Consolidation Coal Co., Inc. v. Liberty Mut. Ins. Co., Civ. A. No. 72-599.

• Decision Date: 12 January 1976
• Docket Number: Civ. A. No. 72-599.
• Parties: CONSOLIDATION COAL COMPANY, INC., Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

406 F. Supp. 1292

CONSOLIDATION COAL COMPANY, INC., Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant.

Civ. A. No. 72-599.

United States District Court, W. D. Pennsylvania.

January 12, 1976.

James E. Coyne, Pittsburgh, Pa., for plaintiff.

Clem R. Kyle, Pittsburgh, Pa., for defendant.

OPINION

SCALERA, District Judge.

In this non-jury case in which this court's diversity jurisdiction is invoked, the parties have stipulated the facts. There are two issues:

(1) whether plaintiff, Consolidation Coal Company, Inc., is entitled to coverage under the policy of insurance issued by defendant, Liberty Mutual Insurance Company, to Long's Hauling Company for the loss sustained by plaintiff in the settlement of the claim filed by Long's employee, Mazjer, in the Court of Common Pleas of Allegheny County, Pennsylvania; and

(2) whether Liberty may recover from Consolidation or its insurer, the Hartford Insurance Group the $3,402.18 of workmen's compensation benefits which defendant Liberty was obligated to pay to Mazjer under the provisions of Pennsylvania's Workmen's Compensation Act, 77 P.S. § 1 et seq.

I

The plaintiff is a citizen of Pennsylvania, having its principal place of business in Pittsburgh. Defendant is a citizen of the Commonwealth of Massachusetts and authorized to do business in Pennsylvania. Consolidation seeks recovery of $10,750 from Liberty, while Liberty has counterclaimed for $3,402.18.

By a contract dated April 30, 1965, Long agreed to haul coal, coke, and coal fuel products for Consolidation. Under paragraph 5¹ of the contract, Long agreed inter alia to indemnify and protect harmless Consolidation against all claims, liabilities, loss and suits caused by, or in any manner resulting from the actions of Long or his agents and/or employees.

On November 20, 1968 at approximately 6:30 a. m., Raymond Mazjer, an employee of Long, while in the course of employment, drove a Long truck onto the premises of Consolidation and was crossing railroad tracks. He jumped from the truck just before it was struck by a railroad car owned by and in the possession and control of Consolidation's employees, who were also in the course of employment.

Mazjer filed suit against Consolidation at No. 1691 January Term, 1971 in the Court of Common Pleas of Allegheny County, Pennsylvania, for damages for injuries sustained in the accident, claiming that the negligence of Consolidation's employees was the sole and proximate cause of the accident. Hartford, Consolidation's general liability insurer, defended Consolidation against Mazjer's claim.

Liberty had issued a comprehensive general liability policy covering Long for the period from February 5, 1968 to February 5, 1969. This policy was in full force during the time of Mazjer's accident. In an endorsement to the policy,² Consolidation was added as "an additional insured," conditioned by the following language: "but only with respect to acts or omissions of the named insured in connection with the named insured's operations" on Consolidation's premises.

Hartford, as Consolidation's insurer, by letter dated July 20, 1970, called upon Liberty to defend the state lawsuit and to provide coverage for Consolidation, as an additional insured under Liberty's policy. Hartford further demanded that Liberty should indemnify Consolidation for any sums it may become obligated to pay to Mazjer. Liberty refused to comply.

Several months later, on or about November 20, 1970, Hartford settled and paid Mazjer's claim out of court for the sum of $19,500, which amount the parties have stipulated was a fair, reasonable and proper settlement.

Consolidation originally demanded in its complaint full indemnification from Liberty for the total amount of the settlement. The parties now agree that even if Liberty's policy with Long covers Consolidation's acts and omissions in the case sub judice, because of the applicable "Other Insurance" provisions of both the Hartford policy issued to Consolidation and the Liberty policy issued to Long, Hartford and Liberty would share the loss equally. Therefore, the maximum amount which Consolidation could be awarded is $10,750.

II

Consolidation argues that coverage under the endorsement is not predicated upon Long causing the Mazjer accident and proposes that the language of the endorsement covers the circumstances of Mazjer's accident because "but for" Mazjer's act of driving the truck across the tracks, the accident would not have occurred. Consolidation notes that because the language of the endorsement gives it coverage "with respect to acts or omissions of the named insured in connection with the named insured's operations" at Consolidation's premises, the fact that Long's acts or omissions were not the proximate cause of Mazjer's injuries is of no moment.

Liberty maintains that the intent and plain meaning of the words "acts or omissions of the named insured" used in the additional insured endorsement is to restrict coverage to those accidents caused by the negligence of Long while acting pursuant to its contract with Consolidation. Defendant argues that the words "acts or omissions" inject a causation factor into the endorsement. Liberty argues that the only reasonable interpretation of the additional insured endorsement, when read in conjunction with the indemnity clause³ contained in the contract, is that Long agreed to indemnify Consolidation against liability sustained by Consolidation only as a result of the negligence of Long or its employees in performance of the contract. Consolidation contends that the language of the basic contract between Long and Consolidation is irrelevant to the issue of whether the endorsement provides coverage to Consolidation.

III

The court must first determine whether the language used in the endorsement is clear and unambiguous. It has been said that a provision of an insurance policy is to be considered ambiguous if intelligent men on considering it in the context of the entire policy would honestly differ as to its precise meaning and if alternative or more explicit language, if used, would have put the meaning of the language beyond reasonable question. Celley v. Mutual Benefit & Health Accident Ass'n, 229 Pa.Super. 475, 324 A.2d 430, 434 (1972). The parties, of course, differ in their understanding of the meaning of the disputed clause. Neither party contends that the disputed language of the endorsement is precise.

Similar language has often been the subject of litigation in which the courts have found the meaning of the language to be ambiguous. Aetna Casualty & Surety Co. v. Ocean Accident & Guar. Corp., 261 F.Supp. 223 (W.D.Pa.1966), aff'd, 386 F.2d 413 (3d Cir. 1967); General Acc. F. & L. Assur. Corp. v. Continental Cas. Co., 287 F.2d 464 (9th Cir. 1961); Manufacturer's Cas. Ins. Co. v. Goodville Mut. Cas. Co., 403 Pa. 603, 170 A.2d 571 (1961).

The court concludes that the phrase "but only with respect to the acts or omissions" used in the endorsement to the insurance policy is ambiguous.

IV

Consolidation contends that the ambiguous language of the endorsement should be subject to the rule of construction which provides that ambiguities in an insurance policy will be construed against the drafting party and in favor of the insured. In re F. H. McGraw & Co., 473 F.2d 465 (3d Cir.), cert. denied, 414 U.S. 1022, 94 S.Ct. 443, 38 L.Ed.2d 312 (1973); Hodgins v. American Mut. Liability Ins. Co., 261 F.Supp. 129 (E.D. Pa.1966); Sykes v. Nationwide Mut. Ins. Co., 413 Pa. 640, 198 A.2d 844 (1964).

However, before adopting Consolidation's contention, the court must first attempt from an examination of the facts to determine the intent of the parties and the meaning of the endorsement.

As Judge Lord noted:

"We feel compelled to comment upon what at first blush appears to be a conflict between a procedural imperative and the widely-held doctrine of construing insurance policy ambiguities against the insurer. If we were to hold that the mere existence of a judicially determined ambiguity demands judgment against the insurer, we would be ignoring completely the rationale for the rule of construction. Insurance policies and other contracts of adhesion are construed strictly and against their author when there is doubt as to what the parties themselves intended. Bergholm v. Peoria Life Ins. Co., 284 U.S. 489, 52 S.Ct. 230, 76 L.Ed. 416 (1931); Liberty Mutual Insurance Co. v. Hercules Powder Company, 224 F.2d 293, 54 A.L.R.2d 513 (3d Cir. 1955). However, this construction can only be invoked when, upon a full consideration of the facts, the intent of the parties is still obscure. Only then, should we place the consequences of the ambiguity upon the party who chose the words." (footnote omitted) Hodgins v. American Mutual Liability Insurance, 261 F.Supp. 129, 130-131 (E.D.Pa.1966).

V

The language of the endorsement reads:

"It is agreed that the `Persons Insured' provision is amended to include as an insured the person or organization named below, but only with respect to acts or omissions of the named insured in connection with the named insured's operations at the applicable location designated below."

Plaintiff contends that the language above is substantially similar to the language discussed in Manufacturer's Cas. Ins. Co. v. Goodville Mut. Cas. Co., supra;⁴Aetna Cas. & Sur. Co. v. Ocean Accident & Guar. Corp., supra,⁵ and General Acc. F. & L. Corp. v. Continental Cas. Co., supra,⁶ and that the endorsement should be interpreted in a similar fashion.

Thus, plaintiff argues that this endorsement falls within that class of cases which have construed the words "arising out of" to mean causally connected with, not proximately caused by. In these cases, "but for" causation, i. e., a cause and result relationship, has been concluded to be sufficient to satisfy the "arising out of" language.

Although the policy language construed in the Goodville, Aetna, General Acc., and Chesapeake & P. Tel....