INDIAN HARBOR INSURANCE COMPANY v. F&M EQUIPMENT LTD.

Filing 69

MEMORANDUM AND/OR OPINION. SIGNED BY CHIEF JUDGE PETRESE B. TUCKER ON 7/17/17. 7/18/17 ENTERED AND COPIES E-MAILED.(mbh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
INDIAN HARBOR INSURANCE
COMPANY,

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Plaintiff,
v.
F&M EQUIPMENT LTD., f/k/a
FURNIVAL MACHINERY COMPANY,
Defendant.

CIVIL ACTION
NO. 12-1506

MEMORANDUM
Tucker, C.J.

July 17, 2017

Before the Court are the following:
1.

Indian Harbor Insurance Company’s Motion for Partial Summary Judgment
(Doc. 62);

2.

F&M Equipment, Ltd.’s Motion for Partial Summary Judgment (Doc. 64);

3.

Indian Harbor Insurance Company’s Brief in Opposition to F&M Equipment
Ltd’s Motion for Partial Summary Judgment (Doc. 65);

4.

Counter-Plaintiff F&M Equipment Ltd’s Memorandum of Law in Opposition to
[Counter-]Defendant’s Motion for [Partial] Summary Judgment (Doc. 66);

5.

Counter-Plaintiff F&M Equipment, Ltd’s Reply Memorandum of Law in Support
of its Motion for [Partial] Summary Judgment (Doc. 67); and

6.

Indian Harbor Insurance Company’s Reply in Support of Motion for Partial
Summary Judgment (Doc. 68).

Upon consideration of the Parties’ submissions, Defendant F&M Equipment Ltd.’s Motion for
Partial Summary Judgment (Doc. 64) is GRANTED IN PART AND DENIED IN PART and
1

Plaintiff Indian Harbor Insurance Company’s Motion for Partial Summary Judgment (Doc. 62) is
DENIED.
I.

FACTUAL AND PROCEDURAL BACKGROUND
The Parties have filed cross-motions for summary judgment requesting, in essence, that

the Court decide whether Indian Harbor Insurance Company (“Indian Harbor”) breached its
obligation under an insurance policy it has with F&M Equipment, Ltd. (“Furnival”) by failing to
offer Furnival a renewal policy that would meet the Third Circuit’s definition of the term
“renewal.” The Parties’ disagreement centers on whether Indian Harbor’s failure to incorporate
language relating to the Parties’ cancellation and non-renewal rights, as set forth in the original
insurance policy, renders the new policy a nonrenewal, and constitutes a breach of Indian
Harbor’s obligation to offer a renewal.
This Court and the United States Court of Appeals for the Third Circuit have extensively
recounted the factual and procedural background of this case in earlier opinions. 1 For this
reason, at this time, the Court will provide a concise summary of the factual and procedural
background only to the extent necessary to resolve the single issue raised by the Parties’ crossmotions for summary judgment.
A.

Initial Litigation and Third Circuit Appeal

In December 2001, Furnival contracted with Indian Harbor for a ten-year Pollution and
Remediation Legal Liability Policy (“Policy”). Pl.’s Br. in Supp. of Mot. for Partial Summ. J.
Ex. A, at 1; Bartle Decl. Ex. 1, at 1. This Policy consisted of a form agreement and a number of

1

See generally Indian Harbor Ins. Co. v. F&M Equipment, Ltd., 804 F.3d 310 (3d Cir. 2015)
(providing a fuller statement of the facts and procedural history, which is undisputed by the
Parties); Indian Harbor Ins. Co. v. F&M Equipment, Ltd., 2013 WL 4405685 (E.D. Pa., Aug. 15,
2013), rev’d, 804 F.3d 310 (3d Cir. 2015) (providing same).
2

separately negotiated endorsements that altered and/or supplemented the Policy’s standard terms.
See generally Pl.’s Br. in Supp. of Mot. for Part. Summ. J. Ex. A; Bartle Decl. Ex 1.
i.

Endorsement No. 16: Cancellation and Non-Renewal Modification

Among the endorsements that the Parties negotiated and ultimately executed was
Endorsement No. 16 titled, “Cancellation and Non-Renewal Modification.” Pl.’s Br. in Supp. of
Mot. for Part. Summ. J. Ex. A, at 30; Bartle Decl. Ex. 1, at 30. By its own terms, Endorsement
No. 16 “change[d] the policy.” Pl.’s Br. in Supp. of Mot. for Part. Summ. J. Ex. A, at 30; Bartle
Decl. Ex. 1, at 30. The first sentence of Endorsement No. 16, in fact, provided that “[t]his
endorsement . . . forms a part of Policy No. PEC0010805.” Pl.’s Br. in Supp. of Mot. for Part.
Summ. J. Ex. A, at 30; Bartle Decl. Ex. 1, at 30. Endorsement No. 16 provided:
I.

The INSURED and the Company agree that the Company may cancel at
any time or refuse to offer a renewal extension of coverage for the
following reasons:
a.
b.
c.
d.

II.

the INSURED has made a material misrepresentation . . . [; or]
the INSURED materially breaches . . . ; or
material failure on the part of the INSURED to comply with Policy
terms, conditions, or contractual duties; or
a material change in the operations or lack of operations performed
by the INSURED. . . .

Furthermore, the INSURED and the Company agree that the Company
may refuse to offer a renewal extension of coverage to the INSURED for
the following reason:
a. Loss of reinsurance or a substantial decrease in reinsurance has
occurred . . . .

The Company agrees that it shall not cancel nor non-renew this Policy except for
the reasons stated above.
All other terms and conditions remain the same.
Pl.’s Br. in Supp. of Mot. for Part. Summ. J. Ex. A, at 30 (emphasis added); Bartle Decl. Ex. 1, at
30. (emphasis added). Under Endorsement No. 16, therefore, Indian Harbor agreed to restrict the
3

conditions under which it could cancel or decide not to offer a renewal of the Policy to Furnival.
Pl.’s Br. in Supp. of Mot. for Part. Summ. J. Ex. A, at 30; Bartle Decl. Ex. 1, at 30. Indeed, the
conditions outlined in Endorsement No. 16 represent the exclusive reasons that either Party could
cancel or not renew the Policy.
ii.

Furnival Seeks to Renew the Policy on Identical Terms and
Conditions

In late 2011, as the Policy was set to expire, Furnival requested that Indian Harbor
provide Furnival with a proposed renewal policy as required under Endorsement No. 16. Bartle
Aff. Ex. 3, at 2; Pl.’s Br. in Supp. of Mot. for Part. Summ. J. 2. In response, Indian Harbor sent
Furnival an “Indication of Coverage.” Bartle Aff. Ex. 4. The Indication of Coverage would
renew the Policy, but with four differences. Id. at 2–19. These four differences were: “1) an
updated price; 2) one year of coverage instead of ten; 3) $5 million coverage limit instead of $14
million; 4) exclusion of Elizabethtown [as a covered geographical site].” Id. Furnival rejected
Indian Harbor’s offer to renew on the altered terms. Bartle Aff. Ex. 6. Instead, Furnival insisted
that Indian Harbor provide a renewal policy on terms identical to those contained in the Policy.
Id. Indian Harbor refused. Bartle Aff. Ex. 7.
Indian Harbor then commenced this suit seeking, among other things, a declaration that
the Indication of Coverage, despite the four differences from the Policy constituted a valid offer
of renewal as required by Endorsement No. 16. Furnival asserted a counterclaim against Indian
Harbor for breach of contract and then filed a motion for summary judgment. This Court denied
the motion for summary judgment. Furnival appealed this Court’s decision to the Third Circuit,
which reversed and remanded for further proceedings.

4

B.

Parties’ Negotiations After Remand from the Third Circuit

After the Third Circuit’s decision to remand, the Parties requested that the Court stay this
case to afford the Parties an opportunity to settle the matter without further Court intervention.
Pl.’s Br. in Supp. of Mot. for Part. Summ. J. 4; Def.’s Mem. of Law in Supp. of Mot. for Part.
Summ. J. 7. The Parties have since engaged in extensive negotiations over what terms should be
included in Indian Harbor’s renewal policy offer in light of the Third Circuit’s decision. Pl.’s Br.
in Supp. of Mot. for Part. Summ. J. 4; Def.’s Mem. of Law in Supp. of Mot. for Part. Summ. J. 7.
The Parties agreed on all matters relating to the renewal policy except whether Indian Harbor
was required to incorporate the terms from Endorsement No. 16 relating to cancellation and
nonrenewal. Pl.’s Br. in Supp. of Mot. for Part. Summ. J. 4; Def.’s Mem. of Law in Supp. of
Mot. for Part. Summ. J. 3.
In short, Indian Harbor contends that it need not include the “broad renewal provisions”
from the initial policy in its new policy for the new policy to constitute a valid renewal.
Therefore, Indian Harbor concludes, its failure to include such terms in its new policy offer does
not constitute a breach of its obligation to offer a renewal under the Policy.
By contrast, Furnival contends that the Third Circuit’s decision requires Indian Harbor to
do the opposite. Furnival contends that Indian Harbor must incorporate the very same
cancellation and non-renewal modifications contained in Endorsement No. 16 in the new policy
offer in order for the new policy offer to constitute a valid renewal. Indian Harbor’s failure to do
so, Furnival reasons, constitutes a breach of the initial Policy. For these reasons, Furnival
requests judgment in its favor for breach of contract.

5

II.

STANDARD OF REVIEW
Under Rule 56 of the Federal Rules of Civil Procedure, a court shall grant summary

judgment in favor of the moving party only “if the movant shows that 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 fact is “material” if it is “one that might ‘affect the outcome of the suit under governing
law.’” Smith v. Johnson & Johnson, 593 F.3d 280, 284 (3d Cir. 2010) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A dispute as to a material fact is “genuine” if it
“is one that ‘may reasonably be resolved in favor of either party.’” Lomando v. United States,
667 F.3d 363, 371 (3d Cir. 2011) (quoting Anderson, 477 U.S. at 250).
The movant has the initial “burden of identifying specific portions of the record that
establish the absence of a genuine issue of material fact.” Santini v. Fuentes, 795 F.3d 410, 416
(3d Cir. 2015). When assessing a motion for summary judgment, the court “must construe all
evidence in the light most favorable to the nonmoving party.” Id.
The standard of review for cross-motions for summary judgment is identical to the
standard applicable to routine motions for summary judgment. Lawrence v. City of Phila., 527
F.3d 299, 310 (3d Cir. 2008). “When confronted with cross-motions for summary judgment . . .
‘the court must rule on each party’s motion on an individual and separate basis, determining, for
each side, whether a judgment may be entered in accordance with the summary judgment
standard.’” Arsdel v. Liberty Life Assurance Co. of Bos., No. CV 14-2579, 2017 WL 1177174, at
*4 (E.D. Pa. Mar. 30, 2017) (citing Erbe v. Conn. Gen. Life Ins. Co., No. Civ.A. 06-113, 2009
WL 605836, at *1 (W.D. Pa. Mar. 9, 2009)).

6

III.

DISCUSSION
A.

Pennsylvania Law Applies

The Court must apply Pennsylvania law in the present dispute because the Court sits in
diversity. See Liggon-Redding v. Estate of Sugarman, 659 F.3d 258, 262 (3d Cir. 2011)
(providing that when a federal court sits in diversity, the court will apply the forum state’s
substantive law while adhering to federal procedural law).
B.

Breach of Contract

Under Pennsylvania law, it is well-established that to state a claim for breach of contract,
a plaintiff must establish three elements: “(1) the existence of a contract, including its essential
terms; (2) the defendant’s breach of duty imposed by the terms; and (3) actual loss or injury as a
direct result of the breach.” Angino v. Wells Fargo Bank, N.A., 666 F. App’x 204, 207 (3d Cir.
2016) (citing Ware v. Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir. 2003)).
It is similarly well-established that:
[c]ontract interpretation is a question of law that requires the court to ascertain
and give effect to the intent of the contracting parties as embodied in the written
agreement. Courts assume that a contract’s language is chosen carefully and that
the parties are mindful of the meaning of the language used. When a writing is
clear and unequivocal, its meaning must be determined by its contents alone.
Old Summit Mfg., LLC v. Pennsummit Tubular, LLC (In re Old Summit Mfg., LLC), 523 F.3d
134, 137 (3d Cir. 2008) (citing Dep’t of Transp. v. Pa. Indus. for the Blind and Handicapped,
886 A.2d 706, 711 (Pa. Commw. Ct. 2008)); see also D&M Sales, Inc. v. Lorillard Tobacco Co.,
No. CIV.A.09-2644, 2010 WL 786550, at *3 (E.D. Pa. Mar. 8, 2010) (providing that “the court’s
goal is ‘to ascertain and give effect to the intent of the contracting parties,’” and “[w]hen the
words of an agreement are clear and unambiguous, the court will ascertain the intent of the
parties from the language used in the agreement.”). In interpreting a contract, courts will “not

7

consider merely individual terms utilized in the insurance contract, but the entire insurance
provision to ascertain the intent of the parties.” 401 Fourth St., Inc. v. Inv’r Ins. Group, 879
A.2d 166, 172 (Pa. 2005).
Contractual language is ambiguous only “if it is reasonably susceptible of different
constructions and capable of being understood in more than one sense.” Gov’t Emps. Ins. Co. v.
Ayers, 955 A.2d 1025, 1028–29 (Pa. Super. Ct. 2008) (citing Inv’r Ins. Group, 879 A.2d at 171).
In short, “Courts must give plain meaning to a clear and unambiguous contract provision unless
to do so would be contrary to a clearly expressed public policy.” Erie Ins. Exch. v. Conley, 29
A.3d 389, 392 (Pa. Super. Ct. 2011) (citing Ayers, 955 A.2d 1025 at 1028–29 (Pa. Super. Ct.
2008)).
In the present case, the Parties’ cross-motions for summary judgment converge on the
second element of the breach of contract claim: whether there has been a breach of a duty
imposed by the terms of the contract. More specifically, the question presented is whether
Indian Harbor must, under the terms of Endorsement No. 16, include the same cancellation and
non-renewal terms contained in Endorsement No. 16 in its new policy in order for the new policy
to constitute a “renewal” as defined by the Third Circuit.
C.

Definition of “Renewal”

In the appeal of this case, the Third Circuit articulated a general rule that “for a contract
to be considered a renewal, it must contain the same, or nearly the same, terms as the original
contract.” F&M Equipment, 804 F.3d at 311. The Third Circuit held that Indian Harbor’s
original Indication of Coverage did not meet the definition of a “renewal.” Id. at 315. In so
holding, the Third Circuit did not affirmatively state what terms must be “the same or nearly the
same” as the Policy for any later policy from Indian Harbor to constitute a “renewal.” Still, the

8

Third Circuit advised that, in this case, the Indication of Coverage was not a renewal because the
Indication of Coverage substantively altered or deleted various terms in the Policy. Id. The
Third Circuit further advised that although “a reasonable change in price should not alone render
a new contract a nonrenewal” the “remaining terms must be recognizable extensions of the initial
Policy, and [in this case] they are not.” Id. (emphasis added).
The Third Circuit noted that the terms in the Indication of Coverage were not
recognizable extensions of the initial Policy because “[t]he length of coverage is different, the
amount of coverage is different, and the scope of coverage is different.” F&M Equipment, 804
F.3d at 315. In particular, the Indication of Coverage differed from the Policy in that it had “1)
an updated price; 2) one year of coverage instead of ten; 3) $5 million coverage limit instead of
$14 million; 4) exclusion of Elizabethtown.” Id. These differences between the terms in the
Indication of Coverage and the Policy were such that the Third Circuit concluded that the
Indication of Coverage was not on “nearly the same terms as the original [Policy]” and,
therefore, could not constitute a renewal. Id. Ultimately, “[b]ecause Indian Harbor did not offer
a contract that is either the same or nearly the same as the Policy, it breached its promise to offer
a renewal extension of coverage.” Id.
In dicta, the Third Circuit addressed an ancillary issue raised by Indian Harbor as part of
its argument against a strict construction of the term “renewal.” The Third Circuit stated:
Indian Harbor complains that holding it to its promise would require renewing the
renewal provision itself, and that would obligate Indian Harbor to recursively
renew the contract in perpetuity. To the extent Indian Harbor argues that a
contract it drafted was not careful enough, we are unmoved. Moreover, in future
policies, Indian Harbor need not incorporate the broad renewal provisions that are
included here. The issue of a perpetual contract is, however, a question for
another day. We hold here only that the terms of a renewal must be the same or
nearly the same as the initial contract. The question of being held to a perpetual
renewal is not before us and we will not opine on such a question at this time.

9

F&M Equipment, 804 F.3d at 316. This passage of the Third Circuit’s decision has engendered
disagreement between the Parties who advance competing interpretations of this language and
the language’s import on the issue now before this Court.
In essence, Furnival contends that by this passage, the Third Circuit impliedly held that
Indian Harbor must include the same cancellation and nonrenewal provisions from Endorsement
No. 16 in any renewal policy. By contrast, Indian Harbor contends that as it relates to the
specific renewal of the Policy in this case, the Third Circuit affirmatively held that Indian Harbor
need not incorporate the terms of Endorsement No. 16 into its renewal policy offer when the
Third Circuit stated that “in future policies, Indian Harbor need not incorporate the broad
renewal provisions that are included here.” Id.
The Parties each place too much weight on this passage and fail to note the reality that
the Third Circuit was clear that it would take no position on the specific issue now presented.
The Third Circuit explicitly acknowledged that “[t]he issue of a perpetual contract is, however, a
question for another day. We hold here only that the terms of a renewal must be the same or
nearly the same as the initial contract. The question of being held to a perpetual renewal is not
before us and we will not opine on such a question at this time.” Id. (emphasis added). The
Third Circuit, thus, made clear that its holding was specific to the facts of the case and whether
the Indication of Coverage constituted a renewal.
D.

Failure to Include Some Recognizable Extension of the Cancellation
and Nonrenewal Terms into the New Policy Renders the New Policy a
Nonrenewal

As the Third Circuit’s decision in the earlier appeal of this matter applies to the question
now presented by the Parties, the Court concludes that Indian Harbor’s failure to incorporate any
language even remotely resembling the cancellation and nonrenewal terms set forth in

10

Endorsement No. 16 of the Policy renders the new policy a nonrenewal and, therefore, Indian
Harbor has breached an essential duty under the Policy. The Court notes, however, consistent
with the Third Circuit’s decision in the earlier appeal of this case, that Indian Harbor need not
have included the verbatim language on cancellation and nonrenewal as provided by
Endorsement No. 16. Rather, Indian Harbor need only have, at a minimum, incorporated terms
that could be considered recognizable extensions of the cancellation and nonrenewal terms
contained in Endorsement No. 16.
At the outset, the Court notes the obvious: the new policy from Indian Harbor does not
meet the Third Circuit’s first part of the definition of “renewal” because the terms of Indian
Harbor’s new offer are not identical to the terms of the Policy. As the terms of the new policy
are not identical, the new policy and the Policy cannot be considered the “same.” Therefore, the
present offer cannot be considered a “renewal” on this basis.
Having determined that the new policy cannot constitute a renewal because its terms are
not the “same” as the terms from the Policy, the Court must next consider whether the terms of
the new policy are otherwise “nearly the same” as those in the Policy. Generally, on the issue of
renewal, the Third Circuit noted that the “[c]ase law . . . is quite thin.” 2 Thus, in this analysis,
the Court remains mindful of, and is guided by, the Third Circuit’s observation that though a
reasonable change in price between an initial policy and a new policy will not generally render
the new policy a nonrenewal, the new policy’s “remaining terms must be recognizable
extensions of the initial Policy.” F&M Equip., 804 F.3d at 315 (emphasis added).
As the Third Circuit’s decision applies to the present facts, the Court concludes that the
categorical omission of any terms that can be considered recognizable extensions of the Policy’s
2

Indian Harbor similarly acknowledged that “controlling case law is sparse.” Pl.’s Brief in
Supp. of Mot. for Partial Summ. J. 9.
11

initial cancellation and non-renewal terms renders the present offer from Indian Harbor a
nonrenewal because it is not “nearly the same” as the Policy. Therefore, Indian Harbor has
breached its duty to provide a renewal offer. This conclusion accords with, and effectuates, the
intent of the Parties as evidenced by the clear and unambiguous terms of the Policy when read in
light of the Third Circuit’s definition of the term “renewal.”
As the Third Circuit acknowledged in the appeal of this case, “[t]he fundamental rule in
interpreting the meaning of a contract is to ascertain and give effect of the intent of the
contracting parties.” F&M Equip., 804 F.3d at 313 (citing Murphy v. Duquesne Univ., 777 A.2d
418, 429 (Pa. 2001)). Where, as here, the terms of a contract are clear and unambiguous, the
Court is constrained to the writing itself to determine the Parties’ intent. 3 The Court’s analysis,
thus, begins and ends with the intent of the Parties as articulated by the unambiguous written
words of the Policy. As discussed in detail below, the Court concludes that the Parties intended,
based upon the clear language of the Policy read in light of the Third Circuit’s definition of
“renewal” that some form of the cancellation and nonrenewal terms contained in Endorsement
No. 16 would be incorporated into any subsequent renewal policy.
Any renewal of the Policy must include Endorsement No. 16 because Endorsement No.
16 was made an essential part of the Policy. The language of Endorsement No. 16 reveals Indian
Harbor’s painstaking incorporation of Endorsement No. 16 into the Policy and Indian Harbor’s
warnings to Furnival of the critical changes wrought by its execution. By its terms, Endorsement
No. 16 proclaimed that it “forms a part of Policy No. PEC0010805” and “CHANGES THE
POLICY.” Pl.’s Brief in Supp. of Mot. for Part. Summ. J. Ex. A, at 30. The changes were of
3

The Parties do not argue that the terms of Endorsement No. 16 are ambiguous. Indeed, the
Parties previously have stipulated that the terms of Endorsement No. 16 are unambiguous. Pl.’s
Br. in Opp. to Def.’s Mot. for Part. Summ. J. 4 (citing Def.’s Mem. in Supp. of Renewed Mot. 1,
at n.1, Doc. 26-1).
12

such great import that Indian Harbor warned Furnival to “PLEASE READ [Endorsement No. 16]
CAREFULLY.” Id. Drawing Furnival’s attention to the changes made to the Policy was
sensible because Endorsement No. 16 “modified insurance provided under the following:
POLLUTION AND REMEDIATION LEGAL LIABILITY.” Id. Thus, Indian Harbor clearly
understood that execution of Endorsement No. 16 made critical and material alterations to the
Policy as a whole, and that Endorsement No. 16 was, by its own terms, made an essential part of
the Policy.
Indeed, this prefatory language helpfully and accurately introduced the terms contained in
Endorsement No. 16, terms that critically altered the relationship between the Parties by
providing an exclusive and exhaustive list of conditions under which the Parties could cancel or
non-renew the Policy. In drafting and executing Endorsement No. 16, Indian Harbor “agree[d]
that it shall not cancel nor non-renew this Policy except for the reasons stated.” Pl.’s Brief in
Supp. of Mot. for Part. Summ. J. Ex. A, at 30 (emphasis added). In so writing, the Parties
specifically bargained for and agreed to two substantive changes to the Policy. First, the Parties
bargained for and agreed to terms that diverged from the standard terms relating to cancellation
that would otherwise have applied under the Policy. 4 Second, the Parties negotiated and agreed
to terms that vested in Furnival a right to a renewal of the Policy that Furnival would not have
otherwise had because the Policy was otherwise silent on the issue of renewal. These changes,
thus, modified significant and substantive terms of the Policy.
Having determined that Endorsement No. 16 was specifically and wholly incorporated
into the Policy and that the language of Endorsement No. 16 changed and added critical terms to
4

The standard language in the Policy regarding cancellation provided a nonexhaustive and
nonexclusive method for canceling the Policy upon “written notice.” See generally Pl.’s Brief in
Supp. of Mot. for Part. Summ. J., Ex. A, 10 (providing the standard terms regarding cancellation
that were ultimately altered upon execution of Endorsement No. 16).
13

the Policy, it is apparent that in agreeing to offer to Furnival a renewal of “this Policy,” Indian
Harbor agreed, and the Parties intended, that the Policy be renewed as a whole inclusive of
Endorsement No. 16 and its critical terms. The plain language of Endorsement No. 16 provides
that Indian Harbor is to renew “this Policy,” which is an unambiguous reference to the Policy as
a whole. That the words “this Policy” refers to the whole Policy including its endorsements is
clear for three reasons. 5
First, when the term “this Policy” is read in the context of Endorsement No. 16’s
incorporation provisions discussed above, it is apparent that the Parties understood the term to
refer to the Policy inclusive of the terms set forth in Endorsement No. 16.
Second, the term “this Policy” is used consistently throughout the writing to refer to the
entire agreement including all its endorsements. For example, by its own terms, the Policy
enumerated in its body each of the “Endorsements Attached to this Policy” including
“Endorsement No. 016 . . . . Cancellation and Non-Renewal Modification.” Pl.’s Brief in Supp.
Ex. A, at 2.
Third, that the term “this Policy” refers to the entire Policy inclusive of all its
endorsements is consistent with the Third Circuit’s view that the Policy’s endorsements
contained critical terms the alteration of which between the Policy and Indian Harbor’s
Indication of Coverage rendered the Indication of Coverage a nonrenewal. As discussed above,
the Third Circuit determined that Indian Harbor’s Indication of Coverage constituted a
nonrenewal in breach of the Policy because it altered certain terms beyond recognition. For

5

Indian Harbor would have the Court interpret the term “this Policy” to mean everything but the
renewal provision. Pl.’s Brief in Supp. of Mot. for Part. Summ. J. 11. However, to interpret the
term in this manner, and out of context, would force this Court to ignore the well-established rule
that courts must “not consider merely individual terms utilized in the insurance contract, but the
entire insurance provision to ascertain the intent of the parties.” 401 Fourth St., 879 A.2d at 172.
14

example, the Third Circuit noted that the “exclusion of Elizabethtown [Landfill Site]” as a
covered location under the Indication of Coverage rendered the Indication of Coverage a
nonrenewal. F&M Equip., 804 F.3d at 315. Elizabethtown, of course, was listed as a covered
site under Endorsement No. 1. Pl.’s Brief in Supp. Ex. A, at 13. Accordingly, it stands to reason
that the Third Circuit believed that Endorsement No. 1 and its terms were material terms of the
Policy as a whole and the alteration of the term in Endorsement No. 1 relating to Elizabethtown
was a significant factor in finding that the Indication of Coverage constituted a nonrenewal. Just
as the terms of Endorsement No. 1 were critical terms the inclusion of which, in some
recognizable form, was necessary for a new policy to constitute a renewal, so too are the terms of
Endorsement No. 16 critical terms that must be incorporated, in some recognizable form, into
Indian Harbor’s new policy for the new policy to constitute a renewal.
For these reasons, it is clear that by agreeing to offer a renewal of “this Policy,” Indian
Harbor agreed to renew the Policy inclusive of the critical terms from the Policy’s endorsements
including the critical cancellation and nonrenewal terms contained in Endorsement No. 16. The
categorical exclusion of terms that even remotely resemble the terms contained in Endorsement
No. 16 materially alters the contractual relationship initially bargained for by the Parties when
they agreed to execute Endorsement No. 16. Without some recognizable extension of the terms
of Endorsement No. 16 in the new policy, the new policy cannot be considered a renewal.
In arguing that it need not include any language relating to cancellation and non-renewal
as set forth in Endorsement No. 16 into its purported renewal policy, Indian Harbor cites to three
Pennsylvania state cases dealing with real estate leases containing covenants to renew. 6 Indian

6

In its brief, Indian Harbor cites to the 1925 Pennsylvania Supreme Court case of Pettit v.
Tourison, 129 A. 587(Pa. 1925), the 1902 Pennsylvania Superior Court case of Swigert v.
15

Harbor cites to these cases for the proposition that “renewal provisions do not need to be
included in renewal contracts even where the contract requires that the renewal be on the same
terms and conditions.” Pl.’s Brief in Supp. of Mot. for Part. Summ. J. 9. Indian Harbor,
however, draws too broad a conclusion from these real estate cases. As an initial matter, these
real estate cases are factually distinguishable from the present insurance contract case by virtue
of the fact that they deal with real estate. 7 Still, the cases cited by Indian Harbor serve simply to
reinforce the well-established rule that a court must effectuate the intent of the contracting parties
when reviewing a contract and refrain from injecting terms into a contract for which the parties
had not bargained.
Indeed, in Pettit v. Tourison, the Pennsylvania Supreme Court reviewed a lease
agreement and a renewal provision contained in the lease that provided that the lease could be
renewed “under the same terms and conditions” at the expiration of its first seven year term. 129
A. at 587. After the initial seven year term, the lessee renewed. Id. The issue before the
Pennsylvania Supreme Court was whether in opting to renew the lease “under the same terms
and conditions” the lessee was entitled to exercise an option to purchase the property that was
contained in the original lease. Id. The Pennsylvania Supreme Court held that the option to
purchase was specific to the initial lease and did not carry over into the renewal lease because the
Parties did not intend to renew the option. Id. at 588. The Pennsylvania Supreme Court
explained that “[t]he lease in questions confers no such right [to extend the option to purchase]
Hartzell, 20 Pa. Super. 56 (1902), and the Chester County Court of Common Pleas case of Barr
v. March, 61 Pa. D. & C.2d 588 (Pa. Com. Pl. 1972).
7
Cases involving real property interests are often treated differently by the courts because of the
general view that real property is, by its nature, unique. See, e.g., Minard Run Oil Co. v. U.S.
Forest Serv., 670 F.3d 236, 256 (3d Cir. 2011) (citing RoDa Drilling Co. v. Siegal, 552 F.3d
1203, 1210 (10th Cir. 2009)) (acknowledging that preliminary injunctive relief may be a
particularly appropriate remedy in cases involving real property interests “because of the unique
nature of the property interest”).
16

upon the lessee. It is clear that the limit which the parties by their agreement provided in this
case” was that the option to purchase would expire at the end of the initial seven year lease term.
Id. (emphasis added). In arriving at this conclusion, the Pennsylvania Supreme Court found the
intent of the contracting parties, as evidenced in the written agreement, to be dispositive of
whether the option to purchase extended to the lease in its renewed form.
That the intent of contracting parties as evidenced in their unambiguous written
agreement is dispositive, even in the context of lease agreements, was confirmed fifty-one years
after the decision in Pettit by the Pennsylvania Superior Court in Bennetch v. Dreistadt, a case
that was not cited by Indian Harbor. 364 A.2d 398 (Pa. Super. Ct. 1976). In Bennetch, a lessor
and lessee executed an agreement that included an option to purchase as well as a “renewal
clause” that indicated that upon the expiration of the term of the lease, if the lessee were to
continue to occupy the premises, then “the Lease and all of its terms, provisions, conditions,
covenants, confessions or confessions of judgment, waivers, remedies and all and distinct rights
and powers upon the lessee” would renew. Id. at 399. After the initial lease term, during one of
the renewal terms, the lessee sought to execute the option to purchase, but the lessor refused
believing that the option to purchase was not incorporated into the subsequent renewals. Id. The
Pennsylvania Superior Court found that while a lease renewal generally applies specifically to
the actual demise, that in this case, the clear language of the renewal provision evidenced the
parties intent that the option to purchase be incorporated into all subsequent renewals of the
lease. Id. at 401. Thus, in Bennetch as in Pettit, the intent of the contracting parties as evidenced
in their unambiguous writing was dispositive on the issue of what terms are intended to be
incorporated into a later renewal of a contract.

17

These cases, thus, stand for the unremarkable proposition that courts must effectuate the
intent of the parties as stated in an unambiguous writing when passing on issues of contractual
interpretation. The Court concludes that the Policy and Endorsement No. 16 clearly and
unambiguously evidence the Parties’ intent to renew the Policy inclusive of the critical
cancellation and nonrenewal terms in Endorsement No. 16 in some recognizable form. To hold
otherwise would require the Court to read into the Policy an implied term that compels the
exclusion of Endorsement No. 16’s from the renewal policy, an implied term that has no support
in the Policy’s or in Endorsement No. 16’s clear terms.
E.

Inclusion of Cancellation and Nonrenewal Terms Does Not Violate
Public Policy That Disfavors Perpetual Contracts

The Court is unpersuaded by Indian Harbor’s contention that requiring Indian Harbor to
include language relating to cancellation and nonrenewal from Endorsement No. 16 would
transform the Policy into a perpetual contract in contravention of public policy because the
presence of such language in the Policy and/or its renewal does not automatically render it and/or
its renewal perpetual. Indeed, the Policy, by virtue of Endorsement No. 16’s cancellation and
nonrenewal modifications specifically eliminated any possibility that the Policy be transformed
into an impermissibly perpetual contract.
It is accepted that “Pennsylvania law disfavors perpetual contracts.” Wyeth Pharms., Inc.
v. Borough of West Chester, 126 A.3d 1055, 1064 (Pa. 2015); see also Hutchinson v. Sunbeam
Coal Corp., 519 A.2d 385, 390 n.5 (Pa. 1986) (providing same). For this reason, “a contract for
an indefinite period will be construed to be for a ‘reasonable time or terminable at will unless the
intention of the parties can be ascertained.’” Wyeth Pharms., 126 A.3d at 1064 (emphasis
added). In resolving most contract questions, when considering whether a contract is
impermissibly perpetual, the reviewing court must focus on effectuating the intent of the
18

contracting parties. To determine the intent of the parties in this regard, the court should
consider whether the “agreement specifies the sole or exclusive conditions that will give rise to
termination, [because then] it is definite in duration and therefore not terminable at will as a
matter of law. In contrast, where an agreement merely specifies conditions that may result in
termination of the agreement, it is indefinite in duration and terminable at will.” Roberts Tech.
Group, Inc. v. Curwood, Inc., 2015 WL 5584498 at *5 (E.D. Pa. Sept. 23, 2015) (citing D & M
Sales, Inc. v. Lorillard Tobacco Co., 2010 WL 786550 at *3 (E.D. Pa. Mar. 8, 2010)).
Though not binding, the Second Circuit case Payroll Express Corp. v. Aetna Cas. and
Sur. Co., is persuasive and instructive on the present facts. 659 F.2d 285, 292 (2d Cir. 1981). In
Payroll, an insured sued its provider of a crime insurance policy for breach of contract when the
insurer attempted to cancel the policy despite the insurer’s earlier issuance of a letter
endorsement that made the policy “non-cancellable by [the insurer] except for non-payment of
premiums.” Id. at 290. After a non-jury trial, the trial court concluded that the noncancellation
endorsement was unenforceable because the noncancellation endorsement made it impossible for
the policy to terminate and, therefore, transformed the policy into a de facto perpetual contract in
violation of the policy against perpetual contracts. Id. at 289. The Second Circuit reversed the
trial court explaining that:
[W]here a contract contains no provisions for termination, the court will look to
the intention of the parties, absent which the contract will be held ‘terminable
within a reasonable time or revocable at will, dependent upon the circumstances.’
However, where the parties, while providing no fixed ‘date for the termination of
the promisor’s obligation . . . condition the obligation upon an event which would
necessarily terminate the contract,’ no such presumption of perpetuity is justified
and they will be deemed to have accepted the obligation to continue until the
condition occurs.
Id. at 292 (citations omitted). Applied to the facts before it, the Second Circuit held that the
noncancellation endorsement did not create a perpetual contract, but merely a contract that could
19

be terminated only upon the insured’s nonpayment of premiums. Id. In so concluding, the
Second Circuit dismissed the insurer’s argument that somehow, the noncancellation endorsement
was “illusory” because under the terms of the endorsement the insurer was “permanently bound,
whereas [the insured] may cancel at any time simply by not paying premiums.” Id. at 291. To
conclude otherwise would “render unenforceable most life insurance contracts, which may be
cancelled by the insured only for non-payment of premiums but by the insured at will.” Id.
The Second Circuit further explained that “[c]onstruction of the agreement as obligating
[the insurer] to continue to provide coverage as long as [the insured] paid premiums set by [the
insurer] does not work any undue hardship of unfairness of the type sought to be avoided by the
policy against perpetuity, since [the insurer] under the terms of the policy remains free, within
the limits allowed by the law, to fix the premium rates according to the risks undertaken by it.”
Id. at 292. The Second Circuit, thus, concluded that holding the insurer to its bargain was wholly
appropriate.
In the present case, neither the Policy nor any renewal of the Policy—so long as the
renewal contains terms that are recognizable extensions of the cancellation and nonrenewal terms
of Endorsement No. 16—can be considered impermissibly perpetual because the terms of
Endorsement No. 16 specify the exclusive conditions that give rise to cancellation and/or
nonrenewal. Endorsement No. 16 provides that Indian Harbor “agrees that it shall not cancel nor
non-renew this Policy except for the reasons stated above.” Pl.’s Brief in Supp. of Mot. for Part.
Summ. J. Ex. A, 30 (emphasis added). Like the noncancellation endorsement in Payroll did not
render the policy at issue a perpetual contract, Endorsement No. 16 does not render the Policy
and/or its renewal a perpetual contract in view of the clear intent of the Parties in setting forth the
exclusive conditions under which the contractual relationship could end.

20

Endorsement No. 16 is not, like the noncancellation endorsement at issue in Payroll was not, a
perpetual contract in view of the clear intent of the Parties in setting forth the exclusive
conditions under which the contractual relationship could end.
Finally, regarding Indian Harbor’s argument that under the terms of Endorsement No. 16,
Furnival wields outsized and improper power with respect to cancellation and renewal, this Court
is, as the Third Circuit was, unmoved. 8 This argument parallels the argument made by the
insurer in Payroll that claimed such an unequal relationship between insurer and insured
rendered the contract “illusory” because under the terms of the endorsement the insurer was
“permanently bound, whereas [the insured] may cancel at any time simply by not paying
premiums.” Payroll, 659 F.2d at 291. However, this Court concludes on the present facts, as the
Second Circuit concluded on the facts before it, that such an arrangement is not per se improper.
F.

Furnival’s Motion for Partial Summary Judgment

The foregoing conclusions apply equally to Furnival’s Motion for Partial Summary
Judgment as they do to Indian Harbor’s Motion for Summary Judgment because both motions
rely on the same set of material and undisputed facts. The Court, however, specifically rejects
Furnival’s Motion for Partial Summary Judgment to the extent that it argues Furnival is entitled
to a renewal of the Policy inclusive of the verbatim terms contained in Endorsement No. 16. The
Third Circuit plainly held that “the terms of a renewal must be the same or nearly the same as the
initial contract.” F&M Equip., 804 F.3d at 316 (emphasis added). Indian Harbor’s duty to offer
a renewal, therefore, may be satisfied if its offer provides terms that constitute “recognizable
extensions” of the cancellation and nonrenewal terms in Endorsement No. 16. What Indian

8

The Third Circuit remarked in its earlier decision in this case that “[t]o the extent Indian Harbor
argues that a contract it drafted was not careful enough, we are unmoved.” F&M Equip., 804
F.3d at 316.
21

Harbor may not do, however, is categorically delete all terms on the subject of cancellation and
nonrenewal as set forth in Endorsement No. 16.
IV.

CONCLUSION
For the reasons set forth above, Defendant F&M Equipment LTD’s Motion for Partial

Summary Judgment is GRANTED IN PART AND DENIED IN PART and Plaintiff Indian
Harbor Insurance Company’s Motion for Summary Judgment is DENIED. An appropriate Order
follows.

22