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United Financial Casualty Co. v. Princeton Excess and Surplus Lines Insurance Co.

United States District Court, E.D. Pennsylvania

May 19, 2017




         This is a dispute between two auto insurers over how to allocate the cost of defending a courier service and its customer in a lawsuit arising out of negligent driving on the part of the courier's deliveryman. The deliveryman's auto carrier settled the case on behalf of the deliveryman, the courier service, and the company employing the courier service. However, it reserved the right to seek contribution from the courier service for the costs of defense. The parties have framed the issue through cross-motions for summary judgement.

         More specifically, Staples, Inc. (“Staples”) hired Prestige Delivery Systems (“Prestige”) to make a delivery, and Prestige assigned the work to one of its drivers, Joseph Nice. In the course of carrying out the assignment, Nice negligently injured one Kenneth Dunbar, who in turn sued Prestige, Staples, and Nice. Nice's auto insurer, United Financial Casualty (“Plaintiff” or “United”) litigated and settled the underlying case. Dunbar brought several types of claims against Prestige, Staples, and Nice. First, he sued Nice individually for his negligence; second, he sued Prestige and Staples for Nice's negligence under the theory of respondeat superior; and finally, he brought direct claims against Prestige and Staples for negligent hiring, supervision, and entrustment. United accepts that it alone must pay for Nice's defense.[1] But United alleges that Prestige's carrier, Princeton Excess and Surplus Lines (“Defendant” or “Princeton”) must share the cost of defense for the vicarious liability claims against Staples. It further argues that it bears no responsibility for the cost of defending direct claims against Prestige and Staples.[2]

         I. The Policies

         The policies of both carriers provided coverage to Prestige and Staples for the claims raised in Mr. Dunbar's suit. United's policy, issued to Joseph Nice with a coverage limit of $100, 000, covered Prestige and Staples as persons or organizations liable for Nice's conduct. United Policy at 6. Princeton's policy, issued to Prestige with a coverage limit of $1, 000, 000, covered claims against Staples because Prestige contracted to indemnify Staples under the terms of its Courier Delivery Service Agreement. Princeton Policy at 9. The parties partially disagree about which policy was primary as to each defendant for vicarious liability claims, and they completely disagree about whether the United policy covered “direct liability” claims against the companies. I will address each disagreement in turn.

         II. Vicarious Liability Claims: Primacy

         A. United's Policy is Primary for Dunbar's Vicarious Claims Against Prestige

         United concedes that it provided primary coverage for Dunbar's vicarious liability claims against Prestige. Compl. at 14. It further concedes that Princeton provided only excess coverage for these claims, because Prestige did not own the car with which Nice injured Dunbar. See Princeton Policy at 9; Compl. at 14. United must therefore pay the full cost of defending Prestige's vicarious liability claims.

         B. Both Policies are Primary for Dunbar's Vicarious Claims Against Staples

         Both United and Princeton provided primary coverage to Staples for vicarious liability claims. United provided coverage to Staples as a “person or organization” that was liable “for acts or omissions of [Nice], ” United Policy at 6, and designated its coverage as “primary” because Nice's vehicle was specifically named on the policy's declarations page. United Policy at 22. Princeton's policy created primary coverage for Staples by virtue of the “insured contract” provision in its policy, which guaranteed that “regardless of the provisions” limiting coverage on unowned autos to excess, Princeton's coverage was “primary for any liability assumed under an ‘insured contract.'”[3] Princeton Policy at 9. The parties agree that the Courier Delivery Service Agreement signed by Prestige and Staples constitutes an “insured contract” for the purposes of this provision. Compl. at 14, Def's MSJ at 2-3.

         Because United and Princeton provided Staples coverage on “the same basis” - in other words, because they both provided it primary coverage - each is responsible for the percentage of total coverage that its policy constitutes. See Princeton Policy at 9, United Policy at 22.[4] Under the apportionment clauses explicitly stated in both insurance policies, United is responsible for nine percent (or $100, 000/$1, 100, 000) and Princeton is responsible for ninety-one percent (or $1, 000, 000/$1, 100, 000)) of costs incurred for vicarious liability claims against Staples. When such apportionment clauses dictate indemnity cost, this Circuit has found them to also govern the cost of furnishing a defense. See Cont'l Ins. Co. v. McKain, 821 F.Supp. 1084, 1093 (E.D. Pa. 1993), aff'd, 19 F.3d 642 (3d Cir. 1994).

         Princeton argues that I should allocate defense costs in “equal shares, ” relying upon American Casualty Co. of Reading v. PHICO Insurance Co., 549 PA 682, 702 A.2d 1050 (Pa. 1997). It overlooks the fact that in American Casualty, the Supreme Court explicitly limited its holding, stating that it “shall not apply to those cases where, for instance, there are two or more policies at issue and the policies do not contain irreconcilable and mutually exclusive ‘other insurance' provisions.” 702 A.2d at 1054, n.7.

         This is not a case with mutually repugnant “other insurance” claims; it is the opposite. Both insurance policies in this case directly address apportionment where another insurer has issued parallel coverage. There is no basis upon which to ignore the provisions of the policy. Fortunately, the policies adopt identical formulas and rationales for apportionment. Costs will thus be apportioned based upon their dictates.

         III. Direct ...

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