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Frederick Mutual Insurance Co. v. Ahatov

United States District Court, E.D. Pennsylvania

April 4, 2017





         Plaintiff Frederick Mutual Insurance Company (“Plaintiff” or “Frederick”) brings this action[1] against Suhrob Ahatov (“Ahatov”), Dilnuza Kabildjanova (“Kabildjanova”), Kieran Cole Construction, Inc. (“Kieran”), J. Tull Mechanical (“Tull”), Concept Development Group, Inc. (“Concept”), AAA Brothers (“AAA”), Metro Impact, Inc. (“Metro”), and Michael Dubinsky (“Dubinsky”) (collectively, “Defendants”), seeking a declaratory judgment that Frederick has no duty to defend or indemnify Concept or Dubinsky or any other person/entity with respect to the claims asserted by Ahatov and Kabildjanova in the underlying tort claim action.[2]

         Presently before the Court is Plaintiff's Motion for Summary Judgment (“Pl. Mot.”) (Doc. No. 59) and accompanying Memorandum of Law in Support of Plaintiff's Motion for Summary Judgment (“Pl. Br.”) (Doc. No. 60); substantive responses with accompanying briefs of Defendants Dubinsky (“Dubinsky's Br.”) (Doc. No. 67) and Ahatov and Kabildjanova (“Ahatov Br.”) (Doc. No. 68); and Frederick's reply (“Pl. Reply”) (Doc. No. 69). Defendant AAA has filed a non-substantive response stating that it does not oppose the relief requested by Frederick. (Doc. No. 66.) Defendants Kieran and Concept have not responded.[3]

         Upon consideration of the materials presented and the extensive oral argument held on March 17, 2017, and for the reasons set out within this memorandum, we grant Plaintiff's motion for summary judgment.


         We set out here the relevant proceedings leading up to the current litigation. We start with a brief discussion of the pending state action in the Philadelphia Court of Common Pleas; we then move to consider the worker's compensation proceedings and end with a discussion of the particulars of this motion.

         A. Philadelphia Court of Common Pleas Case

         The present action seeking declaratory judgment is directly related to a pending state court action in the Philadelphia Court of Common Pleas, Ahatov et al v. Kieran Cole Construction Inc., et al, Case No. 140900267 (Pa. Com. Pl.) (hereinafter, the “Phila. Suit”). There, Ahatov and Kabildjanova (Ahatov's wife) assert tort claims arising out of a work site injury on February 12, 2013 suffered by Ahatov at a construction site located at 2301 Montrose Street, Philadelphia, Pennsylvania. Phila. Suit, Compl. at ¶¶ 9, 14.

         On January 13, 2013, Dubinsky had purchased the property from Metro. (Dubinsky Br. at 2.) Dubinsky then hired Concept as the general contractor to manage the construction of a house on the property. See Doc. No. 59-5, Pl.'s Exh. E, Building Agreement Between the Owners and the Contractor on Fee Plus Cost of Labor and Materials (“Builder's Agreement”). While the Builder's Agreement states that the matters were agreed upon on January 15, 2013, the document was not executed until August 7, 2013. (Id.) In any event, Concept promptly began work after January 15. By early February, Concept hired Tull, Ahatov's employer, as the HVAC contractor. Phila. Suit, Compl. at ¶ 4, 11. On February 12, 2013, Ahatov suffered a fall through an “unguarded hole” on the first floor to the concrete basement floor, sustaining serious injuries. (Id. at ¶ 14.) On September 1, 2014, after retaining counsel, Ahatov and Kabildjanova filed the underlying state action naming Kieran, Tull, Concept, AAA, Metro, Dubinsky, and John Doe A-J and John Doe Corporations A-J for (1) a failure to carry adequate workers' compensation insurance, (2) negligence at the construction worksite, and (3) loss of consortium by Kabildjanova. (Id. at ¶¶ 2-8, Count I, Count II, and Count III.) We understand this case to be awaiting trial.

         B. Worker's Compensation Benefits Proceeding

         On January 8, 2014, Ahatov filed a petition for worker's compensation benefits asserting that Concept was his employer at the time of the accident. See Doc. No. 59-2, Pl.'s Exh. B, Claim Petition for Benefits from Uninsured Employer and the Uninsured Employers Guaranty Fund (“W.C. Claim”). The matter was heard and on August 25, 2015, a final decision was rendered, holding that Concept was Ahatov's “statutory employer” at the time of the accident and that Concept was therefore obligated to pay Ahatov's worker's compensation benefits if Tull did not. See Doc. No. 59-3, Pl.'s Exh. C, Worker's Compensation Decision Rendered (“W.C. Decision”). As neither Concept nor Tull carried worker's compensation insurance on the date of the injury, the Uninsured Employers Guaranty Fund became secondarily liable. (Id. at ¶¶ 13-14.) The decision was not appealed.

         C. Current Litigation

         At the time of the incident, Concept and only Concept was the named insured on the Contractors Special Policy issued by Frederick. See Doc. No. 59-4, Pl.'s Exh. D, Contractors Special Policy (“Policy”). The Policy was purchased for a “one-shot” construction project and was issued for one year with an inception date of January 9, 2013. See Doc. No. 67-4, Def. Dubinsky's Exh. B, Builders Risk Coverage Declarations. Upon the filing of the underlying state action, Concept tendered its defense and indemnity to Frederick. Frederick accepted the tender with a Reservation of Rights. See Doc. No. 60. Dubinsky also tendered to Frederick but Frederick rejected the tender asserting that it had no duty to defend or indemnify. See Doc. No. 3, Pl.'s Exh. A, Case No. 2:16-cv-02234. Frederick now seeks an affirmation by way of declaratory judgment filed on April 27, 2016. See Doc. No. 1. Specifically, Frederick seeks the entry of an order declaring that it has “no duty or obligation to defend [or indemnify] Defendant Concept [or Defendant Dubinsky] and/or any other person or entity under the Policy with respect to claims asserted by Defendants Ahatov and Kabildjanova in the underlying action.” Doc. No. 1; Doc. No. 1, Case No. 2:16-cv-02234.


         Summary judgment is appropriate if there is no genuine issue of material fact and “the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). An issue is “genuine” if the evidence is such that, if accepted, “a reasonable jury could return a verdict for the non-moving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is “material” if it might affect the outcome of the case under governing law. (Id.)

         Under Pennsylvania law, the interpretation of an insurance contract is a question of law for the court to decide. Reliance Ins. Co. v. Moessner, 121 F.3d 895, 900 (3d Cir.1997). “Thus, on a summary judgment motion a court can determine, as a matter of law, whether a claim is within a policy's coverage or is barred by an exclusion.” Verticalnet, Inc. v. U.S. Specialty Ins. Co., 492 F.Supp.2d 452, 456 (E.D. Pa. 2007) (citing Butterfield v. Giuntoli, 448 Pa.Super. 1, 670 A.2d 646, 651 (1995)). Courts in these cases interpret coverage clauses broadly “to afford the greatest possible protection to the insured” and interpret policy exceptions narrowly against the insurer. Westport Ins. Corp. v. Bayer, 284 F.3d 489, 498 n. 7 (3d Cir.2002) (quoting Eichelberger v. Warner, 290 Pa.Super. 269, 434 A.2d 747, 750 (1981)).

         With respect to non-movants who fail to respond to a motion for summary judgment, Federal Rule of Civil Procedure 56(e) explains that the court may: “(1) give an opportunity to properly support or address the fact; (2) consider the fact undisputed for purposes of the motion; (3) grant summary judgment if the motion and supporting materials - including the facts considered undisputed - show that the movant is entitled to it; or (4) issue any other appropriate order.” The 2010 Advisory Committee Notes to subdivision (e) states that:

[S]ummary judgment cannot be granted by default even if there is a complete failure to respond to the motion, much less when an attempted response fails to comply with Rule 56(c) requirements. Nor should it be denied by default even if the movant completely fails to reply to a nonmovant's response. Before deciding on other possible action, subdivision (e)(1) recognizes that the court may afford an opportunity to properly support or address the fact. In many circumstances this opportunity will be the court's preferred first step.

         The Declaratory Judgments Act may be invoked by parties to an insurance contract to interpret their obligations under the contract. General Accident Ins. Co. v. Allen, 547 Pa. 693, 692 A.2d 1089, 1095 (1997). “[The] first step in a declaratory judgment action concerning insurance coverage is to determine the scope of the policy's coverage. After determining the scope of coverage, the court must examine the complaint in the underlying action to ascertain if it triggers coverage.” (Id.) (internal citations omitted). In the context of this declaratory judgment action, Frederick must convince the Court that its contractual coverage precludes the defense and indemnity of Concept and Dubinsky.[4]


         Frederick makes two principal arguments. First, it asserts that the following three exclusions in the Policy between Frederick and Concept bar coverage for Concept: (1) exclusion 11, which bars coverage for bodily injury of an employee that occurs in the course of employment; (2) exclusion 12, which bars coverage for bodily injury that should be covered under workers' compensation insurance; and (3) the cross-liability exclusion. (Pl. Br. at 9.) Second, it asserts that Dubinsky is also not owed coverage under the Frederick Policy as it is not an insured, an “additional insured”, or an insured under the Contractual Liability Coverage provision.

         A. The Policy

         In this section we set out the relevant provisions that fit within the Policy, which the parties agree was in full force and effect on February 12, 2013 when Ahatov suffered his fall. We have reviewed the Policy as it pertains to Frederick's obligations to Concept, its named insured, and also to Dubinsky who claims coverage. As applicable here, we pay particular attention to those “Commercial Liability Coverage Section[s]” for “Bodily Injury Liability/Property Damage Liability” and “Personal Injury/Advertising Injury Liability.” The “Bodily Injury Liability/Property Damage Liability” coverage provides a commitment by Frederick to “pay all sums which an ‘insured' becomes legally obligated to pay as ‘damages' due to ‘bodily injury' or ‘property damage' to which this policy applies.” Doc. No. 59-4, Pl.'s Exh. D, Policy, at 13. Under the “Personal Injury/Advertising Injury Liability” coverage, Frederick commits to “pay all sums which an ‘insured' becomes legally obligated to pay as ‘damages' due to ‘personal injury' or ‘advertising injury' to which this insurance applies.” (Id. at 14.) In its definitions section, the Policy sets out clearly the differences between bodily injury, personal injury, and advertising injury. It defines bodily injury as “bodily harm, sickness, or disease sustained by a person and includes required care and loss of services.” (Id. at 9.) It defines personal injury as “injury (other than ‘bodily injury', ‘property damage' or ‘advertising injury') arising out of one or more of [a few] offenses[, ]” including “oral or written publication of material[, ]” “false arrest, detention, or imprisonment[, ]” and “malicious prosecution.” (Id. at 11.) Advertising injury is defined as “injury (other than ‘bodily injury', ‘property damage', or ‘personal injury') arising out of one or more of [a few] offenses[, ]” including “oral or written publication of material[, ]” “misappropriation of advertising ideas or style of doing business[, ]” and “infringement of copyright, title, slogan, trademark, or trade name.” (Id. at 9.) It is clear from an examination of these Policy provisions that the circumstance here is neither personal injury nor advertising injury, but rather bodily injury.

         Returning to the bodily injury liability coverage, payment for this kind of injury is excluded “if it occurs [to an “employee”] in the course of employment by the “insured”. (Id. at 19.) The Policy goes on to articulate that benefits are not available for any consequential injury to a spouse of an injured employee. (Id.) The exclusion continues to articulate that it “applies where the ‘insured' is liable either as an employer or in any other capacity; or there is an obligation to fully or partially reimburse the third party for ‘damages' arising out of [a bodily injury occurrence].” (Id.) Similarly, the exclusion provides that Frederick does not pay for bodily injury where the “benefits are provided or are required to be provided by the ‘insured' under workers' compensation, disability benefits, occupational disease, unemployment compensation, or like law.” (Id.) (emphasis added). Frederick also notes the cross-liability exclusion in the Policy that precludes coverage for bodily injury to an insured. (Id. at 3.) We accept that Concept, as argued by Ahatov, believes that these exclusions do not apply. For the reasons we have set out within, we do not agree with Ahaotv on this point as we find the language of the Policy to be straightforward, clear, unambiguous, and enforceable as written.

         Next, the relevant provisions raised by Dubinsky, who is seeking coverage, are the “Additional Insured Owners, Lessees, or Contractors (Automatic Status)” provisions, the “Contractual Liability” provisions, and the “Exclusions That Apply to Bodily Injury, Property Damage, Personal Injury, and/or Advertising Injury.” The “Additional Insured Owners, Lessees, or Contractors (Automatic Status)” coverage provides that an additional insured may be added to the insured's Policy when the insured and a person or organization have agreed in a “written contract or agreement that such person or organization be added to [its] policy as an additional insured.” (Id. at 4.) The “Contractual Liability” coverage is offered as supplemental coverage and commits Frederick to pay for bodily injury liability assumed in a contract or agreement “under which [the insured] assume[s] tort liability to pay ‘damages' because of ‘bodily injury' . . . Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.” (Id. at 14.) However, this grant of coverage is an exception to the Policy's contractual liability exclusion, which provides that Frederick is not committed to paying for bodily injury liability “which is assumed by the ‘insured' under a contract or an agreement.” (Id. at 17.) Under the Policy, this exclusion does not apply to situations “covered under Contractual Liability Coverage [the supplemental coverage], provided that the ‘bodily injury' . . . occurs after the effective date of the contract or agreement.” (Id.) We accept that Dubinsky believes that he is owed coverage under these provisions. However, for the reasons we have set out below, we find that the Policy does not include coverage for Dubinsky.

         B. Whether Coverage Is Owed to Concept Under The Policy

         In this section, we analyze whether the Frederick Policy provides coverage to Concept. We begin by setting out Frederick's arguments for why coverage is not owed to Concept, examine Ahatov's defenses, and provide our analysis of the issue. We ultimately find that Concept is not covered under the Policy.

         1. Frederick's Position

         Frederick argues that coverage is not available under the Policy for the benefit of an employee, here Ahatov, where the Policy “clearly and unambiguously bar[s] coverage from applying where the insured is the employer of the plaintiff and/or if the insured was required to provide worker's compensation benefits to the plaintiff by law.” (Pl. Br. at 9.) Frederick specifically points to exclusion 11, exclusion 12, and the cross-liability exclusion of the Policy. Exclusions 11 and 12 provide in relevant part:

         11. “We” do not pay for:

a. “bodily injury” or “personal injury” to an “employee” of the “insured” if it occurs in the course of ...

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