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Lexington Insurance Co. v. Charter Oak Fire Insurance Co.

Superior Court of Pennsylvania

November 6, 2013

LEXINGTON INSURANCE COMPANY, Appellant
v.
THE CHARTER OAK FIRE INSURANCE COMPANY; NORTH RIVER INSURANCE COMPANY; JPC-JAY DEE, JOINT VENTURE, LLP; JPC GROUP, INC., CITY OF PHILADELPHIA; PROTECTION SERVICES, INC. AND SABRINA CHILDS, INDIVIDUALLY AND AS WIFE AND ADMINISTRATRIX OF THE ESTATE OF ALBERT CHILDS, Appellees

Appeal from the Order Entered September 7, 2012 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): January Term, 2010, No. 2142

BEFORE: BENDER, P.J., DONOHUE, J., and MUSMANNO, J.

OPINION

BENDER, P.J.

Lexington Insurance Company (Lexington) appeals from the order entered September 7, 2012, granting summary judgment to North River Insurance Company (North River) in this insurance coverage dispute. We reverse in part, affirm in part, and remand.

In 2005, the City of Philadelphia (City) undertook a flood control project in the Dobson Run area of Fairmont Park. The City contracted with CMX, Inc., formerly known as Schoor DePalma, Inc., (collectively, CMX) for engineering services on the project. CMX was required to maintain insurance and indemnify the City. To meet this obligation, CMX maintained a commercial general liability insurance policy through The Hartford Fire Insurance Company (Hartford) and a professional services liability insurance policy through Lexington.

In 2006, JPC Group, Inc. (JPC) and Jay Dee Contractors, Inc. (Jay Dee) formed a joint venture, known as JPC-Jay Dee, and bid to perform certain work on the project. The City accepted their bid. Thereafter, JPC-Jay Dee subcontracted a portion of the work to JPC and other work to Jay Dee.

The JPC subcontract required JPC to maintain $10 million in "primary and non-contributing" general liability coverage. See North River Motion for Summary Judgment on the Issue of the Duty to Defend, Exhibit H (JPC Subcontract), at 7. The JPC subcontract further required JPC to name CMX as additional insured on each of its insurance policies for the project. Id.

To meet its coverage obligation, JPC maintained policies through The Charter Oak Fire Insurance Company (Charter Oak) and North River. The Charter Oak policy provided $1 million general liability coverage per occurrence. The North River policy provided $20 million in liability coverage per occurrence. The North River policy functioned as excess insurance to the Charter Oak policy. See North River Motion for Summary Judgment on the Issue of the Duty to Defend, Exhibit A, "Schedule A – Schedule of Underlying Insurance" (Schedule A), at 1; "Commercial Umbrella Policy" (Commercial Umbrella Policy), at 3.

The North River policy afforded liability coverage to CMX as an additional insured, defined as follows:

[A]ny person, organization, trust, or estate that has obligated you [i.e., JPC] by an "Insured Contract" to provide the insurance that is afforded by this policy, but this policy applies:
a. only up to the policy limits required by the "Insured Contract, " subject to the limits of this policy; and,
b. only with respect to "Bodily Injury, " "Property Damage" or "Personal and Advertising Injury" that occurs subsequent to the time you enter into the "Insured Contract;" and,
c. only with respect to liability arising out of "Your Work, " "Your Product, " or property owned or used by you, or with respect to other liability arising out of your negligence.

See North River Motion for Summary Judgment on the Issue of the Duty to Defend, Exhibit A, "Commercial Umbrella Policy" (Commercial Umbrella Policy), at 6-7. Thus, despite the North River policy limit of $20 million, CMX was entitled to $9 million coverage.

The North River policy required the insurer to provide its insureds a defense against any suits seeking damages covered by its terms:

A. We will have the right and duty to defend the Insured against any "Suit" seeking damages, or damages and "Covered Pollution Cost or Expense, " covered by the terms and conditions of this policy, even if the allegations are groundless, false, or fraudulent, when:
1. the applicable limits of "Underlying Insurance" and "Other Insurance" have been exhausted by payment of judgments or ...

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