Pennsylvania’s Product Liability Principles Remain Unstable

As we have previously reported, those of us who practice in, or are beholden to, Pennsylvania products liability law, have anticipated the Supreme Court’s decision in Tincher v Omega Flex Inc., where it appeared that the High Court was finally poised to decide whether the Commonwealth would abandon the Second Restatement’s Section 402(a) articulation of strict liability in favor of the increasingly-popular (and allegedly pro-defendant) Third Restatement.  The answer in Tincher may very well have lead to more questions.

Pre-Tincher, strict liability claims were governed by Azzarello’s interpretation of Section 402(a) of the Second Restatement of Torts that “the supplier of a product is the guarantor of its safety [and] [t]he product must, therefore, be provided with every element necessary to make it safe for its intended use, and without any condition that makes it unsafe for its intended use.”  To achieve this end, Azzarello ignored the language of unreasonable danger found in Section 402(a) by holding that negligence concepts could not be considered by the jury when asked to impose strict liability for products.

After years of interpreting the gray areas of Azzarello, several state and federal courts in the Commonwealth suggested that the Supreme Court abandon Section 402(a) by adopting the more hybrid approach found in the Third Restatement. Instead, the Supreme Court recently held that, while instructive, the Third Restatement would not replace Pennsylvania’s “properly calibrated” version of Section 402(a).  Rather, Tincher simply overruled the overbearing Azzarello standard that previously imposed absolute strict liability on manufacturers regardless of reasonableness and foreseeability while affirming the Second Restatement’s place in Pennsylvania common law.

Without the familiarity of Azzarello and its progeny, nor the fresh canvas of the Third Restatement, the reality of Tincher is that Pennsylvania product law is likely to remain in flux for years to come.  However, at a minimum, Tincher eradicated the notion of unconditional liability for product manufactures in favor of allowing the defense to argue traditional negligence concepts to the jury in one of two “composite” approaches.  First, the Court explained that some product cases will lend themselves to a pro-plaintiff “consumer expectations” standard wherein “the product is in a defective condition if the danger is unknowable and unacceptable to the average or ordinary consumer.”  On the other hand, some product cases will allow the defense to argue that the “risk/utility” of the product militates against imposing liability for the plaintiff’s alleged injuries.

Thanks to Adam Gomez for his contribution to this post.

Faulty Workmanship Complaint not Covered Despite Negligence Claims (PA)

Insurers are often required to defend a lawsuit where a nominal count or allegation implicates coverage, despite the fact that the nature of the complaint is clearly outside of the scope of coverage.

This was recently at issue in State Farm Fire & Casualty Co. v. McDermott. A homebuilder, the PulteGroup Inc., sued  contractor Patrick McDermott Plastering, claiming that McDermott performed defective plaster, stucco, and window installation work on almost 300 homes in a housing community. PulteGroup’s also alleged negligence and breach of contract, which McDermott claimed triggered coverage under the CGL policy.

State Farm, McDermott’s insurer, agreed to defend McDermott in the underlying action under a reservation of rights and subsequently filed a declaratory action arguing that the complaint in the underlying suit failed to allege an occurrence needed to trigger coverage. Specifically, State Farm noted that nothing in the complaint suggested that an accident occurred, which the policy language identified as necessary to qualify as an occurrence. Despite the negligence and breach of contract allegations in PulteGroup’s complaint, State Farm argued that the claims did not suggest an unexpected accident but that the underlying substance of the complaint was faulty workmanship, which was not covered.

The Eastern District of Pennsylvania court ultimately agreed with State Farm that the underlying complaint alleged faulty workmanship which was not an accident as necessary to constitute an occurrence under the policy. The court noted that McDermott’s contract with PulteGroup made it McDermott’s contractual duty to complete the project in a “workmanship like manner,” so any liability McDermott faced would stem from his alleged failure to meet such contractual obligations. Thus, relying on the “substance” of the negligence allegations, the court granted State Farm’s Motion for Summary Judgment.

Thanks to Nicole Pedi for her contribution to this post.  Please write to Mike Bono for more information.

PA Supreme Court to Consider Solo Subrogation

The Pennsylvania Supreme Court recently heard arguments as to whether an insurance company can pursue litigation against a third-party tortfeasor if the injured insured does not file suit herself.

At issue before the court in Liberty Mutual Insurance Co. v. Domtar Paper Co. was whether Section 319 of the Pennsylvania Workers’ Compensation Act, 77 P.S. § 671, allows the employer/ insurer to step into the shoes of the insured employee to pursue subrogation against a tortfeasor.   The case arose when George Lawrence, an employee of Schneider National, Inc. fell on his knee at Domtar Paper’s parking lot while acting in the scope of his employment. Liberty Mutual, who issued a workers’ compensation policy to Schneider National, paid approximately $34,000 to Lawrence for his workers’ compensation benefits claim. In an effort to recover the amount it paid out to Lawrence, Liberty Mutual designated itself a subrogee of Lawrence and brought a negligence action against Domtar Paper, who allegedly owned and maintained the parking lot.

Domtar Paper filed Preliminary objections on the basis that Liberty Mutual’s cause of action was barred because Pennsylvania does not recognize an independent cause of action by workers’ compensation insurers when the injured party has not brought suit in his own right and is not a party in the case.  The trial court sustained the objections and the Pennsylvania Superior Court affirmed.  Specifically, the Superior Court explained that Section 319 of the Workers’ Compensation Act does not give an employer or insurer a cause of action in its own right.

Appearing before the Pennsylvania Supreme Court, counsel for Liberty Mutual argued that the Workers’ Compensation Act permits an employer to be subrogated to the rights of an employee and denying that right would create an economic loss for the carrier. Needless to say, judgment in favor of Liberty Mutual would be important for insurers who pursue subrogation.  Thanks to Sheri Flannery for her contribution to this post.  For more information, please write to Mike Bono.


What is Your Business? Describe it Accurately or it May be a Material Misrepresentation.

In Star Ins. Co. v. Treible’s Wrecker Serv. Inc., the underlying plaintiff commenced a negligence action against Treible’s claiming that Treible’s negligence inspection of his car resulted in plaintiff’s damages.  Star Insurance Company disclaimed coverage and commenced a declaratory judgment action seeking to rescind its insurance policy based on a material misrepresentation.  Star claimed that the president of Treible’s fraudulently concealed that Treible’s was operating a state motor vehicle inspection facility in addition to its towing and repossession services.

In its annual renewal application for insurance, Treible’s stated that its business consisted of repossession and towing services.  Moreover, when specifically asked in the application if it conducted any other work, Treible’s responded in the negative.  Further, the insurer’s agent had previously testified that the type of business a potential insured is operating is of the upmost importance in determining whether to issue insurance to that person / organization.  As such, the insurer claimed that it would not have insured Treible’s if it was known that Treible’s operated an inspection business.

Thus, the Court concluded that the representations made by Treible’s in its insurance application were false and material to the insurance contract.  Consequently, the Court granted the insurer’s motion to rescind the insurance policy.

The key question with respect to a material misrepresentation allegation is whether the insurer was induced into the contract by the material misrepresentation.  If the insurer can prove, by clear and convincing evidence, that:  a false representation, material to the transaction, was knowingly or recklessly made with the intent to mislead the party into relying on it, which ultimately resulted in the party’s injuries – then the contract could be rescinded.

Thanks to Colleen Hayes for her contribution to this post.  For any questions contact

When Does the Clock Strike for PA Bad Faith Claims?

In Blackwell v. Allstate Insurance Company, plaintiff filed a March 2011 claim with Allstate for property damage due to a water leak, and contractor vandalism.  Allstate covered the claim, and paid for the cost to repair plaintiff’s furnace.  In October 2012, plaintiff realized that the furnace was inoperable, and filed another claim for the replacement cost, alleging the 2011 water damage and vandalism caused the furnace damage.  On November 13, 2012, Allstate denied Plaintiff’s claim, explaining that the twenty months between Plaintiff’s initial claim and the furnace damage barred recovery.  Plaintiff filed suit in November 2013 for breach of contract, common law bad faith and statutory bad faith.

The District Court dismissed the claim for breach of contract.  Under Pennsylvania law, the statutory limitation period generally starts to run from the time of breach, however, the parties agreed to a different limitation period in the policy, as “one year from inception of the loss or damage.”  Since the “inception of the loss or damage” occurred in March 2011, the breach of contract claim filed after March 2012 (a year from the inception of loss) was time barred.  The court also dismissed the common law bad faith claim, since a common law bad faith claim fails to exist independently of a breach of contract claim.  However, the statutory bad faith claim survived, since under Pa. Const. Stat. Ann. § 8371, the time period for the statute of limitations on a bad faith claim begins on the date the insurance company first denied the insured’s claim in bad faith, here November 13, 2012.  As such, plaintiff’s November 2013 filing was timely.

This case is instructive as it evaluates the accrual dates for bad faith claims.  In analyzing bad faith claims, attorneys must take into account the common law and any statutory limitations to evaluate dismissal potentials.

Thanks to Coleen Hill for her contribution to this post. For any questions please contact




Court Rejects Asbestos Laundry Case (PA)

Earlier this month, the Superior Court of Pennsylvania denied a wrongful death claim in Haldman v. Eaton Corporation that alleged a women developed terminal cancer as a result of her exposure to asbestos while doing laundry. The suit was brought by Daniel Haldaman, the executor of the estate of his wife, Gerda Haldaman.

Evidence suggested that Gerda’s husband, Ray Haldaman, may have been exposed to asbestos dust in the Pennsylvania steel mill where he worked. In fact, the appeals court concluded that in general, asbestos containing products were present in theRay Haldaman’s workplace during the time of his employment. Daniel Haldaman sued the manufacturers of the asbestos-containing brakes that were present in the mill and further alleged that Gerda routinely washed her husband’s clothes, which were “dirty and covered in dust.”

However, the appeals court determined there was no evidence of specific exposure to any of the asbestos-containing products. According to the court, “those statements identifying particular products and times did not mention the presence of Ray Haldaman, and specific references to Ray Haldaman did not place him in the proximity of specific asbestos containing products at specific times.” In sum, there was no nexus between Ray—and by extension Gerda Haldaman—and the asbestos-containing products manufactured by the defendants.

The court concluded that Daniel had only established the potential for exposure, but did not conclusively prove asbestos exposure from a specific source. As a result, the appeals panel upheld the grant of summary judgment for product defendants. The case provides interesting insight into what future plaintiffs need to establish in the increasing number of asbestos cases.

Thanks to Erica Woebse for her contribution to this post. If you have any questions, please email Paul at

Fraud Still Considered “Professional Services” for Purposes of E&O Sublimit (PA)

The Court of Appeals for the Third Circuit recently found that an accounting firm whose employee embezzled and misappropriated client funds is required to reimburse its insurer’s defense costs in excess of the applicable sublimit because, despite the fraud, the employee rendered “professional services” as defined by his firm’s professional liability insurance policy.

In CAMICO Mutual Insurance Co. v. Hefler, Radetich & Saitta, LLP, CAMICO insured Hefler, a Philadelphia accounting firm, under a claims-made Accountants Professional Liability insurance policy that provided limited cover for third-party losses arising out of the firm’s misappropriation, misuse, theft or embezzlement of funds.  CAMICO policy was asked to cover Hefler’s alleged misappropriation of settlement monies it was assigned to administer.  It was  alleged that a senior claims analyst defrauded three separate class actions of tens of millions of dollars by working with co-conspirators to file false claims.  Specifically, in the civil suit that followed the analyst’s criminal prosecution, CAMICO defended Hefler subject to a reservation of rights that expressly preserved its ability to recover defense costs and expenses exceeding a $100,000 sublimit concerning misappropriation, fraud and embezzlement.

Eventually, CAMICO sought declaratory judgment from the United States District Court for the Eastern District of Pennsylvania that it owed no defense or obligation beyond the $100,000 sublimit and was entitled to reimbursement of its excess costs.  After the trial court granted summary judgment in favor of CAMICO, Hefler appealed to the Court of Appeals for the Third Circuit, arguing that the sublimit did not apply because Penta’s fraud did not satisfy the policy’s “professional services” trigger.  More specifically, Hefler suggested that Penta’s actions fell outside the sublimit because his fraudulent administration of settlement funds did not produce fees or commissions for the benefit of his employer, Hefler.  The Third Circuit summarily rejected this argument as an overly restrictive reading of the policy that would gut the sublimit wherever an employee engaged in independent criminal conduct.  As a result, the Third Circuit affirmed the trial court’s declaration and ordered Hefler to reimburse CAMICO for defense costs and fees incurred in excess of the $100,000 sublimit.

While particularly poignant in the context of professional liability, the Third Circuit’s reasoning is also instructive in other niches where defense or indemnity may turn on whether an employee’s independent criminal acts fall outside the ambit of coverage.

Thanks to Adam Gomez for his contribution to this post.  If you have any questions, please email Paul at

Allstate Settles Bad Faith Suit for 88 Times Policy Demand (PA)

Allstate Insurance recently reached a settlement in a bad faith case for $22 million – the largest bad faith settlement recorded in Pennsylvania.

The underlying suit was brought by Patrick Hennessy, who lost his leg in a 2009 auto accident while a passenger of Ryan Caruso.  After Caruso rear-ended another car, Hennessy stepped outside to help push the other car from the road and was hit by a third car (who had no insurance).  Caruso was covered under a $250,000 Allstate policy, and Hennessy offered to settle with Allstate for policy limits, otherwise threatening to sue the Carusos and execute judgment on their personal assets.

Allegedly, Allstate failed to advise the Carusos that Hennessy was willing to settle his claim for the policy limit and did not respond to certain letters from its insured.  Hennessy later filed suit in the Philadelphia Court of Common Pleas in February 2011.  Right before jury selection, Hennessy rejected Allstate’s $250,000 settlement offer, instead demanding $5 million.  The case proceeded to trial which resulted in a verdict of $19.1 million dollars.

Thanks to Thalia Staikos for her contribution to this post.  Please write to Mike Bono for more information.

Caruso assigned his rights against Allstate to Hennesy following the trial. When Allstate refused to pay the judgment, Hennessy brought a bad faith action in the Philadelphia Court of Common Pleas. Allstate attempted to remove the case to federal district court in Philadelphia, but Hennessy joined certain Pennsylvania Allstate employees as defendants, thus defeating diversity jurisdiction which would make removal to federal court appropriate. Judge Stengel of the United States District Court for the Eastern District of Pennsylvania denied Allstate’s motion for removal, stating that all claims against the joined defendants were valid since they were specific to the employees’ conduct and were not frivolous.

In light of this ruling, Allstate decided to settle with Hennessy this fall for $22 million (which included interest and the like) rather than proceed to trial on its bad faith claims.

PA Supreme Court Expected To Rule On Multi-Million Dollar Insurance Cases

The Pennsylvania Supreme Court is expected to hear argument on various multi-million dollar insurance cases this month covering a wide gambit of issues, including testimony by a treating physician in Polett v. Public Communications and indemnification in Babcock & Wilcox.

In Polett v. Public Communications, the plaintiff claimed she suffered a right knee injury while filming a promotional video for an artificial knee implant.  The jury ultimately found in favor of the plaintiff awarding her $27.6 million in damages.  However, the jury’s verdict was reversed, in part, based on the defendant’s claim that the plaintiff did not disclose prior to trial that her treating physician would be testifying as an expert witness.  On appeal, the plaintiff argued that her treating physician was exempt from the rule that all experts need to be disclosed prior to trial because he was her treating physician.  The Pennsylvania Supreme Court granted the plaintiff’s appeal and will be hearing argument on whether the trial court judge’s allowance of the plaintiff’s treating physician to give expert testimony on causation was appropriate given the judge’s finding that the physician reached his opinion during the course of treatment and before litigation was anticipated.

In Babcock & Wilcox, the Pennsylvania Superior Court held that when an insurer agrees to defend its insured pursuant to a reservation of rights in connection to a lawsuit, the insured may either accept the insurer’s defense, which would result in the insured being bound by the policy’s consent-to-settle provision or retain its own counsel, allowing the insured to control the litigation (however, these costs would only be covered by the insurer so long as they were found to be fair and reasonable).  The Superior Court noted the lack of Pennsylvania case law on an insurer’s obligation in connection to a policy’s consent-to-settle provision.  As such, the Pennsylvania Supreme Court will hear argument on whether the Superior Court properly held that when an insured settles a lawsuit, after rejecting an insurer’s defense, the insurer is only obligated to cover the amount of the settlement up to the policy limits if the settlement was reasonable and not entered into in bad faith.

Thanks to Colleen Hayes for her contribution to this post.  For more information, please contact Nicole Y. Brown at

Mall Stuck Because of Ancient Incidents (PA)

As a general rule, third-party criminal acts may be sufficiently unforeseeable to relieve the defendant of liability in a claim for negligence.  That overarching principle, however, appears to be slowly eroding in Pennsylvania where a strict adherence to the Restatement (Second) of Torts recently prompted a three-judge panel of the Superior Court to conclude that a single incident of criminality on a premises triggers the possessor’s duty to generally safeguard against third-party acts.

In the case of Young v. Prizm Asset Management Company, the plaintiff filed suit against a variety of entities involved in the operation of the Steamtown Mall in Lackawanna County, Pennsylvania, after she sustained injuries in an attempted car-jacking that occurred in the parking garage.  Specifically, the plaintiff contended that the Mall defendants unreasonably failed to prevent the attempted car-jacking even though a similar event had occurred at an adjacent leased parking lot years before she began her employment.  Ostensibly taking into account the isolation of this prior incident, the Lackawanna County trial court eventually granted summary judgment in favor of the Mall defendants, noting that they had no duty to prevent an unanticipated criminal assault in an area open to members of the general public.

In the appeal to the Superior Court that followed, the plaintiff argued that the trial court had erred in granting summary judgment because the Restatement (Second) of Torts imposes liability on land possessors for “physical harm caused by the accidental, negligent, or intentionally harmful acts of third persons.”  In ultimately accepting the plaintiff’s premise, the Superior Court explained further that a land possessor’s duty to protect against third-party actions is triggered by prior notice of such actions without regard to the time or place of occurrence.  In fact, the Superior Court affirmed the notion that a duty to protect the entire property exists where the possessor merely “knows or may have reason to know, from past experience, that there is a likelihood of conduct on the part of third persons in general [that] is likely to endanger the safety of a visitor.”  Consequently, the Superior Court found that the trial court had abused its discretion in granting summary judgment in favor of the defendants and reversed for further proceedings.

Although the core concept in Young may not come as much of a shock in Pennsylvania, the facts that underlie the decision are particularly disconcerting insofar as they suggest that one criminal or unlawful act by a third-party may be sufficient to impose liability on land possessors for their failure to reasonably protect against a wide array of unrelated incidents that may occur subsequently on the premises.

Thanks to Adam Gomez for his contribution to this post. If you have any questions or comments, please email Paul at