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HomeMy WebLinkAbout01-4962 CIVIL (3)MOTOR TRUCK EQUIPMENT IN THE COURT OF COMMON PLEAS OF COMPANY, CUMBERLAND COUNTY, PENNSYLVANIA PLAINTIFF V. GLOBE INDEMNITY COMPANY, DEFENDANT 01-4962 CIVIL TERM IN RE: PRELIMINARY OBJECTION OF DEFENDANT TO PLAINTIFF'S COMPLAINT BEFORE BAYLEY, J. AND HESS, J. OPINION AND ORDER OF COURT Bayley, J., March 15, 2002:-- Plaintiff, Motor Truck Equipment Company, filed this complaint against defendant, Royal & SunAIliance USA. The parties, by stipulation, changed the name of defendant to the proper designation of Globe Indemnity Company. Plaintiff has pleaded that it maintained a commercial general liability insurance policy with defendant.~ On June 22, 1999, a lawsuit was initiated against plaintiff in the United States District Court for the Eastern District of Texas. The insurance policy with defendant requires defendant to defend and indemnify it for the claims made in the Texas lawsuit. Defendant refused to provide a defense. Plaintiff seeks recovery against defendant on a count for breach of the insurance contract for the costs it incurred in defending the Texas lawsuit. On a count for bad faith, plaintiff seeks The policy is attached as an Exhibit to the complaint. 01-4962 CIVIL TERM general damages, interest, punitive damages, attorney fees and costs, claiming that defendant (1) failed to conduct an adequate investigation on the underlying claim, (2) failed to adequately research the applicable laws, (3) unreasonably interrupted its policy provisions and exclusions, (4) lacked a reasonable basis for refusing to defend it, and (5) refused to make a reasonable offer to settle. Defendant filed preliminary objections alleging that the complaint must be dismissed because it fails to state a cause of action for either breach of contract or bad faith. 2 A demurrer is to be sustained where a complaint is clearly insufficient to establish any right to relief; any doubt must be resolved in favor of the pleader. County of Allegheny v. Commonwealth, 507 Pa. 360 (1985). A demurrer admits as true all well-pleaded facts, but does not admit conclusions of law, unwarranted inferences from facts, argumentative allegations, or expressions of opinion. Department of General Services v. Celli-Flynn, 115 Pa. Commw. 494 (1988). In $copel v. Donegal Mutual Insurance Company, 698 A.2d 602 (Pa. Super. 1997), the Superior Court of Pennsylvania stated: [i]t has long been the law of our Commonwealth that the nature of the allegations contained in a complaint control whether an insurer must defend a policyholder. See, e.g, Claypoole, 449 Pa. Super. at 154-56, 673 A.2d at 355; Aetna Casualty and Surety Co. v. F~oe, 437 Pa. Super. 414, 422, 650 A.2d 94, 98 (1994); Antrim Mining, 436 Pa. Super. at 527- 29, 648 A.2d at 535. That is, the "insurer is obligated to defend if the factual allegations of the complaint on its face comprehend an injury 2 In an opinion in support of an interim order of January 17, 2002, we concluded that in deciding the preliminary objections we can consider the complaint in the Texas lawsuit that is attached to the objections. _~)_ 01-4962 CIVIL TERM which is actually or potentially within the scope of the policy." Roe, 437 Pa. Super. at 422, 650 A.2d at 99. (Emphasis added.) A decision of whether an insurer has a duty to defend its insured is an issue of law for the court. Id. In the Texas complaint, two persons doing business as the Bulldog Company sued Motor Truck Equipment Company. The plaintiffs alleged that a Kenworth tractor they owned was taken to Motor Truck for mechanical problems. Before any repairs were done, the driver was instructed by the owner to have the tractor taken somewhere else for repairs. Payment was tendered for the services that were already rendered by Motor Truck. The service writer and service manager of Motor Truck refused to release the tractor unless the driver signed an invoice which included a "total disclaimer." The driver, acting on the instructions from his employer, refused to sign a disclaimer. Motor Truck held the vehicle to enforce their demand for a signature on the invoice. After a police officer instructed Motor Truck's employees to surrender the vehicle to the owners, it complied. The plaintiffs averred: Defendant, through its agents, servants and employees wrongfully assume [sic] and exercise [sic] dominion and control over plaintiffs' property to the exclusion of, or in a manner inconsistent with, the plaintiffs' rights in said property. Defendant is jointly and severally liable to each plaintiff for conversion of plaintiff's tractor and keys, and for said conversion, plaintiff should pay $125,000.00, which is the reasonable market value of said tractor and keys at the time and place of their taking by defendant. (Emphasis added.) 3 3 The plaintiff also sought exemplary damages, interest and attorney fees. -3- 01-4962 CIVIL TERM DISCUSSION The plaintiffs in the Texas lawsuit specifically pleaded a cause of action "[f]or conversion," and, as we stated in our opinion in support of the order of January 17, 2002, it "[w]as a suit for conversion." See Pierson v. GFH Financial Services Corp., 829 S.W.2d 311 (Texas App. 1992). Plaintiff maintains that there are three provisions in its insurance contract with defendant that requires defendant to defend and indemnity it for the claims made in the Texas lawsuit. 1. Garage Form Endorsement The Automobile Dealers Legal Defense Cost Coverage, Section I-Insuring Agreements provides: 1. COVERAGE We will pay all sums: a. You become legally obligated to pay as "Legal Defense Costs;" b. Incurred to defend any "suit;" c. Served against you during the policy period by or behalf of your customer; and d. Resulting from an alleged defect, deficiency, or inadequacy or dangerous condition in your "product" or "work you performed." We have the right and the duty to defend any 'suit,' but our right and duty to defend ends when the Limit of Insurance stated in the Schedule has been exhausted for 'Legal Defense Costs.' All 'court costs' and damages assessed against you will be at your expense. Plaintiff argues that the language in subparagraph of Section 1 includes "any suit" brought against plaintiff and therefore defendant is required to defend the Texas lawsuit. Plaintiff, however, incorrectly suggests that the subparagraph l(b) can be considered alone without consideration of the other subparagraphs limiting the -4- 01-4962 CIVIL TERM coverage. The garage form endorsement coverage only applies, as limited in subparagraph l(d), to "an allege defect, deficiency, or inadequacy or dangerous condition of [plaintiff's] product or "work [it] performed." Conversion does not come within this definition. 2. Gara,qekeepers Covera,qe Plaintiff maintains that the Texas lawsuit falls under the Garagekeepers provision of the insurance policy, that provides: A. COVERAGE 1. We will pay all sums the "insured" legally must pay as damages for "loss" to a covered "auto" or "auto" equipment left in the "insured's" care while the "insured" is attending, servicing, repairing, parking or storing it in your "garage operations" under: a. Comprehensive Coverage From any cause except: (1) The covered "auto's" collision with another object; or (2) The covered "auto's" overturn. b. Specified Causes of Loss Coverage Caused by: (1) Fire, lightning or explosion; (2) Theft; or (3) Mischief or vandalism. c. Collision Coverage Caused by: (1) The covered "auto's" collision with another object; or (2) The covered "auto's" overturn. See Garage Coverage Form Section III, Garagekeepers Coverage. The policy generally defines "Loss" as "direct and accidental loss or damage." Under Garagekeepers Coverage, the Garage Coverage Form Section VI-Definitions, defines "loss" as "any resulting loss of use." Plaintiff argues that this definition of "loss" is broad enough to provide coverage in the Texas lawsuit. However, for coverage to -5- 01-4962 CIVIL TERM apply under the Garagekeepers provision, the claims in Texas need to fall under either subsections (a), (b), or (c). Subsection (a) is Comprehensive Coverage. As set forth in the Garage Coverage Part-Auto dealers' Supplementary Schedule, Comprehensive Coverage includes: "each covered auto for loss caused by theft or mischief or vandalism." The Texas lawsuit for conversion did not arise from theft, mischief, or vandalism. Nor did it arise from any of the coverages under subsection (b), specified causes of loss coverage caused by fire, lightening, explosion, theft, mischief or vandalism, or under subsection (c), collision coverage caused by the covered auto's collision with another object, or overturn. 3. Commercial General Liability Covera,qe Plaintiff maintains that defendant is required to defend the Texas lawsuit under Section I Coverage A of the Commercial General Liability Coverage, that provides: SECTION I-COVERAGES COVERAGE A. BODILY INJURY PROPERTY DAMAGE LIABILITY 1. Insuring Agreement a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result. (See Commercial General Liability Coverage Form) Property damage includes "loss of use of tangible property that is not physically injured." However, a loss is deemed to occur at the time of an "occurrence." Under the -6- 01-4962 CIVIL TERM Commercial General Liability Coverage Form Section Il-Who is an Insured, "Occurrence" is defined as an "accident, including continuous or repeated exposure to substantially the same general harmful conditions." The Texas lawsuit did not involve an accident. Thus, al Commercial General Liability coverages do not apply. For the foregoing reasons, defendant having no duty to defend plaintiff in the suit against it for conversion in Texas, the count alleging breach of the insurance contract must be dismissed. Because defendant does not have a duty to defend/indemnify plaintiff in the Texas lawsuit, it cannot be liable to plaintiff for bad faith in not doing so. Accordingly, the count in bad faith must also be dismissed. ORDER OF COURT AND NOW, this day of March, 2002, the preliminary objection of defendant to plaintiff's complaint in the form of a demurrer, IS GRANTED. Plaintiff's complaint, IS DISMISSED. By the Court, Edgar B. Bayley, J. -7- 01-4962 CIVIL TERM Brett M. Woodburn, Esquire For Plaintiff Francis P. Burns, III, Esquire For Defendant :sss -8-