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Pride Mobility Products Corp. v. Dewert Motorized Systems

July 17, 2006

PRIDE MOBILITY PRODUCTS CORPORATION, PLAINTIFF,
v.
DEWERT MOTORIZED SYSTEMS, ET AL., DEFENDANTS.
PHOENIX MECANO, INC., THIRD PARTY PLAINTIFF,
v.
ACE AMERICAN INSURANCE CO., ET AL., THIRD PARTY DEFENDANTS.



The opinion of the court was delivered by: John E. Jones III United States District Judge

Judge Jones

MEMORANDUM AND ORDER

THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:

Pending before the Court is a Motion to Dismiss Defendant Phoenix Mecano, Inc.'s Third Party Complaint Presenting the Defense of Failure to State a Claim ("the Motion") (doc. 117) filed by Third Party Defendant Kingstec Industries, Inc. on April 19, 2006. For the reasons that follow, we will grant the Motion.

PROCEDURAL HISTORY

The Plaintiff, Pride Mobility Products Corporation ("Plaintiff" or "Pride"), filed a complaint in the Luzerne County Court of Common Pleas against Dewert Motorized Systems ("Dewert"), Phoenix Mecano, Inc. ("Phoenix"), and Allianz Global Risks US Insurance Company ("Allianz") arising out of a breach of contract, negligent misrepresentations, and the failure to defend and indemnify Pride in connection with the underlying action, Rodolfo M. Cervera, et al. v. Pride Mobility Corp., et al., Cause No. 02-05-10470-ZCV, 293rd Judicial District of Zavala County, Texas ("Cervera Litigation" or "Cervera Action"). On April 21, 2005, Allianz, Phoenix's insurer, removed this matter to the United States District Court for the Middle District of Pennsylvania. On August 15, 2005, Pride filed an amended complaint against Phoenix, Allianz, and Dewert.

On September 2, 2005, Phoenix was granted leave of court to file a third party complaint against Wright-Gardner Insurance Company ("Wright-Gardner"), Kingstec Industries, Inc. ("Kingstec"), Steadfast Insurance Company ("Steadfast"), Royal Indemnity Company ("Royal"), and Ace American Insurance Company ("ACE"). (Rec. Doc. 54). Phoenix filed its third party complaint on September 2, 2005.*fn1 (Rec. Docs. 55-57).

On June 30, 2006, Pride, Westchester, Steadfast, Royal, Phoenix, Allianz, Wright-Gardner, and Kingstec stipulated and agreed to terms contained in a Stipulation and Agreement ("Agreement"), which was filed under seal with the Court. (Rec. Docs. 139, 143). As a result of the Court approving the Agreement on July 12, 2006, Phoenix's third party complaint against Westchester, Royal, and Steadfast (doc. 57) was dismissed without prejudice, the Motions to Dismiss filed by Westchester (doc. 62), Royal (doc. 66), and Steadfast (doc. 68) were denied as moot, Phoenix's Motion for Joinder of Pride's Insurers as Necessary Party Plaintiffs and Real Parties in Interest (doc. 78) was denied as moot, WrightGardner's Motion for Leave to file Third-Party Complaints against Westchester, Royal, and Steadfast (doc. 118) was denied as moot, and Westchester and Steadfast have been joined and will be named as party Plaintiffs in an amended complaint. (Rec. Doc. 139 at 9, Rec. Doc. 147).

On July 12, 2006, the Court held telephonic oral argument on the Motion, which has been briefed by the parties. The Motion is therefore ripe for disposition.

FACTUAL BACKGROUND

We initially note that the Cervera Litigation is a product liability case brought against Pride and others by the Estate of Manuela Cervera and involved an alleged defective electric lift chair manufactured by Pride. On March 2, 2002, a Pride lift chair allegedly caught fire and Manuela Cervera was fatally injured as a result. The chair incorporated an electrical motor and associated electrical supply and control circuits that were manufactured and sold by Phoenix. On February 3, 2003, Pride filed an amended third party complaint joining Phoenix in the Cervera Litigation as the potentially liable party. Shortly thereafter, the Cervera plaintiffs filed an amended complaint to include Phoenix as a defendant as well. Prior to trial, and after several mediation sessions, Pride settled the Cervera Litigation. The settlement was paid by Steadfast, Royal, and Westchester pursuant to their insurance policies with Pride. Phoenix refused to contribute to the settlement. As a result of the settlement, the Cervera Litigation was dismissed in its entirety.

In its amended complaint against Dewert, Phoenix, and Allianz, Pride asserts that Phoenix agreed to add Pride as an additional insured under its policy with Allianz, and, in fact, had represented that it had done so by forwarding an Accord Certificate indicating that Pride was an additional insured under Phoenix's commercial general liability ("CGL") policy. In that regard, Pride alleges that Phoenix, who manufacturers, assembles, and sells the motorized linear actuator used in Pride's electric lift chairs, had contractually undertaken to obtain insurance coverage for Pride and to indemnify Pride "with respect to all products and services supplied by" Phoenix. (Am. Comp. ¶¶ 35, 43-45). Plaintiff alleges that in January 2003, however, Phoenix advised Pride that Allianz did not issue the additional insured endorsement and would not be providing Pride with defense or indemnity for the Cervera claims. Accordingly, Pride alleges that Phoenix misrepresented to Pride that it would have Pride named as an additional insured on Phoenix's insurance policy to protect Pride from claims made against it as a result of claims arising from Phoenix's products and services. Id. at ¶¶ 67-70, 76-77. Following its settlement of the Cervera Litigation with the assistance of its insurers, Steadfast, Royal, and Westchester, Pride sought to recover from Phoenix, Dewert, and Phoenix for their alleged breach of contract and misrepresentations.

In the amended complaint, Pride has asserted breach of contract claims against Phoenix, Allianz, and Dewert. Pride seeks damages for Phoenix's alleged breach of contract arising from its failure to name Pride as an additional insured under its CGL policy and its failure to defend and indemnify Pride in the Cervera Litigation. Pride seeks damages from Allianz for its alleged breach of contract and fiduciary duties owed to Pride as an additional insured. Pride also filed negligent misrepresentation claims against Phoenix and Dewert in connection with the same alleged misconduct.

As we previously noted, on August 29, 2005, Phoenix sought leave of court to file a third party complaint against Pride's insurers, Steadfast, Royal, and Westchester, as well as against Wright-Gardner and Kingstec. The Court granted leave on September 2, 2005. (Rec. Doc. 54). We initially note that the third party complaint alleges that Steadfast, Royal, and Westchester owed Phoenix a duty of care to prepare and direct the defense and settlement of the ...


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