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Mar. 2020 | Bad Faith Update | Vol. 6 Iss. 5
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TWO POLICIES, TWO DIFFERENT OUTCOMES
In several prior issues of Bad Faith Update, our office stressed the need to closely examine all potential coverages available to an insured for a loss. This is particularly true for potential claims against businesses and their employees given the myriad of coverages and policies that could be implicated.
A recent opinion from the Superior Court of Pennsylvania involving claims against a pizza delivery driver and his employer illustrates the vital need to thoroughly review every policy.
Grange Mut. Cas. Co. v. Milano Enterprises, Inc., et al., 2020 WL 618551 (Feb. 10, 2020 Penn. Sup. Ct.)
Background
In February 2016, Carol Tait was struck and killed by a vehicle driven by Steven Krenke. At the time, Krenke was a pizza delivery driver for Milano Enterprises. Following her death, Tait’s family asserted claims and brought a lawsuit against Krenke for negligence and claims against Milano for respondeat superior and negligent hiring and retention.
To support their claims for negligent retention/hiring, the Tait family alleged that:
- Krenke was driving with a suspended license and was under the influence of a controlled substance;
- Milano did not conduct a review of Krenke’s criminal docket or did so and allowed him to drive for their business despite his numerous violations; and
- Milano had no policies or procedures in place to ensure that delivery drivers had current and valid licenses before allowing them to work as delivery drivers.
Milano’s Grange Mutual Coverage
At the time of the collision, Milano was insured under a CGL Policy and an Umbrella Policy, both of which were issued by Grange Mutual. At issue was the application of Auto Exclusions in the policies.
The CGL Policy provided there was no coverage for:
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Bodily injury… arising out of the ownership, maintenance, use or entrustment of any auto owned or operated by or rented or loaned to any insured….
This exclusion applies even if the claims allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by an insured….
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The Umbrella’s Policy’s Auto Exclusion only provided that there was no coverage for:
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Bodily injury arising out of the ownership, maintenance or use of any auto.
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There is no indication that the Umbrella Policy contained a follow form endorsement.
Grange Mutual’s DJ and Appeal
After the Tait family filed suit, Grange Mutual brought a declaratory judgment asking the Court to declare that no coverage would be provided under either the CGL Policy or the Umbrella Policy. Grange Mutual based its assertion on the above auto exclusions precluding any coverage of the death of Carol Tait.
Grange Mutual filed a Motion for Judgment on the Pleadings concerning its obligation to provide a defense and indemnity for the Tait family’s claims. The trial court agreed that the Auto Exclusion in the CGL Policy unambiguously excluded coverage for the Tait family’s claims. However, the trial court disagreed that the Auto Exclusion in the Umbrella Policy necessarily applied to preclude coverage. Grange Mutual appealed this finding.
The appellate court agreed with the trial court’s finding and held that the Auto Exclusion was ambiguous as applied to the Tait family’s claims. In doing so, the appellate court noted that unlike the CGL Policy, the Auto Exclusion in the Umbrella Policy did not expressly exclude claims alleging negligence in the hiring, supervision or employment of others resulting in bodily injury involving the ownership, maintenance or use of an auto.
In further support of the Auto Exclusion being found ambiguous, the appellate court pointed to the Aircraft or Watercraft exclusion in the Umbrella Policy. That exclusion provided that no coverage would be provided for:
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Bodily injury arising out of the ownership, maintenance, use or entrustment to others of any aircraft or watercraft….
This exclusion applies even if the claims against any insured allege negligence in the supervision, hiring, employment, training or monitoring of others by that insured, if the occurrence… involved the ownership, maintenance, use or entrustment to others of any aircraft or watercraft….
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Both policies were written by Grange Mutual. The inclusion of the additional language in the Aircraft or Watercraft exclusion in the Umbrella Policy and that same language in the Auto Exclusion in the CGL Policy, showed that Grange Mutual knew exactly what language it needed to exclude coverage for the Tait family’s negligent hiring/retention claims but choose not to include such language in the Umbrella Policy’s Auto Exclusion.
At best the Auto Exclusion in the Umbrella Policy was ambiguous as to the Tait family’s negligent hiring/retention claims. Ambiguities are resolved in favor of coverage and thus the Umbrella Policy provided coverage for the Tait family’s claims.
While the opinion does not address how any self-insured retention or retained limit would be addressed or satisfied, a finding of coverage under the Umbrella Policy was a vital first step for the Tait family. This step would not have been possible without a close examination of all sources of coverage by both the Tait family and the Pennsylvania courts.
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"My practice involves keeping up with the latest cases involving bad faith claims. Contact me if you need advice."
- Kirk Presley
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