The opinion of the court was delivered by: Judge Caputo
Presently before the Court is the motion of Plaintiff Northland Insurance Company for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c). Because Defendants' affirmative defense raises a question of material fact, Plaintiff's motion will be denied. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1332. Plaintiff's motion is fully briefed and ripe for disposition.
Plaintiff Northland Insurance Company ("Northland") is a foreign corporation with its principal place of business in Minnesota. Defendant Dominick P. Stranieri, a resident of Pennsylvania, is the owner and president of Defendant Appraisals Limited Enterprises ("Appraisals Limited"), Inc., which is a Pennsylvania corporation with a principal place of business in Pennsylvania and which is named as an interested party only. (Compl., Doc. 1 ¶¶ 1-3; Answer, Doc. 13 ¶¶ 1-3.) Defendants are named insureds on three (3) identically worded "Real Estate Appraisers Errors and Omissions Liability Polic[ies]" (collectively, "the Policy") with Northland, which ran consecutively, for one year each, beginning August 8, 1999 and ending August 8, 2002. (Compl., Doc. 1 ¶¶ 8-11; Answer, Doc. 13 ¶¶ 8-11.) Invoking the Policy, Defendant Stranieri has tendered his defense in four (4) underlying lawsuits to Northland, and Northland is currently defending those four (4) actions, subject to a reservation of rights. (Compl., Doc. 1 ¶ 16; Answer, Doc. 13 ¶ 16.) Northland now seeks a declaratory judgment that it has no duty to defend and/or indemnify Defendant Stranieri in the underlying actions. (Compl., Doc. 1 ¶ 18.)
Two of the underlying suits, Pennsylvania v. Gene P. Percudani, et al., No. 732 MD 2002, (Pa. Commw. Ct., filed Oct. 11, 2002) and Pennsylvania v. Thomas P. Senofonte, et al., No. 595 MD 2003 (Pa. Commw. Ct., filed Sept. 4, 2003), were brought by the Attorney General of Pennsylvania against Defendant Stranieri and a number of others not party to the current case. Both of these civil regulatory actions allege that Stranieri committed unfair and deceptive trade practices in violation of Pennsylvania's Consumer Protection Law by providing deceptively high appraisals of homes in furtherance of schemes with developers and mortgage companies. (See Exs. D & E to Compl., Doc. 1.) The other underlying suits, Eddie Lester, et al. v. Gene P. Percudani, et al., No. 3:01-cv-1182 (M.D. Pa., filed June 28, 2001), and Pablo Acre, et al. v. Chase Manhattan Mortgage Corp., et al., No. 1:04-cv-0832 (M.D. Pa. Filed Apr. 16, 2004), were brought by home purchasers against Stranieri and others, alleging that Stranieri conspired to deceive and defraud them by falsely appraising their homes at higher than their true values. (Exs. F and I to Compl., Doc. 1.) Stranieri's co-defendants in the Eddie Lester suit also filed cross-claims against him for fraud and violation of the UTPCPL (See Exs. G & H to Compl., Doc. 1.)
Plaintiff Northland argues, inter alia, that the Policy covers liability resulting only from "a negligent act, error or omission in the rendering of or failure to render 'appraisal services,'" and the underlying actions allege intentional, fraudulent, deceptive, and dishonest conduct by Stranieri, not negligence, errors, or omissions. (Compl., Doc. 1 ¶¶ 102-04.). In their Answer, Defendants argue (1) that Northland is estopped from requesting a declaration that it has no duty to defend Stranieri because it has litigated the underlying actions for several years and Stranieri would be severely prejudiced in his ability to defend himself if forced to find new counsel at this late stage, (Answer, Doc. 13 ¶ 130) and (2) that a fair reading of the complaints against Stranieri shows that they allege not only intentional acts, but also improper conduct by error or omission.
The standards for deciding a motion for judgment on the pleadings pursuant to Rule 12(c) and a motion to dismiss pursuant to Rule 12(b)(6) are identical. Turbe v. Gov't of V.I., 938 F.2d 427, 428 (3d Cir. 1991). Thus, the district court must view the facts and inferences to be drawn from the pleadings in the light most favorable to the non-moving party. Green v. Fund Asset Mgmt., L.P., 245 F.3d 214, 220 (3d Cir. 2001). "[J]udgment will not be granted 'unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law.' " Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290 (3d Cir. 1988) (quoting Soc'y Hill Civic Ass'n v. Harris, 632 F.2d 1045, 1054 (3d Cir. 1980)). Like in a motion to dismiss, a court may consider matters of public record and "undisputedly authentic" documents attached by the moving party if relied upon by the other party. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993), cert. denied, 510 U.S. 1042 (1994). "Merely attaching documents to a Rule 12(c) motion does not convert it to a motion under Rule 56.... [I]n ruling on the motion a court generally has 'discretion to address evidence outside the complaint.'" CitiSteel USA, Inc. v. GE Co., 78 Fed. Appx. 832, 835 (3d Cir. 2003) (nonprecedential opinion) (quoting Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 559 (3d Cir. 2002)).
Under Pennsylvania law, an insurer's duty to defend is broader than its duty to indemnify, as the duty to defend arises whenever the allegations in the underlying complaint (that is, the complaint in the underlying litigation), taken as true and liberally construed in favor of the insured, state a claim to which the policy potentially applies. Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir. 1999) (citing Erie Ins. Exch. v. Transamerica Ins. Co., 533 A.2d 1363, 1368 (Pa. 1987); Biborosch v. Transamerica Ins. Co., 603 A.2d 1050, 1052 (Pa. Super. Ct. 1992)). "Furthermore, if a single claim in a multiclaim lawsuit is potentially covered, the insurer must defend all claims until there is no possibility that the underlying plaintiff could recover on a covered claim." Id. On the other hand, the duty to indemnify arises only if the damages the insured must pay are actually within the policy coverage. Lucker Mfg. v. Home Ins. Co., 23 F.3d 808, 821 (3d Cir. 1994). Thus, there may be a duty to defend without a duty to indemnify. Frog, Switch & Mfg. Co., 193 F.3d at 746.
The insured has the initial burden to establish that the claim for coverage falls within the terms of the insurance policy, but when an insurer's argument relies on a specific policy exclusion, the insurer bears the burden of proving that the exclusion applies. Cont'l Cas. Co. v. County of Chester, 244 F. Supp. 2d 403, 407 (E.D. Pa. 2003). Pennsylvania law also provides that "[p]olicy exclusions are strictly construed against the insurer." Id. (citing Selko v. Home Ins. Co., 139 F.3d 146, 152 n.3 (3d Cir. 1998)).
In determining whether an insurer has a duty to defend and indemnify, a court must examine only the allegations in the complaint in the underlying litigation; it is error to look elsewhere. Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 896 (Pa. 2006); see also Coregis Ins. Co. v. Harrisburg, No. 1:03-CV-920, 2006 WL 860710, at *4 (M.D. Pa. Mar. 30, 2006) ("Under Pennsylvania law, the question of whether an insurance company has a duty to defend is determined by comparing the allegations contained within the four corners of the underlying complaint against the terms and conditions of the insurance policy at issue.") (emphasis added); Tuscora Wayne Mut. Ins. Co. v. Kadlubosky, 889 A.2d 557, 561 (Pa. Super. Ct. 2005) ("It is the face of the complaint and not the truth of the facts alleged therein which determines whether there is a duty to defend."). When examining the underlying complaint's allegations, the court must "resolve all doubts as to coverage in favor of the insured." Westport Ins. Corp. v. Black, Davis & Shue Agency, Inc., No. 1:05-CV-1252, 2007 WL 1576412, at *4 (M.D. Pa. May 30, 2007).
II. Coverage Under the Policy
The parties' "Real Estate Appraisers Errors and Omissions Liability Policy" provides that Northland "will pay those sums that the insured becomes legally obligated to pay as damages because of a negligent act, error or omission in the rendering of or failure to render 'appraisal services,' provided always that [time, coverage territory, and other requirements are met]." (Exs. A, B, & C to Compl., Doc. 1, at 1.)
Courts interpreting such language have held that, when the factual allegations in a complaint "sound in both intentional tort and negligence," the insurer has a duty to defend. MP III Holdings, Inc. v. The Hartford, Civ. A. No. 05-1569, 2006 WL 2645156, at *10 (E.D. Pa. Sept. 14, 2006) (applying Pennsylvania law, finding duty to defend where underlying complaint brought alternative claims for fraud and for negligent misrepresentation). On the other hand, when the underlying complaint makes no allegations of negligence, there is no duty to defend. For example, the United States District Court for the Eastern District of Pennsylvania found no duty to defend in Unionamerica Ins. Co. v. Lim, because "no such language [asserting negligence theories] is found in [the underlying plaintiffs'] complaint." No. 9904302, 2000 WL 1056450, at *3 (E.D. Pa. Aug. 1, 2000). In reaching its decision, the Unionamerica court distinguished Bitamco Underwriters, Inc. v. Weiner, 636 A.2d 649, 651 (Pa. Super. Ct. 1994), app. denied, 655 A.2d 508 (Pa. 1994), in which the insurer did owe a duty to defend the insured because the underlying complaint asserted negligence theories of recovery.
This principle finds support as well from the Third Circuit Court of Appeals' decision in Matrix Health Mgmt., Inc. v. Western World Ins. Co. No. 93-1750, 1994 WL 378986 (3d Cir. Feb. 1, 1994), which, applying Pennsylvania law, found that an insurer owed a duty to defend its insured against allegations of a fraudulent billing scheme, even though the policy, like Northland's, covered only "liability arising out of any negligent act, error or omission in rendering or failure to render professional services." Id. at *4. It did so in part because the underlying complaint mentioned negligence expressly, albeit only once. The complaint stated that "[b]y making these false representations, [the insureds] were reckless and negligent." Id. at *2 (emphasis added). As another factor, the court noted that, with regard to certain of the insured's employees, "although the Complaint does not explicitly allege negligent conduct by [them], such conduct is potentially implicated by the catch-all phrase, 'other violations of the Plan' in paragraph 1 of the Complaint and by the allegations of negligence in paragraph 51 of the Complaint." Id. at *3 (emphasis added). Additionally, ...