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Haines v. State Auto Property and Casualty Insurance Co.

March 24, 2010

PAUL C. HAINES, ET AL. PLAINTIFFS
v.
STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY DEFENDANT



The opinion of the court was delivered by: Golden, J.

MEMORANDUM OPINION AND ORDER

I. Introduction

Before the Court are the parties cross-motions for summary judgment. Plaintiffs Paul, Kelly and Ryan Haines ("the Haines") seek a declaratory judgment that Defendant State Auto Property and Casualty Insurance Company ("State Auto") owes a duty to defend and indemnify them in an underlying negligence, concert of action and negligent entrustment case in the Lancaster County Court of Common Pleas. They also assert a claim for bad faith, and for violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL"). Defendant State Auto seeks a declaratory judgment that no coverage exists, and that it does not owe either a duty to defend or a duty to indemnify Plaintiffs in the underlying action. State Auto also seeks summary judgment in its favor on Plaintiffs' bad faith and UTPCPL claims. For the foregoing reasons, summary judgment is granted in favor of Defendant State Auto, and against Plaintiffs, as to all claims.

II. Legal Standard

Summary judgment should be granted if the record, including pleadings, depositions, affidavits and answers to interrogatories demonstrates "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. Proc. 56(c). In making that determination, the "evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The question is whether "the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52. See also Sommer v. The Vanguard Group, 461 F.3d 397, 403-04 (3d Cir. 2006).

This matter is before the Court on the basis of diversity jurisdiction. The Court is therefore obligated to apply the substantive law of Pennsylvania. Nationwide Mut. Ins. Cas. Co. v. Buffetta, 230 F.3d 634, 637 (3d Cir. 2000). Interpretation of an insurance policy is a matter of law properly resolved through a declaratory judgment action. Erie Ins. Exchange v. Muff, 851 A.2d 919, 925 (Pa. Super. Ct. 2004). The Court must give effect to an insurance policy's unambiguous language. Standard Venetian Blind v. American Empire Ins., 469 A.2d 563, 566 (Pa. 1983). Any ambiguous language, however, must be construed against the insurer, as the drafter of the policy. Britamco Underwriters, Inc. v. C.J.H., Inc., 845 F.Supp. 1090, 1093 (E.D. Pa. 1994).

III. Factual Background

The material facts of this case are not in dispute. Plaintiffs were sued for negligence, concert of action and negligent entrustment in the Court of Common Pleas of Lancaster County on August 18, 2008, by their neighbors Spencer and Dawn Gamble, on behalf of their minor child. (Joint Stip. of Undisputed Facts, ¶ 15). The suit stems from an April 2004 accident in which the Gamble's son, Hunter, was struck and injured by a golf cart owned by the Haines and allegedly operated by a friend of Ryan Haines. (Id. at ¶¶ 7, 8). The accident took place in an alley behind Plaintiffs' neighbors' garage in Salunga, Lancaster County. (Id. at ¶ 14). The alley is paved, and maintained by the Township. (Haines Dep. 32).*fn1 The Haines filed a claim with State Auto, with whom they have had a homeowner's policy since the late 1980's, seeking defense and indemnification in the underlying action. (Haines Dep. 38; Joint Stip. of Undisputed Facts at ¶ 17). On September 11, 2008, State Auto sent Plaintiffs a reservation of rights letter. On October 14, 2008, State Auto made a determination that coverage did not exist, and sent another letter to that effect. (Id. at ¶ 18).

Mr. Haines initially purchased the golf cart in question in 2002. (Haines Dep. 47). The cart was driven in the alley behind Plaintiffs' home (and neighboring properties), and in a nearby farmer's field. (Haines Dep. 53). Mr. Haines testified that it was used approximately one-third of the time for planting flowers and fetching sodas from a nearby vending machine, and two-thirds of the time for the entertainment of his children and their friends. (Haines Dep. 54).

III. The Policies at Issue

Plaintiffs argue that both the 2003 and 2002 versions of their homeowner's insurance policy provide coverage for the accident. Plaintiffs also assert that, under the reasonable expectations doctrine, they are entitled to invoke the 2002 policy to find coverage, although the 2003 policy was in effect at the time of the accident.

Both policies include an exclusion for motor vehicle liability. The 2003 policy provides an exception to this exclusion if the motor vehicle is "[u]sed solely to service an 'insured's' residence" or is "[d]esigned for recreational use off public roads and:...(2) [o]wned by an 'insured' provided the 'occurrence' takes place on an 'insured location.'"

The 2002 policy provides an exception to the motor vehicle exclusion for a "motorized land conveyance designed for recreational use off public roads" that is "owned by an insured and on an insured location." The next line after the exception for a "motorized land conveyance" describes an exception for a golf cart, when used to play golf on a golf course.

The two policies differ in that the 2002 version has a broader definition of the term "insured location," as applied in the exceptions to the motor vehicle exclusion. In 2002, the applicable definition of "insured location" used in the exception for a motorized land conveyance included "any premises used by you in connection with" the residence premises and other structures and grounds that are part of the residence. The 2003 policy eliminated the clause encompassing "any premises used by you in connection with" the ...


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