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BANKS TOWER COMMUNS. v. HOME INS. CO.

July 30, 1984

BANKS TOWER COMMUNICATIONS, LTD.
v.
THE HOME INSURANCE COMPANY v. CITY OF PHILADELPHIA



The opinion of the court was delivered by: BECHTLE

 BECHTLE, J.

 This suit began as one between an insured and its insurance company. The insurance company subsequently filed a third-party complaint against the City of Philadelphia seeking "contribution and/or indemnity" for the City's alleged negligence in causing plaintiff's injury. Presently before the court is the City's motion to dismiss the third-party complaint. Since matters outside the pleadings have been considered, the motion shall be treated as one for summary judgment. As such, the motion will be granted in part and denied in part.

 Plaintiff, Banks Tower Communications, Ltd., owns a television and radio transmitting tower in Roxborough, Pennsylvania, adjacent to the City of Philadelphia's municipal trash facility. Plaintiff sued defendant, The Home Insurance Company, after defendant refused to pay a claim for repair and replacement of certain of the tower's guy cables. The cables allegedly suffered erosion due to emission of corrosive chemicals from the City's incinerator. Damage to the tower itself allegedly occurred as well. Home Insurance, while denying liability, joined the City as a third-party defendant on the ground that if it was liable to plaintiff, then it was entitled to contribution or indemnity from the City due to the City's negligence in causing plaintiff's loss. The City moved to dismiss the third-party complaint against it on the grounds of lack of subject matter jurisdiction and failure to state a claim for which relief can be granted. The court will address these issues in order.

 Subject Matter Jurisdiction

 Jurisdiction of the complaint filed by plaintiff, Banks Tower, against defendant, Home Insurance, is based on diversity of citizenship. Plaintiff is a Pennsylvania corporation with its principal place of business in Bala Cynwyd, Pa., while defendant is a New Hampshire corporation with its principal place of business in New York City, New York. The third-party defendant City is, of course, also a Pennsylvania corporation.

 In making this argument the City ignores the well known jurisdictional rule that diversity of citizenship is not required between a third-party plaintiff and a third-party defendant even though the jurisdiction of the main claim is based on diversity. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 376, 57 L. Ed. 2d 274, 98 S. Ct. 2396 (1978). That the third-party plaintiff is suing as a subrogee is immaterial. The City's motion to dismiss for lack of jurisdiction must be denied.

 Availability of Legal Relief

 In the words of the third-party complaint, Home Insurance is seeking "indemnity or contribution" from the City in the event that Home Insurance is found liable on the claim of the plaintiff. Moving to dismiss, the City argues that under Pennsylvania law neither indemnity nor contribution are available to Home Insurance. Citing Globe Indemnity Company v. Agway, 456 F.2d 472 (3d Cir. 1972), the City correctly points out that in Pennsylvania, contribution is authorized only among joint tortfeasors, while indemnity is recognized only between parties who are either primarily and secondarily liable to each other, or who have an express contract which provides for it. The City reasons that since it is not a joint tortfeasor or a potential joint tortfeasor with Home Insurance, Home Insurance cannot make out a claim for contribution. Similarly, since there is no contract of indemnity between the City and Home Insurance, and since primary and secondary liability principles do not apply between an insurer and an unrelated third-party tortfeasor, Home Insurance cannot make out a claim for indemnity. While this may be so, it is clear to the court that Home Insurance's intended theory of recovery on the third-party complaint is subrogation, not indemnity or contribution. As Home Insurance explains in its memorandum in opposition to the City's motion, it "has joined the defendant City . . . on the grounds if it is liable that it is subrogated to any rights which the plaintiff may have against the third-party defendant [City] and . . . the City is bound to indemnify or contribute to any loss suffered by it . . . [Home Insurance] in the initial action." (emphasis added).

 It is well established that subrogation is different from either indemnity or contribution. Under the doctrine of subrogation an insurer which pays on a claim of its insured assumes any rights which the insured would have against any other person responsible for the loss. The insurer's right to subrogation is exclusively derivative -- it depends on the claim of the insured and is subject to whatever defenses the tortfeasor has against the insured. Great American Insurance Co. v. United States, 575 F.2d 1031, 1034 (2nd Cir. 1978). While the principle of indemnity underlies subrogation, actions based on subrogation are separate and independent from those based on indemnity. See Great American Insurance Co., 575 F.2d at 1034 (discussing differences between indemnity and subrogation). Thus, whether a party can make out a claim for indemnity is irrelevant in determining whether that party has a right to subrogation.

 Actions based on contribution are also separate and independent from those based on indemnity. Contribution is the right enjoyed by a joint tortfeasor, who has paid more than his proper share of the joint liability, to force the others to reimburse him to the extent of their liability. This is entirely different from subrogation which puts a party in a position to exercise the rights and remedies formerly enjoyed by another who no longer has any use for them due to the actions of the party seeking subrogation. 35 P.L.E. 245 (1961). Again, whether a party can make out a claim for contribution is irrelevant in determining whether that party has a right to subrogation.

 Despite the differences among indemnity, contribution, and subrogation, the court cannot accept the City's claim that Home Insurance's third-party complaint must be dismissed because it does not expressly use the term "subrogation." As the Second Circuit in Great American pointed out:

 
By the subrogation of the insurer is meant the substitution of the insurer in place of the insured for the purpose of claiming indemnity from a third ...

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