Am. Auto. Ins. Co. v. Murray

658 F.3d 311

AMERICAN AUTOMOBILE INSURANCE COMPANY

v.Tyrone MURRAY; Tyrone Murray doing business as Olney Business Center; Ennie, Inc. doing business as Sam's Beer Distributor; *Edward R. Easter, as Executor of the Estate of James S. Easter, Jr.; Jeannette I. Easter, as the Administrator of the Estate of Jessica Lynne Easter; Stephen L. MeloniEnnie, Inc. d/b/a Sam's Beer Distributor, Appellant.(Amended Pursuant to Fed. R. App. P. 43(a) See Clerk's Order dated 11/17/09).American Automobile Insurance Company

v.Tyrone Murray; Tyrone Murray doing business as Olney Business Center; Ennie, Inc. doing business as Sam's Beer Distributor; *Edward R. Easter as Executor of the Estate of James S. Easter, Jr.; *Jeannette I. Easter as the Administrator of the Estate of Jessica Lynne Easter; Stephen L. Meloni*Jeannette I. Easter, as the Administrator of the Estate of Jessica Lynne Easter, Appellant(Amended pursuant to Fed. R. App. P. 43(a) See Clerk's Order dated 11/17/09).

Nos. 09–1106

09–1248.

United States Court of Appeals, Third Circuit.

Argued Sept. 23, 2010.Filed: Sept. 7, 2011.

Roberta D. Pichini, Esq., Thomas Martin, Esq. (Argued), Feldman, Shepherd, Wohlgelernter, Tanner, Weinstock & Dodig, Philadelphia, PA, for Appellants Edward R. Easter and Jeannette I. Easter, Administrators.John J. D'Lauro, Esq., D'Lauro & Dickerson, PC, Philadelphia, PA, for Appellant Ennie, Inc., d/b/a Sam's Beer Distributor.Bethany Culp (Argued), Douglas A. Johns, Hinshaw & Culbertson LLP, Minneapolis, MN, Joseph C. Monahan, Braden Borger, Saul Ewing LLP, Philadelphia, PA, for Appellee American Automobile Insurance Company.Scott E. Miller, Esq., Ardmore, PA, for Appellees Tyrone Murray and Olney Business Center.Before: McKEE, Chief Judge, AMBRO, and CHAGARES, Circuit Judges.

OPINION

CHAGARES, Circuit Judge.

James S. Easter, Jr.¹ and Ennie, Inc. (“Ennie”) appeal the District Court's grant of summary judgment to American Automobile Insurance Company (“AAIC”) and denial of their motion for summary judgment in this declaratory judgment action. Specifically, AAIC sought and received a declaratory judgment that its insured, insurance agent Tyrone Murray, is not covered under its professional liability policy. This case presents a threshold issue of whether Easter and Ennie have standing to appeal. We conclude that Ennie has standing to appeal as a directly injured party of the insured (Murray), but that Easter does not have standing to appeal because his interests in this case are too remote and speculative.

On the policy coverage issue, we agree with the District Court that Murray was not covered under AAIC's policy. Thus, for the reasons that follow, we will affirm the District Court's judgment.

I.

On March 23, 2006, nineteen-year-old Stephen Meloni drove his vehicle while intoxicated and struck a pole, tragically killing his passenger, Jessica Easter. James S. Easter, Jr. individually and as the Administrator of the Estate of his daughter Jessica, filed a lawsuit on October 25, 2006, against Ennie and Steven L. Meloni in the Philadelphia County Court of Common Pleas (“Easter lawsuit”). Easter alleged that Ennie illegally sold alcohol to nineteen-year-old Gary Grato, who then supplied that alcohol to Meloni causing him to operate his vehicle negligently and recklessly.

In response to the lawsuit, Ennie sought a defense and indemnification from its general liability insurer, Century Surety Company (“Century”). Century provided Ennie with a defense under a reservation of rights and then filed a declaratory judgment action in the United States District Court for the Eastern District of Pennsylvania. The District Court granted summary judgment to Century, declaring that Century did not owe Ennie a defense or indemnification for the Easter lawsuit because the insurance policy in effect during the relevant time period contained a liquor liability exclusion.

Consequently, on November 27, 2007, Ennie filed a lawsuit (“Ennie lawsuit”) against its insurance agent, Tyrone Murray, alleging that Murray negligently failed to place liquor liability insurance coverage for Ennie. Through its principal Thai Poeng, Ennie claimed that it consulted with Murray on August 23, 2000, with the purpose of obtaining insurance that would protect the company from any and all risks arising out of the business of operating a beer distributorship. Ennie alleged that in 2002, Murray sold it the Century insurance policy under the pretense that it protected Ennie from these risks. With this belief, Ennie renewed that policy annually through Murray. Murray attested that Poeng renewed the Century policy that was in effect during March 2006 in December 2005, and that this policy did not contain liquor liability coverage. Hence, Ennie alleged that Murray, as a licensed commercial insurance agent, breached his duty to advise it properly of the necessity or availability of liquor liability coverage. Ennie contends that due to this breach of duty, it was required to pay the costs of its own defense in the Easter lawsuit and has been subjected to a potential adverse judgment arising out of the lawsuit.

In response to the Ennie lawsuit, Murray sought a defense under his professional liability policy with AAIC. Murray, as an insurance agent with The Agents & Brokers of Infinity Property Casualty Corp., enrolled online for his own insurance coverage through AAIC, which provided a “claims made and reported” errors and omissions liability policy. The first AAIC policy was issued to Murray on January 1, 2006, providing coverage from January 1, 2006 through January 1, 2007. The policy was properly renewed and Murray continued to receive coverage from AAIC for the period of January 1, 2007 through January 1, 2008. Murray's AAIC policy contains the following relevant language:

NOTICE—THIS IS A “CLAIMS MADE AND REPORTED POLICY”

THIS MEANS THAT COVERAGE APPLIES ONLY TO A CLAIM FIRST MADE AGAINST THE INSURED AND REPORTED DURING THE POLICY PERIOD OR, IF APPLICABLE, DURING THE EXTENDED REPORTING PERIOD.

* * *

I. COVERAGE

A. Insuring Agreements

1. Agents Error and Omissions Liability

We will pay on the Agent's behalf all Loss which such Agent is legally obligated to pay as a result of a Claim first made against such Agent or its Agency/Agency Staff and reported to Us during the Policy Period in accordance with Section VI. Conditions 1.2., provided that such Claim is for a Wrongful Act in the rendering of or failure to render Professional Services in connection with a Covered Product if that Wrongful Act occurs wholly after the Retroactive Date.

* * *

II. DEFINITIONS

C. Claim, either in the singular or plural, means:

1. Any written demand You receive for compensatory damages or services for a Wrongful Act including but not limited to the institution of arbitration proceedings against You, or

2. Any civil proceeding seeking compensatory damages against You for a Wrongful Act commenced by the service of a complaint or similar pleading.

All Claims against the Insured arising out of the same Wrongful Act or Interrelated Wrongful Acts [of one or more of the Insured] will be considered one Claim. All Claims arising out of Interrelated Wrongful Acts will be considered first made at the time the earliest such Claim was made against the Insured.

* * *

Q. Wrongful Act, either in the singular or plural, means:

1. Any actual or alleged negligent act, error or omission, or negligent misstatement or misleading statement by any Agent or its Agency/Agency Staff in the rendering of or failure to render Professional Services; or

2. Any actual or alleged negligent Personal Injury arising out of any Agent's or its Agency/Agency Staff's rendering of or failure to render Professional Services.

3.

Appendix (“App.”) 64, 66, 69 (emphases added).

The AAIC policy also contains the following amendatory endorsement:

Retroactive Date means the earlier of;

1. The Retroactive Date, if any, shown on the Agent's Property/Casualty Insurance Agent's Error and Omissions Liability Policy;

a. Which immediately preceded the first policy American Automobile Insurance Company issued to the Agent; or

b. Which immediately preceded the date the Agent was first added to the American Automobile Insurance Company Policy, if the Agent was added after the inception date of the first American Automobile Insurance Company Policy, provided that there is no lapse in coverage between the termination date of that other policy and the inception date of coverage for the Agent under the Automobile Insurance Company Policy.

If a lapse in coverage exists, the Retroactive Date shall be:

a. The inception date of the first Policy Automobile Insurance Company issued to the Agent; or

b. The inception date of coverage when the Agent was first added to the American Automobile Insurance Company Policy, if the Agent was added after the inception of the first American Automobile Insurance Company Policy.

2. The Retroactive Date for the Sponsoring Company shall be the same as is applicable to the Agent whose Wrongful Act gave rise to the Claim against the Sponsoring Company, and the Retroactive

Date for the Agency/Agency Staff shall be the same as is applicable to the Agent who is responsible for such Agency/Agency Staff.

App. 90. Prior to his relationship with AAIC, Murray was covered under a liability policy from United States Liability Insurance Company (“USLIC”) from the period of November 24, 2004 through November 24, 2005. That policy had a retroactive date of November 24, 2004. Hence, Murray had a lapse in professional liability coverage from November 25, 2005 through December 31, 2005, immediately proceeding the January 1, 2006 effective date of the first AAIC policy.

Murray tendered his defense of the Ennie lawsuit to AAIC, and AAIC provided Murray with a defense under a reservation of rights to deny coverage and to seek recompense of all costs expended if it was determined that the AAIC policy did not provide Murray coverage. On May 8,...