In Chris Eldredge Containers, LLC v. Crum & Foster Specialty Insurance Company, et al., the Superior Court of Pennsylvania addressed the obligation of the Defendant insurers to defend and indemnify their insured, Eldredge Containers, in connection with a personal injury lawsuit.
The underlying personal injury lawsuit arose from an incident in which an Eldredge Containers employee, driving an Ottawa Terminal Tractor, backed into a stationary service truck owned by Safety-Kleen Systems, Inc. (“Safety-Kleen”) and occupied by Safety-Kleen’s employee, Craig Logan (“Logan”). As a result, Logan filed suit against Eldredge Containers, alleging he sustained injuries from the collision.
Eldredge Containers sought defense and indemnity from, inter alia, the insurance carriers Crum & Foster (“C&F”) and National Union. Both carriers disclaimed coverage. Thereafter, Eldredge Containers filed a declaratory judgment action seeking a declaration that the insurers were required to provide it with indemnification and defense in connection with Logan’s underlying personal injury lawsuit.
In the declaratory judgment action, C&F, Eldredge Containers’ general liability carrier, filed a motion for judgment on the pleadings. Therein, C&F argued that while it had issued a Commercial General Liability policy that provided coverage for damages arising from bodily injury, that policy contained an “Absolute Auto Exclusion.” That exclusion provided that there was no coverage for “bodily injury…arising out of or resulting from the ownership, maintenance, use[,] or entrustment to others of any…auto…” C&F argued that the Absolute Auto Exclusion was triggered because Logan’s Safety-Kleen service truck was an “auto” under the definition of the policy and, therefore, Logan’s alleged injuries arose out of the ownership or use of an “auto.” National Union, Eldredge Containers’ excess carrier, similarly filed a motion for judgment on the pleadings, arguing that it had no duty to defend or indemnify Eldredge Containers absent a corresponding duty under an underlying policy.
The trial court granted C&F and National Union’s motions for judgment on the pleadings, dismissing Eldredge Containers’ declaratory judgment action. Thereafter, Eldredge Containers appealed. The appellate court noted that “[t]his appeal involves the interpretation of an insurance policy, which ‘is a question of law that we will review de novo.’” The court then cited various cases from the Commonwealth of Pennsylvania to support the propositions (1) that when a coverage clause is ambiguous, defined as being “reasonably susceptible of different constructions and capable of being understood in more than one sense,” the clause is to be “interpreted broadly so as to afford the greatest possible protection to the insured;” and (2) that exceptions to an insurer’s general liability are to be interpreted narrowly against the insurer.
Applying the above-referenced rules, the appellate court found that the C&F Commercial General Liability policy’s Absolute Auto Exclusion was ambiguous because it did not specify a causation standard or identify whose ownership or use of an auto triggers the exclusion. The court cited prior Pennsylvania decisions which found the phrase “arising out of” to be ambiguous, such that it must be strictly construed against the insurer to exclude only those injuries that are proximately caused by the auto. Here, the court noted that in the underlying personal injury action, it was the Ottawa Terminal Tractor, a non-auto, and not the Safety-Kleen truck, that was the proximate cause of Logan’s injuries.
The appellate court similarly found that the ownership clause in the Absolute Auto Exclusion was ambiguous, because it did not specify whose “ownership, maintenance, use[,] or entrustment to others of any…auto” triggers the exclusion. The court thus strictly construed this clause against the insurer, finding that the exclusion was only triggered by the insured’s (Eldredge Containers’) “ownership, maintenance, use[,] or entrustment to others of” an auto. In this case, the only “auto” at issue was Logan’s Safety-Kleen truck, which Eldredge Containers did not own, maintain, use, or entrust to others. The Absolute Auto Exclusion thus was not triggered.
The appellate court concluded that because the Absolute Auto Exclusion was not triggered, C&F and National Union both had a duty to indemnify and defend Eldredge Containers in the underlying suit. The court thus reversed the trial court’s decision and remanded the case for further proceedings consistent with its opinion.
Takeaway: Pennsylvania insurers should be aware that Pennsylvania law favors the broad interpretation of ambiguous coverage clauses to provide the greatest amount of protection to policyholders, while narrowly interpreting coverage exceptions and exclusions.
