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National Liability & Fire Insurance Co. v. Brimar Transit, Inc.

United States District Court, W.D. Pennsylvania

January 14, 2020

NATIONAL LIABILITY & FIRE INSURANCE COMPANY, Plaintiff,
v.
BRIMAR TRANSIT, INC., Defendant, and PITTSBURGH PUBLIC SCHOOL DISTRICT, Intervenor Defendant.

          MEMORANDUM OPINION

          NORA BARRY FISCHER SENIOR U.S. DISTRICT JUDGE

         I. INTRODUCTION

         This insurance coverage dispute returns to the Court on a contested motion for judgment on the pleadings pursuant to which Plaintiff National Liability & Fire Insurance Company, (“National”), seeks a declaration that it does not owe a duty to defend or indemnify Defendant Brimar Transit, Inc., (“Brimar”), or Intervenor Defendant Pittsburgh Public School District, (the “District”), in the underlying action styled M.M., parent and natural guardian of K.M., a minor v. Pittsburgh Public School District and Brimar Transit, Inc., No. GD-18-003257, (“underlying action”), which is on the May 2020 trial list in the Court of Common Pleas of Allegheny County. (Docket No. 53). National is providing a defense to Brimar in the underlying action under a reservation of rights but is not defending the District. (Docket No. 46 at ¶¶ 15-16). Brimar and the District contest the instant motion and assert that they are both entitled to a defense and indemnification in the event they are ultimately found liable. (Docket Nos. 57-58). The motion for judgment on the pleadings has been fully briefed, (see Docket Nos. 53-54; 57-59; 65-66), and was argued at a motion hearing, (see Docket No. 75), the official transcript of which has been received and reviewed by the Court, (see Docket No. 82). At the Court's direction, the parties also submitted supplemental briefing addressing whether this federal insurance coverage case should be stayed pending the trial of the underlying action. (Docket Nos. 80; 83; 84; 89).

         After careful consideration of the parties' submissions, and for the following reasons, the Court makes the following rulings. First, the rule to show cause, (Docket No. 77), is vacated because the Court agrees with the parties that a stay of these proceedings is not appropriate at this time. Second, National's motion for judgment on the pleadings as to the District, (Docket No. 53), is denied because there are material issues of fact as to whether the District was named an additional insured under the Policy or is entitled to coverage under a separately issued commercial general liability policy, (“CGL Policy”). Third, the District qualifies as an “insured” under the Policy as the underlying action contains allegations that it is vicariously liable for Brimar's neglience. Fourth, National's motion for judgment on the pleadings arguing that it has no duty to defend or indemnify the underlying action, (Docket No. 53), is denied because National has failed to demonstrate that the factual allegations set forth in the underlying action are not potentially covered by the Policy and/or subject to an exclusion. Therefore, National has a duty to defend Brimar and the District in the Court of Common Pleas and any further determinations as to the duty to indemnify either Defendant are premature given the procedural posture of the state tort action and this federal insurance coverage case.

         II. BACKGROUND

         A. Parties

         The District and Brimar are parties to a contract pursuant to which Brimar agreed to provide student transportation services for the District during several school years. (See “Agreement”, Exhibit A, Docket No. 46-1). The relevant terms and conditions of the parties' contract state that Brimar was expected to perform such services using safe vehicles and qualified drivers in accordance with the Pennsylvania Vehicle Code and other highway standards. (Id.). Brimar was also required to maintain insurance coverage for its vehicles and to provide a certificate of insurance to the District each year naming the District “as additional insured, verifying coverage of $1, 000, 000 per accident and a $5, 000, 000 umbrella.” (Id. at ¶¶ 17-19; 2.f). Brimar further agreed “to indemnify, defend and hold harmless” the District “against any and all loss, damage, cost and expenses which the [District] may hereafter suffer or incur arising from [Brimar's] obligations under this Agreement.” (Id. at ¶ 8).

         B. Commercial Auto Policy

         As required under its agreement with the District, Brimar obtained Policy No. 73 APB 001185 from National for the policy period of January 11, 2016 through January 11, 2017, (“Policy”). (See “Commercial Policy”, Docket No. 46-2). The Business Auto Coverage Declarations (“Declarations”) note that Brimar is the named insured and in the business of “school buses”; Burns & Wilcox, Inc. is listed as the producer or broker on the transaction; and the form indicates that this is a new policy, meaning that it was not renewed from a prior time period. (Docket No. 46-2 at 55). The Declarations state that the Policy provides $1, 000, 000 in liability coverage for a premium of $69, 654 as well as smaller premium amounts for additional coverage for personal injury protection; uninsured motorists; and underinsured motorists. (Id.). The Schedule of Covered Autos lists 26 separate vehicles covered under the Policy, all of which are described as “passenger vans” with listed seating capacities of 7 or 9 seats. (Id. at 57-58).

         The relevant terms and conditions of the Policy include the following.

         BUSINESS AUTO COVERAGE FORM

         Various provisions in this policy restrict coverage. Read the entire policy carefully to determine rights, duties and what is and is not covered.

         Throughout this policy the words “you” and “your” refer to the Named Insured shown in the Declarations. The words “we” and “us” and “our” refer to the company providing this insurance.

         SECTION II-LIABILITY COVERAGE

         A. Coverage

         We will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto”.

         … We have the right and duty to defend any “insured” against a “suit” asking for such damages or a “covered pollution cost or expense”. However, we have no duty to defend any “insured” against a “suit” seeking damages for “bodily injury” or “property damage” or a “covered pollution cost or expense” to which this insurance does not apply. We may investigate and settle any claim or “suit” as we consider appropriate. Our duty to defend or settle ends when the Liability Coverage Limit of Insurance has been exhausted by payment of judgments or settlements.

         B. Exclusions

         This insurance does not apply to any of the following:

          2. Contractual

Liability assumed under any contract or agreement.
But this exclusion does not apply to liability or damages:
a. Assumed in a contract or agreement that is an “insured contract” provided the “bodily injury” or “property damage” occurs subsequent to the execution of the contract or agreement; or
b. That the “insured” would have in the absence of the contract or agreement.

(Docket No. 46-2 at 59-61).

         PENNSYLVANIA CHANGES - DEFENSE COSTS

         This endorsement modifies insurance provided under the following:

         COMMERCIAL AUTOMOBILE COVERAGE PART

         A. The provisions of Paragraph B. are added to all Insuring Agreements that set forth a duty to defend under:

         … 1. Section II - Liability Coverage in Paragraph A. Coverage under the Business Auto …

         B. If we initially defend an insured (“insured”) or pay for an insured's (“insured's”) defense but later determine that none of the claims (“claims”), for which we provided a defense or defense costs, are covered under this insurance, we have the right to reimbursement for the defense costs we have incurred.

         The right to reimbursement under this provision will only apply to the costs we have incurred after we notify you in writing that there may not be coverage and that we are reserving our rights to terminate the defense or the payment of defense costs and to seek reimbursement for defense costs.

         (Docket No. 46-2 at 85).

         ABUSE OR MOLESTATION EXCLUSION

         PLEASE READ THIS ENDORSEMENT CAREFULLY

         This endorsement modifies insurance provided under the following:

         BUSINESS AUTO COVERAGE FORM

         The following exclusion is added to the Policy:

         This insurance does not apply to bodily injury or property damage arising out of:

(a) the alleged, actual or threatened abuse, molestation or sexual contact, whether or not intentional, by anyone or any person; or
(b) the negligent:
(i) employment;
(ii) investigation;
(iii) supervision; or
(iv) retention, of anyone or negligent entrustment to anyone whose conduct would be excluded by (a) above; or
(c) the reporting to authorities or failure to report to authorities the alleged actual, or threatened abuse, molestation or sexual contact by anyone or any person.
All other terms and conditions remain unchanged.

(Docket No. 46-2 at 90).

         The Policy also contains definitions of important terms and phrases quoted throughout the policy, endorsements, and exclusions. (See Docket No. 46-2 at 59 (ÔÇťOther words and phrases that appear in quotation marks have special meaning. ...


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