231 A.3d 839
Pa. Super. Ct.2020Background
- Meyer Jabara Hotels LLC managed the Sheraton University City Hotel; the University claimed multimillion-dollar losses after the hotel GM (Kapikian) and chief engineer (Gagliardi) ran a fraud scheme using Cold Wash and inflated vendor invoices to divert kickbacks.
- Gemini issued a professional-liability policy to Meyer Jabara (7/1/14–7/1/15) and, after notice, advanced $975,000 toward Meyer Jabara’s settlement with the University under a reservation-of-rights agreement.
- Gemini then sued for a declaratory judgment denying coverage under policy exclusions and sought reimbursement of the advance and subrogation against third-party vendors (Practical Network, Luther, Stratton, Cold Wash, MJ Employment).
- Meyer Jabara cross-claimed against its brokers (Risk Placement/Gallagher) alleging negligent placement/advice; MJ Employment sought dismissal as an insured.
- The trial court granted summary judgment for Gemini (policy exclusions apply; Meyer Jabara must repay the advance less third-party recoveries), granted summary judgment dismissing MJ Employment and the brokers, and denied Meyer Jabara’s summary judgment; the Superior Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Were Kapikian and Gagliardi "employees" of Meyer Jabara for policy purposes? | They were employees of MJ Employment only; "employee" should mean paid by/receiving W‑2 from Named Insured. | The policy term is unambiguous under its common-law meaning (control test); employees can have multiple employers and Meyer Jabara exercised control. | Court: "employee" unambiguous per dictionary/common-law test; Kapikian and Gagliardi were employees of Meyer Jabara; exclusion triggered. |
| 2) Did the employees' criminal thefts constitute "rendering Professional Services on behalf of" the Named Insured? | Theft is not a Professional Service and was not done on behalf of Meyer Jabara (it harmed, not benefited, the employer). | The fraud occurred while performing management functions (approving invoices, hiring vendors) and thus occurred while rendering Professional Services even if acts conferred personal profit. | Court: Acts occurred in the course of employees' management duties and fall within "Professional Services"; criminal-acts and personal-profit exclusions apply. |
| 3) Did Gemini waive its right to deny coverage by subrogating and settling with third parties? | By settling with third parties based on insured's rights, Gemini voluntarily admitted coverage and waived the right to deny coverage. | Gemini expressly reserved rights in the advance agreement and in its complaint; subrogation and recovery do not create coverage where exclusions apply. | Court: No waiver; insurer may pursue subrogation but insured must repay advance reduced by third-party recoveries to avoid double recovery. |
| 4) Did brokers (Risk/Gallagher) owe a heightened "special relationship" duty and breach it? | Brokers established a special relationship (per Florida authority) and therefore had an enhanced duty to advise on coverage amounts. | No special/confidential relationship; written contract disclaimed fiduciary role; Meyer Jabara was sophisticated and retained decision control. | Court: No genuine issue of material fact that a confidential/special relationship existed; summary judgment for brokers. |
Key Cases Cited
- 401 Fourth St., Inc. v. Investors Ins. Grp., 879 A.2d 166 (Pa. 2005) (insurance policy interpretation governed by parties’ intent; unambiguous terms enforced)
- Bruno v. Erie Ins. Co., 106 A.3d 48 (Pa. 2014) (dictionary definitions may be used to ascertain common and approved meaning)
- Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100 (Pa. 1999) (contractual terms ambiguous only if reasonably susceptible to more than one meaning)
- Hutchison v. Sunbeam Coal Corp., 519 A.2d 385 (Pa. 1986) (definition of ambiguity in contract law)
- Newell v. Montana West, Inc., 154 A.3d 819 (Pa. Super. 2017) (summary judgment standard review)
- Wasilko v. Home Mut. Cas. Co., 232 A.2d 60 (Pa. Super. 1967) (waiver and estoppel cannot create coverage where none exists)
- Shockley v. Harleysville Mut. Ins. Co., 553 A.2d 973 (Pa. Super. 1988) (subrogation principles to prevent double recovery)
- Wisniski v. Brown & Brown Ins. Co. of Pa., 906 A.2d 571 (Pa. Super. 2006) (general rule that brokers do not owe duty to advise on coverage absent special/confidential relationship)
- Yenchi v. Ameriprise Fin., Inc., 161 A.3d 811 (Pa. 2017) (heightened fiduciary duties arise where a confidential relationship exists)