Western Heritage Insurance Company v. Darrah et al

Filing 13

MEMORANDUM AND ORDER AND NOW, this 23rd day of May, 2012, it is ORDERED that the following motions are DENIED: 1. The motion to dismiss (Doc. 5) filed by the Estate of Harry J. Darrah, Jr.; Neil Albert, Esq., the Administrator ofthe Estate of Harry J. Darrah, Jr.; and Harry J. Darrah, Jr. t/a Darrahs Automotive and Recycling. 2. The motion to dismiss (Doc. 7) of defendant JosephStine.Signed by Honorable William W. Caldwell on 5/23/12. (jc)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
WESTERN HERITAGE INSURANCE
COMPANY,
Plaintiff
v.
HARRY J. DARRAH, JR., t/a DARRAH’S
AUTOMOTIVE AND RECYCLING;
ESTATE OF HARRY J. DARRAH., JR.,
Deceased; NEIL ALBERT, ESQ., as
Administrator of the Estate of
Harry J. Darrah, Jr., Deceased;
and JOSEPH STINE,
Defendants

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: CIVIL NO. 1:11-CV-1539
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MEMORANDUM
I.

Introduction and Procedural History
This is a diversity action controlled by Pennsylvania law. Plaintiff,

Western Heritage Insurance Company, seeks a declaratory judgment that it has no
duty to defend or indemnify defendants, the Estate of Harry J. Darrah, Jr.; Neil Albert,
Esq., the administrator of the Estate of Harry J. Darrah, Jr.; and Harry J. Darrah, Jr.,
t/a Darrah’s Automotive and Recycling, in a civil suit in the Court of Common Pleas of
York County, Pennsylvania. The plaintiff in that state-court action, Joseph Stine, has
also been named as a defendant here. He sued to recover for serious personal
injuries he suffered, including scarring and disfigurement, while he was working on
premises controlled by the “Darrah Defendants.”1
This is the second time the parties have been before us litigating
whether Western Heritage must defend and indemnify the Estate or Harry J. Darrah,

1

The “Darrah Defendants,” as Stine defines them in his state-court complaint, are
members of the Darrah family and businesses they operated at the premises. The Darrah
Defendants include Harry J. Darrah, Jr., deceased, and Harry J. Darrah, Jr. t/a Darrah’s
Automotive and Recycling. The administrator of the Estate of Harry J. Darrah, Jr. was named
as a defendant in that action.

Jr., t/a Darrah’s Automotive and Recycling. In the previous case, we ruled that Stine’s
allegations in his state-court amended complaint did not fall within the scope of
Western Heritage’s policy, and we entered a declaratory judgment in its favor.
Western Heritage Ins. Co. v. Harry J. Darrah, Jr., t/a Darrah’s Automotive and
Recycling, No. 10-476, 2010 WL 4780955 (M.D. Pa. Nov. 17, 2010). That case is
now on appeal in the Third Circuit. C.A. No. 10-4663.
After our ruling, Stine filed in the state-court action a second amended
complaint on May 11, 2011, altering the allegations that bear on whether Western
Heritage has to provide coverage. The Western Heritage policy provides coverage for
an automobile dismantling and recycling operation, but Stine’s previous pleading had
alleged he was injured while repairing a vehicle in the repair/body shop. His current
pleading alleges that the repair/body shop is used in the dismantling and recycling
operation and that he was injured while “working on repairing a vehicle in the
repair/body shop in use in auto dismantling and recycling operations . . . .”
Two motions to dismiss have been filed, one by the estate; attorney
Albert, the administrator of the estate, and Harry J. Darrah, Jr. t/a Darrah’s Automotive
and Recycling, and the other by Stine (although Stine simply adopts the arguments
made by the other defendants). Among other things, they argue that the allegations of
the second amended complaint bring Stine’s claim within the coverage provided by
Western Heritage.
II.

Standard of Review
In considering a motion to dismiss under Fed. R. Civ. P. 12(b)(6), “[w]e

‘accept all factual allegations as true, construe the complaint in the light most
favorable to the plaintiff, and determine whether, under any reasonable reading of the
complaint, the plaintiff may be entitled to relief.’” Byers v. Intuit, Inc., 600 F.3d 286,
2

291 (3d Cir. 2010) (quoted case omitted). A court may consider documents attached
to the complaint if they form the basis of the plaintiff’s claim. Mayer v. Belichick, 605
F.3d 223, 230 (3d Cir. 2010). Thus we may consider the second amended complaint
in the underlying state-court action and the Western Heritage policy, attached as
exhibits to Plaintiff’s complaint.
III.

Background
A.

The Pertinent Policy Language
The Western Heritage policy is a commercial general liability insurance

policy providing coverage for bodily injury or property damage “that the insured
becomes legally obligated to pay as damages.” (Doc. 1-4, Compl., Ex. C, the Western
Heritage policy, ECF p. 14).2 The Declarations page lists as the “Named Insured”
“Harry J. Darrah, Jr t/a Darrah’s Automotive and Recy[c]ling” with an address at 535
Prospect Street, York, Pennsylvania. (Id., ECF p. 3). The policy period ran from May
9, 2004, to May 9, 2005. (Id.).
Item 4 on the Declarations page includes a description of the business
as “Auto Sales/Salvage & Repair Garage.” However, an endorsement, effective
August 8, 2004, amended that description to “Auto Dismantling and Recycling
Operations.”3 The endorsement is entitled “Limitation of Coverage to Designated
Premises or Project.” Underneath this title, the endorsement reads: “This
endorsement modifies insurance provided under the following: Commercial General
Liability Coverage Part.” Below this language is the title “Schedule” and two boxes,

2

We refer to the page numbers assigned by the Electronic Case Files (ECF)

system.
3

A previous endorsement on the same date limited coverage to auto dismantling

only.

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one for listing “Premises” and the other for listing a “Project.” The “Premises” box is
empty. The “Project” box reads: “Auto Dismantling and Recycling Operation.”
Underneath the boxes, the endorsement reads: “If no entry appears above,
information required to complete this endorsement will be shown in the Declarations
as applicable to this endorsement.” The endorsement then provides:
This insurance applies only to “bodily injury”, “property
damage” . . . and medical expenses arising out of:
1. The ownership, maintenance or use of the premises
shown in the Schedule and operations necessary or
incidental to those premises; or
2. The project shown in the Schedule.
(Id., ECF p. 9).
B.

The State-Court Action
In his state-court action, Stine alleges the following in his second

amended complaint. Harry J. Darrah, Jr, along with family members, traded and did
business as several business entities, the “Darrah Defendants.” (Doc. 1-2, Ex. A,
state-court second amended complaint ¶¶ 21-30). These business entities owned,
controlled, maintained, co-owned, and/or possessed the premises located at 535-547
E. Prospect Street, York, Pennsylvania. (Id. ¶ 33). “[T]he Darrah Defendants
operated and maintained the premises as a business performing automobile sales,
repairs, salvages, and recycling, among other things.” (Id. ¶ 34). Stine was an
employee of Darrah’s Automotive and Recycling, Inc. “and was on the Darrah
Defendants’ premises for purposes of his employment, and was a business
visitor/business invitee on the premises.” (Id. ¶ 35, ECF p. 9).4

4

Darrah’s Automotive and Recycling, Inc. is not listed as one of the “Darrah
Defendants.” As noted, the named insured on the policy is “Harry J. Darrah, Jr. t/a Darrah’s
Automotive and Recycling,” without the corporate designation.

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The complaint further alleges:
46. At all times relevant hereto, the Darrah Defendants
knew that the repair/body shop on the premises was an
area where mechanics employed by Darrah’s Automotive
and Recycling, Inc. routinely worked.
47. The repair/body shop on the premises was used in
auto dismantling and recycling operations in that autos
were dismantled in the repair/body shop and parts
removed from autos in the repair/body shop were recycled,
and recycled parts were used in the repair/body shop.
....
64. On November 26, 2004, the Darrah Defendants
provided Plaintiff with a droplight that was not safe for use
in an automobile repair/body shop in use in auto
dismantling and recycling operations.
....
70 On November 26, 2004, Plaintiff . . . was working as
a mechanic in the repair/body shop in use in auto
dismantling and recycling operations on the Darrah
Defendants’ premises.
71. At all times relevant hereto, Plaintiff was required by
virtue of his employment to be working in the repair/body
shop in use in auto dismantling and recycling operations
and using the equipment supplied by Defendants, including
the subject Droplight.
72. On November 26, 2004, Plaintiff . . . was working on
repairing a vehicle in the repair/body shop in use in auto
dismantling and recycling operations at the Darrah
Defendants’ premises, and was using the droplight to
illuminate the area of his work.
73. On November 26, 2004, Plaintiff’s co-worker cleared
a vehicle’s fuel line with a compressed air hose causing the
contents of the vehicle’s fuel line to spray on the droplight
and break the droplight’s bulb, igniting gasoline around
Plaintiff.

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(Id. ¶¶ 46-47, 64, 70-73, ECF pp. 7, 9,). As a result, Plaintiff suffered severe injuries,
including burns, scarring and disfigurement. (Id. ¶¶ 79-80, ECF p. 10).5 Stine alleges
that the Darrah Defendants were negligent in their maintenance and control of the
premises and in giving him the droplight to work with.6
IV.

Discussion
A.

The Duty to Defend
In Pennsylvania, “an insurer’s duty to defend and indemnify” its insured

is “determined solely from the language of the complaint against the insured.”
Kvaerner Metals Div. v. Commercial Union Ins. Co., 589 Pa. 317, 331, 908 A.2d 888,
896 (2006). See also Nationwide Mut. Ins. Co. v. CPB Int’l, Inc., 562 F.3d 591, 59596 (3d Cir. 2009) (quoting Kvaerner). “[T]he duty to defend is separate and broader
than the duty to indemnify . . . .” Kvaerner, 589 Pa. at 330 n.7, 908 A.2d at 896 n.7.7
Thus, if there is no duty to defend, there is no duty to indemnify. Id. “‘In determining
the existence of a duty to defend, the factual allegations of the underlying complaint
against the insured are to be taken as true and liberally construed in favor of the
insured.’” Nationwide Mut. Ins. Co., supra, 562 F.3d at 595-96 (quoted case omitted).

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The material differences from Stine’s first amended complaint is the addition of
paragraph 47 which alleges that the repair/body shop is used for the dismantling and recycling
operation and the interpolation of the phrase “in use in auto dismantling and recycling
operations” in paragraphs 64 and 70-73, which correspond to paragraphs 60, and 65 through
68 of the first amended complaint.
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Stine also names as defendants the manufacturer and suppliers of the droplight.

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“[T]he duty to defend arises whenever the complaint filed by the injured party may
fall within the scope of the policy's coverage, [but] the duty to indemnify is more limited
because it arises only if it is established that the insured's damages are actually covered by
the terms of the policy.” Allstate Ins. Co. v. Drumheller, 185 F. App’x 152, 154 n.2 (3d Cir.
2006) (nonprecedential).

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To determine whether an insurer has a duty to defend, we engage in a
two-step process. First, we look at the language of the policy “to determine in which
instances [it] will provide coverage.” Kvaerner, 589 Pa. at 331, 908 A.2d at 896-97.
Any ambiguity in the policy language is resolved against the insurer and in favor of the
insured. Id. at 331, 908 A.2d at 897. Second, we examine the complaint in the
underlying action “to determine whether the allegations set forth therein constitute the
type of instances that will trigger coverage.” Id. at 331, 908 A.2d at 896-97.
B.

The Claim Falls Outside the Scope of Coverage Because
Stine Alleges He Was Injured While Repairing a Vehicle in
the Repair/Body Shop and Coverage Is Limited to Auto
Dismantling and Recycling Operations
Western Heritage raises several grounds in seeking a declaratory

judgment in its favor on its duty to defend or indemnify. As one basis for relief,
Western Heritage contends that Stine’s claim still falls outside the scope of coverage
because coverage applies only to the auto dismantling and recycling operation, and
Stine’s allegations in his second amended complaint are essentially the same as in his
first amended complaint, that he was injured while repairing a car in the repair/body
shop, not while he was engaged in auto dismantling and recycling.8
In moving to dismiss Plaintiff’s action, defendants, Stine; the Estate;
attorney Albert, the Estate’s administrator; and Harry J. Darrah, Jr. t/a Darrah’s
Automotive and Recycling, argue that the averments of the second amended
complaint are materially different from the averments of the first amended complaint.
Unlike the averments of the first amended complaint, they place Stine’s repair work in
the larger context of the dismantling and recycling operation, showing that “the
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Plaintiff’s other grounds are: (1) collateral estoppel based on our previous ruling
there was no coverage; (2) Stine should not be permitted to use “artful pleading” to avoid our
previous ruling; (3) Harry J. Darrah, Jr., does not qualify as an insured under the policy; and
(4) coverage is precluded by the employer’s liability exclusion.

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repair/body shop business was an integral part of the Darrah Defendants auto
dismantling and recycling operation.” (Doc. 8, Opp’n Br. at p. 2). Thus, as alleged in
paragraph 47 of the second amended complaint, the repair/body shop “was used in
auto dismantling and recycling operations in that autos were dismantled in the
repair/body shop and parts removed from autos in the repair/body shop were recycled,
and recycled parts were used in the repair/body shop.”
They also assert that Stine’s second amended complaint “states
explicitly that his injury occurred while working in Darrah’s auto dismantling and
recycling operation, though he happened to be working in the repair/body shop
segment of that operation at the time.” (Doc. 8, Opp’n Br. at p. 10). They add that
since the policy covers an “operation” rather than “premises,” the physical location of
the injury is irrelevant as long as he alleges the “injury occurred while working in the
designated operation.” (Id., p. 18).
After review of the pertinent allegations, we must agree with Plaintiff that
the second amended complaint still does not allege bodily injury that comes within the
policy’s coverage for an auto dismantling and recycling operation. We disagree with
Defendants’ assertion that the second amended complaint alleges that Stine was
injured while working in the dismantling and recycling operation. Paragraph 47 does
allege that the repair/body shop “was used in auto dismantling and recycling
operations,” but that does not mean that every activity that took place in the
repair/body shop was part of that operation. As Plaintiff points out, Stine still alleges
that he was repairing a car when he was injured. Hence we infer that the repair/body
shop was not being used at that time as part of the dismantling and recycling
operation. If the latter operation were happening at the time of Stine’s injury, he
should certainly have been able to make the necessary allegations, even if he himself

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was just repairing a vehicle. In fact, if we were to accept Defendants’ approach to the
coverage issue, coverage would be for the premises where the dismantling and
recycling operation took place, but coverage is not for premises or any particular
location, as Plaintiff points out, but for a work operation, the dismantling and recycling
of automobiles.9
In their reply brief, moving defendants argue for the first time that the
allegations support the inference that Stine was engaged in the covered operation
because auto repair can be a form of auto recycling. They reason that “‘auto
recycling’ requires that used parts removed from certain vehicles be used in the repair
of other vehicles.” Hence, “[i]f no ‘repair’ was required, there would be no ‘recycling.’”
(Doc. 12, Reply Br. at p. 3). The difficulty with this position is that not every repair
involves a recycled part, and Stine does not allege that his repairs involved a recycled
part. It is not enough for Defendants to argue in briefs that Stine “could [have been]
repairing a vehicle at the same time he was recycling auto parts.” (Id. at p. 4).
We will therefore deny the motion to dismiss the declaratory judgment
action as Plaintiff has presented a valid claim that it has no duty to defend or
indemnify the defendants.

/s/ William W. Caldwell
William W. Caldwell
United States District Judge
Date: May 23, 2012

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Neither party has argued that the policy defines a “dismantling and recycling
operation” or “operation.” “Words of common usage in an insurance policy are construed
according to their natural, plain, and ordinary sense,” Kvaerner Metals Div., supra, 589 Pa. at
332-33, 908 A.2d at 897. “Operation” is defined as “a doing or performing esp. of action:
work, deed” or as “the doing or performing of a practical work.” Webster's Third New
International Dictionary 1581 (1993).

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IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
WESTERN HERITAGE INSURANCE
COMPANY,
Plaintiff
v.
HARRY J. DARRAH, JR., t/a DARRAH’S
AUTOMOTIVE AND RECYCLING;
ESTATE OF HARRY J. DARRAH., JR.,
Deceased; NEIL ALBERT, ESQ., as
Administrator of the Estate of
Harry J. Darrah, Jr., Deceased;
and JOSEPH STINE,
Defendants

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ORDER
AND NOW, this 23rd day of May, 2012, it is ORDERED that the
following motions are DENIED:
1. The motion to dismiss (Doc. 5) filed by the Estate of
Harry J. Darrah, Jr.; Neil Albert, Esq., the administrator of
the Estate of Harry J. Darrah, Jr.; and Harry J. Darrah, Jr.
t/a Darrah’s Automotive and Recycling.
2. The motion to dismiss (Doc. 7) of defendant Joseph
Stine.
/s/ William W. Caldwell
William W. Caldwell
United States District Judge