The opinion of the court was delivered by: VANASKIE
On August 25, 1997, defendant American Buildings Company (ABC) filed a motion for summary judgment against plaintiff Techneglas, Inc., asserting that Home Insurance Company (Home), the insurer subrogee of Techneglas' interest, was barred from litigating a subrogation claim against ABC because Home also insured ABC under a commercial umbrella policy in the amount of $ 25,000,000. (Dkt. Entry 142.) Because an insurer may not assert a subrogation claim against its insured, ABC's motion for summary judgment will be granted.
ABC had asserted a third party claim against John J. Passan, t/a Valley Distributing & Storage Co. and Laughlin Partners (collectively referred to herein as "Passan"), seeking contribution and/or indemnification for any liability that ABC may incur as a result of Techneglas' action. On June 15, 1998, Passan filed a motion for partial summary judgment, contending that its third party liability to ABC must be reduced to the extent that ABC's liability to Techneglas is reduced. (Dkt. Entry 178.) Because ABC may no longer be liable for any of Techneglas' insured losses, Passan's motion for partial summary judgment will be granted in relation to ABC's claims for indemnification and/or contribution for Techneglas' insured losses.
On October 11, 1989, Passan entered into a contract with defendant Joseph Banks Construction Co., Inc. (Banks) for the construction of a pre-fabricated warehouse facility in Wilkes-Barre, Pennsylvania. (ABC's Stat. of Facts (Dkt. Entry 100) Exhibit E, P 1; Plf's Stat. of Facts (Dkt. Entry 113) P 1; Bank's Stat. of Facts (Dkt. Entry 170) P 1; Plf's 2d Stat. of Facts (Dkt. Entry 215) P 1.) On October 12, 1989, Banks placed a purchase order to ABC on an ABC purchase order form for one of ABC's pre-fabricated warehouse units. (ABC's Stat. of Facts (Dkt. Entry 100) Exhibit E, P 2; Plf's Stat. of Facts (Dkt. Entry 113) P 2.) This purchase order was filled out by Jim Hill, an ABC district manager, with the assistance of Banks' employee Darrell Logan, now deceased. (Plf's Stat. of Facts (Dkt. Entry 113) P 2; Plf's 2d Stat. of Facts (Dkt. Entry 215) P 2.) ABC completed its shipment to Banks on February 22, 1990. (ABC's Stat. of Facts (Dkt. Entry 100) Exhibit E, P 5; Plf's Stat. of Facts (Dkt. Entry 113) P 5.) Shortly thereafter, Banks completed the construction of warehouse.
On March 7, 1994, the roof collapsed and the warehouse was destroyed. (ABC's Stat. of Facts (Dkt. Entry 100) Exhibit E, P 7; Plf's Stat. of Facts (Dkt. Entry 113) P 7.) At the time the warehouse collapsed, Techneglas was storing equipment and products in the warehouse. As a result of the collapse, Techneglas suffered damage to its property in the amount of $ 1,036,402.00. (Plf's Opp. Brf. (Dkt. Entry 147) at 3.) Of that amount, Home paid Techneglas $ 823,404.36. (Id. Ex. B.) As a result, roughly $ 200,000 of Techneglas' damages were not covered by the Home policy.
Techneglas instituted a civil action against ABC to recover its damages. ABC then instituted a third party action against Passan, seeking contribution and/or indemnification from Passan for any damages in the event that ABC was determined liable to Techneglas. ABC had primary insurance from Northfield Insurance Company with an aggregate limit of $ 1,000,000. (ABC's S.J. Mot. (Dkt. Entry 142) P 6.) This $ 1,000,000 has been paid by Northfield Insurance Company. (ABC's Reply Brf. (Dkt. Entry 157) at 1.) ABC has an umbrella policy of $ 25,000,000 maintained through Home, which ABC contends now covers any damages suffered by Techneglas. (ABC's S.J. Mot. (Dkt. Entry 142) PP 7, 11.)
Summary judgment should be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The parties agree that ABC's motion raises a question of law.
It is well settled that an insurer may not assert a subrogation claim against one of its insureds. See Employers of Wausau v. Purex Corp., 476 F. Supp. 140, 142-43 (E.D. Pa. 1979) ("'No right of subrogation can arise in favor of the insurer against its own insured, since by definition subrogation arises only with respect to rights of the insured against third persons to whom the insurer owes no duty.'" (quoting 16 Couch on Insurance 2d § 61:133 (1966 & 1978 Supp.)); Jos. A. Bank Clothiers, Inc. v. Brodsky, 950 S.W.2d 297, 303 (Mo. Ct. App. 1997) ("No right of subrogation can arise in favor of an insurer against its own insured, since, by definition, subrogation arises with respect to rights of the insured against third persons to whom the insurer owes no duty."); Jones Lang Wootton USA v. LeBoeuf, Lamb, Greene & MacRae, 674 N.Y.S.2d 280, 1998 WL 178837, at *9 (N.Y. App. Div. 1998) ("It is settled that a carrier may not utilize subrogation to maintain an action against its own insured with respect to a loss covered by the policy of insurance. To condone such a course would permit the carrier to recover from its own insured for the very loss against which the insurance policy provides indemnification, a direct breach of the carrier's primary contractual obligation."); Remy v. Michael D's Carpet Outlets, 391 Pa. Super. 436, 447, 571 A.2d 446 (1990) ("By definition, subrogation can arise only with respect to the rights of an insured against third persons to whom the insurer owes no duty. It follows and, indeed, is well established that an insurer cannot recover by means of subrogation against its own insured." (citations omitted)), aff'd on other grounds, 536 Pa. 1, 637 A.2d 603 (1993). This is not the first occasion upon which Home has attempted to assert a subrogation claim against one of its own insureds. In rejecting one of Home's earlier subrogation claims, one court aptly summarized the reasons for the so-called "anti-subrogation" rule:
To permit the insurer to sue its own insured for liability covered by the insurance policy would violate . . . sound public policy. Such action, if permitted would (1) allow the insurer to expend premiums collected from its insured to secure a judgment against the same insured on a risk insured against; (2) give judicial sanction to the breach of the insurance policy by the insurer; (3) permit the insurer to secure information from its insured under the guise of policy provisions available for later use in the insurer's subrogation action against its own insured; (4) allow the insurer to take advantage of its conduct and conflict of interest with its insured; and (5) constitute judicial approval of a breach of the insurer's relationship with its own insured.
Home Insurance Co. v. Pinski Bros., Inc., 160 Mont. 219, 500 P.2d 945, 949 (1972); Keystone Paper Converters, Inc. v. Neemar, Inc., 562 F. Supp. 1046, 1051 (E.D. Pa. 1983) (quoting Pinski).
Techneglas recognizes that an insurer may not generally assert subrogation rights against one of its insureds. (Tech's Opp. Brf. (Dkt. Entry 147) at 5.) Techneglas contends, however, that the "anti-subrogation" rule applies only where both insureds are named on the exact same policy, as opposed to being insureds under different policies. In support, Techneglas relies solely upon Transport Trailer Servs., Inc. v. Upjohn Co., 506 F. Supp. 442 (E.D. Pa. 1981). In that case, the plaintiff's premises caught fire from a defect in defendants' product. The insurer paid for the plaintiff's damages in the amount of $ 191,040.49 and asserted a subrogation action against the defendant. The insurer, however, had a property damage liability policy with the defendant. This policy contained a $ 5,000,000 deductible. Id. at 443. It was undisputed that this deductible amount had not been reached. Id. In that case, the court noted:
[Defendant] has paid Aetna a premium for a products liability policy calculated on a deductible in the amount of $ 5,000,000, and its incurred losses for the relevant policy year do not yet total that sum. To preclude any subrogation claim by Aetna on behalf of any other company also insured by Aetna which may have a valid claim against [defendant] when this deductible amount has not yet been exhausted, might allow [defendant] an unbargained for, unpaid for, windfall; a risk not otherwise insured against would in effect be covered by [defendant's] insurance policy with Aetna ...