The opinion of the court was delivered by: Katz, Senior District Judge.
Plaintiff Jerry Davis, Inc. (JDI) seeks a declaration that its
insurer, Maryland Insurance Company (Maryland), is required under
its "Commercial General Liability" policy to indemnify it in a
lawsuit against it in state court. Before the court is Maryland's
motion to dismiss and plaintiff's response thereto.
JDI contracted with Nunzio Terra and Nufab Corporation, doing
business as Gothum, The New City (referred to collectively as
"Gothum"), to perform the electrical wiring work at a nightclub
Gothum was building. JDI did the work and arranged for a bonding
company to inspect it. The bonding company inspected and approved
the work. Gothum opened its nightclub, only to be shut down five
months later after an inspection by the City of Philadelphia's
Department of Licenses and Inspections revealed a series of
violations stemming from JDI's electrical work. Gothum was forced
to remain closed for six months while a new contractor did
extensive electrical work. Based on the financial hardship caused
by the closing and additional work, the owners were forced to
percentage of their interest in the nightclub, resulting in
further financial losses. See Compl.Ex. B ¶¶ 3-9.
Gothum filed suit against JDI and the bonding company in state
court. The complaint contains counts purporting to state claims
in negligence, breach of contract, fraudulent misrepresentation,
breach of implied warranties, and breach of express
warranties.*fn2 Upon notification of the suit, Maryland informed
JDI that it had no duty to defend or indemnify JDI in the case.
See Compl.Ex. C at 1. Among other reasons, Maryland explained,
"The allegations as contained in the Complaint do not fall within
the meaning of occurrence insured contract or property damage
which are defined in your policy." Id. at 6. JDI filed this
suit, seeking a declaration that Maryland is required to
indemnify it in the Gothum suit.
For the purposes of a 12(b)(6) motion to dismiss a complaint,
this court must accept as true all the allegations of fact in
plaintiff's complaint, must construe the complaint in the light
most favorable to plaintiff, and must determine whether, under
any reasonable reading of the pleadings, plaintiff may be
entitled to relief. See Nami v. Fauver, 82 F.3d 63, 65 (3d Cir.
The court's first step is to determine the scope of the
policy's coverage. The terms of the policy must be compared to
the nature of the allegations in the complaint to determine
whether, if the allegations are sustained, the insurer would be
obligated to bear the expense of the judgment. See Snyder
Heating Co., Inc. v. Pennsylvania Mfrs. Assoc. Ins. Co.,
715 A.2d 483, 484 (Pa.Super. 1998). In determining whether the claims
made by Gothum against JDI in the underlying lawsuit fall within
the policy and thus trigger Maryland's duty to defend and
indemnify, the court should look solely to the allegations of the
complaint in the underlying action. See, e.g., Pacific Indem.
Co. v. Linn, 766 F.2d 754, 760 (3d Cir. 1985) ("The obligation
to defend is determined solely by the allegations of the
complaint in the action."); Snyder Heating, 715 A.2d at 484
("The nature of the claim, rather than the actual details of any
injuries suffered by the insured, determines whether the insurer
is required to defend."); Scopel v. Donegal Mut. Ins. Co.,
698 A.2d 602, 605 (Pa.Super. 1997) ("[T]he nature of the allegations
contained in a complaint control.").
The court in Britamco Underwriters, Inc. v. Stokes,
881 F. Supp. 196 (E.D.Pa. 1995) summed up the relevant determination:
If there is a possibility that any of the underlying
claims could be covered by the policy at issue, the
insurer is obliged to provide a defense at least
until such time as those facts are determined, and
the claim is narrowed to one patently outside of
coverage. On the other hand, if there is no
possibility that any of the underlying claims could
be covered by the policy at issue, judgment in the
insurer's favor with regard to the duty to defend and
indemnification is appropriate.
JDI argues that Maryland has a duty to indemnify based on the
following policy language:
We will pay those sums that the insured becomes
legally obligated to pay as damages because of
"bodily injury" or "property damage" to which this
insurance applies. We will have the right and duty to
defend any "suit" seeking those damages. . . . This
insurance applies to "bodily injury" and "property
damage" only if . ...