Philadelphia Indemnity Insurance Company v. Yap et al

Filing 50

MEMORANDUM (Order to follow as separate docket entry) re 41 MOTION for Judgment on the Pleadings filed by Philadelphia Indemnity Insurance Company Signed by Honorable Julia K Munley on 3/27/24. (sm)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
No. 3:21 cv1236

PHILADELPHIA INDEMNITY
INSURANCE COMPANY and
ADVENTURE SPORTS, INC.,
Plaintiffs

(Judge Munley)

v.
TINA YAP, as Administratrix ad
Prosequendum of the ESTATE OF
CHEEYEN YAP, deceased, and
VIRGINIA CHAN,
Defendants

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MEMORANDUM
Before the court is a motion for partial judgment on the pleadings (Doc. 41)

filed by Plaintiff Philadelphia Indemnity Insurance Company ("PIIC") based on the
terms of outdoor activity waivers. PIIC's insured, Plaintiff Adventure Sports, Inc.
("Adventure Sports") joins in the motion. (Doc. 45). Having been fully briefed,
this matter is ripe for disposition. 1
Background
This matter arises out of the death of Cheeyen Yap during a canoe trip in
the Delaware Water Gap Recreation Area and the waiver forms he signed prior
to the trip. (Doc. 1-5, Complaint). Cheeyen Yap's wife, Defendant Tina Yap, later

1

The Honorable Robert D. Mariani transferred this case to the undersigned on November 7,
2023.

filed a personal injury action against the company that facilitated the trip,
Adventure Sports, and the other person in the canoe, Defendant Virginia Chan. 2

(kl 1J 16 & Exh. C, Yap Complaint). This declaratory judgment and breach of
contract action followed.
As alleged by PIIC in this action, Cheeyen Yap and Defendant Chan
chartered a canoe from Adventure Sports in East Stroudsburg, Pennsylvania on
May 25, 2018. (kl 1J1J 16-17, 19). That day, Adventure Sports transported
Cheeyen Yap and Defendant Chan to a launching point along the Delaware
River. (kl 1J 19). While out on the river, Defendant Chan stood up in the canoe
and caused it to capsize. (kl 1J 21 ). Cheeyen Yap was not wearing a life jacket
and drowned. (kl 1l1J 20-22).
Before they embarked, Cheeyen Yap and Defendant Chan signed two
separate documents with Adventure Sports: 1) "Adventure Sports Liability
Release & Rental Contract" with a subheading "Rental Contract" ("Rental
Contract"); and 2) "Acknowledgement of Risks & Acceptance of Responsibility
Release of Liability - Read Before Signing" ("Release of Liability"). (kl 1J1J 8-14,

2

Yap v. Adventure Sports, 3:19cv6298 (D .N.J).

2

17 & Exhs. A-B). 3 The Rental Contract and Release of Liability contain
indemnification clauses and exculpatory language.
Defendant Tina Yap alleges in the underlying negligence action that
Adventure Sports held itself out as properly licensed and qualified by the National
Park Service to organize boating trips within the Delaware Water Gap Recreation
Area. (kl, Exh. C, Yap Complaint, Parties 112, Factual Background 11111 -8). Per
these averments, when the Delaware River reaches a depth of eight (8) feet or
more, federal regulations required Adventure Sports to implement mandatory
safety measures, including the mandatory wearing of life jackets during boating
activities. (liL. Factual Background, 11116-8). The Delaware River allegedly
measured at 8.10 feet on the date of the incident. (kl) Per a theory of liability in

3

As attached to PIIC's complaint, Yap and Defendant Chan executed Adventure Sports'
Rental Contract and Release of Liability using Smartwaiver software. (Doc. 1-5, Exhs. A-B).
Yap e-signed the documents as "Chrid Yap" on May 25, 2018 at 17:11 UTC, (19.,,, Exh. A, p. 1),
and Defendant Chan e-signed the documents on the same date at 17: 13 UTC, (19.,,, Exh . B, p.
1).
Yap and Defendant Chan first had to initial the Rental Contract to indicate that they agreed to
the late fee policy of $25.00 per boat. (19.,,, Exhs. A-B, p. 2) . They also had to sign the Rental
Contract to "certify that [they] have read , understand and accept the terms and conditions
stated on th is contract. " (19.,,, p. 3) . The Rental Contract contains a provision permitting
recovery of costs and attorneys' fees by Adventure Sports "in exercising any of its rights or
remedies hereunder, or enforcing the terms, cond itions, or provisions hereof." (19.,, ,r 6).
Following this first signature, Yap and Defendant Chan signed again under the separate
Release of Liability, which contains the words "indemnify" and "hold harmless" as further
discussed in this memorandum. The second signature follows language in bold , underlined
capital letters that they read "this release of liability and assumption of risk agreement, fully
understand its terms, understand that [they] have given up substantial rights by signing it and
sign it freely and voluntarily with out [sic] any inducement." (19.,,, p. 3-4).

3

that case, Adventure Sports violated the regulations by failing to ensure that
Cheeyen Yap and Defendant Chan possessed life jackets and knew that the use
of life jackets was mandatory. 4 (kl, Factual Background 1J1J 7-8, First Count, 1J1l
3-4, Second Count, 1l1f 2-3).
Returning to the averments in this action, PIIC insured Adventure Sports
under a commercial general liability policy. (Doc. 1-5, Complaint, 1J1f 24-28 & Exh.
D). PIIC alleges it has incurred costs defending Adventure Sports in the
underlying negligence action. (kl 1f1f 29-31 ). Moreover, PIIC's insurance contract
with Adventure Sports provides PIIC with subrogation rights. (kl 1l1f 31-32).
Standing in the shoes of Adventure Sports in this action, PIIC now seeks
indemnity -- compensation for defense costs -- based on the terms found within
Adventure Sports' Rental Contract and Release of Liability. Counts I and 11 of the
complaint seek a declaration that the defendants are obligated to defend and
indemnify Adventure Sports in the underlying action and reimburse PIIC for all
legal fees, costs, and expenses incurred. (kl 1J1J 51-70). Counts Ill and IV assert
breach of contract claims for recovery of damages in the form of costs paid to
date by PIIC in defending against the negligence claims in the underlying action.

(kl 1J1J 70-100).

4

The underlying action seeks damages in accordance with New Jersey law. Defendant Tina
Yap did not allege gross negligence or recklessness by Adventure Sports. She does not seek
the award of punitive damages.

4

Pl IC initiated this action in the Monroe County Court of Common Pleas on
June 21, 2021. (Doc. 1-5). Defendants removed this matter on July 14, 2021
based on the parties' diversity jurisdiction. 5 (Doc. 1). After all parties answered
the complaint, PIIC filed the instant motion for partial judgment on the pleadings
regarding Counts I and II. (Doc. 41 ). The parties have fully briefed their
respective positions bringing this case to its present posture.
Jurisdiction

The court has jurisdiction pursuant to the diversity statute, 28 U.S.C. §
1332. PIIC and Adventure Sports are alleged to be Pennsylvania corporations
with principal places of business in Pennsylvania. (Doc. 1-5, Complaint,

,m 1, 4).

Defendant Tina Yap is a citizen of New Jersey and Defendant Chan is a citizen
of New York. (kl 11112-3). Additionally, the amount in controversy exceeded
$75,000 at the time this matter was commenced. Because complete diversity of
citizenship exists among the parties and the amount in controversy exceeded
$75,000 at the commencement of the action, the court has jurisdiction over this
case. See 28 U.S.C. § 1332 ("district courts shall have original jurisdiction of all
civil actions where the matter in controversy exceeds the sum or value of
$75,000, exclusive of interest and costs, and is between ... citizens of different

5

Defendant Chan removed this matter. (Doc. 1). Defendant Tina Yap consented to removal.
(Doc. 13). PIIC initially named Adventure Sports as a defendant. (Doc. 1-5). Judge Mariani
later realigned this action to make Adventure Sports a party plaintiff. (Doc. 29) .

5

states[.]"); 28 U.S.C. § 1441 (A defendant can generally move a state court civil
action to federal court if the federal court would have had original jurisdiction to
address the matter pursuant to the diversity jurisdiction statute). As a federal
court sitting in diversity, the substantive law of Pennsylvania shall apply to the
instant case. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing
Erie R.R. v. Tomkins, 304 U.S. 64, 78 (1938)).
Legal Standard
Federal Rule of Civil Procedure 12(c) provides , "[a]fter the pleadings are
closed-but early enough not to delay trial-a party may move for judgment on the
pleadings." FED. R. CIv. P. 12(c). Under Rule 12(c), "the trial court must view the
facts in the pleadings in the light most favorable to plaintiff and must grant the
motion only if the moving party establishes that no material issues of fact remains
and that it is entitled to judgment as a matter of law. " Shelly v. Johns-Manville
Corp. , 798 F.2d 93, 97, n. 4 (3d Cir. 1986). "[l]n deciding a motion for judgment
on the pleadings, a court may only consider the complaint, exhibits attached to
the complaint, matters of public record , as well as undisputedly authentic
documents if the complainant's claims are based upon these documents."
Wolfington v. Reconstructive Orthopaedic Assocs. II PC, 935 F.3d 187, 195 (3d
Cir. 2019)(citation and internal quotation marks omitted).

6

Discussion
PIIC's motion for partial judgment on the pleadings is based upon its
insurance contract with Adventure Sports and the Rental Contracts and Releases
of Liability signed by Cheeyen Yap and Defendant Chan with Adventure Sports
on the date of the canoe trip. PIIC argues that the agreements are clear and
unambiguous and thus require indemnification. The defendants counter that the
existence of material issues of fact regarding enforcement of the indemnification
provisions in the agreements and policy considerations preclude judgment as a
matter of law.
1. Interpretation of the Agreements
The parties agree that Pennsylvania law applies. "In interpreting the terms
of a contract, the cardinal rule followed by courts is to ascertain the intent of the
contracting parties. " Com. ex rel. Kane v. UPMC, 129 A.3d 441,463 (Pa.
2015)(citing Lesko v. Frankford Hosp.-Bucks Cty., 15 A.3d 337, 342 (Pa. 2011 ).
"If the contractual terms are clear and unambiguous on their face, then such
terms are deemed to be the best reflection of the intent of the parties." ~ (citing
Kripp v. Kripp. 849 A.2d 1159, 1162 (Pa. 2004 ). If, however, the contractual
terms are ambiguous, meaning "they are subject to more than one reasonable
interpretation when applied to a particular set of facts[,]" then the resort to
extrinsic evidence to ascertain their meaning is proper.
7

kl (citations and internal

quotation marks omitted). "While unambiguous contracts are interpreted by the
court as a matter of law, ambiguous writings are interpreted by the finder of fact."
Commonwealth by Shapiro v. UPMC, 208 A.3d 898, 910 (Pa. 2019)(quoting Ins.
Adjustment Bureau, Inc. v. Allstate Ins. Co., 905 A.2d 462, 468-69 (Pa.
2006))(emphasis removed).
The language relied upon by Pl IC appears in two different electronic
documents signed by Cheeyen Yap and Defendant Chan . Paragraph 4 of the
Release of Liability contains the words "indemnify" and "hold harmless" and
Paragraph 6 of the Rental Contract contains provisions for the recovery of costs
and attorneys' fees by Adventure Sports. Under Pennsylvania jurisprudence, "[i]f
contracting parties choose, they may express their agreement in one or more
writings and, in such circumstances, the several documents are to be interpreted
together, each one contributing (to the extent of its worth) to the ascertainment of
the true intent of the parties. " lnt'I Milling Co. v. Hachmeister, Inc., 110 A.2d 186,
191 (Pa. 1955); see also Kroblin Refrigerated Xpress, Inc. v. Pitterich , 805 F.2d
96, 107 (3d Cir. 1986)(citations omitted)(applying Pennsylvania law)("lt is a
general rule of contract law that where two writings are executed at the same
time and are intertwined by the same subject matter, they should be construed
together and interpreted as a whole, each one contributing to the ascertainment
of the true intent of the parties.").
8

Here, neither the Rental Contracts nor the Releases of Liability explicitly
refer to the other, but they were each signed by Cheeyen Yap and Defendant
Chan on the same date and time. Each document thus contributes "to the extent
of its worth" in ascertaining the true intent of the parties. lnt'I Milling Co., 380 Pa.
at417-418.

2. The Waiver Forms
In relation to PIIC's indemnification rights through the Adventure Sports
waiver forms, the words "indemnify" and "hold harmless" appear only once in the
agreements, within Paragraph 4 of the Release of Liability. (Doc. 1-5, Complaint,
Exhs. A-B). 6
The Release of Liability provides, in relevant part:

ACKNOWLEDGEMENT OF RISKS & ACCEPTANCE
OF RESPONSIBILITY
RELEASE OF LIABILITY - READ BEFORE SIGNING
In consideration of being allowed to participate in any way
in the Adventure Sports program, its related event and
activities,
I the undersigned (BELOW), acknowledge, appreciate and
agree that: ...

6

The Rental Contract contains a separate indemnity provision: "6. Lessee shall pay all costs
and expenses, including attorney's fees, incurred by Adventure Sports in exercising any of its
rights or remedies hereunder, or enforcing the terms, conditions, or provisions hereof." (Doc.
1-5, Complaint, Exhs. A-B)(emphasis added). The terms as noted in bold are ambiguous
based on the signature line separating the Rental Contract from the Release of Liability. One
reasonable interpretation of these terms would limit the application of this paragraph solely to
the Rental Contract as it deals with property damage and the recovery of property-related fees.

9

4. I, for myself and on behalf of my heirs, assigns,
personal representatives and the next of kin , HEREBY
RELEASE, INDEMNIFY, AND HOLD HARMLESS,
ADVENTURE SPORTS, their officers, officials, agents
and/or employees, other participants, sponsoring
agencies, sponsors, advertisers, and if applicable,
owner and lessor of premises used for this activity
("releasees"), WITH RESPECT TO ANY AND ALL
INJURY, DISABILITY, DEATH , or loss or damage to
person or property associated with my presence or
participation, WHETHER ARISING FROM THE
NEGLIGENCE
OF
THE
RELEASEES
OR
OTHERWISE, to the fullest extent permitted by law.
I HAVE FULLY READ THIS RELEASE OF LIABILITY
AND ASSUMPTION OF RISK AGREEMENT, FULLY
UNDERSTAND ITS TERMS, UNDERSTAND THAT I
HAVE GIVEN UP SUBSTANTIAL RIGHTS BY SIGNING
IT, AND SIGN IT FREELY AND VOLUNTARILY WITH
OUT ANY INDUCEMENT [sic]

In Pennsylvania, an indemnity agreement that covers loss due to the
indemnitee's own negligence must be clear and unequivocal. Jacobs
Constructors, Inc. v. NPS Energy Servs., Inc., 264 F.3d 365, 371 (3d Cir. 2001)
(citing Perry v. Payne, 66 A. 553 (Pa. 1907); Ruzzi v. Butler Petroleum Co., 588
A.2d 1, 5 (Pa. 1991 )). 7

7

Named for these two cited cases, "the Perry-Ruzzi rule" is synonymous with the requirement
in Pennsylvania that a contract of indemnity should not be construed to indemnify against the
negligence of the indemnitee unless so expressed in unequivocal terms. Hershey Foods Corp .
v. Gen. Elec. Serv. Co., 619 A.2d 285, 288 (Pa. Super. Ct. 1992). "The liability on such
indemnity is so hazardous, and the character of the indemnity so unusual and extraordinary,
that there can be no presumption that the indemnitor intended to assume the responsibility
unless the contract puts it beyond doubt by express stipulation. No inference from words of

10

PIIC argues that the indemnification obligation set forth in Adventure
Sports' Release of Liability is clear and unequivocal and must be enforced. (Doc.
42, p. 11-15). Defendants argue that this language violates public policy based
on Adventure Sports' alleged failure to ensure that Cheeyen Yap wore a life
jacket according to federal regulations. (Doc. 47, p. 6-7; Doc. 48, p. 5-6). In
response, PIIC counters that this motion is about indemnification obligations not
public policy arguments more suited for a dispute over an exculpatory provision.
(Doc. 49, p. 7-8). The court finds the defendants' arguments more persuasive.
In their simplest forms, an exculpatory clause "deprives one contracting
party of a right to recover for damages suffered through the negligence of the
other contracting party[,]", while an indemnity clause, "effects a change in the
person who ultimately has to pay the damages[.]" Dilks v. Flohr Chevrolet, Inc.,
192 A.2d 682 , 687, n. 11 (Pa . 1963). The Supreme Court of Pennsylvania has
noted that "there is a substantial kinship between both types of contracts[.]" kl
In Paragraph 4 of the Release of Liability, that kinship is on full display.
That paragraph deprives Cheeyen Yap's estate of rights to recover damages for
his death due to Adventure Sports' negligence in the same sentence shifting
payment of any damages from Adventure Sports to Cheeyan Yap's estate (and

general import can establish it." Perry, 66 A. at 557; see also Greer v. City of Philadelphia, 795
A.2d 376, 380 (Pa . 2002).

11

Defendant Chan). Accordingly, the indemnification language relied upon by PIIC
is inextricably connected with exculpatory language and the defendants' public
policy arguments about exculpatory clauses must be considered in tandem with
this indemnity clause. See~ Warren City Lines, Inc. v. United Ref. Co., 287
A.2d 149, 150-54 & n. 1 (Pa. Super. Ct. 1971 )(finding a combined exculpatory
and indemnification clause invalid where it released a party for acts of negligence
premised on a violation of state regulations). Furthermore, "[t]he test used to
determine the enforceability of exculpatory and indemnity provisions is the
same." Valhal Corp. v. Sullivan Associates, Inc., 44 F.3d 195, 202 (3d Cir.
1995)(citing Dilks, 192 A.2d at 687, n. 11 ).
Under Pennsylvania law, "[a] valid exculpatory contract fully immunizes a
person or entity from any consequences of its negligence. " Degliomini v. ESM
Prods., Inc., 253 A.3d 226, 238 (Pa. 2021 )(citation omitted). As summarized:
It is generally accepted that an exculpatory clause is valid
where three conditions are met. First, the clause must not
contravene public policy. Secondly, the contract must be
between persons relating entirely to their own private
affairs and thirdly, each party must be a free bargaining
agent to the agreement so that the contract is not one of
adhesion ...
Chepkevich v. Hidden Valley Resort, L.P ., 607 Pa. 1, 26, 2 A.3d 1174, 1189
(201 0)(citations omitted and formatting modified).
"An exculpatory contract contravenes public policy when it violates an
obvious, 'overriding public policy from legal precedents, governmental practice,
12

or obvious ethical or moral standards.' " Degliomini, 253 A.3d at 238 (quoting
Tayar v. Camelback Ski Corp., Inc. , 47 A.3d 1190, 1199 (Pa. 2012)).

An

exculpatory contract withstands a challenge based on public policy if it does not
contravene any policy of the law, that is, if it is not a matter of interest to the
public or to the state.

kl (citations omitted).

Furthermore:
An otherwise valid contract will not be voided in favor of a
vague public policy goal; rather, [the Supreme Court of
Pennsylvania] requires that to support such a heavyhanded result, the alleged public policy must be:
ascertained by reference to the laws and legal
precedents and not from general considerations of
supposed public interest. .. . [T]here must be found
definite indications in the law of the sovereignty to
justify the invalidation of a contract as contrary to that
policy[.] ... Only dominant public policy would justify
such action. In the absence of a plain indication of
that policy through long governmental practice or
statutory enactments, or of violations of obvious
ethical or moral standards, the Court should not
assume to declare contracts ... contrary to public
policy. The courts must be content to await legislative
action.

kl at 238 (quoting Williams v.

GEICO Gov't Emps. Ins. Co., 32 A.3d 1195, 1200

(Pa. 2011 )).
An exculpatory contract is void as against public policy in Pennsylvania if it
immunizes a party from liability for their grossly negligent conduct, Feleccia v.
Lackawanna Coll. , 215 A.3d 3, 20 (Pa. 2019), reckless conduct, Tayar, 47 A.3d
13

at 1203, or "where it immunizes a party from the consequences of violating a
statute or regulation intended to preserve health or safety[,]" Degliomini, 253
A.3d at 239.
Neither gross negligence nor reckless conduct are pied in the underlying
action , but, in that case, Defendant Tina Yap alleges that Adventure Sports
violated federal regulations intended to preserve health and safety. As averred,
the accident occurred on the Delaware River within the Delaware River National
Recreation Area between Smithfield Beach and Kittatinny Point. (Doc. 1-5, Exh.
C., Yap Complaint, Jurisdiction and Venue ,I 3, Factual Background ,I 5). This
area is administered by the National Park Service under the United States
Department of Interior. See 16 U.S.C. § 4600, et seq.
The Department of Interior is authorized to prescribe federal regulations
concerning boating or other water activities within National Park System units.
54 U.S.C.A. § 100751(b). By regulation, the National Park Service has adopted
the regulations of the United States Coast Guard ("USCG") regarding personal
floatation devices ("PFD"). 8 36 C.F.R. § 3.7. USCG regulations provide that no

8

PIIC refers to PFDs as life jackets in the complaint. (Doc. 1-5, ,r 20).

14

person may use a recreational vessel 9 unless at least one wearable PFD 10 is on
board for each person and those PFDs are used in accordance with the
requirements of the approval label and owner's manual, if applicable. 33 C.F.R. §
175.15.
Additionally, pursuant to these regulations, the superintendent of a National
Park Service unit "may require that a PFD be worn or carried on designated
waters, at designated times and/or during designated water based activities[.]" 36
C.F.R. § 3.7. As such, the superintendent of the Delaware Water Gap
Recreation Area has issued a compendium of park-specific regulations, including
a requirement that PFDs are mandatory "during a period of high water, 8 feet or
above, measured at the Montague River Gauge, for each individual onboard a
vessel which is underway, on, or in the waters of the Delaware River, within the
park[.]" (Doc. 47-2, ECF p. 45 (setting forth the Superintendent's public use limits
under 36 C.F.R. § 1.5(a)(2))).
As alleged in the underlying action, the Delaware River measured at 8.10
feet on the date of the incident and Cheeyen Yap was not wearing a PFD. (Doc.
1-5, Exh. C, Yap Complaint, Factual Background,

,m 6-9).

Defendant Tina Yap

9

"Recreational vessel means any vessel being manufactured or operated primarily for
pleasure, or leased, rented, or chartered to another for the latter's pleasure." 33 C.F.R. §
175.3.
10

"Wearable PFD means a PFD that is intended to be worn or otherwise attached to the body."
33 C.F.R. § 175.13.

15

avers that Adventure Sports held itself out as licensed by the National Park
Service and bears duties and responsibilities to ensure the use of PFDs in
compliance with federal regulations. (~

,m 1, 4, 6-9).

With only the pleadings and contracts to consider at this stage, the court
cannot rule out that Adventure Sports may be found negligent in the underlying
action based on the alleged regulatory violations. Under those circumstances,
the exculpatory language in Adventure Sports' Rental Contract and Release of
Liability may be declared partially or wholly invalid on public policy grounds
depending on the factual record as it develops there. That same exculpatory
language in the Release of Liability provides for indemnity and thus the same
material issues of fact exist in this contract-based action. Accordingly, PIIC's
motion for partial judgment on the pleadings will be denied.
Conclusion

For the above reasons, PIIC's motion for partial judgment on the pleadings
is denied. An appropriate order follows.

16