214 A.3d 688
Pa. Super. Ct.2019Background
- Nationwide issued a personal umbrella policy to August W. Arnold covering personal injury claims but excluding "an occurrence arising out of the business pursuits" of an insured.
- Arnold, a PennDOT employee, brought a qui tam (False Claims Act) action as relator alleging CMC overbilled PennDOT; the qui tam action failed and CMC sued Arnold (and his counsel Pushinsky) under the Dragonetti Act, abuse of process, and tortious interference.
- Nationwide defended Arnold under a reservation of rights and filed a declaratory-judgment action seeking a declaration that the policy’s business-pursuits exclusion barred coverage for the CMC suit.
- The trial court issued conflicting orders but ultimately ruled that Nationwide had a duty to defend and/or indemnify Arnold; Nationwide appealed the denial of summary judgment (consolidated appeals; one appeal later quashed as duplicative).
- The Superior Court reviewed whether the business-pursuits exclusion applied (focusing on whether Arnold’s alleged misconduct in litigating the qui tam action "arose out of" his PennDOT employment) and whether the trial court prematurely ordered indemnification.
Issues
| Issue | Plaintiff's Argument (Nationwide) | Defendant's Argument (Arnold / Pushinsky) | Held |
|---|---|---|---|
| Whether the policy’s "business pursuits" exclusion applies to bar coverage for CMC’s suit | The qui tam litigation "arose out of" Arnold’s PennDOT employment (but for his job he couldn’t access the information); exclusion therefore precludes defense/indemnity | Arnold: the suit challenged his actions taken outside job duties; he litigated as a private relator, not as part of his PennDOT employment | Court: Exclusion does not apply — Nationwide failed to prove the CMC claims arose out of Arnold’s business pursuits; allegations target personal conduct, not acts performed in the scope of employment |
| Proper application of the two-prong White test (continuity and profit motive) | Nationwide: causal "arising out of" relation suffices; continuity/profit elements satisfied because employment provided access and motive | Defendants: the White test should be applied to whether the occurrence arose from the business, not to label the litigation itself a business; Arnold’s litigation lacked continuity and was not his livelihood | Court: Trial court misapplied the test by assessing whether the litigation itself was a business; correct inquiry is whether the occurrence arose from Arnold’s business — court finds it did not |
| Whether trial court erred by ordering indemnification prematurely | Nationwide: duty to indemnify is conditional and only arises if insured is held liable; court cannot order indemnity before liability | Defendants: trial court’s statement that indemnity attaches if liability is found is correct | Court: Agrees indemnity is conditional; reverses any part of the order that imposed an absolute duty to indemnify and clarifies indemnity is owed only if Arnold is found liable for a covered claim |
Key Cases Cited
- White v. Keystone Ins. Co., 775 A.2d 812 (Pa. Super. 2001) (articulates two‑prong ‘‘business pursuits’’ test: continuity and profit motive)
- Old Guard Ins. Co. v. Sherman, 866 A.2d 412 (Pa. Super. 2004) (applies business‑pursuits exclusion where alleged conduct was rooted in insureds’ business)
- Sun Alliance Ins. Co. v. Soto, 836 F.2d 834 (3d Cir. 1988) (interprets continuity and profit motive; resident’s commercial property operations barred coverage)
- Erie Ins. Exchange v. Muff, 851 A.2d 919 (Pa. Super. 2004) (insurer bears burden to prove exclusion; duty to defend governed by face of underlying complaint)
- Kvaerner Metals Div. v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006) (discusses when underlying complaint triggers duty to defend and duty to indemnify)
- Allstate Prop. & Cas. Ins. Co. v. Squires, 667 F.3d 388 (3d Cir. 2012) ("arising out of" construed as causal connection; but not every incidental nexus satisfies exclusion)