automobile accident victim brought a garnishment action alleging bad faith for failure to settle against the tortfeasor’s insurer. The victim had obtained a $75,000 judgment against the tort-feasor. The tortfeasor’s insurer paid its $25,000 policy limits. The victim received the remaining $50,000 from her underinsurance motorist carrier. Thereafter, she commenced the bad faith garnishment action against the tortfeasor’s insurer for $50,000, alleging that the insurance company acted in bad faith in dealing with its insured by failing to settle the matter prior to trial for the policy limits. The court specifically held “that when an injured party is fully compensated for a particular loss by her underinsurance carrier, her right to sue the tortfeasor is extinguished.” Id. at 451 , 664 A.2d at 98 . It summarized that “because Appellant has received the full value of the remitted verdict she has no claim to pursue.” Id. at 457 , 664 A.2d at 101 . Thus, the issue of the validity of such a garnishment action absent an assignment from the tortfeasor was not before the court and not necessary to its decision. However, comments regarding this question were made in two footnotes in the court’s opinion.

In footnote three, the court remarked that although it was precluded from deciding the case based upon the validity of the action because such a claim was not raised, it questioned whether a judgment creditor can bring a civil bad faith action against a judgment debtor’s insurer. It opined that the insurer owes no duty to the creditor and has no contractual relationship with her; rather the insurer’s duty to act in good faith runs only to its insured. Id. at 454 , 664 A.2d at 99, fn. 3 .

Discussion regarding the effect of an assignment of a bad faith claim was set forth in footnote two. There the court attempted to trace the “origin” of the concept of a bad faith garnishment action. The court cited to the federal case of Shaw v. Botens, 403 F.2d 150 (3rd Cir.1968), which permitted a garnishment action and held that garnishment proceedings are available in Pennsylvania to *115 determine the validity of an alleged claim of a judgment debtor against the garnishee-insurer. Our supreme court criticized this conclusion and remarked that the Shaw court was relying on the decision in Gray v. Nationwide Mut. Ins. Co., 422 Pa. 500 , 223 A.2d 8 , (1966), in which there was an actual assignment of the cause of action from the judgment debtor to the judgment creditor. The court in Johnson noted that there was not an express assignment of the bad faith claim in the case before it; however the insurer had never raised an objection on these grounds. Johnson v. Beane, supra, at 453-454, 664 A.2d at 98-99, fn. 2 .

I do not read the comments contained in these footnotes as a directive which will not permit a bad faith garnishment action by a victim/judgment debtor to proceed against the tortfeasor’s insurer absent an assignment from the tortfeasor. This issue was never presented to the court in Johnson and was not necessary to the ultimate decision of the case. In fact, Justice Cappy in a Concurring Opinion remarked that he was “troubled” by the discussion set forth in these footnotes. Id. at 458 , 664 A.2d at 101 . (Concurring Opinion by Justice Cappy). He stated: “It is beyond peradventure that the Majority’s discussion in footnotes two and three is dictum and devoid of precedential authority.” Id. at 459 , 664 A.2d at 101 .

The Majority recognizes that these statements set forth in Johnson , “may be” dicta but conclude that “reason and logic, compel that we hold in conformity” 'with this expression. Majority opinion at 111. While I have carefully considered this position, I believe that it is entirely appropriate to allow Appellants to proceed with a garnishment action against Nationwide based upon a bad faith claim, even absent an express assignment.

First, I note, despite criticism of the application of Gray v. Nationwide Mut. Ins. Co., supra, to a garnishment action absent an assignment, the court in Gray never made a determination that a bad faith cause of action must be expressly assigned. Johnson v. Beane, supra. In Gray there was an express assignment of a bad faith claim by an insured to a judgment creditor and the court was asked to decide whether the insured’s payment of the balance due to the judgment creditor was a prerequisite to bringing the action, and whether the insured’s right of action was assignable. The court held that payment of the balance was not a prerequisite and the right of action was assignable.

In answering these two questions, the court employed reasoning I find instructive. When ruling that it was not necessary for a judgment debtor to pay the creditor the balance due on the judgment in excess of the policy limits before a bad faith claim could be pursued, the court looked to the policy reasons which supported this decision. Among the reasons provided was that such a ruling would prevent an insurer from benefiting from the impecuniousness of its insured.

In considering whether an assignment of the insured’s right to his creditor was valid, the court dispelled arguments that the creditor was a stranger to the relationship between the insured and the insurer and that the creditor actually benefited by the action of the insurer by means of a verdict larger than the policy limits which could have been offered in settlement. The court reasoned that although these statements may be true they were irrelevant since the creditor was not suing in his own right, but rather as an assignee of the insured, and thus, standing in the shoes of the insured. Gray v. Nationwide Mut Ins. Co., supra, at 507, 223 A.2d at 11 . It further found that the insurer’s duty to the creditor “arises not so much under the terms of the contract but is said to arise because of the contract and to flow from it.” Id. at 509 , 223 A.2d at 12 . The court reasoned that permitting assignment in cases such as the one before it would ensure that bankruptcy proceedings would not be necessary. Rather, “the insured, after a judgment has been rendered against him, can follow the more simple and less expensive procedure of assigning the cause of action against his insurer, directly to his judgment creditor.” Id. at 510 , 223 A.2d at 12 .

Absent the existence of an express assignment, a garnishment has long been a viable remedy for a judgment creditor to collect a judgment from the judgment debtor’s insurer. Bianco v. Concepts “100” Inc., 291 *116 Pa.Super. 458 , 436 A.2d 206 (1981). In such instances the garnishment “operates as an equitable assignment to the judgment creditor of the judgment debtor’s claim against the garnishee.” Id. at 463 , 436 A.2d at 208 .

Thus, I would find that even absent an express assignment, this matter can proceed because the garnishment action operates as an equitable assignment to Appellants of the tortfeasor’s claim of bad faith against Nationwide. By means of this equitable assignment, Appellants stand in the shoes of the tortfeasor, Nationwide’s insured. Further, like the court in Gray , I believe there are sound policy reasons for this decision.

The court in Gray recognized the benefits of streamlining the process to enable a judgment creditor to proceed against the judgment debtor’s insurer directly. That same purpose would be fostered by allowing such actions to proceed through garnishment without a formal assignment. Requiring a formal assignment can completely frustrate the bad faith claim. If the insured never granted the assignment, the insurer could benefit from its bad faith actions. Similarly, an insurer could agree to settle a bad faith claim with its insured for substantially less than the verdict amount. This type of action could create a process which protects an insurer who engages in bad faith conduct. In short, I can perceive of no reason to require an express assignment, and like the court in Gray , I believe the result I suggest prevents an insurer from benefiting from its wrongful conduct and provides a simple procedure to enable the creditor to collect upon a finding of bad faith.

The Majority suggests that this view prevents the insured from presenting a claim for bad faith damages. This is not the case. In a garnishment proceeding, the injured party is only entitled to receive that portion of the “bad faith” damages necessary to satisfy the judgment. The insured is free to maintain an action for its damages, i.e., attorney fees, beyond the judgment sum.

Nor should we fear the opening of a “Pandora’s box” of litigation. While this phrase is often used to suggest the action taken will result in frivolous litigation, history discloses that is not the case. See, In re John Doe Corps. A, B, C, D & E, 507 Pa. 137 , 489 A.2d 182 (1985); Bigley v. Unity Auto Parts, Inc., 496 Pa. 262 , 436 A.2d 1172 (1981); Geary v. United States Steel Corp., 456 Pa. 171 , 319 A.2d 174 (1974); Niederman v. Brodsky, 436 Pa. 401 , 261 A.2d 84 (1970); Duffy v. National Janitorial Services, 429 Pa. 334 , 240 A.2d 527 (1968); Burger’s Estate, 425 Pa. 395 , 229 A.2d 463 (1967); Commonwealth v. Ladd, 402 Pa. 164 , 166 A.2d 501 (1960); 46 South 52nd St. Corp. v. Manlin, 398 Pa. 304 , 157 A.2d 381 (1960); Berger v. Public Parking Auth. of Pittsburgh, 380 Pa. 19 , 109 A.2d 709 (1954). Rather, I am persuaded by the eloquence of the late Justice Michael Musman-no’s dissent in Knaub v. Gotwalt, 422 Pa. 267 , 220 A.2d 646 (1966). “I would rather see the opening of a Pandora’s box than the closing of a coffin over an elementary principle of justice.” Id. at 277 , 220 A.2d at 650 . Apparently, thirteen years later, Pandora’s box disappeared when the Supreme Court overturned Knaub in Sinn v. Burd, 486 Pa. 146 , 404 A.2d 672 (1979).

It is for these reasons that I believe the garnishment action should proceed.