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Toll Bros., Inc. v. Essex Insurance Co.

United States District Court, E.D. Pennsylvania

April 29, 2015

TOLL BROS., INC., Plaintiff,


PETRESE B. TUCKER, Chief District Judge.

Before the Court is Plaintiff Toll Brothers, Inc.'s Affidavit of Fees and Costs (Doc. 88), Defendant Essex Insurance Company's Response in Opposition thereto (Doc. 89), and Plaintiff's Reply Brief in Further Support of Plaintiff's Affidavit of Fees and Costs (Doc. 90). Also before the Court are the parties' memoranda concerning the issues of Defendant's duty to defend and rescission (Docs. 93, 94). For the reasons set forth herein, the Court will deny Plaintiff's request for fees and costs. This Court also vacates its June 17, 2013 order to the extent that it granted Plaintiff's Motion for Partial Summary Judgment on the duty to defend claim, and enters summary judgment in favor of Defendant on that claim.

I. Factual Background

Plaintiff Toll Brothers, Inc. ("Toll") is a luxury homebuilder that builds new home communities throughout Pennsylvania. On or about April 22, 1999, Toll hired H.A.S. Protection, Inc. ("H.A.S.") as a subcontractor to provide and install fire suppression systems in a number of residential communities in the greater Philadelphia area. The agreement between Toll and H.A.S. required H.A.S. to indemnify and defend Toll for any claim or demand arising out of or relating to H.A.S.'s provision and installation of the fire suppression systems. Their agreement also required H.A.S. to name Toll as an additional insured under its insurance policy and to procure and maintain general liability insurance of $1, 000, 000 for the term of their agreement. Pursuant to H.A.S.'s agreement with Toll, H.A.S. contracted with Defendant Essex Insurance Company ("Essex") for commercial general liability policies of insurance ("Policies"). Toll was named as an additional insured on the Policies.

On July 18, 2005, Ron and MaryEllen Ort and Sridhar Iyer commenced an action in state court against Toll, H.A.S., and other entities. See Ronald and MaryEllen Ort et al v. Harvel Plastics et al., No. 05-5604 (Chester Cty Ct. of Common Pleas) ("Ort/Iyer lawsuit"). The plaintiffs' complaint concerned H.A.S.'s provision and installation of the fire suppression systems. The causes of action asserted against Toll and H.A.S. in the Ort/Iyer lawsuit were identical. Essex provided a defense for H.A.S. in relation to the Ort/Iyer lawsuit, but refused to defend Toll despite Toll's repeated requests that it do so. As a result, Toll retained, at its own cost, counsel to defend it in the Ort/Iyer lawsuit.

A. Essex Institutes a Declaratory Judgment Action Against H.A.S. for Rescission

On November 16, 2006, Essex initiated a declaratory judgment action against H.A.S. in this Court. See Essex Ins. Co. v. H.A.S. Protection, Inc., No. 06-5076 (E.D. Pa. filed Nov. 16, 2006) ("Essex/H.A.S. action"). Essex sought, in part, a declaration from the Court that the Policies issued by Essex to H.A.S were rescinded, null, and void, and that Essex did not have a duty to defend and indemnify H.A.S.

H.A.S. never appeared in the Essex/H.A.S. action. As a result, Essex requested and received a default against H.A.S. On March 29, 2007, Essex filed a motion for summary judgment seeking a declaration of equitable rescission of the Policies, as well as a declaration that the Policies were null and void. The Court granted Essex's motion for summary judgment as unopposed on May 9, 2007.

B. Toll's Breach of Contract Action

Meanwhile, on February 15, 2007, Toll filed the instant suit against Essex in the Court of Common Pleas of Chester County as a result of Essex's failure to defend and indemnify Toll in the Ort/Iyer lawsuit. The suit was removed to this Court based on diversity of citizenship. Toll asserted claims for the following against Essex: (1) breach of contract; (2) defense and indemnification; (3) declaratory judgment; (4) breach of good faith and fair dealing; and (5) third party beneficiary.

On November 8, 2007, Essex moved for summary judgment. Essex asserted that Toll was not entitled to any coverage because the insurance policies no longer exist on account of Essex's successful rescission of the policies in the Essex/H.A.S. action. In short, Essex asserted that relitigation of the issues regarding the rescission of the Policies was precluded pursuant to the doctrines of res judicata and collateral estoppel.

On March 7, 2008, this Court granted Essex's motion for summary judgment. Toll Bros. Inc. v. Century Sur. Co ., CIV.A. 07-1296, 2008 WL 638232 (E.D. Pa. Mar. 6, 2008), rev'd, 318 F.App'x 107 (3d Cir. 2009). The Court granted summary judgment on two grounds: (1) the rescission order in the Essex/H.A.S. action had claim preclusive effect on the instant case, and (2) no coverage existed for Toll under the Policies pursuant to the terms of the "Additional Insured Endorsement"-which states that an additional insured was entitled to no greater coverage than the primary insured-because the insurance policy between Essex and H.A.S. was rescinded. Toll appealed to the United States Court of Appeals for the Third Circuit.

C. Third Circuit Reversal

On March 24, 2009, the Third Circuit issued an Opinion reversing and remanding this Court's grant of summary judgment in favor of Essex. Toll Bros., Inc. v. Century Sur. Co., 318 F.App'x 107 (3d Cir. 2009). The Third Circuit held that there was no privity between Toll and H.A.S. because their interests in the Essex/H.A.S. action conflicted. Specifically, the Third Circuit reasoned that "[b]y its default in [the Essex/H.A.S. action, ] H.A.S. was clearly indifferent to a decision rescinding its Essex insurance policy. Toll, however, had a strong interest in opposing the rescission ...

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