"ADDITIONAL INSURED," Priorities of Coverage Issues: General's Carrier vs. Subcontractor's Carrier ...

 ... Plus Bad Faith Issues Too.

           Insurance Coverage issues were exhaustively addressed by a Federal Court in Pennsylvania in Mega Construction Corp. v. Quincy Mutual Fire Insurance Co., 2012 WL 3994473 (E.D. Pa. September 12, 2012), Download Mega Construction v. Quincy Mut. Fire Ins. Co. (E.D. Pa. No. 09.01728, Memorandum Opinion Filed September 12, 2012) PUBLIC ACCESS.  The Insurance Coverage issues surrounded a General Contractor, its Subcontractor, the Subcontractor's CGL carrier, the G.C.'s CGL carrier, and an injured claimant.  The Court resolved those issues with the same result, it ruled, under both Pennsylvania and New Jersey law.

          The case also involved jury issues of Bad Faith under New Jersey law, the Court ruled.

          First, the significant Coverage issues included the Subcontractor's Carrier's "Additional Insured" endorsement extending Coverage to the General Contractor, and the priority of Coverages as between the General's Insurance carrier and the Sub's Insurance carrier.  As noted, the issues of Insurance Coverage were resolved under both Pennsylvania and New Jersey law in this case, with the same result.

 

The "Additional Insured" Insurance Coverage Issues.

            In accordance with Dobek's Subcontract, Dobek asked and Quincy added Mega to Dobek's G.L. as an "Additional Insured" by an endorsement with this standard language:

Who Is An Insured (Section II) is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured.

Mega Constr. Co. v. Quincy Mut. Fire Ins. Co., 2012 WL 3994473 *1 (E.D. Pa. September 12, 2012).  [Boldfaced in the Policy; italics by the Court.]

          Under both Pennsylvania and New Jersey law, according to the Federal Court in this case, "additional insured endorsements with language similar to this one may cover liability arising out of the additional insured's own negligence."  Mega Constr. Co. v. Quincy Mut. Fire Ins. Co., 2012 WL 3994473 *6 (E.D. Pa. September 12, 2012).  Further, both States interpret "arising out of" language like that quoted above to mean "either 'but-for' causation or 'substantial nexus.'"  Mega Constr. Co. v. Quincy Mut. Fire Ins. Co., 2012 WL 3994473 *7 (E.D. Pa. September 12, 2012).  The Federal Court also found as a fact that Mr. Tavares's injury "plainly arose out of Dobek's 'ongoing operations.'"  Mega Constr. Co. v. Quincy Mut. Fire Ins. Co., 2012 WL 3994473 *9 (E.D. Pa. September 12, 2012).  Thus, there was no doubt in the mind of the Judge that for all these reasons, Quincy extended Coverage to Mega under the quoted "Additional Insured" endorsement in this case.  Quincy therefore owed Mega duties to defend and to indemnify Mega in the underlying case.  Since Quincy neither defended Mega nor attempted to settle on Mega's behalf when the underlying case settled, Quincy breached its duties to Mega, the Court held.

 

The Consequences of Quincy's Breach of its Duty to Defend Mega.

         As consequences of Quincy's breach of its duty to defend Mega, the Court held that (1) Harleysville (which intervened against Quincy) is entitled to be reimbursed in full by Quincy for the costs Harleysville incurred in defending Mega in the underlying case against Mega, and that (2) under New Jersey law, Harleysville is also entitled to recover its attorney's fees and costs in prosecuting "this declaratory judgment action" against Quincy.  Mega Constr. Co. v. Quincy Mut. Fire Ins. Co., 2012 WL 3994473 *9 (E.D. Pa. September 12, 2012).

 

The Competing "Other Insurance" Clauses.

            Both the G.L. Policies, the one issued by Harleysville to Mega the General, and the one issued by Quincy to Dobek the Sub, contained identical "Other Insurance" clauses   They would have cancelled each other out accordingly, except that the Harleysville clause was given effect to the extent that it provided that Harleysville's Policy would be excess over a Policy, like Quincy's, which extended "Additional Insured" Coverage to Harleysville's Named Insured.  Accordingly, Quincy provided Primary G.L. Coverage to Mega while Harleysville provided Excess G.L. Coverage to Mega here.  Mega Constr. Co. v. Quincy Mut. Fire Ins. Co., 2012 WL 3994473 *12-*13 (E.D. Pa. September 12, 2012).

 

Liability for the Underlying Settlement, and Proof.

            Harleysville also claimed reimbursement from Quincy of the "$1.1 million [paid by Harleysville] in settlement of  Mr. Tavares's claims against Mega."  Mega Constr. Co. v. Quincy Mut. Fire Ins. Co., 2012 WL 3994473 *11 (E.D. Pa. September 12, 2012).  Harleysville put on evidence sufficient to satisfy the laws of both Pennsylvania and New Jersey, that Harleysville's settlement with Tavares on behalf of Mega was reasonable and in Good Faith.  Without quoting all the evidence referenced in the Court's opinion, Harleysville put on evidence of:

• The injuries suffered by the claimant, which in this case were "catastrophic".
• The claimant's settlement demands.
• The experience and expertise of the Plaintiff's Attorney in the underlying case.
• The venue where the underlying case was going to be tried to a Jury.
• The legal rules governing liability in the underlying case.

Harleysville did not even attempt to put on any evidence at all of its defense costs, it appears, or to prove that its "settlement decisions" were reasonable, only that the amount of the settlement was reasonable and that Harleysville negotiated the settlement in Good Faith once Quincy denied all Coverage to Mega.

            Under the evidence of record in this case, Harleysville met its burden of proving that its settlement on behalf of Mega in the underlying case was both reasonable in amount, and negotiated in Good Faith.  This has the legal effect of rendering the Defendant Liability Insurance Company, here Quincy, liable up to its policy limits for the amount of the settlement in a case like this one.  Mega Constr. Co. v. Quincy Mut. Fire Ins. Co., 2012 WL 3994473 *11 (E.D. Pa. September 12, 2012)(applying both Pennsylvania and New Jersey law in this regard).

 

Last But Not Least, Mega's Bad Faith Claim Against Quincy Goes To A Jury.

            Finally, under both New Jersey and Pennsylvania law, Mega's Bad Faith claim against Quincy presented questions of fact which would be resolved by a Jury.  Mega Constr. Co. v. Quincy Mut. Fire Ins. Co., 2012 WL 3994473 *13 (E.D. Pa. September 12, 2012).

Conclusion.

            Faced with a cornucopia of exhausting factual and legal issues, the Court in this case exhaustively addressed each issue, often under the law of two States.  With respect to the duty to defend under Liability Insurance Policy, in any case, this decision once again shows that it is often if not always and everywhere a good practice to provide the Policyholder or other Insured with a defense under a Reservation of Rights while simultaneously pursuing a judicial resolution of important Coverage issues.

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Comments

[peliculas gratis]

An outstanding share! I have just forwarded this onto a colleague who had been conducting a little homework on this. And he in fact ordered me breakfast due to the fact that I found it for him... lol. So let me reword this.... Thank YOU for the meal!! But yeah, thanks for spending the time to discuss this issue here on your blog.