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

Failure to Use Consistent Exclusionary Language Dooms UIM Limitation (PA)

Timothy Clarke suffered serious injuries when his motorcycle crashed into a car. Clarke was thrown from his motorcycle and spent eleven days on life support at Paoli Memorial Hospital.

After the accident, Clarke sought coverage under the underinsured motorist coverage clause (“UIM”) of an insurance policy issued by MMG Insurance. MMG denied Clarke any UIM coverage, stating that the motorcycle involved in the accident was not a “covered vehicle” under the policy. The MMG policy covered Clarke’s two automobiles, while an American Modern Select Insurance Company policy specifically covered Clarke’s motorcycle.  The trial court agreed that the policy language of the exclusion clearly and unambiguously excluded coverage.

Upon Clarke’s appeal, the question was the breadth of the MMG’s exclusion of UIM coverage. The Court concluded that the policy had to be read as a whole, interpreting multiple provisions together to construe the meaning of their words. Under these facts, this meant reading the UIM exclusion together with a separate exclusion for uninsured motorists (“UM”) coverage.

The court held that the plain language of MMG’s UIM form excluded coverage only for injuries sustained in vehicles “not insured for this coverage.”  In contrast, the UM provision excluded coverage for injuries sustained in vehicles “not insured under this policy.” Thus, the exclusions contained the UIM and UM coverages used different exclusionary language.

The court determined that if the UM and UIM exclusions were intended to have the same meaning, they would have used the same language. The court concluded that the plain language of MMG’s policy only excluded coverage for vehicles that did not maintain UIM coverage under any policy, not merely for vehicles not insured under MMG’s policy. Fortuitously,  Clarke’s American Modern Select Insurance policy for his motorcycle had UIM coverage so it was insured for UIM coverage. Thus, Clarke’s motorcycle was insured for UIM coverage (i.e., had “coverage under any policy”) so the UIM exclusion was not triggered.

The court’s holding in Clarke is a reminder to insurance companies to be precise and consistent particularly when drafting exclusionary language.  Any inconsistencies will be magnified when an insurer seeks to deny coverage based on an exclusion.

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

Subrogation Suit Over Laundromat Fire Goes up in Flames (PA)

In Charlie v. Erie Insurance Exchange, the Pennsylvania Superior Court dealt with the important issue of the respective duties of a business invitee and its customer within the context of negligence claims against a bartender and his employer for causing a laundromat fire.

A fire occurred in Egypt Laundromat after a bartender from a local restaurant and pub placed several of the restaurant’s cotton rags in a dryer.  Once placed in the dryer, the rags, used to clean up spilled drinks and spilled grease, spontaneously combusted, causing a fire.  Erie filed a subrogation suit against the bartender and the restaurant, claiming that the bartender was negligent in drying the greasy rags in the scope of his employment, specifically by not taking the rags out of the dryer earlier.

The trial court granted the restaurant’s motion for summary judgment, finding that the bartender had no duty to prevent spontaneous combustion. The trial court analyzed the factors enumerated in Althaus v. Cohen to determine whether a duty existed. These factors include the relationship between the parties, the social utility of the activity, the nature and forseeability of the risk, and the consequences of imposing a duty upon the actor. Ultimately, the court noted that no duty existed because the defendants were business invitees to the laundromat, and the ability for the defendants to clean rags in a public Laundromat has a social value that outweighs any burden this places on the Laundromat. Further, the court noted that the possibility of rags spontaneously combusting was not a foreseeable risk as spontaneous combustion is, by its very nature, not foreseeable. And finally, the court held that imposition of the plaintiff’s proposed mandates, including requiring the use of a commercial restaurant laundry service to clean oil soaked rags, was not feasible.

Erie appealed, claiming that the trial court incorrectly labeled the defendants business invitees. Alternatively, Erie argued that the defendants were “bailees” due to the mutual benefit the laundromat and defendants received from the use of the establishment. On the basis of such a relationship, Erie claimed that the defendants owed a duty of ordinary care to the laundromat as the “bailor.”

The Superior Court rejected Erie’s argument that the trial court’s erroneous categorization of the relationship created a basis for reversing the court’s position on the basis of a duty. The Superior Court noted that all factors had to be weighed when determining whether to impose a new affirmative duty on an actor. Furthermore, the Superior Court noted that the trial court was, in fact, correct in its categorization of the relationship between the appellant and appellees, as the bailor-bailee relationship that the appellant proposed typically would require a contract between the two parties.  As such, the court affirmed the trial court’s decision to grant the defendants motion for summary judgment.

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

Necessary Pleadings Required For A DJ Complaint (PA)

In Kofsky v. Unum Life Ins. Co. of America, Kofsky filed a declaratory judgment action against his insurer and broker alleging that the defendants unilaterally canceled his insurance policy on an undetermined date without prior notice, despite his premium payment and request that his policy be reinstated.  Kofsky sought damages based on fraud, breach of fiduciary duty and bad faith.

The fraud claim was dismissed as Kofsky failed to meet the heightened pleading standards of the Federal Rules and the court refused to relax the standards as the necessary factual information was not within the defendants’ control.  The court noted that there was no reason that Kofsky could not have identified in his complaint the misrepresentations that he alleged were made to him by the defendants.

The court also dismissed his breach of fiduciary claim as Kofsky failed to plead any facts in support of such a claim.  In reaching its determination, the court refused to adopt Kofsky’s argument that his claims for breach of the duty of good faith and fair dealing could act as a basis for his breach of fiduciary claim and noted that under Pennsylvania law, a breach of fiduciary claim could not be based on such things.

Finally, the court dismissed the bad faith claim against the broker, ruling that bad faith claims could only be brought against an insurer and not an insurance broker.  However, Kofsky’s claim against his insurer was allowed to proceed, because if the court accepted the allegations in the complaint as true, then the insurance company’s cancelation of the policy despite payment of the premium could constitute bad faith.

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

No Strict Liability for Medical Expenses from Dog Bites (PA)

In Pennsylvania, 3 P.S. § 459-502(b)(1) of “Dog Law” provides the following for bite victims: “Any cost to the victim for medical treatment resulting from an attacking or biting dog must be paid fully by the owner or keepers of the dog. The Commonwealth shall not be liable for medical treatment costs to the victim.” The question becomes whether the statute imposes strict liability on dog owners for medical expenses resulting from dog bites.

In Warner v. Campbell, the plaintiff filed suit in the Court of Common Pleas of Lycoming County after he was bitten by the defendants’ dog. The defendants filed preliminary objections to count III of the amended complaint which sought a claim for medical expenses resulting from the dog bite based on the Pennsylvania statute—that according to the plaintiff—imposed strict liability for those expenses.

The court relied on Rosenberry v. Evans and statutory interpretation in making its decision. The court reasoned that while the statute appears to provide a claim for strict liability on its face, the court in Rosenberry found that proof of the owner’s negligence is required to succeed in a cause of action against dog owners for injuries sustained by their dogs. In other words, Pennsylvania does not impose absolute or strict liability upon dog owners for dog bites.

The court also reasoned that the statute is worded to make clear that while the Commonwealth will pay detention costs when the dog’s owner is unknown, the Commonwealth is not responsible for medical expenses to the victim. Additionally, sections 531 and 532 of the statute provide a private causes of action to owners of sheep for damages resulting from dogs “chasing or worrying sheep.” The court held that since the legislature did not provide a similar cause of action for victims of dog bites, the legislature did not intend to do so. As a result, the court sustained the defendants’ preliminary objections and dismissed count III of the amended complaint based on strict liability.

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


“Hills and Ridges” Doctrine Levels Lawsuit (PA)

In Pennsylvania, liability is ordinarily not created just because a sidewalk is slippery. Conversely, liability will be imposed when there is a dangerous slippery condition that has remained for an unreasonable amount of time.

Stobodzian v. PNC Financial Services Group, et al., arose out of a February 12, 2010 slip and fall that occurred in a PNC Bank parking lot following a substantial snowfall. The plaintiff’s complaint alleged that he slipped on snow/ice while lawfully on the premises of PNC Bank. The plaintiff joined a number of defendants including PNC Bank and those responsible for the snowplowing at the time of the plaintiff’s slip and fall.

At the conclusion of the two-day trial, the jury was charged with a “hills and ridges” instruction, which describes an owner’s duty of care regarding snow/ice on a walking surface. A “hills and ridges” instruction is only appropriate when the general slippery condition results from an “entirely natural accumulation of snow/ice”. Thus, in order for this plaintiff to be awarded damages, the jury must find three essential elements: (1) that ice and snow had accumulated on the walking surface in ridges or elevations that unreasonably obstructed travel and were a danger to persons traveling on the walk; (2) that the defendant property owner knew or should have known of the existence of such conditions; and (3) that it was the dangerous accumulation of ice and snow that caused the plaintiff to fall. Ultimately, the jury determined that none of the defendants were negligent and awarded the plaintiff no damages.

On appeal, the plaintiff raised one issue: the “hills and ridges” jury instruction should not been given. Specifically, the plaintiff argued that the trial court erred in giving the instruction because the snow/ice that the plaintiff slipped on was the result of an “artificial condition created by human intervention”. To support his argument, the plaintiff relied on the fact that vehicles pulling into PNC Bank’s parking lot would drag snow in with them. The Superior Court, however, affirmed the trial court’s use of the “hills and ridges” instruction, adhering to Pennsylvania’s long-standing doctrine used to protect land owners from liability where the owner has not permitted the snow/ice to accumulate.

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