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State Farm Fire and Casualty Co. v. DTL Mechanical, LLC

United States District Court, E.D. Pennsylvania

March 30, 2018



          GERALD J. PAPPERT, J.

         State Farm Fire and Casualty Company insured DTL Mechanical, LLC under a business owners policy. (Pl.'s Mot. & Mem. for Summ. J., ¶ 1, ECF No. 14.) DTL was subcontracted to install a heating, ventilation and air conditioning (“HVAC”) system in an addition to the home of Scott and Maria Evans. (Id., Ex. C (“Joinder Complaint”) at ¶ 11, ECF No. 14-5.) There were numerous problems with the addition, including the HVAC installation. (Id., Ex. B (“Complaint”), ECF No. 14-4.) The Evanses sued the contractors in state court, and the contractors in turn sued DTL (the “underlying litigation”). (Joinder Complaint at ¶¶ 2, 7, 12.) State Farm declined to defend or indemnify DTL in the underlying litigation, and the Evanses eventually settled with the contractors and DTL. (Mot. at ¶ 13.) As part of that settlement agreement, DTL assigned to the Evanses its right to pursue certain claims against State Farm. (Defs.' Resp., Ex. A (“Assignment”), ECF No. 5.)

         State Farm seeks a declaration that it did not owe DTL a duty to defend or indemnify it in the underlying litigation, and thus has no obligation to indemnify the Evanses under the Assignment.[1] (Compl., ECF No. 1.) The Evanses responded by asserting thirteen counterclaims. (Resp. at 12-28.) State Farm filed a Motion for Summary Judgment (Mot. at 1), which the Court grants for the reasons that follow.


         The Evanses hired Bianco Contractors, Inc. and Jeffrey Biancaniello (“the contractors”) in mid-2014 to construct an addition onto their home. (Complaint at ¶ 5.) During the course of the construction, the contractors hired DTL as a subcontractor to install an HVAC system. (Joinder Complaint at ¶ 11.) A number of problems arose after the addition was completed, forcing the Evanses to reconstruct or replace portions of the addition. (Complaint at ¶ 9.) As a result, the Evanses sued the contractors in the Delaware County Court of Common Pleas. (Id. at ¶¶ 11, 20, 22, 24, 29.) Relevant to the present Motion, the Evanses alleged that the contractors installed an improperly “designed, sized, vented and harmonized HVAC system, ” failed to comply with applicable building codes, and breached implied warranties that the HVAC system would comply with industry standards and fit for ordinary purposes. (Id. at ¶¶ 20, 32.) The contractors, in turn, alleged that DTL was “responsible for the installation of the HVAC system, ” and that damages sustained by the Evanses were caused by DTL's “negligent performance of the work.” (Joinder Complaint at ¶¶ 2, 7, 12.)

         DTL had a Business Owners Policy with State Farm, the term of which ran from September 1, 2014 through September 1, 2015 (“the Policy”). (Mot. at ¶ 1; Resp. at ¶ 1.) The Policy provided that State Farm would “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury', ‘property damage' or ‘personal and advertising injury'” caused by an “occurrence.” (Id., Ex. A (“Policy”) at 23, ECF No. 14-3.) “Property damage” means “[p]hysical injury to tangible property, including all resulting loss of use of that property, ” or “[l]oss of use of tangible property that is not physically injured or destroyed, provided such loss of use is caused by physical injury to or destruction of other tangible property.” (Id. at 36.) “Occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (Id.)

         State Farm declined to defend or indemnify DTL, maintaining that the allegedly negligent installation work did not constitute an “occurrence” under the Policy. (Mot. at ¶ 13; Resp. at ¶ 13.) The Evanses subsequently settled the underlying litigation against the contractors and DTL. As part of that settlement, DTL assigned the Evanses its rights to pursue “any and all insurance defense and/or indemnification declaratory judgment claims, as well as any and all bad faith claims that may apply or arise as a result of the failure and/or refusal by State Farm…to indemnify and/or defend DTL as to claims asserted against DTL within the Lawsuit.” (Id.)


         Summary judgment is proper if there is no genuine issue of material fact and if, viewing the facts in the light most favorable to the non-moving party, the moving party is entitled to judgment as a matter of law. Smathers v. Mutli-Tool, Inc./Multi-Plastics, Inc. Emp. Health & Welfare Plan, 298 F.3d 191, 194 (3d Cir. 2002); see also Fed. R. Civ. P. 56(c). A genuine issue of material fact exists when “a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). In reviewing the record, a court “must view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor.” Prowell v. Wise Bus. Forms, 579 F.3d 285, 286 (3d Cir. 2009). The court may not, however, make credibility determinations or weight the evidence in considering motions for summary judgment. See Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150 (2000); see also Goodman Pa. Tpk. Comm'n, 293 F.3d 655, 665 (3d Cir. 2002).


         Under Pennsylvania law, “the interpretation of an insurance contract regarding the existence or non-existence of coverage is generally performed by the court.” Gardner v. State Farm Fire & Gas. Co., 544 F.3d 553, 557 (3d Cir. 2008) (quoting Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286, 290 (Pa. 2007)); see also Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 897 (Pa. 2006) (“The interpretation of an insurance contract is a question of law”). “When the language of the policy is clear and unambiguous, we must give effect to that language.” Baumhammers, 938 A.2d at 290. If the language of the policy is ambiguous, the policy must be construed against the insurer. Med. Protective Co. v. Watkins, 198 F.3d 100, 103 (3d Cir. 1999).

         The Evanses seek indemnification from State Farm based on State Farm's alleged duty to defend and indemnify DTL in the underlying litigation. The duty to defend is broader than the duty to indemnify, Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir. 1999), and that duty is assessed by comparing the underlying complaint to the insurance policy. See Gene's Rest., Inc. v. Nationwide Ins. Co., 548 A.2d 246, 246-47 (Pa. 1988). Factual allegations in the complaint are taken as true and liberally construed in favor of the insured. Frog, 193 F.3d at 746 (citing Biborosch v. Transamerica Ins. Co., 603 A.2d 1050, 1052 (Pa. Super. Ct. 1992)). The duty to defend arises if “the allegations in the complaint…could potentially fall within the coverage of the policy.” Air Prods. & Chemicals, Inc. v. Hartford Accident & Indem. Co., 25 F.3d 177, 179 (3d Cir. 1994). In assessing that duty, the Court focuses on the factual allegations contained in the complaint, rather than the causes of action. See Mutual Benefit Ins. Co. v. Haver, 725 A.2d 743, 745 (Pa. 1999); see also Quality Stone Veneer, Inc. v. Selective Ins. Co. of Am., No. 15-6509, 2017 WL 345636, at *1-2 (E.D. Pa. Jan. 23, 2017) (analyzing factual assertions in original complaint and amended joinder complaint). “Because an insurer's duty to defend it's insured in a lawsuit is broader than its duty to indemnify, it necessarily follows that it will not have a duty to indemnify an insured for a judgment in an action for which it was not required to provide defense.” Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660, 673 (3d Cir. 2016).

         To determine whether the duty to defend is triggered, the Court must first examine the language of the insurance policy to determine the scope of coverage. See Nationwide Mut. Ins. Co. v. CPB Int'l, Inc., 562 F.3d 591, 596 (3d Cir. 2009). Next, the Court analyzes the complaint in the underlying litigation to determine if those claims potentially fall within the scope of the Policy's ...

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