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INGERSOLL-RAND EQUIP. CORP. v. TRANSPORTATION INS.

May 5, 1997

INGERSOLL-RAND EQUIPMENT CORPORATION, Plaintiff
v.
TRANSPORTATION INSURANCE COMPANY; SCANLON, HOWLEY, SCANLON & DOHERTY; JAMES M. SCANLON; Defendants



The opinion of the court was delivered by: CALDWELL

 This is a legal malpractice case, brought by Plaintiff, Ingersoll-Rand Equipment Corp. ("Ingersoll-Rand"), against Defendants, Transportation Insurance Co. ("Transportation Insurance"), and attorney James M. Scanlon and the law firm of Scanlon, Howley, Scanlon and Doherty (collectively, "Scanlon"). Before us is Transportation Insurance's motion to dismiss.

 I. Background

 In August of 1989, a well drilling vehicle, owned and operated by Ingersoll-Rand, damaged a house owned by Lynn and Leah Decker. The Deckers sued Ingersoll-Rand for negligence on May 30, 1990. Transportation Insurance, Ingersoll-Rand's liability insurer at the time, selected Scanlon to defend the Decker action.

 In January of 1992, two and one-half years after the accident, the Deckers sought to amend their complaint against Ingersoll-Rand to add a demand for punitive damages. Scanlon, as Ingersoll-Rand's trial counsel, opposed the amendment as time barred, but the trial court ruled for the Deckers and permitted the amendment. Scanlon failed to assert the statute of limitations in the answer he filed on Ingersoll-Rand's behalf, and failed to raise the defense again until after a jury had awarded the Deckers punitive damages of one million dollars. Scanlon was unable to obtain reversal of this damage award for Ingersoll-Rand, either through post-trial motions or on appeal. The trial court ruled that while the statute of limitations had passed prior to the amendment which added the punitive damages demand, Ingersoll-Rand had waived the limitations defense by failing to raise it in its answer.

 Ingersoll-Rand brought this action against Scanlon and Transportation Insurance, alleging negligence on the part of Scanlon (Count I), and alleging that Transportation Insurance is liable for breach of fiduciary duty (Count II), negligence (Count III), is vicariously liable for Scanlon's negligence (Count IV), and breached its contract of insurance with Ingersoll-Rand (Count V). Transportation Insurance has moved to dismiss the claims against it, arguing that they fail to state a claim upon which relief may be granted.

 II. Standard of Review

 When considering a motion to dismiss under Rule 12(b)(6) "all facts alleged in the complaint and all reasonable inferences that can be drawn from them must be accepted as true." Malia v. General Elec. Co., 23 F.3d 828, 830 (3d Cir. 1994). The motion must be denied unless the plaintiff cannot prove any facts in support of the claim which would entitle it to relief. Rocks v. Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989).

 III. Discussion1

 Transportation Insurance's arguments in favor of dismissal can be separated into three categories: (1) those seeking dismissal of the tort law claims raised in Counts II and III; (2) those seeking dismissal of the claim for vicarious liability based on Scanlon's negligence raised in Count IV; and (3) those seeking dismissal of Count V's breach of contract claim.

 A. Tort Claims Against Insurer (Counts II & III)

 Transportation Insurance first argues that Pennsylvania law does not recognize non-contractual tort claims against an insurer for damages related to the insurer's duty to defend and indemnify. In Pennsylvania, there is no separate tort-law cause of action against an insurer for negligence and breach of fiduciary duty: such claims must be brought in contract. Greater N.Y. Mut. Ins. Co. v. North River Ins. Co., 872 F. Supp. 1403, 1406, 1409 (E.D. Pa. 1995), aff'd, 85 F.3d 1088 (3d Cir. 1996) (citing D'Ambrosio v. Pennsylvania Nat'l Mut. Cas. Ins. Co., 494 Pa. 501, 507-08, 431 A.2d 966, 969-70 (1981)); Gedeon v. State Farm Mut. Auto. Ins. Co., 410 Pa. 55, 58, 188 A.2d 320, 321 (1963); Cowden v. Aetna Cas. & Sur. Co., 389 Pa. 459, 468, 134 A.2d 223, 227 (1957).

 Ingersoll-Rand argues that these cases are distinguishable under the misfeasance/nonfeasance distinction drawn in Raab v. Keystone Insurance Co., 271 Pa. Super. 185, 412 A.2d 638 (1979). Raab suggested that "the test to determine if there exists a cause of action in tort growing out of a breach of contract is whether there was an improper performance of a contractual obligation (misfeasance) rather than the mere failure to perform (nonfeasance)." Id. at 187-88, 412 A.2d at 639.

 Raab's approach, however, has been expressly rejected by the Superior Court in favor of one which looks to the essence of the cause of action asserted: "to be construed as a tort action, the wrong ascribed to the defendant must be gist of the action with the contract being collateral." Phico Ins. Co. v. Presbyterian Med. Serv. Corp., 444 Pa. Super. 221, 228-29, 663 A.2d 753, 757 (1995); Redevelopment Auth. of ...


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