United States District Court, W.D. Pennsylvania
MEMORANDUM AND ORDER
CATHY BISSOON, District Judge.
For the reasons that follow, BBU's Motion for Summary Judgment (Doc. 106) will be denied, Greenwich's Motion for Summary Judgment (Doc. 111) regarding its affirmative claims will be denied, and Greenwich's Motion for Summary Judgment (Doc. 114) regarding BBU's Counterclaims will be granted in part and denied in part. Specifically, questions of fact remain regarding BBU's bad faith claims, but BBU cannot recover punitive damages or consequential damages based on generalized harms to its business operations.
The parties are well acquainted with the facts, and the Court will summarize them only for the purpose of context. Greenwich issued CGL and excess/umbrella policies to BBU, and Chesapeake was named as an additional insured. See generally Compl. (Doc. 1). Greenwich has brought this action, in diversity, seeking a judicial declaration that it owes no duty of coverage to BBU or Chesapeake for injuries sustained by the Lancasters in February 2011, said injuries having been litigated in West Virginia state court. The Lancasters were employees of BBU, and, in April 2011, they brought a state court action against Chesapeake, only, in light of the workers compensation bar. See compl. in state court (filed under Doc. 110-2) at ¶ 7 (alleging tort-based claims against Chesapeake, and acknowledging that Lancasters "were [acting] in the scope of their employment with BBU").
Under a master service agreement ("MSA") between BBU and Chesapeake, BBU owed a contractual duty of indemnification to Chesapeake. Chesapeake notified BBU of the potential Lancaster claims, and BBU forwarded them to Greenwich for defense and coverage. See Defs.' Facts (Doc. 110) at ¶¶ 10, 23 & 24. In May 2011, Greenwich accepted the Chesapeake tender and informed Defendants that it would not invoke a reservation of rights. See id. at ¶ 56.
Five months later, in October 2011, Greenwich changed its position and issued a reservation of rights letter (although Greenwich agreed to continue Chesapeake's defense in the state action). See Ltr. (filed under Doc. 110-3 at pgs. 107-137 of 159). Among other things, Greenwich took the position that the Lancasters' injuries "were not caused, in whole or in part, by BBU's actions or omissions, " as purportedly required under the policy definitions of "insured contract" and "additional insured." Id. at pgs. 133-134 of 159; see also Defs.' Facts (Doc. 110) at ¶ 89.
At the time Greenwich issued its reservation of rights letter in October 2011, BBU was not a party to the underlying litigation. BBU was not joined into the litigation until October 2012, when Chesapeake brought a third-party claim against BBU alleging negligence. See 3d p. compl. in state action (filed under Doc. 110-4 at pgs. 64-68 of 186). In the interim, little of substance transpired in the state court proceedings, as the parties awaited the state court's ruling on a forum non conveniens motion that had been filed by Chesapeake. See Greenwich's Facts (Doc. 116) at ¶¶ 47-52 and Defs.' Resps. (Doc. 130) (admitting same).
Shortly after BBU was named as a third-party defendant, Greenwich agreed to defend BBU in the state action, pursuant to a reservation of rights. See Doc. 110-4 at pgs. 175-185 of 186. According to BBU, Greenwich's reservation letter asserted that there were discrepancies between Chesapeake's address in the policy documents and the location of the accident, that BBU was not negligent, and that the MSA's indemnification provisions violated controlling state law. See BBU's Countercl. at ¶ 31. In connection with the third-party claims, Greenwich agreed to retain BBU's law firm of choice, Huddleston & Bolen, for its defense. See Greenwich's Facts (Doc. 116) at ¶ 85; see also Greenwich's Resp. (Doc. 141) to Defs.' Facts at ¶ 33.
Around March 2013, approximately five months after BBU was joined in the underlying state action, the lawsuit settled. Chesapeake paid the full amount of the settlement, and the case was dismissed with prejudice. See Greenwich's Facts (Doc. 116) at ¶¶ 86-87.
Greenwich filed the instant declaratory judgment action in March 2012, and the parties have vigorously litigated coverage issues while the state court action proceeded to resolution. In addition to the coverage issues, BBU has filed Counterclaims for breach of contract and bad faith, relying, in large part, on Greenwich's change of position regarding whether Chesapeake's defense was offered with or without a reservation of rights. BBU seeks damages in the form of attorneys' fees and costs in connection with this lawsuit, the underlying state case and in a tangentially related state-court action against the insurance agency that secured the Greenwich policies. See BBU's Countercl. at Count I. BBU further claims prospective damages flowing from its duty to indemnify Chesapeake under the MSA, in the absence of coverage. See id. Finally, BBU alleges bad faith and it seeks consequential and punitive damages. See id. at Count II.
This case proceeded to summary judgment, and all of the parties cross-filed motions based on their respective positions. Before the Court was able to decide the Motions, however, the parties filed a joint stipulation of dismissal, with prejudice, eliminating all claims in this lawsuit save the ones between Greenwich and BBU. See Doc. 143. To be clear, all other claims have been extinguished, including any potential claims of indemnification asserted by Chesapeake against BBU. See id. (Chesapeake "hereby dismiss[es] with prejudice all claims that have been asserted, or could have been asserted by them in this action, whether by claim, counterclaim or cross claim, against BBU").
These events, by necessity, have narrowed the scope of the litigation remaining before the Court. A sizable piece of BBU's putative harms, namely, its duty to indemnify the other Defendants in the absence of coverage, no longer is at issue.
In any event, if the Court concludes that Greenwich owed no duty of coverage (and otherwise did not act in bad faith), this ends the inquiry and BBU may enjoy no further relief. If, on the other hand, the Court finds that coverage to Chesapeake or BBU may attach, BBU can proceed against Greenwich on its Counterclaims, presumably to recoup compensatory and punitive damages under the rubric of bad faith.
For the reasons stated below, the Court concludes that Greenwich is not entitled to summary judgment on its declaratory judgment claims. Thus, BBU is able to proceed on its Counterclaims, but the Court disagrees that BBU is entitled to summary judgment regarding bad faith. The Court also determines that BBU's claims for punitive damages fail to satisfy the governing legal standards, and those claims will not be submitted to a jury. Finally, the Court determines, as a matter of law, that BBU's ...