Monday, October 14, 2019

Duty to Defend Supports Cross-Claim for Non-payment of Defense Legal Fees

In the case of Huffsmith v. PPL Electric Utilities Corporation, No. 11-CV-1012 (C.P. Lacka. Co. Sept. 5, 2019 Nealon, J.), the court addressed the issues surrounding a duty to defend and a duty to indemnify relative to a cross-claim asserted by one Defendant against a Co-Defendant. 

According to the Opinion, PPL Electric Utilities Corporation retained a contractor to perform tree removal services around transmission lines. 

Under the contract between the parties, the tree removal services contractor was obligated to indemnify the utility company for any personal injury or property damages claims resulting from the contractor’s work. Under the contract, the contractor also had a separate duty to defend at its own expense, with counsel acceptable to PPL, any suit or action brought against PPL based upon such claims. 

In an underlying matter, landowners filed a trespass action against the utility company and the tree removal services contractor for allegedly improperly moving seventeen (17) fully grown evergreen trees from the landowner’s property. There was a dispute in that matter as to whether or not the trees were within PPL’s lawful right-of-way. 

During the course of that litigation, PPL tendered its defense of the lawsuit to the contractor under the contract. 

However, the tree removal services contractor’s insurance company rejected PPL’s tender of its defense under an argument that the contractor’s duty to defend PPL would arise only if PPL became obligated to make a payment on the landowners’ trespass claim by virtue of a settlement or a verdict. 

As such, PPL retained its own defense counsel and, in the lawsuit, asserted a cross-claim against the contractor seeking to recover its own defense cost and counsel’s fees based upon the contractor’s breach of its contractual duty to defend. 

The case was litigated to a successful conclusion with a jury finding that the utility and the contractor had not trespassed upon the landowners’ property. 

Pursuant to a Stipulation between the two (2) Defendants, PPL’s crossclaim against the contractor was then subsequently submitted to a non-jury decision before Judge Terrence R. Nealon of the Lackawanna County Court of Common Pleas under Pa. R.C.P. 1038.

In this decision, Judge Nealon held that, although the contractor’s duty to indemnify the utility was contingent upon PPL’s liability for a payment for the landowner as a result of a settlement or verdict, the contractor’s duty to defend the utility went into effect once the landowner’s filed their lawsuit against both the PPL and the contractor for property damages allegedly caused by the contractor’s tree removal activities. 

Accordingly, the court ruled that the contractor breached its contractual duty to defend PPL in this matter.  The contractor was found to be liable for compensatory damages in the amount of the reasonable and necessary counsel fees and costs incurred and paid by PPL in defending this trespass action as well as in pursuing its cross-claim to recover those costs of defense. The court found that the defense costs and fees in the amount of $148,235.18 were reasonable and necessary to defend the lawsuit, which fees included litigation of an appeal and a remand by the appellate court.

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

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