PHILADELPHIA – A Massachusetts-based insurance company will not be reimbursed in excess of $1 million for defense and indemnification of one of its policyholders, according to the U.S. Court of Appeals for the Third Circuit.
A Monday decision from the Court, authored by Judge D. Michael Fisher, stipulated Quincy Mutual Fire Insurance Company of Quincy, Mass., was not entitled to a declaratory judgment seeking reimbursement from Imperium Insurance Company of New York City in regards to expenses incurred in connection with Sunrise Concrete, Inc.
Sunrise Concrete is a Quincy Mutual policyholder and was the concrete contractor for a housing development construction project in Pottstown. Sunrise Concrete sub-contracted some of the concrete work, including porch construction, to a separate group, Cruzeiro Novo, under an oral agreement.
Over the course of construction, a worker named Zhe Feng Huang was injured while working on a porch roof, and Huang then sued Sunrise Concrete and others for negligence in Pennsylvania state court.
Sunrise Concrete’s general liability insurance carrier was Quincy Mutual, who defended them against Huang’s suit. Quincy Mutual also added Cruzeiro Novo’s insurer, Imperium, as a defendant in the state court litigation, arguing Sunrise Concrete was an additional insured on Cruzeiro Novo’s policy – and that Imperium was therefore obligated to defend Sunrise Concrete.
Sunrise Concrete sought assurance from Cruzeiro Novo it was an additional insured on Cruzeiro Novo’s policy, and Cruzeiro Novo produced a certificate of liability insurance to this effect.
However, the certificate, issued by Imperium agent Fairways Insurance Services, came with the following caveat: “This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below.”
At the time of Huang’s injury, Cruzeiro Novo’s insurance policy with Imperium contained a blanket additional insured endorsement: “Insured includes any person or organization that you have agreed in a written contract or agreement to add as an additional insured on this policy, but only with respect to liability arising out of your work for such person or organization.”
However, Imperium argued Sunrise Concrete was not an additional insured party, because Cruzeiro Novo worked as Sunrise Concrete’s subcontractor under an oral agreement; not a written contract.
Quincy Mutual settled Huang’s suit against Sunrise Concrete for $1 million but reserved its rights against Imperium and filed the instant declaratory judgment action in the U.S. District Court for the Eastern District of Pennsylvania. Quincy Mutual and Imperium each filed motions for summary judgment, and the District Court granted Imperium’s motion, while denying Quincy Mutual’s motion.
Quincy Mutual appealed the District Court’s ruling, claiming they erred in determining the additional insured endorsement did not apply to Sunrise Concrete.
“Under Pennsylvania law, courts interpret the meaning of insurance contracts by determining the intent of the parties as expressed by the policy language,” Fisher said. “If the language is unambiguous, the express terms of the contract are controlling.”
Fisher added the parties agreed there was no written contract or agreement between Sunrise Concrete and Cruzeiro Novo, meaning under the language of the endorsement, Sunrise Concrete was not an additional insured and Imperium was not obligated to defend and indemnify it.
“The District Court correctly interpreted the contract,” Fisher said.
Quincy Mutual further asserted Imperium was bound by the certificate of insurance issued by their agent, Fairway Insurance Services – a rationale the Third Circuit also rejected.
“Fairways did not have authority to add Sunrise Concrete as an additional insured through a certificate of insurance. The certificate of insurance specifically stated that it was for informational purposes only and did not modify the terms, exclusions, or conditions of the policy,” Fisher said.
Quincy Mutual’s final argument was even if Sunrise Concrete was not an additional insured party under the policy endorsement or certificate of insurance, Imperium is estopped from denying coverage due to the statement in the certificate of insurance. However, Fisher indicated both Pennsylvania and New Jersey law thwarted this belief.
“To establish coverage by estoppel, the insured must have reasonably and detrimentally relied on a misstatement by the insurer that coverage existed,” Fisher said.
“The District Court correctly determined that no reasonable jury could find that Sunrise Concrete reasonably relied on the certificate of insurance. It is unreasonable to rely on a certificate of insurance that explicitly disclaims conferring any rights,” Fisher concluded.
The appellant is represented by Fred B. Buck of Rawle & Henderson, in Philadelphia.
The appellee is represented by Stanley W. Kallmann of Gennet Kallmann Antin & Robinson in Parsippany, N.J. and Nancy Elizabeth Zangrilli of McDonnell & Associates in King of Prussia.
U.S. Court of Appeals for the Third Circuit case 15-2104
U.S. District Court for the Eastern District of Pennsylvania case 2:14-cv-00612
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at firstname.lastname@example.org