UNITED NATIONAL INSURANCE COMPANY v. INDIAN HARBOR INSURANCE COMPANY
2:14-cv-06425
| E.D. Pa. | Feb 2, 2015Background
- Plaintiffs United National Insurance Company (UNIC) and Penn‑America are insurers who purchased "all risk" excess policies from defendant Indian Harbor; dispute centers on whether Indian Harbor must reimburse defense costs/settlements paid by plaintiffs in three underlying suits. Two underlying suits (Peccadillo and Jackson dram‑shop suits) remain at issue; this opinion addresses only the Port LA action between UNIC and its insured Port LA Distribution Center, L.P.
- Port LA sued UNIC in California after UNIC partially denied coverage for costs arising from regulatory demands to investigate/clean up petroleum contamination discovered in groundwater. UNIC tendered defense costs to Indian Harbor, which refused payment relying on a broad pollution exclusion in the Indian Harbor policies.
- Indian Harbor moved for judgment on the pleadings (treated under Rule 12(c)) to dismiss UNIC’s claims insofar as they relate to the Port LA action (Counts I–III) and sought dismissal of the reformation claim (Count IV) in full; Indian Harbor also moved to strike jury demand on certain counts.
- The pollution exclusion barred coverage for claims "based on or directly or indirectly arising out of or resulting from" pollution and regulatory orders/requests to test, monitor, clean up, etc. Port LA’s complaint plainly arose from regulatory requests tied to identified contaminants.
- Court applies Pennsylvania contract and insurance law principles: clear policy language controls; ambiguities are construed against the insurer; insurer duty to defend/indemnify is assessed by comparing the underlying complaint to the policy terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Indian Harbor must cover UNIC’s defense costs for the Port LA action (breach of contract, Count I) | Pollution exclusion does not apply or is ambiguous; alternatively reasonable‑expectations or illusory coverage doctrines protect UNIC | The pollution exclusion unambiguously excludes claims arising from contamination/regulatory cleanup requests; thus no coverage | Court: Pollution exclusion unambiguous and applies; judgment for Indian Harbor on Count I as to Port LA |
| Whether Indian Harbor breached duties (bad faith/failure to investigate/advance costs, Count II) | Indian Harbor failed to investigate/acknowledge and should have advanced defense costs pending resolution | No contractual duty to investigate or advance costs; no statutory bad faith claim pleaded under 42 Pa.C.S. § 8371; advancement not required absent policy provision | Court: No duty breached; judgment for Indian Harbor on Count II as to Port LA |
| Whether Indian Harbor waived or is estopped from asserting the pollution exclusion (Count III) | Silence/delay in responding amounted to waiver or induced reasonable reliance and prejudice | Silence does not show a clear, voluntary relinquishment of rights nor misleading conduct causing detrimental reliance | Court: Pleading fails to show clear waiver or detrimental reliance for estoppel; judgment for Indian Harbor as to Port LA portion of Count III |
| Whether policies should be reformed to cover pollution‑related claim handling (Count IV) | Policies should be reformed due to mutual or unilateral mistake to cover claim handling for pollution claims | Reformation not pleaded with the particularity required; no facts showing mutual mistake or that Indian Harbor knew of a unilateral mistake to justify reformation | Court: Reformation claim inadequately pleaded under Rule 9(b); Count IV dismissed in full |
Key Cases Cited
- Turbe v. Gov’t of V.I., 938 F.2d 427 (3d Cir. 1991) (answering defendant’s 12(b)(6) motion treated as Rule 12(c) judgment on the pleadings)
- Phillips v. County of Allegheny, 515 F.3d 224 (3d Cir. 2008) (pleading standards: accept factual allegations and draw inferences for plaintiff)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must state plausible claim; conclusory allegations insufficient)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for pleadings)
- Unionamerica Ins. Co. v. J.B. Johnson, 806 A.2d 431 (Pa. Super. Ct.) (duty to indemnify/defend determined by comparing underlying complaint to policy)
- 401 Fourth St., Inc. v. Investors Ins. Grp., 879 A.2d 166 (Pa. 2005) (clear and unambiguous contract language governs interpretation)
- Heller v. Pa. League of Cities & Municipalities, 32 A.3d 1213 (Pa. 2011) (illusory coverage doctrine requires showing that the vast majority of claims would be excluded)
- Regions Mortg., Inc. v. Muthler, 844 A.2d 580 (Pa. Super. Ct. 2004) (reformation available for mutual or unilateral mistake; unilateral mistake requires culpable knowledge to infer fraud/bad faith)