Homeland Ins. Co. of Del. v. Devereux Found.

505 F.Supp.3d 508

HOMELAND INSURANCE COMPANY OF DELAWARE, Plaintiff,

v.The DEVEREUX FOUNDATION and Eric Johnson, Defendants.

CIVIL ACTION NO. 17-2415

United States District Court, E.D. Pennsylvania.

Filed December 7, 2020

Ilan Rosenberg, Alexander Brown, Eric C. Rosenberg, Jacob C. Cohn, Gordon Rees Scully Mansukhani, LLP, Philadelphia, PA, for Plaintiff.

Eric J. Schreiner, Kleinbard LLC, Joseph N. Bongiovanni, IV, Mariel C. Marsh, Post & Schell, P.C., Philadelphia, PA, for Defendant the Devereux Foundation.

Charles L. Becker, Colin Burke, Dominic C. Guerrini, Kline & Specter, P.C., Eric J. Schreiner, Paul G. Gagne, Steven J. Engelmyer, Kleinbard LLC, Philadelphia, PA, for Defendant Eric Johnson.

MEMORANDUM

JONES, II, District Judge

I. INTRODUCTION

The Devereux Foundation ("Devereux") faced an $11 million jury verdict following a civil action in 2017 by Eric Johnson ("Johnson") after he was injured by a Devereux resident in 2011. Devereux and Johnson subsequently reached a settlement agreement whereby Devereux assigned Johnson the right to recover from Devereux's insurer, Homeland Insurance Company ("Homeland"). Homeland then initiated this action against Devereux, seeking a declaratory judgment to clarify that it has no obligation to indemnify Devereux or Johnson for the verdict, as Devereux failed to provide timely notice of the claim—a condition precedent to coverage. The Parties have cross-moved for summary judgment on the issue of the timeliness of Devereux's notice to Homeland; Homeland has additionally moved for summary judgment on the issue of whether Devereux breached the insurance agreement between the Parties and failed to satisfy a condition precedent to coverage. For the reasons outlined below, Devereux and Johnson's Partial Motion for Summary Judgment (ECF No. 82) is denied, and Homeland's Cross-Motion for Summary Judgment (ECF No. 84) is granted. Therefore, Homeland's additional Motion for Summary Judgment (ECF No. 101) is dismissed as moot.

II. STATEMENT OF FACTS

Plaintiff/counterclaim Defendant Homeland Insurance Company of Delaware ("Homeland") had long insured Defendant/counterclaim Plaintiff The Devereux Foundation ("Devereux"). (ECF 85; Homeland's Supplemental Statement of Undisputed Facts ("SSF") at ¶ I.1; Ex. H to Johnson and Devereux's Statement of Undisputed Facts ("SUF") at 42:17-44:7). From July 1, 2013 to July 1, 2014, Homeland insured Devereux under Policy No. MPP-5447-13 ("2013-14 Policy"), and from July 1, 2014 to July 1, 2016, Homeland insured Devereux under Policy No. MPP-6333-14 ("2014-16 Policy"). ECF 85; SSF at ¶¶ I.2, I.8; Exs. B and C to SUF. Each policy provided coverage for claims of Professional Services Wrongful Acts made and reported during the Policy Period or Extended Reporting Period. (ECF 85; SSF ¶¶ I.4, I.10).

As relevant here, the 2013-14 Policy Period concluded on July 1, 2014 and included a sixty-day Extended Reporting Period concluding on August 30, 2014. (ECF 85; SSF ¶ I.6). The 2013-14 Policy defined a "claim" as "a written demand received by an insured for monetary damages resulting from a Wrongful Act or Occurrence." (ECF 49; Third Am. Compl., Ex. C at 43). The 2014-16 Policy defined a "claim" as "any written notice received by an insured that any person or entity intends to hold an Insured responsible for a Wrongful Act or an Occurrence." (ECF 49; Third Am. Compl., Ex. D at 114). The 2013-14 Policy provided a coverage limit of $4 million per claim, subject to a $2 million per claim deductible. (ECF 85; SSF at ¶ I.3). The 2014-16 Policy provided a coverage limit of $10 million per claim, subject to a $4 million per claim deductible. (ECF 85; SSF at ¶ I.9). Both policies contained "OneBeacon Professional Insurance Medical Professional and General Liability Claim Reporting Guidelines," which enumerated the types of events that should be reported under the policies. (ECF 85; SSF at ¶ 1.15). For all relevant purposes, OneBeacon and Homeland behaved as a single entity before, during, and after the Johnson matter and will be referred to collectively as "Homeland" for clarity.

Early in the morning on June 23, 2011, Philadelphia resident Eric Johnson was shot outside his home. (ECF 85; SSF at ¶ II.16; ECF 59; Johnson's Answer to Homeland's Compl. at ¶¶ 8-10). Mr. Johnson identified Devereux resident Shykir Crew as his assailant. (ECF 85; SSF at ¶¶ 17-18; Ex. 1 to SSF; Ex. 2 to SSF at 170:14-171:3). Following an investigation and criminal trial, a jury found Mr. Crew guilty of robbery, aggravated assault, carrying a loaded firearm, possession of a firearm by a minor, and possession of an instrument of crime. (ECF 85; SSF at ¶¶ II.16-42).

Following Mr. Crew's criminal trial, Mr. Johnson instituted a civil negligence suit against Devereux, Crew, and various Devereux employees in their individual capacity ("Johnson matter" or "Johnson action"). (ECF 85; SSF at ¶¶ 43, 45). In order to commence the action, Johnson filed a Praecipe for Writ of Summons in the Philadelphia Court of Common Pleas and served the Writ of Summons on Defendants on June 20, 2014. (ECF 85; SSF at ¶ III.43, III.49-50). This informed Defendants that Johnson had "commenced an action against [them]," while the Civil Cover Sheet noted the "case type" was a "tort" and stated the amount in controversy is "more than $50,000." (ECF 85; SSF at ¶¶ 44, 47; ECF 59, 63). As addressed below, the parties dispute whether the Civil Cover Sheet was in fact attached to the Writ of Summons that Devereux received. (ECF 92; Memo. in Opp. Homeland's Cross Mot. Summ. J. at 2-3; Third Am. Compl. at ¶¶ 23-24; Ex. 13 to SSF at Ex. B-D).

Upon receipt of the Writ of Summons, Devereux immediately began preparing to defend the case. That same day, Devereux employee Judy Starr emailed Devereux's then-senior counsel, John Edward Krampf, informing him that she had just received a "civil complaint" and discussing the importance of retaining qualified defense counsel. (ECF 85; SSF at ¶ 53; Ex. 15 to SSF; Ex. 4 to SSF at 62:17-24). Three days later, on June 23, 2014, Devereux retained Yost & Tretta, LLP as defense counsel in the Johnson matter. (ECF 85; SSF at ¶ 57; Ex. 16 to SSF). Ms. Starr then informed Kathy-Ann Lewis, Devereux's then-Assistant Treasurer, that "[t]he Johnson matter falls under [Devereux's Professional Liability/General Liability policy ("PL/GL")]." (ECF 85; SSF at ¶¶ 59, 60). Devereux initially listed the report date of the Johnson claim as "6/9/14" in its claims bordereaux for the fiscal year ending June 30, 2014; however, the report date had been changed to reflect "12/16/14" in the claims bordereaux for the fiscal year ending June 30, 2015. (ECF 85; SSF at ¶¶ 72-74; Exs. 21 and 22 to SSF).

Richard Yost began reviewing the Johnson matter and communicating with Johnson's counsel, William Davis, on June 25, 2014, and he officially entered an appearance in the action on June 26, 2014. (ECF 85; SSF at ¶¶ 82-83). The Court of Common Pleas scheduled a Case Management Conference for the Johnson action to be held on August 22, 2014. (ECF 85; SSF at ¶¶ 87, 92). In accordance with this conference, Mr. Yost requested Devereux's insurance coverage for the matter; in response, Ms. Lewis provided the 2013-14 Policy. (ECF 85; SSF at ¶¶ 88-91). On October 6, 2014, Eric Johnson officially filed a Complaint after Devereux ruled him to do so. (ECF 85; SSF at ¶¶ 99-100; Ex. B to SSF).

Homeland's claims adjuster, Nancy Morel, received notice of the Johnson claim on November 24, 2014, when Devereux forwarded her a spreadsheet of its active PL/GL claims in advance of the following day's claims review meeting. (ECF 85; SSF at ¶¶ 106, 110; Ex. 39 to SSF; Ex. 19 to SSF at 144:1-147:4). The spreadsheet listed the report date of the Johnson claim as June 19, 2014. (ECF 85; SSF at ¶ 108; Ex. 39 to SSF at line 219). Despite this report date, Ms. Morel informed Ms. Lewis on December 9, 2014, that Homeland had no record of receiving notice of the Johnson claim. (ECF 85; SSF at ¶ 110; Ex. 19 to SSF at 144:1-147:4). Shortly thereafter, Devereux officially reported the Johnson claim to Homeland by emailing the company a copy of the one-page Writ of Summons and the Complaint. (ECF 85; SSF at ¶ 113; SUF at ¶ 45; Ex. G to SUF). On January 14, 2015, Homeland issued Devereux a letter describing its current coverage position for the Johnson matter; the letter stated the 2014-16 Policy applied but expressly reserved Homeland's rights to "limit or deny coverage on additional or alternative bases" as they became known. (ECF 85; SSF at ¶ 118; Ex. G to SUF). Homeland discovered in April 2017 that Devereux had received the Writ of Summons in June 2014. (ECF 85; SSF at ¶ 119; Ex. 64 to SSF at 59:9-60:25).

Between June and September 2015, Mr. Yost engaged in cost-of-defense settlement discussions with Mr. Davis. (ECF 85; SSF at ¶¶ 137-149: Ex. 53 to SSF; Ex. 54 to SSF; Ex. 4 to SSF at 122:17-125:20; Ex. 55 to SSF; Ex. 28 to SSF at 59:3-60:3; Ex. 4 to SSF at 130:5-131:5; Ex. 56 to SSF; Ex. 28 to SSF at 67:8-68:9; Ex. 57 to SSF; Ex. 58 to SSF). Mr. Yost and Mr. Davis failed to reach an agreement, and settlement discussions broke down when Mr. Johnson retained counsel from Kline & Specter. (ECF 85; SSF at ¶¶ 144, 149-50; Ex. 28 to SSF at 67:8-68:9; Ex. 60 to SSF at 147:2-148:5). Homeland was not involved at any stage of the settlement discussions or the subsequent trial. (ECF 85; SSF at ¶ 135; Ex. 28 to SSF at 74:12-76:4; Ex. 4 to SSF at 96:6-24). Ultimately, a jury awarded an $11,031,000 verdict to Mr. Johnson after finding Devereux's gross negligence was a factual cause of his injuries. (ECF 82; SUF at ¶¶ 30-31). Devereux and Mr. Johnson thereafter reached a settlement agreement under which Devereux assigned him the right to recovery under its 2013-14 and/or 2014-16 Policies. (ECF 82; SUF at ¶¶ 55-56).

Homeland then initiated the present action by filing a Complaint against Devereux on May 26, 2017. (ECF 1). Homeland filed an Amended Complaint on August 18, 2017 and a...