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Home My WebLink About2007-1164 Civil SOUTH CENTRAL : IN THE COURT OF COMMON PLEAS OF EMPLOYMENT CORP., : CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff : : CIVIL ACTION – LAW vs. : NO. 07-1164 CIVIL NATIONAL UNION FIRE : INSURANCE COMPANY, : Defendant : IN RE: DEFENDANT’S PRELIMINARY OBJECTIONS TO PLAINTIFF’S COMPLAINT BEFORE BAYLEY, P.J., AND HESS, J. OPINION AND ORDER Before the court are the preliminary objections of the defendant in the nature of a demurrer. Accordingly, the only relevant facts are those set forth in the plaintiff’s complaint. They are as follows. In December of 2001, Gertha Jones applied for two positions with South Central Employment Corporation (SEC). (Compl. ¶ 13). Ms. Jones was notified that she was not hired for either position by letters dated January 24, 2002, and February 13, 2002. (Id. at ¶ 14). On May 28, 2002, she made a claim with the Pennsylvania Human Relations Commission alleging that she was not hired because of her age, disability, and/or race. (Id. at ¶ 15). She also filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) on November 3, 2002. (Id. at ¶ 16). The EEOC issued a determination on June 14, 2004, finding “[t]he evidence shows [Mrs. Jones’] race was a factor considered by [SEC] when she was not selected for either position.” (Id. at ¶ 18). On August 4, 2005, Ms. Jones filed a complaint in the United States District Court for the Middle District of Pennsylvania alleging discrimination on the basis of age, disability, and race. (Id. at ¶ 21). NO. 07-1164 CIVIL During a portion of the time relevant to these proceedings, SEC had purchased insurance polices issued by the defendant covering, among other things, employment practices liability. The first policy covered the period from March 17, 2002 to March 17, 2003, and the second policy covered the period from March 17, 2004 until March 17, 2005. SEC first provided notice of Ms. Jones’s claims, referencing policy one, to National Union, by letter dated October 5, 2005. (Id. at ¶ 22). National Union declined to afford coverage or extend a defense on the basis that the claim was outside the policy period provided, not only for policy one but also for policy two. “THE The first paragraph of the Declarations Page of each policy expressly states: COVERAGE OF THIS POLICY IS GENERALLY LIMITED TO LIABILITY FOR ONLY THOSE CLAIMS THAT ARE FIRST MADE AGAINST THE INSURED DURING THE POLICY PERIOD AND REPORTED IN WRITING TO THE INSURER PURSUANT TO THE TERMS HEREIN.” (Emphasis in original). Both policies further explain in the Insuring Agreement: “This policy shall pay on behalf of the Organization Loss arising from a Claim first made against the Organization during the Policy Year or the Discovery Period (if applicable) and reported to the Insurer pursuant to the terms of this policy for any actual or alleged Wrongful Act of the Organization.” (Policy One and Two at ¶ 1, Coverage C). A claim is defined by both policies as “a civil, criminal, regulatory or administrative proceeding for monetary or non-monetary relief which is commenced by . . . receipt or filing of a notice of charges.” (Policy One and Two at ¶ 2(b)). Both policies also state that a claim is first made 2 NO. 07-1164 CIVIL against an Insured “when written notice of such Claim is received by any Insured, by the Named Organization on the behalf of an Insured or by the Insurer, whichever comes first.” (Policy One and Two at ¶ 7). Also, each policy provides an explanation of the insured’s reporting obligation necessary to receive coverage of the claim: The Insureds shall, as a condition precedent to the obligations of the Insurer under this policy, give written notice to the Insurer of any Claim made against an Insured as soon as practicable and either: (1) anytime during the Policy Year or during the Discovery Period (if applicable); or (2) within 60 days after the end of the Policy Year or the Discovery Period (if applicable), as long as such Claim is reported no later than 60 days after the date such Claim was first made against an Insured. Id. In deciding preliminary objections, the court must determine whether the alleged facts are legally sufficient to establish a right to relief. Werner v. Zazyczn, 545 Pa. 570, 578, 681 A.2d 1331, 1335 (1996). According to the Pennsylvania Supreme Court, “[a court] must consider, as true, all the well-pleaded material facts set forth . . . and make all reasonable inferences that may be drawn from those facts. Preliminary objections will be sustained only in cases clear and free from doubt that the facts pleaded are legally insufficient to establish a right to relief.” Id. Interpretation of an insurance contract is generally performed by a court. Madison Constr. Co. v. The Harleysville Mut. Ins. Co., 557 Pa. 595, 606, 735 A.2d 100, 106 (1999). The Supreme Court explained that the goal of interpretation is to ascertain the intent of the parties as demonstrated by the language of the instrument. Id. The court also noted that “words of 3 NO. 07-1164 CIVIL common usage” should be construed in the plain and ordinary sense. Id. at 608, 735 A.2d at 108. In the absence of ambiguity, the court must rely on the well-settled principle of contract interpretation by giving effect to the plain language of the contract. Id. at 606, 735 A.2d at 106 Here, the language of the insurance policies is clear and unambiguous when stating that as a condition precedent to coverage, notice must be given to National Union as soon as and practicable during the policy year or within sixty days after the end of the policy year as long as such claim is not reported more than sixty days after the claim was first made. Under a plain reading of the contract, SEC did not satisfy the condition precedent to coverage because they failed to provide notice to the Insurer during the policy period or within sixty days after the claim was first made. Although SEC failed to satisfy the express notice provisions of the contract, they argue that Pennsylvania law requires the insurance company to prove not only that the notice requirement was breached, but also that the breach resulted in prejudice to their position. In Brakeman v. Potomac Ins. Co., 472 Pa. 66, 76-77, 371 A.2d 193, 198 (1977), the Pennsylvania Supreme Court held that “where an insurance company seeks to be relieved of its obligations under a liability insurance policy on the ground of late notice, the insurance company will be required to prove that the notice provision was in fact breached and that the breach resulted in prejudice to its position.” The court reasoned that allowing an insurance company to escape compensating the insured on the ground of late notice is unduly severe and inequitable because the insured has paid premiums for coverage refused. See id. at 76, 371 A.2d 198. The court stated that a strict contractual approach is not appropriate in the case of a notice requirement in 4 NO. 07-1164 CIVIL an insurance contract because the term is not part of a bargained-for exchange. Id. at 72, 371 A.2d 196. It is important to note that the court in Brakeman did not distinguish between a “claims made” policy and an “occurrence” policy nor does logic suggest that there ought to be a distinction. Under a “claims made” or “occurrence” policy there is an event which triggers coverage; in the case of the former a claim and in the latter an event giving rise to liability. The insurance company must be notified of the triggering event in either case. Brakeman stands for the proposition that coverage ought not to be denied merely because notification of the triggering event comes late. Admittedly, in Brakeman, notification was to have been made to the insurance company “as soon as practical” whereas in the matter sub judice the claim was to be reported during the policy period or within thirty days after the end thereof. Here, it appears that the insured had notice of a claim by Ms. Jones as early as May 2002 and that notice was not given to the insurer until October of 2005, a rather extraordinary delay of more than three years. While the insured may be prejudiced by the late notice, such an issue cannot be decided on these preliminary objections. Therefore, the following order is entered. ORDER AND NOW, this 18th day of June, 2007, the defendant’s preliminary objections to the plaintiff’s complaint are DENIED. BY THE COURT, _______________________________ Kevin A. Hess, J. 5 NO. 07-1164 CIVIL Dean Reynosa, Esquire For the Plaintiff David E. Edwards, Esquire For the Defendant Donald B. Hoyt, Esquire For Intervener, Gertha R. Jones 6 SOUTH CENTRAL : IN THE COURT OF COMMON PLEAS OF EMPLOYMENT CORP., : CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff : : CIVIL ACTION – LAW vs. : NO. 07-1164 CIVIL NATIONAL UNION FIRE : INSURANCE COMPANY, : Defendant : IN RE: DEFENDANT’S PRELIMINARY OBJECTIONS TO PLAINTIFF’S COMPLAINT BEFORE BAYLEY, P.J., AND HESS, J. ORDER th AND NOW, this 18 day of June, 2007, the defendant’s preliminary objections to the plaintiff’s complaint are DENIED. BY THE COURT, _______________________________ Kevin A. Hess, J. Dean Reynosa, Esquire For the Plaintiff David E. Edwards, Esquire For the Defendant Donald B. Hoyt, Esquire For Intervener, Gertha R. Jones :rlm