Western Heritage Insurance Company v. Darrah et al
Filing
32
MEMORANDUM AND ORDER Plaintiff, Western Heritage Insurance Company's, motion for judgment on the pleadings (Doc. 21) is granted. It is hereby declared that Plaintiff, Western Heritage Insurance Company, has no duty to defend or indemnify the re presentative of the Estate of Harry J. Darrah, Jr., and Harry J. Darrah, Jr. t/a Darrah's Automotive and Recycling in Stine v. Balkamp, Inc., et al., on the second amended complaint in the suit pending against them in the Court of Common Pleas of York County, Pennsylvania, docketed at 2006 SU 3976 Y01. The Clerk of Court shall close this file. Signed by Honorable William W. Caldwell on 12/6/12. (pw)
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
We are considering Plaintiff’s motion under Fed. R. Civ. P. 12(c) for
judgment on the pleadings. 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
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.
II.
Procedural History
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, Jr., t/a
Darrah’s Automotive and Recycling in the Stine litigation. In the previous case, we
ruled that Stine’s allegations in his first amended state-court 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
only alleged he was injured while repairing a vehicle in the repair/body shop. His
second amended state-court complaint attempts to tie his injury to the policy’s
coverage by adding new allegations. He now adds that the repair/body shop is used in
the dismantling and recycling operation, and in several paragraphs of his new pleading
he adds the italicized language that he was injured while “working on repairing a
vehicle in the repair/body shop in use in auto dismantling and recycling operations . . .
.” (See e.g., Doc. 2-2, second amended state-court complaint ¶ 72).
Stine’s new state-court pleading prompted plaintiff Western Heritage to
file this second declaratory-judgment action. Defendants then filed two motions to
dismiss, 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 adopted the arguments made by the other defendants). Among other
2
things, they argued that Plaintiff was not entitled to a declaratory judgment denying
coverage because the allegations of the second amended state-court complaint
brought Stine’s claim within the coverage provided by Western Heritage. On May 23,
2012, we denied both motions, concluding that Stine’s new state-court complaint still
did not bring his claim within Plaintiff’s duty to defend or indemnify and hence Western
Heritage could still be entitled to a declaratory judgment. Western Heritage Ins. Co. v.
Harry J. Darrah, Jr., t/a Darrah’s Automotive and Recycling, No. 11-1539, 2012 WL
1886665, at *4 (M.D. Pa. May 23, 2012).
As noted, we now have before us the plaintiff insurer’s motion for
judgment on the pleadings. That motion makes the following arguments: (1) even
under the new state-court complaint, Stine still has not made a claim within the scope
of the policy’s coverage that requires either a duty to defend or indemnify; (2) the
Employer’s Liability exclusion excludes coverage because Stine is an employee of the
Named Insured; (3) Harry J. Darrah, Jr., is not the Named Insured and does not qualify
as an insured in his individual capacity for the claims made against him; (4) the
doctrine of collateral estoppel bars the defendants from seeking defense or coverage
under the policy as the issue was already litigated in the prior declaratory-judgment
action; and (5) Pennsylvania law on artful pleading bars Defendants from seeking
defense or coverage because Stine’s second amended state-court complaint
represents an attempt to evade our ruling in the previous declaratory-judgment action.
III.
Standard of Review
Under Fed. R. Civ. P. 12(c), “[a]fter the pleadings are closed –- but early
enough not to delay trial –- a party may move for judgment on the pleadings.” To be
successful on a Rule 12(c) motion, the moving party must establish that “‘no material
issue of fact remains to be resolved and that he is entitled to judgment as a matter of
3
law.’” Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008)(quoted case
omitted). “‘[W]e 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. (quoted
case omitted)(brackets added). In deciding the motion, we may also consider
documents attached to the complaint. See Huertas v. Galaxy Asset Mgmt., 641 F.3d
28, 32-33 (3d Cir. 2011).
IV.
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). 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.”2
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, one for listing “Premises”
2
A previous endorsement on the same date limited coverage to auto dismantling
only.
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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).
Item 4 on the Declarations page also asked that a check be placed in
one of four check boxes that correspond to the type of business the Named Insured
was. The options were: “Individual,” “Partnership or Joint Venture,” “Limited Liability
Company,” or “Other.” The “Other” box was checked. (Doc. 1-4, Compl., Ex. C, the
Western Heritage policy, ECF p. 3).
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
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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).3
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.
3
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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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.
(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).4 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.5
V.
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, 595-96 (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.7.6 Thus, if
there is no duty to defend, there is no duty to indemnify. Id.
4
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.
5
Stine also names as defendants the manufacturer and suppliers of the droplight.
6
“[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.
The four corners of the insurance policy must be compared to the four
corners of the complaint. Penn-America Ins. Co. v. Peccadillos, Inc., 27 A.3d 259, 265
(Pa. Super. 2011)(quoted case omitted). An insurer may refuse to defend only when it
is clear from an examination of the underlying complaint and the policy language that
the claim does not potentially come within the policy’s coverage. Id. (quoted case
omitted). The factual allegations of the underlying complaint are taken as true “and
liberally construed in favor of the insured.” Id. (quoted case omitted)
B. The Claim Falls Outside the Scope of Coverage Because
Stine Does Not Allege He Was Injured While the Repair/Body
Shop Was Being Used in the Auto Dismantling and Recycling
Operation
In moving for judgment on the pleadings, Western Heritage contends
that Stine’s claim 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. Plaintiff maintains it is immaterial that the second
amended state-court complaint adds the italicized allegation that the injury occurred
while he was working on repairing a vehicle in the repair/body shop in use in auto
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dismantling and recycling operations at the Darrah Defendants’ premises,” because he
still alleges he was injured while repairing a vehicle.
In opposing the motion, Defendants make the following two arguments.
First, the policy covers the premises, not just auto dismantling and recycling
operations. They rely on the same endorsement that Western Heritage does, the
endorsement effective August 8, 2004, entitled “Limitation of Coverage to Designated
Premises or Project” which leaves the “Premises” box empty but which contains the
description of coverage in the “Project” box as: “Auto Dismantling and Recycling
Operation.” In Defendants’ view, since the “Premises” box was left empty, language
appearing later in the endorsement incorporated the address of the premises from the
Declarations page. That later language reads: “If no entry appears above, information
required to complete this endorsement will be shown in the Declarations as applicable
to this endorsement.”
In Western Heritage’s first declaratory judgment action, we rejected this
argument and see no reason to change our conclusion. We stated there:
The endorsement is entitled in the disjunctive, limiting
coverage to designated premises or a project, and
providing boxes to describe the premises or the project.
The endorsement incorporates the information on the
Declarations page only when “no entry appears above” in
the boxes. But as plaintiff Great Western notes, an entry
does appear above, in the project box, and we reject the
position that an empty premises box by itself means
coverage is provided for premises listed in the Declarations
page. Rather, since the project box contains a description
of the activity covered, the endorsement limits coverage to
the project described, the “project shown in the Schedule,”
the auto dismantling and recycling operation.
Western Heritage, supra, 2010 WL 4780955, at *4 (M.D. Pa. Nov. 17, 2010).
Defendants next argue that the second amended state-court complaint
does allege that Stine’s injuries arose out of the Darrah Defendants’ automobile
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dismantling and recycling operations. They point to the following four allegations from
the underlying complaint:
34. At all times relevant hereto, the Darrah Defendants
operated and maintained the premises as a business
performing automobile sales, repairs, salvages, and
recycling, among other things.
....
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.
....
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.
(Doc. 1-2, Ex. A, state-court second amended complaint ¶¶ 34, 47, and 72-73).
We disagree that these allegations bring Stine’s claim even potentially
within the policy’s coverage. These averments only establish that the repair/body shop
was sometimes used (or was “in use”) in the dismantling and recycling operation. That
is not enough to establish coverage. Contrary to Plaintiff’s position, the mere fact that
Stine was repairing a vehicle at the time he was injured does not automatically
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preclude coverage, but there has to have been some dismantling or recycling activity
going on that gave rise to the injury. There are no allegations in that regard.7
C. Plaintiff’s Other Arguments
As noted, Plaintiff has made other arguments in support of its motion for
judgment on the pleadings. We will treat the first two together. Plaintiff argues that
the Employer’s Liability exclusion excludes coverage because Stine is an employee of
the Named Insured and that Harry J. Darrah, Jr., is not the Named Insured and does
not qualify as an insured in his individual capacity for the claims made against him.
These arguments involve interpretation of the insurance policy, and while that is the
court’s responsibility, the arguments cannot be resolved on the pleadings and require
consideration of extrinsic evidence. See Sikirica v. Nationwide Ins. Co., 416 F.3d 214,
220 (3d Cir. 2005).
Next, Plaintiff argues collateral estoppel would bar Defendants from
seeking defense or coverage under the policy. Plaintiff is mistaken. Since the
underlying complaint as amended was not litigated in the prior declaratory-judgment
action, collateral estoppel cannot be invoked here. See Nationwide Mut. Fire Ins. Co.
v. George V. Hamilton, Inc., 571 F.3d 299, 310 (3d Cir. 2009)(one element of collateral
estoppel under Pennsylvania law requires that “the issue decided in the prior case
must be identical to the one presented in the later case”).
7
We note here that in moving to dismiss Plaintiff’s complaint, Defendants elaborated
on their coverage position, asserting that there was coverage because “the 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), and because he alleges 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.” (Id., p. 10). We
rejected this position in Western Heritage, supra, 2012 WL 1886665, at *4 (M.D. Pa. May 23,
2012).
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Finally, Plaintiff argues that Pennsylvania law on “artful pleading” would
bar Defendants from seeking defense or coverage. We disagree. Plaintiff cites
Mutual Benefit Ins. Co. v. Haver, 555 Pa. 534, 725 A.2d 743 (1999), in support, but
that case is distinguishable. In Haver, the Pennsylvania Supreme Court held that
“artful pleadings,” complaints presenting only causes of action intended to avoid
coverage difficulties for the insured and injured parties, could not be used to determine
if an insurer had a duty to defend or provide coverage. Id. at 538-39, 725 A.2d at 74546. Instead, the court had to look at the factual allegations alone. Id., 725 A.2d at
745.8 In the instant case, Plaintiff asserts that the artful pleading was the filing of the
second amended state-court complaint, after we had ruled in the first declaratoryjudgment action that there was no coverage. Haver does not control here because
Stine has not attempted by his choice of a cause of action to defeat a valid claim by
Western Heritage that there is no coverage. He has, of course, amended his factual
allegations, but factual allegations are the test of coverage. Further, Plaintiff has not
shown that Stine’s amended pleading was improper under state procedural rules or
why this court should ignore what the state court apparently accepted as a valid
amended pleading.
We note that Defendants also argue that Plaintiff violated state law by
failing to respond in a timely manner to the Darrah Defendants’ notice of the filing of
the second amended complaint and that discovery is required on this issue. We need
not deal with this argument as the Darrah Defendants did not file a counterclaim in this
regard.
8
In Haver, the plaintiff insurer sought a declaratory judgment that there was no duty
to defend or indemnify based on an exclusion for “knowing endangerment.” The defendant
insured and injured parties argued the exclusion did not apply because they had filed only a
negligence action.
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We will grant Plaintiff’s motion for judgment on the pleadings as Plaintiff
has no duty to defend or indemnify the defendants.
/s/ William W. Caldwell
William W. Caldwell
United States District Judge
Date: December 6, 2012
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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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: CIVIL NO. 1:11-CV-1539
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:
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ORDER
AND NOW, this 6th day of December, 2012, it is ORDERED that:
1. Plaintiff, Western Heritage Insurance Company's,
motion for judgment on the pleadings (Doc. 21) is granted.
2. It is hereby declared that Plaintiff, Western Heritage
Insurance Company, has no duty to defend or indemnify
the representative of the Estate of Harry J. Darrah, Jr., and
Harry J. Darrah, Jr. t/a Darrah's Automotive and Recycling
in Stine v. Balkamp, Inc., et al., on the second amended
complaint in the suit pending against them in the Court of
Common Pleas of York County, Pennsylvania, docketed at
2006 SU 3976 Y01.
3. The Clerk of Court shall close this file.
/s/ William W. Caldwell
William W. Caldwell
United States District Judge
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