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Camico Mutual Insurance Co. v. Heffler, Radetich & Saitta, LLP

United States District Court, Third Circuit

June 27, 2013





This case arises out of a dispute over insurance coverage. Defendant Heffler, Radetich & Saitta, L.L.P. (“Heffler”) administers class action settlement funds, and was insured by plaintiff CAMICO Mutual Insurance Company (“CAMICO”). One of Heffler’s employees, Christian Penta, participated in a scheme to siphon several million dollars of settlement proceeds to certain confederates and subsequently pled guilty in federal court to mail fraud and wire fraud. Following the discovery of Penta’s scheme, certain members of a settlement class sued Heffler for damages resulting from Penta’s actions, captioned as Oetting v. Heffler.[1] CAMICO has thus far funded Heffler’s defense in the Oetting action, but now seeks a declaratory judgment that it has no further obligation to Heffler.

The parties have filed cross-motions for summary judgment. For the reasons that follow, the Court grants CAMICO’s motion for summary judgment as to CAMICO’s claims and Heffler’s counterclaims and denies Heffler’s motion for summary judgment.


CAMICO seeks, inter alia, a declaratory judgment that it has no further duty to defend or indemnify Heffler. The parties agree that Pennsylvania law applies to this case, and the Court finds “no cause sua sponte to challenge that choice of law.” See Schiavone Const. Co. v. Time, Inc., 735 F.2d 94, 96 (3d Cir. 1984); see also Allegrino v. Conway E & S, Inc., 2010 WL 4052923, at *6 n.16 (W.D. Pa. Oct. 14, 2010).

“An insurer's duty to defend is broader than its duty to indemnify . . . An 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.” Am. & Foreign Ins. Co. v. Jerry's Sport Ctr., Inc., 606 Pa. 584, 609 (Pa. 2010). Because the Court determines that CAMICO has no further duty to defend, it need not separately address the duty to indemnify. See Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 225 (3d Cir. 2005) (noting that “there is no duty to indemnify if there is no duty to defend.”)

The Court looks to the underlying Amended Complaint in the Oetting action to determine the duty to defend. “In determining the duty to defend, the complaint claiming damages must be compared to the policy and a determination made as to whether, if the allegations are sustained, the insurer would be required to pay resulting judgment.” Donegal Mut. Ins. Co. v. Baumhammers, 595 Pa. 147, 155 (Pa. 2007). Thus, “the court must focus solely on the factual averments contained in the complaint itself.” Lebanon Sch. Dist. v. Netherlands Ins. Co., 2013 WL 308702, at *3 (M.D. Pa. Jan. 25, 2013).

The Amended Complaint in the underlying Oetting action alleges, in pertinent part, the following facts. In 2002, Judge Nangle of the District Court for the Eastern District of Missouri approved a $490 million settlement in a class action against BankAmerica Corporation, regarding its merger with NationsBank. (Am. Compl. at ¶2, 16.) Heffler was appointed by that court as Claims Administrator for the settlement, and Christian Penta, a senior accountant for Heffler, was assigned to help administer the settlement. (Id. at ¶5, 18.) However, “Penta . . . defrauded three separate class actions, including [that] [a]ction, of tens of millions of dollars. The amount Heffler paid from the NationsBank Class settlement fund on the false claims submitted by Penta and his co-conspirators totaled somewhere over $5.0 million.” (Id. at ¶10.)

Specifically, “[w]hen the claim deadline was approaching, Penta arranged for his co-schemers to hand deliver to Penta, and send directly to Penta through overnight mail services, fraudulent claims so that Penta could ensure that the claims were timely processed and approved for payment.” (Id. at ¶53.) “Penta personally approved the fraudulent claims or took whatever steps necessary to make sure that other employees at Heffler approved the claims and did not prevent the subsequent payment of the claims.” (Id. at ¶54.) On September 11, 2008, Penta, along with five others, was charged by the federal government with mail fraud and wire fraud relating to the NationsBank Class Action and other class action settlements. (Id. at ¶5.) Penta later pled guilty. (Id.) David Oetting, individually and on behalf of those similarly situated, brought suit against Heffler, seeking damages sustained as a result of Penta’s crimes. Oetting claimed, inter alia, a breach of fiduciary duty, accountant malpractice and negligence in supervising employees.

The following facts concerning the instant litigation are not materially in dispute. CAMICO issued a “claims made” liability insurance policy to Heffler, which was in effect from January 23, 2008 until January 23, 2009. (Pl. Statement of Undisputed Material Facts, at ¶8; Resp. to Pl. Statement, at ¶1.) CAMICO was first notified of Heffler’s potential class action liability on June 13, 2008, by means of a “potential claim” letter sent by Heffler’s counsel. (Def. Statement of Undisputed Material Facts, at ¶16; Pl. Statement of Undisputed Material Facts, at ¶47.) CAMICO initially funded Heffler’s defense in the Oetting action, but on July 6, 2011, CAMICO advised Heffler that it was reserving all rights to recover costs and expenses relating to the defense of the Oetting action, which exceeded a $100, 000 sub-limit provided in the policy. (Def. Statement of Undisputed Material Facts, at ¶28; Pl. Statement of Undisputed Material Facts, at ¶66.) CAMICO then filed the instant suit against Heffler, seeking, inter alia, declaratory judgment that CAMICO owes Heffler no defense or obligation beyond a single $100, 0000 sub-limit, and that CAMICO is entitled to recover expenses incurred after July 6, 2011. Heffler filed two counterclaims, for (1) declaratory judgment that CAMICO has a duty to defend and indemnify not limited by the $100, 000 sub-limit, and (2) bad faith.

The parties have agreed to resolve this case by way of cross-motions for summary judgment, subject to the proviso that the Court notify the parties of any genuine dispute of material fact. The Court has found no genuine dispute of material fact.


In considering motions for summary judgment, “the court is required to examine the evidence of record in the light most favorable to the party opposing summary judgment, and resolve all reasonable inferences in that party’s favor.” Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir. 2007). The party opposing the motion, however, cannot “rely merely upon bare assertions, conclusory allegations or suspicions” to support its claim. Fireman’s Ins. Co. v. DuFresne, 676 F.2d 965, 969 (3d Cir. 1982). After examining the evidence of record, a court should grant a motion for summary judgment if the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); accord Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

A factual dispute is material when it “might affect the outcome of the suit under the governing law, ” and genuine when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation omitted).


“The task of interpreting an insurance contract is generally performed by a court rather than by a jury. The goal of that task is, of course, to ascertain the intent of the parties as manifested by the language of the written instrument. Where a provision of a policy is ambiguous, the policy provision is to be construed in favor of the insured and against the insurer, the drafter of the agreement. Where, however, the language of the contract is clear and unambiguous, a court is required to give effect to that language.” Gene & Harvey Builders v. Pennsylvania Mfrs. Ass'n Ins. Co., 517 A.2d 910, 913 (Pa. 1986) (internal citations omitted).

“Contractual language is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense. This is not a question to be resolved in a vacuum. Rather, contractual terms are ambiguous if they are subject to more than one reasonable interpretation when applied to a particular set of facts.” Madison Const. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999) (internal citations omitted). Courts should not, “however, distort the meaning of the language or resort to a strained contrivance in order to find an ambiguity.” Id.

“Where an insurer relies on a policy exclusion as the basis for its denial of coverage and refusal to defend, the insurer has asserted an affirmative defense and, accordingly, bears the burden of proving such defense.” Canal Ins. Co. v. Underwriters at Lloyd’s London, 435 F.3d 431, 435 (3d Cir. 2006).

1. Sub-Limit for Misappropriation, Misuse, Theft, or Embezzlement

CAMICO argues that it has no further obligation to defend or indemnify Heffler because coverage related to the Oetting action is limited by a sub-limit in the policy. That sub-limit states: “The maximum amount payable . . . for each covered Claim arising from, related to or in connection with any Insured’s misappropriation, misuse, theft or embezzlement of funds shall be $100, 000 in excess of the Per Claim Deductible.” (Pl. Ex. A, at Sec. I(C)(1)(b).) CAMICO notes that it has paid over $200, 000 in connection with the ...

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