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Admiral Insurance Co. v. Liberty Mutual Fire Insurance Co.

United States District Court, E.D. Pennsylvania

August 19, 2019

ADMIRAL INSURANCE CO., on its own behalf and as assignee of Girard Estate Fee and Girard Estate Leasehold Plaintiff,
v.
LIBERTY MUTUAL FIRE INSURANCE CO. AND LIBERTY INSURANCE CORP., Defendants.

          MEMORANDUM

          Chad F. Kenney, Judge

         I. INTRODUCTION

         Plaintiff Admiral Insurance Company ("Admiral") seeks declaratory judgment against Liberty Mutual Fire Insurance Company, et al. ("Liberty") in order to establish that Liberty owes an obligation under an insurance agreement to provide umbrella coverage up to $5, 000, 000 to Girard Estate, rather than only the $1, 000, 000 it paid pursuant to the umbrella policy. ECF No. 1. Admiral's position is that Liberty has waived or is estopped from "relying on an endorsement in its umbrella policy to reduce the limits of that policy from $5, 000, 000 to $1, 000, 000 for Girard Estate" because of Liberty's actions during the defense of a personal injury suit against Girard Estate. ECF No. 46-5 at 4. Defendant Liberty's position is that it covered Girard Estate under a primary policy of $ 1 million and met that obligation as well as meeting its obligation under the umbrella by paying $ 1 million under it for a total of $2 million. ECF No. 44-4. Girard Estate, as an additional insured under the umbrella policy, is subject to the Additional Insured Limitation endorsement of $1, 000, 000. Id. Admiral agrees that the policy language would normally limit Liberty's exposure to $1, 000, 000 but claims Liberty's actions in this case serve as a waiver and estoppel to assert the policy language and therefore Liberty is liable to pay up to the full-face amount of the policy of $5 million. ECF No. 46-5. Liberty argues that the waiver and estoppel claims must fail as a matter of law. ECF No. 44-4 at 5-7.

         Currently before the Court is Defendants' Motion for Summary Judgment (ECF No. 44), Plaintiffs Response (ECF No. 46), Defendants' Reply (ECF No. 47), and Plaintiffs Sur-Reply (ECF No. 49).

         II. BACKGROUND

         The underlying personal injury suit at issue involved an individual, Timothy May, who alleged he was severely injured while working at a property owned by Girard Estate in his capacity as an employee of Farrelly Building Services, Inc. ("Farrelly"). ECF No. 44-4 at 10.[1] An access door blew shut, striking him, and causing him to fall back and hit his head on a support beam. Id. Admiral, as the primary liability insurer for Girard Estate, was first put on notice of May's insurance claim on October 26, 2015. ECF No. 44-2 at ¶ 2.

         At the time of May's claim, Girard Estate was insured by Admiral under a commercial liability insurance policy limited to $1, 000, 000 per occurrence. Id. at ¶ 21. Farrelly was insured by Liberty under two separate policies: a primary liability policy through Liberty Mutual Fire Insurance Company with a $1, 000, 000 per occurrence limitation and an umbrella liability policy through Liberty Insurance Corp. with a $5, 000, 000 per occurrence limitation. ECF No. 44-4 at 5.

         Girard estate was an additional insured under Liberty's primary policy with Farrelly. ECF No. 44-2 at ¶ 19. Girard Estate was also covered under the umbrella policy, which contained an "ADDITIONAL INSURED LIMITATION." ECF No. 44-2 at ¶ 20. This endorsement modifies coverage limits for "an additional insured under 'underlying insurance'" to the amount "required by the contract or agreement to provide for such additional insured." Id. The amount required by the Agreement for Engineering Services between Farrelly and Kennedy-Wilson Pennsylvania Management ("KWPMI"), Farrelly, as the contractor, was "in an amount of not less than $2, 000, 000." Id. at ¶ 9. This language, the parties agree, then limits Liberty's available insurance to Girard Estate to $2 million. See ECF No. 46-5 at 22.

         Admiral denied May's claim against Girard Estate by December 30, 2015. Id. at ¶ 28. On September 28, 2016, May sued Girard Estate and KWPMI for damages related to his injury. Id. at ¶ 1. Admiral assumed defense of the suit and retained the law firm Deasey, Mahoney & Valentini which filed an Answer to the Complaint on behalf of all Defendants. Id. at ¶¶ 4-6. Then, on November 22, 2016, counsel for Admiral formally tendered defense of the May lawsuit to Farrelly and Liberty. Id. at ¶ 6. On a November 30, 2016 phone conference, Sandra Baker, a claims specialist at Liberty, indicated to Admiral that Liberty would assume the defense of the May lawsuit. Id. at ¶ 34.

         Carol Sisto ("Sisto"), a claims adjuster for Admiral, testified at her deposition that she was the most knowledgeable person regarding the May lawsuit. Id. at ¶ 23. After May's claim was filed, Sisto reviewed the Agreement for Engineering Services and also received a Certificate of Insurance prepared and issued by Wells Fargo Insurance Services USA, Inc. ("Wells Fargo"), Farrelly's insurance broker. Id. at ¶¶ 24-25. The Certificate of Insurance referenced both the primary and the umbrella policies and their respective limits, as well as the additional insurance limitation endorsement. Id. at ¶¶ 17-18. The certificate stated, "[a]ll coverages are subject to policy terms, conditions and exclusions." Id. at ¶ 18. Most telling, Sisto did not request to review the policies listed in the Certificate of Insurance. Id. at ¶ 25. She candidly testified that "if anyone had reviewed the certificate of insurance and then the form that was explicitly referenced in the certificate of insurance, they would have known about the limit of coverage that was being made available to additional insureds." Id. at ¶ 26.

         Girard Estate believed it was covered as an additional insured under Farrelly's primary and umbrella policies issued by Liberty with limits of $1, 000, 000 and $5, 000, 000 respectively, rather than just the $2 million total that a reading of the policies would have demonstrated. ECF No. 46-5 at 6. However, this belief was only based on a reading of the limits stated on the declaration pages of those policies. Id.

         Sisto never discussed how much coverage was available to Girard Estate under the primary or umbrella policies with Liberty as it related to the May lawsuit until March of 2018. ECF No. 44-2 at ¶ 52. When Admiral tendered the defense of the suit to Liberty over a year earlier, on November 30, 2016, it believed the claim would not exceed $1, 000, 000, and the defense of the lawsuit would be paid for under Liberty's primary policy. Id. at ¶¶ 29-31. Admiral, based on the assumptions it made without reading the policy and its evaluation of the claim, closed its file on May's claim, did not follow the development of the suit, and made an indemnity reserve of $0. Id. at ¶ 36.

         During the May lawsuit, Liberty's counsel engaged Dr. Jonas Gopez as a defense medical expert to conduct an independent medical exam of May on September 15, 2017. Id. at ¶ 44. Dr. Gopez conceded that May could not return to work as a building engineer's helper. ECF No. 46-5 at 7. He opined, however, that May was still capable of "gainful employment and sedentary duty would be his most appropriate level." Id. A day before the independent medical exam was conducted by Dr. Gopez, Liberty filed suit against Dr. Gopez and other physicians in the Philadelphia area for submitting fraudulent claims. Id.

         On February 2, 2018, a motion for summary judgment was filed on behalf of all defendants in the May lawsuit. ECF No. 44-2 at ¶ 45. On February 21, 2018, counsel for Liberty stated in an internal written evaluation of the claim that they could not call Dr. Gopez because of the lawsuit against him and recommended that they try and "get this case to mediation." ECF No. 46-5 at 10; ECF No. 44-2 at ¶ 47. On March 6, 2018, Liberty opened a claim under Farrelly's umbrella policy. Id. at ¶ 48. On March 8, 2018, a representative from Liberty advised Sisto that Liberty had $2 million in total coverage available for the May lawsuit, and that "a potential excess exposure existed" that would impact Admiral and that Liberty was trying to set up a date for mediation of the claim. ECF No. 44-4 at 17. On the same day, Admiral re-opened its claim file for the May lawsuit but did not set an indemnity reserve for the claim. ECF No. 44-2 at ¶ 51. "Although it sent an excess letter, at no time during the underlying May case did Liberty issue a reservation of rights letter to Girard Estate, reserving its rights to claim that the limits on the umbrella Policy are only $1, 000, 000." ECF No. 46-5 at 10.

         Summary judgment in the May lawsuit was denied on March 28, 2018. ECF No. 44-2 at ¶ 55. The next day, Sisto informed her manager that May's expert economist "opined a loss of $2.8 million." Id. at ¶ 56. Sisto at this point then evaluated the full value of the claim at $3.2 million but did not set an indemnity reserve, which would implicate Admiral's full coverage of $1 million if it were to accept Liberty's claim of a $2 million dollar limit, and this on a claim they originally denied and then reserved at $0. Id. at ΒΆ 57. On April 3, 2018, Liberty provided Sisto with the Liberty Insurance Corp. policy, Additional Insured Limitation endorsement, and six ...


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