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Scottsdale Ins. Co. v. Kinsale Ins. Co.

United States District Court, E.D. Pennsylvania

May 26, 2017

SCOTTSDALE INS. CO., Plaintiff,
v.
KINSALE INS. CO., Defendant.

          MEMORANDUM

          EDUARDO C. ROBRENO, J.

         This action arises from a claim by Plaintiff Scottsdale Insurance Company ("Scottsdale") that Defendant Kinsale Insurance Company ("Kinsale") is liable under an insurance policy issued by Defendant Kinsale to AJA Skies the Limit, Inc. ("AJA Skies the Limit") for the costs of Plaintiff Scottsdale's defense and indemnification of its own insured, P. Tamburri Steel, LLC ("Tamburri"), with respect to an underlying action based on a written subcontract (the "Subcontract") between Tamburri and AJA Skies the Limit. Kinsale removed the case to federal court on the basis of diversity, and now moves to compel arbitration. For the reasons that follow, the Court will grant the motion to compel arbitration and dismiss the case.

         I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

         Scottsdale's insured is Tamburri. Kinsale's insured is AJA Skies the Limit. See Notice of Removal ¶ 1, ECF No. 1. The Subcontract at issue concerns steel erection services that were to be performed at a certain Pennsylvania construction project. Compl. ¶ 18, ECF No. 1. Under the Subcontract, a company called AJA Services, Inc. ("AJA Services") agreed to indemnify and hold harmless Tamburri with respect to all personal injury claims arising out of or resulting from the performance of the steel erection work performed on the project. Id. ¶ 20.

         Two separate actions filed in the Court of Common Pleas of Philadelphia County are relevant to the instant lawsuit. The first of these is Buckman v. Gwynedd Mercy University, et al., No. 2342 (Pa. Ct. Com. PI. filed Feb. 14, 2014) (the "Buckman Action"). See id. ¶ 2. This was a personal injury action in which a plaintiff steel worker claimed to have slipped and fallen on wet steel decking at a construction site. See id. ¶ 14. On January 22, 2015, the Court of Common Pleas entered a default judgment in favor of the plaintiffs[1] and against AJA Skies the Limit and AJA Services for failure to answer the complaint within the required time limit. See id. ¶ 21. Nearly a year later, on January 12, 2016, the case settled for a total amount of $1, 209, 717.69. See id. ¶ 22. On April 28, 2016, the Court of Common Pleas held a bench trial and subsequently entered a finding of liability and order of judgment against AJA Skies the Limit and in favor of Tamburri in the amount of $1, 154, 491, representing the reasonable cost of settlement and the reasonable cost of attorneys' fees and expenses incurred in defending against this action. Id. ¶¶ 23-25. Scottsdale incurred and paid the above defense and indemnity amounts on behalf of Tamburri. Id. ¶ 26.

         The second action relevant to the instant case is P. Tamburri Steel, LLC v. AJA Skies the Limit, Inc., et al., No. 0855, (Pa. Ct. Com. PI. filed Jan. 25, 2017) (the "Tamburri Action"). See id. ¶ 2. In the Tamburri Action, Tamburri--the defendant contractor in the Buckman Action--sought declaratory relief to reform the Subcontract that was at issue in the Buckman Action. Id. ¶ 28. On January 14, 2015, the Court of Common Pleas entered default judgment against AJA Skies the Limit. Id. ¶ 29. On February 23, 2015, the Court of Common Pleas signed an order granting Tamburri's motion for entry of judgment and order on default, thereby equitably reforming the Subcontract to name "AJA Skies the Limit, Inc."--rather than the originally named "AJA Services, Inc., "--as the steel erector with whom Tamburri subcontracted with respect to the construction project at issue in the Buckman Action.[2] Id. ¶ 32.

         The following diagram illustrates the relationships between the various actors implicated in this case:

         (Image Omitted)

         In the instant case here in federal court, Scottsdale seeks, in both its individual capacity and as a subrogee of Tamburri, to recover from Kinsale the monies spent and incurred for its defense and indemnity of Tamburri in the Buckman Action. See Notice of Removal ¶ 15 (citing Compl. ¶ 1). Kinsale "has consistently denied coverage under [its] Policy with respect to the claims alleged in the underlying Philadelphia county actions, claiming that AJA Skies the Limit, Inc. was the only named insured under Kinsale's Policy." Compl. ¶ 38.

         On October 20, 2014, Scottsdale sent Kinsale a letter tendering the underlying claims against Tamburri to Kinsale and requesting that Kinsale undertake the defense, indemnity, and handling of the claims against Tamburri in the Buckman Action pursuant to the terms of the Subcontract. Id. ¶ 42. Scottsdale cautioned in the letter that Kinsale's "failure, refusal[, ] or neglect to undertake the defense and to indemnify Tamburri would result in Kinsale being bound by the result of a trial or settlement of the underlying Buckman Action." Id. ¶ 43.

         Kinsale denied coverage for Scottsdale's tender on behalf of Tamburri, asserting that Tamburri's Subcontract was not with Kinsale's insured, AJA Skies the Limit, but instead was with AJA Services, Inc., which was not an insured or additional insured under Kinsale's policy. Id. ¶ 44.

         Following the issuance of the February 23, 2015, order reforming the Subcontract to name "AJA Skies the Limit" instead of "AJA Services, " Scottsdale retendered the defense of Tamburri to Kinsale on March 6, 2015. Id. ¶ 45. Kinsale again denied coverage, and this cycle happened twice more in 2015. See Id. ¶¶ 47-49. In December 2015, Kinsale characterized the February 23, 2015, order as a "sham [o]rder" constituting a "fiction" created by Scottsdale. Id. ¶ 49. Kinsale again denied the existence of any written contract between Tamburri and AJA Skies the Limit sufficient to trigger coverage under Kinsale's policy. See id.

         Based on the foregoing facts, Scottsdale now brings six distinct causes of action and requests for relief against Kinsale, all of which stem from Scottsdale's expenses incurred in defending AJA Skies the Limit in the Buckman Action. These include unjust enrichment, quantum meruit, equitable request for reimbursement of defense costs, equitable contribution and indemnification, equitable subrogration, and reformation of the Kinsale Insurance Policy. Id. ¶¶ 50-93. Scottsdale demands total compensation in excess of $75, 000. Notice of Removal ¶ 16.

         On January 25, 2017, Kinsale removed the instant action to this Court on the basis of diversity.[3] ECF No. 1. On February 6, 2017, Kinsale filed a motion to dismiss and compel arbitration. ECF No. 5. Scottsdale responded in opposition to this motion on February 21, 2017. ECF No. 8. On March 7, 2017, the Court held an initial pretrial conference and hearing on the motion to dismiss and compel arbitration. See ECF Nos. 7, 11.

         II. MOTION TO DISMISS AND ...


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