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All State Insurance Co. v. Callaghan

June 7, 2006

ALL STATE INSURANCE CO., PLAINTIFF,
v.
CYNTHIA M. CALLAGHAN I/A/D/B/A TOP OF THE MOUNTAIN DAY CARE, ET AL., DEFENDANT.



The opinion of the court was delivered by: A. Richard Caputo United States District Judge

(JUDGE CAPUTO)

MEMORANDUM

Before me is Plaintiff Allstate Insurance Company's ("Allstate") Motion for Summary Judgment. (Doc. 30.) Allstate seeks declaratory judgment that it does not owe a duty to defend or indemnify Charles Callaghan, Cynthia Callaghan i/a/d/b/a Top of the Mountain Day Care Center and K.C. for claims made against them by Rodger Gehring, Lisa Gehring and P.G., a minor in a suit in the Court of Common Pleas of Schuylkill County, Pennsylvania. (Doc. 30 ¶ 1.)

The Defendants apparently concede that the Plaintiff is under no obligation to defend Cynthia Callaghan i/a/d/b/a Top of the Mountain Day Care. (Doc. 40.) Defendants do persist in the contention that there is a duty to defend and indemnify Charles Callaghan and K.C., a minor.

Because the policy refers to Charles Callaghan and K.C. as "an insured" and because of the joint obligations clause, the business exclusion provision of the policy defeats coverage and the consequent duty of Plaintiff to defend and indemnify him and K.C..

STANDARD OF REVIEW

Summary judgment is appropriate if "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 that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56 (c). A fact is material if proof of its existence or non-existence might affect the outcome of the suit under the applicable substantive law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Where there is no material fact in dispute, the moving party need only establish that it is entitled to judgment as a matter of law. Where, however, there is a disputed issue of material fact, summary judgment is appropriate only if the factual dispute is not a genuine one. See id. at 248. An issue of material fact is genuine if "a reasonable jury could return a verdict for the nonmoving party." Id.

Where there is a material fact in dispute, the moving party has the initial burden of proving that (1) there is no genuine issue of material fact; and (2) the moving party is entitled to judgment as a matter of law. See CHARLES ALAN WRIGHT & ARTHURR. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL2D § 2727 (2d ed. 1983). The moving party may present its own evidence or, where the nonmoving party has the burden of proof, simply point out to the court that "the nonmoving party has failed to make a sufficient showing of an essential element of her case." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

All doubts as to the existence of a genuine issue of material fact must be resolved against the moving party, and the entire record must be examined in the light most favorable to the nonmoving party. See White v. Westinghouse Elec. Co., 862 F.2d 56, 59 (3d Cir. 1988). Once the moving party has satisfied its initial burden, the burden shifts to the nonmoving party to either present affirmative evidence supporting its version of the material facts or to refute the moving party's contention that the facts entitle it to judgment as a matter of law. See Anderson, 477 U.S. at 256-257.

The court need not accept mere conclusory allegations or denials taken from the pleadings. See Schoch v. First Fidelity Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). In deciding a motion for summary judgment, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249.

DISCUSSION

A. Duty to Defend and Indemnify

In Pennsylvania, the proper construction of an insurance policy is a matter of law, which a court may properly resolve when ruling on a summary judgment motion. Acceptance Ins. Co. v. Seybert, 757 A.2d 380, 382 (Pa. Super. Ct. 2000); Fisher v. Harleysville Ins. Co., 621 A.2d 158 (Pa. Super. Ct. 1993). An insurer's duty to defend the insured is determined by the factual allegations of the underlying complaint. Gen. Accident Ins. Co. of Am. v. Allen, 708 A.2d 828, 830 (Pa. Super. Ct. 1998). The insurer is obligated to defend if the factual allegations of the underlying complaint, on its face, state a claim that would actually or potentially fall within the policy's coverage if the allegations were true. American State Ins. Co. v. Maryland Cas. Co., 170, 183, 628 A.2d 880, 887 (Pa. Super. Ct. 1993); Stidham v. Millvale Sportsmen's Club, 618 A.2d 945, 953 (Pa. Sup. Ct. 1992). "While an insurer is not required to defend an insured in every claim brought against it, an insurer must defend in any suit in which there exists actual or potential coverage." Seybert, 757 A.2d at 382 (citing Moorhead, 578 A.2d at 494).

The underlying complaint filed in the Court of Common Pleas of Schuylkill County*fn1 contains fifteen counts. The Complaint concerns deviate sexual behavior on the part of the Callaghan's minor son, K.C., against the Gehring's minor son, P.G., while P.G. was being cared for at Mrs. Callaghan's day care center known as Top of the Mountain Day Care. Count II contains allegations that Charles Callaghan was negligent and careless in his supervision of his minor son, K.C., while K.C. was around others. (Doc. 32, Ex.1 at 19, ¶ 17). Count VII makes the same allegation vis a vis the victim minor, P.G.. (Id. at 27,¶ 51.) Count VIII alleges that Charles Callaghan negligently inflicted emotional distress upon the minor victim, P.G.

In interpreting an insurance policy, a court must determine the parties' intent as manifested by the language of the written agreement. Madison Const. Co. v. Harleysville Mut, Ins. Co., 735 A.2d 100, 106 (Pa. 1999). Plaintiff bears the burden of demonstrating that the policy's exclusion encompasses the underlying complaint. Nationwide Mut. Ins. Co. v. Yaeger, 1994 WL 447405 at *1 (E.D. Pa. 1994); Britamco Underwriters Inc. v. O'Hagan, 1994 WL 477551 at *3 (E.D. Pa. 1994). While ambiguous contract policies are construed against the insurer who drafted the contract, Miller v. Boston Ins. Co., 218 A.2d 275, 277 (Pa. 1966), if the language is clear and unambiguous, the court is required to give effect to that language and give the words their natural meaning. First Oak Brook Corp. Syndicate v. Comly Holding Corp., 93 F.3d 92, 94 (3d Cir. 1996); Ricco v. American Republic Ins. Co., 705 A.2d 422, 426 (Pa. 1997); Paylor v. Hartford Ins. Co., 640 A.2d 1234 (1994) (citations omitted). Courts should not distort the meaning of the language of a policy in order to create an ambiguity and coverage where none existed. Sphere Drake, P.L.C. v. 101 Variety Inc., 35 F. Supp.2d 421, 427 (E.D. Pa. 1999); Madison,735 A.2d at 106.

Allstate issued Deluxe Plus Homeowners Policy No. 098146779 to Charles L. and Cynthia Callaghan at 528 Mountain Road, Tamaqua, PA ("Policy").

The following are relevant sections from the Policy:

"You" or "your" - means the person named on the Policy Declarations as the insured and that person's resident spouse. "Insured person(s)" - means you and, if a resident of your household:

(a) any relative; and,

(b) any dependent person in your care. "Bodily Injury" - means physical harm to the body, including sickness or disease, and resulting death, ...


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