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Suffolk Construction Co. v. Reliance Insurance Co.

Supreme Court of Pennsylvania

December 17, 2019

SUFFOLK CONSTRUCTION COMPANY, Objector
v.
RELIANCE INSURANCE COMPANY (IN LIQUIDATION) (ANCILLARY MATTER TO IN RE: RELIANCE INSURANCE COMPANY (IN LIQUIDATION) 1 REL 2001) APPEAL OF: SUFFOLK CONSTRUCTION COMPANY

          SUBMITTED: December 17, 2019

          Appeal from the Order of Commonwealth Court at No. 2 REL 2017 dated March 18, 2019

          SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

          OPINION

          DONOHUE JUSTICE

         This direct appeal of a decision by the Commonwealth Court involves a question of contract interpretation under Connecticut law. The Commonwealth Court found that the language of the contract was clear and unambiguous, thus precluding consideration of extrinsic evidence of the parties' intent. After careful review of the contract and the pertinent law, we conclude that the Commonwealth Court erred. We therefore vacate its decision and remand for further proceedings consistent with this Opinion.

         In 1997, Suffolk Construction Company ("Suffolk") entered into a contract with the University of Connecticut ("UConn") for the construction of several buildings on UConn's campus (hereinafter referred to as "the Project"). UConn secured insurance policies from Reliance Insurance Company ("Reliance") for the Project, naming Suffolk (and other contractors) as an insured. Suffolk completed the work in January 2001. The Reliance insurance policy was extended until January 2004 - three years after final acceptance of the Project. In late 2001, however, Reliance went into liquidation.

         In 2013 and 2014, UConn complained of defects in the construction that resulted in damage to its buildings. UConn retained counsel and initiated legal proceedings against Suffolk and other contractors. The claims proceeded through mediation, and Suffolk put its insurers on notice of the claims. On March 22, 2016, Suffolk submitted a proof of claim to the Insurance Commissioner of Pennsylvania, as the statutory liquidator ("Liquidator") of Reliance.

         In June of 2016, in the midst of Suffolk's attempt to obtain insurance coverage on its claim from Reliance, UConn entered into a settlement agreement with Suffolk and the other contractors ("Settlement Agreement"). The Settlement Agreement was between UConn, "on behalf of itself and its officers, directors, Trustees, insurers, heirs, personal representatives, successors, assigns and subrogees," and seven "Defending Parties" (one of which is Suffolk), "on behalf of themselves and their respective insurers, reinsurers, third-party administrators, attorneys, successors, sureties, parents, subsidiaries, affiliates, distributors, suppliers, agents, subcontractors, employees, subrogees, subrogors and their officers, directors and assigns." Settlement Agreement at 1 (emphasis added). The Settlement Agreement was entered into "to settle all claims between and among [UConn and the Defending Parties] arising out of or related to" the construction work originally contracted for on UConn's campus. Id. at 2 ¶ G (emphasis added). The Settlement Agreement called for the release of claims as follows:

Upon receipt of the Settlement Sum described in Paragraph 2 below, the sufficiency of which is hereby acknowledged, UConn and the Defending Parties hereby unconditionally mutually release and forever discharge each other, and their respective insurers, sureties, re-insurers, third-party administrators, attorneys, successors, parents, subsidiaries, affiliates, distributors, suppliers, agents, subcontractors, employees, insureds, subrogees, subrogors and their officers, directors and assigns from any and all claims, actions, causes of action, demands, damages, rights or remedies, past, present and future, known or unknown, foreseen or unforeseen, arising from or relating to the Project directly or indirectly of whatever kind or nature, including but not limited to claims for insurance coverage, indemnity or attorney's fees, that are in any way connected with the Project including, but not limited to, errors or omissions in development, design, construction, provision of products or materials, equipment, sale or repair of the Project, or representations relating to the Project, as well as claims for contribution, apportionment, indemnity, additional insured status, defense costs and attorney's fees (the "Released Claims").

Id. at 3 ¶ 1A (emphasis added). The Settlement Agreement further provided, in pertinent part, that its "purpose, intent and legal effect" was

to extinguish the entire liability of the Defending Parties to UConn and to each other … arising out of or connected with the Released Claims, and to bar forever any recovery by way of subrogation, indemnity, contribution or any other claim against any Party by any other Party or any third-party regarding the Released Claims as set out in Paragraph 1 above. Each Party represents that it does not intend to and shall not pursue claims arising from or related to the Project and/or that are the subject of this Agreement and that each Party accepts the payments made or received in this case as full and final consideration for the claims of all Parties, including claims against each other for contributions, deductibles, set-offs, counterclaims, offset premiums, subrogation or any other claim directly or indirectly relating to this Project.

Id. at 6-7 ¶ 4. The parties to the Settlement Agreement acknowledged that they were represented by counsel, were aware of the legal consequences of the Settlement Agreement, and that it "contains the entire agreement between UConn and Defending Parties (and as between the Defending Parties) with respect to the Released Claims[.]" Id. at 8 ¶ 5, 9 ¶ 7.

         Pursuant to the Settlement Agreement, Suffolk agreed to pay UConn $3, 250, 000, much of which was paid by its other insurers. Suffolk paid $800, 000 out of pocket, which it contended was Reliance's responsibility pursuant to the proof of claim it submitted to Liquidator. On April 12, 2017, Liquidator issued a notice of determination regarding Suffolk's insurance claim, finding a value of $0.00. On June 12, 2017, Suffolk objected to the determination. Liquidator responded, raising several bases for its determination, including that Suffolk had expressly waived its right to seek insurance coverage in the Settlement Agreement. The parties jointly requested the appointment of a referee, which the Commonwealth Court did on October 16, 2017. See Pa.R.A.P. 3781(d)(3) (governing the assignment of a referee in liquidation proceedings).

         On November 21, 2017, Liquidator filed a motion for summary judgment before the referee. On February 28, 2018, the referee issued a report and recommendation to the Commonwealth Court that it grant Liquidator's motion based on the language of the Settlement Agreement, which the referee found precluded Suffolk from seeking insurance coverage from Reliance. In so recommending, the referee relied on Tallmadge Bros. v. Iroquois Gas Transmission Sys., L.P., 746 A.2d 1277 (Conn. 2002) ("Tallmadge"), finding that Connecticut law ...


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