Sunday, August 22, 2010

Recent Pennsylvania Supreme Court Decisions of Note

American and Foreign Insurance Company v. Jerry's Sports Center

My partner, Sal Cognetti, Esquire was local counsel for the prevailing party in a recent August 17, 2010 Pennsylvania Supreme Court decision that should have a significant impact in the insurance industry here in Pennsylvania.

In the case of American and Foreign Insurance Company v. Jerry's Sport Center, Inc., 2010 WL 3222404 (Pa. Aug. 17, 2010, Baer, J.), the Pennsylvania Supreme Court addressed the issue of whether, following a court's declaration that an insurance company had no duty to defend its insured, the insurance carrier was entitled to be reimbursed those amounts it paid out to defense counsel for the defense of its insured in the underlying suit.

The carrier was seeking such reimbursement from its insured on the basis of a series of reservation of rights letters as opposed to any express language in the insurance policy allowing for any such reimbursement.

The basic facts of the case involved a lawsuit filed by the NAACP against numerous firearms wholesalers and distributors for failing to reasonably and safely distribute its firearms to the public. The NAACP was asserting that this alleged negligence of the firearms dealers was the cause of injuries, deaths, and damages to NAACP members.

The insured in this matter, Jerry's Sports Center, was one of the defendant firearms dealers named in the underlying suit. American and Foreign Insurance Company defended Jerry's Sports Center under a reservation of rights and, when the carrier prevailed in its declaratory judgment action with a finding that it need not defend nor indemnify its insured under the circumstances of the lawsuit, the carrier sought to get back from its insured the defense costs it paid out to a New York City defense firm which costs were in excess of $300,000.

In its decision, the Supreme Court held that "an insurer is not entitled to be reimbursed for defense costs absent an express provision in the written insurance contract." Here, there was no such provision in the policy and, therefore, no reimbursement was allowed.

While this case involved a corporate insured, the decision appears to be a victory for the "little man" insured, protecting them from having to pay back insurance companies any defense costs in the event of a decision in favor of a carrier in a declaratory judgment action on the coverage/duty to defend issue (assuming there is nothing in the policy requiring the insured to reimburse the carrier in such circumstances).

To view the majority opinion by Justice Baer online, click on this link:

To view the concurring opinion by Justice Saylor:

I thank my partner Sal Cognetti, Esquire for bringing this case to my attention.

Kincy v. Petro

In the case of Kincy v. Petro, 2010 WL 3222025 (Pa. Aug. 17, 2010, Todd, J.), the Pennsylvania Supreme Court ruled upon the effect of a trial court order consolidating, under Pa.R.C.P. 213(a), two separate actions involving different parties and different theories of liability "for all purposes."

The Court ruled that, in such circumstances, "such an order does not result in the complete consolidation of such actions, such that the pleadings are merged and/or the actions shed their separate identities."

The underlying facts shed light on the issue presented. This matter involved a motor vehicle accident. In the Plaintiff's vehicle were two injured parties, Alice Kincy as the driver and her brother Jerome Nixon as a passenger. The Defendant vehicle was owned by a Defendant-mother who had allowed Defendant-daughter to drive the vehicle.

For some reason, the Plaintiff-driver, Alice Kincy, filed suit only against the Defendant-owner. The Defendant-owner filed an Answer and New Matter identifying the daughter as the driver of the Defendant vehicle at the time of the accident. Nevertheless, the Plaintiff-driver never amended her Complaint or otherwise sued the Defendant-driver.

Meanwhile the Plaintiff-passenger, Jerome Nixon, had filed suit against both the Defendant-owner and the Defendant-driver.

Thereafter, a trial court judge issued an order consolidating the two lawsuits "for all purposes" including discovery and arbitration. At a later joint arbitration, a panel ruled against the Plaintiff-driver, Alice Kincy, but entered an award in favor of Plaintiff-passenger, Jerome Nixon. Mr. Nixon would eventually settle his case.

The Plaintiff-driver, Alice Kincy, appealed her case up to the court of common pleas level where both the Defendant-owner and Defendant-driver asserted in a summary judgment motion that the Plaintiff-driver failed to timely assert a valid claim of negligence against the Defendant-driver.

Kincy countered by arguing that the consolidation order merged her Complaint with Nixon's Complaint such that a valid negligence claim was indeed asserted against the Defendant-driver. She also filed her own motion for summary judgment with similar arguments. The trial court denied the cross motions for summary judgments without an opinion.

Later, however, a different trial court judge granted the Defendants' motion in limine to preclude the Plaintiff-driver from introducing any evidence against the Defendant-Driver who was not named in the Complaint at issue. That trial judge noted that, where the consolidation order involved actions having different parties, the order merely served to consolidate the two lawsuits, not merge them into one lawsuit. As such, the Defendants were granted a nonsuit at trial due to the failure to name the Defendant-Driver in the Complaint.

The nonsuit was upheld at the Supreme Court level. The Supreme Court's Opinion gives a nice analysis of the varying effects a trial court consolidation order may have.

Where there are identical parties, subject matter, issues and defenses, a consolidation order can result in a "complete consolidation," or merger of the actions into one lawsuit.

The Court rejected any notion that actions involving different parties, issues, or defenses could be completely consolidated, or merged into a single lawsuit, to be "untenable." Rather, such actions can be consolidated, or combined, for discovery purposes, for trial purposes, or both--but the cases still retain their separate identities under Pa.R.C.P. 213(a).

To view the majority Opinion of Justice Todd online, click on this link:

To view the concurring opinion by Justice Saylor, click on this link:

Applying this case to the cases that have been consolidated in the Post-Koken arena, it appears that, although those cases are combined to proceed under one caption, they remain their separate identities given that there are different parties involved on each side of the case.

The further import of this Kincy decision on those Post-Koken cases remains to be seen as those cases proceed toward trial across the Commonwealth.

I thank Attorney James Beck of the Philadelphia office of the Dechert LLP law firm for bringing this case to my attention.

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