Selective Way Ins. Co. v. Mak Servs., Inc.

232 A.3d 762

SELECTIVE WAY INSURANCE COMPANY

v.MAK SERVICES, INC.; Tornetta Realty Corporation, Delval Properties Associates; The Valley Forge Marketplace Condominium Corporation; Henry Dunn, Inc.; Oscar and Cheryl, h/w Gordon

Appeal of: MAK Services, Inc.

No. 1289 EDA 2019

Superior Court of Pennsylvania.

Argued November 12, 2019

Filed April 24, 2020

James C. Haggerty, Philadelphia, for appellant.

Jeffrey H. Quinn, Philadelphia, for appellee.

BEFORE: BOWES, J., SHOGAN, J., and STRASSBURGER, J.^*

OPINION BY BOWES, J.:

MAK Services, Inc. ("MAK Services") appeals from the April 16, 2019 order granting summary judgment to Selective Way Insurance Company ("Selective Way"). After careful review, we reverse and remand.

As the trial court adroitly observed, the underlying factual history of this case is a veritable "comedy of errors" involving insurance coverage issued to MAK Services by Selective Way. Trial Court Opinion, 5/22/19, at 1. At the outset, we note that MAK Services is exclusively in the business of snow and ice removal. MAK Services worked with a broker, Henry Dunn, Inc. ("Dunn"), which obtained liability insurance for its operations. To that end, Selective Way issued Policy No. S199822500 (the "Policy") to MAK Services, which was effective from July 11, 2011, to July 11, 2012. See Selective Way's Complaint, 11/13/14, at Exhibit A.

The Policy excluded various types of coverage. Among these exclusions was one titled "Exclusion – Snow and Ice Removal," which modified the liability coverage provided by the Policy as follows:

This insurance does not apply to "bodily injury," "property damage," or "personal and advertising injury" arising out of snow and ice removal activities that are performed for others by the insured or by any contractors or subcontractors working on the insureds behalf. Snow and Ice Removal includes but is not limited to: snow plowing, snow blowing, snow or ice clearing, shoveling or salting, by means whether mechanical or by hand.

See Selective Way's Complaint, 11/13/14, at Exhibit D. It is unclear whether MAK Services was directly advised of the existence of this exclusion at the time the Policy was issued, although it appears Dunn was aware of the exclusion in the policy. See MAK Services’ Motion for Summary Judgment, 10/23/18, at ¶¶ 6-7; Selective Way's Answer, 11/21/18, at ¶¶ 6-7.

On or about October 30, 2011, Oscar Gordon slipped and fell on ice while walking through a parking lot on the premises of the Valley Forge Marketplace in Norristown, Pennsylvania, which was a client of MAK Services. Mr. Gordon and his wife (collectively, the "Gordons") initiated a lawsuit seeking damages for Mr. Gordon's resulting injuries and his wife's loss of consortium, naming MAK Services as one of several defendants. See Gordons’ Complaint, 4/9/13, at ¶¶ 6, 12, 20, 24. In relevant part, the Gordons asserted that MAK Services had been negligent in removing snow and ice from the subject lot. Selective Way appointed defense counsel to represent MAK Services regarding the Gordons’ claims.

On May 1, 2013, Selective Way contemporaneously sent a reservation of rights letter¹ to MAK Services, which stated the following:

One of the benefits of your insurance policy from Selection is that we will provide you with a legal defense when potentially covered claims are made against you. Since this case meets that standard, I have referred your file to [a] law firm .... They will represent you in this case. You should be hearing from that firm shortly. Please give them your full cooperation and refrain from discussing this loss with anyone other than your attorney or a properly identified representative of Selection.

In addition, please be aware that you always have the right to consult an attorney of your choice, at your own expense, to discuss this matter or to coordinate your defense with the attorney we have retained for you.

....

In the meantime, please be aware that Selective will be handling this matter under a reservation of rights. This means that Selective reserves all rights reserved to it under applicable law, insurance regulations and policy provisions that may become relevant as this matter continues to develop. Those rights include, but are not limited to, the rights to decline coverage for this claim and to withdraw assigned defense counsel.

Selective Way's Motion for Summary Judgment, 11/21/18, at Exhibit C. The letter did not acknowledge or discuss the snow and ice removal exclusion contained in the Policy. That same day, defense counsel retained by Selective Way entered an appearance on behalf of MAK Services. For the next eighteen months, Selective Way represented MAK Services in all aspects as to its defense against the Gordons’ civil claims.

On November 13, 2014, Selective Way filed a complaint seeking a declaratory judgment against, inter alia , MAK Services. In pertinent part, Selective Way averred that MAK Services' "potential negligence is based solely upon ice and snow removal activity, and the [Policy] specifically excludes a defense and indemnity for any damages arising from snow and ice removal activity ...." Selective Way's Complaint, 11/13/14, at ¶ 22. As such, Selective Way requested a judgment declaring that Selective Way: (1) did not owe MAK Services a defense in the Gordons’ civil action; (2) did not owe indemnity to MAK Services for the claims in the Gordons’ civil action; and (3) may withdraw its defense of MAK Services in the underlying case. Id .

On June 3, 2015, MAK Services filed an answer with new matter and counterclaim, that: (1) requested a declaratory judgment that Selective Way had an ongoing requirement to both defend and indemnify MAK Services with respect to the Gordons’ civil action; (2) argued that Selective Way should be estopped from ceasing its representation and indemnification of MAK Services; (3) raised a claim against Selective Way sounding in fraud; and (4) asserted a claim against Selective Way for statutory and common law bad faith. See MAK Services’ Answers to Complaint with New Matter and Counterclaim, 6/3/15, at ¶¶ 23-169.

On October 23, 2018, MAK Services filed a motion for summary judgment, arguing that the language contained in Selective Way's May 1, 2013 reservation of rights letter was "insufficient to properly preserve the potential coverage defense of the Snow and Ice Removal exclusion," and that Selective Way should be estopped from raising the policy exclusion. MAK Services’ Motion for Summary Judgment, 10/23/18, at ¶¶ 35-63. On November 21, 2018, Selective Way filed a cross motion for summary judgment, arguing that the reservation of rights letter was sufficient to preserve the efficacy of the snow and ice removal exclusion. Selective Way's Cross Motion for Summary Judgment, 11/21/18, at ¶¶ 30-55. The trial court held oral argument.

On April 16, 2019, the trial court entered an order granting Selective Way's motion, awarding the declaratory relief requested, and entering summary judgment in favor of Selective Way. See Order, 4/16/19 ("Selective Way has no duty to defend or indemnify [MAK Services] for the claims brought against it by [the Gordons] pursuant to the [Policy] and reservation of rights letter ...."). MAK Services filed a timely notice of appeal. The trial court ordered MAK Services to file a concise statement of errors pursuant to Pa.R.A.P. 1925(b), MAK Services timely complied, and the trial court issued a Rule 1925(a) opinion.

MAK Services presents two issues for our consideration:

1. Did the trial court err as a matter of law in finding that the reservation of rights issued by [Selective Way] on May 1, 2013, which did not reference the snow and ice removal exclusion in the Policy as a potential coverage defense, fully and fairly advised [MAK Services] of [Selective Way's] coverage position?

2. Did the trial court err as a matter of law in holding that [Selective Way] did not waive the coverage defense of the snow and ice removal exclusion when it failed to reference that exclusion in its May 1, 2013 reservation of rights, raising it only for the first time in the November 13, 2014 declaratory judgment complaint?

MAK Services’ brief at 2 (excessive capitalization omitted).

These claims concern the trial court's grant of summary judgment. "The question of whether summary judgment is warranted is one of law, and thus our standard of review is de novo and our scope of review is plenary."

City of Philadelphia v. Cumberland County Bd. of Assessment Appeals , 622 Pa. 581, 81 A.3d 24, 44 (2013). We are also mindful of the following principles:

We may reverse if there has been an error of law or an abuse of discretion. ... We must view the record in the light most favorable to the nonmoving party and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Furthermore, in evaluating the trial court's decision to enter summary judgment, we focus on the legal standard articulated in the summary judgment rule. The rule states that where there is no genuine issue of material fact and the moving party is entitled to relief as a matter of law, summary judgment may be entered. Where the nonmoving party bears the burden of proof on an issue, he may not merely rely on his pleadings or answers in order to survive summary judgment. Failure of a non-moving party to adduce sufficient evidence on an issue essential to his case and on which he bears the burden of proof establishes the entitlement of the moving party to judgment as a matter of law.

Carlino East Brandywine, L.P. v. Brandywine Village Association , 197 A.3d 1189, 1199-1200 (Pa.Super. 2018) (quoting Gubbiotti v. Santey , 52 A.3d 272, 273 (Pa.Super. 2012) ).

Although stated as separate issues, MAK Services is essentially challenging the sufficiency of Selective Way's reservation of rights letter, and thereby its preservation of the snow and ice removal exclusion. As a general matter, insurers have a broad responsibility to defend and indemnify its insureds....