Hollis et al v. Lexington Insurance Company et al

Filing 49

MEMORANDUM OPINION re Motions for Summary Judgment. Signed by District Judge James C. Cacheris on 4/12/16. (klau, )

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
KATHRYN T. HOLLIS, ET AL.,

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Plaintiffs,
v.
LEXINGTON INSURANCE COMPANY,
ET AL.,
Defendants.

Case No. 1:15-cv-290 (JCC/JFA)

M E M O R A N D U M

O P I N I O N

This matter is before the Court for declaratory
judgment regarding an insurer’s obligations under a “per
occurrence” commercial general liability insurance policy.
Plaintiffs suffered injuries in a fireworks accident and hope
the insurer will satisfy the judgment they might receive in
state court for those injuries.

To that end, Plaintiffs

motioned for summary judgment seeking a declaration that their
injuries arise from multiple “occurrences” within the meaning of
the insurance policy.

The insurer cross-motioned for summary

judgment for a declaration that the Plaintiffs’ injuries arise
from a single occurrence, for which it has exhausted its
indemnification obligation.

An excess insurer also cross-

motioned for summary judgment seeking a declaration that its
indemnification obligation is limited to $4 million, regardless
1

of the number of occurrences.

For the reasons described below,

the Court holds that the Plaintiffs’ alleged injuries arise from
a single occurrence.

Therefore, the Court will deny Plaintiffs’

motion for summary judgment, will grant the insurer’s crossmotion for summary judgment, and will deny the excess insurer’s
cross-motion for summary judgment.
I.

Background

The injuries alleged in this case occurred at a
fireworks show in Vienna, Virginia on the Fourth of July in 2007
(“fireworks incident” or “the accident”).

(SOF ¶ 1.)1

During

the show, a twenty-five shot “barrage cake”2 firework exploded
unexpectedly, causing a three-inch mortal shell to launch
directly into the crowd.

(SOF ¶¶ 3, 5.)

The powerful shell

detonated inches from Plaintiff Kathryn Hollis and her two sons
Alexander and M.H.3

(SOF ¶ 5.)

The explosion caused Kathryn and

M.H. to suffer severe burns and brain injuries and burned
Alexander.

1

(SOF ¶¶ 6-8.)

Citations to “SOF” refer to undisputed facts contained
within Defendant Lexington Insurance Company’s Local Rule 56(B)
statement of facts. (See Lexington Mem. [Dkt. 41] at 2-10.)
2
A “barrage cake” is “a pre-manufactured set of
fireworks mortar tubes that are chain fused together to ignite
in rapid sequence.” (Kathryn Compl. [Dkt. 1-3] ¶ 26.)
3
To avoid confusion between different members of the
Hollis family, this memorandum opinion will refer to the family
members by their first names or initials to identify an infant.
2

After the accident, Kathryn filed a lawsuit in the
Fairfax County Circuit Court against the various parties
involved in the fireworks show, including the company hired to
perform the show and its president and employee, several Chinese
fireworks manufacturers, Vienna municipal employees, and
firefighters.

(Kathryn Compl. [Dkt. 1-3].)

Prior to trial,

Kathryn settled her claim against the employee of the company
hired to perform the fireworks show.
4].)

(Kathryn Judg. [Dkt. 1-

A jury ultimately awarded Kathryn a verdict of $4,750,000

after finding that the fireworks company, Schaefer Pyrotechnics,
Inc. (“Schaefer”), and its president were negligent.

(Id. ¶ 5.)

Kathryn’s older son, Alexander, filed a lawsuit for
his injuries and received a jury verdict of $45,000 against
Schaefer and its president for their negligence.

(SOF ¶¶ 19-20;

Alexander Compl. [Dkt. 1-5]; Alexander Judg. [Dkt. 1-6].)
In December 2013, Kathryn and her husband filed a
substantively identical lawsuit (“Underlying Complaint”) on
behalf of their infant son, M.H (collectively “Plaintiffs”).4
(SOF ¶ 21; Underlying Compl. [Dkt. 1-7].)

Like the prior two

lawsuits, the Underlying Complaint alleges that Schaefer, its
president, and its employee Jacqueline Gass (the “Insured”) were

4

Plaintiffs also allege that M.H will file a lawsuit on
his own behalf when he reaches maturity. (SOF ¶ 24.)
3

negligent or grossly negligent during the several months between
the time they sought to acquire fireworks from China and the
time the shell exploded in the Vienna crowd.

Specifically, the

Underlying Complaint alleges that the Insured breached their
duties to: properly hire, supervise, and train employees
handling fireworks; follow all appropriate laws and regulations
pertaining to the purchase, care, transportation, display, and
ignition of fireworks; establish appropriate safety “set backs”;
warn spectators of known dangers; purchase only the highest
quality fireworks; ensure the fireworks were safe; take
appropriate measures to protect spectators from fireworks
failures; properly inspect fireworks; properly test fireworks;
ignite fireworks only under safe weather conditions; follow
appropriate safety precautions; use ordinary care; heed warnings
from fire professionals; and adjust for complications at prior
shows at the Vienna location and other shows.
Compl. ¶¶ 114, 120-128.)

(Underlying

The Underlying Complaint also alleges

that Schaefer and its president were liable for strict
liability, public nuisance, breach of express/implied warranty,
and negligent design.

The state court stayed Plaintiffs’ tort

lawsuit pending this Court’s determination of insurance
coverage.

(SOF ¶ 23.)

4

At the time of the fireworks incident, Defendant
Lexington Insurance Company (“Lexington”) insured Schaefer
through a per-occurrence commercial general liability policy
(“Primary Policy”).

(SOF ¶ 28; Primary Policy [Dkt. 1-1].)

The

Primary Policy covers bodily injury and property damage caused
by an “occurrence.”

(SOF ¶ 33; Primary Policy at 5.)

An

occurrence is defined as “an accident, including continuous or
repeated exposure to substantially the same general harmful
conditions.”

(SOF ¶ 34; Primary Policy at 22.)

The policy

covers up to $1 million per occurrence and $2 million in
aggregate.

(SOF ¶¶ 28, 35.)

Lexington’s duty to defend and to

indemnify terminate when it has “used up the applicable limit of
insurance in the payment” of judgments or settlements for bodily
injury claims.

(Primary Policy at 5.)

At the time of this

lawsuit, Lexington has paid $1 million under the Primary Policy
to satisfy judgments for bodily injuries arising from the
fireworks incident.

(SOF ¶ 37; Compl. ¶¶ 15, 16.)

Defendant Axis Surplus Insurance Company (“Axis”) also
insured Schaefer at the time of the firework incident.
¶ 28; Axis Policy [Dkt. 1-2].)

(SOF

Axis issued an “Excess Policy”

covering claims that exceed the coverage provided by Lexington’s
Primary Policy.

(Axis Mem. [Dkt. 39] ¶ 11; Axis Policy at 23.)

The Excess Policy is limited to $4 million per occurrence and in
5

the aggregate.

(Axis Mem. ¶ 10; Axis Policy at 1, 23.)

Axis

has paid under this policy to satisfy the judgments Kathryn and
Alexander received, but it is not known exactly how much Axis
has paid.

(Compl. ¶¶ 15, 16.)
Plaintiffs filed suit seeking declaratory judgment as

to whether the Underlying Complaint alleges a single occurrence
or multiple occurrences under the Primary Policy.
11.)

(Compl. at

Plaintiff motioned for summary judgment, arguing that the

Underlying Complaint alleges nineteen occurrences.

Lexington

cross-motioned for summary judgment arguing that the Underlying
Complaint alleges only a single occurrence.

Axis cross-motioned

for summary judgment seeking a declaration that its
indemnification obligation is limited to $4 million, regardless
of the number of occurrences alleged.

The parties briefed these

motions and orally argued at a hearing on April 7, 2016.
Accordingly, these motions are ripe for disposition.
II.

Standard of Review

Summary judgment is appropriate only if the record
shows that “there is no genuine dispute as to any material fact
and that the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-48 (1986).

A genuine issue of material fact

exists if the evidence, when viewed “in the light most favorable
6

to the non-moving party,” Miller v. Leathers, 913 F.2d 1085,
1087 (4th Cir. 1990), “is such that a reasonable jury could
return a verdict for the nonmoving party,” Anderson, 477 U.S. at
248.
On cross motions for summary judgment, the court must
review each motion separately on its own merits.
Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003).

Rossignol v.

“When considering

each individual motion, the court must take care to resolve all
factual disputes and any competing, rational inferences in the
light most favorable to the party opposing that motion.”

Id.

(internal quotations and citation omitted).
Summary judgment is especially appropriate in this
case because the construction of insurance contracts is a legal
question well suited for resolution by the courts.

Clark v.

Metro. Life Ins. Co., 369 F. Supp. 2d 770, 774 (E.D. Va. 2005);
see also Donegal Mut. Ins. Co. v. Baumhammers, 595 Pa. 147, 155,
938 A.2d 286, 290 (2007) (noting interpretation of insurance
contract is question of law “generally performed by the court”).
Because jurisdiction is based on diversity, the Court
applies Virginia’s choice of law rules.

Marks v. Scottsdale

Ins. Co., 791 F.3d 448, 451 (4th Cir. 2015). “In insurance
cases, Virginia law looks to the law of the state where the
insurance contract is written and delivered” as the source of
7

law.

Id.

The parties agree that the Primary Policy was

delivered in Pennsylvania and that Pennsylvania law governs.
(Hollis Mem. in Supp. [Dkt. 36] at 5; Lexington Mem. [Dkt. 41]
at 11 n.9.)
Under Pennsylvania law, the goal when construing and
applying an insurance contract is to effectuate the intent of
the parties as manifested by the language of the policy.

Penn.

Nat. Mut. Cas. Ins. Co. v. St. John, 106 A.3d 1, 14 (Pa. 2014).
The language of the policy “must be construed in its plain and
ordinary sense, and the policy must be read in its entirety.”
Id.

When the language is plain and unambiguous, that language

is controlling.

If the policy contains an ambiguous term,

however, “the policy is to be construed in favor of the insured
to further the contract’s prime purpose of indemnification and
against the insurer, as the insurer drafts the policy, and
controls coverage.”

Id. (quoting 401 Fourth Street Inc. v.

Investors Ins. Grp., 583 Pa. 445, 454, 879 A.2d 166, 171
(2005)).
The present case affects whether Lexington will have a
duty to indemnify the Insured if the facts alleged in the
Underlying Complaint are proven at trial, i.e. Lexington’s
“conditional obligation to indemnify in the event the insured is
held liable for a claim covered by the policy.”
8

Gen. Acc. Ins.

Co. of Am. v. Allen, 547 Pa. 693, 706, 692 A.2d 1089, 1095
(1997); Allstate Prop. & Cas. Ins. Co. v. Winslow, 66 F. Supp.
3d 661, 670 (W.D. Pa. 2014).

Because this is a prospective

inquiry similar to determining an insurer’s duty to defend, the
Court confines its analysis to the terms of the Primary Policy
and the allegations in the Underlying Complaint, assumed as
true.

See Frog Switch & Mfg. Co., Inc. v. Travelers Ins. Co.,

193 F.3d 742, 746 (3d Cir. 1999); Baumhammers, 595 Pa. at 155,
938 A.2d at 291.5

5

Pennsylvania law does allow an insurer to rely on some
limited facts outside the underlying complaint to disprove its
ultimate obligation to indemnify, even before trial or
settlement reduces a claim to judgment. See ACandS, Inc. v.
Aetna Cas. & Sur. Co., 764 F.2d 968, 975 (3d Cir. 1985) (“If, at
the outset of a particular action, it is properly established
that the insurer cannot possibly be liable for indemnification
because policy limits have been exhausted, then the policy
language does not impose a duty to defend that action under
Pennsylvania law.”); Strouss v. Fireman’s Fund Ins. Co., No.
Civ. A 03-5718, 2005 WL 418036, at *9 (E.D. Pa. Feb. 22, 2005)
(“[A]n insurer is entitled to a declaratory judgment that it has
no duty to indemnify when the insurer establishes as a matter of
law that there is no conceivable way for the underlying claims
to trigger coverage under the policy. To help the court in
making this determination, both parties may rely upon evidence
outside the underlying complaint.”); see also Nationwide Ins. v.
Zavalis, 52 F.3d 689, 695 (7th Cir. 1995) (listing Pennsylvania
cases looking beyond underlying complaint regarding duty to
defend). In the present case, it is unnecessary to consider
such facts because parties agree that Lexington has exhausted
its duty to defend and indemnify for a single occurrence related
to the fireworks incident.
9

III.

Analysis

Jurisdiction is proper under 28 U.S.C. § 1332 because
all defendants are completely diverse from all plaintiffs and
the amount in controversy exceeds $75,000.6

Venue is proper

under 28 U.S.C. § 1391(b)(2) because a substantial part of the
events giving rise to the claim occurred within this district.

6

Plaintiffs are all individual citizens of Virginia.
(Kathryn Compl. ¶ 1.) Defendant Axis is a citizen of Illinois.
(Compl. ¶ 3.) Defendant Lexington is a citizen of Delaware and
Massachusetts. (Id. ¶ 2.) Defendants Schaefer, Kimmel R.
Schaefer, and Jacqueline Gass are all citizens of Pennsylvania.
(Id. ¶¶ 4-6.)
Diversity of citizenship remains even if the Court
looks beyond the pleadings to sua sponte realign the parties
according to their interests in the “primary issue in
controversy.” See U.S. Fidelity & Guar. Co. v. A&S Mfg. Co.,
Inc., 48 F.3d 131, 133 (4th Cir. 1995); Indianapolis v. Chase
Nat’l Bank, 314 U.S. 63 (1941). The primary issue in
controversy is whether the Underlying Complaint alleges multiple
occurrences, thereby obligating Lexington to defend and
conditionally indemnify Insured on those claims. With respect
to that issue, the Hollises, the Insured, and Axis have an
aligned interest in arguing that multiple occurrences are
alleged. See A&S Mfg. Co., Inc., 48 F.3d at 134; Mosby v. ALPS
Property & Cas. Ins. Co., No. 3:15-cv-489, 2015 WL 5430366 (E.D.
Va. Sept. 14, 2015); Nationwide Mut. Ins. Co. v. 1400 Hampton
Blvd., LLC, No. 2:10cv310, 2010 WL 5476748 (E.D. Va. Dec. 2,
2010); (see also Axis Policy at 23 (noting coverage is only in
excess of primary insurance coverage).) Lexington is the only
party in this proceeding with an interest in arguing that it has
exhausted its policy limits with respect to Plaintiffs’
injuries. Thus, if the parties were realigned, citizens from
Illinois (Axis), Pennsylvania (Schaefer, Kimmel Schaefer, and
Jacqueline Gass), and Virginia (Hollises), would be completely
diverse from Defendant Lexington, which is a citizen of Delaware
and Massachusetts.
10

This case also presents a justiciable controversy that
is properly resolved through declaratory judgment.

Federal

standards guide the inquiry into the propriety of declaratory
relief in federal courts.

White v. Nat’l Union Fire Ins. Co. of

Pittsburgh, Pa., 913 F.2d 165, 169 (4th Cir. 1990).

Declaratory

judgment is available when there is a dispute creating a “case
or controversy” within the meaning of Article III of the United
States Constitution and the Declaratory Judgment Act, 28 U.S.C.
§ 2201(a).

White, 913 F.2d at 167.

The declaratory relief must

also be prudentially appropriate because it will (1) clarify the
legal relations in issue or (2) “terminate and afford relief
from the uncertainty, insecurity, and controversy giving rise to
the proceeding.” Id. at 168.

The present case satisfies both

the actual controversy and the prudential requirements for
declaratory judgment to issue.
In this case, tort claimants in a pending state court
action seek declaratory judgment about the coverage of the
alleged tortfeasor’s primary insurance policy.

It is well

recognized that a coverage dispute between tort claimants and
the primary policy insurer creates a case or controversy within
the meaning of Article III and the Declaratory Judgment Act,
even before the tort claimant’s allegations have been reduced to
a judgment.

See, e.g., Md. Cas. Co. v. Pac. Coal & Oil Co., 312
11

U.S. 270, 274 (1941); White, 913 F.2d at 169; Vt. Mutual Ins.
Co. v. Everette, 875 F. Supp. 1181, 1185 (E.D. Va. 1995).
Additionally, the declaration sought will resolve the
controversy regarding Lexington’s duty to defend and conditional
duty to indemnify.

Lexington and Plaintiffs agreed at oral

argument that Lexington has exhausted its policy obligations
related to a single occurrence arising from the fireworks
incident.

Thus, Lexington has a conditional duty to indemnify

for injuries arising from the same incident only if the Court
finds the Underlying Complaint alleges multiple occurrences.
Consequently, declaratory judgment will clarify the parties’
legal relations.

See White, 913 F.2d at 169.

In sum, this

declaratory judgment action presents a justiciable issue as to
whether the allegations in the Underlying Complaint, assumed as
true, assert a single “occurrence” or multiple occurrences under
Lexington’s Primary Policy.
A.

The Underlying Complaint Alleges Only a Single
Occurrence
Parties agree that Pennsylvania law governs the

definition of “occurrence” in this case, but parties vastly
disagree about the result of applying that law to the Underlying
Complaint.

Plaintiffs contend that the Underlying Complaint

alleges nineteen occurrences, corresponding with the number of
duties that Schaefer, its president, and employee Gass allegedly
12

breached.

Those breaches include negligently selecting and

purchasing the fireworks, violating laws and regulations in the
import of the fireworks, failing to test the fireworks before
deployment, disregarding indications that the location for the
fireworks show was unsafe, failing to set the crowd back at a
safe distance from the launch area, violating Schaefer’s own
plan for the fireworks show, negligently training its employees,
and other similar allegations.

(See Hollis Mem. in Supp. at 8.)

In contrast to Plaintiffs’ long list of “occurrences,”
Lexington argues that Plaintiffs’ injuries arise from one
occurrence: the explosion of the firework shell within the
crowd.

(Lexington Reply [Dkt. 46] at 1.)

The Court agrees with

Lexington and will grant summary judgment in its favor.
Despite the parties’ disagreement about the
application of law to these facts, both parties recognize that
Pennsylvania applies a “cause approach” to defining occurrences
for liability insurance purposes.

Under the cause approach,

courts “consider whether there is a single cause or multiple
causes for the losses sustained.”

Cf. Donegal Mut. Ins. Co. v.

Baumhammers, 595 Pa. 147, 159, 938 A.2d 286, 292 (2007).

More

specifically, courts ask if there “was but one proximate,
uninterrupted, and continuing cause which resulted in all of the
injuries and damage.”

D’Auria v. Zurich Ins. Co., 507 A.2d 857,
13

860 (Pa. Super. Ct. 1986).

The cause approach stands in

contrast to the “effects approach,” which “calculate[s] the
number of occurrences by looking to the effect of the accident
or, in other words, how many individual claims or injuries
resulted therefrom.”

Baumhammers, 938 A.2d at 292.

Applying the cause approach in accordance with the
Pennsylvania Supreme Court’s most recent interpretation of the
test leads to the unambiguous conclusion that the Underlying
Complaint alleges only a single occurrence.

In Kinney-Lindstrom

v. Medical Care Availability & Reduction of Error Fund, the
Pennsylvania high court stated that the number of causes depends
on “whether there is one or multiple instances of professional
negligence that caused the harm alleged” and “each instance of
negligence must be associated with a distinct injury.”
52, 72, 73 A.3d 543, 556 (2013).7

621 Pa.

The distinct-injury

requirement is particularly important to the present case
because that element is so clearly lacking from the Underlying
Complaint.

7

In Kinney-Lindstrom, the court found that two

Plaintiffs and Lexington both rely on Kinney-Lindstrom
without distinguishing the case as an interpretation of an
insurance statute, rather than an insurance policy. The Court
does not find that distinction meaningful here. See KinneyLindstrom, 621 Pa. at 72, 73 A.3d at 556 (“[T]here is no reason
for ‘occurrence’ to be construed in the MCARE Act in a manner
markedly different from the way the term was interpreted in
Donegal.”).
14

occurrences could arise from allegations that each of two twins,
while in the womb, “became infected by different organisms at
different times, and that Dr. S. was negligent in failing to
diagnose and treat each separate condition.”

Id.

The mere fact

that two children were injured did not provide evidence of
“distinct injuries,” as the number of victims is not
determinative in the cause analysis.

See Baumhammers, 595 Pa.

at 165, 938 A.2d at 165 (“[T]he fact that there were multiple
victims does not determine the limits of Parents liability
coverage . . . .”).)

Instead, distinct injuries were present

because each child suffered two temporally and qualitatively
distinct injuries—infections from different organisms occurring
at different times.

See Kinney-Lindstrom, 621 Pa. at 72, 73

A.3d at 556 (“[T]here may be two separate instances of
professional negligence causing distinct damages to each twin,
and, thus, two occurrences.” (emphasis added)).
In contrast to Kinney-Lindstrom, the Underlying
Complaint in the present case does not satisfy the distinctinjury requirement.8

8

The allegations of negligence in this case

Of course, even alleging distinct injuries is not
sufficient to establish multiple occurrences, as the injuries
also must be proximately caused by multiple instances of
professional negligence. See Appalachian Ins. Co. v. Liberty
Mut. Ins. Co., 676 F.2d 56, 61 (3d Cir. 1982) (“The fact that
there were multiple injuries and that they were of different
15

are all associated with the exact same injuries, which occurred
contemporaneously due to the explosion of the firework shell.
Without any allegation of distinct injuries attributable to the
nineteen allegedly wrongful acts, the Insured’s negligence forms
only a single cause.

Therefore, under Kinney-Lindstrom, the

Underlying Complaint alleges only a single occurrence.
Applying the cause approach under the more traditional
“proximate cause” terminology results in the same conclusion.
In that inquiry, courts “focus on the act of the insured that
gave rise to their liability,” Baumhammers, 595 Pa. at 162, 938
A.2d at 295, to determine if there was “one proximate,
uninterrupted, and continuing cause which resulted in all the
injuries and damage.”

D’Auria v. Zurich Ins. Co., 507 A.2d 857,

860 (Pa. Super. Ct. 1986); see also Flemming ex rel. Estate of
Flemming v. Air Sunshine, Inc., 311 F.3d 282 (3d Cir. 2002)
(applying this standard); Appalachian Ins. Co. v. Liberty Mutual
Ins. Co., 676 F.2d 56, 61 (3d Cir. 1982) (same).

When

conducting this analysis, it is “the general rule that where a
series of related acts of negligence results in an injury, those
acts are considered a single ‘occurrence’ for the purposes of

magnitudes and that injuries extended over a period of time does
not alter our conclusion that there was a single occurrence. As
long as the injuries stem from one proximate cause there is a
single occurrence.”)
16

determining coverage limits under an insurance policy.”
Evanston Ins. Co. v. Ghillie Suits.com, Inc., No. C 08-2099,
2009 WL 734691, at *7 (N.D. Cal. Mar. 19, 2009).
Courts applying this approach do not divide a
proximate cause into each particularized but-for cause that
contributed to the ultimate injury.

See, e.g., Real Legacy

Assurance Co. v. Afif, 409 F. App’x 558, 562 (3d Cir. 2011)
(noting “cause theory is designed to avoid the trap of infinite
regression” that would result from parsing the cause of an
injury “into several distinct stages, each describing the
ultimate cause in greater and greater detail”); Auto-Owners Ins.
Co. v. Munroe, 614 F.3d 322, 326 (7th Cir. 2010) (concluding
that no Illinois court applying the cause approach “has held
that a single claim or injury can give rise to multiple
occurrences merely because several acts of negligence combined
to produce a single result”); D’Auria, 507 A.2d at 861-62.

For

example, in Western World Insurance Co. v. Wilkie, a district
court rejected tort claimants’ argument that multiple occurrence
arose from children becoming infected with E. coli at a petting
zoo due to the zoo operator’s “failure to properly clean the zoo
area, failure to use a barricade to separate the animals from
the children, failure to prevent hand-to-mouth activities,
inadequate signage, and failure to provide proper hand washing
17

stations.”

Id. at *3.

Instead, the court found a single

occurrence because the presence of E. coli was the “general
harmful condition to which defendants were exposed, and the
cause of this condition was [defendant’s] ongoing negligence.”
Id. at *5.

Similarly, a Pennsylvania appellate court expressly

condemned the practice of dividing a proximate cause of injury
into particularized acts, characterizing it as an “artificial
and arbitrary division” that would “forsake common sense.”
D’Auria, 507 A.2d at 861.
In accordance with those cases, the Underlying
Complaint alleges only one occurrence.

The Insured’s wrongful

actions and inaction caused a firework shell to explode
dangerously close to the Hollises, contemporaneously causing
them injury.

Although many breaches of duty contributed to this

accident as but-for causes, those breaches involved only one
proximate cause of injury: the negligent explosion of the
firework shell.

Consequently, the Underlying Complaint alleges

only a single occurrence under Pennsylvania law.
Plaintiffs’ reliance on the Eleventh Circuit’s
interpretation of Florida law in Mid-Continent Casualty Co. v.
Basdeo, does not compel a different result.
(11th Cir. 2012).

477 F. App’x 702

In Basdeo, the court found that multiple

occurrences arose from the insured party’s negligent performance
18

of a roof construction contract, which caused rain to damage the
building’s interior.

Id. at 708.

The court found three causes

of the damage: (1) negligently placing tarps on the building in
a way that caused holes and allowed water to enter; (2) leaving
a slanted section of the roof open and exposed to rainfall; and
(3) leaving a flat section of the roof open and exposed.
704.

Id. at

The Basdeo scenario is different from the fireworks

incident because each act of negligence in Basdeo is associated
with a distinct injury, i.e. rain entering a different part of
the building through a distinct opening.

Furthermore, the

Basdeo court could not identify any unifying proximate causal
link between the three acts of negligence.

In the present case,

by contrast, all of the acts of negligence and gross negligence
alleged culminated in a single event causing contemporaneous
injury, the shell explosion.

Thus, Basdeo is distinguishable

from the present facts.
There is also no support for Plaintiffs’ argument that
the number of alleged tortfeasors is determinative of the number
of occurrences.

No case identified by any party in these

proceedings emphasizes the number of alleged tortfeasors as the
relevant focus of the cause approach.

The Pennsylvania Supreme

Court did not place any significance on the number of
tortfeasors in Donegal Mutual Insurance Co. v. Baumhammers, when
19

it concluded that a single cause arose from two parents
negligently failing to confiscate their son’s weapon and/or
failing to notify enforcement authorities of the son’s unstable
condition.

595 Pa. 147, 163 938 A.2d 286, 295.

Furthermore, in

Auto-Owners Insurance Company v. Munroe, the Seventh Circuit
explicitly rejected the argument that three occurrences arose
from the negligent acts of three truck drivers causing a single
accident.

614 F.3d 322, 326 (7th Cir. 2010).

The Court finds

those opinions persuasive and declines Plaintiffs’ invitation to
find multiple occurrences based on the fact that two individuals
and a corporate entity were allegedly negligent in this case.
In summary, taking the allegations of the Underlying
Complaint as true, Plaintiffs allege only a single occurrence
within the meaning of the Primary Policy.

As parties agreed at

oral argument, Lexington has no duty to defend or to indemnify
the Insured for the allegations in the Underlying Complaint
because Lexington has already exhausted its $1 million Primary
Policy obligation with respect to this occurrence.

Accordingly,

the Court will grant summary judgment to Lexington.
B.

Axis’s Cross-Motion for Summary Judgment Will Be
Denied as Nonjusticiable
In addition to the cross-motions discussed above, Axis

Surplus Insurance Company also filed a cross-motion for summary
judgment.

Axis appears to seek a declaration that its
20

obligation under its Excess Policy is limited to $4 million,
regardless of how many occurrences are alleged.

Axis did not,

however, file a counterclaim or crossclaim for declaratory
judgment seeking this declaratory relief.
The Court will deny Axis’s motion because it involves
an issue that is presently nonjusticiable.

As described more

fully above, declaratory judgment is only proper when there is a
definite and concrete dispute involving the legal relations of
parties with adverse legal interests and when the judgment would
clarify or terminate that dispute.

White v. Nat’l Union Fire

Ins. Co. of Pittsburgh, Pa., 913 F.2d 165, 168 (4th Cir. 1990).
Axis and Plaintiffs both recognize that the Complaint in this
case does not raise a dispute regarding the scope of the Excess
Policy.

Plaintiffs concede that questions regarding the Axis

policy are “simply irrelevant and not at issue under the
pleadings of this case.”

(Hollis Reply to Axis [Dkt. 43] at 3.)

Similarly, Axis argues that under its policy, “it is irrelevant
how many occurrences are claimed by Plaintiffs.”
Supp. [Dkt. 38] at 3.)

(Axis Mem. in

Furthermore, it is purely speculative

whether any party would ever argue that Axis’s policy
obligations depend on the number of occurrences alleged or
proven in Plaintiffs’ lawsuit.

Consequently, Axis’s cross-

motion does not involve a justiciable issue and will be denied.
21

Cf. Nat’l Cas. Ins. Co. v. Inc. Village of Irvington, No. 92
CIV. 2014, 1997 WL 411928, at *4 (S.D.N.Y. 1997).
IV.

Conclusion

For the reasons stated above, the Court will grant
Lexington’s cross-motion for summary judgment, deny Plaintiffs’
motion for summary judgment, and deny Axis’s cross-motion for
summary judgment.

Consequently, all justiciable disputes in

this case are resolved.
An appropriate order will issue.

April 12, 2016
Alexandria, Virginia

/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE

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