Kleban v. National Union Fire Ins. Co.

• Decision Date: 27 March 2001
• Parties: Thomas A. KLEBAN, Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Appellee.
• Court: Pennsylvania Superior Court

771 A.2d 39

Thomas A. KLEBAN, Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Appellee.

Superior Court of Pennsylvania.

Argued January 30, 2001.

Filed March 27, 2001.

Delano M. Lantz, Harrisburg, for appellant.

Walter F. Kawalec, III, Philadelphia, for appellee.

Before POPOVICH, JOYCE and BROSKY, JJ.

JOYCE, J.:

¶ 1 Thomas Kleban, Appellant, appeals from the order dated July 7, 2000 wherein the trial court entered summary judgment in favor of National Union Fire Insurance Company, Appellee. We affirm. Before reviewing the merits of the case, a recitation of the factual and procedural history is in order.

¶ 2 This case has its genesis in an accident that occurred on July 2, 1989, when Appellant dove into a pool, severing his spine and rendering him a quadriplegic. Appellant brought suit on September 20, 1990 in the Superior Court of New Jersey. Appellant named the pool manufacturer ("Heldor") and the pool owner, Prudence Simonds as defendants in his complaint. At the time of the accident, Appellee insured Heldor under a policy that provided general liability coverage. The insurance policy contained a self-insured retention clause that provided that Heldor was responsible for the first $250,000.00 per occurrence and Appellee was responsible for the remainder of a judgment or settlement up to the policy limits of two million dollars.

¶ 3 On December 7, 1990, Heldor filed for bankruptcy and an automatic stay was issued pursuant to the Bankruptcy Code. Appellant filed for relief from the automatic stay in order to pursue his negligence action. The parties stipulated to an order of the bankruptcy court lifting the stay.

¶ 4 Appellant settled his case against Prudence Simonds and proceeded to a jury trial against Heldor. A verdict was returned on July 29, 1994 in favor of Appellant in the amount of $8,780,000.00. Heldor was found to be 10% responsible, thus its liability was $878,000.00.

¶ 5 Appellee paid all of the judgment in favor of Appellant and against Heldor in excess of $250,000.00, the self-insurance retention. Five years later, on March 1, 1999, Appellant instituted the current action by filing a complaint against Appellee contending that Appellee is responsible for the $250,000.00 that it withheld. Appellee filed an answer and new matter to the complaint. Appellant responded with a reply to new matter. On March 2, 2000, Appellee filed a motion for summary judgment. On April 3, 2000, Appellant filed an answer to the motion for summary judgment and also a cross-motion for summary judgment and motion to compel the production of documents. Following oral argument, the trial court granted Appellee's motion for summary judgment and denied both the cross-motion for summary judgment and the motion to compel the production of documents by order dated July 7, 2000. This timely appeal followed.

¶ 6 Appellant presents the following issues for our consideration:

A. Where an Insuring Agreement contains a self-insured clause that includes both defense costs and indemnity within the retention, the insured goes bankrupt and the insurer chooses to vigorously defend and pay defense costs in excess of the retention, and the tort victim gets a judgment below the policy limits, do the defense costs reduce the self-insured retention (the insurer having a pre-petition claim against the insured in the bankruptcy) so that the tort victim creditor has a claim against the insurer under the indemnity provisions for the full amount of the judgment since the self-insured retention was satisfied by the defense costs incurred in defending against the claim?

B. Assuming the insurer was otherwise obligated to make the payment, did the stipulated Bankruptcy Court Order granting relief from the automatic stay clearly and unambiguously relieve the insurer of the obligation where the order stated that, "to the extent the amount of any judgment ... is not payable from available insurance proceeds, including, specifically, to the extent the amount of any award or settlement falls within the self-insured retention or exceeds the upper limits of insurance coverage, movant [Appellant] expressly reserves his right to assert a claim against the debtor or its estate for any such amount..."?

C. Under the facts in (A) and (B), where some defense costs were incurred by the insured before it filed bankruptcy, is the insurer entitled to summary judgment before full discovery is completed regarding the defense costs incurred and without hearing evidence of the intent of the parties under the stipulated order?

Appellant's Brief, at 4.

¶ 7 In reviewing a trial court's grant of summary judgment, our scope of review is plenary and our standard is as follows:

In reviewing the grant of summary judgment, we look to whether the trial court committed an error of law. Summary judgment may be granted only in cases where it is clear and free from doubt that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law. The moving party has the burden of proving the nonexistence of any genuine issues of material fact. The record must be viewed in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. The entry of summary judgment is proper where the incontraverted allegations in the pleadings, depositions, answers to interrogatories, admissions of record, and submitted affidavits demonstrate that no issue of material fact exists and that the moving party is entitled to judgment as a matter of law.

Kafando v. Erie Ceramic Arts Co., 764 A.2d 59, 61 (Pa.Super.2000), citing Rush v. Philadelphia Newspapers, Inc., 732 A.2d 648, 650-51 (Pa.Super.1999)

.

¶ 8 Appellant brought this action pursuant to the Direct Action Statute, 40 P.S. § 117, which states in pertinent part:

[T]he insolvency or bankruptcy of the person insured shall not release the insurance carrier from the payment of damages for injury sustained ... [if] execution against the insured is returned unsatisfied in an action brought by the injured person ... because of such insolvency or bankruptcy, then an action may be maintained by the injured person, ... against such [insurer], under the terms of the policy, for the amount of the judgement in the said action, not exceeding the amount of the policy.

40 P.S. § 117. (Emphasis added). Since the Direct Action Statute directs that an action may only be maintained against the insurer to the degree that it complies with the terms of the policy, an evaluation of the policy is in order.

¶ 9 The insurance policy between Appellee and Heldor contains the following "Endorsement # 3", titled, "Self Insured Retention." In pertinent part it states:

1. In consideration of the premium charged it is agreed that the limits of insurance for each of the coverages provided by this policy will apply excess of a $250,000.00 self-insured retention (hereinafter referred to as the "Retention amount").

. . .

Your bankruptcy, insolvency or inability to pay the retention amount shall not increase our obligation under this policy.

. . .

4. We shall have the right but not the duty to participate with you at our own expense in the defense or settlement of any claim or suit seeking damages covered under this policy. In the event of a claim or suit which in our reasonable judgement may result in payments, including supplementary payments, in an amount in excess of the retention amount we may assume control of the defense or settlement of such claim or suit. You will continue to be responsible for the payment of the retention amount.

5. In the event there is any other insurance, whether or not collectible, applicable to an "occurrence", claim or suit within the retention amount, you will continue to be responsible for the full retention amount before the limits of insurance under this policy apply.

National Union Fire Insurance Policy, GL-590-18-20, issued to Heldor.

¶ 10 Although we have been unable to find any Pennsylvania state law on point in this matter, Appellee cites to federal caselaw to support its position. While we recognize that federal court decisions are not binding on this court, we are able to adopt their analysis as it appeals to our reason. Chester Carriers, Inc. v. National Union Fire Insurance Company of Pittsburgh, 2001 WL 21308, at 5 (2001) citing, Willard v. Interpool, 758 A.2d 684 (Pa.Super.2000)

. In In re Amatex Corp., 107 B.R. 856, 871-872 (Bankr.E.D.Pa.1989), the court addressed the issue of whether a self-insured retention...