Pennsylvania Superior Court Holds [C]overt Allegations in Underlying Complaint Sufficient to Trigger Coverage
December 6, 2019
In a memorandum decision filed on December 3, 2019, the Superior Court of Pennsylvania ruled that “overt allegations” of a named insured’s misconduct are not necessary to trigger additional-insured coverage despite the coverage hinging on the named insured’s involvement. The opinion serves as a reminder to construe a complaint’s allegations liberally when evaluating whether coverage is available or owed since, if it comes to it, Pennsylvania courts will likely do so.
Precision Underground Pipe Services, Inc. v. Penn National Mutual Casualty, et al. involved a construction-site injury and the contracts between certain contractors and subcontractors. Verizon had contracted with Parkside to install an underground conduit for Verizon’s fiber optic cable. The agreement required Parkside name Verizon as an additional insured on its insurance policies and provide Verizon with a defense and indemnity in the event of a qualifying claim. Parkside subsequently subcontracted with Precision to provide labor for the project. The Parkside-Precision agreement required Precision name Parkside and Verizon as additional insureds on its insurance policies. The Parkside-Precision agreement also required that the additional-insured coverage for Parkside and Verizon be primary and noncontributory with respect to any other insurance available to Parkside or Verizon.
Precisions’ relevant policy was a commercial general liability policy issued by Penn National Mutual Casualty. The policy contained an endorsement titled “Automatic Additional Insureds – Owners, Contractors, Subcontractors,” that read:
Section II – Who Is An Insured
- Any person(s) or organization(s) (referred to below as additional insured) with whom you are required in a written contract or agreement to name as an additional insured, but only with respect to liability for “bodily injury,” “property damage” or “personal and advertising injury” caused, in whole or in part, by:
- Your acts or omissions; or
- The acts or omissions of those acting on your behalf;
in the performance of your ongoing operations for the additional insured(s) at the location or project described in the contract or agreement. A person’s or organization’s status as an additional insured under this agreement ends when your operations for that additional insured are completed.
Thus, under the policy, a company could be eligible for coverage as an additional insured if: (1) Precision was obligated to name the company as an additional insured pursuant to a written agreement; (2) the claim involved liability for “bodily injury” or other specified harm; (3) the bodily injury or other specified harm was caused in whole or in part by the actions or inaction of Precision or someone acting on Precision’s behalf; (4) the relevant conduct occurred in the course of Precision’s ongoing operations for the company seeking coverage; and (5) the conduct occurred at the location or project described in the agreement between Precision and the company seeking coverage.
During the policy period, Christopher Hammell, a Precision employee, fell into a trench on the jobsite and was injured. Hammell brought a personal-injury claim against Verizon, Parkside, and others, alleging that Verizon and Parkside were liable because, as the entities that owned, occupied, or controlled the property, they purportedly violated their duty to protect workers from hazardous conditions on the property caused by their conduct. Hammell did not name his employer (Precision) as a defendant or allege that Precision contributed to his injuries because Pennsylvania’s Worker’s Compensation Act grants employers immunity from liability for their employees’ work-related personal-injury claims.
Parkside subsequently tendered its defense and indemnity to Penn National. In its tender letter, Parkside took the position that both it and Verizon qualified as additional insureds under the policy Penn National had issued to Precision. Penn National, focusing on the scope of the additional-insured coverage and the allegations in the underlying complaint, rejected the tender. According to Penn National, the policy required Penn National provide coverage to additional insureds only for injuries caused by the conduct of Precision or Precisions’ agents; since Hammell’s complaint neither named Precision as a defendant nor averred Hammell’s injuries were caused by Precision’s conduct, the claim fell outside the scope of coverage it owed an additional insured.
After Penn National denied Parkside and Verizon’s tender, Precision brought a lawsuit against Penn National seeking declaratory judgment and damages for breach for contract. At summary judgment, the trial court agreed with Penn National, ruling that Penn National did not owe a duty to defend Verizon or Parkside because “Precision is neither a named defendant nor otherwise implicated in” the underlying personal-injury action, and “[t]o trigger additional insured coverage under the policy, the complaint needed to allege, at the very least, that Hammell’s bodily injuries were caused, in whole or in part, by Precision, or by someone acting on Precision’s behalf….”
On appeal, the Superior Court reversed. Criticizing the trial court’s “narrow reading” of the complaint, the Superior Court held that the complaint’s allegations were sufficient to trigger additional-insured coverage under the Penn National policy. “[T]hat Hammell did not make any overt allegations of negligence or wrongdoing against Precision … d[id] not foreclose Penn National’s duty to defend.” It was sufficient, the Superior Court concluded, that the complaint could be read to allege Verizon and Parkside owed a duty to protect workers from hazards caused by Precision, even if the complaint did not aver that Precision actually caused such a hazard.
Pennsylvania remains a “four corners” jurisdiction—that is, courts evaluating whether a claim triggers coverage generally are supposed to restrict their gaze to the relevant policy language and the four corners of the underlying complaint. But the Superior Court’s decision in Precision Underground Pipe Services, Inc. illustrates how courts may read not only the text found on the page but also the sub-text found between the lines. Parties considering whether to submit a tender as well as claims professionals assessing whether to accept a tender should keep this in mind when deciding how to proceed.
This Client Alert is intended to keep readers current on matters affecting businesses and is not intended to be legal advice. If you have question regarding this information, please contact Eli Granek at (215) 851-8421 or email@example.com.