Injured Plaintiffs Lack Standing To Enforce Insurance Contracts (PA)

In Nalesnik v. United Nat’l Ins. Co., the plaintiff, an independent contractor, was injured while performing renovation work on Blue Label Properties’ property.  Blue Label was insured under a policy that covered bodily injuries sustained on its property.  Ultimately, the plaintiff sued Blue Label, but Blue Label’s carrier refused to provide a defense claiming that coverage was excluded under the policy’s independent contractor endorsement.  Consequently, the plaintiff commenced a declaratory judgment action to determine whether the carrier’s obligations under the policy.

In its analysis, the court initially noted that, generally, the duty of an insurer runs only to its insured, not to third parties to the contract.  Therefore, in order for the plaintiff to establish that he was aggrieved by any breach of the insurance policy, he needed to show a legal duty owed to him as a third-party beneficiary of the policy.  The court reasoned that for a third-party to have standing to recover under these circumstances, both contracting parties needed to have made such coverage explicit.  Here, the court noted that the plaintiff was not a named insured and was not identified as a third-party beneficiary on the policy.

But, the court’s analysis did not end there.  The court noted that an intended third-party beneficiary did not need to be expressly identified in the contract if recognition of the beneficiary’s rights would effectuate the intention of the parties and either party was a creditor or done beneficiary.  The court concluded that the plaintiff was not a creditor or donee beneficiary and there was no evidence to suggest that the carrier intended to confer any benefit to the plaintiff.  Therefore, the plaintiff did not have standing to compel the carrier to provide overage to Blue Label and the plaintiff’s suit was dismissed.

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

Four Corners of Complaint Provides Basis for “Personal and Advertising Injury Exclusion”

Many insurance policies provide coverage for claims of “Personal and Advertising Injury.”  These cases often involve claims where the insured violated another’s right to privacy.

In OneBeacon America v. Urban Outfitters, OneBeacon sued for a declaration that it did not owe defense or indemnification to Urban Outfitters in three underlying cases in three different jurisdictions where customers sued for privacy violations.  In each of the underlying cases, Urban Outfitters used or disseminated to third-parties, customer zip codes.  OneBeacon relied on an exclusion that excluded coverage for “Recording and Distribution of Material in Violation of Law.”  In all three cases, the plaintiffs alleged that Urban Outfitters violated state statutes that addressed the collection of private information.  As such, the court in OneBeacon, found that the exclusion applied, and that OneBeacon was not obligated to defend or indemnify Urban Outfitters in the underlying cases.

Typically, the four corners of the complaint provide the basis for an insured to allege its entitlement to coverage.  In OneBeacon, the four corners of the complaint provided the insurer’s basis to deny coverage, since the entirety of the underlying complaints relied on violations of state statutes, for which coverage was specifically excluded under the policy.

Thanks to Coleen Hill for her contribution to this post.


Third-Circuit Confirms Unconstitutionality of Same-Sex Marriage Ban

In May 2014, Judge Jones of the Middle District of Pennsylvania authored a majority opinion holding that Pennsylvania’s ban on same-sex marriage is unconstitutional.  Despite a pledge by PA governor Tom Corbett not to appeal the ruling, a Schuykill County official tried to take steps to appeal the case herself.

Judge Jones denied Register of Wills Theresa Santai-Gaffney’s motion to intervene in June, which she promptly appealed to the Third Circuit Court of Appeals.  Gaffney, a court clerk, claimed that her rights and duties were affected when marriage ban was overturned since she enforces marriage laws as part of her employment.  Judge Jones noted that Gaffney had no personal interest in the outcome of the case and her appeal was a contrived “to accomplish what the chief executive of the commonwealth…has declined to do”.

The Third Circuit issued a two sentence order affirming the district court’s opinion, saying specifically: “For essentially the reasons set forth in the opinion of the district court, the order denying the motion to intervene is summarily affirmed and the appeal is dismissed.”  This ruling provides the strongest affirmation for supporters of same-sex marriage in Pennsylvania and suggests that the courts will frown on any additional attempts to reinstate the ban.

Thanks to Remy Cahn for her contribution to this post. If you have any questions or comments, please email Paul at

“Limited Tort” Option Bars Plaintiff’s Claims for Soft Tissue Damages to Neck and Back (PA)

The Pennsylvania Motor Vehicle Financial Responsibility Act bars recovery for pain and suffering, and other non-economic losses when the insured selects the limited tort option. Non-economic losses are only recoverable if the injuries suffered fall within the “serious injury” definition under the policy. A “serious injury” is one which results in death, serious impairment of a bodily function, or permanent disfigurement. When the plaintiff alleges soft tissue injuries, and the resulting impairment is de minimis, a court should grant summary judgment to the defendants.

In Ramos v. Jones, as a result of a car accident between defendant Michael Jones and plaintiff Melanie Ramos, plaintiff alleged that she suffered sprains and strains of her neck and back, mental damages, and economic injuries. Defendants moved for partial summary judgment on the ground that any claims for non-economic losses were barred by the Motor Vehicle Financial Responsibility Act because plaintiff had selected the limited tort option on her insurance policy.

The medical records revealed that plaintiff’s physical injuries amounted to soft tissue damage to her neck and back. Furthermore, there was evidence that plaintiff had a history of neck pain prior to the accident. Plaintiff failed to show how these physical injuries interfered with her daily life aside from missing a few days of work and being unable to participate in physical activities with her children.

The court granted partial summary judgment for the defendants because plaintiff failed to show how the soft tissue injuries resulted in a substantial interference with any bodily function. The court reasoned that the medical records did not support her claims, and the impairment, when viewed in the light most favorable to the plaintiff, was clearly de minimis.

Thanks to Eric Clendening for his contribution to this post. If you have questions or comments, please email Paul at

Choice of Law Leaves Plaintiff Empty-Handed (PA)

Pennsylvania’s approach to choice of law is supposed to be “workable and fair.” Recently, the Philadelphia Court of Common Pleas reviewed a case involving a claim for underinsured motorist coverage and a choice of law analysis, resulting in an empty-handed plaintiff.

In Inez Coates v. Nationwide Insurance Company, the plaintiff Inez Coates was operating her father’s Mitsubishi Galant when she was rear-ended by David Tamarchio’s van while driving in Philadelphia on the Schuylkill Expressway.  Coates settled the claim against Tamarchio for $100,000 – the auto policy limit.  Subsequently, Coates filed a claim for the underinsurance coverage limit of $15,000 with her father’s insurer, Nationwide Assurance Company.    After Nationwide denied the claim and Coates sued Nationwide for both bad faith and breach of contract.

The case centered on one issue: what state’s law applied? While the accident occurred in Pennsylvania, the Nationwide insurance policy was issued in Delaware and Coate’s father resided in Delaware.  Moreover, Coate’s father agreed to comply with Delaware’s motor vehicle statutes upon purchasing the policy.  This question was crucial because if Pennsylvania law applied, Coates would be entitled to $15,000, but if Delaware law applied, Coates would not be entitled to anything.  Pennsylvania case law is settled: (a) when the issue is coverage under an insurance policy, the case is a contract matter, and (b) when the issue involves an insurance policy, courts consider each state’s contacts with the insurance policy at issue and not the underlying tort.

In Coates, the court arrived at its answer quite easily given that the only contacts the insured and insurer had with Pennsylvania was the underlying car accident giving rise to the underinsured claim.  In its analysis, the court relied on the expectations of both the insurer and insured, stating that Nationwide had the expectation to be bound by Delaware law in its dealings with Coate’s father, and that Coate’s father should have expected Delaware law to apply.  Lastly, the court stated that the fact that the accident occurred in Pennsylvania was just “happenstance” and that no matter where the car was driven, Delaware ultimately had the most relevant contacts with the insurance policy.  Accordingly, the court ruled in favor of Nationwide and Coates was unable to recover any underinsured motorist benefits.

Thanks for Erin Connolly for her contribution to this post.  If you have any questions or comments, please contact Paul at

Valet Service Not Liable for Patron’s Drunk Driving (PA)

Although relatively strict with respect to dram shop liability, the Pennsylvania Superior Court recently deviated from the “visible intoxication” mantra to hold in a case of first impression that valet services are not liable for injuries sustained by a patron who injures himself as a result of driving under the influence.

In the case of Moranko v. Downs Racing LP, the administratrix of the decedent’s estate brought wrongful death and survival actions against Mohegan Sun casino under Pennsylvania’s dram shop laws, alleging that before his fatal motor vehicle accident, Mohegan Sun had served her son copious amounts of alcohol and allowed him to retrieve his automobile from valet services despite his alleged visible intoxication.  While Mohegan Sun unsurprisingly moved the trial court for summary judgment as to the lack of evidence regarding visible intoxication, it also argued that there is no cause of action in Pennsylvania allowing recovery against a valet service for relinquishing control of a vehicle to a visibly intoxicated customer.  This latter argument ultimately proved successful and summary judgment was awarded in favor of Mohegan Sun.

In the appeal to the Superior Court that followed, the administratrix took exception to, among other things, the trial court’s finding that Pennsylvania law does not impose an affirmative duty on valet services to prevent intoxicated customers from operating their vehicles.  Citing case law from around the country that likened the relationship between customer and valet to that of bailor and bailee, the three-judge panel of the Superior Court concluded that valets are “duty bound to surrender control of the [customer’s] vehicle when it [is] demanded, notwithstanding the [customer’s] alleged intoxication.”  More specifically, the Court explained that while valets retain temporary possession of their customers’ vehicles, they do not maintain a right of control and are therefore required to relinquish possession immediately upon request.

Although clearly compelled by Pennsylvania law governing the bailor-bailee relationship, the Court’s decision in Moranko might have been different if Mohegan Sun’s internal policies were intended to prevent intoxicated customers from operating their vehicles.  In particular, the Court considered whether Mohegan Sun’s internal policy preventing intoxicated customers from gambling was also evidence that it assumed the duty of preventing drunk driving.  Despite answering that question in the negative, the Court did imply that internal policies aimed at preventing customers from driving under the influence might suffice to impose a legal duty under Pennsylvania law.

All told, Moranko serves as a departure from Pennsylvania’s trending social policy towards dram shop liability, yet reminds us that parties can nonetheless assume otherwise nonexistent legal duties under the right circumstances.

Thanks to Adam Gomez for his contribution.

For more information, contact Denise Fontana Ricci at


Personal Jurisdiction Dispute Adds Fuel to the Fire (PA)

When a fire ignited at the BP Oil Refinery on the Delaware River in Paulsboro, New Jersey, both the Philadelphia and Westville fire departments responded to the emergency.   Allegedly, during the response effort, Philadelphia’s fire boat caused a large wake that inflicted over $140,000 in damage to Westville’s boat.  Westville’s insurance company, Tri-County Municipal Joint Insurance Fund, paid the claim, but advised Philadelphia it intended to subrogate against them.

The city filed a declaratory judgment action against defendants Westville and Tri-County, seeking to be absolved of any liability for the incident.  The defendants asserted that Philadelphia’s claim was invalid because of a lack of personal jurisdiction. To meet the requirements for personal jurisdiction, an out-of-state defendant must conduct a certain amount of business activity in the state in which the suit is brought.  In this case, either the Westville, a New Jersey municipality, or Tri-State, a New Jersey company, must have conducted sufficient business activities in Pennsylvania for the lawsuit to proceed in the Pennsylvania court.

The Pennsylvania trial court found that the company conducted business to a substantial and acceptable degree in Pennsylvania and thus overruled the Defendant’s assertion of lack of personal jurisdiction.  Additionally, the trial court gave immunity to Philadelphia from all insurance and subrogation claims related to the boat incident.  The Defendants appealed, contending once again that the trial court erred in finding personal jurisdiction for the out-of-state participants.

On appeal, the Court found that Westville’s fire boats patrolled the New Jersey side of the Delaware River without crossing into Pennsylvania waters.  Furthermore, Tri-County only conducted business in New Jersey and provided insurance coverage exclusively to New Jersey municipalities.  Philadelphia argued that Westville’s boats might have at one point crossed over into Pennsylvania and that Tri-County transmitted correspondence regarding the incident to Philadelphia. However, the Court found those activities were not sufficient to confer either general or specific personal jurisdiction over the non-resident defendants.

Therefore, the Court dismissed the case for lack of personal jurisdiction and Philadelphia’s immunity to insurance or subrogation claims for the boat incident was negated.

Thanks to Coleen Hill for her contribution to this post.  For more information, please write to Mike Bono.

Why Did the Chicken…End Up On the Racetrack? And Who is Liable? (PA)

A day at the races took a turn for the worse when a horse out for a practice run was startled by multiple chickens, one of which was directly on the racetrack flapping its wings.  The horse’s jockey, Mario Calderon, was thrown when the horse abruptly bucked and bolted away from the erratic chicken.  Though Calderon was jolted out of the saddle, his foot remained stuck in the stirrup, and the terrified horse trampled and drug the jockey down the track causing several injuries that eventually resulted in fatal brain bleeds.

In Calderon v. Philadelphia Park Casino and Racetrack, Calderon’s wife sued the racetrack owner, maintaining that the owner was fully aware of both the chickens’ presence and the potential danger presented to the horses and employees.  The plaintiff argued that a similar accident occurred just five months prior, where another horse was spooked by a chicken and caused injury to the jockey, evidencing the owner’s knowledge of the unsafe work environment.  Conversely, the owner denied liability, contending that Calderon knew the dangers of being a jockey and accepted the risks of his employment.  Furthermore, the owner argued that the track had posted warning signs stating that all participants assumed any risk of injury associated with riding horses.

Nonetheless, a Philadelphia jury sided with the plaintiff, finding the racetrack owner liable and awarding compensatory, as well as punitive damages.  The evidence at trial showed that the chickens had been purposely brought to the track as pets by horse owners and trainers for over a decade.  The vice president of the Jockey Association testified that he had previously confronted the racetrack’s head of security to alert him that someone would be killed if the chickens continued to wander, but nothing was done in response.   Thus, the jury concluded that the owner of the track must take responsibility for the added danger to jockeys.

Thank to Coleen Hill for her contribution to this post.  For more information, please contact Nicole Y. Brown at

Ball Tap Game Leaves Adolescent Uncovered (PA)

In American National Property and Casualty Companies v. Thomas W. Hearn  and Clayton Russell, the boundaries of an intentional act exclusion were tested in a case involving an adolescent “game.”

The underlying claim arose one night when Hearn and Russell were sixteen-year old boys hanging out in Russell’s basement with a group of friends.  Russell was playing “Dance, Dance Revolution”, a video game, when he was struck in the testicles by Hearn from behind.  Hearn testified that he did not intend to inflict serious pain on Russell, merely to deliver a “ball tap”, which the group of friends apparently had done regularly when one of them was “doing something stupid” (according to Hearn).  Russell suffered immediate pain and was hospitalized with a testicular torsion.  Russell and his mother sued Hearn and his parents for negligence, battery, assault and intentional infliction of emotional distress.  They requested punitive damages.


Simultaneously, American (the  Hearns’ homeowners insurer) filed a declaratory judgment action on the basis that the claim arose from an intentional act that was excluded by the policy.  The Court granted American’s motion for summary judgment.  Russell, a defendant to that action,  appealed arguing that Hearn did not intend to cause him the harm that actually occurred, and that coverage should not be excluded.  

In affirming summary judgment, the Superior Court found that Hearn’s act of hitting Russell was clearly intentional.  It reasoned that Pennsylvania insurance contract interpretation does not require coverage for intentional acts resulting in bodily injury even in circumstances where the harm was different than what was expected or intended by the insured.  In fact, the American policy specifically notes that the intended injury clause applies “even if the actual injury or damage is different than expected or intended.”


Furthermore, the court held that there was no occurrence during the policy period, because the intended harm was not an “accident” under the policy definition.  Thus, given these considerations, the court determined that no coverage was owed under the American policy.

Thanks to Remy Cahn for her contribution.

For more information contact Denise Fontana Ricci at

Court Finds Good Faith Requirement Even In Mandatory Settlement Conference (PA)

While it is axiomatic that good faith is the polestar of the transactional world, it is often times less evident whether the same obligation extends to adverse parties involved in litigation.  In particular, the question can arise where adverse parties submit to some form of alternative dispute resolution – mediation, settlement conference or otherwise – that depends heavily on good faith negotiations to resolve the dispute.  For at least one court in Pennsylvania, however, it appears that the good faith is an immutable requirement in ADR even where the parties are, by their very nature, adverse to one another.

In Grigoryants v. Safety-Kleen, United States Magistrate Judge Maureen Kelly entertained sanctions against a defendant whose corporate policy was to entertain settlement only after the close of discovery.  Specifically, the Grigoryants litigation involved husband-and-wife plaintiffs who sued Safety Kleen after the husband was exposed to one of that company’s chemicals, and later contracted myelofibrosis.  Following initial discovery, the United States District Court for the Western District of Pennsylvania ordered the parties to appear for mediation and instructed both sides to produce representatives with full and unqualified settlement authority.  In anticipation of the mediation, both parties engaged in pre-mediation conference calls with the mediating judge to discuss their respective positions on liability and damages, and also submitted pre-mediation memorandum outlining the same.  Despite this preparation, however, the mediation was ultimately unsuccessful and prompted the plaintiffs to move for sanctions against Safety-Kleen after learning that the corporation had an internal policy of not discussing potential settlement before the filing of dispositive motions.

In ultimately imposing sanctions against Safety-Kleen, Judge Kelly noted that good faith is a necessary element of court-mandated mediation.  Further, Judge Kelly found that certain of Safety-Kleen’s actions constituted bad faith insofar as they undermined the opportunity to alternatively resolve the litigation.  Chief among Safety-Kleen’s bad faith actions was the fact that it knew of its unwillingness to engage in settlement negotiations prior to the close of discovery, but neglected to make that fact known to the Court.  In fact, Judge Kelly explained that the concealment of Safety-Kleen’s position with respect to settlement, not the failure to settle, itself, was the core of its sanctionable conduct.  Consequently, Judge Kelly ordered Safety-Kleen to restore the plaintiff to their pre-mediation condition by paying costs, expenses and attorneys-fees incurred.

To our mind, the decision in Grigoryants is both cautionary and encouraging.  On the one hand, there is no doubt that Pennsylvania’s state and federal courts consider alternative dispute resolution an indispensable cog in the litigation process, and, as a result, require transparency with the mediator in respect of settlement positions.  On the other, however, it appears that Pennsylvania courts do recognize the thin line between requiring good-faith and simply fruitless settlement negotiations.   Simply put, candor with the court and adversaries is the preferable – and safer- way to proceed   

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