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C. RAYMOND DAVIS & SONS v. LIBERTY MUT. INS. CO.

January 16, 1979

C. RAYMOND DAVIS & SONS, INC.
v.
LIBERTY MUTUAL INSURANCE COMPANY



The opinion of the court was delivered by: NEWCOMER

MEMORANDUM AND ORDER

This is a suit on a Comprehensive General Liability Policy and an Umbrella Excess Liability Policy brought by the plaintiff insured against the defendant insurer for damages allegedly caused by the insurer's failure to defend and pay claims made by a third party against the insured. Jurisdiction of this Court is based on diversity of citizenship. 28 U.S.C. § 1332(a).

 The Court has before it cross-motions for summary judgment on the issue of liability. For the reasons set forth below, partial summary judgment is granted in favor of the plaintiff insured, and partial summary judgment is granted in favor of the defendant insurer.

 The plaintiff C. Raymond Davis & Sons, Inc. (Davis) is a building contractor. In 1969, the Company constructed a building for National Label Company in Montgomery County, Pennsylvania. Davis built the structure on a sanitary landfill, following plans prepared by an independent architect. After completion of construction, the land under the building began to settle, and the floor and walls began to crack, sink and tilt. National Label, the owner of the building, brought a claim against Davis for damage to the building, and for other consequential damages, including damage to certain of National Label's printing machines, which required an absolutely level floor to operate properly. Relying on the Defense Clause in the insurance policy, Davis called upon Liberty Mutual to defend the claim. Liberty Mutual refused. National Label obtained an arbitrator's award against Davis for $ 50,000. and the award was elevated to judgment in the Court of Common Pleas of the Commonwealth of Pennsylvania.

 DUTY TO DEFEND

 The duty to defend provision of a liability insurance contract is an agreement by which the insurer, in consideration of the premium paid by the insured, assumes the obligation to arrange for and pay the expenses of the defense of certain lawsuits brought against the insured. In the policy at issue, the defense clause was written as follows:

 
"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of
 
Coverage A. Bodily injury or
 
Coverage B. Property damage
 
to which this policy applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless false or fraudulent . . ."

 A plausible reading of the clause is that the duty to defend and the duty to indemnify are co-extensive. The insurer agrees to defend suits alleging Such bodily injury or property damage; "such" apparently refers to bodily injury or property damage "to which this policy applies."

 Courts, however, have not read duty to defend clauses narrowly. The duty to defend has been held to be broader than the duty to indemnify. Gedeon v. State Farm Mutual Automobile Insurance Co., 410 Pa. 55, 58-9, 188 A.2d 320 (1963).

 Where the allegations of the complaint against the insured state on their face a claim against the insured to which the policy Potentially applies, the insurer must defend the claim. Id.; Zeitz v. Zurich General Accident and Liability Insurance Co., 165 Pa.Super. 295, 67 A.2d 742 (1949). The insurer is obliged to defend the entire claim if some of the allegations in the complaint fall within the terms of coverage and others do not. Cadwallader v. New Amsterdam Casualty Co., 396 Pa. 582, 152 A.2d 484 (1959).

 Davis relies principally on Paragraphs 34 and 38 of National Label's complaint to show that Liberty Mutual had ...


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