Detailed Decision by PA Superior Court in Duty to Defend Coverage Case Appealed to PA Supreme Court

In its December of 2013 decision in the case of Indalex v. National Union Fire Ins. Co. of Pittsb., 83 A.2d 413 (Pa.Super. 2013)(Donohue, Shogan, and Wecht, J.J.; Opinion by Shogan, J.), the Pennsylvania Superior Court offered one of its latest and most detailed recitations of the law of insurance contract interpretation and the duty to defend in the context of a products liability case and faulty workmanship claims.

The Superior Court ultimately ruled, after a comparison of the underlying Complaints at issue to the policy language in question, that the carrier did indeed have a duty to defend its insured.  In so ruling the court rejected an argument by the carrier the "gist of the action" doctrine (contract actions can not be recast into tort actions by artful pleading) did not serve to preclude coverage.

The Superior Court noted "that the gist of the action doctrine has not been adopted by our Supreme Court in an insurance coverage context."  The Superior Court in Indalex found persuasive the analysis of the United States District Court for the Western District Court of Pennsylvania on the relationship between the gist of the action doctrine and the duty to defend. 

In that regard, the Federal Western District Court of Pennsylvania ruled that "[i]f the underlying complaint contains more than one cause of action, and one of them would constitute a claim within the scope of the policy's coverage, the insurer must defend the complaint until it can confine the claim to a recovery excluded from the scope of the policy." Citing National Fire Ins. Co. of Hartford v. Robinson Fans Holdings, Inc., Not Reported in F.Supp.2d, 2011 WL 1327435 (W.D.Pa.2011), citing American States v. Maryland Cas., 427 Pa.Super. 170, 628 A.2d 880, 887 (Pa.Super.Ct.1993).

The Indalex court found that, since tort claims were pled in the Complaints in the underlying suits, such tort claims must be considered in the ordinary duty to defend insurance contract analysis (i.e., do the allegations of the Complaint fall within the coverage provisions of the policy?).

The court in Indalex went on to state that "[w]hether the laws under which the complaints are brought will bar those tort claims because of the application of the gist of the action or a similar doctrine will be decided by the courts presiding over those lawsuits. Ultimately, because the gist of the action doctrine has never been adopted by our Supreme Court in an insurance coverage context, we are convinced that, at this juncture of a duty to defend claim, applying the gist of the action doctrine is inappropriate. Citing with "See" signal Berg Chilling Sys., 70 Fed.Appx. [620] at 624 [(3rd Cir. 2003)](stating that a court undertaking a duty to defend analysis should not rely entirely upon whether the plaintiff characterizes its claim as one arising in tort or contract).

The Superior Court in Indalex ultimately held that "[b]ecause the underlying complaints alleged defective products resulting in property loss, to property other than Appellants' products, and personal injury, we conclude there was an “occurrence” and reverse the order granting summary judgment."


It is reiterated that, in addition to addressing the novel issue of the application of the gist of the action doctrine in the context of a duty to defend argument, the Indalex Opinion offers an excellent overview of the appropriate standard of review in a declaratory judgment action on the issue of the duty to defend under a liability insurance policy.

The Pennsylvania Superior Court's decision can be viewed HERE.


UPDATE:

Reargument in this case was denied by the PA Superior Court on February 10, 2014.

A Petition for Allowance of Appeal to the PA Supreme Court was filed on March 12, 2014.
 

 

 

I send thanks to Don Bankus, Legal Affairs Manager for Insurance Agents & Brokers of PA, MD & DE (www.IABforME.com) for bringing this to my attention.