YOST & TRETTA, LLP - Attorneys at Law

SPRING 2010

RECENT CASE SUMMARIES INSURANCE COVERAGE

We have prepared the following compilation of insurance coverage decisions by the Pennsylvania courts during the last six months, which may be of interest to you. Please contact us if you have any questions or would like a copy of any of these decisions.

ALL RISKS POLICY-CONCURRENT CAUSE

In Bishops v. Penn National Insurance Company, 984 A.2d 982 (Pa. Super. 2009), the Pennsylvania Superior Court held that the insured was entitled to coverage for damage caused by flooding during a hurricane, even though a “concurrent cause” provision in an exclusion purported to exclude coverage for damage concurrently caused by flooding and any other causes.

ASSAULT AND BATTERY EXCLUSION

In Alea London, Ltd. v. Woodlake Mgmt., 2010 U.S. App. LEXIS 3023 (3d Cir. Pa. Feb. 17, 2010), the United States Court of Appeals for the Third Circuit held that an assault and battery exclusion barred coverage for a claim arising out of a shooting at the insured’s apartment building where the “but for” cause of the victim's injuries was the shooting, even though the plaintiff alleged that the insured was negligent in not providing a working security lock, creating a dangerous condition on the premises, and enabling the assailant to enter the premises.

ATTORNEY CLIENT PRIVILEGE

In Nationwide Insurance Company v Fleming, 2010 Pa. LEXIS 40 (Pa. Jan. 29, 2010), an equally divided Pennsylvania Supreme Court affirmed a decision by the Superior Court that the attorney-client privilege did not apply to a memo that Nationwide’s in-house counsel sent to several of the company’s managers and other counsel. The Superior Court reasoned that the privilege applies only to confidential communications made by the client to counsel. The Court held that the privilege did not apply to Nationwide’s memo because it did not contain any confidential communications from the client to the attorney or reveal any confidential communications previously made by the client to counsel, but only the attorney’s analysis of legal issues. The Superior Court did not address the work-product doctrine or any other possible grounds for withholding disclosure of the memo. Nationwide Mut. Ins. Co. v. Fleming, 924 A.2d 1259 (Pa. Super. 2007).

AUTO/UNINSURED/UNDERINSURED MOTORISTS

In Willett v. Allstate Ins. Co., 2009 U.S. App. LEXIS 28711 (3d Cir. Pa. Dec. 31, 2009), the United States Court of Appeals for the Third Circuit held that an insured was not entitled to recover underinsured motorist benefits for the death of her son where she had recovered from the tortfeasor the maximum amount permitted by the law of the state where the accident occurred, even though she might have been entitled to recover more damages if the accident had occurred in another state.

In Erie Ins. Exch. v. Larrimore, 987 A.2d 732 (Pa. Super. 2009), the Pennsylvania Superior Court held that the insured was entitled to underinsured motorist coverage equal to the limit of the policy’s liability coverage where the insurer failed to produce a written request for a lower limit of coverage other than the signed application.

BAD FAITH

In Johnson v. Progressive Ins. Co., 987 A.2d 781 (Pa. Super. 2009), the Pennsylvania Superior Court held that the insurer had not acted in bad faith in handling the insured’s claim for underinsured motorist benefits where the insurer had a reasonable basis for the value that it placed on the insured’s damages, even though it ultimately made an offer that was less than fifty percent of the eventual arbitration award.

CRIMINAL ACT EXCLUSION

In Allstate Ins. Co. v. Hopfer, C. A. No. 08-4549, United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 107949 (E.D.Pa. November 19, 2009), the Court held that a “criminal acts” exclusion barred coverage for claims against the insureds and their son arising out of the drug overdose death of a guest at their home whom the son had injected with an illegal drug.

DUTY TO DEFEND

In Genaeya Corp. v. Harco National Insurance Company, Superior Court of Pennsylvania, No. 1704 Eastern District Appeal 2008, 2010 Pa. Super. LEXIS 63 (Pa. Super. March 15, 2010), the Pennsylvania Superior Court held that, where policy stated that insurer “may elect to defend” the insured, the insurer had the right, but not the duty to defend the insured.

EQUITABLE CONTRIBUTION

In Great Northern Ins. Co. v. Greenwich Ins. Co., 2010 U.S. App. LEXIS 6034 (3d Cir. Pa. Mar. 24, 2010), the United States Court of Appeals for the Third Circuit held that an insurer who settled a claim on behalf its named insured and an additional insured could not recover contribution from the additional insured’s own insurer where it offered insufficient evidence at trial for the court to apportion the settlement payment between the two insureds.

ESTOPPEL

In Goodville Mutual Cas. Co. v. Hynes (In re Hynes), United States Bankruptcy Court for the Eastern District of Pennsylvania, 2009 Bankr. LEXIS 4140 (Bankr. E.D. Pa. Dec. 14, 2009), the court held that the insurer was not estopped to deny coverage for claim against the insured where claimants failed to establish that they or insured sustained prejudice as a result of delay in issuing reservation of rights.

FIRE DEPARTMENT CHARGES

In Safe Auto Ins. Co. v. Berlin, 2010 PA Super 31, 2010 Pa. Super. LEXIS 60 (Pa. Super. Ct. 2010), the Pennsylvania Superior Court held that a motor vehicle policy did not provide coverage for charges by a volunteer fire department for the cost of emergency equipment and supplies that it used in rescuing the insured from an accident.

NEGLIGENT ENTRUSTMENT

In Countryway Ins. Co. v. Slaugenhoup, 2010 U.S. App. LEXIS 312 (3d Cir. Pa. Jan. 7, 2010), the United States Court of Appeals for the Third Circuit held that exclusion in farm owner’s policy for liability imposed on an insured “for the use of” a motor vehicle barred coverage for claim against son who was allegedly negligent in asking his elderly father to drive the vehicle that was involved in the accident.

OCCURRENCE

In State Farm Fire & Cas. Co. v. Estate of Mehlman, 589 F.3d 105, 2009 U.S. App. LEXIS 27544 (3d Cir. Pa. 2009), the United States Court of Appeals for the Third Circuit held that the estate of insured who attempted to shoot the plaintiff was not entitled coverage because the insured's intoxication did not render his attack on the plaintiff unintentional.

In Colony Insurance Company v. Mid-Atlantic Youth Services Corp., United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 21432 (M.D. Pa. March 9, 2010), the court held that claims against parties to a kickback conspiracy involving juvenile court judges did not arise out of an “occurrence” and also fell within the scope of exclusion for knowing violation of rights of others.

SUCCESSOR CORPORATION

In Greenway Ctr., Inc. v. Essex Ins. Co., 2010 U.S. App. LEXIS 5174 (3d Cir. Pa. Mar. 11, 2010), the United States Court of Appeals for the Third Circuit held that the insurer was not required to provide coverage to an entity that took over the insured’s operations after the insured’s bankruptcy where successor never purchased any of the insured’s assets and no stock was ever transferred from the insured to the successor.

REIMBURSEMENT OF DEFENSE AND SETTLEMENT COSTS

In Utica Mutual Insurance Co. v. Rohm & Haas, et al., United States District Court for the Eastern District of Pennsylvania, 2010 U.S. Dist. LEXIS 10069 (February 5, 2010), the court held that the insurer was not entitled to reimbursement of defense costs and settlement payments even though it had reserved the right to recover those amounts.

_______________________________________________

FALL 2009

ALL RISKS POLICY/BURDEN OF PROOF

    In Somerset Industries, Inc., et al. v. Lexington Ins. Co., United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 57809 (E.D. Pa. July 7, 2009), the court held that the exclusion in an all-risk policy for “water that backs up from a sewer or drain” did not defeat coverage for damage arising from flooding in the insured’s warehouse because the exclusion could either be interpreted as water back up occurring from a blockage or an excess volume of water causing overflow, and the exclusion was construed against the insurer.

ASSAULT AND BATTERY EXCLUSION

    In Regis Insurance Company v. Kenny’s Bar and Restaurant, et al., 974 A.2d 1201 (Pa. Super. 2009), the Pennsylvania Superior Court affirmed the decision of the trial court which held that an assault and battery exclusion barred coverage for a claim by a patron who was allegedly assaulted by patrons at a bar, even though complainant alleged that the incident occurred in the presence of the bartender and security personnel.

    In Regis Ins. Co. v. All Am. Rathskeller, Inc., 976 A.2d 1157 (Pa. Super. 2009), the court held that an insurer had no duty to indemnify an insured bar for claims arising out an alleged assault and battery committed by employees of the bar in the parking lot because, although the complaint in the underlying action alleged failure to train and supervise the employees, the assault and battery exclusion in the policy specifically excluded coverage arising from the insured’s failures in hiring, supervision, etc.

    In Victoria Ins. Co., v. Mincin Insulation Services, Inc., United States District Court for the Western District of Pennsylvania, 2009 U.S. Dist. LEXIS 84082 (W.D. Pa. September 15, 2009), the court held that an action which arises from injuries from a physical attack is not covered under a policy with an assault and battery exclusion even where the complaint alleges assault and battery against plaintiff’s co-workers and separate counts of negligent hiring and failure to intervene against his employer because all claims arise from the physical injuries.

AUTO/FIRST PARTY BENEFITS

    In McCleester v State Farm, United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 90345 (M.D. Pa. September 30, 2009), the court held that a driver who was injured when a rock was thrown through the windshield of his truck was not entitled to recover first party wage loss benefits because his injury did not arise out of the maintenance or use of a motor vehicle.

AUTO/LIABILITY COVERAGE

    In Kropa v. Gateway Ford, 974 A.2d 502 (Pa. Super. 2009), the Pennsylvania Superior Court held that the authorized driver of a loaner vehicle from an automobile dealership was entitled to liability coverage under the dealership’s policy for amount of primary liability coverage required by the Financial Responsibility Law, but not for excess coverage maintained by the dealership.

AUTO/SUBROGATION

    In Oliver v. City of Pittsburgh, 977 A.2d 1232 (Pa. Commw. Ct. 2009) and Cole v. Sheils, United States Court of Appeals for the Third Circuit, 2009 U.S. App. LEXIS 8777 (3d Cir. Pa. April 3, 2009) the courts held that an employer was entitled to subrogate against its officer's third-party recovery for benefits paid to the employee under the Heart and Lung Act for injuries sustained in a motor vehicle accident.

AUTO/UIM/SET-OFF

    In Pusl v. Means, No. 596 WDA 2008, 2009 Pa. Super. LEXIS 3742 (Pa. Super. September 23, 2009), the court held that, where the plaintiff previously recovered $75,000 in underinsured motorist benefits and her own insurer failed to assert its subrogation rights, the subsequent verdict against the tortfeasor was reduced by that amount.

AUTO/UM/UIM/STACKING

    In State Auto Property and Casualty Ins. Co. v. Pro Design, United States Court of Appeal for the Third Circuit, 566 F.3d 86 (3d Cir. Pa. May 12, 2009), the court held that a waiver of stacking UIM coverage signed by the insured at inception of a single-vehicle policy remained valid and that an insurer is not required to provide the insured with the opportunity to waive stacking when an additional vehicle is added to the policy.

AUTO/HOUSEHOLD EXCLUSION

    In Erie Ins. Exch. v. Baker, 972 A.2d 507 (Pa. 2009), the Pennsylvania Supreme Court held that, where the insured was injured while operating his motorcycle that was not insured under the policy, application of the “household exclusion” was not contrary to the Motor Vehicle Financial Responsibility Law’s provision permitting stacking of UIM coverage.

COLLAPSE COVERAGE

    In Young Sook Pak, et al. v. Alea London Limited, et al., United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 65640 (E.D. Pa. July 30, 3009), the court held that an insured must prove that a reasonable insured would not have been aware of hidden decay in a collapsed wall, it is not enough that the insured himself was unaware of the decay.

DUTY TO DEFEND

    In Nationwide Mutual Ins. Co. v. Garzone, et al., United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 85528 (E.D. Pa. September 18, 2009), the court held that the insurer had no duty to defend an insured for a body organ harvesting scheme because although the complaint sufficiently alleged an occurrence for purposes of the CGL policy, there was no “property damage” or “bodily injury” because there is no property interest in a deceased body and emotional distress is not bodily injury.

EXHAUSTION OF POLICY LIMITS

    In NIA Learning Ctr., Inc. v. Empire Fire & Marine Ins. Cos., United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 92991 (E.D. Pa. October 1, 2009), the court held that the insured failed to establish that the insurer acted in bad faith when it exhausted the policy limits by paying fewer than all of the claims against the insured.

OCCURRENCE/BREACH OF CONTRACT

    In Nationwide Mutual Ins. Co. v. CPB International, Inc., United States Court of Appeals for the Third Circuit, 562 F.3d 591 (3d Cir. April 14, 2009), the court held that an insurer had no obligation to defend or indemnify insured for an action arising from the insured’s sale of a defective product, even though the complaint alleged consequential damages, because the natural and foreseeable acts which exacerbate damage from faulty workmanship do not constitute an “occurrence” under the policy and it was foreseeable that the product would be used for the purpose for which it was sold.

    In Erie Ins. Exch. v. Abbott Furnace Co., 972 A.2d 1232 (Pa. Super. 2009), the Pennsylvania Superior Court held that, where the underlying claim concerned product defects in an annealing furnace that the insured manufactured, there was no coverage because the complaint in the underlying action did not allege an “occurrence,” but rather asserted a claim that arose from the terms of the contract.

PRIOR PUBLICATIONS EXCLUSION

    In Transp. Ins. Co. v. Pa. Manufacturers' Ass'n Ins. Co., United States Court of Appeals for the Third Circuit, 2009 U.S. App. LEXIS 21126 (3d Cir. Sept. 23, 2009), the court held that, where the underlying action alleged defamatory statements made by the insured over a period of time covered by two insurers’ policies, coverage was precluded under the later policy by an exclusion for “oral or written publication of material whose first publication took place before the beginning of the policy period".

PROPERTY DAMAGE

    In Pisano v. Nationwide Mutual Fire Ins. Co., United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 98213 (E.D. Pa. October 21, 2009), the court held that coverage for water damage to a commercial property was excluded because although the damage was caused in part by a covered loss, a non-covered loss contributed to the damage, therefore based on the language of the policy, the loss was excluded entirely from coverage.

PROFESSIONAL LIABILITY COVERAGE

    In Transcore, LP v. Caliber One Indem. Co., 972 A.2d 1205 (Pa. Super. 2009), the Pennsylvania Superior Court held that an exclusion for "knowing" actions in a professional liability policy barred coverage for a claim for inducement of patent infringement because an action for inducing a third party to violate a patent can only be brought if the violation is knowing.

    In Executive Risk Indem., Inc. v. CIGNA Corp., 976 A.2d 1170 (Pa. Super. 2009), the Pennsylvania Superior Court held that a professional liability policy issued to a health insurer did not provide coverage for breach of contract claims arising out of alleged underpayment of claims by medical providers, but did cover RICO claims.

REINSURANCE

    In Ario v. Reliance Ins. Co., Commonwealth Court of Pennsylvania, 2009 Pa. Commw. LEXIS 1428 (Pa. Commw. September 4, 2009), the court held that hospitals could assert a direct claim for insurance coverage against the reinsurer for their insolvent malpractice insurer where the reinsurer effectively functioned as the hospitals' insurer with respect to the handling and funding of claims under a fronting arrangement with the insolvent insurer.

If you have questions about any of the above decisions or would like a copy of any opinion, please contact us.

YOST AND TRETTA, LLP




		SPRING 2010 RECENT CASE SUMMARIES INSURANCE COVERAGE We have prepared the following compilation of insurance coverage decisions by the Pennsylvania courts during the last six months, which may be of interest to you. Please contact us if you have any questions or would like a copy of any of these decisions. ALL RISKS POLICY-CONCURRENT CAUSE In Bishops v. Penn National Insurance Company, 984 A.2d 982 (Pa. Super. 2009), the Pennsylvania Superior Court held that the insured was entitled to coverage for damage caused by flooding during a hurricane, even though a “concurrent cause” provision in an exclusion purported to exclude coverage for damage concurrently caused by flooding and any other causes. ASSAULT AND BATTERY EXCLUSION In Alea London, Ltd. v. Woodlake Mgmt., 2010 U.S. App. LEXIS 3023 (3d Cir. Pa. Feb. 17, 2010), the United States Court of Appeals for the Third Circuit held that an assault and battery exclusion barred coverage for a claim arising out of a shooting at the insured’s apartment building where the “but for” cause of the victim's injuries was the shooting, even though the plaintiff alleged that the insured was negligent in not providing a working security lock, creating a dangerous condition on the premises, and enabling the assailant to enter the premises. ATTORNEY CLIENT PRIVILEGE In Nationwide Insurance Company v Fleming, 2010 Pa. LEXIS 40 (Pa. Jan. 29, 2010), an equally divided Pennsylvania Supreme Court affirmed a decision by the Superior Court that the attorney-client privilege did not apply to a memo that Nationwide’s in-house counsel sent to several of the company’s managers and other counsel. The Superior Court reasoned that the privilege applies only to confidential communications made by the client to counsel. The Court held that the privilege did not apply to Nationwide’s memo because it did not contain any confidential communications from the client to the attorney or reveal any confidential communications previously made by the client to counsel, but only the attorney’s analysis of legal issues. The Superior Court did not address the work-product doctrine or any other possible grounds for withholding disclosure of the memo. Nationwide Mut. Ins. Co. v. Fleming, 924 A.2d 1259 (Pa. Super. 2007). AUTO/UNINSURED/UNDERINSURED MOTORISTS In Willett v. Allstate Ins. Co., 2009 U.S. App. LEXIS 28711 (3d Cir. Pa. Dec. 31, 2009), the United States Court of Appeals for the Third Circuit held that an insured was not entitled to recover underinsured motorist benefits for the death of her son where she had recovered from the tortfeasor the maximum amount permitted by the law of the state where the accident occurred, even though she might have been entitled to recover more damages if the accident had occurred in another state. In Erie Ins. Exch. v. Larrimore, 987 A.2d 732 (Pa. Super. 2009), the Pennsylvania Superior Court held that the insured was entitled to underinsured motorist coverage equal to the limit of the policy’s liability coverage where the insurer failed to produce a written request for a lower limit of coverage other than the signed application. BAD FAITH In Johnson v. Progressive Ins. Co., 987 A.2d 781 (Pa. Super. 2009), the Pennsylvania Superior Court held that the insurer had not acted in bad faith in handling the insured’s claim for underinsured motorist benefits where the insurer had a reasonable basis for the value that it placed on the insured’s damages, even though it ultimately made an offer that was less than fifty percent of the eventual arbitration award. CRIMINAL ACT EXCLUSION In Allstate Ins. Co. v. Hopfer, C. A. No. 08-4549, United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 107949 (E.D.Pa. November 19, 2009), the Court held that a “criminal acts” exclusion barred coverage for claims against the insureds and their son arising out of the drug overdose death of a guest at their home whom the son had injected with an illegal drug. DUTY TO DEFEND In Genaeya Corp. v. Harco National Insurance Company, Superior Court of Pennsylvania, No. 1704 Eastern District Appeal 2008, 2010 Pa. Super. LEXIS 63 (Pa. Super. March 15, 2010), the Pennsylvania Superior Court held that, where policy stated that insurer “may elect to defend” the insured, the insurer had the right, but not the duty to defend the insured. EQUITABLE CONTRIBUTION In Great Northern Ins. Co. v. Greenwich Ins. Co., 2010 U.S. App. LEXIS 6034 (3d Cir. Pa. Mar. 24, 2010), the United States Court of Appeals for the Third Circuit held that an insurer who settled a claim on behalf its named insured and an additional insured could not recover contribution from the additional insured’s own insurer where it offered insufficient evidence at trial for the court to apportion the settlement payment between the two insureds. ESTOPPEL In Goodville Mutual Cas. Co. v. Hynes (In re Hynes), United States Bankruptcy Court for the Eastern District of Pennsylvania, 2009 Bankr. LEXIS 4140 (Bankr. E.D. Pa. Dec. 14, 2009), the court held that the insurer was not estopped to deny coverage for claim against the insured where claimants failed to establish that they or insured sustained prejudice as a result of delay in issuing reservation of rights. FIRE DEPARTMENT CHARGES In Safe Auto Ins. Co. v. Berlin, 2010 PA Super 31, 2010 Pa. Super. LEXIS 60 (Pa. Super. Ct. 2010), the Pennsylvania Superior Court held that a motor vehicle policy did not provide coverage for charges by a volunteer fire department for the cost of emergency equipment and supplies that it used in rescuing the insured from an accident. NEGLIGENT ENTRUSTMENT In Countryway Ins. Co. v. Slaugenhoup, 2010 U.S. App. LEXIS 312 (3d Cir. Pa. Jan. 7, 2010), the United States Court of Appeals for the Third Circuit held that exclusion in farm owner’s policy for liability imposed on an insured “for the use of” a motor vehicle barred coverage for claim against son who was allegedly negligent in asking his elderly father to drive the vehicle that was involved in the accident. OCCURRENCE In State Farm Fire & Cas. Co. v. Estate of Mehlman, 589 F.3d 105, 2009 U.S. App. LEXIS 27544 (3d Cir. Pa. 2009), the United States Court of Appeals for the Third Circuit held that the estate of insured who attempted to shoot the plaintiff was not entitled coverage because the insured's intoxication did not render his attack on the plaintiff unintentional. In Colony Insurance Company v. Mid-Atlantic Youth Services Corp., United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 21432 (M.D. Pa. March 9, 2010), the court held that claims against parties to a kickback conspiracy involving juvenile court judges did not arise out of an “occurrence” and also fell within the scope of exclusion for knowing violation of rights of others. SUCCESSOR CORPORATION In Greenway Ctr., Inc. v. Essex Ins. Co., 2010 U.S. App. LEXIS 5174 (3d Cir. Pa. Mar. 11, 2010), the United States Court of Appeals for the Third Circuit held that the insurer was not required to provide coverage to an entity that took over the insured’s operations after the insured’s bankruptcy where successor never purchased any of the insured’s assets and no stock was ever transferred from the insured to the successor. REIMBURSEMENT OF DEFENSE AND SETTLEMENT COSTS In Utica Mutual Insurance Co. v. Rohm & Haas, et al., United States District Court for the Eastern District of Pennsylvania, 2010 U.S. Dist. LEXIS 10069 (February 5, 2010), the court held that the insurer was not entitled to reimbursement of defense costs and settlement payments even though it had reserved the right to recover those amounts. _______________________________________________ FALL 2009 ALL RISKS POLICY/BURDEN OF PROOF In Somerset Industries, Inc., et al. v. Lexington Ins. Co., United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 57809 (E.D. Pa. July 7, 2009), the court held that the exclusion in an all-risk policy for “water that backs up from a sewer or drain” did not defeat coverage for damage arising from flooding in the insured’s warehouse because the exclusion could either be interpreted as water back up occurring from a blockage or an excess volume of water causing overflow, and the exclusion was construed against the insurer. ASSAULT AND BATTERY EXCLUSION In Regis Insurance Company v. Kenny’s Bar and Restaurant, et al., 974 A.2d 1201 (Pa. Super. 2009), the Pennsylvania Superior Court affirmed the decision of the trial court which held that an assault and battery exclusion barred coverage for a claim by a patron who was allegedly assaulted by patrons at a bar, even though complainant alleged that the incident occurred in the presence of the bartender and security personnel. In Regis Ins. Co. v. All Am. Rathskeller, Inc., 976 A.2d 1157 (Pa. Super. 2009), the court held that an insurer had no duty to indemnify an insured bar for claims arising out an alleged assault and battery committed by employees of the bar in the parking lot because, although the complaint in the underlying action alleged failure to train and supervise the employees, the assault and battery exclusion in the policy specifically excluded coverage arising from the insured’s failures in hiring, supervision, etc. In Victoria Ins. Co., v. Mincin Insulation Services, Inc., United States District Court for the Western District of Pennsylvania, 2009 U.S. Dist. LEXIS 84082 (W.D. Pa. September 15, 2009), the court held that an action which arises from injuries from a physical attack is not covered under a policy with an assault and battery exclusion even where the complaint alleges assault and battery against plaintiff’s co-workers and separate counts of negligent hiring and failure to intervene against his employer because all claims arise from the physical injuries. AUTO/FIRST PARTY BENEFITS In McCleester v State Farm, United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 90345 (M.D. Pa. September 30, 2009), the court held that a driver who was injured when a rock was thrown through the windshield of his truck was not entitled to recover first party wage loss benefits because his injury did not arise out of the maintenance or use of a motor vehicle. AUTO/LIABILITY COVERAGE In Kropa v. Gateway Ford, 974 A.2d 502 (Pa. Super. 2009), the Pennsylvania Superior Court held that the authorized driver of a loaner vehicle from an automobile dealership was entitled to liability coverage under the dealership’s policy for amount of primary liability coverage required by the Financial Responsibility Law, but not for excess coverage maintained by the dealership. AUTO/SUBROGATION In Oliver v. City of Pittsburgh, 977 A.2d 1232 (Pa. Commw. Ct. 2009) and Cole v. Sheils, United States Court of Appeals for the Third Circuit, 2009 U.S. App. LEXIS 8777 (3d Cir. Pa. April 3, 2009) the courts held that an employer was entitled to subrogate against its officer's third-party recovery for benefits paid to the employee under the Heart and Lung Act for injuries sustained in a motor vehicle accident. AUTO/UIM/SET-OFF In Pusl v. Means, No. 596 WDA 2008, 2009 Pa. Super. LEXIS 3742 (Pa. Super. September 23, 2009), the court held that, where the plaintiff previously recovered $75,000 in underinsured motorist benefits and her own insurer failed to assert its subrogation rights, the subsequent verdict against the tortfeasor was reduced by that amount. AUTO/UM/UIM/STACKING In State Auto Property and Casualty Ins. Co. v. Pro Design, United States Court of Appeal for the Third Circuit, 566 F.3d 86 (3d Cir. Pa. May 12, 2009), the court held that a waiver of stacking UIM coverage signed by the insured at inception of a single-vehicle policy remained valid and that an insurer is not required to provide the insured with the opportunity to waive stacking when an additional vehicle is added to the policy. AUTO/HOUSEHOLD EXCLUSION In Erie Ins. Exch. v. Baker, 972 A.2d 507 (Pa. 2009), the Pennsylvania Supreme Court held that, where the insured was injured while operating his motorcycle that was not insured under the policy, application of the “household exclusion” was not contrary to the Motor Vehicle Financial Responsibility Law’s provision permitting stacking of UIM coverage. COLLAPSE COVERAGE In Young Sook Pak, et al. v. Alea London Limited, et al., United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 65640 (E.D. Pa. July 30, 3009), the court held that an insured must prove that a reasonable insured would not have been aware of hidden decay in a collapsed wall, it is not enough that the insured himself was unaware of the decay. DUTY TO DEFEND In Nationwide Mutual Ins. Co. v. Garzone, et al., United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 85528 (E.D. Pa. September 18, 2009), the court held that the insurer had no duty to defend an insured for a body organ harvesting scheme because although the complaint sufficiently alleged an occurrence for purposes of the CGL policy, there was no “property damage” or “bodily injury” because there is no property interest in a deceased body and emotional distress is not bodily injury. EXHAUSTION OF POLICY LIMITS In NIA Learning Ctr., Inc. v. Empire Fire & Marine Ins. Cos., United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 92991 (E.D. Pa. October 1, 2009), the court held that the insured failed to establish that the insurer acted in bad faith when it exhausted the policy limits by paying fewer than all of the claims against the insured. OCCURRENCE/BREACH OF CONTRACT In Nationwide Mutual Ins. Co. v. CPB International, Inc., United States Court of Appeals for the Third Circuit, 562 F.3d 591 (3d Cir. April 14, 2009), the court held that an insurer had no obligation to defend or indemnify insured for an action arising from the insured’s sale of a defective product, even though the complaint alleged consequential damages, because the natural and foreseeable acts which exacerbate damage from faulty workmanship do not constitute an “occurrence” under the policy and it was foreseeable that the product would be used for the purpose for which it was sold. In Erie Ins. Exch. v. Abbott Furnace Co., 972 A.2d 1232 (Pa. Super. 2009), the Pennsylvania Superior Court held that, where the underlying claim concerned product defects in an annealing furnace that the insured manufactured, there was no coverage because the complaint in the underlying action did not allege an “occurrence,” but rather asserted a claim that arose from the terms of the contract. PRIOR PUBLICATIONS EXCLUSION In Transp. Ins. Co. v. Pa. Manufacturers' Ass'n Ins. Co., United States Court of Appeals for the Third Circuit, 2009 U.S. App. LEXIS 21126 (3d Cir. Sept. 23, 2009), the court held that, where the underlying action alleged defamatory statements made by the insured over a period of time covered by two insurers’ policies, coverage was precluded under the later policy by an exclusion for “oral or written publication of material whose first publication took place before the beginning of the policy period". PROPERTY DAMAGE In Pisano v. Nationwide Mutual Fire Ins. Co., United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 98213 (E.D. Pa. October 21, 2009), the court held that coverage for water damage to a commercial property was excluded because although the damage was caused in part by a covered loss, a non-covered loss contributed to the damage, therefore based on the language of the policy, the loss was excluded entirely from coverage. PROFESSIONAL LIABILITY COVERAGE In Transcore, LP v. Caliber One Indem. Co., 972 A.2d 1205 (Pa. Super. 2009), the Pennsylvania Superior Court held that an exclusion for "knowing" actions in a professional liability policy barred coverage for a claim for inducement of patent infringement because an action for inducing a third party to violate a patent can only be brought if the violation is knowing. In Executive Risk Indem., Inc. v. CIGNA Corp., 976 A.2d 1170 (Pa. Super. 2009), the Pennsylvania Superior Court held that a professional liability policy issued to a health insurer did not provide coverage for breach of contract claims arising out of alleged underpayment of claims by medical providers, but did cover RICO claims. REINSURANCE In Ario v. Reliance Ins. Co., Commonwealth Court of Pennsylvania, 2009 Pa. Commw. LEXIS 1428 (Pa. Commw. September 4, 2009), the court held that hospitals could assert a direct claim for insurance coverage against the reinsurer for their insolvent malpractice insurer where the reinsurer effectively functioned as the hospitals' insurer with respect to the handling and funding of claims under a fronting arrangement with the insolvent insurer. If you have questions about any of the above decisions or would like a copy of any opinion, please contact us. YOST AND TRETTA, LLP