Selective Way Ins. Co. v. MAK services, Inc. ( 2020 )

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2020 PA Super 103SELECTIVE WAY INSURANCE : IN THE SUPERIOR COURT OF
COMPANY : PENNSYLVANIA
:
v. :
:
MAK SERVICES, INC.; TORNETTA :
REALTY CORPORATION, DELVAL :
PROPERTIES ASSOCIATES; THE :
VALLEY FORGE MARKETPLACE :
CONDOMINIUM CORPORATION; :
HENRY DUNN, INC.; OSCAR AND :
CHERYL, H/W GORDON :
:
APPEAL OF: MAK SERVICES, INC. : No. 1289 EDA 2019
Appeal from the Order Entered April 16, 2019
in the Court of Common Pleas of Montgomery County
Criminal Division at No(s): No. 2014-30190
BEFORE: BOWES, J., SHOGAN, J. and STRASSBURGER, J.*
DISSENTING OPINION BY STRASSBURGER, J.: FILED APRIL 24, 2020
In reversing the order granting summary judgment, the Majority
concludes that Selective Way should have been estopped from asserting the
snow and ice removal exclusion because failing to communicate clearly
notice of the exclusion in its reservation of rights letter indicated a deficient
investigation on Selective Way’s part, thereby presumptively prejudicing
MAK Services. Because I believe that prejudice must be proven in this case,
I respectfully dissent.
In finding prejudice presumed, the Majority relies on this Court’s
decision in Erie Ins. Exchange v. Lobenthal, 114 A.3d 832 (Pa. Super.
2015). See Majority at 12-16. In Lobenthal, a complaint was filed in June
* Retired Senior Judge assigned to the Superior Court.
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2011 against Lobenthal. Erie insured Lobenthal by virtue of her being a
member of her parent’s (the named insured’s) household. Erie had sent a
reservation of rights letter to the named insureds prior to the filing of the
complaint. In February 2012, over three months after preliminary
objections were ruled upon and the only remaining claim against Lobenthal
was not covered pursuant to a policy exclusion, Erie sent a second
reservation of rights letter to the named insureds, referencing the applicable
exclusion. Neither of Erie’s letters was addressed to Lobenthal or mentioned
Lobenthal in its text. As such, this Court concluded that Erie had only
reserved rights as to the named insureds because it did not specifically and
directly communicate the reservation of rights to Lobenthal. While the
February 2012 letter was not sent to Lobenthal, this Court also held that Erie
was estopped from relying on the exclusion because the letter was untimely.
In response to Erie’s argument that Lobenthal had failed to establish
prejudice, this Court noted that “where an insurer fails to clearly
communicate reservation of rights to an insured, prejudice may be fairly
presumed[.]” 114 A.3d at 839. In other words, prejudice was presumed
because Erie had never communicated its reservation of rights to Lobenthal.
I find the instant case distinguishable. The failure to communicate
clearly the reservation of rights in Lobenthal was based on Erie’s failure to
address the reservation of rights letter specifically to Lobenthal or to name
her therein. That is not the case here. Selective Way addressed its
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reservation of rights letter to MAK Services and specifically referenced MAK
Services as the insured party therein. Thus, I would conclude that Selective
Way clearly communicated its reservation of rights to MAK Services, and
there is no presumption of prejudice here.
Accordingly, in order to estop Selective Way from asserting the
exclusion, MAK Services must have proven prejudice. In an alternative
analysis footnote, the Majority concludes that MAK Services has proven
prejudice because “this Court has identified an insured’s surrender of his
legal defense to an insurance company as a critical prejudicial factor. See []
Lobenthal, 114 A.3d [at] 840 [] (‘Nothing chills one’s zeal for a defense so
much as the belief that, even if he loses, it will cost him nothing.’).”
Majority at 15 n.6.
In the instant case, MAK Services has not claimed lost evidence or
witnesses, or that it would have handled its defense differently. Rather, all
the record indicates is that Selective Way provided free legal representation
to MAK Services for 18 months. That does not establish prejudice.
Accordingly, because Selective Way timely and clearly communicated
its reservation of rights to MAK Services, and because MAK Services has
failed to prove prejudice sufficient to estop Selective Way from asserting the
snow and ice removal exclusion, I would affirm the order granting summary
judgment.
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