United States District Court, E.D. Pennsylvania
ADMIRAL INSURANCE CO., on its own behalf and as assignee of Girard Estate Fee and Girard Estate Leasehold Plaintiff,
LIBERTY MUTUAL FIRE INSURANCE CO. AND LIBERTY INSURANCE CORP., Defendants.
F. Kenney, Judge
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.
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).
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. 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.
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
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.
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.
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.
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.
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.
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.
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.
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 ¶ 57. On April 3, 2018,
Liberty provided Sisto with the Liberty Insurance Corp.
policy, Additional Insured Limitation endorsement, and six