Erie Ins. Exch. v. Scottsdale Ins. Co., 2:11-cv-429

• Decision Date: 07 September 2012
• Docket Number: 2:11-cv-429
• Parties: ERIE INSURANCE EXCHANGE, Plaintiff, v. SCOTTSDALE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of Pennsylvania

ERIE INSURANCE EXCHANGE, Plaintiff,

v.SCOTTSDALE INSURANCE COMPANY, Defendant.

2:11-cv-429

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

Dated: September 7, 2012

MEMORANDUM OPINION AND ORDER OF COURT

Pending before the Court is the MOTION FOR SUMMARY JUDGMENT OF DEFENDANT SCOTTSDALE INSURANCE COMPANY, filed at Doc. No. 30, a concise statement of material facts (Doc. No.31), an appendix to the concise statement of material facts (Doc. No. 32), and a brief in support of its motion for summary judgment (Doc. No. 33). Also pending before the Court is PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGEMNT, filed at Doc. No. 36. In support of its amended motion for summary judgment, Plaintiff has also filed a concise statement of material facts with attached exhibits (Doc. No. 37), and a brief in support of its amended motion (Doc. No. 38). Both parties have also responded to their opponent's respective motions for summary judgment with briefs in opposition (Plaintiff's brief filed at Doc. No. 40, and Defendant's brief filed at Doc. No. 41), as well as responsive concise statements of material fact (Plaintiff's responsive statement at Doc. No. 39, and Defendant's responsive statement at 42). The issues have been fully presented and briefed, and are now ripe for disposition.

On or about March 2, 2011, Plaintiff, Erie Insurance Exchange ("Erie"), initiated an action for Declaratory Judgment against Defendant, Scottsdale Insurance Company, via a Complaintfiled in the Court of Common Pleas of Allegheny County Pennsylvania, docketed at Case No. GD-11-003925. See Doc. No. 1, Notice of Removal, at Ex. A ("Complaint"). Generally speaking, the civil action arises from insurance coverage claims made by Kyrk A. Pyros under insurance policies issued to him for defense and indemnification relative to two civil action complaints that had been filed against him which alleged discriminatory housing actions and practices in the George Washington Hotel (the "Hotel"), a residential building located in Washington, PA.¹ The Hotel is owned and operated by The George Washington, L.P. ("Washington, L.P.") and is managed by PyRsquared Group, Inc. ("PyRsquared"). According to the two discrimination complaints, Kyrk A. Pyros is the general partner of Washington, L.P., and is also the owner and/or principal officer and agent of PyRsquared Group, Inc. and PyRsquared Management Company, Inc. In a nutshell, Plaintiff Erie seeks an award ordering Defendant Scottsdale to reimburse it for all sums expended by Erie for the defense and indemnification of Mr. Pyros in those two civil actions.

Defendant removed the action to this Court, and subsequently answered on April 15, 2011, see Doc. Nos. 1 & 7, and a period of discovery commenced. After discovery concluded, both parties moved for summary judgment. Before the Court are the parties' cross-motions for summary judgment on the claims for declaratory relief. For the reasons stated herein, the Court will grant summary judgment in favor of Defendant Scottsdale.

Standard of Review

Summary judgment must be granted when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."Fed.R.Civ.P. 56(a). The movant must identify those portions of the record which demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To withstand summary judgment, the non-movant must show a genuine dispute of material fact by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials." Fed.R.Civ.P. 56(c)(1)(A); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). A dispute is "genuine" only if "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Cross-motions for summary judgment "are no more than a claim by each side that it alone is entitled to summary judgment, and the making of such inherently contradictory claims does not constitute an agreement that if one is rejected the other is necessarily justified or that the losing party waives judicial consideration and determination whether genuine issues of material fact exist." Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir.1968).

The court must determine the governing state law. A federal district court sitting in diversity must apply the choice-of-law rules of the state where it sits. Amica Mut. Ins. Co. v. Fogel, 656 F.3d 167, 170 (3d Cir.2011). Under Pennsylvania law, the law of the state in which an insurance policy is issued and delivered governs the action. Bennison v. Nationwide Mut. Ins. Co., 42 Pa. D. & C.4th 466, 473 (Pa.Ct.Com.Pl.1999). The named insureds procured the insurance policy in Pennsylvania, and Pennsylvania law governs this action.

The court interprets an insurance policy as a matter of law when the facts are not in dispute.Pac. Indem. Co. v. Linn, 766 F.2d 754, 760 (3d Cir.1985).

Factual Background

The following facts are taken from the evidentiary record and are not in dispute.

A. Insurance policies

1. Terms of the Scottsdale Commercial General Liability Policy

Defendant Scottsdale issued a commercial general liability policy, number CLS1421707, to PyRSquared Management, Inc. and The George Washington, L.P., which was effective from December 31, 2007 to December 31, 2008. Pl. App. at Ex. E. The policy limits of liability for Coverage B, "Personal and Advertising Injury Liability", are $1 million per occurrence, and $2 million in the aggregate (the "Scottsdale Policy"). Doc. No. 32 at Ex. C ("Def. App. at Ex. C"). The "Description of Business" block on the Scottsdale Policy's declaration pages states that the Named Insured is an "organization including a corporation (other than a partnership, joint venture or limited liability company)." Id. In terms of Coverage B, the Scottsdale Policy included in relevant part:

COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "personal and advertising injury" to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or "suit" that may result. ...

2. Exclusions

This insurance does not apply to:

a. Knowing Violation of Rights of Another

"Personal and advertising injury" caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict "personal and advertising injury."

Id.

The Scottsdale Policy contains the following "Who Is Insured" provision, in pertinent part:

SECTION II - WHO IS INSURED

1. If you are designated in the Declarations as:

. . .

d. An organization other than a partnership, joint venture or limited liability company, you are an insured. Your "executive officers" and directors are insureds, but only with respect to their liability as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.

Id. The Scottsdale Policy also contains the following "Other Insurance" provision, as modified via endorsement, in pertinent part:

AMENDMENT TO OTHER INSURANCE CONDITION

4. Other Insurance

a. Primary Insurance

This insurance is primary expect when b. below applies.

b. Excess Insurance

This insurance is excess over any other insurance, whether primary, excess, contingent or on any other basis:

. . .

(4) That is valid and collectible insurance available to you under any other policy.

When this insurance is excess, we will have no duty under Coverages A or B to defend the insured against any "suit" if anotherinsurer has a duty to defend against that "suit." If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers.

. . .

If a loss occurs involving two or more policies, each of which states that its insurance will be excess, then our policy will contribute on a pro rata basis.

Id.

2. Terms of the Erie Ultraflex Policy and the HomeProtector Policy

Plaintiff Erie issued an Ultraflex Package Policy, ULF (Ed. 3/01) UF-8126, #Q48-0450306 (the "Ultraflex Policy") to Kyrk Pyros, with a policy effective date of December 4, 2007, and a termination date of December 4, 2008, and with limits of $1 million for personal and advertising injury and $2 million in the aggregate. See Doc. No. 37 at Ex. A ("Pl. App. at Ex. A"); see also, id. at Ex. B ("Ultraflex declarations page"). Erie also issued a HomeProtector policy, #Q59-1507624 (the "HomeProtector Policy") to Mr. Pyros. See Pl. App. at Ex. C (policy) and Ex. D (declarations page). The commercial general liability coverage part of the Erie Ultraflex Policy includes the following "Who Is An Insured" provision, in pertinent part:

SECTION II - WHO IS AN INSURED

1. If you are designated in the Declarations as:

a. An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner.

Id. The commercial general liability coverage part of the Ultraflex Policy contains the following "Other Insurance" provision, in pertinent part:

4. Other Insurance

If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:

a. Primary

...