EXECUTIVE RISK INDEMNITY, INC. Appellee
CIGNA CORPORATION Appellant
Appeal from the Order Entered February 22, 2012 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): 01495 November Term, 2004
BEFORE: LAZARUS, J., OTT, J., and STRASSBURGER, J.[*]
Cigna Corporation (Cigna) appeals from the trial court's order denying its request for a judgment notwithstanding the verdict (JNOV)/new trial and reaffirming its prior order entering declaratory judgment in favor of Appellee, Executive Risk Indemnity, Inc. (Executive Risk), and against Cigna on all claims. After careful review, we affirm.
The underlying litigation involves an insurance coverage dispute between Cigna, as an insured, and its excess insurer, Executive Risk. After Cigna settled class-action claims for breach of contract and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO),  it submitted a claim to Executive Risk for indemnification of settlement payments and defense costs. Executive Risk refused to indemnify Cigna and, in fact, Executive Risk filed a complaint seeking declaratory judgment against Cigna; Cigna counterclaimed, seeking a declaration that Executive Risk had an obligation to indemnify it. In addition, Cigna brought a bad faith claim against Executive Risk arising from its failure to provide timely coverage.
After an extensive discovery process, the parties filed cross-motions for summary judgment. On March 19, 2008, the trial court granted Executive Risk's motion on all claims and denied Cigna's motion. The court essentially concluded that Cigna's settlement of the breach of contract and RICO claims fell within the breach of contract exclusion in its professional liability policy. Cigna appealed and this Court issued a decision reversing summary judgment, finding that while the breach of contract claims were excluded under the policy, Executive Risk, 976 A.2d at 1173, the RICO claims fell within the policy definitions of "claim" and "loss" and within the general terms of the policy. Id. at 1174. Our Court also remanded the case to the trial court so that it could address the "allocation of claims between the covered RICO claims and excluded breach of contract claims." Id. at 1175. The Court found that because the case had settled, an allocation trial/hearing was necessary so that indemnification could be properly distributed between the covered and excluded claims.
The Honorable Mark I. Bernstein heard arguments and accepted evidence on the allocation issue for two days in November 2010, placing the burden upon Cigna to prove the allocation of settlement monies between the two classes of claims. At the hearing, neither party produced expert testimony to opine what, in retrospect, the allocation of funds should have been at the time of settlement. The court reasonably allocated $3, 827, 287 each, for attorneys' fees and defense costs solely for the parties' contract claims. However, there was insufficient evidence to prove what percentage of those defense costs went toward defending solely covered claims and what portion of attorneys' fees were being paid on which class of claims. Ultimately, the trial court found that Cigna failed to meet its burden and reaffirmed its prior judgment entered in favor of Executive Risk on all claims. Cigna filed post-trial motions that were denied. This appeal follows.
On appeal of a trial court's denial of a motion for JNOV,  the Pennsylvania Superior Court will reverse the trial court only upon a finding of an abuse of discretion or error of law that controlled the outcome of the case. Eichman v. McKeon, 824 A.2d 305, 311-12 (Pa. Super. 2003). Additionally, where credibility and the weight to be accorded the evidence are at issue, this Court will not substitute its judgment for that of the fact-finder. Id. at 312.
Cigna states its issues on appeal as follows:
(1) Where an insured sought coverage under its own professional liability policy, did the trial court err in concluding that the insured, rather than the insurer, bore the burden of proving whether the policy's exclusion of contract claims applied to a nationwide class action settlement?
(2) If the insurer, not the insured, bore the burden of proving that the policy's exclusion of contract claims applied to a nationwide class action settlement, did the trial court err in failing to conclude that the insurer failed to prove that 100% of the settlement amount was excluded under the policy?
(3) Whether, regardless of who bore the burden of proof on allocation between covered and excluded claims, the trial court erred and/or abused its discretion in concluding that the insured failed to prove that at least 75% percent of the class action settlement amount was attributable to RICO-related claims and, thus, did not fall within the policy's exclusion for breach of contract claims?
In Butterfield v. Giuntoli, 670 A.2d 646 (Pa. Super. 1995), our Court reiterated the appropriate burden apportionment and shifting in insurance coverage cases, stating "[t]he insured must show that the policy covers its claim, and then the burden shifts to the insurer to establish an exclusion." See also Erie Ins. Exch. v. Transamerica Ins. Co., 533 A.2d 1363, 1366 (Pa. 1987) (in coverage cases, insured must show claim comes within coverage provided by policy; defense based on policy exception or exclusion is affirmative one which insurer has burden to establish).
Instantly, the parties do not dispute that the breach of contract claims were properly excluded from coverage under the parties' insurance policy or that the RICO claims are covered claims. The trial court, however, required proof of exactly how much of the $140 million settlement proceeds applied toward those excluded claims so it could properly assess Executive Risk's obligation to indemnify Cigna for the covered RICO claims. While the court was able to determine that the $40 million of the Claim Distribution Fund payments, roughly $3.8 million in defense costs and $3.8 million in attorneys' fees were attributable solely to contract ...