Can an Insurer Be Held Responsible for an Insured’s Criminal Restitution?

An Analysis of Brethren Mutual Insurance Company v. McKernan

In Brethren Mutual Insurance Company v. McKernan, 961 A.2d 205 (Pa. Super 2008), the Superior Court addressed the issue of whether Pennsylvania public policy prohibits the use of insurance coverage to pay for criminal restitution. In affirming the lower court’s decision, the Court held that a convict, in the context of a criminal litigation, cannot utilize a policy of insurance to cover a restitution order.

By way of background, on February 1, 1999, Cynthia McKernan was involved in an argument with her boyfriend, Joseph Gardner. During that argument, McKernan grabbed a knife, and in an effort to scare Gardner away from her, swung it. Unfortunately, the knife struck Gardner, resulting in his death. Following a jury trial, McKernan was convicted of reckless endangerment and simple assault. The trial court imposed a sentence that included, among other things, a restitution order in the amount of $5,190.00 (equal to the cost of the decedent’s funeral expenses).

Following the conviction, the decedent’s estate and minor children filed a wrongful death and survival action against McKernan. The suit alleged that McKernan negligently and recklessly caused decedent’s death. Subsequently, McKernan’s insurer, Brethren Mutual Insurance Company, filed a declaratory judgment action seeking a declaration that it had no obligation to defend or indemnify McKernan due to her intentional conduct. The trial court denied Brethren’s motion for summary judgment on this issue, stating that McKernan’s convictions were based upon negligent and reckless conduct. By way of denying Brethren’s motion for summary judgment, the trial court held that Brethren had a duty to defend and provide coverage to McKernan in the civil action.

Eventually, the wrongful death and survival action resolved without exhausting the Brethren policy limits. A dispute arose, however, when McKernan filed a counterclaim to Brethren’s declaratory judgment action seeking reimbursement for the $5,190.00 she paid to the estate pursuant to the restitution order. Brethren responded to the counterclaim with a motion for summary judgment which was granted by the trial court. McKernan appealed to the Superior Court.

On appeal, the Superior Court characterized the issue to be resolved as follows: “whether an insured may seek reimbursement against his insurer for a criminal restitution award resulting from a criminal prosecution?”

In reviewing the issue, the court noted that an order of criminal restitution is imposed for its effect on the defendant. “It is meant to help rehabilitate a convict by impressing upon him, in some degree, the scope of the damage inflicted by his criminal conduct.” The proposition that a third party insures against the ordered criminal restitution would defeat this purpose entirely. Furthermore, a finding of coverage under these circumstances would place the insurer in a position where it could not “vindicate its own rights under the insurance policy,” as it would be unable to exercise its rights to defend, choose counsel or settle the action as provided in the policy.

In light of the above, the Superior Court affirmed the trial court and held that a convict, in the context of criminal litigation, cannot utilize a policy of insurance to cover a restitution order.