Tuesday, April 30, 2019

Federal Court Rules that Pennsylvania Supreme Court Decision in Gallagher (Household Exclusion Invalid) Case Applies Retroactively

In the case of Butta v. Geico, No. 19-675 (E.D. Pa. April 19, 2019 Kearney, J.), Judge Mark Kearney of the Eastern District Federal Court of Pennsylvania ruled that the January, 2019 decision by the Pennsylvania Supreme Court in the case of Gallagher v. Geico, in which that Court eradicated the household exclusion under automobile insurance policies, should apply retroactively. 

As Tort Talkers may recall, in the Gallagher case, the Pennsylvania Supreme Court ruled, in a 5-2 fashion, that a household exclusion in a Geico policy violated the Pennsylvania Motor Vehicle Financial Responsibility Law because it served as a “de facto waiver” of stacked coverage.   The Gallagher decision not only applied to that case but also across the board.   Here is a LINK to the prior Tort Talk post on the Gallagher case, along with a link to that decision.

According to an April 24, 2019 article by Max Mitchell in the Pennsylvania Law Weekly entitled "‘Seismic’ Insurance Stacking Decision Applies Retroactively, Federal Judge Rules,” since the Gallagher decision came down, five (5) Class Action lawsuits have been filed aimed at seeking compensation for those who had their stacked benefits previously denied under the household exclusion.   This Butta case is one of those proposed class actions.  

In his Opinion, Judge Kearney analyzed his thoughts on his prediction as to how the Pennsylvania Supreme Court would rule on the issue of whether Gallagher should apply retroactively.   In the end, the Butta court ruled that it should be applied retroactively and analysis that the Opinion in Gallagher did not announce a new rule of law in Pennsylvania.  

Anyone wishing to review a copy of this decision in the Butta case may click this LINK. 

I send thanks to Attorney Scott Cooper of the Harrisburg, PA law firm of Schmidt Kramer for bringing this case to my attention.  

"Low Ball Offer" Bad Faith Claim Dismissed

In the case of Moran v. USAA, No. 3:18-cv-2085 (M.D. Pa. Feb. 14, 2019 Caputo, J.), the court dismissed a Plaintiff’s bad faith claim without prejudice and leave to amend to correct certain issues with the Complaint.  

In Moran, the court noted that the only additions previously added to an original Complaint were facts that possibly supported the Plaintiff’s evaluation of the claims presented, but the court noted that no new facts were added as to why the carrier’s settlement offer was allegedly unreasonable or any new facts to show how the carrier knew or recklessness disregarded the fact that its offer was unreasonable. 

Rather, the court noted that the additional facts added to the Amended Complaint by the Plaintiff did not allow anything other than a possible finding of a negligent valuation, which did not support a claim for bad faith.  

Judge Caputo ruled that insurance bad faith cannot arise solely from discrepancies or disagreements with regards to the evaluation of a case presented.  

Anyone wishing to review a copy of this decision may click this LINK.  

I send thanks to Attorney Brigid Alford of the Camp Hill, Pennsylvania office of Marshall Dennehey, Warner, Coleman & Goggin for bringing this case to my attention.

I also send thanks as well as to Attorney Lee Applebaum, of the Philadelphia law firm of Fineman, Krekstein & Harris as well as from the Pennsylvania and New Jersey Insurance Bad Faith Case Law blog.   

Thursday, April 25, 2019

Link to Complimentary Copy Tort Talk 2019 Civil Litigation Update Booklet

Here is a LINK to a complimentary copy of the Tort Talk 2019 Civil Litigation Update Booklet I created in conjunction with my presentation at the Northeastern Pennsylvania Trial Lawyers Association CLE "Personal Injury Potpourri" on April 25, 2019 at the Mohegan Sun Casino in Plains, PA.

This 93 page booklet provides updates on important cases and trends that have been highlighted on the Tort Talk Blog (www.TortTalk.com) over the last 6 months or so.

I hope you find it informative and helpful with your practice.


To schedule a Mediation with Cummins Mediation Services, please call 570-346-0745 or send an email to dancummins@comcast.net.

Save the Date for the Lackawanna Pro Bono Golf Tournament

15 Surprising Things Productive People Do Differently

Came across this article on Linked and found it interesting and thought I would pass it along.  The article is entitled "15 Surprising Things Productive People Do Differently." 

Here is the LINK to the article written by Kevin Kruse for Forbes online (Jan. 20, 2016).

Wednesday, April 24, 2019

UIM Bad Faith Claim Dismissed Where No Allegations as to Amount of Liability Coverage

In the case of Ceresko v. Keystone Container Service, Inc., No. 18-CV-3361 (C.P. Lacka. Co. April 9, 2019 Nealon, J.), the court sustained a UIM carrier’s demurrer relative to a Plaintiff’s bad faith claim in a Post-Koken matter but, given that the statute of limitations had not yet expired, granted the Plaintiff leave to amend.  

According to the Opinion, six (6) days after a Plaintiff was involved in a motor vehicle accident with a waste container carrier that was transporting a large dumpster, the Plaintiff notified their UIM carrier of their demand for the payment of UIM benefits.  

Nine (9) days later, and without knowing that liability coverage limits covering the alleged tortfeasor Defendant and/or his corporate employer, the Plaintiff commenced this lawsuit against the driver of the waste container carrier, his employer, and the Plaintiff's own UIM carrier.  

On the UIM claim, the Plaintiff asserted a breach of the carrier’s contract to pay UIM benefits and also demanded punitive damages and other damages relative to a bad faith claim with respect to the denial of the claim for UIM benefits.  

The UIM carrier filed Preliminary Objections asserting a demurrer to the legal insufficiency of the Plaintiff’s bad faith claim in light of the facts alleged.  In the alternative, the UIM carrier requested a severance and stay of the bad faith claim.  

Judge Terrence R. Nealon
Lackawanna County
In granting the demurrer, the court noted that, at the time the Plaintiff filed this claim, which included a bad faith action, neither the Plaintiff nor the UIM carrier knew what the liability coverage limits were for the alleged tortfeasor Defendants.  

The court noted that the facts alleged in the Plaintiff’s Complaint were insufficient to sustain a bad faith claim.   However, as stated, the Plaintiff was granted leave to amend should facts be uncovered to support such a claim.  

Anyone wishing to review this case may click this LINK.

TODAY Is Administrative Professional's Day -- Remember the Ones Who Make You Look Good!

Tuesday, April 23, 2019

Petition to Open Default Judgment Denied

In the case of Turner Constr. Co. v. Associated Indus. Ins. Co., March Term 2018, No. 01727 (C.P. Phila. Co. Jan. 31, 2019 Padilla, J.), the court denied a Defendant’s Petition to Open a Default Judgment.   This matter arose out of a dispute between a Plaintiff, who was a general contractor, and the Defendant insurance company.   The Plaintiff claimed that the Defendant was obligated to provide the Plaintiff with a defense in an underlying case but had refused to do so.  

The court noted that the Defendant did not file a Petition to Open a Default Judgment until 85 days after the judgment had been entered.  As such, the rule requiring the court to enter a default judgment if the Petition to Open or Strike was filed within ten (10) days of the default was found not to apply.  

As such, under the case of Schultz v. Erie Ins. Exch., 477 A.2d 471 (Pa. 1984), in order to open a default judgment, the Defendant was required to demonstrate that (1) the petition was timely filed, (2) a reasonable explanation or legitimate use for the inactivity or delay was provided, and (3) the existence of a meritorious defense.  

In this matter, in an attempt to explain its failure to file a responsive pleading to the Complaint, the Defendant asserted that it was not properly served.   The court rejected this explanation as the record showed that the Defendant had indeed been properly served.  

As such, the court found that the Defendant failed to meet the standard set forth in the Schultz case for the opening of a judgment.  Accordingly, the Petition to Open the Judgment was denied.  

Anyone wishing to review a copy of this case may click this LINK.

Source: “Digest of Recent Opinions.”  Pennsylvania Law Weekly (March 5, 2019)

Summary Judgment Affirmed in Fatal Slip and Fall Case ("Non-precedential")

Tort Talkers may recall that Summary Judgment was granted by the trial court in a fatal slip and fall case under the caption of Wasnetsky v. Quinn's Market, No. 14-CV-4437 (C.P. Lacka. Co. June 15, 2018 Nealon, J.).  Summary Judgment was granted due to the absence of any dangerous condition of the floor and/or any actual or constructive notice on the part of the Defendant.

The June 21, 2018 Tort Talk post on the trial court's decision can be viewed HERE

By way of status update, on April 9, 2019, the Pennsylvania Superior Court issued a Non-precedential Memorandum affirming the decision by Judge Terrence R. Nealon in the court below.  That appellate decision can be reviewed HERE.

As a further update, it is noted that, yesterday, January 2, 2020, the Pennsylvania Supreme Court denied plaintiff's petition for allowance of appeal.  Here is a LINK to the Supreme Court's Order in this regard.

Monday, April 22, 2019

No Coverage Then No Bad Faith

In the case of Warrick v. Empire Fire & Marine Ins. Co., No. 18-1952, 2019 W.L. 1359737 (E.D. Pa. March 25, 2019 Kenny, J.), the court granted an excess carrier summary judgment on UIM breach of contract and bad faith claims filed by an injured party Plaintiff.  

According to the Opinion, the Plaintiff rented a rental car and obtained excess insurance through the rental company.   The Plaintiff was injured in a motor vehicle accident and pursued a UIM claim under the excess policy. 

The excess carrier asserted that UIM coverage was excluded and, as a result, denied coverage.  

The Plaintiff brought breach of contract and bad faith claims.  

In its Opinion, the court in Warrick agreed that the excess policy excluded UIM coverage and that there were no exceptions that could change that result.  

As such, the court held that, since the policy “specifically excluded coverage for underinsured motorist claims,..Plaintiff’s claims for breach of contract and bad faith are unfounded.”  

Anyone wishing to review a copy of this decision may click this LINK. 

I send thanks to Attorney Lee Applebaum of the Philadelphia law firm of Fineman, Krekstein & Harris for bringing this case to my attention.  Attorney Applebaum writes the excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law blog, which can be viewed HERE.

Several Notable Civil Litigation Decisions Pertaining to Expert Testimony

Judge Terrence R. Nealon of the Lackawanna County Court of Common Pleas recently issued several decisions of note heading into a medical malpractice trial in the case of The Pennsylvania Trust Co. v. Wilkes-Barre Hosp. Co., LLC, et al., No. 17 - CV - 4655 (C.P. Lacka. Co. April 12, 2019 Nealon, J.).

The case arose out of claims of alleged negligent neonatal care.  Plaintiff's counsel in the case was Attorney Matthew A. Casey of Ross Feller Casey, LLP out of Philadelphia.

Reduction of future medical costs to present value prohibited

In a decision found at this LINK, Judge Nealon addressed issues pertaining to the reduction of future medical expenses to present value.  In this matter, the Plaintiff asserted a pre-trial objection to the defense economists expert from repeatedly referencing the amounts of future medical and/or life care costs in terms of the present value of the costs.

Judge Terrence R. Nealon
Lackawanna County
After pointing to 80 years of Pennsylvania precedent, as well as MCARE precedent, confirming that future medical cost claims are not to be reduced to present value in (non-automobile accident) civil litigation matters, the court granted the Plaintiff's motion in limine in this regard and held that the defense economist expert was precluded from referencing the reduction of the Plaintiff's future medical and/or life care costs to present value.

Expert testimony on need for future medical care allowed

Under a separate detailed Order found at this LINK, Judge Nealon addressed the issue of the presentation of expert testimony on likelihood of future medical care.  The defense objected to the Plaintiff's expert's proposed testimony in this regard as speculative and inappropriate.  Citing to a number of cases, the court overruled the defense's objection and allowed the opinion on the basis that experts are permitted to offer their opinions as to the future treatment required by a Plaintiff's injury or condition based upon facts in evidence that the jury would be warranted in relying upon.

References to learned treatises is hearsay in Pennsylvania state court (but allowed in a limited fashion)

In yet another pre-trial detailed Order found at this LINK, the court addressed objections by the Plaintiff to the defense expert's plan to reference medical publications in his opinion.

The court pointed out that, unlike the Federal Rules of Evidence, the Pennsylvania Rules of Evidence do not recognize an exception to the hearsay rule permitting the admission of a learned treatise as substantive evidence on a limited basis.  Judge Nealon even pointed to a Superior Court decision from a week ago in which that Court held that reading a passage from a treatise into evidence in an effort to prove the truth of the matter asserted therein amounts to inadmissible hearsay which is not changed by the fact that the passage is read by an expert.  See Order at p. 2 citing Hassel v. Franzi, 2019 WL 1512346 at *5 (Pa.Super. 2019).

Yet, the court also noted that experts may refer to treatises to explain the reasoning behind the expert's opinion as long as limiting instructions are provided by the court to ensure that the reference to the treatise does not come in as substantive evidence on the point made.

As such, Judge Nealon crafted a result in this matter by granting part, and denying in part, the Plaintiff's motion.  Under the Order, the defense expert would be permitted to reference certain treatises or publications but the court would issue limiting instructions to confirm that the referenced passages were not coming into the case before the jury as substantive evidence.

Low Ball Offer Not Necessarily Bad Faith

In the case of Rosenthal v. Am. States Ins. Co., No. 1:18-cv-01755 2019 (WL 1354141 M.D. Pa. March 26, 2019 Kane, J.), the court dismissed a bad faith count in a UIM case but allowed the Plaintiff the right to file an Amended Complaint.  

Generally speaking, after reviewing general bad faith law, the court noted that failing to plead descriptions of what a carrier actually did, or why they did it, can be fatal to a bad faith claim under the Federal Rules of Civil Procedure.  

Of note, the court confirmed that an allegation that the carrier paid first party medical benefits while not paying UIM claims is not in and of itself bad faith.   The court noted that allegations of bad faith in this regard must go beyond “a mere inconsistency” in the handling of these two (2) types of claims under the policy.  

Moreover, the court also noted that an allegation of a bad faith failure to communicate requires the Plaintiff to plead actual efforts to communicate with the carrier to which the carrier failed to respond in good faith.  

Judge Kane additionally held that identifying the difference between a demand and an offer alone cannot serve as the basis for claim for bad faith, absent allegations that the carrier acted unreasonably and in bad faith by making the lower offer.   In this case, the Plaintiff was demanding $1 million dollars in settlement, which she alleged was lower than her actual damages, and asserted that the carrier only offered $107,012.00.  The court found that these allegations, in and of themselves, were insufficient to support a claim for bad faith.  

The court noted that a low but reasonable estimate would be not treated as bad faith.  Here, the insured also did not allege any facts from which a jury could plausibly conclude that the Defendant’s offer was unreasonable and not made in good faith as opposed to an offer being made as part of the ordinary course of negotiations between carriers and Plaintiffs. 
Anyone wishing to review a copy of this decision may click this LINK

I send thanks to Attorney Lee Applebaum of the Philadelphia law firm of Fineman, Krekstein & Harris, and the writer of the Pennsylvania and New Jersey Insurance Bad Faith Case Law blog for bringing this case to my attention. 

Friday, April 19, 2019


In the event you need CLE credits, I wanted to note some upcoming CLE presentations I have on the calendar.

Next week, on Thursday April 25, 2019, I will be presenting a Tort Talk Top 10 Practical Tips at the NEPA Trial Lawyers Association Personal Injury Potpourri set to take place all day at the Mohegan Sun Hotel and Conference Center in Wilkes-Barre, PA.  You will have to get up early if you would like to see my presentation as I go on bright and early at 8:30 am.  For info on how to register for this CLE, please click this LINK.

Attorney Paul Oven and I will be doing another encore presentation of our previously well-received CLE entitled "The Law is Like a Box of Chocolates:  A Forrest Gump Themed Civil Litigation Update" at the Monroe County Bar Association on May 28, 2019.  Lunch begins at 11:30 a.m. and the CLE runs from 12 Noon to 1 p.m.  For more info on that program and how to register, please click this LINK.

I will also be presenting "The Law is Like a Box of Chocolates:  A Forrest Gump Themed Civil Litigation Update" again at the Annual Meeting of the Pennsylvania Defense Institute on Thursday, July 11, 2019 at 9:30 a.m. at the Bedford Springs Resort in Bedford Springs, PA.  More details to follow for that event.

Wednesday, April 17, 2019

Good Faith Effort To Complete Service Required to Avoid Statute of Limitations Dismissal

In the case of Flanigan v. Ellwood City Hospital, No. 30007-CV-2017 (C.P. Lawrence Co. Feb. 6, 2019 Cox, J.), the court found that a Plaintiff did not attempt to complete service of a Writ upon a Defendant doctor in a medical malpractice action with good faith efforts such that the Plaintiff’s cause of action was deemed to be barred by the applicable statute of limitations.  

According to the Opinion, the Plaintiff was injured while riding a dirt bike and then sought medical treatment from the Defendant medical providers.  Although the Plaintiff was a minor at the time of the accident, he was coming up on the age of majority and, under 42 Pa. C.S.A. §5524 and 5533, the applicable statute of limitations on the Plaintiff’s cause of action was two (2) years from the date that he reached majority.  

The statute of limitations in this case was set to expire on June 18, 2017.   A Writ of Summons was timely filed two (2) days earlier on June 16, 2017.  

The Writ was served on some Defendants but there was no docketed Sheriff’s Return demonstrating service on one physician Defendant. 

According to the record before the court, the Sheriff’s office made an unsuccessful attempt to serve that particular Defendant doctor at a satellite office on July 16, 2017, thirty (30) days after the Writ had been filed.  

Three and half months thereafter, that Defendant doctor was served at his office in Pittsburgh.    The doctor acknowledged that he had been presented with service papers at his Pittsburgh office on October 27, 2017.  

The Plaintiff had filed a Complaint on September 12, 2017.   The Defendant doctor filed Preliminary Objections asserting that the Complaint was not timely filed and should be dismissed based upon the statute of limitations.  

Judge Cox of the Lawrence County Court of Common Pleas noted that a statute of limitations can be tolled by the filing of a Writ of Summons.   After a Writ is issued, a Plaintiff has thirty (30) days to serve the Writ under the Rules of Civil Procedure pertaining to service.    The court noted that the Writ may be reissued and that the tolling effect on the statute of limitations continues along with the reissuance of a Writ of Summons as long as a good faith effort is made to complete service.  

In an effort to show good faith in this case, the Plaintiff submitted a document asserting that he, the Plaintiff, had asked his attorney multiple times to serve the Defendant doctor at his place of employment in Pittsburgh, but that the Plaintiff’s counsel had responded that the efforts to serve the doctor at the satellite office were legally sufficient.   According to the Plaintiff, service was finally made on the Defendant doctor after the Plaintiff begged his attorney to serve the doctor at his place of employment in Pittsburgh.

The court noted that, under Pennsylvania law, a client may be bound by the acts or statements of his attorney when such acts or statements are completed within the scope of the attorney’s authority.   The court found that, notwithstanding the Plaintiff’s personal efforts to push his attorney to complete service in another manner, the Plaintiff was bound by the actions, or inaction, of his counsel.  

Accordingly, the court did not consider the Plaintiff’s own actions while being represented by his attorney when assessing whether or not a good faith effort had been attempted to complete service.  

Consequently, since proper service was not made prior to the expiration of the statue of limitations, the court found that the Plaintiff failed to meet his burden of demonstrating evidence of actual notice on the part of the defense of the lawsuit or meet his burden of showing good faith attempts to complete service on that doctor.  

Given that it was found that the case was untimely filed, the court granted the Defendant doctor’s Motion to Dismiss. 

Anyone wishing to review a copy of this decision may click this LINK.

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (March 19, 2019).

Complaint Dismissed Due To Failure of Plaintiff To Conduct Good Faith Effort at Service of Process

In the case of Gussom v. Teagle, April Term 2018, No. 03821 (C.P. Phila. Co. Jan. 3, 2019 Patrick, J.), the court granted a Defendant’s Preliminary Objections seeking the dismissal of a Plaintiff’s Complaint for failure to complete service before the expiration of the statute of limitations.  

This matter arose out of a motor vehicle accident that occurred on July 26, 2016.   The Plaintiff filed a Complaint against the Defendant on April 26, 2018.   The Plaintiff was unable to complete service at the Defendant’s last known address in Philadelphia.  According to the Affidavit of Non-Service, the occupant of the last known address stated that the Defendant had relocated to Virginia.  

Several months later on August 22, 2018, which was after the expiration of the statute of limitations, the Plaintiff filed a Praecipe to Reinstate the Complaint. The defense responded with Preliminary Objections to the Complaint that was then filed in September of 2018.  

The Plaintiff did not respond to the Preliminary Objections. Instead the Plaintiff filed another Praecipe to Reinstate the Complaint in September of 2018.

The court sustained the Defendant’s Preliminary Objections in October of 2018, dismissing the Plaintiff’s Complaint in its entirety.   Two days later, the Plaintiff filed a Motion for Reconsideration which was also denied.  

The court reviewed Pennsylvania law requiring a good faith effort to complete service once an action was commenced.   The court found, in its sound discretion, that, under the facts presented, the Plaintiff’s inaction demonstrated an intent to stall the judicial machinery that the Plaintiff had set in motion.  

More specifically, the court pointed to the fact that, after the Plaintiff’s unsuccessful attempt to serve the Defendant at his last known address, there were no further efforts by the Plaintiff to locate and serve the Defendant.   The court also faulted the Plaintiff for not attempting to serve the Defendant by alternative means.   The court additionally noted that the two (2) Praecipes to Reinstate the matter were not filed timely.   

The court also noted that the Plaintiff did not file an Affidavit of the eventual completion of service until after the court had already sustained the Defendant’s Preliminary Objections.   The court found that, overall, the Plaintiff had failed to act in good faith in the efforts to complete service.  

The court also rejected the Plaintiff’s Motion for Reconsideration as no new facts or evidence were presented that would excuse the Plaintiff’s lack of a good faith effort to complete service on the Defendant prior to the expiration of the statue of limitations. 

Anyone wishing to review this case may click this LINK.

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (Jan. 29, 2019).

Monday, April 15, 2019

Criminal Convictions Found to Support Negligence per se Finding in Companion Civil Case

In the fraternity hazing case of Liu v. Pi Delta Psi Fraternity, Inc., No. 3028-CV-2015 (C.P. Monroe Co. March 21, 2019 Zulick, J.), Judge Arthur L. Zulick of the Monroe County Court of Common Pleas addressed a Plaintiff’s use of the doctrine of offensive collateral estoppel by way of a Motion for Summary Judgment seeking a finding of liability against certain fraternity Defendants based upon prior criminal convictions and/or pleas of guilty relative to the hazing charges arising out of the same incident.

According to the Opinion, this case arose out of fatal injuries to a pledge to a fraternity at Baruch College in New York City.   The fraternity had rented a house in Monroe County over a weekend for initiation rituals.  

After the Plaintiff’s decedent sustained fatal injuries allegedly as a result of the initiation rituals, a personal injury action was brought against the fraternity and various members of the fraternity.   

In separate proceedings, criminal charges were brought against the fraternity and 37 individuals.  

One of the Defendants at issue with respect to the Motion for Summary Judgment had entered a guilty plea to conspiracy to hinder apprehension/conceal evidence, and conspiracy to commit hazing.  

The fraternity itself went to trial and was convicted of multiple counts, including aggravated assault, conspiracy to commit aggravated assault, and hazing.  

The Plaintiff filed a Motion for Summary Judgment arguing that the Defendants at issue, who had been previously convicted of charges and/or who pled guilty to charges in the criminal case should be deemed to be negligent per se in this civil lawsuit.

Judge Arthur L. Zulick
After reviewing the law pertaining to negligence cause of actions and negligence per se, the court ruled that summary judgment would be entered in favor of the Plaintiff due to the Defendants’ convictions for conspiracy to haze the Plaintiff, which convictions were found to supply the basis for a determination of a breach of duty in this negligence cause of action.  

Anyone wishing to review a copy of this decision may click this LINK.

Tuesday, April 9, 2019

Entrustment Clause of Property Damage Policy Upheld To Preclude Coverage For Acts of Vandalism To Rental Property

In the case of KA Together, Inc. v. Aspen Specialty Ins. Co., No. 18-CV-142 (E.D. Pa. Jan. 24, 2019 Slomsky, J.), the court granted a Defendant carrier’s Motion for Summary Judgment on a property damage insurance claim presented by the Plaintiff for water damages.  

According to the Opinion, the Plaintiff alleged claims for breach of contract and bad faith stemming from a Defendant’s denial of an insurance claim made by the Plaintiff for losses at the Plaintiff’s property.   The Plaintiff had filed the insurance claim for water damage caused by two (2) individuals who had been residing in a third floor apartment on the property.  

The Defendant carrier filed a Motion for Summary Judgment asserting that the Plaintiff’s claims were barred by the “entrustment exclusion” of the insurance policy at issue, which expressly excluded coverage for all losses resulting from dishonest or criminal acts by person to whom the Plaintiff entrusted the property.  

The Plaintiff opposed the Motion for Summary Judgment by arguing that the entrustment exclusion did not apply because the Plaintiff never entrusted the property to the two (2) individuals responsible for causing the water damages.  

By way of further background, the property at issue was a mixed commercial residential building.   There was a rental apartment of the third floor.   The carrier insured the property with a commercial property policy which, as noted, included an “entrustment exclusion” which allowed the carrier to deny coverage for any losses resulting from dishonest or criminal acts by the insureds or anyone to whom the insured entrusted the property for any purpose.  

According to the Opinion, at some point, the person who had signed a Lease for the third floor apartment had his girlfriend move into the apartment.  Thereafter, the tenant and his girlfriend were arrested on separate criminal charges and removed from the property.   

The manager of the property was then made aware that another person claimed that he had signed a sublease for the apartment with the girlfriend.   That person was told that the Lease Agreement with the girlfriend would not be accepted by the landowner as the girlfriend had no authority to sublease the property to that person.  

After that person was asked to leave the premises, the landowner received a phone call the day after the person vacated the premises from the business that operated in the same building at the first and second floor, claiming that there is water flowing and flooding down into the office and store.   

When the manager went to the property, he found that there were three (3) sources of running water with the drains purposefully blocked in the third floor apartment.   The manager called the police and filed an incident report.   Thereafter, the insurance claim was submitted to the carrier.  

The landowner believed that the damage was covered under the policy as an act of vandalism. However, as noted above, the carrier relied upon the entrustment exclusion to deny coverage.   

The court found that the entrustment exclusion was not ambiguous and must be enforced.   The court emphasized that the entrustment exclusion broadly applies to dishonest or criminal acts by “anyone to whom [the landowner] entrust[s] the property for any purpose.”   The court ruled that, under the plain meaning of the policy, the carrier is entitled to summary judgment under the exclusion at issue.  

Anyone wishing to review a copy of this decision may click this LINK