IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
July 19, 2011
FIREMAN'S FUND INSURANCE CO., 580 & 530 SWEDESFORD ASSOCIATES, LP & KEYSTONE PROPERTY GROUP, GP, LLC, PLAINTIFFS,
ZURICH AMERICAN INSURANCE CO., DEFENDANT.
The opinion of the court was delivered by: Rufe, J.
MEMORANDUM ORDER AND OPINON
In this insurance-coverage dispute, both parties have filed motions for summary judgment. The court will grant the Defendant's motion for summary judgment and deny the Plaintiff's motion for partial summary judgment.
I. B ACKGROUND*fn1
The pending litigation arises from two insurance companies' dispute over which is responsible for the costs of defending a civil tort action brought against 580 & 530 Swedesford Associates, L.P and Keystone Property Group, GP, LLC.
The underlying civil tort action took place in the Chester County Court of Common Pleas, Pennsylvania under the caption Dadario v. 580 & 530 Swedesford Associates, L.P., et al.. *fn2 That case involved an injury allegedly sustained by Dadario, a security guard, when he boarded an elevator on the third floor of 530 East Swedesford Road, Wayne, Pennsylvania ("530 East") *fn3
Swedesford owns and operates 530 East; Keystone manages the premises. *fn4
In January 2008, Dadario filed his claims against Swedesford and Keystone in state court, alleging that in August 2006, he tripped and fell over the "defective, uneven and/or irregular surface of the elevator floor" at 530 East. *fn5 Dadario's complaint alleged, inter alia , negligent supervision of the maintenance and inspection of the elevators. A year later, Swedesford and Keystone filed a four-count joinder complaint against Schindler Elevator company, which had contracted with Swedesford to maintain and inspect the elevators located on its property, *fn6 alleging negligence and breach of contract. *fn7 In its answer to the joinder complaint, Schindler admitted that it performed maintenance on the elevators at 530 East five days before the accident.*fn8
At the time of that accident, Fireman's Fund Insurance Company insured Swedesford under a primary commercial general liability policy. *fn9 Swedesford and Keystone were also insured by Defendant Zurich American Insurance Company, under a Owner's and Contractor's Protective Liability ("OCPL") policy issued to Schindler, which provides coverage for injuries arising out of work performed by Schindler. Schindler secured the OCPL policy pursuant to a Continuing Service Contract with Swedesford. *fn10 In late 2009, Fireman's Fund wrote to Zurich, demanding it indemnify and defend Swedesford and Keystone pursuant to the OCPL policy. *fn11 Zurich refused, *fn12 and Fireman's Fund assumed Swedesford's and Keystone's defense in the Dadario litigation.*fn13
On July 27, 2010, Plaintiffs Fireman's Fund, Swedesford, and
Keystone filed a three-count complaint in the Court of Common Pleas,
Philadelphia County against Zurich. In Count One, pursuant to the
Pennsylvania Declaratory Judgments Act, *fn14
Plaintiffs sought an order, inter alia : (1)
declaring that Zurich was obligated to defend and indemnify Swedesford
and Keystone in the Dadario litigation; *fn15
and (2) directing Zurich to reimburse Fireman's Fund for all costs
expended in the defense of Swedesford and Keystone. *fn16
In counts Two and Three, Plaintiffs sought compensatory
damages for breach of contract and breach of the duty of good faith
arising out of Zurich's refusal to defend. *fn17
Invoking this Court's diversity jurisdiction, Zurich
removed the action to this Court on August 24, 2010. *fn18
On January 31, 2011, a jury found Swedesford, Keystone, and Schindler negligent, but concluded that their negligence was not a factual cause of Dadario's injuries and did not award him damages. *fn19 Thus, the pending motions, filed March 21, 2011, solely present the question of whether Zurich had an obligation to defend Swedesford and Keystone pursuant to the OCPL policy. *fn20
II. S TANDARD OF R REVIEW
Under Federal Rule of Civil Procedure 56(a), a court may grant summary judgment only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." *fn21 A fact is "material" if it could affect the outcome of the suit, given the applicable substantive law. *fn22 A dispute about a material fact is "genuine" if the evidence presented "is such that a reasonable jury could return a verdict for the nonmoving party." *fn23
In considering a summary judgment motion, the Court does not weigh the evidence or make credibility determinations; moreover, "the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." *fn24 The same standard applies when there are cross-motions for summary judgment.*fn25
III. D ISCUSSION
A. I NSURER' S D UTY TO D EFEND
Under Pennsylvania law, *fn26 "[a]n
insurer is obligated to defend its insured if the factual allegations
of the complaint on its face encompass an injury that is actually or
potentially within the scope of the policy." *fn27
To determine whether a claim against an insured is
potentially covered, the Court compares "the four corners of the
insurance contract to the four corners of the complaint."
*fn28 "As long as the complaint 'might or might
not' fall within the policy's coverage, the insurance company is
obliged to defend." *fn29 Conversely, there
is no duty to defend where it is apparent that the policy does not
cover the injuries alleged. *fn30 The
allegations in the underlying complaint-and not the causes of action
pleaded-must inform the court's determination in this
respect. *fn31 Similarly, "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." *fn32
Thus, to determine whether a claim may come
within the coverage of a policy, "the court must ascertain the scope
of the insurance coverage, and then analyze the allegations in the
complaint." *fn33 Where proceedings as to
liability occur before a determination is made about whether there is
a duty to defend, an insurer declines to defend at its own risk.*fn34
B. I NTERPRETATION OF C ONTRACTS FOR I NSURANCE U NDER P ENNSYLVANIA L AW
The law in Pennsylvania with respect to the interpretation of insurance contracts is "well settled." *fn35 Interpretation of such a contract is a matter of law for the court. *fn36 The aim of a court in interpreting an insurance contract is to determine the intent of the parties. *fn37 The inquiry begins with the language of the policy in question. *fn38 The "policy must be read as a whole and construed according to the plain meaning of its terms." *fn39
A court must give effect to unambiguous language in an insurance contract. *fn40 "Contractual language is ambiguous 'if it is reasonably susceptible to different constructions and capable of being understood in more than one sense.'" *fn41 Ambiguous language in an insurance contract must be construed against the insurer. *fn42 Such construction "further[s] the contract's prime purpose of indemnification," and recognizes the fact that the insurer controls the policy language establishing the scope of coverage. *fn43 However, the Third Circuit Court of Appeals and the Pennsylvania Supreme Court have repeatedly warned courts against straining to find ambiguity in insurance contract language. *fn44 Indeed, policy language should be read to avoid creating or finding ambiguity wherever possible. *fn45
While the insured has the burden of demonstrating coverage under
an insurance policy, *fn46
the insurer has the burden of demonstrating the applicability of
any policy exclusions. *fn47 A court must
construe policy exclusions against the insurer, *fn48
enforcing them only if plainly displayed and clearly
IV. A PPLICATION
The sole question presented by the instant motions for summary judgment is whether, under the OCPL policy, Zurich had a duty to defend Swedesford in the Dadario lawsuit. Zurich disclaims any such duty, arguing that under Pennsylvania law, the allegations in Dadario's complaint did not trigger Zurich's duty to defend. *fn50 Alternatively, Zurich asserts that even if the complaint triggered a duty to defend, two provisions of the OCPL policy unambiguously exclude coverage. Plaintiffs challenge each of these contentions.
A. D UTY TO D EFEND
Zurich argues that it had no duty to defend Plaintiffs because Dadario's complaint did not specifically allege loss arising either out of operations performed by Schindler for Swedesford and Keystone, or arising from Swedesford and Keystone's supervision of Schindler. *fn51 Plaintiffs dispute Zurich's interpretation, arguing that Dadario's allegation of negligent supervision of elevator work is sufficiently broad to trigger the duty to defend. *fn52 In Plaintiff's view, "[t]here can be no question that the claim involved the potential for liability arising out of Schindler's negligent performance of its inspection and maintenance operations." *fn53
To determine whether Zurich had a duty to defend Plaintiffs, the Court compares the terms of the OCPL policy with the nature of the allegations in the underlying complaint. Zurich's OCPL insurance policy provides:
We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damages" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking those damages for "bodily injury" or "property damage" to which this insurance does not apply. . . . *fn54
The insurance applies if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" and arises out of:
(a) Operations performed for you by the "contractor" at the location specified in the Declarations; or
(b) Your acts or omissions in connection with the general supervision of such operations.
The Dadario complaint alleged that Swedesford and Keystone:
[H]ad under [their] care, supervision , control, maintenance and/or was responsible for the care, maintenance and condition of the said property located at 530 East Swedesford Road, Wayne Pennsylvania, including but not limited to the elevators in the building. *fn55
The complaint further alleged that the "negligence and
carelessness of Defendant, through its agents ,
servants, workmen, and employees," *fn56 led
to the "defective, uneven and/or irregular condition in one of the
elevators, rendering it unsafe and dangerous." *fn57
Specifically, Dadario alleged negligence in "failing to
properly maintain the elevators in its building;" "failing to use due
care and employ reasonable skill in performing maintenance and
inspections of the said elevators in its building;" and "failing to
properly inspect the elevators in its building." *fn58
Defendant's contention that the Dadario complaint need specifically contain allegations against Schindler in order to trigger the duty to defend is inconsistent with the Pennsylvania courts' view that "[t]he broad duty to defend that exists in Pennsylvania encourages insurance companies to construe their insurance contract broadly and to defend all actions where there is any potential coverage." *fn59 It is unnecessary that "[t]he underlying complaint . . . track the policy language for there to be coverage." *fn60 Instead, the test is whether the complaint "might or might not fall within the policy's coverage." *fn61 Because the Dadario complaint alleged an injury *fn62 caused, in part, by negligent supervision of the maintenance of an elevator at 530 East and the negligent acts of Defendant's agents, the claim against Swedesford and Keystone "might potentially be covered." *fn63
Thus, Zurich's duty to defend was triggered.
B. E XCLUSIONS
Zurich argues that even if the Complaint triggered its duty to defend, coverage is excluded by Section 2.c. of the OCPL policy, which reads:
"Bodily injury" or property damage which occurs after the earlier of the following times:
(1) When all "work" on the project (other than service, maintenance or repairs) to be performed for you by the "contractor" at the site of the covered operations has been completed; or
(2) When the portion of the "contractor's" "work", out of which the injury or damage arises, has been put to its intended use by any person or organization, other than another contractor or subcontractor working directly or indirectly for the "contractor" or as part of the same project."
Zurich interprets the provision to preclude coverage at times when
Schindler was not performing work on the elevator. *fn64
Because Dadario was entering the elevator when he was
injured, Zurich contends that the "work" (i.e., inspection and
maintenance that occurred 5 days
prior) had been put to its intended use at the time of the
accident. Plaintiffs argue that the provision is ambiguous because it
is subject to more than one reasonable interpretation.*fn65
This debate boils down to the correct definition of "work." Defendants define work as a discreet act of servicing or maintaining an elevator; Plaintiffs define it as an ongoing service obligation which cannot be "completed" until the termination of the service and maintenance contract. In Plaintiff's view, the provision is inapplicable to its contract with Schindler because an ongoing maintenance and inspection service is "work" that can never be put to an "intended use." According to Plaintiff, this type of provision is "not intended to apply to a service and maintenance contract" and was "intended to apply to a contract for the affirmative installation of a particular piece of equipment or construction of a physical structure."
To accept Plaintiff's argument is to render the "intended use" and
"work completed" exclusions as meaningless. But "[i]t is a rule of
universal application that in construing a contract each and every
part of it must be taken into consideration and given effect if
possible," *fn66 and "[a] court may not
disregard a provision in a contract if a reasonable meaning may be
ascertained therefrom." *fn67 And although we
bear in mind that "[e]xclusions are always strictly construed against
the insurer and in favor of the insured," *fn68
we conclude that this provision is clear and
The clauses of the provision are disjunctive, and therefore apply to different scenarios. The first, "work completed" clause, plainly excludes service and maintenance from "work" ( ". . . all 'work' on the project ( other than service, maintenance or repairs ) to be performed"). By its terms, the clause narrows "work" to projects , which it distinguishes from maintenance, service, and repair work. The second clause, however, does not so narrowly define work. Rather than refer to "project," it refers to a "portion of work." And, unlike the preceding clause, it does not limit work to "projects (other than service, maintenance or repairs)." Thus, the term "work" in the "intended use" clause sweeps more broadly and contemplates ongoing work that might be completed in "portion[s]"- like maintenance, service or repairs. *fn70 Therefore, the "intended use" exclusion applies to the matter at hand.
It is undisputed that at the time of the accident, Schindler's employees were not on the premises and that the elevator was in service. The parties do not dispute that the intended use "of an elevator in an office building is to transport passengers, office supplies, and equipment." *fn71
Because the injury occurred at a time when the elevator was being put to its intended use, coverage is unambiguously excluded by the OCPL contract.
For the foregoing reasons, Plaintiff's Motion for Partial Summary Judgment will be denied and and Defendant's Motion for Summary Judgment is granted.
A corresponding order follows.
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
FIREMAN'S FUND INSURANCE CO., 580 & 530 SWEDESFORD ASSOCIATES, LP & KEYSTONE PROPERTY GROUP, GP, LLC, Plaintiffs, v. ZURICH AMERICAN INSURANCE CO., Defendant.
CIVIL ACTION: NO. 10-cv-4293
ORDER AND NOW , this 19th day of July 2011, it is hereby
ORDERED that Plaintiff's Motion for Partial
Summary Judgment [doc. no. 12] is DENIED .
Defendant's Motion for Summary Judgment on all counts of Plaintiff's
complaint [doc. no. 11] is GRANTED. The Clerk of
Court is directed to mark this case as CLOSED.
It is so ORDERED.
BY THE COURT:
HON. CYNTHIA M. RUFE