Four Corners of the Complaint Remain Essential in Determining Whether There is a Duty to Defend and Indemnify (PA)
In Utica Mutual Insurance Company, the Eastern District of Pennsylvania analyzed whether an insurer’s duty to defend and indemnify had been triggered. The case arose from a demand for arbitration filed by the plaintiff, Pine Run, against the defendant, McDonald’s. McDonald’s attempted to bring in its subcontractor Voegele, as a party to the arbitration action. Voegele had a general liability policy with Utica Ins. Co. and McDonald’s contended it constituted an additional insured under the Utica policy. Utica filed a declaratory judgment action for a declaration that it did not owe Voegele, the named insured, a duty to defend or indemnify. Both Utica and McDonald’s subsequently filed cross motions for summary judgment.
In determining whether there was coverage under the Utica policy, the court reasoned that Pennsylvania courts invariably apply the “four-corners rule” in determining an insurer’s obligations under a policy. This means that the allegations included in the complaint determine whether coverage is triggered. Here, the plaintiff’s complaint included breach of contract, breach of warranties, breach of express warranties and faulty workmanship. With regards to the plaintiff’s faulty workmanship claim, the plaintiff alleged that it suffered damages as a result of McDonald’s negligent and defective installation of air conditioning units.
Looking to the Utica policy, the court reasoned the policy only afforded coverage if the property damage was caused by an “occurrence.” The Utica policy defined “occurrence” as an “accident … including continuous or repeated exposure to substantially the same general harmful conditions.” However, the policy did not define “accident.” As such, the court applied the Pennsylvania Supreme Court’s definition of “accident” as “[a]n unexpected and undesirable event, or something that occurs unexpectedly or unintentionally.” Ultimately, the court held that none of the plaintiff’s allegations constituted an accidental occurrence, under the policy, as it was “foreseeable that the faulty installation of air conditioning units and windows could lead to water damage and the growth of mold.” Therefore, the Court held the Utica policy did not afford indemnity and defense to Voegele and McDonald’s.
This case reiterates the importance of the four-corners rule. The factual allegations plead in the underlying complaint are key to determining whether defense or indemnification is warranted.
Thank you to Rachel Thompson for her contribution to this post. Please email Colleen E. Hayes with any questions.