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Zurich American Insurance Co. v. FTS USA, LLC

United States District Court, E.D. Pennsylvania

July 17, 2018

FTS USA, LLC, Defendant.


          SLOMSKY, J.


         The instant case is a declaratory judgment action brought pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. (Doc. No. 1.) This case stems from an underlying action (the “Hays Litigation”) in which a worker, Jeremy Hays, brought a workers' compensation complaint in Tennessee state court against CVRS Telecommunications, Inc. (“CVRS”) and Comcast Corporation. (Id. at 2-3.) Hays filed the complaint after he was injured while installing cable in Tennessee, which CVRS had hired him to install. (Id.) Hays alleged in the workers' compensation complaint that CVRS and Comcast were his employers. (Id.)

         To do the cable installation, Comcast had contracted with FTS USA, LLC (“FTS”). FTS in turn contracted with CVRS, which hired Hays to perform the installation. (Id.) After Hays filed his lawsuit against Comcast and CVRS, Comcast filed a Third-Party Complaint (TPC) against FTS seeking express indemnity for Hays's claim for workers' compensation against Comcast. (Id. at 3-4.) The TPC is the subject of the instant case and is based on the contract between Comcast and FTS. (Id.)

         FTS is a named insured under a commercial general liability policy (the “CGL Policy”) sold by Zurich American Insurance Company (“Zurich”), and a workers' compensation policy (the “Workers' Compensation Policy”) sold by American Zurich Insurance Company (AZIC). (Id. ¶¶ 20-22.) The CGL Policy covers FTS's assumption of Comcast's liability for bodily injuries to third parties. The Workers' Compensation Policy covers workers' compensation damages imposed against FTS.

         Plaintiff Zurich seeks a declaratory judgment that it owes no coverage to FTS under the CGL Policy. (Id.) FTS counterclaimed against Zurich and asserted claims against a third party, Defendant AZIC, based on the Workers' Compensation Policy. (Doc. No. 6.)

         The CGL Policy contains a contractual liability exclusion, which is a provision that excludes certain damages FTS assumes in a contract or agreement, but the exclusion does not apply to what is described in the policy as an “insured contract.” The indemnity agreement between Comcast and FTS is an “insured contract” if FTS assumed Comcast's “tort liability” under that agreement. The crux of this case therefore is whether the indemnity agreement between Comcast and FTS is an “insured contract, ” or to state it differently, whether the workers' compensation claim in the underlying Hays Litigation constitutes a “tort liability.”[1]

         Before the Court are cross-motions for judgment on the pleadings, one filed jointly by Zurich and AZIC (Doc. No. 19) and the other filed by FTS (Doc. No. 20). The motions are ripe for a decision.[2]

         Because this Court will find, contrary to FTS's argument, that the contractual undertaking by FTS to defend Comcast against a workers' compensation claim does not fall within the definition of “tort liability” in the CGL Policy, this Policy does not provide coverage for FTS in the agreement with Comcast. Likewise, as will be discussed infra Section IV.B, because the Workers' Compensation Policy excludes coverage for liability assumed under contract, the Court will find that there is no coverage under that policy either.


         A. The Commercial General Liability Policy

         Zurich issued to FTS the CGL Policy, titled Commercial General Liability Insurance Policy GLO-0269604-00, for the period of July 1, 2011 to July 1, 2012, with a per occurrence limit of $1, 750, 000.[3] (Doc. No. 1 ¶¶ 20, 22.)

         Pursuant to the terms of the CGL Policy, Zurich is required to pay, inter alia, “those sums that [FTS] becomes legally obligated to pay as damages because of ‘bodily injury' or ‘property damage' to which this insurance applies.” (Doc. No. 1-8, Ex. D at 13.) The CGL Policy further provides that Zurich is obligated to “defend [FTS] against any ‘suit' seeking those damages.” (Id.)

         B. The Workers' Compensation Policy

         AZIC issued to FTS the Workers' Compensation Policy, titled Workers' Compensation and Employers Liability Insurance Policy WC 0269602-00, with a policy period from July 1, 2011 to July 1, 2012.[4] FTS is a named insured under the Workers' Compensation Policy.

         C. The Hays Litigation

         According to the Hays complaint, CVRS contracted with Comcast to provide individuals to install cable services for Comcast in Memphis, Tennessee. (Id., Ex. A ¶ 13.) Hays alleges that “[o]n or about the beginning of May 2012, [he] was sent to Memphis by Defendant CVRS to work for Defendant Comcast pursuant to the contract and/or agreement, ” and “Comcast became [his] employer, special employer, joint employer and/or statutory employer.” (Id., Ex. A ¶ 14.) Hays seeks compensation benefits under the Tennessee Workers' Compensation Laws, Tenn. Code Ann. § 50-6-101, together with statutory penalties under that Act. (Id., Ex. A. ¶¶ 28-29.)

         On July 25, 2015, Comcast filed a Third-Party Complaint (TPC) against FTS in the Hays Litigation seeking “express indemnity” for Hays's claim against Comcast for workers' compensation benefits.[5] The TPC is the subject of this coverage litigation. It was based on a February 15, 2012 “Preferred Vendor Agreement for Broadband Installation/Disconnection /Construction” (the “Preferred Vendor Agreement”) entered into by Comcast and FTS.[6]

         In its TPC, Comcast claims that FTS agreed to defend and indemnify Comcast for Hays's workers' compensation benefits pursuant to the following contractual provision:

In addition to any other indemnification obligations under this Agreement, [FTS] shall indemnify and hold harmless, and at the company's election defend, [Comcast] from and against:
* * * *
(b) Any and all claims, judgments, liabilities, damages, expenses, fines, losses, demands, actions, lawsuits, executions and costs (including but not limited to attorneys' fees and court costs) in whole or in part arising out of or in connection with any of the following:
(i) Performance of the Work by the Contractor or any one or more Sub-Contractors, or any agent, servant, employee or representative of the Contractor or any one or more Sub-Contractors;
* * * *
(vi) Any injury, damage or loss to persons (including injury to the Contractor's employees and agents and the employees and agents of any one or more Sub-Contractors or material suppliers) or property, including without limitation, the Company's property, occurring during, arising from or arising in connection with: (A) the Work, including without limitation any defective, non-conforming or omitted Work; (B) the entry upon or possession of Work site by the Contractor or its Sub-Contractors; or (C) the acts or omissions of the Contractor, its Sub-Contractor or the agents, employees, or invitees of the Contractor or its Sub-Contractor or any other person for whom the Contractor or its Sub-Contractors is responsible. . . .

(Doc. No. 1, Ex. B ¶ 20 (quoting Section 16 of the Preferred Vendor Agreement).)

         More specifically, in the TPC, Comcast alleges FTS had an “express contractual duty” to defend Comcast against Hays's workers' compensation claim:

27. Plaintiff [Hays] alleges injuries arising out of and occurring in the course and scope of employment, avers that Comcast is Plaintiff's employer, special employer, joint employer and/or statutory employer, and seeks judgment against Comcast pursuant to the Workers' Compensation Laws of Tennessee.
28. Pursuant to Tenn. Code Ann. § 50-6-211(b), nothing “shall prevent any agreement between the different employers between themselves as to the distribution of the ultimate burden of the compensation.”
* * * *
30. Furthermore, Tennessee law does not preclude “third party indemnity actions against an employer who has expressly contracted to indemnify the third party.” Tenn. Code Ann. § 50-6-108(c).
31. FTS has an express contractual duty to indemnify, hold harmless, and defend Comcast from and against all Plaintiff's [Hays's] claims.

(Id., Ex. B ¶¶ 27-31.)

         On February 11, 2014, Comcast put FTS on notice of its claim for indemnity and tendered the Hays Litigation Complaint. (Id., Ex. B ¶ 21.) On September 28, 2016, FTS provided Zurich with notice of Comcast's claim against FTS, contending that Zurich is liable to defend it and pay any costs and damages that Comcast incurs in the suit brought by Hays. (Id. at 11 ¶ 31.) Following the tender, Zurich disclaimed any insuring obligation under its commercial general liability coverage, relative to the contractual indemnification claim for workers' compensation benefits asserted against FTS. (Id. ¶ 32.)

         On March 16, 2017, after FTS disputed Zurich's disclaimer, this ensuing action was initiated by Zurich. (Id.) On June 2, 2017, FTS filed an Answer and a Third-Party Complaint against AZIC, which had issued the Workers' Compensation Policy to FTS. (Doc. No. 6.) AZIC filed an Answer and Counterclaim against FTS on September 5, 2017, contending that its first party workers' compensation coverage was not implicated by Comcast's claim for express contractual indemnity from FTS. (Doc. No. 17.) Further, that the contractual indemnity claim against FTS was specifically excluded under the employer's liability coverage. (Id.)


         A. Standard to Resolve Motion for Judgment on the Pleadings

         “After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). In deciding a motion for judgment on the pleadings, a court must consider only those documents contained in the pleadings. See Moco Invs., Inc. v. United States, 362 Fed.Appx. 305, 307 n.4 (3d Cir. 2010) (explaining that the district court's consideration of ...

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