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United Financial Casualty Co. v. AM Skier Agency, Inc.

United States District Court, M.D. Pennsylvania

April 24, 2014

UNITED FINANCIAL CASUALTY COMPANY, Plaintiff,
v.
A.M. SKIER AGENCY, INC., et al., Defendants.

MEMORANDUM AND ORDER

THOMAS M. BLEWITT, Magistrate Judge.

I. Background.

On May 9, 2013, Plaintiff, United Financial Casualty Company ("United"), filed a Complaint against original Defendants, A.M. Skier Agency, Inc. (referred to herein as "AM Skier"), AMSkier Partners, Inc., and Kimberly Latsch, an employee of AM Skier. (Doc. 1). This case arises out of an insurance Producer Agreement (the "Agreement") between Plaintiff and A.M. Skier Agency, Inc. Pursuant to the Agreement, Defendant AM Skier was authorized to provide insurance products for Plaintiff. The Agreement was attached to Plaintiff's Complaint as Exhibit 1. (Doc. 1-1).

This Court's jurisdiction over this case is based on diversity.[1] See 28 U.S.C. § 1332.

Plaintiff's Complaint centers around "a breach of the Agreement in relation to a loss paid under a policy underwritten by Defendants that is alleged to not be in conformance with the underwriting guidelines of the Agreement." (Doc. 24, p. 1, ¶ 2). Plaintiff alleges that under the Agreement, Defendant AM Skier was not authorized to submit to Plaintiff any insurance application "for any class of risk not specified in the Underwriting Requirements." Further, Plaintiff avers that the "Underwriting Requirements, which Defendant[] possessed, delineated unacceptable risks for hired auto-coverage and employer's non-owned liability coverage under a commercial auto policy, ' including restaurant/pizza/fast-food delivery.'"

Plaintiff also alleges that Defendant Latsch improperly, and without its knowledge, annually provided a commercial insurance policy from May 25, 2007, through May 25, 2011, to Settlers Inn, Ltd. ("Settlers Inn"), and that Settlers Inn was within the prohibited category of "restaurant/pizza/fast-food delivery" business pursuant to the Underwriting Requirements. Plaintiff avers that Defendant Latsch incorrectly represented to Settlers Inn that its policy had hired auto-coverage and employer's non-owned liability coverage. Plaintiff then avers that on May 11, 2011, Colleen Stevens, an employee of Settlers Inn, during her scope employment, was involved in a motor vehicle accident with Joseph Hussey in Wayne County, PA. Since Defendants represented to Plaintiff that the policies they issued to Settlers Inn had hired auto-coverage and employer's non-owned liability coverage, Plaintiff settled Hussey's claims against Settlers Inn and Stevens for $122, 500.00. Plaintiff also states that it incurred attorney's fees and costs in the amount of $21, 128.00 related to Hussey's claim.

Additionally, Plaintiff alleges that the Agreement it had with AM Skier had an Indemnification Clause in Article X(B), which provided that AM Skier would indemnify, defend, and hold Plaintiff harmless for all losses that Plaintiff sustained due to AM Skier's negligence, wrongful acts, errors or omissions, or due to AM Skier's failure to comply with the provisions of the Agreement or the Underwriting Requirements. Pursuant to this Indemnification Clause, Plaintiff tendered a demand for indemnity related to Hussey's claim and Defendants refused to pay Plaintiff. ( See Doc. 17, pp. 2-3, citing ¶'s 10-33 of the Complaint, Doc. 1).[2]

On June 25, 2013, Defendants jointly filed a Motion to Dismiss Plaintiff's Complaint. (Doc. 9). On March 5, 2014, the Court granted, in part, and denied, in part, Defendants' Motion. (Docs. 17 & 18). Specifically, the Court denied Defendants' Motion to Dismiss Count II of Plaintiff's Complaint (Plaintiff's Equitable Subrogation claim), and the Court granted Defendants' Motion with respect to Count III (Plaintiff's Fraud claim) on the basis of the "gist of the action" doctrine and dismissed this claim with prejudice. Thus, Plaintiff is now proceeding on its Count I (Breach of Contract claim), and Count II (Equitable Subrogation claim).

On March 18, 2014, Defendants filed their Answer to the remaining Counts of Plaintiff's Complaint with Affirmative Defenses, and Defendant/Counterclaim Plaintiff AM Skier filed a Counterclaim against Plaintiff/Counterclaim Defendant United. (Doc. 21 & Doc. 21, ¶'s 51-56, respectively).[3]

In ¶ 48 of Defendants' Affirmative Defenses, Defendants aver as follows:

48. The Defendant, A.M. Skier Agency, Inc., and its employees complied with the Underwriting Requirements for commercial auto polices; and the coverage under the commercial auto policy was properly submitted [to Plaintiff United] since the coverage definitions defining unacceptable business use of the risk type known as restaurant/pizza/fast food delivery did not and does not become "unacceptable under the facts of the Hussey claim; rather, the subject insured's driver, Colleen Stevens, operating on behalf of the Settlers Inn, was delivering to another restaurant of the insured Settlers Inn; to wit, the Cocoon, and not driving as deliver to customers and thus no violation occurred here. Further, at the time of the policy application hereunder, the Cocoon did not even exist. Therefore, the application was proper and/or within underwriting guidelines and/or within the past practices, custom or trade in the industry.

(Doc. 21, ¶ 48).

In its Counterclaim against Plaintiff United, Defendant AM Skier essentially avers as follows: that AM Skier and Plaintiff United are each bound by Article X of the Agreement, titled "Indemnification;" AM Skier suffered losses as set forth under Article X(A), including expenses and attorney's fees as a result of the filing of this action by Plaintiff; AM Skier's losses are substantial and will be sustained due to Plaintiff's wrongful acts, errors, and/or omissions, and due to Plaintiff's failure to comply with the provisions of the Agreement and/or the Underwriting Requirements; and the breach by Plaintiff of under Article X(A) of the Agreement caused AM Skier's losses. ( See Doc. 21, ¶'s 51-56)(emphasis added).

Thus, AM Skier asserts a Counterclaim for contractual indemnification against Plaintiff United under ...


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