Liberty Mutual Insurance Co v. Penn National Mutual Casualty ( 2021 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 20-3468
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LIBERTY MUTUAL INSURANCE COMPANY
v.
PENN NATIONAL MUTUAL CASUALTY INSURANCE COMPANY,
Appellant
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Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 2-16-CV-01613)
District Judge: Hon. Mark R. Hornak
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Submitted under Third Circuit L.A.R. 34.1(a)
October 4, 2021
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Before: SHWARTZ, RESTREPO, and SCIRICA, Circuit Judges.
(Filed: November 18, 2021)
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OPINION*
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*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
SHWARTZ, Circuit Judge.
Penn National Mutual Casualty Insurance Company (“Penn National”) appeals
orders directing it to defend and indemnify an entity insured by Liberty Mutual Insurance
Company (“Liberty Mutual”). Because the Court properly determined that Penn National
had a duty to defend and indemnify Liberty Mutual’s insured, we will affirm.
I
A
A large concrete panel collapsed on and killed Yamil Alexander Gonzalez while
he was working at the Grandview Project construction site in New Kensington,
Pennsylvania. Cost Company, Liberty Mutual’s insured, was a masonry subcontractor on
the project, and Cost further subcontracted with Pittsburgh Flexicore Co., Penn
National’s insured, for the concrete panels. According to the Subcontract Agreement
between Cost and Flexicore, Flexicore would “[m]anufacture, furnish, [and] deliver to the
project site . . . all required precast hollowcore plank and solid balcony [concrete] slabs
required at the Grandview Apartments.” App. 114.
The Subcontract Agreement contained a safety provision that deemed Flexicore
“solely responsible for the health and safety of its employees, agents, Subcontractors, and
other persons on and adjacent to the Work Site.” App. 122. The Subcontract Agreement
further required Flexicore to obtain general liability insurance and name Cost as an
additional insured. The Subcontract Agreement also provided that Flexicore would
indemnify Cost “against any and all claims, causes of action, suits, losses, costs, or
2
damages, including attorneys’ fees, resulting from the acts, failure to act, omissions,
negligence, or fault” of Flexicore, “whether or not said claim . . . is alleged to be caused
in part by any act, omission, negligence, or fault” of Cost. App. 124.
Flexicore obtained a general liability policy from Penn National.1 The Penn
National policy contains automatic additional-insured endorsement provisions. The
Completed Operations endorsement designates as an additional insured:
Any person(s) or organization(s) . . . with whom you are required in a written
contract . . . to name as an additional insured for the “products-completed
operations hazard”, but only with respect to liability for “bodily injury” . . .
caused, in whole or in part, by “your work”, at the location or project
designated and described in the contract . . . performed for that additional
insured and included in the products-completed operations hazard.
App. 314.2
1
Penn National also issued Flexicore an umbrella insurance policy, which Penn
National agrees covers Cost if it is determined to be an additional insured under the
general commercial policy.
2
The products-completed operations hazard “[i]ncludes all bodily injury and
property damage occurring away from premises [Flexicore] own[s] or rent[s] and arising
out of [Flexicore’s] product or [its] work,” except:
(1) Products that are still in [Flexicore’s] physical possession; or
(2) Work that has not yet been completed or abandoned. However, “your
work” will be deemed completed at the earliest of the following times:
(a) When all of the work called for in [the] contract has been
completed.
(b) When all of the work to be done at the job site has been completed
if [the] contract calls for work at more than one job site.
(c) When that part of the work done at a job site has been put to its
intended use by any person or organization other than another
contractor or subcontractor working on the same project.
App. 333. “Your work” means “work or operations performed by [Flexicore] or on [its]
behalf,” including “[t]he providing of or failure to provide warnings or instructions.”
App. 334.
3
B
Gonzalez’s widow, Karina Ramirez, brought a wrongful death and survival action
in Pennsylvania state court against Cost and Flexicore, among others involved in the
Grandview Project. See Ramirez v. Longwood at Oakmont, Inc., GD No. 10-19146
(Allegheny Cnty. Ct. Com. Pl. 2010). Counts V and VI of the Ramirez Amended
Complaint brought wrongful death and survival claims against Cost based on its alleged
negligence and failure to maintain adequate safety measures at the Grandview Project.
Counts IX and X alleged that Flexicore “negligently failed to ensure that the concrete
panel conformed to the manufacturing specifications, negligently failed to have proper
warnings or instructions concerning its use, and [] negligently designed [the panels],” and
that the defective condition of the concrete panel “was a proximate cause of” Gonzalez’s
death. App. 1053
After Ramirez sued, Cost asked Penn National to defend and indemnify it. Penn
National denied the request, contending that the Subcontract Agreement did “not clearly
and unambiguously evidence an agreement by [Flexicore] to indemnify Cost Company
for its own negligence” and “any additional insured status . . . was terminated when
[Flexicore’s] operations for [Cost] were completed.” App. 258-59. As a result, Liberty
Mutual defended Cost and Penn National defended Flexicore in the Ramirez action,
which they subsequently settled.
3
Count IX was titled “Wrongful Death (Products Liability),” App. 103, and Count
X was titled “Survival Action (Products Liability),” App. 107.
4
C
Following the settlement, Liberty Mutual filed this suit against Penn National,
asserting that Cost was an additional insured under the Penn National policy and seeking
reimbursement for the sums it paid to defend and indemnify Cost in the Ramirez action.
Liberty Mutual and Penn National each moved for summary judgment on whether Penn
National had a duty to defend Cost. The District Court granted Liberty Mutual’s motion
and denied Penn National’s motion, holding that Cost was an additional insured under
Penn National’s policy and thus Penn National had a duty to defend Cost. The Court
reasoned that the facts in the Ramirez Amended Complaint, accepted as true, alleged that
Flexicore negligently failed to provide adequate warnings and thus “raise[d] the
possibility that Mr. Gonzalez’s death was caused in whole or in part by Flexicore’s acts
or omissions.” Liberty Mut. Ins. Co. v. Penn Nat’l Mut. Cas. Ins. Co., No. CV 16-1613,
2018 WL 3872155, at *7 (W.D. Pa. Aug. 15, 2018) (emphasis omitted). While the
Ramirez Amended Complaint’s headers labeled the claims against Flexicore as strict
products liability, the Court found that the substance of the allegations also sounded in
negligence. Id. at *8. As a result, it concluded that there was a possibility that the claims
were covered.4 Id. at *8-9.
Liberty Mutual then moved for summary judgment on Penn National’s duty to
indemnify, which the District Court also granted. The Court found that “there [were]
4
The District Court determined that Penn National had a duty to defend Cost
under both the Ongoing and Completed Operations endorsements.
5
multiple claims, multiple parties, multiple insurers, and a settlement . . . that preclude[d] a
determination on the facts of th[e] case relative to liability and its apportionment.”
Liberty Mut. Ins. Co. v. Penn Nat’l Mut. Cas. Ins. Co., 499 F. Supp. 3d 130, 145 (W.D.
Pa. 2020). The Court held that where the settlement “preclude[d] such . . . factual
determinations,” “the duty to indemnify follows the duty to defend.” Id. at 139
(omissions in original) (quoting Pac. Indem. Co. v. Linn, 766 F.2d 754, 766 (3d Cir.
1985)).
Penn National appeals the orders denying it summary judgment and granting
Liberty Mutual summary judgment.5
II6
We first consider whether Penn National had a duty to defend Cost under the
policy it issued Flexicore and then turn to whether it had a duty to indemnify Cost. Both
5
Penn National does not dispute the reasonableness of (1) the $191,431.74
defense costs Liberty Mutual incurred, (2) the $850,000 settlement, or (3) the
$349,401.03 prejudgment interest award.
6
The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction
under 28 U.S.C. § 1291.
“We review a district court’s grant of summary judgment de novo,” Tundo v.
County of Passaic, 923 F.3d 283, 286 (3d. Cir. 2019), and we view the facts and make all
reasonable inferences in the non-movant’s favor, Hugh v. Butler Cnty. Fam. YMCA, 418
F.3d 265, 266-67 (3d Cir. 2005). Summary judgment is appropriate where “there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a).
6
issues require us to consider the insurance policy and the claims made against the
insured. See Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286, 290-91 (Pa. 2007).
A
An insurer has a duty to defend its insured in any suit in which the complaint
alleges claims that the insurance policy potentially covers. Id. To determine whether an
insurer’s duty to defend is triggered by a claim against its insured, we “compar[e] the
four corners of the insurance contract [with] the four corners of the complaint.” Lupu v.
Loan City, LLC, 903 F.3d 382, 389 (3d Cir. 2018) (quoting Am. & Foreign Inc. Co. v.
Jerry’s Sport Ctr., Inc., 2 A.3d 526, 541 (Pa. 2010)).
When interpreting an insurance contract under Pennsylvania law, which the parties
agree governs this dispute, we must ascertain and give effect to the parties’ intent as
manifested in the terms of the policy. Baumhammers, 938 A.2d at 290. Where the
language is clear and unambiguous, we must follow it. Minn. Fire & Cas. Co. v.
Greenfield, 855 A.2d 854, 861 (Pa. 2004). However, where the contract language is
ambiguous, we construe the provision in favor of the insured. Id. When reviewing the
underlying complaint, we “view[] the allegations as true and liberally construe [them] in
favor of the insured.” Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660, 673 (3d Cir.
2016) (quotation marks omitted). If a single claim in a multiclaim lawsuit is potentially
covered by the insurance policy, the insurer must defend all claims until “there is no
possibility that the underlying plaintiff could recover on a covered claim.” Frog, Switch
& Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir. 1999); see also Erie Ins.
7
Exch. v. Claypoole, 673 A.2d 348, 355-56 (Pa. 1996) (similarly summarizing the duty to
defend).
Penn National’s duty to defend was triggered because Cost qualified as an
additional insured under the policy’s Completed Operations endorsement. As noted, that
endorsement designates as an additional insured “[a]ny . . . organization(s) with whom
[Flexicore] is required in a written contract . . . to name as an additional insured for the
‘products-completed operations hazard’, but only with respect to liability for ‘bodily
injury’ . . . caused, in whole or in part, by ‘[Flexicore’s] work.’” App. 314. Here: (1) the
Subcontract Agreement named Cost as an additional insured; (2) the Ramirez Amended
Complaint alleged that Gonzalez’s bodily injury was caused, at least in part, by
Flexicore’s work; and (3) the policy’s products-completed operations hazard covers such
work. Specifically, the policy: (1) defines the “products-completed operations hazard” to
include “all ‘bodily injury’ . . . occurring away from premises [Flexicore] own[s] or
rent[s] . . . arising out of . . . ‘your work,’” App. 333; (2) provides that Flexicore’s work
is deemed completed “[w]hen all of the work called for in [its] contract has been
completed,” App. 333; and (3) explains that “your work” includes “[t]he providing of or
failure to provide warnings or instructions,” App. 334. The Ramirez Amended
Complaint alleged that Flexicore manufactured and delivered the concrete panels to the
Grandview Project and that Gonzalez’s bodily injury resulted from Flexicore’s “work,”
i.e., its “failure to provide warnings.” App. 334; see also App. 105 (Amended Complaint
asserting that “[Flexicore] negligently failed to have proper warnings or instructions
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concerning [the concrete panels’] use, and [the concrete panels were] negligently
designed”). Because the allegations demonstrate that there is a possibility that the Penn
National policy covers the claim, the District Court correctly held that Penn National had
to defend Cost in the Ramirez action. See Ramara, 814 F.3d at 674 (concluding insurer
had duty to defend “because . . . the factual allegations in the complaint . . . potentially
triggers coverage”).7
B
Unlike the duty to defend, the duty to indemnify requires a determination that the
policy actually covered the claim at issue. See Am. States Ins. Co. v. State Auto Ins. Co.,
721 A.2d 56, 64 (Pa. Super. Ct. 1998) (“[A] duty to indemnify requires an inquiry into
whether there was actual coverage for the underlying claim.”). As a result, an insurer is
“entitled to an opportunity to introduce evidence” that goes beyond the four-corners of
the underlying tort complaint to “prov[e] the applicability of [a] subject [policy]
exclusion” in the coverage action. Regis Ins. Co. v. All American Rathskeller, Inc., 976
A.2d 1157, 1161 (Pa. Super. Ct. 2009). This rule, however, does not mean that insurers
may present all factual issues associated with the tort case for resolution as part of the
insurance coverage action. Rather, where the underlying tort case has been settled, the
insurers may seek resolution of only the factual disputes that would not have been
7
Because we conclude that Penn National had a duty to defend based on the
Completed Operations endorsement, we need not address its obligations under the
Ongoing Operations endorsement.
9
resolved had the underlying tort suit been tried. Thus, where the coverage suit raises
factual disputes about coverage that would have also been addressed in the settled
underlying litigation, such disputes cannot be resolved in the coverage action. In such a
situation, Pennsylvania law provides that the duty to defend itself triggers the duty to
indemnify. See Linn, 766 F.2d at 766 (explaining that the duty to indemnify may follow
the duty to defend where “settlement ma[kes] it impossible to determine on what theories
of liability, if any, the underlying claimants would have prevailed”).
American States is instructive. There, the Pennsylvania Superior Court concluded
that there was no automatic duty to indemnify following a settlement in a car accident
lawsuit because “the settlement of the underlying tort claim [did] not ma[ke] it
impossible to determine if the [insurer’s] policy provided coverage.” 721 A.2d at 64.
The policy at issue required determining whether the vehicle involved in the accident fell
within the policy’s definition of a “temporary substitute auto.” Id. “The issue of whether
the vehicle being driven . . . at the time of the accident was a ‘temporary substitute auto’
under the terms of the [insurer’s] policy [was] one that would not have been resolved in
the tort litigation, even if it had gone to trial” because it was not relevant to the tort
claims or any defenses. Id. As a result, the settlement did not preclude the court from
deciding whether the policy covered the claim. Id.Here, by contrast, the District Court properly concluded that because the Ramirez
litigation involved multiple claims against multiple defendants, covered by multiple
insurers, the settlement made it impossible to determine the precise basis of Cost’s and
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Flexicore’s liability. Liberty Mut., 499 F. Supp. 3d at 141-46. That is, determining
actual coverage here would require a court to decide whether Flexicore was liable for its
“work,” such as its “failure to provide warnings,” App. 334 (Penn National policy), or
liable under a different negligence or products liability theory not covered by the policy.
Because such factual disputes cannot be decided in this multiparty, multiclaim case
without factfinding in the underlying Ramirez litigation, Pennsylvania law requires that
Penn National’s duty to indemnify follows its duty to defend Cost. See Sapa Extrusions,
Inc. v. Liberty Mut. Ins. Co., 939 F.3d 243, 250 n.3 (3d Cir. 2019) (reiterating Linn’s
holding where there was “little to no fact-finding from the Underlying Action on which
we could base a nuanced coverage determination because the parties settled that case
before it went to trial” and rejecting the plaintiff’s coverage argument which “would
effectively force . . . the [i]nsurers to try the Underlying Action before then trying the
coverage case”).8
III
For these reasons, we will affirm the District Court’s orders.
Were this not the case, “an insurer would be able to settle a suit without an
8
agreement with the insured, and attempt to avoid its duty to indemnify by claiming a jury
would have found the claims in the underlying suit were not covered by the policy.” 12th
St. Gym, Inc. v. Gen. Star Indem. Co., 93 F.3d 1158, 1167 (3d Cir. 1996).
11