The opinion of the court was delivered by: Savage, J.
Moving for summary judgment, Tower Insurance Company of New York ("Tower") and Everest National Insurance Company ("Everest") seek a declaration that they have no duty to defend or indemnify Dockside Associates Pier 30, LP ("Dockside") and DePaul Management Company ("DePaul") in an action pending in Pennsylvania state court.*fn1 They contend that the claims against Dockside and DePaul in the underlying action are not covered under the commercial general liability insurance policies issued by them because the claims arise out of a contract. In the alternative, they argue that coverage is barred by mold exclusions in the policies and the "known loss" doctrine; the insureds failed to give Tower proper notice of the loss; and the loss occurred prior to the effective date of the policies.
Dockside and DePaul contend that the claims are covered because the complaint in the underlying action asserts claims other than for breach of contract. They also contest that policy exclusions bar coverage, the "known loss" doctrine applies, or they failed to provide proper notice of loss.
After reviewing the policies and the plaintiffs' complaint in the underlying action, we conclude that Tower and Everest have no duty to defend and indemnify Dockside and DePaul. Accordingly, Tower and Everest's motion for declaratory judgment will be granted.
In their amended complaint filed in the Philadelphia County Court of Common Pleas, Raymond Forceno and Cheryl Ann Ryan assert causes of action arising out of their purchase of a condominium unit from Dockside. They allege that as a result of faulty construction, water "intruded" into their unit causing water damage and mold. Compl., at
20. They seek damages for "the cost of repairing the condominium unit, permanent diminished value of the condominium unit, personal injuries, economic damages resulting from moving from the condominium unit and costs associated with relocation." Compl., at
16. They sued Dockside, the seller; DePaul and Camco Management Company ("Camco"), the managers of the property at various times; Keating Building Company ("Keating"), the builder of the condominium; and Dockside Condominium Association ("Condominium Association"), owner of the common areas.
The state court complaint contains seven counts. Five counts are brought against Dockside,*fn2 one against DePaul,*fn3 and one against Keating. The causes of action against Dockside are for breach of contract, breach of implied warranty, unjust enrichment, fraud, and deceptive and fraudulent business practices under the "state consumer protection statute." The count against DePaul is for negligently failing to maintain and repair the condominium unit.
Our task is to decide whether Tower and Everest, at this time, have a duty to defend and indemnify Dockside or DePaulagainst any applicable claims. In other words, we must determine whether any of the applicable claims are potentially covered by the policies issued to Dockside and DePaul.
The interpretation of an insurance contract is a question of law. J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 360 (3d Cir. 2004) (citing Med. Protective Co. v. Watkins, 198 F.3d 100, 103 (3d Cir. 1999)). "Whether a particular loss is within the coverage of an insurance policy is such a question of law and may be decided on a motion for summary judgment in a declaratory judgment action." State Farm Mut. Auto. Ins. Co. v. Universal Underwriters Ins. Co., 657 A.2d 1252, 1255 (Pa. Super. 1995), rev'd on other grounds, 701 A.2d 1075 (Pa. 1997).
A court must give effect to the plain language of the insurance contract read in its entirety. Lexington Ins. Co. v. W. Pa. Hosp., 423 F.3d 318, 324 (3d Cir. 2005) (quoting Reliance Ins. Co. v. Moessner, 121 F.3d 895, 901 (3d Cir. 1997)). When the policy language is ambiguous, the provision must be construed in favor of the insured. Reliance, 121 F.3d at 900-01(citing Standard Venetian Blind v. Am. Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983)). Contract language is ambiguous if it is reasonably susceptible to more than one construction and meaning. Bowersox v. Progressive Cas. Ins. Co., 781 A.2d 1236, 1239 (Pa. Super. Ct. 2001) (citing Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986)). However, policy language may not be stretched beyond its plain meaning to create an ambiguity. Trizechahn Gateway LLC v. Titus, 976 A.2d 474, 483 (Pa. 2008).
The insured has the initial burden of establishing coverage under the policy. Butterfield v. Giuntoli, 670 A.2d 646, 651-52 (Pa. Super. Ct. 1995). Conversely, when the insurer relies on a policy exclusion as the basis for denying coverage, it has the burden of proving, by uncontradicted facts, that the exclusion applies. Mistick, Inc. v. Northwestern Nat. Cas. Co., 806 A.2d 39, 42 (Pa. Super. Ct. 2002); Butterfield, 670 A.2d at 651-52. Policy exclusions are strictly construed against the insurer. Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 206 (3d Cir. 2001)(citing Selko v. Home Ins. Co., 139 F.3d 146, 152 n.3 (3d Cir. 1998)).
An insurance carrier's duty to defend is distinct from its duty to provide coverage. It is interpreted more broadly than the duty to indemnify. Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 896 n.7 (Pa. 2006). An insurer may have a duty to defend even though it has no duty to indemnify. Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir. 1999). A duty to indemnify does not arise until the insured is found liable for a covered claim. Id.
Because the duty to defend is broader than the duty to indemnify, the complaint in the underlying action must be construed liberally, the factual allegations must be accepted as true, and all doubts as to coverage resolved in favor of the insured. Roman Mosaic & Tile Co. v. Aetna Cas. & Sur. Co., 704 A.2d 665, 669 (Pa. Super. 1997). To prevent artful pleading designed to avoid policy exclusions, it is necessary to look at the factual allegations in the complaint, not how the underlying plaintiff frames the request for relief.
Kvaerner Metals, 908 A.2d at 893; Mut. Benefit Ins. Co. v. Haver, 725 A.2d 743, 745 (Pa. 1999). In other words, the focus of the coverage inquiry is on the substance, not the form, of the allegations.
An insurer is obligated to defend the insured against any suit arising under the policy "'even if the suit is groundless, false, or fraudulent.'" Britamco Underwriters, Inc. v. Weiner, 636 A.2d 649, 651 (Pa. Super. Ct. 1994) (quoting Gedeon v. State Farm Mut. Auto. Ins. Co., 188 A.2d 320, 321 (Pa. 1963)). Consequently, whenever the complaint sets forth facts raising claims that could possibly come within the policy's coverage, the insurer's duty to defend is triggered. Erie Ins. Exch. v. Muff, 851 A.2d 919, 931 (Pa. Super. Ct. 2004); Belser v. Rockwood Cas. Ins. Co., 791 A.2d 1216, 1219, 1222 (Pa. Super. Ct. 2002). If a single claim in a multiple claim complaint is potentially covered, the duty to defend attaches until the underlying plaintiff can no longer recover on a covered claim. Frog, Switch & Mfg. Co.,193 F.3d at 746; Am. Contract Bridge League v. Nationwide Mut. Fire Ins. Co., 752 F.2d 71, 75 (3d Cir. 1985).
Applying these principles to this case, we examine the insurance policies and the allegations in the state court complaint. What the complaint in the state action alleges Dockside and DePaul did and the language of the insurance policies are not in dispute. Thus, we must decide whether ...