FAIRFIELD HENRY, LLC v. PHILADELPHIA INDEMNITY INSURANCE COMPANY et al

Filing 28

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MARY A. MCLAUGHLIN ON 3/13/2014. 3/13/2014 ENTERED AND COPIES E-MAILED.(sg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
FAIRFIELD HENRY, LLC
v.
PHILADELPHIA INDEMNITY
INSURANCE CO., et al.

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CIVIL ACTION

NO. 12-5079

MEMORANDUM
McLaughlin, J.

March 13, 2014

This case relates to a lease agreement between the
plaintiff, Fairfield Henry LLC (“Fairfield Henry”), and the
defendant Y.A.P.A. Apartment Living, Inc. d/b/a Project
Transition (“Project Transition”).

Fairfield Henry owned and

managed a multi-building apartment community called “Henry on
the Park.”

Fairfield Henry leased several apartments at Henry

on the Park to Project Transition.

Project Transition used

those apartments to operate a community based treatment program
for clients who were mentally ill.
Once Project Transition began operating its program at
Henry on the Park, the conditions of the community began to
deteriorate.

On July 14, 2009, one of Project Transition‟s

clients set a fire in her apartment.

The fire caused extensive

damage to one of the buildings at Henry on the Park, including
damage to the apartments and personal property of residents who
were not clients of Project Transition.

1

Following the fire, a series of lawsuits commenced.
Fairfield Henry sued Project Transition for damage to Henry on
the Park and for the cost of lost rents and certain repairs.
That lawsuit settled.

Two lawsuits were filed by tenants of

Henry on the Park against Fairfield Henry and Project
Transition.

Those lawsuits settled.

A purported class action

was also filed by tenants of Henry on the Park against Fairfield
Henry and Project Transition.

Class certification was denied,

except for a limited class seeking injunctive relief, and
individual tenant claims for damages were severed.
This lawsuit was then filed by Fairfield Henry against
Project Transition and its insurer, the Philadelphia Indemnity
Insurance Company (“Philadelphia Indemnity”).

Fairfield Henry

seeks reimbursement from Project Transition and Philadelphia
Indemnity for attorney‟s fees and costs and settlement payments
in the three tenant lawsuits.

It also seeks a declaratory

judgment declaring that Philadelphia Indemnity has a duty to
defend and indemnify Fairfield Henry in the three tenant
lawsuits, and in any future lawsuits filed by Henry on the Park
tenants which relate to Project Transition‟s presence.
Before the Court are cross motions for summary
judgment.

For the reasons discussed herein, the Court will deny

the defendants‟ motion for summary judgment.

2

The Court will

grant in part and deny in part the plaintiff‟s motion for
summary judgment.
I.

Procedural History
The Court bifurcated discovery in this matter.

11/12/12 Scheduling Order (Doc. No. 11).

See

Preliminary discovery

related to the defendants‟ obligation to indemnify and defend
the plaintiff under either the Philadelphia Indemnity insurance
policy or the lease between the plaintiff and Project
Transition.

The parties filed these summary judgment motions

following the preliminary stage of discovery.

Although the

plaintiff included information regarding damages in its motion,
at oral argument the defendants requested that additional
discovery regarding the amount of damages be allowed if the
defendants‟ motion is denied.
The Court will therefore decide only questions of
liability at this juncture.

The Court will address additional

discovery on damages in a separate order.
II.

Summary Judgment Record1
Fairfield Henry owned and managed the Henry on the

Park apartment complex from December 2006 through December 2009.
Henry on the Park consists of seven apartment buildings
1

The facts contained herein are undisputed unless otherwise

noted.
3

(buildings A through G), a rental office, pool, tennis courts,
and a gym, located at 7901 Henry Avenue in Philadelphia,
Pennsylvania.

In 2008 and 2009, Project Transition leased 17

apartments at Henry on the Park in various buildings within the
complex.

Pl.‟s Statement of Facts at ¶ 1; Pl.‟s Mot. Exh. 1

(“Def.‟s Response to Pl.‟s Request for Admissions”) at No. 3.
A.

Project Transition
Project Transition provides apartment-based

therapeutic communities for individuals with histories of
psychiatric problems.

Project Transition describes its program

as providing a broad range of integrated treatment,
rehabilitation, and independent living services to persons 18 to
65 years old with serious and persistent mental illness.
Project Transition‟s program is operated in “therapeutic
communities” within suburban apartment complexes, such as Henry
on the Park.

According to Project Transition, most of its

clients have had multiple prior hospitalizations or
rehabilitation experiences which were unsuccessful.

More than

two-thirds of Project Transition‟s clients also have “diverse
addiction profiles” including substance abuse, parasuicidal
behaviors, and other self-injurious or self-defeating behaviors.
Def.‟s Response to Pl.‟s Request for Admissions at No. 1; Def.‟s
Mot. Exh. B (“Project Transition Description”) at 1-2.

4

To operate its program, Project Transition utilizes
several apartments within a complex for workshops, medication
management, therapies, meetings, and other services provided by
Project Transition staff.
within the complex.
clients.

Clients also live in the apartments

Some clients share an apartment with other

The clients‟ apartments are scattered throughout the

complex, and are not adjacent to each other.

Project Transition

Description at 1-2.
B.

The Apartment Lease Contract
Project Transition signed a lease agreement with

Fairfield Henry for each apartment that it leased at Henry at
the Park.

One of the apartments leased by Project Transition

was apartment B-409.

In May 2009, Project Transition accepted

Patricia Gilberthorpe into the program, and placed her in
apartment B-409 at Henry on the Park.

Def.‟s Response to Pl.‟s

Request for Admissions at Nos. 3-4, 10-11.
The lease agreements, including the lease for
apartment B-409, contained a provision which required Project
Transition to reimburse Fairfield Henry for damages to the
apartment building.

That provision provides:

You must promptly reimburse us for loss, damage,
government fines, or cost of repairs or service in the
apartment community due to a violation of the Lease
Contract or rules, improper use, negligence, or
intentional conduct by you or your guests or
occupants.
5

Pl.‟s Mot. Exh. 2 (“Apartment Lease Contract”) at ¶ 13.
The lease agreements also prohibited Project
Transition‟s clients from engaging in certain conduct including
behaving in a loud or obnoxious manner, and disturbing or
threatening the rights, comfort, health, safety, or convenience
of others in or near the apartment community.

Id. at ¶ 21.

The leases also required Project Transition to obtain
liability insurance.

Such liability insurance must have named

Fairfield Henry as an interested party.

Project Transition

obtained liability insurance under a Commercial General
Liability Policy (“CGL Policy”) issued by Philadelphia Indemnity
Insurance Company (“Philadelphia Indemnity”).

Id. at ¶ 9, Lease

Addendum: Liability Insurance Required of Resident; Pl.‟s Mot.
Exh. 3 (“CGL Policy”).
C.

The July 14, 2009 Fire
On July 14, 2009, Ms. Gilberthorpe set a fire in

apartment B-409 which caused property damage to B-409 and other
apartments and common areas in the B building at Henry on the
Park.

Def.‟s Response to Pl.‟s Request for Admissions at No.

12.

6

D.

Philadelphia Indemnity Insurance Policy
At the time of the fire, Project Transition was

insured under the Philadelphia Indemnity Insurance Company CGL
Policy.

In the Health Services Endorsement, the CGL Policy

identifies as additional insureds:
f. Managers, Landlords, or Lessors of Premises – Any
person or organization with respect to their liability
arising out of the ownership, maintenance, or use of
that part of the premises leased or rented to
you . . . .
Pl‟s Mot. Exh. 4 (“Health Services Endorsement”) at 4.

A

Certificate of Liability Insurance issued in connection with the
CGL Policy identifies Fairfield Henry as a Certificate Holder
and adds insurance coverage for Henry on the Park.

Pl.‟s Mot.

Exh. 5 (“Certificate”) at 1.
The CGL Policy provides coverage for “those sums that
the insured becomes legally obligated to pay as damages because
of „bodily injury‟ or „property damage‟ to which this insurance
applies.”

The CGL Policy applies to “bodily injury” and

“property damage” only if caused by an “occurrence” as defined
by the policy.

An “occurrence” is defined as an accident,

including continuous or repeated exposure to substantially the
same general harmful conditions.

The Policy provides that

Philadelphia Indemnity has the right and duty to defend the
insured in any suit seeking damages for bodily injury or
property damage that is covered by the Policy.
7

CGL Policy at 1.

The CGL Policy contains a clause which alleviates
Philadelphia Indemnity from the duty to defend and indemnify if
it is “excess insurance.”

The CGL Policy is excess if there was

another insurance policy in effect which applies to covered
claims for bodily injury and property damage, if the other
policy was effective prior to the effective date of the CGL
Policy.
E.

Id. at 11-12.
The Fairfield Henry v. Project Transition Lawsuit
On September 11, 2009, Fairfield Henry filed suit

against Project Transition in the Philadelphia Court of Common
Pleas.

In that suit, Fairfield Henry brought claims for

negligence and breach of contract.

The Complaint alleged that

the July 14, 2009 fire and the efforts to extinguish that fire
caused damage to Henry on the Park in excess of $2 million.

The

case was resolved by a settlement agreement executed on June 28,
2011.

Def.‟s Mot. Exh. N (“9/11/09 Fairfield Henry Complaint”)

at ¶¶ 17, 22, 24-27; Def.‟s Mot. Exh. O (“Fairfield Henry
Settlement Agreement”).
The settlement agreement states that it applies to
“claims of negligence and breach of contract arising out of the
damages sustained as a result of the July 14, 2009 fire at the
Henry on the Park Apartments” asserted by Fairfield Henry and
its insurance company, AXIS Insurance Company, against Project

8

Transition.

The settlement agreement is an agreement by

Fairfield Henry and AXIS “to settle their claims against
[Project Transition] and avoid further litigation.”

Fairfield

Henry Settlement Agreement at 1-2.
The settlement agreement specifically defines
“damages” as:
[T]he damages claimed to have been sustained included
cleaning, trash and rubbish removal, security
services, engineering services, repairs and
replacement of floors, walls, ceilings, windows,
doors, fixtures, wiring, elevator repairs and
improvements, lost rents, asbestos remediation,
Fairfield Henry‟s insurance deductible, and other
expenses as per the statement of loss appended hereto
and identified as Appendix 1, and collectively
referred to herein as “damages.”
Id. at 1.

Appendix 1 to the agreement sets out specific repair

costs to be covered by the settlement.

The list of repairs does

not include costs for damage to personal property of any of the
Henry on the Park tenants.

Id. at Appendix 1.

The release provision of the settlement agreement
released Project Transition and Philadelphia Indemnity from all
past, present, and future claims “arising out of a fire on July
14, 2009 at the Henry on the Park Apartments . . . particularly
referenced at the Court of Common Pleas, Philadelphia County,
September Term 2009, No. 06334 . . . for those damages arising
out of the July 14, 2009 fire . . . .”

9

Id. at 2.

The settlement agreement also specified that it did
not constitute a release of Fairfield Henry‟s crossclaims for
indemnification and contribution in the three then pending cases
brought by Henry on the Park tenants: Guynn v. Fairfield Henry,
LLC, et al., Goldfarb v. Fairfield Henry, LLC, et al., and
Oehrtman v. Fairfield Henry, LLC, et al..
F.

Id. at 3.

Oehrtman, Goldfarb and Guynn Lawsuits
Three lawsuits were filed in 2010 by Henry on the Park

residents in the Philadelphia Court of Common Pleas alleging
damages as a result of the fire started by Ms. Gilberthorpe.
A class action was filed in May 2010 against Fairfield
Henry, Project Transition, and other defendants (hereinafter
“Oehrtman lawsuit”).
defendant.

Philadelphia Indemnity was not a named

The Oehrtman lawsuit sought certification of the

following class:
All persons residing at or who were tenants of Henry
on the Park from the date of execution of the first
lease between Landlord and Project Transition through
the trial of this matter and who were damaged thereby
(the “Class”).
Def.‟s Mot. Exh. K (“Oehrtman Complaint”) at ¶ 15.
The Oehrtmann lawsuit alleged claims regarding
deterioration of safety, security, and quiet enjoyment in the
Henry on the Park apartments as a result of Project Transition‟s

10

presence.2

The Complaint alleged that there were questions

common to the class regarding: (1) whether Fairfield Henry was
negligent in allowing Project Transition‟s clients to live at
Henry on the Park; (2) whether Fairfield Henry was negligent in
allowing Project Transition to choose which patients would live
at Henry on the Park; (3) whether Fairfield Henry was negligent
in failing to provide adequate security in light of the risks of
having Project Transition present; (4) whether damage from the
fire set by Ms. Gilberthorpe resulted from Fairfield Henry‟s
negligence; etc.

Id. at ¶ 18, pages 28-47.

The Complaint alleged that many class members suffered
physical injuries, were displaced, and incurred uninsured outof-pocket costs as a result of the fire.

It also alleged that

Project Transition patients stole packages, and were observed
loitering, roaming in the hallways, sleeping in the lobby and
vandalizing the property.

It alleged that many tenants had

verbal altercations with Project Transition‟s clients over
issues of cleanliness and disposal of trash, and some tenants

2

The Oehrtman Complaint asserted claims for (1) breach of
quiet enjoyment, (2) violation of statutory landlord duties, (3)
breach of contractual duty to provide adequate security, (4)
breach of the lease agreement, (5) breach of duty to screen
tenants, (6) breach of duty to provide adequate security, (7)
violation of unfair trade practices and consumer protection law,
(8) negligence against Project Transition, (9) nuisance against
Project Transition, and (10) intentional or negligent infliction
of emotional distress. Oehrtman Complaint at 28-47.
11

were subjected to harassment by Project Transition‟s clients.
The class members alleged that they no longer felt safe at Henry
on the Park because of the presence of Project Transition, and
that the atmosphere at Henry on the Park has drastically
changed, and was not what Fairfield Henry advertised, due to
Fairfield Henry‟s lease to Project Transition.

Id. at ¶¶ 47,

90, 116, 118, 120-121.
Fairfield Henry asserted crossclaims against Project
Transition for contribution, indemnification, and breach of the
lease agreement.

In an April 3, 2011 Order, the plaintiffs‟

Motion for Class Certification was denied, except that the Order
indicated that a class of current residents of Henry on the Park
seeking to have the current landlord provide additional security
would be certified upon proof of adequate financial resources.
The plaintiffs‟ claims for damages were severed.

The Order

indicated that the plaintiffs could re-file their claims for
damages in individual actions.

Def.‟s Mot. Exh. L (“Fairfield

Henry Answer to Oehrtman Complaint) at 71-73; Def.‟s Mot. Exh. M
(“Oehrtman Order”) at 1-2.
Also in May 2010, Samantha Goldfarb and John O‟Malley
filed a complaint in the Philadelphia Court of Common Pleas,
alleging damages as a result of the fire started by Ms.
Gilberthorpe (hereinafter “Goldfarb lawsuit”).

The Goldfarb

Complaint named Fairfield Henry and Project Transition as
12

defendants, among others.
defendant.

Philadelphia Indemnity was not a

The Goldfarb plaintiffs lived in apartment B-407.

They alleged that the plaintiffs suffered losses to personal
property as a result of the fire in excess of $100,000.3
their personal possessions were damaged or destroyed.

Most of

They also

alleged that they suffered mental and emotional anguish.

Pl.‟s

Mot. Exh. 7 (“Goldfarb Complaint”) at ¶¶ 2-3, 76-79.
Fairfield Henry asserted crossclaims for contribution,
indemnification, and breach of the lease agreement against
Project Transition.

The Goldfarb lawsuit settled, and was

discontinued pursuant to a joint order, signed by all parties,
to settle, discontinue, and end the lawsuit with prejudice.
Def.‟s Mot. Exh. I (“Fairfield Henry Answer to Goldfarb
Complaint”) at 56-58; Def.‟s Mot. Exh. J (“Goldfarb Order”).
In October 2010, Henry Guynn and Carolyn Dancy filed a
complaint in the Philadelphia Court of Common Pleas, alleging
damages as a result of the fire started by Ms. Gilberthorpe
(hereinafter “Guynn lawsuit”).

The Complaint named Fairfield

3

The Goldfarb Complaint asserted claims for (1) breach of
quiet enjoyment, (2) violation of statutory landlord duties, (3)
breach of contractual duty to provide adequate security, (4)
breach of the lease agreement, (5) failure to screen tenants,
(6) failure to provide adequate security, (7) violation of
unfair trade practices and consumer protection laws, (8)
negligence against Project Transition, and (9) intentional or
negligent infliction of emotional distress. Goldfarb Complaint
at 16-35.
13

Henry and Project Transition as defendants, among others.
Philadelphia Indemnity was not a defendant.
lived in apartment B-509.

The plaintiffs

They alleged that they suffered

mental anguish and loss to personal property resulting from the
fire in excess of $50,000.4

Def.‟s Mot. Exh. E (“Guynn

Complaint”) at ¶ 23-24, 28-30.
Fairfield Henry asserted crossclaims for contribution,
indemnification, and breach of the lease agreement against
Project Transition.

The parties in the Guynn lawsuit settled

and entered into a joint order to settle, discontinue and end
the lawsuit with prejudice.

Def.‟s Mot. Exh. F, (“Fairfield

Henry‟s Answer to Guynn complaint”) at 25-27;

Def.‟s Mot. Exh.

G (“Guynn Order”).
While the Oehrtman, Goldfarb, and Guynn lawsuits were
pending, Fairfield Henry sent letters to Philadelphia Indemnity
demanding that Philadelphia Indemnity defend and indemnify
Fairfield Henry for the costs incurred in those lawsuits.
Fairfield Henry sent such letters on February 18, 2011 and July
13, 2011, to which Philadelphia Indemnity did not respond.
Fairfield Henry sent another letter on September 20, 2011.
Philadelphia Indemnity responded by refusing to defend or
4

The Complaint asserted claims for (1) breach of quiet
enjoyment, (2) breach of contractual duty to provide adequate
security, (3) breach of duty to provide adequate security, (4)
negligence of Project Transition, (5) nuisance, (6) negligent
infliction of emotional distress. Guynn Complaint ¶¶ 31-80.
14

indemnify Fairfield Henry.

Pl.‟s Mot. Exh. 12, Exh. 11

(“Fairfield Henry Demand Letters”).
G.

Goldfarb and Guynn Settlement Agreements
The plaintiffs in the Goldfarb and Guynn lawsuits

entered into settlement agreements with Fairfield Henry and
Project Transition.

Philadelphia Indemnity indemnified Project

Transition for settlement payments made by Project Transition to
the Goldfarb and Guynn plaintiffs.

Pl.‟s Mot. Exh. 19

(“Philadelphia Indemnity‟s Response to Pl.‟s Request for
Admissions”) at No. 16.
The Goldfarb Settlement Agreement contained a release
provision in which the plaintiffs released Project Transition,
Fairfield Henry, and Connecticut General Life Insurance Company
from all claims and causes of action.

Pl.‟s Resp. Exh. K

(“Goldfarb Settlement Agreement”) at 1-3.
The Goldfarb Settlement Agreement specifically
provided that:
This settlement agreement is not and is not intended
to be, nor is it, a release of [Project Transition],
or any of their representatives, insurers, agents,
servents, employees, partners, administrators,
successors, or assigns, or any of them, by Fairfield
Henry, LLC [], or any of their officers, directors,
employees, parent or subsidiary entities, agents or
insurers.
Id. at 3.

15

The Guynn Settlement Agreement provided only for the
release of the plaintiffs‟ claims against Project Transition and
Fairfield Henry.

Pl.‟s Resp. Exh. M (“Guynn Settlement

Agreement”) at 1-4.
The Guynn Settlement Agreement specifically provided
that:
This settlement agreement and release is not intended
to be, nor is it, a release of [Project Transition],
or any of their representatives, insurers, agents,
servants, employees, partners, associates, heris,
executors, administrators, successors or assigns, or
any of them, by Fairfield Henry [], or any of their
officers, directors and employees, and any and all
other persons, firms, corporations, associations,
parent or subsidiary entities, agents, insurers or
other entities, their heirs, executors and
administrators.
Id. at 4.
III. Analysis
A.

Standard of Review
A party is entitled to summary judgment if there “is

no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”
56(a).

Fed. R. Civ. P.

The moving party bears the initial burden of

demonstrating the basis of its motion.
Catrett, 477 U.S. 317, 323 (1986).

Celotex Corp. v.

Once a properly supported

motion for summary judgment is made, the burden of production
shifts to the nonmoving party, who must set forth specific facts

16

showing that there is a genuine issue for trial.
Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).

Anderson v.
In reviewing a

motion for summary judgment, the court does not resolve factual
disputes or make credibility determinations, and must view facts
and inferences in the light most favorable to the party opposing
the motion.

Siegel Transfer, Inc. v. Carrier Express, Inc., 54

F.3d 1125, 1127 (3d Cir. 1995).
B.

Defendants‟ Motion for Summary Judgment
The defendants make several arguments for summary

judgment in their favor.

First, they argue that they are

entitled to summary judgment because Fairfield Henry released
the defendants from liability for the claims in the current suit
in the Fairfield Henry Settlement Agreement.

Second, they argue

that this lawsuit is barred by the doctrine of res judicata
because Fairfield Henry‟s crossclaims in the Oehrtman, Goldfarb,
and Guynn lawsuits were discontinued with prejudice.
Third, the defendants argue that Project Transition is
immune from Fairfield Henry‟s claims under the Pennsylvania
Mental Health and Procedures Act.

Fourth, Philadelphia

Indemnity argues that it is entitled to summary judgment on
Fairfield Henry‟s claims against it for declaratory judgment and
breach of contract.

Philadelphia Indemnity argues that it did

not have a duty to defend or indemnify Fairfield Henry in the

17

Oehrtman, Goldfarb, and Guynn lawsuits because Fairfield Henry
was not an “insured” under the CGL Policy.
Finally, Philadelphia Indemnity argued in its motion
that it is entitled to summary judgment because the CGL Policy‟s
coverage of Fairfield Henry was “excess,” and therefore
Philadelphia Indemnity had no duty to defend or indemnify
Fairfield Henry in the Oehrtman, Goldfarb, and Guynn lawsuits.
At oral argument, the defendant abandoned this argument.
The Court will address each of the defendants‟
arguments in turn.

For the reasons discussed below, the Court

will deny the defendants‟ motion for summary judgment.
1.

Fairfield Henry Settlement Agreement

The defendants argue that the release provision in the
settlement agreement which resolved Fairfield Henry, LLC v.
Project Transition bars the plaintiff‟s complaint in this case
in its entirety.

The defendants argue that the settlement

agreement released the defendants of any and all claims related
to the fire, except for crossclaims in the three then-pending
cases and any crossclaims in future cases brought by tenants.
The defendants argue that, because the three pending cases
settled and were dismissed, Fairfield Henry forfeited its
crossclaims against the defendants.

The defendants also argue

that, if the settlement agreement does not bar Fairfield Henry‟s

18

claims entirely, the settlement agreement did not preserve the
breach of contract claim against Project Transition or any
claims against Philadelphia Indemnity, because it only carved
out contribution and indemnification crossclaims in the tenant
suits to which Philadelphia Indemnity was not a party.
Fairfield Henry argues that the settlement agreement
was explicitly limited to specific property damage suffered by
Fairfield Henry.

Also, the settlement agreement carved out

claims for indemnification or contribution in the three pending
cases, and those claims were not waived by settlement and
dismissal of those cases.

The Court agrees with the plaintiff.

“A signed release is binding upon the parties unless
executed and procured by fraud, duress, accident or mutual
mistake.”

Bowersox Truck Sales and Serv., Inc. v. Harco Nat‟l

Ins. Co., 209 F.3d 273, 279 (3d Cir. 2000) (quoting Three Rivers
Motors Co. v. Ford Motor Co., 522 F.2d 885, 892 (3d Cir. 1975)).
In interpreting the terms of a release, the intention of the
parties governs, and that intention must be gathered from the
language of the release.

Id. (quoting Three Rivers Motors Co.,

209 F.3d at 892).
In determining the intent of the parties to a release,
the Court must look at the agreement as a whole.

Lesko v.

Frankford Hospital-Bucks County, 15 A.3d 337, 342 (Pa. 2011).
“An interpretation will not be given to one part of the contract
19

which will annul another part of it.”

Capek v. Devito, 767 A.2d

1047, 1050 (Pa. 2001).
The defendants argue that the settlement agreement
released all present and future, known and unknown claims by
Fairfield Henry against Philadelphia Indemnity, and all present
and future, known and unknown claims by Fairfield Henry against
Project Transition except for those specifically identified in
the carve out provision.
The language of the release is not as broad as the
defendants contend, however.

The settlement agreement sets

forth a limited definition of “damages” for the purposes of the
agreement.

Fairfield Henry Settlement Agreement at 1.

“Damages” were limited to specific property damage suffered by
Fairfield Henry as a result of the fire, including cleaning,
trash and rubbish removal, security services, engineering
services, repairs and replacements of floors, walls ceilings
windows, etc.

Id.

Those damages are listed individually in an

appendix to the agreement.

Id. at Appendix 1.

The release provision of the agreement provides that
Fairfield Henry releases Project Transition and Philadelphia
Indemnity:
of and from all, and all manner of, liability, actions
and causes of action, suit, debts, dues, accounts,
bonds, covenants, contracts, agreements, judgments,
claims and demands whatsoever, in law or equity,
arising out of a fire on July 14, 2009 at the Henry on
20

the Park Apartments in Philadelphia, Pennsylvania,
particularly referenced at the Court of Common Pleas,
Philadelphia County, September term 2009, No. 06334,
which against [Project Transition] and any other
person, partnership, firm, corporation or other entity
charged or chargeable with responsibility or liability
and their administrators, successors or assigns, they
ever had, now have or which their administrators,
successors or assigns, or any of them hereafter can,
or may have, for those damages arising out of the July
14, 2009 fire, from the beginning of the world to the
date of these presents.
This settlement agreement and general release fully
and completely disposes of any and all claims that
have been brought or could have been brought by
[Fairfield Henry] for the damages claimed in this
lawsuit.
Id. at 2-3.
This is the provision on which the defendants base
their argument that all claims against them brought by Fairfield
Henry are barred by the release.

Based on the unambiguous

language of the settlement agreement as a whole, however, the
release provision releases the defendants from all claims by
Fairfield Henry only for the “damages” resulting from the July
14, 2009 fire that are specifically listed in the agreement.
The release does not release the defendants from any
claims by Fairfield Henry for damages resulting from the fire
that are not listed in the settlement agreement.

This lawsuit

arises from damages that are not listed in the settlement
agreement.

The agreement also specifies that it is a release of

those claims asserted in the specific complaint filed by

21

Fairfield Henry in the Court of Common Pleas.

This lawsuit is

not for claims that were asserted in that complaint.

This

lawsuit, therefore, is not barred by the terms of the settlement
agreement.
Additionally, the release provision specifically
carved out crossclaims for indemnification and contribution in
the then-pending lawsuits.

The agreement specifically provides:

Notwithstanding the foregoing, this settlement
agreement and general release does not prevent
[Fairfield Henry] from asserting crossclaims for
indemnification or contribution in the pending civil
cases of:
Oehrtman v. Fairfield Henry, LLC, etal.
(CCP Philadelphia County, May Term 2010, No. 2410);
Goldfarb v. Fairfield Henry, LLC, etal.
(CCP Philadelphia County, May Term 2010, No. 3693);
Guynn v. Fairfield Henry, LLC, etal.
(CCP Philadelphia County, November Term 2010, No.
3578)
or any other civil action(s) that may be filed by
tenant(s) of the Henry on the Park Apartments, except,
however, to the extent that any such crossclaims
assert claims and/or damages covered by this
settlement agreement and general release.
Id. at 3.
This language further evidences the parties‟ intent
not to release claims by Fairfield Henry against the defendants
for any damages asserted in the Oehrtman, Goldfarb, and Guynn
lawsuits that were not specifically listed in the settlement
agreement.
22

The carve out provisions also do not bar Fairfield
Henry from bringing its breach of contract claims in this
action.

Although the release did specifically reserve

crossclaims for contribution and indemnification in the
Oehrtman, Goldfarb, and Guynn actions, it does not necessarily
follow that Fairfield Henry is barred by the release from
bringing a breach of contract claim against Project Transition
and Philadelphia Indemnity in this case.

The agreement only

releases the defendants from claims by Fairfield Henry for
damages that are identified in the agreement.

It does not

release the defendants from claims by Fairfield Henry for breach
of contract related to damages that are not identified in the
agreement.

The plaintiffs were not required to specifically

reserve a claim to which the release did not apply.
2.

Res Judicata

The defendants also argue that the plaintiff‟s claims
are barred by the doctrine of res judicata.

Fairfield Henry

asserted crossclaims against Project Transition in the Oehrtman,
Goldfarb, and Guynn lawsuits.

Following settlement, the parties

in the Guynn and Goldfarb lawsuits all signed “Joint Order[s] to
Settle, Discontinue and End with Prejudice,” which were filed
with the Court of Common Pleas.

The Joint Orders requested that

the Prothonotary “[k]indly mark the above-referenced matter

23

settled, discontinued and ended, with prejudice, upon payment of
the Prothonotary‟s costs only.”

Goldfarb Order; Guynn Order.

The defendants argue that this discontinuance with
prejudice was a final judgment on the merits as to the Guynn and
Goldfarb plaintiffs‟ claims, as well as Fairfield Henry‟s
crossclaims.

They argue that this case is barred by res

judicata because it includes claims that were or could have been
raised by Fairfield Henry in their crossclaims in Goldfarb and
Guynn.

The defendants also argue that the Guynn and Goldfarb

crossclaims “encompass the claims raised by the plaintiffs in
Oehrtman” and the claims of future plaintiffs, so the dismissal
of Guynn and Goldfarb also bars Fairfield Henry‟s current claims
regarding Oehrtman and future lawsuits under res judicata.
Federal courts must give the same preclusive effect to
a prior state court judgment as would the courts of that state.
Kremer v. Chem. Constr. Corp., 456 U.S. 461, 466 (1982).

Under

Pennsylvania law, “a valid final judgment upon the merits by a
court of competent jurisdiction bars any future suit between the
parties or their privies, on the same cause of action.”
Keystone Bldg. Corp. v. Lincoln Sav. & Loan Assoc., 360 A.2d
191, 194 (Pa. 1976) (internal citations and quotations omitted).
In Pennsylvania, in order for res judicata to apply, there must
be “(1) identity in the thing sued upon; (2) identity of the
cause of action; (3) identity of persons and parties to the
24

action; and (4) identity of the quality or capacity of the
parties suing or sued.”

Bearoff v. Bearoff Bros., Inc., 327

A.2d 72, 74 (Pa. 1974) (citations omitted).
As an initial matter, there has been no final judgment
on Fairfield Henry‟s crossclaims in the Oehrtman action and
there have been no final judgments in any future tenant actions,
so res judicata does not apply to Fairfield Henry‟s claims
related to Oehrtman and future tenant actions.

Also,

Philadelphia Indemnity was not a party to the Guynn and Goldfarb
lawsuits, so res judicata does not apply to Fairfield Henry‟s
claims against Philadelphia Indemnity in this lawsuit.

Project

Transition, on the other hand, was a party in the Guynn and
Goldfarb lawsuits and Fairfield Henry did raise a breach of
contract claim arising from the same set of facts against
Project Transition in its crossclaims.

Considering the

discontinuance orders along with the Guynn and Goldfarb
settlements agreements, however, the Court concludes that there
were no final judgments as to Fairfield Henry‟s crossclaims
against Project Transition in those cases.
In Pennsylvania, “the entry of an order to settle,
discontinue, and end a proceeding has „the same effect as the
entry of a judgment‟ in any legal proceeding.”

Barson's &

Overbrook, Inc. v. Arce Sales Corp., 324 A.2d 467, 468 (Pa.
1974) (quoting Sustrik v. Jones & Laughlin Steel Corp., 197 A.2d
25

44, 46 (Pa. 1964)).

“All parties who sign such an order to

settle, discontinue, and end forever renounce their claims
arising out of said action.”

Id.

The preclusive effect of an order to settle,
discontinue, and end with prejudice, however, only extends to
the matters contemplated by the underlying settlement agreement.
See U.S. v. Staff Builders, Inc., 1999 WL 179745, at *3 (E.D.
Pa. Mar. 1999) (“[T]he preclusive effect of such stipulated
dismissals is determined by the terms of the release
agreement.”); DeYoung v. Smith Facing & Supply Co., 1988 WL
92875, at *1 (E.D. Pa. Sep. 6, 1988) (holding that an “Order to
settle, discontinue and end the underlying action constitue[d] a
final termination of all the claims made by the parties in that
litigation, since there [were] no express agreements or
stipulations by any of the litigants to reserve certain claims
for decision in another forum”); Hillworth v. Smith, 624 A.2d
122, 125 (Pa. Super. Ct. 1993) (holding that “the terms of the
release settlement agreement determines the effect of” an order
to mark the case settled, discontinued and ended).
Here, the orders to settle, discontinue, and end the
Goldfarb and Guynn cases does not bar this lawsuit because the
settlement agreements in those cases did not release Project
Transition from Fairfield Henry‟s crossclaims.

The Goldfarb

Settlement Agreement contains a release provision in which the
26

plaintiffs released Project Transition, Fairfield Henry, and
Connecticut General Life Insurance Company from all claims and
causes of action.

Goldfarb Settlement Agreement at 1, 3. The

Goldfarb Settlement Agreement specifically provides that:
This settlement agreement is not and is not intended
to be, nor is it, a release of [Project Transition],
or any of their representatives, insurers, agents,
servants, employees, partners, administrators,
successors, or assigns, or any of them, by Fairfield
Henry, LLC [], or any of their officers, directors,
employees, parent or subsidiary entities, agents or
insurers.
Id. at 3.
Similarly, the Guynn Settlement Agreement provides
only for the release of the plaintiffs‟ claims against Project
Transition and Fairfield Henry.
1, 3-4.

Guynn Settlement Agreement at

The Guynn Settlement Agreement specifically provides

that:
This settlement agreement and release is not intended
to be, nor is it, a release of [Project Transition],
or any of their representatives, insurers, agents,
servants, employees, partners, associates, heirs,
executors, administrators, successors or assigns, or
any of them, by Fairfield Henry [], or any of their
officers, directors and employees, and any and all
other persons, firms, corporations, associations,
parent or subsidiary entities, agents, insurers or
other entities, their heirs, executors and
administrators.
Id. at 4.
Based on the language of the Guynn and Goldfarb
settlement agreements, the parties did not intend for the

27

settlement and discontinuance of those cases to preclude
Fairfield Henry from going forward with its claims against
Project Transition.

Because the release specifically preserved

Fairfield Henry‟s claims against Project Transition, Fairfield
Henry‟s breach of contract claim against Project Transition in
this lawsuit is not barred by res judicata.
3.

Project Transition‟s Immunity under the Mental
Health Procedures Act

The defendants argue that Fairfield Henry‟s breach of
contract claim against Project Transition is also barred by
Pennsylvania‟s Mental Health Procedures Act (MHPA).5

The MHPA

provides qualified immunity to persons and entities who
participate in a treatment or placement decision for a mentally
ill patient.

The MHPA provides:

In the absence of willful misconduct or gross
negligence, a county administrator, a director of a
facility, a physician, a peace officer or any other
authorized person who participates in a decision that
a person be examined or treated under this act, or
that a person be discharged, or placed under a partial
hospitalization, outpatient care or leave of absence,
or that the restraint upon such person be otherwise
5

The plaintiff argues that the defendants waived this
defense by failing to raise it in their answer. Although
qualified immunity is an affirmative defense that should be
asserted in a defendant‟s responsive pleading, failure to do so
is not an automatic waiver in the Third Circuit. Eddy v. Virgin
Islands Water & Power Auth., 256 F.3d 204, 209 (3d Cir. 2001);
Fed R. Civ. P. 8(c). A defendant “does not waive an affirmative
defense if he raised the issue at a pragmatically sufficient
time, and the plaintiff was not prejudiced in its ability to
respond.” Id. (internal quotations omitted).
28

reduced, or a county administrator or other authorized
person who denies an application for voluntary
treatment or for involuntary emergency examination and
treatment, shall not be civilly or criminally liable
for any such decision or for any of its consequences.
50 P.S. § 7114(a).
The MHPA “establishes rights and procedures for all
involuntary treatment of mentally ill persons, whether inpatient
or outpatient, and for all voluntary inpatient treatment of
mentally ill persons.”

50 P.S. § 7103.

Admission into Project

Transition‟s program is voluntary, so the program would have to
provide inpatient treatment6 in order to be covered by the MHPA.
Id.

During oral argument, the defendant characterized Project

Transition as an “outpatient” program.

If Project Transition is

a voluntary outpatient program, the MHPA does not apply.
Even if Project Transition is covered by the MHPA,
however, Fairfield Henry‟s breach of contract claim does not
come within the scope of the immunity provision.

The purpose of

the MHPA is to “assure the availability of adequate treatment to
persons who are mentally ill,” 50 P.S. § 7102, and that purpose
is not furthered by immunizing parties from breaches of
commercial contracts.

Typical claims in which immunity is

6

“Inpatient” is defined under the MHPA as “all treatment
that requires full or part-time residence in a facility.” 50
P.S. § 7103. A “facility” is “any mental health establishment,
hospital, clinic, institution, center, day center, base service
unit, community mental health center, or part thereof, that
provides for the diagnosis, treatment, care or rehabilitation of
mentally ill persons.” Id.
29

provided under the MHPA include claims against facilities or
doctors for the negligent supervision, treatment, or placement
of mentally ill patients.

The MHPA does not excuse doctors,

hospitals, and other mental health facilities from their
contractual duties to third parties.
4.

Whether Fairfield Henry was an “Insured” under
the Philadelphia Indemnity CGL Policy

Philadelphia Indemnity argues that it is entitled to
summary judgment on all of Fairfield Henry‟s claims against it
because Fairfield Henry was not an insured under the CGL policy.
Specifically, Philadelphia Indemnity argues that Fairfield Henry
was not an insured under the language of the CGL and
circumstances of the Oehrtman, Goldfarb, and Guynn lawsuits
because Fairfield Henry‟s liability in those lawsuits did not
“arise out of” the ownership, maintenance, or use of the
apartments leased to Project Transition.
Project Transition is the named insured under the
Philadelphia Indemnity Commercial General Liability Policy.

CGL

Policy at 1; CGL Policy, Section II, ¶ 1; Pl.‟s Mot. Exh. 18,
(“CGL Policy Decl. Page”).

The Human Services Endorsement

amends the CGL policy to include additional parties as insureds.
Section J of the Human Services Endorsement provides:
Each of the following is also an insured:

30

f. Managers, Landlords, or Lessors of Premises – Any
person or organization with respect to their liability
arising out of the ownership, maintenance, or use of
that part of the premises leased or rented to you7
subject to the following exclusions:
This insurance policy does not apply to:
(1) any “occurrence” which takes place after you cease
to be a tenant in that premises.
(2) Structural alterations, new construction or
demolition operations performed by or on behalf of
that person or organization.
Human Services Endorsement at Exh. 4.
The defendants argue that Fairfield Henry is not
covered because the claims asserted against Fairfield Henry in
the Oehrtman, Goldfarb, and Guynn lawsuits do not relate to that
part of the premises leased to project Transition.

Philadelphia

Indemnity argues that the claims in those lawsuits all related
to Fairfield Henry‟s alleged negligence with regard to the
control and/or maintenance of the common areas of the Henry on
the Park Apartments, and do not relate to the apartments leased
to Project Transition.
Fairfield Henry argues, on the other hand, that it is
a covered insured under this section because (1) it is a
manager, landlord or lessor of the premises leased or rented to
Project Transition, and (2) Fairfield Henry‟s liability in the
Oehrtman, Goldfarb, and Guynn lawsuits arises out of Fairfield

7

The term “you” refers to Project Transition.
31

CGL Policy at 1.

Henry‟s ownership of the apartments leased or rented to Project
Transition.

The Court agrees with Fairfield Henry.

Interpretation of an insurance contract is a question
of law for the Court to decide.

401 Fourth St., Inc. v.

Investors Ins. Grp., 879 A.2d 166, 170 (Pa. 2005).

“Coverage

clauses are interpreted broadly so as to afford the greatest
possible protection to the insured.”

Penn Nat‟l Ins. v. HNI

Corp., 482 F. Supp. 2d 568, 607 (M.D. Pa. 2007) (quoting
Eichelberger v. Warner, 434 A.2d 747, 750 (Pa. 1981)).
Exceptions to an insurer‟s liability are interpreted narrowly
against the insurer.

Id.

If a provision of an insurance policy

is ambiguous, the provision is to be construed in favor of the
insured and against the insurer.

USF Ins. Co. v. Mr. Dollar,

Inc., 175 F. Supp. 2d 748, 751 (E.D. Pa. 2001) (citing Madison
Constr. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100, 106
(Pa. 1999).
The Pennsylvania Supreme Court has held that,
“[c]onstrued strictly against the insurer, „arising out of‟ [an
insurance policy] means causally connected with, not proximately
caused by.”

Allstate Prop. and Cas. Ins. Co. v. Squires, 667

F.3d 388, 391-92 (3d Cir. 2012)(quoting Mfrs. Cas. Ins. Co. v.
Goodville Mut. Cas. Co., 170 A.2d 571, 573 (Pa. 1961).

“But

for” causation satisfies the “arising out of” language in an

32

insurance policy.

Id.

This formulation of “arising out of” is

well settled in Pennsylvania.

Id.

Additionally, for the purpose of determining whether
there was a duty to defend under an insurance policy, the Court
must look at whether the facts alleged in the underlying
complaint may potentially come within the coverage of the
policy.

Penn Nat‟l Ins., 482 F. Supp. 2d at 607 (citing Frog,

Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742, 746
(3d Cir. 1999)).

In making that determination, the Court must

look beyond the claims asserted in the complaint to the factual
allegations pled.

QBE Ins. Corp. v. M & S Landis Corp., 915

A.2d 1222, 1225 (Pa. Super. Ct. 2007).
Fairfield Henry‟s liability in the Guynn lawsuit arose
from its ownership and the use of the apartments leased to
Project Transition.

The Guynn plaintiffs alleged that they

suffered loss to personal property as a result of the fire set
by Patricia Gilberthorpe.

They lived in apartment B-509,

directly above Ms. Gilberthorpe‟s apartment.
¶ 23-24.

Guynn Complaint at

They alleged that they suffered losses to personal

property related to the fire in excess of $50,000.
Complaint at ¶ 28-30.

Guynn

They also alleged that they suffered

mental anguish as a result.

Id.

Although the Guynn plaintiffs‟

actual claims relate to lack of security, breach of quiet
enjoyment, failure to screen tenants, etc., the complaint seeks
33

compensation for the damage to their personal property and
mental anguish in all claims asserted against Fairfield Henry.
Looking beyond the nature of the claims asserted, the factual
allegations indicate that the Guynn plaintiffs‟ claims arise
from the fire started in B-409.
The fire set by Ms. Gilberthorpe in apartment B-409,
leased to Project Transition, was a but for cause of Fairfield
Henry‟s liability as to those claims.

If Project Transition had

not leased apartment B-409, and placed Ms. Gilberthorpe there,
Fairfield Henry would not be liable to the Guynn plaintiffs for
their personal property losses and personal injuries.

Fairfield

Henry was therefore an insured under the CGL policy under the
circumstances of the Guynn lawsuit.
Similarly, Fairfield Henry‟s liability in the Goldfarb
lawsuit arose from its ownership and the use of the apartments
leased to Project Transition.

The Goldfarb plaintiffs alleged

that they suffered loss to personal property as a result of the
fire in excess of $100,000.

Goldfarb Complaint at ¶ 78.

The

Goldfarb plaintiffs lived in apartment B-407, presumably next
door to Ms. Gilberthorpe.

Id. at ¶¶ 2-3.

As a result of the

fire, most of the plaintiffs‟ personal possessions were damaged
or destroyed, including handbags, clothing, furniture, etc.
at ¶¶ 76-77.

Id.

The plaintiffs also alleged that they suffered

mental and emotional injuries as a result of the fire.
34

Id. at ¶

79.

The plaintiffs‟ claims against Fairfield Henry relate to

the fire and seek compensation for the loss of personal property
and mental anguish.

As in the Guynn lawsuit, Fairfield Henry‟s

liability in the Goldfarb lawsuit was causally related to
Project Transitions lease of apartment B-409.
The Oehrtman claims also at least potentially arose
from the use or ownership of that part of Henry on the Park that
was leased to Project Transition.8

The class sought to be

certified consisted of residents of Henry on the Park who were
damaged by the lease between Fairfield Henry and Project
Transition.

The proposed class alone is evidence that Fairfield

Henry‟s liability was potentially causally related to the
apartments leased to Project Transition.
The factual allegations also demonstrate a causal
connection.

In their claims against Fairfield Henry in the

Oehrtman Complaint, there are allegations that some class
members suffered personal property damage and personal injuries
from the fire.

Those allegations arise out of the ownership and

use of apartment B-409, where the fire was started.

8

Philadelphia Indemnity had a duty to defend Fairfield
Henry in the Oehrtman lawsuit if the factual allegations in the
Oehrtman complaint potentially come within coverage of the CGL
Policy. Fairfield Henry does not claim that Philadelphia
Indemnity has a duty to indemnify Fairfield Henry for anything
related to the Oehrtman lawsuit.
35

There are also allegations regarding Project
Transition‟s clients‟ disruptive and offensive behavior
throughout the Henry on the Park complex.

Conduct in the common

areas of the complex at least potentially comes within “that
part of the premises leased to” Project Transition because use
of the common areas is contemplated by and incidental to the
lease of each individual apartment.

The leases governed access

to and use of Henry on the Park‟s common amenities.

Also,

because Project Transition rented several apartments throughout
the complex, which operated as meeting places for clients, use
of the common areas was necessary for patients to get in and out
of their apartments and to travel to meeting places.

See, e.g.,

ZKZ Assoc. LP v. CNA Ins. Co., 679 N.E.2d 629, 629 (N.Y. 1997)
(finding that an injury sustained on the sidewalk outside of the
building fell within “that part of the described premises which
is leased to” the insurance policy holder because use of the
sidewalk was necessary for access in and out of the leased
premises).
Thus, construing the coverage terms broadly, and
considering that the duty to defend is triggered if any claims
may potentially come within coverage, Fairfield Henry was an
“insured” for the purpose of Philadelphia Indemnity‟s duty to
defend in the Oehrtman lawsuit.

36

5.

Whether Philadelphia Indemnity‟s Coverage was
“Excess”

Finally, Philadelphia Indemnity argued in its motion
that it is entitled to summary judgment on the plaintiff‟s
claims, even if Fairfield Henry was an insured under the CGL
Policy, because Philadelphia Indemnity‟s coverage was “excess.”9
Philadelphia Indemnity argued that the CGL policy is excess
because Fairfield Henry had other insurance that was in effect
at the time of the fire, provided by New Hampshire Insurance
Company, and because New Hampshire Insurance provided a defense
in the Goldfarb and Guynn cases.

Philadelphia Indemnity did not

include any evidence in support of its argument.
In response, Fairfield Henry provided evidence that
the CGL Policy was not “excess” because Fairfield Henry‟s New
Hampshire Insurance Policy was not effective prior to the policy
period of the CGL Policy.
Insurance Policy”) at 1.

Pl.‟s Resp. Exh. V (“New Hampshire
The defendants did not file a

response, and had no argument in response at oral argument.

The

Court therefore finds that the CGL Policy was not excess.

9

The CGL Policy was “excess” if there was another insurance
policy in effect that provided coverage if that other insurance
policy was effective prior to the beginning of the CGL Policy‟s
policy period. CGL Policy at 11-12.
37

C.

Fairfield Henry‟s Motion for Summary Judgment
Having found that the defendants are not entitled to

summary judgment based on any of the arguments in their motion,
the Court will move on to consider the plaintiff‟s motion for
summary judgment.

Fairfield Henry‟s complaint asserts two

claims against defendant Philadelphia Indemnity.

First,

Fairfield Henry asserts a claim for breach of contract for
Philadelphia Indemnity‟s failure to defend and indemnify
Fairfield Henry in the Oehrtman, Goldfarb, and Guynn lawsuits.
Second, Fairfield Henry seeks a declaratory judgment
declaring that the Philadelphia Indemnity CGL Policy provides
liability coverage to Fairfield Henry for the claims in the
Oehrtman, Goldfarb, and Guynn lawsuits and any future lawsuits
relating to the 2009 fire or the presence of Project Transition
at Henry on the Park; and (2) that Philadelphia Indemnity has a
duty to defend Fairfield Henry in future lawsuits relating to
the 2009 fire or the presence of Project Transition at Henry on
the Park.
Fairfield Henry also asserts a claim against Project
Transition for breach of contract, for its failure to reimburse
Fairfield Henry for attorney‟s fees, costs, and settlement
payments made in the Oehrtman, Goldfarb, and Guynn lawsuits,
pursuant to the Apartment Lease Contracts.

38

The defendants did not respond to the plaintiff‟s
motion for summary judgment, except for referencing their own
motion for summary judgment.

For the reasons discussed below,

the Court concludes that Fairfield Henry is entitled to summary
judgment on the issue of liability with respect to Philadelphia
Indemnity‟s duty to defend and indemnify in the Goldfarb and
Guynn lawsuits, Philadelphia Indemnity‟s duty to defend in the
Oehrtman lawsuit, and Project Transition‟s breach of contract.
Fairfield Henry is not entitled to summary judgment on its
claims regarding future tenant lawsuits.

The Court will also

reserve judgment on the issue of damages.
1.

Philadelphia Indemnity‟s Duty to Defend and
Indemnify in the Oehrtman, Goldfarb and Guynn
Lawsuits

In determining whether an insurer owes a duty to
defend, the Court must first determine the scope of insurance
coverage, and then “examine the complaint in the underlying
action to determine whether it triggers coverage.”

Sikirica v.

Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir. 2005).

An

insurer owes a duty to defend an insured when the allegations in
the complaint potentially come within insurance coverage.

Penn

Nat‟l Ins., 482 F. Supp. 2d at 607 (citing Frog, Switch & Mfg.
Co., 193 F.3d at 746).

If one claim of a multi-claim lawsuit is

potentially covered, the insurer owes a duty to defend the

39

insurer on all claims until it is clear that the insured cannot
recover on a covered claim.

Id.

The question of whether a claim against an insured is
potentially covered is answered “by comparing the four corners
of the insurance contract to the four corners of the complaint.”
Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 517 (3d Cir.
2012) (internal citation omitted).

“[T]he particular cause of

action that a complainant pleads is not determinative of whether
coverage has been triggered.

Instead it is necessary to look at

the factual allegations contained in the complaint.”

Mut.

Benefit Ins. Co. v. Haver, 725 A.2d 743, 745 (Pa. 1999).
The duty to indemnify is triggered only if the
insurance policy actually covers the claimed incident.

Pacific

Indem. Co. v. Linn, 590 F. Supp. 643, 650 (E.D. Pa. 1984)
(citing C.H. Heist Caribe Corp. v. Am. Home Assurance Co., 640
F.2d 479, 483 (3d Cir. 1981), aff‟d 766 F.2d 754 (3d Cir. 1985).
Under Pennsylvania law, “[c]laims for indemnification arise only
when the party seeking indemnity has made a payment on the
underlying claim.”

McClure v. Deerland Corp., 585 A.2d 19, 23

(Pa. Super. Ct. 1991).
The CGL Policy obligates Philadelphia Indemnity to
defend and indemnify its insured under the following conditions:

40

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
. . . .
b. This insurance applies to “bodily injury” and
“property damage” only if:
(1) The “bodily injury” or “property damage” is
caused by an “occurrence” that takes place in the
“coverage territory”. . . .
CGL Policy at 1.
“Bodily injury” is defined as “bodily injury, sickness
or disease sustained by a person, including death resulting from
any of these at any time.”

Id. at 14.

“Property damage” is

defined as “physical injury to tangible property, including all
resulting loss of use of that property” or “loss of use of
tangible property that is not physically injured.”
17.

Id. at 16-

An “occurrence” is “an accident, including continuous or

repeated exposure to substantially the same general harmful
conditions.”

Id. at 16.

in the United States.

“Coverage territory” includes anywhere

Id. at 14.

A “suit” includes a “civil

proceeding in which damages because of „bodily injury,‟ [or]
„property damage‟ . . . are alleged.”

Id. at 17.

The Guynn and Goldfarb claims against Fairfield Henry
allege that the plaintiffs suffered property damage and personal
injuries.

Those suits, therefore, fall within the CGL policy‟s
41

coverage.

Having already concluded that Fairfield Henry was an

“insured” in the contexts of the Guynn and Goldfarb lawsuits,
the Court concludes that Philadelphia Indemnity had a duty to
defend Fairfield Henry in those lawsuits.

Philadelphia

Indemnity breached the terms of the CGL Policy by refusing to
defend Fairfield Henry in those lawsuits.
The Guynn and Goldfarb lawsuits settled, and Fairfield
Henry made settlement payments to the plaintiffs.

Philadelphia

Indemnity therefore also had a duty to indemnify Fairfield Henry
for damages it paid to the Guynn and Goldfarb plaintiffs for
personal injuries and property damage.

Because the parties have

not yet fully briefed damages, the Court takes no position on
the amount for which Philadelphia Indemnity has a duty to
indemnify the plaintiff.
The Oehrtman Complaint also alleges damage to personal
property and personal injuries suffered by the class members due
to the fire and due to Project Transition‟s clients‟ conduct.
Many of the claims directed at Fairfield Henry relate to
Fairfield Henry‟s negligent maintenance, security, and
communication which do not necessarily depend on the presence of
Project Transition and do not relate to property damage or
personal injury.

But, because some of the factual allegations

against Fairfield Henry may potentially be covered, Philadelphia
Indemnity had a duty to defend Fairfield Henry until it was
42

clear that no claims were covered.

Philadelphia Indemnity‟s

duty to defend would have been extinguished when the Court of
Common Pleas denied class certification, at which point no
claims against Fairfield Henry would move forward.10
Philadelphia Indemnity, therefore, had a duty to defend up until
that point.

Philadelphia Indemnity has no duty to indemnify

Fairfield Henry in the Oehrtman lawsuit, because there was no
settlement or finding of liability against Fairfield Henry in
that case, and because Fairfield Henry did not make any payments
to the Oehrtman plaintiffs.
2.

Philadelphia Indemnity‟s Duty to Defend and
Indemnify in Future Tenant Lawsuits

Fairfield Henry also seeks a declaratory judgment
which declares that Philadelphia Indemnity has a duty to defend
and indemnify Fairfield Henry in future lawsuits by Henry on the
Park residents that arise from Project Transition‟s presence on
the property.

At the time the parties filed their summary

judgment motions, the plaintiff anticipated that seventy-one
individual tenant lawsuits, triggered by the Oehrtman denial of
class certification, would be filed against Fairfield Henry.
During oral argument, the plaintiff asserted that fifty-five

10

Fairfield Henry asserts that it is no longer the landlord
of Henry on the Park, so there are no remaining claims against
it in the Oehrtman action.
43

tenant lawsuits, with claims identical or nearly identical to
the Oehrtman claims, have since been filed.
Fairfield Henry is not entitled to a declaratory
judgment on the issue of whether Philadelphia Indemnity has a
duty to defend and indemnify in those lawsuits or in any
hypothetical future tenant lawsuits.

A court must determine

whether an insurance company has a duty to defend by comparing
the four corners of the insurance policy with the four corners
of the underlying complaint.

The Court cannot make this

determination about hypothetical lawsuits that may or may not be
filed against the plaintiff.

The Court also cannot make this

determination regarding the fifty-five tenant lawsuits that have
allegedly already been filed because the Court has not been
presented with those complaints.11
Similarly, Fairfield Henry is not entitled to a
declaratory judgment on whether Philadelphia Indemnity has a
duty to indemnify in future tenant cases, because any claim for
indemnification is premature until a party makes payment on an
underlying claim.

The Court has not been presented with any

evidence that payments have been made on any other existing

11

During oral argument, the plaintiff suggested that those
complaints could be filed with the Court following the Court‟s
decision on the motions for summary judgment, in order to decide
whether this decision applies to those complaints. The Court
takes no view on whether such a procedure would be appropriate
in this case.
44

claims, and the Court cannot make a determination on any
hypothetical future claims.
3.

Project Transition‟s Breach of Contract

The plaintiff argues that it is also entitled to
summary judgment on its breach of contract claim against Project
Transition.

Fairfield Henry argues that Project Transition

entered into a lease agreement with Fairfield Henry.

The

language of the lease requires Project Transition to reimburse
Fairfield Henry for damages caused by Project Transition‟s
employees, business invitees and guests.

Project Transition

breached the lease when it failed to reimburse Fairfield Henry
for damages that were caused by Project Transitions guests,
employees and business invitees.

The defendants have not

responded to the merits of Fairfield Henry‟s breach of contract
claim.

The Court will grant summary judgment for Fairfield

Henry on this issue.
The Court must interpret and enforce unambiguous
agreements according to their terms.

McDowell v. Philadelphia

Hous. Auth., 423 F.3d 233, 238 (3d Cir. 2005).

If a contract is

unambiguous, the Court construes the contract as a matter of
law.

Mellon Bank, N.A. v. Aetna Bus. Credit, Inc., 619 F.2d

1001, 1011 n.10 (3d Cir. 1980).

When the language is clear and

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unambiguous, the Court must give effect to that language.

401

Fourth St., Inc., 879 A.2d at 171.
The lease agreement prohibits Project Transition and
its guests or occupants from engaging in certain activity:
21. PROHIBITED CONDUCT. You and your occupants or
guests may not engage in the following activities;
behaving in a loud or obnoxious manner; disturbing or
threatening the rights, comfort, health, safety, or
convenience of others (including our agents and
employees) in or near the apartment community . . . .
Apartment Lease Contract ¶ 21.
The leases require Project Transition to reimburse
Fairfield Henry for damages and costs caused by Project
Transition‟s negligent or intentional conduct or violation of
the lease provisions, such as the prohibited conduct provision:
13. DAMAGES AND REIMBURSEMENT. You must promptly
reimburse us for loss, damage, governmental fines, or
cost of repairs or service in the apartment community
due to a violation of the Lease Contract or rules,
improper use, negligence, or intentional conduct by
you or your invitees, guests or occupants.
Apartment Lease Contract ¶ 13.
Project Transition‟s occupant or guest, Patricia
Gilberthorpe, set fire to Apartment B-409.

The plaintiffs in

the Oehrtman, Goldfarb, and Guynn lawsuits alleged that the fire
set by Ms. Gilberthorpe caused damage to their personal
property.

The plaintiffs in those lawsuits also alleged that

Project Transition‟s clients engaged in threatening and
disturbing conduct toward them.

The complaints also alleged
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that Project Transition‟s clients disturbed the comfort and
safety of the plaintiffs.
Paragraph 13 of the lease required Project Transition
to reimburse Fairfield Henry for loss and damage due to a
violation of the lease or negligent or intentional conduct of
its occupants or guests.

Fairfield Henry sustained losses and

damages in the form of attorney‟s fees, litigation costs, and
payments made to the Goldfarb and Guynn plaintiffs to settle
those cases.

Project Transition‟s refusal to reimburse

Fairfield Henry for those costs constitutes a breach of the
agreement.12

The Court therefore grants summary judgment to the

plaintiff on this breach of contract claim.
An appropriate order shall issue separately.

12

The Court does not decide, at this point, the amount of
damages for which Project Transition is liable to Fairfield
Henry.
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