Sackett v. Nationwide Mutual Insurance
No. 8 WAP 2006 (Pa. Supreme Court, Dec. 27, 2007)

Everhart v. The PMA Insurance Group
No. 13 WAP 2007, (Pa. Supreme Court, Dec. 27, 2007)

The Sackett and Everhart cases have been subjects of prior eNotes and extensive commentary in the legal and insurance communities. 
Read our summary of the latest update

Johanna Seeton v. Pa. Game Commission
2007 Pa. Lexis 2876 (Pa. 2007)

PENNSYLVANIA SUPREME COURT FINDS THAT “CANNED HUNTS” ARE WITHIN THE JURISDICTION AND CONTROL OF THE GAME COMMISSION

In 2004, Plaintiff Johnna Seeton requested that the Pennsylvania Game Commission ("PGC") issue a cease and desist order against the Tioga Boar Hunt Preserve because it offered so called "canned hunts " of wild boar at its facility in Tioga County. Canned hunts occur on private hunting grounds where customers pay fees to shoot exotic animals such as wild boar. The sites are controversial because the "hunting" is done in an enclosed area, the animals are sometimes drugged or tied to stakes and every customer is guaranteed a kill. Because the element of "fair chase" is eliminated, 23 states have enacted at least partial bans of the practice. Seeton requested that the PGC take action against Tioga contending that wild boar are protected mammals under the Pa. Game Code which cannot be hunted without a provision in the Game Code or regulations permitting such activity. The Commission refused her request stating that privately owned wild boar held in captivity are not wild animals and therefore do not fall within its jurisdiction. Seeton, claiming standing as a taxpayer, brought an action in mandamus in the Commonwealth Court against the PGC to compel it to enforce the pertinent provisions of the Game Code.

The Commonwealth Court held that Seeton had taxpayer standing and that the animals were not protected. The Pa. Supreme Court reversed, holding that the wild boar, held in captivity, are wild animals within the jurisdiction of the PGC and thus cannot be hunted without specific authorization from the Commission. The practical effect of the decision is that without a change in the Pa. Game Code, canned hunts of wild boar must likely cease and the Game Commission, which has long overlooked canned hunts, will now have to oversee what occurs at these sites for compliance with the Game Code.

Gordon A. Einhorn from the Harrisburg office was counsel for Johnna Seeton in the case.  For further information on this decision, please contact Gordon Einhorn at (717) 441-7054 or geinhorn@tthlaw.com

Donegal Mutual Ins. Co. v. Baumhammers
893 A.2d 797 (Pa. 2007)

NEGLIGENT SUPERVISION BY PARENTS OF AN ADULT CHILD WHO WENT ON A SHOOTING SPREE INVOLVING SIX SEPARATE VICTIMS WAS A SINGLE "OCCURRENCE" UNDER THE PARENTS' HOMEOWNERS LIABILITY INSURANCE POLICY

On December 27, 2007, the Pennsylvania Supreme Court decided Donegal Mutual Ins. Co. v. Baumhammers, 893 A.2d 797 (Pa. 2007), and reversed the Superior Court's holding that the negligence claim against the parents constituted six separate occurrences, and hence six separate $300,000 limits under the homeowners liability policy.

In summary, Richard Baumhammers, an adult (and a lawyer), lived with his parents, who were insured by Donegal. Richard went on a shooting spree and shot six people, at four separate locations. Five of them died. Richard was arrested and convicted of five counts of first degree murder and one count of attempted murder. The six victims (or their estates) sued Richard and his parents. The theory against the parents was that they knew Richard was a menace, and that they negligently did not do a number of things to protect others, such as taking away Richard's handgun.

Donegal filed a declaratory judgment action, seeking a ruling that it had no duty to defend or indemnify either Richard or the parents, and, in the alternative, a ruling that the claims against the parents involved a single occurrence. On summary judgment motions, the trial court ruled that Donegal had no duty to defend or indemnify Richard, apparently because of the intentional acts exclusion in the policy. The trial court ruled, however, that Donegal did have the duty to defend and indemnify the parents for six separate occurrences. Donegal appealed, and the Superior Court en banc affirmed the trial court's order, and ruled that Donegal had a duty to provide coverage for the parents for six separate occurrences--which meant exposure for Donegal for six times the liability policy limit.

The Supreme Court of Pennsylvania granted allowance of appeal on two issues:  (1) Whether the claims against the parents involved an "accident" such that Donegal had a duty to defend them in the underlying actions; and (2) Whether the claims against the parents involved a single occurrence or multiple occurrences under the homeowners policy.

(1) The Supreme Court found that from the parents' perspective, Richard's shooting spree was an accident, and therefore Donegal was obligated to defend them. The Court defined the term "accident"--when used without specific definition in insurance policies--to mean "an unexpected and undesirable event occurring unintentionally, and that the key term in the definition of the 'accident' is 'unexpected' which implies a degree of fortuity." The Court then wrote: "The extraordinary shooting spree embarked upon by [Richard] resulting in injuries to Plaintiffs cannot be said to be the natural and expected result of Parents' alleged acts of negligence. Rather, Plaintiffs' injuries were caused by an event so unexpected, undesigned and fortuitous as to qualify as accidental within the terms of the policy. Because the alleged negligence of Parents resulted in the tragic accidental injuries to the individual Plaintiffs, Donegal is therefore required to defend Parents."

(2) Next, the Court held that from the Parents' perspective, there was a single occurrence giving rise to the shooting spree. The Court wrote: "parents' alleged negligence in failing to remove [Richard's] weapon and/or alerting the authorities as to his dangerous propensities is the 'occurrence' that began the sequence of events that resulted in the eventual injuries to Plaintiffs. In this case, the number of victims does not determine the limits of Parents' liability coverage, the number of occurrences does. Although this is a disturbing case with tragic consequences, we are compelled to conclude that Parents' alleged negligence constituted but a single "occurrence" for purposes of coverage" under Donegal's insurance policy."

Paul R. Walker and Peter J. Speaker wrote the amicus brief on behalf of Pennsylvania Association of Mutual Insurance Companies.  Any questions regarding this case can be directed to Paul Walker at (717) 441-7061 or pwalker@tthlaw.com and/or Pete Speaker at (717) 255-7644 or pspeaker@tthlaw.com.

Jalapenos LLC v. GRC General Contractor, Inc.
2007 PA Super 391
December 19, 2007

THE PENNSYLVANIA SUPERIOR COURT UPHOLDS A SUMMARY JUDGMENT ORDER IN FAVOR OF DEFENDANT BASED ON THE LANGUAGE OF A COMMONLY USED, BUT RARELY ANALYZED, AIA CONSTRUCTION CONTRACT PROVISION.

Background:   Plaintiff filed a complaint alleging that Defendant GRC was liable, under theories of breach of contract and negligence, for a fire that occurred on premises being rented and remodeled by Plaintiff for use as a restaurant. Plaintiff hired GRC to perform construction and remodeling work and alleged that GRC caused the fire.

Both parties signed an AIA contract providing that Plaintiff was to maintain property insurance written on an “all-risk” policy, which was to include the peril of fire. If Plaintiff did not maintain the insurance, Plaintiff was to inform Defendant GRC in writing. The AIA contract also provided that if Plaintiff was damaged by its failure to maintain the insurance, Plaintiff would bear all reasonable costs attributable to that failure and the parties waived all rights of subrogation. Plaintiff failed to maintain the required insurance at the time of the fire.

Holding:  The Superior Court held that Plaintiff’s claims were barred by the AIA contract provisions given Plaintiff’s failure to maintain the required insurance. Acknowledging that cases interpreting this section of the AIA contract do not abound, the Court reasoned that the AIA contract creates a scheme by which first-party property damage is covered by insurance purchased by the owner of the project, and, if the owner fails to purchase the insurance, the owner bears the risk of loss. The Court dismissed the Plaintiff’s arguments that the contract terms required Plaintiff, essentially, to indemnify the Defendant for the Defendant’s own negligence and that the terms were against public policy. The Court explained that the AIA contract terms were to protect both parties from the consequences of litigation, which would disrupt performance under the contract.

Scott D. McCarroll wrote the Superior Court brief on behalf of GRC and argued the case before the Superior Court.  Any questions regarding this case can be directed to Scott McCarroll at (717) 237-7131 or smccarroll@tthlaw.com.

Casselli v. Powlen
2007 PA Super 362 (Pa. Super.2007)
December 3, 2007

PENNSYLVANIA SUPERIOR COURT REVERSES A “ZERO DAMAGES” AWARD WHERE DEFENDANT ADMITTED PLAINTIFF SUFFERED BROKEN BONE AND BOTH PARTIES FOUND 50% AT FAULT

Background:  Plaintiff tripped and fell on the sidewalk outside of Defendant’s home. It was undisputed that Plaintiff broke a bone in his foot in the fall. Defendant did not dispute that the Plaintiff incurred medical expenses of $1,578 to treat the broken bone. At trial, the jury found both parties 50% negligent, but awarded “zero damages.” Plaintiff sought a new trial on damages, which the trial court denied. Plaintiff appealed.

Holding:  The Superior Court reversed, and remanded for a new trial on the issue of damages. The Superior Court ruled that where the Defendant conceded that the broken bone was caused by the fall and the treatment sought for the injury was reasonable, that alone made it “abundantly clear” that the verdict of zero damages was not only against the weight of the evidence, but also “in defiance of common experience and every day logic.” The Court explained that a jury is not free to ignore an “obvious” injury. Waxing philosophical, the Court explained that “there are injuries to which human experience teaches there is accompanying pain”—and a broken bone is one such injury.

The “zero damages” issue has become a “hot” area of appeal. The best method to attempt to preserve a possible zero damages verdict, is for the defendant to attempt, at trial, to present evidence refuting the injury, or at least the reasonableness of the treatment provided, which was not done by the Defendant here.

Any questions regarding this case can be directed to Corey J. Adamson at (717) 255-7639 or cadamson@tthlaw.com.

Excavation Technologies, Inc. v. Columbia Gas Company
 of Pennsylvania
2007 Pa. Super. 327 (Pa. Super. Ct.)
November 7, 2007

ECONOMIC LOSS DOCTRINE PRECLUDES EXCAVATOR’S CLAIM FOR NEGLIGENT MISREPRESENTATION UNDER THE ONE CALL ACT.

Facts: This case concerned a Plaintiff who allegedly incurred certain “down time” claims while performing excavation work for a water line project. Prior to beginning its work, the Plaintiff requested that the Defendant, a utility company, mark any gas lines in the vicinity, in accord with the provision of the One Call Act. According to the Plaintiff, the Defendant marked several of its lines improperly and some were not marked at all. The Plaintiff alleged that it struck the Defendant’s lines on several occasions and had to search for the Defendant’s gas lines in other instances. This extra work allegedly cost Plaintiff approximately $75,000 for down time of personnel and equipment.

The Plaintiff filed suit against the Defendant, asserting a claim for negligent misrepresentation, and the Defendant filed Preliminary Objections raising the Economic Loss Doctrine, which provides that “‘no cause of action exists for negligence that results solely in economic damages unaccompanied by physical injury or property damage.’” Excavation Techs. v. Columbia Gas Co., 2007 Pa. Super. 327, at 9 (Pa. Super. Ct. 2007) (citations omitted). The trial court sustained the Preliminary Objections and the Plaintiff appealed to the Superior Court.

On appeal, the Plaintiff cited existing Pennsylvania authority and argued that the Economic Loss Doctrine did not preclude its claim for negligent misrepresentation because said claim was brought under Restatement (Second) of Torts § 552, which creates an exception to the Economic Loss Doctrine. The Plaintiff relied upon subsection 1 of Restatement Section 552, which governs negligent misrepresentation claims against those who provide information “in the course of [their] business, profession or employment, or in any other transaction in which [they have] a pecuniary interest[,]” and upon subsection 3 of Restatement Section 552, which governs negligent misrepresentation against those who are under a public duty to provide information where the failure to properly do so causes harm to someone within the class of persons meant to be protected by that duty.

The Superior Court agreed with the defense and affirmed the trial court, finding that the Economic Loss Doctrine does apply to bar claims by excavator’s for negligent misrepresentation brought against those who supply information under the One Call Act. The Superior Court found that Plaintiff’s claim was not brought pursuant to Restatement Section 552. It found subsection 1 of said section inapplicable because, in marking the location of its lines pursuant to the One Call Act, the Defendant did not provide information for pecuniary gain or as part of a commercial transaction. It then found subsection 3 of said section inapplicable because, while the Defendant may be one who is under a public duty to provide information by virtue of the One Call Act, the Plaintiff is not within the class of persons meant to be protected by the One Call Act. Accordingly, because the excavator’s negligent misrepresentation claim was not brought pursuant to Restatement Section 552, the Economic Loss Doctrine did apply and barred the claim.

A dissent filed by Judge Klein, who would have found that a viable negligent misrepresentation claim had been stated under Restatement Section 552(3).

Any questions regarding this case can be directed to Bernard T. Kwitowski at (610) 332-7018 or bkwitowski@tthlaw.com, and/or Joseph A. Holko at (610) 332-7005 or jholko@tthlaw.com

Gaffer Ins. Co. v. Discover Reinsurance Co.
2007 Pa. Super. 339
November 16, 2007

PENNSYLVANIA SUPERIOR COURT UPHOLDS AN ARBITRATION PROVISION IN A CONTRACT OVER A PROVISION WHICH REQUIRES THE PARTIES TO CONSENT TO SUIT.

Background:  Gaffer, a captive insurance company, entered into a captive reinsurance agreement with Discover for the reinsurance of certain policies. The agreement required Gaffer to produce collateral, including an irrevocable adjustable letter of credit. Gaffer later terminated the agreement, but was required to keep an appropriate amount of collateral in place to cover outstanding claims. Gaffer claimed that, as claims settled, its collateral should decrease. Discover disagreed. Gaffer filed suit for unjust enrichment and breach of contract. Discover sought to compel arbitration under the agreement, which contained an arbitration clause. Gaffer argued that the arbitration clause was ineffective as merely permissive, as it contained the phrase “unless otherwise agreed”. Gaffer argued such an “other” agreement, due to a “consent to suit” provision in the agreement, provided that Gaffer did not waive its rights to commence a court action. The trial court held in favor of Gaffer.

Holding:  On appeal, the Superior Court reversed. The Court based its holding on a rule of interpretation that all parts of a contract must be given meaning: to favor the consent to suit clause would eviscerate the arbitration provision. However, mandating arbitration still allows the consent to suit provision to apply in actions to compel arbitration and where the parties mutually agree not to arbitrate their disputes. Furthermore, public policy favors arbitration, allowing a set-aside of arbitration clauses only on contract defenses such as fraud, duress, and illegality. Here, the arbitration provision is very broad, mandating that the dispute “will be submitted” to arbitration. A contract must be considered as a whole, giving meaning to each part.

Any questions regarding this case can be directed to Paul Walker at (717) 441-7061 or pwalker@tthlaw.com.

Bostanic v. Barker-Barto
2007 Pa. Super. 332 
November 9, 2007

SUPERIOR COURT HOLDS THAT A JURY MAY NOT DISREGARD UNCONTROVERTED EXPERT WITNESS TESTIMONY THAT AN ACCIDENT CAUSED AN INJURY

Background:  Plaintiff had the right-of-way at an intersection and was struck by Defendant’s vehicle. Plaintiff brought suit alleging negligence and relatively minor injuries, including cervical and thoracic strain, shoulder pain and chronic headaches. At trial, Plaintiff’s expert testified that the accident caused Plaintiff’s injuries. Moreover, Defendant’s only medical expert also testified that Plaintiff suffered some injury as a result of the accident (although Defendant’s expert did term Plaintiff's injuries as minor and "subjective"). The jury found that Defendant was negligent in causing the accident and that Defendant’s negligence was not a factual cause in bringing about Plaintiff’s injuries. Verdict was entered in favor of Defendant. Plaintiff filed post-trial motions, alleging the verdict was against the weight of the evidence, and the trial court agreed, and ordered a trial de novo.

Holding:  On appeal, the Superior Court affirmed the trial court’s holding and remanded for a new trial, but only on the limited issue of Plaintiff’s injuries which were conceded by Defendant’s expert. The Superior Court held that a jury may not disregard uncontroverted expert witness testimony that an accident caused an injury. The Superior Court did go on to note, however, that the jury was still free to find that the injuries caused by the accident were incidental or non-compensable, and deny damages on that basis.

Any questions regarding this case can be directed to Jason Giurintano at (717) 237-7157 or jgiurintano@tthlaw.com.

Blood v. Old Guard
934 A.2d 1218
November 20, 2007

PENNSYLVANIA SUPREME COURT HOLDS THAT WHERE THERE IS AN EXISTING VALID SIGN-DOWN OF UM/UIM LIMITS, A NEW SIGN-DOWN IS NOT NECESSARY IN CONJUNCTION WITH A LATER ELECTION OF REDUCED LIABILITY LIMITS

Background:  In 1986, when the Bloods obtained auto insurance coverage through Old Guard, they requested $500,000 in liability limits and at the same time made a valid sign-down of their UM/UIM coverage to $35,000. Four years later, they decided to lower their liability coverage to $300,000 and checked the box on a coverage selection form indicating their desire for reduced liability limits. On the same form, there were boxes for selecting UM/UIM limits in various amounts but the boxes for UM/UIM coverage were left blank.

Two months after his parents reduced their liability limits, Jay Blood was involved in an accident and was seriously injured. After he collected the tortfeasor’s coverage limit, he sought UIM benefits from Old Guard. Old Guard paid Mr. Blood $105,000 representing the $35,000 limit stacked times three and took the position that it owed no more based upon the original coverage selection form. Blood asserted that he was entitled to stacked limits of $900,000 because Old Guard failed to obtain a new written sign-down at the time Blood’s parents reduced the policy liability limit to $300,000.

The trial court agreed with Old Guard but the Superior Court reversed and held that Old Guard was responsible for the increased limits.

Holding:  The Supreme Court reversed, holding that the Motor Vehicle Financial Responsibility Law was unambiguous in its requirement of a written request for lower limits and that once a carrier has complied with this rule, the MVFRL contains no further duty to obtain a sign-down in conjunction with a later reduction in liability limits. The Court went on to state that even if Old Guard did fail in one of its statutorily mandated duties, there was no remedy.

Any questions regarding this case can be directed to Kevin McNamara at (717)237-7132 or kmcnamara@tthlaw.com.

Brethren Mut. Ins. Co. v. McKernan
2007 Pa. Super. 325
November 1, 2007

THE PENNSYLVANIA SUPREME COURT HOLDS THAT A CRIMINAL RESTITUTION AWARD IS COVERED BY LIABILITY INSURANCE, WHERE THE CRIMINAL CONVICTION WAS BASED ON NEGLIGENCE.

Background:  McKernan stabbed her boyfriend, Gardner, to death. Gardner was abusive and had been arrested for drunk driving the day of his death. Gardner was released into McKernan’s custody, but remained angry. Once home, Gardner struck McKernan, and she grabbed a knife, allegedly intending to frighten him. She struck him as he advanced on her, piercing his heart. McKernan immediately called emergency personnel, stating that she had accidentally stabbed Gardner. McKernan was criminally convicted of reckless endangerment and simple assault, by negligently caused bodily injury to another with a dangerous weapon. McKernan sought coverage under her Brethren homeowners policy, alleging that she had not intended to strike or injure Gardner. Brethren filed a declaratory judgment action, but its motion for summary judgment was denied. Brethren defended McKernan and settled the underlying civil action. McKernan then filed a counterclaim against Brethren, seeking reimbursement for Gardner’s funeral expenses, which were paid as restitution in the criminal action against her. The trial court denied the counterclaim.

Holding:  On appeal, the Superior Court reverses the trial court holding and remandes for an award in favor of McKernan. It observes that Brethren does not dispute an “occurrence” under its homeowners policy or asserts that the “expected/intended” bodily injury exclusion applies. The Court also notes the criminal conviction was based on negligence. The Court then addresses the insuring agreement, namely whether the restitution award is “damages” for which the insured is “legally liable” in a “claim” or “suit” because of bodily injury. Turning to Black’s Law Dictionary, the court holds that the restitution award is a “claim”, as it is a means by which money is recovered. The criminal action also is a “suit” brought against McKernan. These policy terms are not limited to a civil claim or suit. Relying on the statutory definition of restitution, the court holds that restitution is compensatory in nature, and qualifies as “damages”. Although a purpose of restitution may be punitive or rehabilitative in nature, restitution awards have become increasingly broad and duplicative of relief which may be sought in a civil action. The court refuses to hold as a matter of public policy that criminal restitution awards are not insurable.

Any questions regarding this case can be directed to Paul Walker at (717) 441-7061 or pwalker@tthlaw.com.

Ocean Spray Cranberries vs. Refrigerated Food Dist.
2007 Pa. Super 311
October 15, 2007

PENNSYLVANIA SUPERIOR COURT REVERSES PHILADELPHIA TRIAL COURT ORDER OF SUMMARY JUDGMENT ON INDEMNIFICATION, FINDING THAT IF THE PARTIES INTENDED THAT THE CLAUSE COVER THE INDEMNITEE’S OWN NEGLIGENCE, THE AGREEMENT MUST EXPLICITLY PROVIDE FOR SUCH INDEMNIFICATION IN CLEAR AND UNEQUIVOCAL LANGUAGE, AND THIS RULE IS APPLIED NOT ONLY TO PERSONAL INJURY CLAIMS BUT TO CLAIMS FOR PROPERTY DAMAGE.

Contractor RDS signed a Factor Agreement with York, obligating RDS to promote and sell York Products. RDS installed freezer equipment manufactured by York which ultimately broke free of its restraints and fell, severing an ammonia pipe line after which 10,000 lbs of liquid ammonia escaped, causing property damage and spoiling food products stored in the warehouse. A jury found York 75% responsible at trial, after which York filed a Motion for Summary Judgment as to indemnity and defense costs against RDS which the court granted. On appeal, RDS argued that the indemnification clause contained in the Factor Agreement did not unequivocally require RDS to assume liability for York’s own acts of negligence. The indemnity provision required RDS to indemnify York from all claims “based in whole or in part upon any act or omission on the part of [RDS]…in connection with the performance of any obligation of [RDS].” The court discussed the Perry/Ruzzi rule and noted that in the 100 years since the Perry case was decided by the Pennsylvania Supreme Court in 1907, the rule in Pennsylvania is that “If parties intend to include within the scope of their indemnity agreement a provision that covers losses due to the indemnitee’s own negligence, they must do so in clear and unequivocal language. No inference from words of general import can establish such indemnification.” Ruzzi v. Butler Petroleum Co., 527 Pa. 1, 7 (1991).

Though the trial court had found Ruzzi inapplicable because property damage rather than personal injury was involved, the Superior Court disagreed and held that the Perry/Ruzzi rule applies even in cases of pure property damage.

The Superior Court distinguished cases involving exculpatory clauses (See Topp Copy Products v. Singletary, 533 Pa. 486 (1993))

The Superior Court analogized the indemnification clause to a similar clause at issue in the Supreme Court’s determination of Bernotas v. Super Fresh Food Markets, 581 Pa. 12 (2004), and held that analyzing the Factor Agreement under the principle set forth by Bernotas and Perry/Ruzzi, it did not “clearly express” an intent by RDS to indemnify York for its own negligence. Since the jury apportioned 75% liability to York, clearly the indemnitee’s own negligence was at issue.

Any questions regarding this case can be directed to Dan Grill at (717) 237-7115 or dgrill@tthlaw.com.

Millers Capital Ins. Co. v. Gambone Bros. Development Co., Inc. et al.
2007 Pa. Super. 403
Filed: December 28, 2007

THE PENNSYLVANIA SUPERIOR COURT FOLLOWS KVAERNER AND HOLDS THAT WHEN FAULTY WORKMANSHIP ALLOWS WATER LEAKS INTO HOME INTERIORS, SUCH DAMAGE IS FORESSEABLE AND THERE IS NO “OCCURRENCE.” THE COURT CONCLUDES THAT THERE IS NO DUTY TO DEFEND OR INDEMNIFY THE INSURED WHO PLANNED, DEVELOPED AND BUILT THE HOMES.

Background:  Gambone developed and built two housing developments. Homeowners in the first development had sale agreements with Gambone and alleged water leaks as the result of “construction defects and product failures” in vapor barriers, windows, roofs, and stucco exteriors. Suit was filed for breach of contract, breach of warranty, negligence, strict liability, fraud and misrepresentation, and violations of the Unfair Trade Practice and Consumer Protection Law (UTPCPL). The negligence claims were dismissed, and arbitration resulted in an award against Gambone in excess of 1.1 million dollars. Homeowners in the second development alleged that defective stucco resulted in “delamination, peeling, disfigurement, compromise of structural integrity, infiltration by the elements, mold, cracking of the exterior cladding, and moisture penetration and entrapment.” Poor workmanship was alleged during initial construction, including improper or faulty design, implementation, workmanship, and supervision. Suit was filed for breach of implied warranty, fraudulent nondisclosure, negligent misrepresentation, and violations of the UTPCPL. Only the breach of implied warranty claims survived preliminary objections. Millers issued to Gambone a primary package policy, an excess policy, and a commercial general liability policy. Millers filed suit for declaratory judgment on its duty to defend and indemnify Gambone. The trial court found no coverage.

Holding:  On appeal, the Superior Court holds that Millers has no duty to defend or indemnify. The Pennsylvania Supreme Court decision in Kvaerner stands for the principle that an insurance claim under an “occurrence” policy (an accident) cannot be premised on a claim of faulty workmanship. Gambone argued that the claims against it not only involved claims for faulty workmanship that led to the failure of the stucco exteriors but also involved additional accidental damage caused by resulting water leaks to non-defective work inside the home interiors. Even if the damage to the faulty stucco exteriors was not covered, Gambone asserted that the resulting water damage to the homes’ interiors was covered. The Superior Court holds that all of the damage resulted from faulty workmanship that was intended to prevent the very damage claimed by the homeowners. The court states that such damage is not fortuitous. Natural and foreseeable acts, such as rainfall, which tend to exacerbate damage or consequences caused initially by faulty workmanship cannot be considered sufficiently fortuitous to constitute an “occurrence.” Even when the damage was continuous, or was caused by repeated exposure to conditions, does not make it fortuitous. The court also rejects arguments that its holding would render policy exclusions as mere surplusage or that Gambone’s reasonable expectations should afford coverage.

Any questions regarding this case can be directed to David Schwalm at (717) 255-7643 or dschwalm@tthlaw.com and/or Paul Walker at (717) 441-7061  or pwalker@tthlaw.com.