OLD REPUBLIC GENERAL INSURANCE CORP. v. SCOTTSDALE INSURANCE COMPANY

Filing 34

MEMORANDUM OPINION AND ORDER denying 13 Motion for Summary Judgment; granting 16 Motion for Summary Judgment; adopting Report and Recommendations re 30 Report and Recommendations. Signed by Judge Barbara Rothstein on 3/30/2016. (nk)

UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF PENNSYLVANIA

OLD REPUBLIC GENERAL INSURANCE
CORPORATION,

Civil Action No. 15-31

Plaintiff,

MEMORANDUM ORDER ADOPTING
THE REPORT AND
RECOMMENDATION; GRANTING
PLAINTIFF’S MOTION FOR
SUMMARY JUDGMENT; AND
DENYING DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT

v.
SCOTTSDALE INSURANCE COMPANY,
Defendant.

Before the Court is Defendant Scottsdale Insurance Company’s (“Scottsdale”) objection to
Magistrate Judge Baxter’s Report and Recommendation (“R&R”). The R&R recommends that
this Court grant Plaintiff Old Republic General Insurance Corporation’s (“Old Republic”) motion
for summary judgment and hold that Scottsdale has a duty to defend a third-party—E.E. Austin &
Son, Inc.—for whom Old Republic is currently paying defense costs. After reviewing the Report
and Recommendation, Scottsdale’s objections, the briefs, and all other relevant material properly
before the Court, the Court adopts the Report and Recommendation’s reasoning. The Court’s
reasoning follows:
BACKGROUND 1
Erie Water Works—a public utility company—hired E.E. Austin to serve as its general contractor
for a construction and renovation project. Doc. No. 16-3. In order to complete this project, E.E.
Austin hired DH Steel to serve as its subcontractor for all metal installation. Id. While E.E. Austin
already had a general insurance policy with Plaintiff Old Republic, the E.E. Austin-DH Steel

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The Magistrate Judge’s Report and Recommendation sets out the factual background of this
case at length. The Court will only discuss the factual issues raised by the objection.
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agreement required DH Steel to obtain insurance coverage that would indemnify E.E. Austin for
any harms stemming from DH Steel’s actions during the project.
DH Steel obtained a comprehensive general liability insurance policy from Scottsdale. The
policy provides the following covered for “Additional Insured” parties:
Who is An Insured is amended to include as an additional insured any
person or organization for whom you are performing operations when you
and such person or organization have agreed in writing in a contract or
agreement that such person or organization be added as an additional
insured on your policy. Such person or organization is an additional insured
only with respect to liability for ‘bodily injury’ . . . caused in whole or in
part, by:
i.
Your acts or omission; or
ii.

The acts or omissions of those acting on your behalf.

Doc. No. 16-4, at 38.
During the policy period, one of DH Steel’s employees filed a negligence action in state
court, naming E.E. Austin as the sole defendant. The employee’s underlying complaint alleged
that he was injured while working for DH Steel on the Erie Water Works project. According to
the complaint, the employee was injured as a result of E.E. Austin’s failure: to implement an
effective daily inspection plain with its subcontractor’s employees; to provide an on-site
supervisor; to train and supervise its DH Steel’s employees; and to designate a competent
supervisor to review DH Steel’s safety program.
As E.E. Austin’s general insurance company, Old Republic submitted a request for
coverage to Scottsdale. Scottsdale denied the claim on the grounds that the employee’s underlying
complaint did not expressly state that DH Steel engaged in any acts of negligence and, therefore,
did not implicate the Additional Insured Parties provision and was not covered by Scottsdale’s
policy. Old Republic then filed the present declaratory action in federal court.

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LEGAL STANDARD FOR A DUTY TO DEFEND
Generally, a court examining questions of insurance coverage shall grant summary
judgment only if the movant shows that there is no genuine dispute as to any material fact. Fed.
R. Civ. P. 56(a); Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000) (courts
“review all of the evidence in the record . . . [and] draw all reasonable inferences in favor of the
nonmoving party”). However, it is well-settled law in Pennsylvania that the duty to defend is
broader than the duty to indemnify. Sikirica v. Nationwide Ins. Co. 416 F.3d 214, 225 (3d Cir.
2005). In Pennsylvania, the duty to defend arises if there are any facts in the complaint that could
“potentially” impose liability upon the insured within the policy’s coverage. Sikirica, 416 F.3d at
226 (citations omitted). In making this determination, the court must “liberally construe” the
allegations in the underlying complaint in favor of the insured. Frog, Switch, Mfg. Co., 193 F.3d
at 746. That is, if there are any genuine disputes of fact regarding coverage, the insured party is
entitled to summary judgment on the duty to defend. Erie Ins. Exch. V. Transamerica Ins. Co.,
516 Pa. 574 (1987).
DISCUSSION
The R&R concludes that Scottsdale has a duty to defend E.E. Austin because the
employee’s underlying complaint alleges facts that, if true, would potentially impose liability that
falls within the scope of the Scottsdale insurance policy. According to the employee’s complaint,
the injuries were caused—at least in part—by the actions of DH Steel’s employees. The complaint
seeks to hold E.E. Austin for negligently supervising DH Steel. That is, by implication, it alleges
that E.E. Austin should have prevented DH Steel’s employees from engaging in negligent acts
which caused the employee’s injury.

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Scottsdale objects to this determination.

According to Scottsdale, the employee’s

complaint does not implicate the Additional Insured provision of the policy because it does not
“expressly state” that the DH Steel is liable or potentially liable. The Third Circuit has already
found Scottsdale’s proffered interpretation of the policy language to be incorrect. In Ramara, Inc.
v. Westfield Ins. Co., 2 which involved identical policy language together with a very similarly
worded complaint, the Third Circuit held that allegations that a general contractor negligently
supervised the subcontractor’s employees necessarily imply that the subcontractor’s employees
caused the injury. Thus, the Magistrate Judge’s reasoning in the R&R is correct.
CONCLUSION AND ORDER
NOW, THEREFORE, IT IS HEREBY ORDERED that:
1. The Court ADOPTS the reasoning set forth in the Report and Recommendation;
2. GRANTS Old Republic’s Motion for Summary Judgment; and
3. DENIES Scottsdale’s Motion for Summary Judgment.

BARBARA J. ROTHSTEIN
UNITED STATES DISTRICT JUDGE

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No. 15-1003, 2016 WL 624801, at *10 (3d Cir. Feb. 17, 2016).
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