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TVSM, INC. v. ALEXANDER & ALEXANDER

April 24, 1984

TVSM, INC.
v.
ALEXANDER & ALEXANDER, INC., Defendant and Third-Party Plaintiff and WAUSAU UNDERWRITERS INSURANCE COMPANY, Defendant and SHOWTIME ENTERTAINMENT, Third-Party Defendant



The opinion of the court was delivered by: LORD

 Plaintiff's business prepares program guides for cable television companies throughout the United States. Third party defendant Showtime Entertainment sells shows for transmission on cable television. Showtime provides plaintiff with schedules which TVSM compiles, prints and distributes in its program guides. On July 27, 1982, TVSM published and distributed inaccurate program guides. In all of the guides, according to the complaint, the listings for Showtime Entertainment programming was in error by one hour. The complaint alleges that TVSM incurred increased expenses to notify recipients of the program guides of the inaccuracy of the guide and to distribute corrected program guides.

 The complaint alleges further that TVSM advised defendant Alexander & Alexander, plaintiff's insurance broker, of the loss. Alexander & Alexander (A & A) advised TVSM, according to the complaint, that a policy obtained through A & A and written by defendant Wausau Underwriters Insurance Company covered the claim. Wausau allegedly agreed that the policy provided coverage for the claim. However, it subsequently refused to pay TVSM for the increased expenses plaintiff had incurred.

 Plaintiff's complaint comprises three counts. Count I alleges that the Wausau policy covers plaintiff's claim and that Wausau's refusal to pay has been in bad faith.

 Count II alleges that TVSM and Wausau intended that the Wausau policy provide coverage for claims such as this and demands that, in the event that the policy does not cover this claim, the court reform the contract to include this claim.

 Count III alleges, in the alternative, that if the Wausau policy is not deemed to provide coverage for this claim and if the court refuses to reform the contract between plaintiff and Wausau, A & A, as agent of TVSM for the purpose of acquiring insurance coverage, negligently breached its duties and obligations to TVSM.

 Defendant A & A filed a third-party complaint against Showtime Entertainment (Showtime), alleging that Showtime promotes its business by providing monthly program guide production kits to publishers of cable television program guides such as TVSM. It further alleges, that on June 17, 1982, Showtime sent to TVSM its August 1982 program guide production kit containing inaccurate times for its program listings. The third-party complaint further alleges that if TVSM incurred damages, as alleged in its complaint, the damages were caused by the negligence of Showtime. The complaint demands judgment against the third-party defendant, Showtime, for all sums that may be adjudged against defendant A & A.

 Third-party defendant Showtime has moved for judgment on the pleadings and for dismissal of Showtime as a third-party defendant in this action. Under Federal Rule of Civil Procedure 14(a) a defendant, as a third-party plaintiff, may bring in a person not a party to the action "who is or may be liable" to the defendant for all or part of the plaintiff's claim against defendant. Because there is no set of facts and no theory under which third-party defendant Showtime may be liable to third-party plaintiff A & A, I will grant Showtime's motion.

 I have diversity jurisdiction over this case. Therefore, Pennsylvania law provides the answer to the question whether the third-party defendant "may be liable" to the third-party plaintiff. Federal Rule of Civil Procedure 14(a) provides merely a procedural means of adding a third-party defendant; it provides no substantive rights. Under Pennsylvania law, the only means by which Showtime may be liable to third-party plaintiff A & A are indemnity, contribution, and subrogation.

 I. Indemnity

 Indemnity shifts the entire loss from one defendant to another. Burch v. Sears, 320 Pa. Super. 444, 467 A.2d 615, 622 (1983). In Pennsylvania, indemnity is available only from those who are primarily liable to those who are merely secondarily or vicariously liable. Id. "To evaluate primary as against secondary liability courts have focused on factors such as active or passive negligence and knowledge of or opportunity to discover or prevent the harm." Id. The Pennsylvania Supreme Court has described indemnity as follows:

 
It is a right which insures to a person who, without active fault on his own part, has been compelled, by reason of some legal obligation, to pay damages occasioned by the initial negligence of another, and for which he himself is only secondarily liable.

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