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Admission Cannot Be Used to Withdraw Duty to Defend Against Policyholder (PA)

February 13, 2020

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<p style="text-align: justify;">The United States District Court for the Middle District of Pennsylvania recently rejected an insurance company’s attempt to withdraw its defense based on its insured’s admission in a separate pleading.  In<em> <a href="">MMG Insurance Company v. Guiro. Inc.</a></em>, the insurance company moved for judgment on the pleadings claiming that it owed no coverage to its insured in an underlying action arising from a motor vehicle accident.</p>
<p style="text-align: justify;">The underlying incident, which was filed in state court, involved a car accident in which the plaintiff was injured as a result of Guiro, Inc.’s (“Guiro”) delivery driver.  The plaintiff also alleged that the vehicle driven by Guiro was an automobile covered under Guiro’s insurance policy.  At the time, Guiro was insured by MMG Insurance Company (“MMG”).</p>
<p style="text-align: justify;">MMG filed a declaratory judgment action in federal court, alleging it was not required to defend or indemnify Guiro because the vehicle operated by the delivery driver was not actually a covered automobile.  In response, Guiro admitted that the delivery driver was not driving a vehicle covered by its commercial automobile insurance policy at the time of the incident.  Given this response, MMG filed a motion for judgment on the pleadings citing Guiro’s admission in the federal action as a basis for releasing MMG from defending or indemnifying Guiro under the terms of Guiro’s insurance policy.</p>
<p style="text-align: justify;">The District Court denied MMG’s motion for judgment on the pleadings as well as MMG’s motion for reconsideration.  Rather, the District Court reiterated that “Pennsylvania courts and the Third Circuit have been abundantly clear that, under Pennsylvania law, ‘[w]e do not consider extrinsic evidence’ when determining whether ‘a claim against an insured is potentially covered’ for purposes of determining whether an insurer has a duty to defend.  The District Court went on to state that “[w]ere we to consider evidence extrinsic to an underlying state court complaint in the context of an insurer's duty to defend by first considering that evidence in the context of the insurer's duty to indemnify and then applying the absence of a duty to indemnify to negate the insurer's duty to defend, the four-corners rule as it relates to the duty to defend would be rendered nugatory.”</p>
<p style="text-align: justify;">Relying on this precedent, the District Court declined to accept any extrinsic evidence and rely on Guiro’s prior admissions.  The District Court noted MMG’s unfortunate position, but stood strong in its stance that carving out an exception under these circumstances would gut the strictly enforced four-corners rule in its entirety.  As such, the District Court denied MMG’s motion for reconsideration.</p>
Thanks to Zhanna Dubinsky for her contribution to this post.  Please contact <a href="">Vincent Terrasi</a> with any questions.

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