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MICHAEL CARBONE, INC. v. GENERAL ACCIDENT INS. CO.

August 8, 1996

MICHAEL CARBONE, INC., Plaintiff
v.
GENERAL ACCIDENT INSURANCE CO. and KEITH EDWARD WILSON, Defendants



The opinion of the court was delivered by: Donald W. VanArtsdalen, S.J

95-5462.

The plaintiff, Michael Carbone, Inc. ("Carbone") seeks a declaratory judgment requiring defendant General Accident Insurance Co. ("General Accident") to defend and indemnify it pursuant to a Commercial General Liability ("CGL") policy written by General Accident. The loss at issue arose on September 28, 1993 when Keith Edward Wilson's car was rear-ended by an automobile driven by Dennis Sebelist, a Carbone employee traveling to a customer service call on behalf of his employer. In a related civil matter, Wilson sued both Sebelist and Carbone. See Wilson v. Sebelist, No. 95-5462 (E.D.Pa.1995) (unreported case). This underlying action has been settled through a two-tiered settlement in which the amount of plaintiff's recovery is contingent upon whether the defendants are covered by the Carbone CGL policy.

In this action, both Carbone and General Accident have moved for summary judgment. General Accident argues that it has no duty to defend or indemnify Carbone because the CGL policy at issue contained an exclusion for losses arising out of the ownership, maintenance, or use an automobile. Carbone, in contrast, seizes upon a "separation of insureds" clause in the CGL policy, which it argues makes the automobile exclusion inapposite. After carefully considering the briefs filed by both parties and the oral argument on the cross-motions for summary judgment, I have concluded that the automobile exclusion does apply and that General Accident is not required to defend or indemnify Carbone. Therefore, General Accident's motion for summary judgment will be granted and Carbone's will be denied.

I. Undisputed Facts

Although the parties desire very different outcomes in this action, they agree on all of the pertinent facts. Carbone concedes that Sebelist was acting in the scope of his employment when he was involved in the collision with Wilson's car. The parties agree that Sebelist owned and insured the car he was driving at the time of the accident; it was not owned by Carbone.

Furthermore, the parties agree that the CGL policy contained an automobile exclusion and a separation of insureds clause, although they disagree vehemently on the proper interpretation of those provisions. The CGL policy obligated General Accident to defend and indemnify Carbone and the other "insureds" for a wide variety of losses. Since Carbone is a corporation, Section II.1.c. of the policy provides the relevant definition of "insureds":

If you are designated in the Declarations as:

.... c. An organization other than a partnership or joint venture, you are an insured. Your executive officers and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.

A subsequent provision, Section II.2.a., extends the definition of "insured":

Each of the following is also an insured:

a. Your employees, other than your executive officers, but only for acts within the scope of their employment by you.

The policy also contains an "automobile exclusion," the relevant portion of which states:

This insurance does not apply to:

.... g. "Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "Auto" or watercraft owned or operated by or rented or loaned to any insured.

Finally, the CGL policy includes a "Separation of Insureds" clause which states, in toto:

Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Form to the first Named Insured, this insurance applies:

a. As if each Named Insured were the only Named Insured; and

b. Separately to each insured against whom claim is made or "suit" is brought.

II. Summary Judgment Standard

Both sides have moved for summary judgment. A motion for summary judgment is appropriate only when there is no genuine issue of material fact, and one party is entitled to judgment as a matter of law. Williams v. Borough of West Chester, 891 F.2d 458, 463-64 (3d Cir.1989). In a motion for summary judgment, the court may examine evidence beyond the pleadings. The court must always consider the evidence, and the inferences from it, in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir.1987); Baker v. Lukens Steel Co., 793 F.2d 509, 511 (3d Cir.1986). If a conflict arises between the evidence presented by both sides, the court must accept as true the allegations of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513-14, 91 L.Ed.2d 202 (1986). For a dispute to be "genuine," a reasonable jury must be able to return a verdict for the non-moving party. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510.

III. Legal Analysis

Given that there are no disputes as to any material fact, this case is particularly eligible for resolution by summary judgment. The determination of which party's motion should be granted turns on the interpretation of the CGL policy. General Accident claims that the automobile exclusion bars coverage. General Accident notes that the loss at issue was caused by Sebelist's operation of an automobile while Sebelist was acting within the scope of his employment. Furthermore, since Sebelist was acting on behalf of Carbone, his employer, General Accident argues that Sebelist's acts must be imputed to Carbone under ordinary agency law doctrines. Therefore, General Accident contends that the loss arose out of use or operation of an automobile by an insured (i.e. Carbone Inc.), and thus, the automobile exclusion applies to bar coverage.

A. The Separation of Insureds Clause and the Auto Exclusion

Carbone concedes that the automobile exclusion plays some role in the present analysis. However, Carbone argues that the exclusion must be read in light of the separation of insureds clause. Essentially, this requires that the automobile exclusion must be applied to each insured separately. In particular, Carbone believes that when the automobile exclusion is read to determine how it applies to Carbone it reads as follows:

This insurance does not apply to:

g. "Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "Auto" or watercraft owned or operated by or rented or loaned to Carbone Inc.

In short, Carbone thinks that the phrase "any insured" must be replaced by each insured individually when determining the scope of the exclusion. In essence, Carbone views "any insured" to be synonymous with "the insured." Similarly, when read to determine how it ...


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