United States District Court, E.D. Pennsylvania
AUSTIN MCHUGH UNITED STATES DISTRICT JUDGE.
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.
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. 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.
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.
Vicarious Liability Claims: Primacy
United's Policy is Primary for Dunbar's Vicarious
Claims Against Prestige
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.
Both Policies are Primary for Dunbar's Vicarious Claims
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.'” 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.
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
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).
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.
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.