Indalex Inc. v. National Union Fire Insurance
83 A.3d 418
Pa. Super. Ct.2013Background
- Appellants (Indalex and Harland Clarke) sought coverage under a commercial umbrella policy for multiple out-of-state lawsuits alleging defective windows/doors that caused water intrusion, mold, property damage, and personal injury.
- A primary insurer (OneBeacon) defended and indemnified until its policy limits exhausted in November 2005; Appellants then tendered defense/indemnity to Appellee (National Union).
- Appellee moved for summary judgment arguing no "occurrence" under the umbrella policy; trial court granted summary judgment for Appellee relying on Kvaerner.
- The umbrella policy defined "occurrence" as an "accident" (including repeated exposure) that results in bodily injury or property damage "neither expected nor intended from the standpoint of the Insured," and excluded "property damage in your product" while providing Products-Completed Operations coverage for damage away from insured premises.
- Underlying complaints included tort claims (negligence, strict liability) and contract-based claims (breach of warranty/contract) across five states; Appellants argued tort claims alleged damage to property other than the products and triggered a duty to defend.
- The Superior Court reversed summary judgment, holding the duty to defend was triggered because complaints potentially alleged an "occurrence" (active product malfunction causing third‑party harm) and declining to apply the gist‑of‑the‑action doctrine at the duty‑to‑defend stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer had duty to defend/indemnify under umbrella policy for 1998–1999 period | Appellants: underlying complaints plead tort-based product‑liability and third‑party property/personal injury, which potentially fall within the policy's occurrence/product hazard coverage | Appellee: claims are only for faulty workmanship/economic loss to insured product; no "occurrence" under policy (Kvaerner) so no coverage | Reversed trial court: duty to defend exists because complaints potentially allege an "occurrence" (active product malfunction causing harm to others) |
| Whether underlying claims are "faulty workmanship" only (no occurrence) | Appellants: product failure allegations can be read as active malfunctions, not merely workmanship defects | Appellee: analogous to Kvaerner/Gambone where damage to the work product alone is not an occurrence | Court: Kvaerner/Gambone inapplicable here because claims allege damage to property/persons other than the product and policy uses subjective "expected or intended" language — coverage potentially triggered |
| Whether gist‑of‑the‑action doctrine precludes tort claims for coverage analysis | Appellants: gist doctrine should not bar duty‑to‑defend analysis; insurer must defend potentially covered tort claims | Appellee: underlying claims are essentially contractual and gist doctrine should prevent treating them as torts for coverage | Court: declined to apply gist doctrine at duty‑to‑defend stage; duty to defend is broader and insurer must defend until tort claims are foreclosed in underlying suits |
| Interpretation of "occurrence" in light of Kvaerner | Appellants: policy's subjective "neither expected nor intended from the standpoint of the Insured" differs from Kvaerner policy; Kvaerner not controlling | Appellee: Kvaerner controls and bars coverage for defective product/workmanship claims | Court: Kvaerner distinguished — policy language and factual allegations here permit finding an "occurrence"; Kvaerner does not automatically bar coverage |
Key Cases Cited
- Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006) (faulty workmanship/economic‑loss claims to the work product do not constitute an "occurrence")
- Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., Inc., 941 A.2d 706 (Pa. Super. 2007) (applied Kvaerner to homebuilder claims where damage was to the home itself)
- Erie Ins. Exch. v. Abbott Furnace Co., 972 A.2d 1232 (Pa. Super. 2009) (examined adequacy of pleaded negligence and applied gist‑of‑the‑action analysis to deny coverage when tort claims were essentially contractual)
- Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286 (Pa. 2007) (clear policy language controls; ambiguities construed for insured)
- American States Ins. Co. v. Maryland Cas. Co., 628 A.2d 880 (Pa. Super. 1993) (insurer must defend entire suit if any claim is potentially covered)