Zurich Am. Ins. Co. v. Citizens Ins. Co. of Am.

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ZURICH AMERICAN INSURANCE COMPANY v. CITIZENS INSURANCE COMPANY OF AMERICA, BELFI BROS. AND COMPANY, INC.

Civil Action No. 24-1879

United States District Court, E.D. Pennsylvania

September 13, 2024

MEMORANDUM

KEARNEY, J.

A general contractor on a construction project hires subcontractors to complete the assigned project. Both the general contractor and subcontractor purchase liability insurance. The general contractor requires the hired subcontractor to identify the general contractor as an “additional insured” on the subcontractor's insurance. The subcontractor's employees perform services at the Pennsylvania job site. If subcontractor's employee is injured on site, the Pennsylvania Workers' Compensation Act bars the employee from suing the employer subcontractor. So the injured employee instead sues the general contractor for negligence in state court. And the general contractor looks to the subcontractor for insurance coverage. We today address whether the subcontractor's insurer must cover the general contractor's costs of defending the employee's negligence case. We study the four corners of the “additional insured” policy language and the employee's allegations. Our Court of Appeals and several colleagues offer thoughtful guidance. The employee's state court allegations sufficiently trigger the obligations of the subcontractor's insurer to pay the general contractor's costs of defending the employee's case. We enter judgment on the pleadings declaring the subcontractor's insurer must reimburse for earlier costs and cover current fees and costs necessary to defend the general contractor in the employee's case. We dismiss the remaining claim for indemnity as not ripe.

I. Background

Southeastern Pennsylvania Transportation Authority hired general contractor James J. Anderson Company, Inc. to perform construction work on the Susquehanna-Dauphin Broad Street line station.^[1] General contractor Anderson Construction purchased general liability insurance for its protection from Zurich American Insurance Company.^[2]

General contractor Anderson Construction hired Belfi Bros. and Company, Inc as a tiling subcontractor.^[3] Subcontractor Belfi agreed to maintain commercial general liability insurance and name general contractor Anderson Construction as an additional insured for its work on SEPTA's job on a primary non-contributory basis.^[4] Belfi bought insurance from Citizens Insurance Company of America.^[5] It identified Anderson Construction as an additional insured.^[6] Citizens agreed to provide coverage for Anderson Construction to recover as an additional insured: (1) for injuries “caused, in whole or in part, by” Belfi's “acts or omissions” or the “acts or omissions of those acting on [Belfi's] behalf; in the performance of [Belfi's] ongoing operations for [Anderson Construction]”;^[7] and (2) for injuries “caused, in whole or in part, by [Belfi's] acts or omissions, or the acts or omissions of those acting on [Belfi's] behalf but only with respect to . . . [Belfi's] work for the additional insured(s) designated in the contract, agreement or permit; . . . Premises [Belfi] own[s], rent[s], lease[s] or occup[ies],” or for “[Belfi's] maintenance, operation or use of equipment leased to [Belfi].”^[8]

Enrico Panvini worked at SEPTA's job site for Belfi.^[9] Mr. Panvini slipped while carrying the heavy part of a wet saw backwards down about thirty steps.^[10] He sustained severe and permanent bodily injuries and losses.^[11] He sued SEPTA, general contractor Anderson Construction, and John Does in the Philadelphia County Court of Common Pleas alleging their negligence caused his injuries and seeking damages.^[12] He alleged his injuries occurred within the scope of his employment with Belfi.^[13] He also alleged general contractor Anderson Construction's agents and representatives failed to supervise the work, provide a safe work site, and provide a safety plan.^[14] Mr. Panvini did not sue his Employer, Belfi.^[15] Anderson Construction, through its insurer Zurich, asked Citizens to provide a defense as an additional insured under Belfi's insurance policy in Mr. Panvini's action on February 15, 2024.^[16] Citizens declined to defend.^[17]

II. Analysis

The general contractor's insurer Zurich now sues the subcontractor's insurer Citizens asking we declare Citizens has a duty to defend the general contractor in Mr. Panvini's ongoing negligence suit.^[18] Zurich also asserts a claim for indemnification. The two insurers now crossmove for judgment on the pleadings as to Citizens' obligation to pay the costs of defense in Mr. Panvini's suit.^[19]

Zurich argues its customer general contractor Anderson Construction qualifies as an additional insured under either of Citizens' additional insured endorsements because Mr. Panvini alleged Employer Belfi's acts or omissions potentially caused his injuries in his negligence case.^[20]Citizens responds general contractor Anderson Construction does not qualify as an additional insured because Mr. Panvini did not allege Employer Belfi's acts or omissions potentially caused his injuries.^[21]

We grant Zurich's Motion and deny Citizens' Motion. Mr. Panvini alleged Employer Belfi's acts or omissions potentially caused his injuries. Subcontractor Belfi's insurer Citizens must defend general contractor Anderson Construction as an additional insured on Belfi's insurance policy issued by Citizens.

A. We construe Mr. Panvini's allegations in favor of Anderson Construction.

Citizens has a duty to defend general contractor Anderson Construction if Mr. Panvini's underlying negligence complaint alleges Employer Belfi is “in whole or in part” responsible for his injuries.^[22] We resolve this issue by comparing Mr. Panvini's allegations to the language of the Citizens policy.^[23] Citizens must defend Anderson Construction if Mr. Panvini's negligence allegations potentially support recovery under the policy.^[24]

An insurer's duty to defend under Pennsylvania law “is a distinct obligation” “different from and broader than the duty to indemnify.”^[25] Determining whether an insurer has a duty to defend requires defining the scope of coverage under the insurance policy on which the insured relies and comparing it to the employee's allegations.^[26] We construe ambiguities in the Citizens policy “in favor of the insured to further the contract's prime purpose of indemnification and against the insurer, as the insurer drafts the policy and controls coverage.”^[27]

The Pennsylvania Supreme Court counsels, “[i]f the complaint filed against the insured avers facts which would support a recovery that is covered by the policy, it is the duty of the insurer to defend until such time as the claim is confined to a recovery that the policy does not cover.”^[28]“[A]n insurer has a duty to defend if there is any possibility that its coverage has been triggered by allegations in the underlying complaint.”^[29] Judges applying Pennsylvania law follow the “four corners” or “eight corners” rule, which limits an insurer's potential duty to defend to solely the “allegations of the complaint in the [underlying] action.”^[30]

We do not look outside Mr. Panvini's allegations or consider extrinsic evidence.^[31] We view as true and liberally construe Mr. Panvini's allegations in general contractor Anderson Construction's favor to determine whether the allegations trigger Citizens' duty to defend Anderson Construction.^[32]

B. We must account for the fact Mr. Panvini cannot sue Belfi in state court while applying the four corners interpretative rule.

Mr. Panzini did not sue his Employer, Belfi, in state court. His underlying allegations do not directly attribute fault to Citizens' insured (Belfi). We must account for the Pennsylvania Workers' Compensation Act when analyzing Mr. Panvini's allegations (or lack thereof) about Employer Belfi in the underlying complaint.

The Workers' Compensation Act is an injured worker's exclusive remedy against his or her employer.^[33] The Pennsylvania General Assembly prevents Mr. Panvini from suing Belfi. This limitation impacts an insurer's duty to defend. Our Court of Appeals instructed in Ramara, Inc. v. Westfield Ins. Co. “where the Workers' Compensation Act is relevant to a coverage determination, insurers (and the courts that review their determinations) must interpret the allegations of an underlying complaint recognizing that the plaintiff's attorney in the underlying action drafted the complaint taking the existence of the Act into account.”^[34]

Our awareness of the Act's impact on Mr. Panvini's underlying negligence claim does not violate Pennsylvania's four corners rule.^[35] As our Court of Appeals directed in Ramara, “[t]he four corners rule . . . does not permit an insurer to make its coverage decision with blinders on, disclaiming any knowledge of coverage-triggering facts.”^[36] Our colleagues consistently account for the Workers' Compensation Act when an insured subcontractor's employee is injured, the employer subcontractor is immune from suit under the Act, and the duty to defend is at issue.

Judge Robreno's analysis in Liberty Mutual Fire Ins. Co. v Harleysville Worcester Ins. Co. is illustrative.^[37] Like here, the general contractor's insurer sued the subcontractor's insurer seeking a declaratory judgment the subcontractor's insurer had a duty to defend the general contractor.^[38]The subcontractor's employee sustained injuries on the job and the subcontractor's insurer declined to defend the general contractor.^[39] Applying the facts of Ramara, Judge Robreno noted because “direct employers are immune from tort claims for workplace injuries of their employees, the plaintiff's attorney in the underlying action in Ramara would not have drafted the...