274 F. Supp. 3d 273
E.D. Pa.2017Background
- On Feb. 12, 2013, construction worker Suhrob Ahatov fell at 2301 Montrose St., Philadelphia; he and his wife sued several parties (Phila. Ct. Common Pleas).
- Concept Development Group, Inc. (“Concept”) was the named insured on a one-year Contractors Special Policy issued by Frederick (effective Jan. 9, 2013); Concept hired subcontractor J. Tull Mechanical (“Tull”), Ahatov’s employer.
- A workers’ compensation judge later found Concept to be Ahatov’s statutory employer and therefore primarily liable for workers’ compensation benefits; neither Concept nor Tull had WC insurance, so the Uninsured Employers Guaranty Fund paid benefits.
- Concept and owner Michael Dubinsky tendered defense/indemnity to Frederick; Frederick reserved rights and then denied any duty to defend or indemnify, filing declaratory judgment actions consolidated in federal court.
- Frederick moved for summary judgment arguing Policy exclusions (employee/cross-liability and workers’ compensation-related exclusions) bar coverage for Concept and that Dubinsky is not an insured/additional insured nor covered under the Policy’s contractual-liability provision.
Issues
| Issue | Plaintiff's Argument (Frederick) | Defendant's Argument (Concept / Ahatov / Dubinsky) | Held |
|---|---|---|---|
| Whether Policy excludes coverage for employee bodily injury when injured in course of employment | Exclusions 11 and 12 bar coverage for employee bodily injury and for injuries required to be covered by workers’ comp | Policy ambiguous; contractor lacked understanding; exclusions inapplicable because of coverage expectations | Exclusions are clear and unambiguous; they bar coverage for Concept (employee statutory status confirmed by WC decision) |
| Effect of workers’ compensation adjudication | WC judge’s final determination that Concept is statutory employer triggers exclusions; collateral estoppel bars relitigation | Argued unfairness and that UEGF recovery leaves plaintiff uncompensated; policy should be construed for coverage | WC decision is final; collateral estoppel applies; exclusions operate as written so no coverage |
| Whether cross-liability exclusion bars recovery when injured person is an "insured" under Policy | Policy defines insured to include employees; cross-liability exclusion precludes coverage for bodily injury to an insured | Plaintiff contends he was not an insured for purposes of third-party suit | Ahatov is an insured (employee) under Policy definition; cross-liability exclusion bars coverage |
| Whether Dubinsky is covered (named/additional insured or under contractual-liability coverage) | Dubinsky is not a named insured; no written agreement made him an additional insured at time of loss; contractual-liability coverage (and indemnity clause) does not obligate Concept to indemnify Dubinsky for Dubinsky’s own negligence | Dubinsky says he reasonably expected coverage; Builder’s Agreement and owner status confer additional-insured/contractual protection | Dubinsky is not an insured or additional insured (contract not executed until after loss and does not name him); indemnity clause does not clearly cover indemnitee’s own negligence; no duty to defend or indemnify Dubinsky |
Key Cases Cited
- Inman v. Nationwide Mut. Ins. Co., 641 A.2d 329 (Pa. Super. 1994) (upholding employee/workers’-compensation exclusion to prevent employers from evading WC obligations)
- Grant v. GAF Corp., 608 A.2d 1047 (Pa. Super. 1992) (workers’ compensation adjudications can have collateral estoppel effect)
- Erie Ins. Co. v. Muff, 851 A.2d 919 (Pa. Super. 2004) (insurer bears burden to show applicability of policy exclusions when disclaiming duty to defend)
- Ruzzi v. Butler Petroleum Co., 588 A.2d 1 (Pa. 1991) (indemnity for indemnitee’s own negligence must be expressed in clear and unequivocal terms)
- Pacific Indem. Co. v. Linn, 766 F.2d 754 (3d Cir. 1985) (unambiguous policy exclusions are effective even if insured did not read/understand them)
- Kvaerner Metals Div. v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006) (duty to defend depends on whether the underlying complaint triggers policy coverage)