The Cincinnati Ins. Co. v. Selective Ins. Co., 446 EDA 2017

Background

Worker Jody Peterman (an employee of subcontractor Da-Lyn) fell from a ladder at a Wal‑Mart construction site managed by general contractor Leonard S. Fiore, Inc. and suffered catastrophic injuries.
Peterman sued Wal‑Mart, Fiore and others in the underlying action; Da‑Lyn was not a named defendant.
Fiore was insured by Cincinnati Insurance Company (CIC) under a primary CGL policy ($1M per occurrence) and a $12M umbrella policy; Da‑Lyn was insured by Selective Insurance Company of South Carolina (SIC).
Fiore and Wal‑Mart were named as additional insureds on the Selective policy via the subcontract between Fiore and Da‑Lyn.
CIC defended and settled the underlying action for $8.5M, exhausting part of CIC’s umbrella but not CIC’s combined policy limits. CIC then sued SIC seeking contribution/indemnity and defense-cost reimbursement.
Trial court granted summary judgment for SIC, holding the Selective policy was excess and SIC had no duty to defend or indemnify because CIC’s primary limits were not exhausted; CIC appealed and the Superior Court affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Selective policy was excess or primary relative to CIC policies	CIC: Subcontract required Da‑Lyn to provide primary CGL and name Fiore as additional insured; Selective policy therefore should be primary over CIC umbrella and should exhaust before CIC umbrella	SIC: Policy language makes coverage for additional insureds expressly excess unless the contract specifically requires Selective to be primary; subcontract contains no such specific language	Held: Selective policy is excess to both CIC primary and umbrella; subcontract did not unambiguously require Selective to be primary
Whether the Selective policy was triggered (duty to defend) by the amended complaint in the underlying action	CIC: Amended complaint sufficiently alleged negligence by Fiore’s subcontractors (including Da‑Lyn) so Selective’s additional‑insured coverage was triggered	SIC: Amended complaint lacked allegations tying negligence to Da‑Lyn; therefore no potential coverage and no duty to defend	Held: Amended complaint did sufficiently allege proximate causation attributable to subcontractors (including Da‑Lyn), but Selective’s status is still excess so it had no duty to defend where CIC’s policies provided primary defense
Whether SIC must reimburse CIC for defense costs and settlement contribution	CIC: As additional insureds under Selective, Fiore’s defense costs paid by CIC are recoverable under Selective; also contractual indemnity qualifies as insured contract under Selective	SIC: As an excess carrier with no duty to defend until primaries are exhausted, SIC owes no defense or indemnity contribution because CIC’s primary limits were not exhausted	Held: Because CIC had not exhausted primary policy limits (CIC settlement $8.5M did not exhaust CIC primary + umbrella limits), Selective—being excess—had no obligation to reimburse defense costs or indemnify CIC

Key Cases Cited

Wall Rose Mut. Ins. Co. v. Manross, 939 A.2d 958 (Pa. Super. 2007) (summary judgment standard and insurance coverage principles)
Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006) (plenary review in declaratory judgment actions interpreting insurance contracts)
Nationwide Mut. Ins. Co. v. Cummings, 652 A.2d 1338 (Pa. Super. 1994) (court must give effect to clear policy language)
Madison Constr. v. Harleysville Mut. Ins. Co., 735 A.2d 100 (Pa. 1999) (ambiguities in insurance policies construed against drafter)