Liberty Mut. Fire Ins. Co. v. Harleysville Worcester Ins. Co.

524 F.Supp.3d 462

LIBERTY MUTUAL FIRE INSURANCE CO., Plaintiff,

v.HARLEYSVILLE WORCESTER INSURANCE CO., Defendant.

CIVIL ACTION NO. 20-5093

United States District Court, E.D. Pennsylvania.

Filed March 10, 2021

Rocco Luisi, Jaffe & Asher LLP, Paramus, NJ, for Plaintiff.

William T. Salzer, Swartz Campbell LLC, Philadelphia, PA, for Defendant.

MEMORANDUM

EDUARDO C. ROBRENO, DISTRICT JUDGE.

I. INTRODUCTION

This is an insurance coverage dispute. Liberty Mutual Fire Insurance Company ("LMFIC"), the Plaintiff here, seeks the following: 1) a declaratory judgment that Harleysville Worcester Insurance Company ("Harleysville") was and is required to defend and indemnify Domus, Inc. and Domus Construction, Inc. for an underlying lawsuit; 2) damages against Harleysville for attorneys’ fees, plus costs and interest, incurred by LMFIC in connection with its defense of Domus in the underlying lawsuit; and 3) attorneys’ fees and costs for the current lawsuit.

In response, Harleysville filed a Motion to Dismiss. For the reasons explained below, Harleysville's Motion to Dismiss LMFIC's Complaint will be denied, but LMFIC's declaratory judgment claim as it pertains to Harleysville's duty to indemnify will be stayed, and therefore no judgment will be entered until the claim becomes ripe.

II. FACTUAL BACKGROUND¹

On February 20, 2019, Joseph Forgrove commenced an action in the Philadelphia Court of Common Pleas against several defendants, seeking damages for injuries he allegedly sustained in a slip and fall accident on March 15, 2017, at a construction project near 845 N. 12th Street in Philadelphia (the "Premises"), where Domus, Inc. and its related entities (collectively, "Domus") were allegedly the construction managers, and Forgrove's employer, Direct Air LLC ("Direct Air"), was performing work.

In the underlying action, Forgrove asserts claims for negligence against Domus and others and alleges he was a Direct Air employee working in the course and scope of his employment at the Premises at the time of the accident. He also alleges Domus was negligent in failing to provide a safe workplace, in supervising the work site, in failing to require contractors and subcontractors to protect against the risk of injuries, and in failing to train and supervise employees. Furthermore, he alleges that defendants themselves, or through their employees, servants, and agents, had notice of the alleged unsafe and dangerous condition of the Premises.

Domus, as contractor, and Direct Air, as subcontractor, entered into a Subcontract on July 15, 2016, concerning construction work that Direct Air agreed to perform for the project known as HELP Philadelphia V located at the Premises. Section 4.1 of the Subcontract provides that the "Subcontractor shall supervise and direct the Subcontractor's work, and shall cooperate with the Contractor in scheduling and performing the Subcontractor's Work." Compl. ¶ 16, ECF No. 1. Section 4.3.1 of the Subcontract provides that the Subcontractor "shall take reasonable safety precautions with respect to performance of this Agreement [and] shall timely comply with safety measures initiated by Contractor." Id. ¶ 17 (alteration in original).

The Subcontract contains an indemnification provision that provides as follows:

2. INDEMNIFICATION

a. To the fullest extent permitted by law, the Subcontractor shall indemnify and hold harmless the Owner, Contractor, Architect, Architect's consultants, Engineer, and agents and employees of any of them from and against any and all liability, claims, suits, causes of action, arbitrations, damages, losses and expenses, including but not limited to attorney's fees, arising out of or resulting from performance of the Subcontractor's Work, failure to perform the Work or other act or omission under or in connection with this Agreement. This express indemnity shall not be construed to negate, abridge otherwise reduce other rights or obligations of indemnity that may otherwise exist.

b. In claims against any person or entity indemnified under this Paragraph 4.6 by an employee of Subcontractor, the Subcontractor's Subcontractors, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under Subparagraph 4.6.1 shall not be limited by a limitation on the amount or type of damages, compensation or benefits payable by or for the Subcontractor's Subcontractors under workers compensation acts, disability benefit acts or other employee benefit acts.

Id. ¶ 18.

The Subcontract also contains an insurance provision that required Direct Air to purchase and maintain a Commercial General Liability Insurance policy. In compliance with the Subcontract, Direct Air obtained such a policy from Harleysville (the "Harleysville Policy") with a policy period from August 2, 2016, to August 2, 2017. The Harleysville Policy contains an Additional Insured Endorsement ("AI endorsement") which provides, in part, as follows:

1. Section II - Who Is An Insured is amended to include as an insured any person or organization for whom "you" are performing operations only as specified under a written contract (for purposes of this coverage referred to as the "written contract") that requires that such person or organization be added as an additional insured on "your" policy. Such person or organization is an additional insured only with respect to liability caused, in whole or in part, by the acts or omissions of the "Named Insured", or those acting on behalf of the "Named Insured", in the performance of the "Named Insured's" ongoing operations for the additional insured only as specified under the "written contract". A person's or organization's status as an insured under this coverage ends when "your" ongoing operations for that insured are completed.

Id. ¶ 22.

Pursuant to the terms of the AI endorsement, Domus, Inc. and Domus Construction, Inc. qualify as additional insureds under the Harleysville Policy for the claims alleged in the underlying action. The Harleysville Policy contains an "Other Insurance" provision which provides, in part, that "[i]f specifically required by the written contract referenced in Paragraph 1. above, any insurance provided by this coverage to an additional insured shall be primary and any other valid and collectible insurance available to the additional insured shall be non-contributory with this insurance." Id. ¶ 24.

LMFIC issued a Commercial General Liability Policy ("LMFIC Policy") to Domus, Inc. with a policy period of July 15, 2016, to July 15, 2017. The LMFIC Policy also contained an "Other Insurance" provision, but this one stated "[t]his insurance is excess over ... [a]ny other primary insurance available to you covering liability for damages arising out of the premises or operations, or the products and completed operations, for which you have been added as an additional insured." Id. ¶ 26.

In a letter dated February 19, 2018, LMFIC tendered Forgrove's claims against Domus to Direct Air. Harleysville denied this tender. In a letter dated March 21, 2018, LMFIC tendered Forgrove's claims against Domus to Harleysville. Harleysville did not respond. In letters dated April 30 and August 12, 2020, LMFIC tendered the defense and indemnity of Domus in the underlying action to Harleysville. Harleysville denied the first tender and did not respond to the second one.

Based on the foregoing, LMFIC seeks a declaration of its rights with regard to the Harleysville Policy, including declaratory judgment that Harleysville was and is required to defend and indemnify Domus for the underlying action under the Harleysville Policy, and that such coverage applies on a primary and non-contributory basis before coverage under the LMFIC Policy applies to Domus. In addition to declaratory judgment, LMFIC seeks damages against Harleysville for attorneys’ fees, plus costs and interest, incurred by LMFIC in connection with its defense of Domus in the underlying action. LMFIC also seeks attorneys’ fees and costs for the current action.

III. LEGAL STANDARD

A party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When considering such a motion, the Court must "accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party." DeBenedictis v. Merrill Lynch & Co., 492 F.3d 209, 215 (3d Cir. 2007) (internal quotation marks removed).

To withstand a motion to dismiss, the complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. Although a plaintiff is entitled to all reasonable inferences from the facts alleged, a plaintiff's legal conclusions are not entitled to deference, and the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).

The pleadings must contain sufficient factual allegations so as to state a facially plausible claim for relief. See, e.g., Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). In deciding a Rule 12(b)(6) motion, the Court limits its inquiry to the facts alleged in the complaint and its attachments, matters of public record, and undisputedly authentic documents if the complainant's claims are based upon these documents. See Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d...