UNITRIN DIRECT INSURANCE COMPANY v. ESPOSITO

Filing 25

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 11/29/2017. 11/29/2017 ENTERED AND COPIES E-MAILED.(sg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
UNITRIN DIRECT INSURANCE COMPANY
v.
MICHAEL ESPOSITO

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CIVIL ACTION

NO. 16-5239

MEMORANDUM OPINION
Savage, J.

November 29, 2017

Unitrin Direct Insurance Company moves for reconsideration of the order
declaring it has a duty to defend its insured in a state court personal injury action.
Unitrin challenges the finding that although the injury-producing conduct alleged in the
underlying action does not fall within the policy definition of an occurrence, the
exception to the policy exclusion for intentional conduct expressly provides coverage for
an insured who acted in self-defense or defense of another.

In essence, Unitrin

contends that we did not properly apply Pennsylvania’s four corners rule in determining
whether the policy covered the claims made in the underlying action. It argues that we
should not have considered the insured’s answer in the underlying action and in the
declaratory judgment action to determine whether the exception to the exclusion in the
policy may apply, triggering a duty to defend.
Because Unitrin has not demonstrated an error of law, we shall deny its motion
for reconsideration.
Standard of Review
A party may move to alter or amend a judgment under Rule 59(e) only where: (1)
there has been an intervening change in controlling law; (2) new evidence has become
available; or (3) there is a need to correct a clear error of law or fact, or to prevent

manifest injustice. Schumann v. Astrazeneca Pharm., L.P., 769 F.3d 837, 848 (3d Cir.
2014) (citation omitted); Blystone v. Horn, 664 F.3d 397, 415 (3d Cir. 2011) (citation
omitted); N. River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir.
1995). A Rule 59(e) motion may not be used to relitigate issues or present arguments
that could have been raised, but were not. Blystone, 664 F.3d at 416 (citing Howard
Hess Dental Labs., Inc. v. Dentsply Int’l, Inc., 602 F.3d 237, 251 (3d Cir. 2010)).
Analysis
Unitrin argues that we misapplied Pennsylvania law in relying on facts outside
the complaint in the underlying action when we determined that it had a duty to defend
Esposito in that action.

Unitrin maintains that once we determined there was no

occurrence, defined in the policy as an accident, that was the end of the coverage
inquiry. It urges us to ignore a provision which it had raised, that provides coverage for
an insured who causes bodily injury when acting in self-defense or defense of another.
Alternatively, it argues that it was error to consider one exclusion and not
another. Because the exception to the expected or intended injury exclusion potentially
provided coverage, we did not consider the policy exclusion barring coverage for injury
arising out of “physical abuse.”
These are not new arguments.

We already considered and rejected them.

Because Unitrin’s motion is a reiteration of the arguments it made in its motion for
judgment on the pleadings, it does not merit reconsideration. Nevertheless, we shall
explain why there was no clear error.
In analyzing whether Unitrin has a duty to defend, we must read the policy in its
entirety. Pa. Nat’l Mut. Cas. Ins. Co. v. St. John, 106 A.3d 1, 14 (Pa. 2014) (citing

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Riccio v. Am. Republic Ins. Co., 705 A.2d 422, 246 (Pa. 1997)). We do not look at one
provision standing alone. Instead, we examine it “in the context of the entire policy.”
Med. Protective Co. v. Watkins, 198 F.3d 100, 105 (3d Cir. 1999) (citing Reliance Ins.
Co. v. Moessner, 121 F.3d 895, 900 (3d Cir. 1997)); see also Am. Auto. Ins. Co. v.
Murray, 658 F.3d 311, 321 (3d Cir. 2011).
A court must give effect to the plain language of the insurance contract. Murray,
658 F.3d at 320. When the language is plain and unambiguous, the court is bound by
that language.

St. John, 106 A.3d at 14.

When it is ambiguous, the provision is

construed in favor of the insured. Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660,
673–74 (3d Cir. 2016); St. John, 106 A.3d at 14. Contract language is ambiguous if it is
reasonably capable of more than one meaning. St. John, 106 A.3d at 14. However,
policy language may not be stretched beyond its plain meaning to create an ambiguity.
Meyer v. CUNA Mut. Ins. Soc., 648 F.3d 154, 164 (3d Cir. 2011); Trizechahn Gateway
LLC v. Titus, 976 A.2d 474, 483 (Pa. 2009).
An ambiguity may be created by conflicting provisions. Adamitis v. Erie Ins.
Exch., 54 A.3d 371, 379–80 (Pa. Super. 2012) (analyzing whether an exclusion is
ambiguous when read against another provision within the insurance policy); see also
Sch. Dist. of City of Monessen v. Farnham & Pfile Co., 878 A.2d 142, 149 (Pa. Commw.
Ct. 2005) (concluding that ambiguity is created by two conflicting contract provisions).
In determining whether a term is ambiguous, not only must it be considered in the
context of the entire policy language, but also from the surrounding circumstances.
United Servs. Auto. Ass’n v. Elitzky, 517 A.2d 982, 986 (Pa. Super. 1986) (quoting Erie
Ins. Exch. v. Transamerica Ins. Co., 507 A.2d 389, 392 (Pa. Super. 1986)).

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In interpreting the homeowner’s policy issued by Unitrin, we concluded that the
policy provisions defining occurrence and the exception to the expected or intended
injury exclusion created an ambiguity. The policy provides coverage for bodily injury
caused by an occurrence, defined as an accident. It excludes coverage for bodily injury
that is expected or intended by the insured. But, it provides coverage for an insured
who causes bodily injury while using reasonable force to protect himself or others.1
These provisions are inherently incompatible, creating a conflict. On one hand,
the definition of an occurrence as an accident necessarily excludes intentional conduct
from coverage. On the other hand, intentional conduct carried out in self-defense or
defense of another is not excluded. If conduct is not excluded, it is included. Stated
differently, if Unitrin had intended to exclude all intentional conduct, why would it have
included the exception for self-defense? The exception to the exclusion together with
the definition of an occurrence creates an ambiguity.

Thus, given that the policy

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The policy excludes coverage for bodily injury that is expected or intended by the insured in
Exclusion E.1, which reads:
Coverages E and F do not apply to the following:
1. Expected Or Intended Injury
“Bodily injury” or “property damage” which is expected or intended by an “insured”, even
if the resulting “bodily injury” or “property damage”:
a. Is of a different kind, quality or degree than initially expected or intended; or
b. Is sustained by a different person, entity or property than initially expected or
intended.
However, this Exclusion E.1 does not apply to “bodily injury” or “property
damage” resulting from the use of reasonable force by an “insured” to protect
persons or property.
Compl. Ex. A, Section II – Exclusions, Coverage E – Personal Liability (Doc. No. 1-2) ¶¶ E.1–E.1.b, at
ECF 7.
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contains two conflicting provisions, it is construed in favor of the insured. Ramara, 814
F.3d at 673–74; St. John, 106 A.3d at 14.
In his answer in this action, Esposito claimed he acted in defense of himself and
his wife. We recognize that whether Esposito acted in defense of himself and his wife is
not undisputed. If Esposito proves in the underlying action that he used reasonable
force to protect himself and his wife, his conduct is covered. On the other hand, if he
fails to prove that the force was reasonable or was in self-defense, his conduct is not
covered. Until it is determined whether Esposito acted with reasonable force in selfdefense or in defense of his wife, Unitrin has a duty to defend him even though it will not
have a duty to indemnify him under either circumstance.
The Four Corners Rule
Unitrin correctly points out that “[t]he 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.” Am. & Foreign Ins. Co. v.
Jerry’s Sport Ctr., Inc., 2 A.3d 526, 541 (Pa. 2010) (citation omitted). The “four corners
rule” generally prevents a court from considering extrinsic factual evidence, such as
affidavits, deposition testimony, or facts developed through discovery in determining an
insurer’s duty to defend. Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Comm. Union
Ins. Co., 908 A.2d 888, 896 (Pa. 2006).2

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In support of its argument, Unitrin cites to Germantown Ins. Co. v. Martin, 595 A.2d 1172 (Pa.
Super. 1991), which held that extrinsic evidence to show self-defense was not admissible because the
allegations of intentional gunshots clearly fell within the policy’s exclusion of “expected or intended”
damage. Id. Martin is distinguishable. The “expected or intended” clause did not include any exception
to the exclusion for self-defense or defense of another, as does the policy here.
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The rule is not without exception.

There are circumstances where evidence

beyond the four corners of the underlying complaint may be considered.

Extrinsic

evidence may be used to rebut the insurer’s contention that a policy exclusion bars
coverage. In that case, the burden is on the insured “to show that the exclusion which
appears to be triggered does not apply after all.” Air Prods. & Chems., Inc. v. Hartford
Acc. & Indem. Co., 25 F.3d 177, 180 (3d Cir. 1994) (citations omitted). If the insured is
successful in demonstrating that coverage is not necessarily excluded by the facts
averred in the underlying complaint, the insurer is required to defend. Id.
Extrinsic evidence may also be introduced to show that an exception to an
exclusion does not apply. Haines v. State Auto Prop. & Cas. Ins. Co., 417 F. App’x 151,
153 (3d Cir. 2011) (quoting Air Prods., 25 F.3d at 180; and N. Ins. Co. of N.Y. v.
Aardvark Assocs., Inc., 942 F.2d 189, 196 (3d Cir. 1991)). The insurer may rely on
extrinsic evidence only if it is “used to show that no exception to the exclusion applied,
and not to support the application of the exclusion” itself.

Id.; see also Aardvark

Assocs., 942 F.2d at 196 (analyzing extrinsic evidence to determine scope of pollution
exclusion clause exception for discharges that are “sudden and accidental” under
Pennsylvania law). Thus, although extrinsic evidence is barred to show the claim falls
outside coverage pursuant to an exclusion, it is allowed to demonstrate that the claim is
covered by an exception to the exclusion.
In resolving the question whether the insurer has a duty to defend, extrinsic
evidence may be used to demonstrate the possibility of coverage, but not to exclude it.3

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See, e.g., Heffernan & Co. v. Hartford Ins. Co. of Am., 614 A.2d 295, 298 (Pa. 1992) (holding
that answers to interrogatories filed in the underlying action, which put the insurer on notice that a
complaint would probably be amended to state a covered claim, triggered a duty to defend); see also,
e.g., Meridian Mut. Ins. Co. v. Cont'l Bus. Ctr., No. Civ. A. 04-1639, 2005 WL 856935, at *5 (E.D. Pa. Apr.
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Of course, further discovery in the underlying case may reveal facts that plainly take the
case outside policy coverage, relieving the insurer of the duty to defend.
In determining the scope of Unitrin’s duty to defend, we found that this case fell
within what the Third Circuit has described as “the subset of exclusion cases that
concerns exceptions to exclusions,” inviting us to look beyond the complaint in the
underlying action. Air Prods., 25 F.3d at 180. We then concluded that the definition of
an “occurrence” conflicts with the exception to the exclusion which covers intentional
conduct carried out with reasonable force in self-defense or defense of another.4
To rigidly apply the four corners rule here would render the exception to the
exclusion providing coverage superfluous and illusory. USX Corp. v. Liberty Mut. Ins.
Co., 444 F.3d 192, 200 (3d Cir. 2006) (quoting Girard Trust Bank v. Life Ins. Co. of N.
Am., 364 A.2d 495, 498 (Pa. Super. 1976)).

If a court could not look beyond the

complaint in the underlying action alleging that the insured assaulted the plaintiff, an
insured claiming self-defense could not invoke a duty to defend. How else could a court
determine that an insured was claiming self-defense if it could not consider what his
defense was in the underlying action? It could do so only by considering his answer in
the underlying case or his answer in the declaratory judgment action. Otherwise, the
insurer could avoid its duty to defend under the exception to the exclusion.

14, 2005), aff’d, 174 F. App’x 104 (3d Cir. 2006) (to determine whether there is a duty to defend under
Pennsylvania law, the court determined a person’s status as an “insured” before applying the four corners
rule); Penn Nat’l Ins. v. HNI Corp., 482 F. Supp. 2d 568, 607–11 (M.D. Pa. 2007) (analyzing deposition
transcripts, certificate of insurance and an independent contractor agreement to determine whether a
party is an additional insured under Pennsylvania law).  
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Indeed, at oral argument on the motion for reconsideration, Unitrin’s counsel agreed that there
is a conflict between these two provisions. Oral Arg. Tr. at 6:22–7:9. But, limiting his focus to the
complaint, he argued that the conflict is not supported by the allegations. Id. at 10:3-6.
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In other four corners jurisdictions, courts have looked beyond the complaint in the
underlying action to determine whether the self-defense exception to an intentional acts
exclusion provided coverage.

For example, the Illinois Supreme Court held that

potential coverage existed under a policy, which contained both an exclusion for
intentional acts and a self-defense exception to that exclusion, where the insured relied
on self-defense in his counterclaim. Pekin Ins. Co. v. Wilson, 930 N.E.2d 1011, 1022–
23 (Ill. 2010). The court held that where coverage depends on whether an insured
acted in self-defense, the court must consider all the evidence presented before
deciding the insured has no duty to defend. Id. Consequently, in determining the scope
of the insurer’s duty to defend in such a case, the court may consider pleadings beyond
the underlying complaint. See id.
Similarly, where an insured had been sued for personal injury resulting from an
assault, the Virginia Supreme Court looked beyond the allegations in the underlying
complaint to conclude the insurer had a duty to defend its insured who claimed he had
acted in self-defense. Copp v. Nationwide Mut. Ins. Co., 692 S.E.2d 220, 224–25 (Va.
2010).

It then held that the insurer had a duty to defend its insured under the self-

defense exception to the expected or intended injury exclusion in the policy. Id.
The Copp court found that the insured’s conduct in a fist fight was not excluded
as an intentional act because the jury could find he acted in self-defense, an exception
to the exclusion for intentional acts causing bodily injury. Id. Explaining why it was not
applying the four corners rule, the Virginia Supreme Court acknowledged:
In several prior decisions in this type of case, we have applied the rule that
only the allegations in the complaint and the provisions of the insurance
policy are to be considered in deciding whether there is a duty on the part
of the insurer to defend and indemnify the insured. None of our prior
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decisions, however, has involved the type of situation we have here,
where in one of the four corners of an insurance policy there is a provision
specifically stating that an exclusion “does not apply to bodily injury or
property damage caused by an insured trying to protect person or
property.” This provision must be considered and construed together with
each phrase of the umbrella policy.
Id. at 225 (internal citations and footnotes omitted).
The Copp court further explained that the self-defense exception to the exclusion
“requires consideration of an insured’s claim that he or she caused bodily injury or
property damage trying to protect person or property in evaluating whether there is a
duty to defend in a given case.” Id. This evaluation necessitates looking beyond the
underlying complaint.
If the four corners rule were rigidly applied, the insured who acts in self-defense
or to protect someone else would never be afforded a defense, even though the policy
covers such acts. Certainly, a plaintiff in the underlying complaint would not allege that
he was injured when the defendant, the insured, acted in self-defense. See Pekin, 930
N.E.2d at 1022–23.
Unitrin contends that because there was no occurrence, the exclusions are
irrelevant. However, it is not the expected or intended injury exclusion that triggers the
duty to defend. It is the exception to the exclusion that does. The exception provides
coverage for conduct that does not fall within the definition of an occurrence or accident
and would otherwise be excluded from coverage.
Again, we emphasize that the exception does not create a duty to indemnify, only
a duty to defend. An insurer’s duty to defend continues unless and “until the claim is
narrowed to one patently outside the policy coverage.” Stidham v. Millvale Sportsmen’s
Club, 618 A.2d 945, 954 (Pa. Super. 1992), appeal denied, 637 A.2d 290 (Pa. 1993);
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Erie Ins. Exch. v. Transamerica Ins. Co., 533 A.2d 1363, 1368 (Pa. 1987). Thus, Unitrin
must defend Esposito in the underlying suit until a jury finds that he did not act in selfdefense or in defense of his wife.
Public Policy
Unitrin complains that we did not address its argument that requiring an insurer
to defend and indemnify an insured in connection with “willfully injurious” acts would
contravene public policy. Just as it is against public policy for an insurer to defend an
insured for bodily injury caused by intentional conduct, it is against public policy for an
insurer to refuse to defend an insured who caused injury while defending himself or
another. It would contravene public policy to absolve an insurer of its duty to defend an
insured against a claim for bodily injury caused by conduct carried out with reasonable
force in self-defense or defense of another in light of the language of the exception to
the expected or intended injury exclusion.
Although “the law presumes [an insured acting in self-defense] intended the
result which was the natural consequence of his intentional act, one acting in selfdefense is confronted with a risk over which he has little control.” Auto–Owners Ins. Co.
v. Stevens & Ricci Inc., 835 F.3d 388, 406 n.23 (3d Cir. 2016) (internal quotation marks
and brackets omitted) (quoting Transamerica Ins. Grp. v. Meere, 694 P.2d 181, 188–89
(Ariz. 1984)).

Resulting injury will be covered because of “the underlying purpose of

insurance: protecting against risks that are outside [the insured’s] control. It would be
inconsistent with that purpose to exclude coverage for an insured who is simply
attempting to avoid a calamity which has befallen him.”

Id. (internal citations and

quotation marks omitted) (quoting Meere, 694 P.2d at 185–86).

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On one hand, it is against public policy to insure against claims for intentional
torts or criminal acts. See, e.g., Gene’s Restaurant, 548 A.2d at 247 (no duty owed
where underlying complaint alleged assault and battery and occurrence defined in
policy as “an accident, . . . which results in bodily injury or property damage neither
expected nor intended from the standpoint of the insured”); Martin, 595 A.2d at 1175
(citing Wilson v. Maryland Cas. Co., 105 A.2d 304 (Pa. 1954); and Esmond v. Liscio,
224 A.2d 793 (Pa. Super. 1966) (no duty based on language of the insurance contract
and public policy)); see also, e.g., Travelers Prop. Cas. Co. of Am. v. Mericle, 486 F.
App’x 233, 238 (3d Cir. 2012) (no duty based on policy’s occurrence language and
various exclusions, including for knowing violations of rights and violations of penal
statutes, and noting Pennsylvania’s public policy against shifting responsibility to
insurers for one’s intentional acts).
On the other hand, Pennsylvania public policy encourages rescue and rendering
aid at the scene of an emergency. See Kmart Corp. v. W.C.A.B. (Fitzsimmons), 748
A.2d 660, 666 & n.3 (Pa. 2000) (citing 42 Pa. Cons. Stat. § 8332(a)). The Pennsylvania
Good Samaritan statute provides immunity from civil liability for rendering aid at the
scene of an emergency event or a crime. 42 Pa. Cons. Stat. § 8332(a). It provides:
“Any person . . . who in good faith renders emergency care, treatment, first aid or
rescue at the scene of an emergency event or crime . . . shall not be liable for any civil
damages” except for acts or omissions that were grossly negligent or carried out with an
intent to harm. Id.
The public policy rationale for the Good Samaritan rescue doctrine applies
equally to a rule encouraging persons to defend another. Thus, it would contravene

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public policy to absolve an insurer of its duty to defend its insured against civil suits
arising from conduct undertaken with reasonable force to defend himself or another
where the policy contains a self-defense exception, as it does here.
At this stage, there is a dispute whether Esposito intentionally assaulted the
plaintiff in the underlying action or was acting in defense of himself and his wife. Until
the factfinder in the underlying action determines how and why Esposito acted, we do
not know which public policy applies. In the meantime, Unitrin must defend Esposito.

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