Court Broadly Applies Pollution Exclusion To Oil and Gas Operations

Broad pollution exclusions may be applied to bar coverage in certain circumstances. In Hiland Partners GP Holdings, LLC, et al. v. National Union Fire Insurance Company of Pittsburgh, the Eighth Circuit broadly applied a commercial general liability’s pollution exclusion, upholding an insurer’s denial of coverage.

In Hiland, an explosion occurred at a natural gas processing facility.  In its declaratory judgment action, the owner and operator of the facility were seeking additional insured status under another party’s CGL policy.  The CGL contained a pollution exclusion stating no coverage was provided under the policy for, damage arising out of the actual, alleged or threatened discharge of a contaminant.  Contaminant was not defined by the policy.  The insurer denied coverage under the policy on the basis of this exclusion.

On appeal, the Eighth Circuit concluded that the exclusion barred coverage reasoning that one of the byproducts, condensate, which was produced during the processing operation, constituted a contaminate because it was flammable, volatile and explosive and had the ability to infect the environment.  Accordingly, since the insured’s damages arose out of the condensate, the pollution exclusion barred coverage.

This case illustrates how broadly a court could potentially interpret a policy’s pollution exclusion to bar coverage.  However, not all courts may apply a policy’s pollution exclusion as broadly to bar coverage for damages stemming from operations in the oil and gas industry.  As such, if an insurer intends to issue a policy to an insured, operating in the field of oil and gas, an insurer may benefit from terms, provision and/or exclusions that are more specifically tailored to the risks associated with oil and gas operations, as to avoid providing coverage for damages to which an insurer did not intend.

Thanks to Colleen Hayes for her contribution to this post.




Court Spurns Request for Claims Reps’ Personnel Files While Compelling Underwriting Materials in DJ Action (PA)

Underwriting manuals and files and claims professionals’ personnel files are guarded business records for any insurance company.  These proprietary and confidential documents were the subject of discovery demands in a declaratory judgment action involving denial of defense and indemnity to a law firm in a professional liability action.  In Westport Insurance Corp. v. Hippo Fleming & Pertile Law Offices, the federal court sitting in the Western District of Pennsylvania grappled with whether to compel production these sensitive documents.

The law firm contended that Westport’s coverage denial was made in bad faith and in breach of contract.  To establish its claims, it sought Westport’s underwriting manual and file.   The firm specifically sought information shared between claims and underwriting professionals in connection with an increase in premium tied to the underlying litigation. In opposition, Westport argued that the underwriting materials were irrelevant because there were no claims related to the underwriting of Hippo’s policy.

The court, however, found that although Hippo did not make any specific claims regarding the underwriting of its policy, the bad faith and breach of contract claims supported the discovery sought.  The firm pointed to premium increases imposed by the insurer that were related to the underlying litigation.  Given this allegation, the Court ruled that the underwriting files may be relevant and compelled production.

On the other hand, the Court was not inclined to order the insurer to produce personnel files of three claims adjusters who worked on Hippo’s underlying claim.  Hippo argued the personnel files would help Hippo establish Westport’s corporate policy, standards, training, procedures and relationship with its employees.  The court, however, did not believe Hippo’s reasoning for the request was sufficient to overcome the general privacy concerns when production of personnel files is at issue.  Rather, the court noted that Hippo could obtain the information it needed through other, less invasive means, e.g. depositions of the employees.

In making both of these discovery rulings, the court noted that the case law in both areas (production of underwriting files and personnel files) is murky at best.  Thus, the court reiterated that production of such information will depend on the specific facts and circumstances a on a case by case basis.

Thanks to Erin Connolly for her contribution.

For more information, contact Denise Fontana Ricci at

Homeowner’s Replacement Cost only for Replacement (PA)

In Brown v. Everett Cash Mutual Insurance Company, the Pennsylvania Superior Court found no basis for plaintiffs’ breach of contract and bad faith claims against a homeowner’s insurer on a first party claim.  Sabrina Brown and her father, William T. Scott, owned a farmhouse in Carmichaels, Pennsylvania.  Everett issued a homeowners policy to the named insureds, Brown and Scott.  In July 2007, the residence burned to the ground in a fire that qualified as a covered loss under the insurance policy.

In January 2008, Everett issued a check for the actual cash value of the house  as well as four months of living expenses totaling $1,800 based upon documentation provided by its insureds. Everett denied the insureds’ request for additional living expenses under the policy because the residence had not been rebuilt in a reasonable amount of time following the fire.

Under the policy terms, Everett was required to issue the reimbursement checks payable to both Brown and Scott. Scott refused to sign the check, and it expired 180 days after issuance. Everett ultimately reissued another check to Brown and Scott for the same amount.

Brown and her husband filed suit against Everett for breach of contract and bad faith (among other claims).  Specifically, Brown claimed that Everett breached the contract by only paying her the actual cash value of the house instead of the replacement value.  The policy provided that:

When the cost to repair or replace exceeds the lesser of $2,500 or 5% of the limit on the damaged building, we do not pay for more than the actual cash value of the loss until repair or replacement is completed.

Relying on this language, the Court determined that Brown was only entitled to replacement cost if she actually rebuilt the house, which she never did.  Brown argued that she needed the replacement cost money to rebuild the house.  The Court quickly dismissed this disingenuous argument based upon evidence in the record that the house had not been rebuilt due to a dispute between Brown and Scott rather than a lack of money.   Therefore, she was not entitled to the replacement cost.


Brown also argued that she was entitled to the full policy limit for additional living costs.  However, Brown provided proof of expenses for  only four months – which Everett had paid.  Thus, the Court held that Everett was not obligated to pay the full policy limits for additional living expenses.

Lastly, Brown argued that Everett acted in bad faith when it failed to issue separate checks to her and Scott.  However, Brown’s policy provided that insurance benefits are made directly to the insureds as they are identified on the Declarations page of the policy – in this case Brown and Scott.  Everett told Brown to have Scott give his written consent to allow two separate checks to be issued, however, Brown failed to do so.  Everett even offered to deposit the funds into court in an interpleader action so that Brown and Scott could determine their entitlement and again, Brown failed to act on this option.  Thus, the Court held that Brown’s bad faith claim lacked merit.

Thanks to Marcus Washington for his contribution.

For more information, contact Denise Fontana Ricci at

Advertise Away, It Has Little to Do With Venue (PA)

On March 8, the Superior Court of Pennsylvania affirmed a lower court’s decision to transfer venue in Wyszynski v. Greenwood Gaming & Entertainment, Inc. Wyszynski v. Greenwood Gaming & Entertainment, Inc.,  The case arises out of an alleged slip and fall that Wyszynski suffered in the restroom of Parx Casino in Bensalem, Pennsylvania.

The complaint was originally filed in Philadelphia.  Defendant Greenwood Gaming & Entertainment, Inc. (“Greenwood”) filed preliminary objections, arguing that venue was improper and that the case should have been filed in Bucks County.  Greenwood argued that it did not regularly conduct business in Philadelphia.  The Philadelphia Court of Common Pleas granted Greenwood’s preliminary objections and transferred the case to Bucks County.  Wyszynski then appealed, arguing that Greenwood advertises heavily in Philadelphia.

In Pennsylvania, a plaintiff’s choice of forum is given great weight.  An action against a corporation, in Pennsylvania, may be brought in the county where its registered office or principal place of business is located, a county where it regularly conducts business, the county where the cause of action arose, or a county where the transaction or occurrence took place out of which the cause of action arose.  Greenwood has its office in Bucks County and neither party disputed that the cause of action arose in Bucks County as well.  Wyszynski argued, however, that Greenwood “regularly conducts business” in Philadelphia.

Pennsylvania applies a quality and quantity test to determine if a business regularly conducts activity in a county.  Quality acts mean those directly, furthering, or essential to corporate objectives.  It does not include incidental acts.  Quantity means those acts that are so continuous and sufficient to be general or habitual.  Those acts in aid of a main purpose are incidental while those necessary for the corporation’s existence are direct.  Numerous courts in Pennsylvania have held that mere solicitation of business does not amount to conducting business in a county.

Wyszynski pointed to the fact that Greenwood had substantial advertisements in Philadelphia newspapers, magazines, on radio stations, on television, and sponsoring events in Philadelphia.  The court disagreed with her, however, and held that advertising is incidental to the purpose of business.  They further stated that advertising, no matter how pervasive, cannot satisfy the quality and quantity analysis.

This case demonstrates the importance of analyzing a business’s activities in different counties when it is a defendant in a case.  Looking at a company’s website and asking a corporate rep about their advertising and activities in the area can give defense counsel an insight into whether the case can be transferred to a more defense-friendly venue.  This little bit of homework at the beginning of a case can lessen liability and lead to reduced verdicts in the long run.  Thanks to Peter Cardwell for his contribution to this post.  Please email Brian Gibbons with any questions.


Pennsylvania Court Orders Plaintiff to Narrow the Complaint to Specify Cause of Plaintiff’s Fall

Plaintiffs often use the broadest possible language in a complaint to describe conditions that allegedly caused their premises liability accident in order to preserve their causation arguments as discovery unfolds. This often leaves defendants scratching their heads as to what the plaintiff is actually claiming until the issues are clarified in written discovery or depositions. This commonality in Pennsylvania premises liability litigation might change. Recently, in Fenstermacher v. Sands Bethlehem Retail, et. al.., a Northampton County judge cracked down on broad pleading language by granting a defendant’s preliminary objections, thereby striking various terms from a plaintiff’s slip and fall complaint and essentially forcing plaintiff to narrow the scope of issues to be litigated.

First, the judge struck the phrase “dangerous conditions, including but not limited to” from the plaintiff’s complaint, in the context of the defendant failing to inspect the subject area for “dangerous conditions, including but not limited to slippery surfaces.”  The judge found that this language did not properly set forth the concise facts upon which plaintiff’s slip and fall claim is based in accordance with Pennsylvania fact pleading requirements. The judge clarified that the term “dangerous condition” may be properly used if it was being used to refer to a specific condition the plaintiff claimed he fell upon, such as a wet soapy substance, but that the “including but not limited to” language indicated that the plaintiff was using “dangerous conditions” as an impermissible catch-all.

The judge also struck the term “similar medical expenses” in the context of the plaintiff claiming he was forced to incur liability for medical treatments, medications, physical therapy and “similar medical expenses.” The judge viewed this as an impermissible catch-all allegation that was unnecessary since plaintiff specified at least some of the treatment he did undergo. The judge’s ruling essentially narrowed the breadth of damages to be litigated.

This ruling is positive for defendants in that it puts pressure on plaintiffs to clearly articulate their claims from the get-go. This will serve to narrow the scope of liability and damages issues for a defendant to litigate, and may help eliminate the element of surprise at depositions.

Thanks to Rachel Freedman for her contribution to this post.




Late Joinder No Reason to Dismiss (PA)

In Pennsylvania, joinder of additional defendants to a lawsuit is governed by Pennsylvania Rule of Civil Procedure 2252.  A Pennsylvania trial court rejected an  additional defendant’s objections joinder on the grounds that it was untimely in Lemoncelli v. Newell Rubbermaid, Inc.

Lemoncelli involved a products liability claim for a defective propane cylinder.  The plaintiff allegedly sustained second-degree burns to his lower extremities.  As a result of the accident, the plaintiff sued Newell Rubbermaid as the manufacturer and seller of the propane cylinder.  Plaintiff and Newell’s initial discovery revealed, however, that a valve manufactured by Schrader-Bridgeport, Inc. may have been the cause of the product’s malfunction.

As a result of this revelation, Newell, with the cooperation and assistance of Schrader, conducted various tests on the valve in an effort to re-create the plaintiff’s accident.  After the testing procedures, on December 3, 2015, Newell learned of the likelihood that Schrader’s valve did, in fact, malfunction and cause the accident.

Nearly six months after the testing, Newell filed a motion for leave to join Schrader to the lawsuit as an additional defendant.  Newell’s motion was granted, and it filed its joinder complaint.  Schrader objected to the joinder complaint, arguing (1) it was untimely filed and Newell did not provide a “reasonable justification or excuse” for the untimely filing of the joinder; and (2) it would be prejudiced by the untimely joinder.

First, the court outright rejected Schrader’s first argument regarding the lack of “reasonable justification or excuse” because the plaintiff did not oppose the joinder and this argument is reserved exclusively for plaintiffs under the Pennsylvania Rules of Civil Procedure.  In support of Schrader’s second argument, Schrader merely posited that it would be prejudiced by the joinder because of its inability to conduct a prompt post-accident investigation.  The court, however, noted that discovery was still ongoing and the initial testing that was done on the valve was done in the presence of Schrader.  As such, the court concluded that Schrader did not provide any evidence of actual, real prejudice to Schrader as a result of being joined to the lawsuit.  Accordingly, the court rejected Schrader’s objections to the joinder complaint.

Thanks to Erin Connolly for her contribution.

For more information, contact Denise Fontana Ricci at

A “Snapshot” of a Case Can Determine Venue (PA)

On February 3, the Superior Court of Pennsylvania overruled the lower court’s decision to transfer venue in Burgess v. Clark Electrical Contractors, Inc., et al. The case arises out of a worksite accident.  On December 12, 2012, James Burgess (“Burgess”) was working on a drill rig when a light fixture fell from the rig and struck him, rendering him a quadriplegic.  The accident occurred in Susquehanna County, Pennsylvania.

In December 2014, Burgess commenced a lawsuit in Philadelphia and brought claims for negligence, recklessness, and loss of consortium.  Several defendants and companies were named as defendants and third-party defendants.  The incident spawned several different lawsuits, which were later consolidated by the court.  A few of the defendant companies were located in Philadelphia.

On August 27, 2015, the Philadelphia County Court of Common Pleas issued an order granting the defendants’ preliminary objections as to improper venue and to transfer the case to Susquehanna County.  In July and October 2015, the Philadelphia defendants were dismissed from the case.  Burgess then filed an appeal of the trial court’s decision.

In Pennsylvania, the decision to transfer venue is within the discretion of the trial court, and presumption is in favor of the plaintiff’s original forum choice.  Under the Pennsylvania Rules of Civil Procedure, an action against two or more defendants may be brought against all defendants in a county where venue may be laid against any one of the defendants.

The Superior Court reasoned that a question of improper venue is answered by taking a snapshot of the case at the time it is initiated.  If it is proper at the time of the snapshot, then it remains proper throughout.  At the snapshot of the instant case at its initiation, there were several defendant companies located in Philadelphia, and thus, venue was proper in Philadelphia when the suit was filed.

This case demonstrates the interplay of rules of civil procedure with the desire to remove cases from plaintiff-friendly jurisdictions, like Philadelphia.  Though it is always good to look at issues like federal removal, improper venue, or forum non-conveniens, local rules and other rules of civil procedure can, in some instances, disallow removal, rendering the ensuing motion practice an exercise in futility.  Thanks to Peter Cardwell for his contribution to this post.  Please email Brian Gibbons with any questions.

Authority to Bind (in Arbitration) comes Unbound (PA)

The Superior Court recently issued a decision that tells a cautionary tale regarding authority to bind, through arbitration.  In the matter of Mary P. Petersen, by and through her attorney-in-fact, Kathleen F. Morrison v. Kindred Healthcare, Inc., and Personcare of Reading, Inc., d/b/a Kindred Transitional Care and Rehabilitation-Wyomissing, and Kindred Nursing Centers East, LLC, and Kindred Healthcare Operating, Inc., and Monique Cole, 2017 Pa Super 26 (Feb. 1, 2017), the Court found that a successor agent does not possess the requisite authority to render an arbitration agreement binding.

In this matter, Petersen sued Kindred for negligent care it rendered to Peterson during her stay as a patient a Kindred Facility.  In response to Petersen’s complaint, Kindred filed preliminary objections, seeking to enforce an arbitration agreement signed by Petersen’s daughter, Darlene Uriate, pursuant to a power of attorney (“POA”).  The POA appointed Uriarte as successor agent in the event her sister, Kathleen Morrison, was “unwilling or unable” to act.  However, there is no indication that Kindred confirmed whether Morrison was “unwilling or unable” to act, as required by the arbitration agreement.

Petersen argued that the agreement was “unenforceable, void, unconscionable, and/or a contract of adhesion,” and sought to litigate the matter in state court, rather than through arbitration. Following oral argument, the trial court directed Kindred to answer Petersen’s complaint, thereby denying the arbitration demand.  Kindred appealed.

On appeal, the Superior Court was asked to determine whether Uriarte possessed the authority to act on Petersen’s behalf under the POA.  The Court reasoned that the POA appointed Uriarte as agent only upon the occurrence of a specific contingency, i.e., if Kathleen Morrison was unwilling or unable to act.  Thus Uriarte’s authority to bind her mother did not arise until her sister, Kathleen Morrison, became “unwilling or unable” to act.  Having received a copy of Petersen’s POA, Kindred had actual notice that Uriarte had authority to act only based on the occurrence of certain conditions.  The Court further observed that Kindred demonstrated no attempt to ascertain whether Morrison was “unwilling or unable” to act..  Rather, Kindred simply accepted Uriarte’s representation that she possessed the requisite authority to act on behalf of her mother, even though she was named in the document only as successor agent.

In the endt, the Court concluded that Kindred failed in its obligation to take notice of the nature and extent of the authority conferred upon Uriarte by Petersen’s POA.  To view this issue another way, Morrison’s being “unwilling or unable” to act was, essentially, a condition prcedent to arbitration.  And Kindred never satisfied this condition.  Hence, no arbitration.  Thanks to Hillary Ladov for her contribution to this post.  Please email Brian Gibbons with any questions.


Standing Taking a Seat in Cyber Claims.

The standard defense to a data breach lawsuit has been — there was no actual injury (only the fear of a potential injury), so the plaintiffs lack standing and the case must be dismissed. This defense has historically resulted in the dismissal of data breach lawsuits. But this standing defense is under siege and the Third Circuit might have given it a permanent seat.

In re: Horizon Data Breach Litigation, Horizon, a large health insurer, had two laptops stolen. The laptops contained the PII (or personally identifiable information) of hundreds of thousands of people. A class action lawsuit was filed in which the plaintiffs alleged that because Horizon did not take reasonable steps to secure its data, the plaintiffs were exposed to a potential vulnerability to identity theft. The district court dismissed the action, on the basis of standing, as none of the putative class members could show that the breached information was used to their detriment. The Third Circuit, in a published and precedential decision that was the first of its kind, reversed and found that, even without evidence that the information was used improperly, the plaintiffs had standing to proceed with their claims.

This decision is big news as it comes from a federal circuit court and means that the standing defense is losing its hold as a viable defense. Standing, in short, is taking a seat.

Special thanks to Matt Care for his contribution to this post. For more information, please e-mail Bob Cosgrove.

Pennsylvania Superior Court Finds Employers Have No Duty to Protect Electronically Stored Personal Information

In Dittman v. UPMC,  breach of contract and negligence actions were brought against an employer when employees’ personal information was stolen from the employer’s computer system and used to file fraudulent tax returns and steal tax refunds.  Particularly, the names, birth dates, social security numbers, tax information, addresses, salaries, and bank information of approximately 62,000 UPMC employees and former employees were accessed and stolen from UPMC’s computer system.  The information stolen was personal information that UPMC required employees to provide as a condition of employment.

The employees filed a class action lawsuit, arguing that UPMC had a legal duty to protect their personal and financial information and that UPMC failed to properly encrypt the data and establish adequate firewalls to protect the information in its network.  UPMC filed preliminary objections to the complaint, arguing that the employees lacked standing to assert these claims on behalf of an individual who had not yet been injured and that the negligence and breach of contract claims failed as a matter of law.  The trial court sustained the preliminary objections and dismissed the claims.

On appeal, the Superior Court agreed with the trial court that UPMC did not owe a duty of reasonable care in its collection and storage of the employees’ data.  In coming to that conclusion, the Superior Court weighed five factors.  First, the Superior Court found that the relationship between the parties, that of employer and employee, weighed in favor of imposing a duty on the employer.  Second, the Court reasoned that employers have an obvious need to collect and electronically store the personal information of their employees.  Although the foreseeability of a data breach is a substantial risk, the utility of electronically storing information outweighs the risk.  Next, the Court reasoned that it was unnecessary to have a judicially imposed duty requiring employers to incur significant costs to increase security when there is not true way to prevent security breaches altogether.  Finally, the Court found that it was not in the public interest to impose a duty and expend judicial resources, as there was already legislature to  address the issue.

Thanks to Alexandra Perry for her contribution to this post and please write to Mike Bono if you would like more information.