The Superior Court of Pennsylvania recently held that an auto salvage business is entitled to coverage against claims that an explosion in its yard resulted in fire damage to neighboring properties. In Tuscarora Wayne Insurance Company v Hebron Inc, the Superior Court was tasked with, inter alia, evaluating the applicability of a commercial general liability policy’s Designated Ongoing Operations endorsement (the “Exclusion”), which provided that the policy did not apply to  “property damage arising out of [vehicle dismantling], regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others.”

According to the Superior Court, the fire broke out while one of Hebron, Inc.’s (“Hebron”) truck drivers was trying to refuel a flatbed truck, as another employee was moving an extension cord connected to the pump. As “vehicle dismantling” was not defined in the policy, the trial court determined that the Exclusion barred coverage to Hebron because the property damage arose “out of . . . vehicle dismantling”, which constituted “ongoing business operations.”  Accordingly, the trial court awarded summary judgment in favor of Tuscarora Wayne Insurance Company (“TWIC”), thereby holding that TWIC did not owe a duty to defend or indemnify Hebron.

One of the fundamental questions on appeal was whether the trial court committed errors of law and abuse of discretion in awarding summary judgment in favor of TWIC. In accordance with its authority, the Superior Court evaluated whether the trial court misapplied the law and whether it exercised its discretion in a manner lacking reason.  Through this lens, and after considering all arguments, the Superior Court concluded that the trial court did abuse its discretion because it reached a conclusion that was not in conformity with the facts and circumstances underlying the declaratory action.  Specifically, the Superior Court noted that the fire occurred away from the vehicle stripping area and broke out half an hour after the yard’s dismantling operation had finished for the day.  Accordingly, the Superior Court held that the trial court committed error of law in declaring that TWIC was not required to defend or indemnify Hebron based on the Exclusion.  Therefore, the Superior Court reversed and remanded the case holding that Hebron was entitled to summary judgment and TWIC is required to defend and indemnify Hebron.

Thanks to Lauren Berenbaum for her contribution to this post. Please email Vito A. Pinto with any questions.