Egger v. Gulf Ins. Co.

• Decision Date: 23 August 2006
• Citation: 903 A.2d 1219
• Parties: Patricia M. EGGER, Administratrix of the Estate of Charles Egger, Deceased and National Union Fire Insurance Company, v. GULF INSURANCE COMPANY, Brownyard Group, Inc., W.H. Brownyard Corporation and/or Brownyard Brothers, Inc. and AON Risk Services, Inc. of Pennsylvania and Brokerage Professionals, Inc., Appeal of Gulf Insurance Company.
• Court: Pennsylvania Supreme Court

Page 1219

903 A.2d 1219

Patricia M. EGGER, Administratrix of the Estate of Charles Egger, Deceased and National Union Fire Insurance Company, v. GULF INSURANCE COMPANY, Brownyard Group, Inc., W.H. Brownyard Corporation and/or Brownyard Brothers, Inc. and AON Risk Services, Inc. of Pennsylvania and Brokerage Professionals, Inc. Appeal of Gulf Insurance Company.

Supreme Court of Pennsylvania.

Argued October 17, 2005.

Decided August 23, 2006.

John J. Barrett, Jr., Edward J. Kelbon, Jr., Esq., Karl Stewart Myers, Esq., Philadelphia, for Gulf Insurance Company.

Robert E. Kelly, Jr., Esq., Harrisburg, for amicus curiae Insurance Federation of Pennsylvania.

Thomas Wayne Hall, Esq., Lancaster, for Patricia M. Egger, Administratrix of the Estate of Charles Egger, Deceased, et al.

BEFORE: CAPPY, C.J., and CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and BAER, JJ.

OPINION

Justice NEWMAN.

In this case, we determine whether an assignee has standing to sue an insurer where the insured assigned its interest in an insurance policy without the prior consent of the insurer, contrary to the requirement in the policy. For the reasons that follow, we affirm the Order of the Superior Court that affirmed the Order of the Court of Common Pleas of Philadelphia County (trial court), which granted summary judgment in favor of the assignee.

FACTS AND PROCEDURAL HISTORY

On September 5, 1997, Charles Egger (Egger) was cleaning a confined space on the roof of a scrubber unit at Philadelphia Electric Company's (PECO) Eddystone power plant. Foulke Associates, Inc. (Foulke) provided both security guard services and plant protection services to PECO at the power plant under two separate contracts.

Egger was using a high pressure water jet to clean sulfur dioxide residue from this scrubber unit. After a sudden loss of water pressure, he lost his balance, and the water jet came to rest near the back of his knee. When the water pressure suddenly returned, the water pierced his leg and severed several arteries.

Egger placed an emergency call to Foulke personnel, who arrived twenty minutes later, without rescue or first aid equipment. Instead of administering first aid, the Foulke staff decided first to retrieve him from the confined space. During this process, Egger bled to death.

Patricia Egger (hereinafter Appellee or Assignee), the wife of Egger, brought suit against Foulke for, inter alia, failing to administer timely first aid, and the case went to trial.¹ Foulke was insured for $1,000,000.00 through a primary general liability insurance policy issued by Security Insurance Company of Hartford (Security).

In addition to this primary liability policy, Foulke maintained an umbrella/excess general liability insurance policy issue (the excess insurance policy) issued by Appellant Gulf Insurance Company (Gulf) with a liability limit of $10,000,00.00. The term of the policy was from May 14, 1997 through May 14, 1998, and it provided coverage for "Occurrences" during that period, in the event that damages exceeded the $1,000,000.00 limit of the primary policy.

The policy defined "Occurrence" as "an accident . . . that results in `Bodily Injury' or `Property Damage' that is not expected or not intended by the `Insured.'" Exhibit F, Commercial Umbrella Policy, Supplemental Appendix to Combined Reply in Support of Defendant Gulf Insurance Company's Motion for Summary Judgment, Section IV H.

A provision included in the section of the policy labeled "Conditions" stated that "[y]our rights and duties under this policy may not be transferred without our prior written consent, except in the case of death of an individual `Named Insured.².'" Exhibit F, Commercial Umbrella Policy ["Policy"] Supplemental Appendix to Combined Reply in Support of Defendant Gulf Insurance Company's Motion for Summary Judgment, "Conditions," Section K, "Transfer of Your Rights and Duties under This Policy."

On February 7, 2001, shortly before the jury verdict, Gulf denied excess insurance coverage to Foulke. Immediately after that, and prior to the jury verdict, Foulke and Appellee entered into a settlement agreement. In exchange for Appellee's agreement not to enforce against Foulke any excess judgment beyond the $1,000,000.00 that Foulke insured through its primary general liability policy, Appellee accepted $825,000.00, along with an assignment of Foulke's rights under the Gulf excess insurance policy.³ On February 9, 2001, the jury returned a verdict against Foulke in the amount of $3,500,000.00. Following the grant of Appellee's Motion for delay damages, the final judgment against Gulf totaled $3,837,965.75.

On May 18, 2001, Appellee brought suit against Gulf alleging breach of contract and bad faith in denying coverage. Both parties filed cross-motions for summary judgment, which the trial court denied on September 11, 2002.

The trial court determined that Foulke's assignment to Appellee of its rights under the excess insurance policy was valid, despite the fact that the required notice had not been provided. Citing the decision of this Court in Nat'l Mem'l Services v. Metro. Life Ins., 159 Pa.Super. 292, 48 A.2d 143 (1946), the trial court noted that "Pennsylvania courts have . . . analyzed non-assignment clauses by considering the clear language used and the purposes for which the clauses were inserted." Trial Court Opinion of September 11, 2002 (Trial Court Opinion) at 4.

The trial court denied the parties' cross-motions for summary judgment based on its determination that genuine issues of material fact existed with respect to Gulf's claim that coverage was excluded pursuant to an "Incidental Malpractice" provision of the policy and a Professional Liability Exclusion Endorsement.

Following the parties' submission of supplemental briefs and additional argument, on July 16, 2003, the trial court vacated the portion of its previous Order denying summary judgment to Appellee on the coverage issue, and granted summary judgment to her in the amount of $3,481,849.42, which was reduced by stipulation of the parties to $3,352,370.57.

Following a bench trial, on March 10, 2004, the trial court entered judgment in favor of Gulf on Appellee's claim of bad faith. Gulf timely appealed to the Superior Court, challenging the trial court's grant of summary judgment in favor of Appellee.

A panel of the Superior Court held that Appellee had standing to seek recovery from Gulf and the trial court did not err in granting summary judgment in her favor. Egger v. Gulf Ins. Co., 864 A.2d 1234 (Pa.Super.2004). The court noted that "Pennsylvania law is anything but `well settled' on the issue . . . [of] the validity of non-assignment clauses after a loss has occurred." Id. at 1238 (internal citation omitted). This observation was similar to one made by the trial court when it stated that "Pennsylvania law is unclear on this issue whether general stipulations prohibiting assignments absent an insurer's consent . . . should apply only to pre-loss assignments." Trial Court Opinion at 4. The Superior Court noted that case law does not make clear when a "loss" occurs.

The Superior Court rejected Gulf's argument that Fran & John's Doylestown Auto Ctr., Inc. v. Allstate Ins. Co., 432 Pa.Super. 449, 638 A.2d 1023 (1994), and High-Tech-Enters. Inc. v. Gen. Accident Ins. Co., 430 Pa.Super. 605, 635 A.2d 639 (1993), mandated a finding that the assignment was invalid.

The Superior Court acknowledged that it could "only honor [the decisions in Fran & John's and High-Tech-Enters.] to the extent that they comport with the binding law" that this Court set forth in Nat'l Mem'l Services, Inc. v. Metro Life Ins. Co., 355 Pa. 155, 49 A.2d 382 (1946). Egger, 864 A.2d at 1239. It stated that in Nat'l Mem'l, we noted that "there seems to be no sound reason for the insurance company to forbid or limit an assignment by a beneficiary of the amount due him or her after the death of the insured." Id. at 1240 (citing Nat'l Mem'l, 49 A.2d at 382-83). Recognizing that our holding in Nat'l Mem'l accorded with well-accepted principles of interpretation of insurance policies, the Superior Court concluded that the prohibition of an assignment after the loss has occurred would be void as against public policy.

Similarly, the Superior Court rejected Gulf's argument that the loss in this case was not fixed until the jury entered its verdict, which was one day after Foulke assigned its right to the excess insurance policy to Appellee. The court determined that although the exact amount of the loss was not known at the time of the assignment, the "risk, although not yet quantified to the penny by a jury, was in principle triggered by the injury itself and Foulke's personnel's conduct in response thereto, matters that occurred long before Foulke's assignment of the policy to Egger." Id. at 1242.⁴

On June 20, 2005, we granted Gulf's Petition for Allowance of Appeal, limited to one issue, which was "[w]hether an assignee has standing to sue an insurer where an insured's assignment of its interests in an insurance policy is made to the assignee in violation of a policy restriction requiring the insurer's consent?" For the reasons that follow, we affirm the Order of the Superior Court.

DISCUSSION

In the matter sub judice, we determine whether an assignment of rights that did not comply with the requirement of prior written consent is fatal to Appellee's claim of standing. For the reasons that follow, we hold that the assignment was valid and that it conferred standing upon the Assignee.

This matter involves an appeal from a trial court order granting summary judgment in favor of Appellee on the issue of the effectiveness of the assignment of the Gulf excess insurance policy. The appropriate construction of an insurance policy poses a question of law, and our review, therefore, is plenary. Minnesota Fire Cas. Co. v. Greenfield, 579 Pa. 333, 855 A.2d 854 (2004).

In reviewing a summary judgment order, we "will...