No. 1321 Philadelphia, 1981, Appeal from the Order of April 27, 1981, Court of Common Pleas, Montgomery County, Civil Division--Equity, No. 79-21450.
Brian P. Sullivan, Norristown, for appellant.
Robert M. John, Hatboro, for appellee.
McEwen, Johnson and Watkins, JJ.
[ 304 Pa. Super. Page 356]
This case presents the issue of whether or not an insurer (Appellant) must defend the insured (Appellee) against a counterclaim in a suit filed by Appellee to collect an unpaid debt from Appellee's customer.
Appellee was covered by Appellant's insurance policy which contained the following defense clause:
[ 304 Pa. Super. Page 357]
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 insurance 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, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.
Because Appellee, a contractor, was unable to collect the balance on his customer's account, he filed a suit before the American Arbitration Association (A.A.A.), according to the compulsory arbitration terms of the construction contract. The customer, in response, filed an answer and a counterclaim against Appellee. The answer alleged, first, that the customer's property had been damaged in an amount of approximately $27,000.00, and, second, that the damage was the direct result of Appellee's negligence and of his failure to provide adequate protection to prevent the damage. The counterclaim demanded damages of ...