United States District Court, E.D. Pennsylvania
J. PAPPERT, J.
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.)
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. (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.
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.)
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.”
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.)
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).
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).
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).
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