CITIZENS INSURANCE COMPANY OF AMERICA v. SELECTIVE WAY INSURANCE COMPANY
MEMORANDUM SIGNED BY HONORABLE WENDY BEETLESTONE ON 4/14/15. 4/14/15 ENTERED AND COPIES E-MAILED. (va, )
— FOR PUBLICATION —
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
CITIZENS INSURANCE COMPANY OF
SELECTIVE WAY INSURANCE
This action involves a dispute between two insurers over which has the duty to defend
general contractor Michael & Karen Palmieri Enterprises, Inc. d/b/a Lynmar Builders
(“Lynmar”) in personal injury litigation pending in a Pennsylvania state court and over the costs
incurred in defending that litigation to date. Plaintiff, Citizens Insurance Company of America
(“Citizens”)—Lynmar’s insurer—is seeking judgment on the pleadings, pursuant to Federal Rule
of Civil Procedure 12(c), that Defendant, Selective Way Insurance Company (“Selective”)—
which insured one of Lynmar’s subcontractors—owes a duty to defend the general contractor in
the tort action. For the reasons set out below, the motion will be denied.
On November 19, 2009, Lynmar contracted to perform construction work at a Save-A-
Lot store located at 5601 Vine Street in Philadelphia, Pennsylvania. Compl. ¶ 11. Lynmar
subcontracted with Integrity Plumbing & Heating (“Integrity”) to perform a portion of the
construction work. Id. ¶ 12. The parties’ pleadings do not state when Integrity completed its
work on the project. However, Selective has alleged in its Answer that “Integrity’s ongoing
operations performed for Lynmar [did not] cause the bodily injury” at issue in the state court
personal injury litigation. Answer at 6 (Eighth Affirmative Defense).1
That injury occurred on May 12, 2010, when an employee of Sav-A-Lot, Robert
Tomlinson, allegedly “fell through an unidentified, unmarked and unguarded drop ceiling and/or
floor in the vicinity of [the area in which Integrity performed its work] which appeared to be a
floor,” and sustained serious injuries. Compl. Ex. A ¶¶ 5, 30-31. Tomlinson filed suit in the
Court of Common Pleas of Philadelphia County against, among others, Lynmar and Integrity
(the “Tomlinson” action). In his complaint, Tomlinson alleges, inter alia, that the defendants
were negligent in “failing to ensure adequate handrails and/or guardrails existed on the
Premises,” and in “failing to take proper measures to warn or guard the location of the accident.”
Id. Ex. A ¶¶ 66(n), (q).
Integrity is insured under a commercial general liability policy issued by the Defendant
here, Selective (the “Policy”). Compl. ¶ 18. The Policy also insures as additional insureds any
party who Integrity agrees to indemnify in one of its construction contracts. Id. Ex. A at 11.
Integrity’s subcontract with Lynmar requires Integrity to indemnify Lynmar with respect to
liability arising from Integrity’s work and required that Lynmar be added to the Policy as an
additional insured. Id. ¶¶ 15-16. Lynmar complied with those requirements. See id. ¶¶ 15-19.
The provision of the Policy that extends coverage to Lynmar only extends that coverage for
liability that is “caused in whole or in part by . . . [Integrity’s] ongoing operations performed for
[the indemnified party].” Id. Ex. C at 11 (emphasis added). The policy also provides Integrity
For the purposes of the present Rule 12(c) motion, the Court will consider, in addition to the pleadings, the
Policy, the subcontract between Lynmar and Integrity and the complaint filed in the underlying Tomlinson
action. Each of those documents is attached to the Complaint in this action and is “‘integral to or explicitly
relied upon in the complaint.’” U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002) (quoting
In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)) (emphasis removed).
with coverage for injuries arising out of its own operations that already have been completed,
called “completed operations” coverage. Opp’n Ex. D at 23.2 It does not, however, extend
completed operations coverage to additional insureds, like Lynmar; they are covered only for
injuries caused by ongoing operations. Compare Compl. Ex. C at 11, with Opp’n Ex. D at 23.
Citizens contends that Tomlinson’s injury “was caused . . . by [Integrity’s] ongoing operations
performed for [Lynmar], Compl. Ex. C at 11, and that Lynmar, therefore, is covered for the
injury. Mot. at 10-11. Selective contends that the injury occurred “when all of the work in
[Integrity’s] contracts [with Lynmar] ha[d] been completed,” Opp’n Ex. D at 23, that Lynmar is
covered only for injuries caused by Integrity’s ongoing operations and that Lynmar, therefore, is
not covered for the injury. Opp’n at 12-13.
Lynmar tendered its defense of the Tomlinson Court of Common Pleas action to
Selective. Compl. ¶ 19. Selective, however, did not accept that tender. Id. ¶ 20; Answer ¶ 20.
As a result, Citizens, as Lynmar’s insurer, has defended Lynmar in the Tomlinson action.
Compl. ¶ 23.
On a motion for judgment on the pleadings, “‘judgment will not be granted unless the
movant clearly establishes that no material issue of fact remains to be resolved and that he is
entitled to judgment as a matter of law.’” Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir.
2008) (quoting Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290-91 (3d Cir. 1988)).
In deciding the motion, the court must “‘view the facts presented in the pleadings and the
inferences to be drawn therefrom in the light most favorable to the nonmoving party.’” Id.
The term “completed operations” is defined to include “all ‘bodily injury . . . arising out of . . . ‘your work’
except . . . work that has not been completed or abandoned.” Opp’n Ex. D at 23. Work is “deemed completed”
at the earlier of “when all of the work called for in your contracts has been completed” or when the work “has
been put to its intended use by any person or organization other than another contractor or contractor working
on the same project.” Id.
This motion raises two primary issues: (1) whether Selective has a duty to defend Lynmar
in response to the allegations regarding negligent construction stated in the Tomlinson complaint;
and, (2) whether Selective has a duty to defend Lynmar in response to the Tomlinson complaint’s
failure to warn allegations. The parties dispute whether Pennsylvania or New Jersey law governs
those issues. As an initial matter, the Court will address the choice-of-law issue.
Choice of Law
As the forum state, Pennsylvania choice-of-law rules apply to this action. Hammersmith
v. TIG Ins. Co., 480 F.3d 220, 226 (3d Cir. 2007). Under those rules, a court must “assess each
state’s contacts under the Second Restatement of Conflict of Laws, bearing in mind that ‘[w]e
are concerned with the contract of insurance’ and not the underlying tort.” Id. at 232-33 (quoting
McCabe v. Prudential Prop. & Cas. Ins. Co., 514 A.2d 582, 586 (Pa. Super. Ct. 1986)).
“Section 193 of the Second Restatement specifically governs casualty insurance contracts, and
provides that the” interpretation of a casualty insurance contract is “‘determined by the local law
of the state which the parties understood to be the principal location of the insured risk during the
term of the policy unless . . . some other state has a more significant relationship . . . to the
transaction and the parties . . . .’” Id. at 233 (quoting Restatement (Second) of Conflict of Laws
§ 193). Comment b to section 193 states that courts generally should give the location of the
insured risk “greater weight than any other single contact.” Id. (quoting Restatement (Second) of
Conflict of Laws § 193 cmt. b).
Both Lynmar and Integrity are New Jersey companies. Compl. Ex. B at 1-2. Selective
issued the policy from its office in Branchville, New Jersey. Id. Ex. C at 2. The contract
between the two New Jersey construction companies called for work to be performed in
Pennsylvania. Id. Ex. B at 2. For the insurance policy in question here, issued by a New Jersey
insurer to a New Jersey insured and extended to a New Jersey additional insured, the location of
the insured risk is New Jersey and, thus, New Jersey law applies. See Hammersmith, 480 F.3d at
This conclusion is reinforced by an analysis of the additional Hammersmith factors: “(1)
the place of contracting; (2) the place of negotiation of the contract; (3) the place of performance;
(4) the location of the subject matter of the contract; and (5) the domicile, residence, nationality,
place of incorporation and place of business of the parties.” Id. at 233 (citing Restatement
(Second) of Conflict of Laws § 188(2)).3 The place of contracting for an insurance policy is the
state where it is delivered. Id. Here, the Policy reflects that it was issued from Selective’s New
Jersey office to Integrity’s New Jersey office. Compl. Ex. C at 2. Given the location of the
parties’ respective offices, and absent any allegations to the contrary, it is reasonable to conclude
that New Jersey is the place where the negotiations over the policy occurred and the place where
the subject matter of the insurance policy is located. The place of performance refers to the place
of performance of the insurance contract and not that of the construction work, Hammersmith,
480 F.3d at 232-33,4 which, here, are the offices of the contracting parties in New Jersey. The
record contains no evidence to suggest that the parties have any other domicile, residence, place
of incorporation or place of business than their listed offices in New Jersey. Thus, based on
consideration of all of the relevant factors, New Jersey law governs the interpretation of the
Citizens points in its choice of law argument to factors such as that the injury occurred in Pennsylvania to a
Pennsylvanian who filed the underlying tort action in Pennsylvania. Those are not the relevant considerations
for determining choice of law regarding contract interpretation. Hammersmith, 480 F.3d at 232-33.
The fact the project site at which Tomlinson was injured is in Pennsylvania does not require a different result.
“Section 193 clearly reflects a ‘preference that only one set of laws governs a given insurance contract, and a
disapproval of the possibility that the laws of different jurisdictions might apply to different risks under the
policy.’” Id. at 233 (quoting United Brass Works, Inc. v. Am. Guar. Liab. Ins. Co., 819 F. Supp. 465, 469
(W.D. Pa. 1992)).
Whether, Under New Jersey Law, Citizens Is Entitled to Judgment on the
Pleadings that Selective Owes a Duty to Defend the Allegations of Negligent
Construction Made Against Lynmar in the Tomlinson Action
New Jersey recognizes the general rule that a liability insurer is obligated to defend
whenever the complaint against the policyholder contains allegations that, if proven true, would
be covered under the policy. Burd v. Sussex Mut. Ins. Co., 267 A.2d 7, 9 (N.J. 1970). The duty
to defend exists even if the claim against the policyholder is completely without merit, so long
as, if the claim pleaded in the action against the policyholder were to be proven valid, it would be
covered by the policy. This is because to rule otherwise would deprive the policyholder of “‘one
of the basic purposes’” of obtaining liability insurance—“‘protection of the insured from the
expenses of litigation.’” Vorhees v. Preferred Mut. Ins. Co., 607 A.2d 1255, 1259 (N.J. 1992)
(quoting Solo Cup Co. v. Fed. Ins. Co., 619 F.2d 1178, 1185 (7th Cir. 1980)). An insurer is not
required, however, to provide a defense to a lawsuit alleging claims that, even if they were
proven true, would not fall within the insurer’s policy. Hartford Acc. & Indem. Co. v. Aetna Life
& Cas. Co., 483 A.2d 402, 405 (N.J. 1984); Burd, 267 A.2d at 9. When the insurer believes that
the claim would not be covered even if proven, the insurer “may deny coverage and await a
judicial resolution.” Polarome Int’l., Inc. v. Greenwich Ins. Co., 961 A.2d 29, 48 (N.J. Super.
Ct. App. Div. 2008).
Sometimes, however, the issue that determines whether a claim is covered will not be
resolved in the litigation against the policyholder. When that is the case, an insurer may bring a
declaratory judgment action, like the one here, to determine whether it is obligated to cover the
policyholder. Burd, 267 A.2d at 11. In such an action, the insurer is not limited to the facts
pleaded in the complaint against the policyholder, but may introduce evidence to show that the
claim against the policyholder is not covered by its policy. See Polarome, 961 A.2d at 48
(stating that insurer may introduce extrinsic evidence to show claim is not covered); see also
Burd, 267 A.2d at 14 (stating that the carrier was entitled to try the issue of whether the injuries
in fact were within the policy exclusion for intentional acts).
Thus, in Burd, the complaint in the underlying personal injury action contained separate
counts alleging alternatively that the insured intentionally shot the plaintiff and that he did so
negligently. Burd, 267 A.2d at 9. The issue whether the shooting was negligent or intentional
was not resolved in the personal injury action, id., but it was critical to whether the insurer had a
duty to defend. Accordingly, in a subsequent action seeking a declaration that the insurer owed
coverage, the insurer was not limited to the terms of the personal injury complaint against its
policyholder but was entitled to show that the shooting actually was intentional and, therefore,
not covered by its policy. See id. at 9-11.
Here, Selective argues that it has no duty to defend Lynmar in Tomlinson because the
injury Mr. Tomlinson alleges was not caused by Integrity’s ongoing operations but happened
after Integrity had completed operations at the site. The issue whether Mr. Tomlinson’s injury
was caused by Integrity’s ongoing operations is not relevant to his tort claim and will not be
resolved in the state court action. Thus, in this declaratory judgment action, Selective will be
entitled to introduce evidence in a summary judgment motion or at trial to show when the injury
occurred in relation to the completion of Integrity’s operations. Polarome, 961 A.2d at 48; see
also Burd, 267 A.2d at 11. The present motion, however, is under Rule 12(c), and for the
purposes of this motion, only the factual allegations contained in the pleadings in this action, as
well as certain documents “integral to or explicitly relied upon in the complaint,” may be
considered. U.S. Express Lines Ltd., 281 F.3d at 388 (citation and internal quotation marks
omitted); see also supra note 1. It is Citizens’ burden on this motion to show that those
allegations reflect that there exists no issue of material fact and that it is entitled to judgment as a
matter of law. Rosenau, 539 F.3d at 221.
A review of the pleadings shows that there is an issue of material fact that remains to be
resolved. That issue arises from the parties’ dispute over whether Tomlinson’s injuries were
caused by Integrity’s ongoing operations. Mot. at 9; Opp’n at 12-13.5 New Jersey courts view
the distinction between ongoing operations and completed operations as:
a limitation on coverage for liability based on the date of the damage. There is
coverage for property damage occurring before the work was completed and the
construction project was put to use, but not for property damage that occurs
thereafter. These exclusions [for completed operations] incorporate the general
rule that comports with common understanding—“the time of the occurrence of
an accident within the meaning of an indemnity policy is not the time the
wrongful act is committed but the time when the complaining party is actually
E. Coast Residential Assocs., LLC v. Builders Firstsource-Ne. Grp., LLC, 2012 WL 75146, at *3
(N.J. Super. Ct. App. Div. Jan. 11, 2012) (quoting Owens-Ill. Inc. v. United Ins. Co., 650 A.2d
974, 981 (N.J. 1994)); accord Deodato v. Hartford Ins. Co., 363 A.2d 361, 402 (N.J. Super. Ct.
Law Div. 1976), aff’d, 381 A.2d 354 (N.J. Super. Ct. App. Div. 1977) (per curiam).
The parties are at odds as to whether Mr. Tomlinson’s injuries happened during
Integrity’s “ongoing operations.” Citizens’ points to Mr. Tomlinson’s allegations that the
defendants, including Integrity, acted negligently in construction of the area around the water
heater from which he fell, Compl. Ex. A ¶¶ 66(n), (q), and concludes from there that his injury
occurred during Integrity’s ongoing operations. Mot. at 10-11. Selective alleges in its Answer,
Citizens also argues, relying entirely on Selective Ins. Co. v. Lower Providence Township, No. 12-0800, 2013
WL 3213348 (E.D. Pa. June 26, 2013), that Lynmar could be covered even if the potential liability in Tomlinson
was not caused by Integrity’s ongoing operations. Apart from the fact New Jersey law applies here, Lower
Providence does not support Selective’s argument. In Lower Providence, the court held that an injury to a
contractor’s employee that did occur during the contractor’s ongoing operations was covered even though the
negligence was that of the party the contractor had agreed to indemnify and not of the contractor itself. Id. at
*8-9. The court did not address whether an injury occurring after completion of the work was caused by the
contractor’s ongoing operations. Id.
to the contrary; that Integrity’s ongoing operations performed for Lynmar did not cause Mr.
Tomlinson’s injuries. Answer at 6 (Eighth Affirmative Defense). Thus, Selective highlights a
material question of fact regarding when Tomlinson’s injury occurred in relation to when it
completed its work.
Given this factual dispute found in the pleadings, the Court concludes that Citizens’ has
not met its burden to show “that no material issue of fact remains to be resolved and that [it] is
entitled to judgment as a matter of law.” Rosenau, 539 F.3d at 221 (citation and internal
quotation marks omitted). As stated above, in addressing a Rule 12(c) motion the Court “view[s]
the facts presented in the pleadings and the inferences to be drawn therefrom in the light most
favorable to the nonmoving party.” Id. When a nonmoving defendant denies a material
allegation in its answer, that denial creates a question of fact that prevents judgment on the
pleadings. Inst. for Scientific Info., Inc. v. Gordon & Breach, Scientific Publishers, Inc., 931
F.2d 1002, 1008 (3d Cir. 1991). The nonmoving party, Selective, has alleged in its Answer that
Integrity’s ongoing operations did not cause Tomlinson’s injury. Answer at 6 (Eighth
Affirmative Defense). If the injury was not caused by Integrity’s ongoing operations, Lynmar is
not entitled to coverage from Selective. In light of Selective’s allegation, Citizens cannot show
that there is not at least a question of fact regarding whether Lynmar is entitled to coverage.
That fact question precludes judgment on the pleadings.
Whether, Under New Jersey Law, Citizens Is Entitled to Judgment on the
Pleadings that Selective Owes Lynmar a Duty to Defend It Against the Failure
to Warn Allegations in Tomlinson
Citizens also argues that the allegations against Integrity in Tomlinson of failure to warn
themselves alone impose on Selective a duty to defend Lynmar. The Tomlinson complaint
alleges, inter alia, that Integrity “faile[d] to warn those lawfully on the Premises of the
dangerous conditions existing thereon.” Compl. Ex. A ¶ 66(k). Citizens relies on Pennsylvania
case law to assert that allegation alleges an injury that is deemed, as a matter of law, to have been
caused by ongoing operations regardless that the resultant injury—in this case, the fall—did not
occur until after the work had been completed. Mot. at 11-12 (citing Bombar v. W. Am. Ins. Co,
932 A.2d 78, 88-89 (Pa. Super. Ct. 2007); Keystone Spray Equip., Inc. v. Regis Ins. Co., 767
A.2d 572, 575 (Pa. Super. Ct. 2001)).
As discussed above, however, New Jersey law governs the interpretation of the Policy,
and it is to the contrary. Under New Jersey law, liability for a failure to warn that results in
injury—like Mr. Tomlinson’s fall—after the work has been completed is covered by completed
operations coverage and not by coverage for ongoing operations. S.T. Hudson Eng’rs, Inc. v. Pa.
Nat’l Mut. Cas. Co., 909 A.2d 1156, 1164 (N.J. Super. Ct. App. Div. 2006) (“[T]he acts that fall
within products-completed operations coverage relate to the giving of information, i.e.,
instructions and warnings . . . .”); see also Inductotherm Corp. v. N.J. Mfrs. Cas. Ins. Co., 200
A.2d 358, 364 (N.J. Super Ct. Law Div. 1964) (“the allegations . . . arising out of its failure to
warn of a danger inherent in the use of its product . . . are not sufficient to remove these claims
from the exclusionary clause of the contract of insurance” for products—completed operations
coverage). Thus, if Mr. Tomlinson fell after Integrity had completed its work because Integrity
failed to warn him of a danger, that fall would not be caused by Integrity’s ongoing operations.
And, if the fall was not caused by Integrity’s ongoing operations, liability for failure to warn
about the drop ceiling/floor is not covered under the Policy.
Selective has proffered evidence to show that Mr. Tomlinson fell some months after
Integrity had completed its work at the site. Opp’n at 15-16 Exs. A-C. That evidence consists
of: (1) excerpts from Lynmar’s summary judgment motion in Tomlinson, id. Ex. A ¶¶ 5, 6, 8; (2)
excerpts from Integrity’s summary judgment motion in Tomlinson, id. Ex. B ¶¶ 14, 15; and (3) a
Final Waiver of Lien Form issued by Integrity to Lynmar indicating completion of, and full
payment for, the work under the parties’ subcontract, id. Ex. C. On this Rule 12(c) motion, the
Court is unable to consider that evidence because none of those documents are “integral to or
explicitly relied upon in the complaint.” U.S. Express Lines, 281 F.3d at 388 (citation and
internal quotation marks omitted). The Tomlinson complaint does not clearly state whether the
fall happened before or after Integrity completed its operations at the site. Citizens argues that
the fall happened during Integrity’s operations, see Compl. ¶¶ 27-30, while Selective has alleged
that it did not, see Answer at 6 (Eighth Affirmative Defense). Thus, at this stage in the
proceedings, with respect to the failure to warn allegation—just as for the negligent construction
allegations—there remains a factual question regarding when Integrity completed its operations
in relation to when the fall occurred, which precludes judgment on the pleadings.
For the foregoing reasons, Citizens’ Motion will be denied. An appropriate Order
Dated: April 14, 2015
BY THE COURT:
/S/WENDY BEETLESTONE, J.
WENDY BEETLESTONE, J.
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