Zenith Ins. Co. v. Newell

• Decision Date: 19 March 2021
• Docket Number: CIVIL ACTION NO. 20-3878
• Citation: 527 F.Supp.3d 778
• Parties: ZENITH INSURANCE COMPANY, Plaintiff, v. Martin P. NEWELL, Jr. and M.P.N., Inc., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

527 F.Supp.3d 778

ZENITH INSURANCE COMPANY, Plaintiff,

v.Martin P. NEWELL, Jr. and M.P.N., Inc., Defendants.

CIVIL ACTION NO. 20-3878

United States District Court, E.D. Pennsylvania.

Signed March 19, 2021

Sharon F. McKee, Ronald P. Schiller, Hangley Aronchick Segal Pudlin & Schiller, Philadelphia, PA, for Plaintiff.

Jason A. Snyderman, Huaou Yan, Blank Rome LLP, Philadelphia, PA, Jeffrey J. Vita, Saxe Doerberger & Vita, PC, Trumbull, CT, for Defendants.

OPINION

WENDY BEETLESTONE, J.

In this not-so-run-of-the-mill insurance coverage dispute, the question presented is whether Plaintiff Zenith Insurance Company ("Zenith") has a duty to defend and indemnify Defendants M.P.N., Inc. ("MPN") and Martin P. Newell (collectively, "Defendants") with respect to an underlying state tort action.

I. BACKGROUND

A. The Underlying Action

This action arises from a personal injury lawsuit filed by Jerry Mercer, Jr. ("Mercer Jr."), a former MPN employee, and his son, Jerry Mercer, III ("Mercer III") in the Philadelphia Court of Common Pleas, in which both MPN and Newell—MPN's owner—are named as defendants.

The Mercers allege the following facts in their underlying action. From May 2015 to November 17, 2017, Mercer Jr. worked for MPN at its Philadelphia, Pennsylvania assembly plant soldering radiator parts using a lead and cadmium alloy. Mercer Jr.’s employment regularly exposed him to toxic substances. Because of this exposure, OSHA regulations required that MPN monitor Mercer Jr. by measuring the lead, zinc, and cadmium levels in his blood.

On May 13, 2016, MPN prepared a letter to Mercer Jr. stating that a blood draw showed Mercer Jr.’s blood lead level to be 35 micrograms/deciliter, close to OSHA's acceptable level of 40 micrograms/deciliter. The letter further reported Mercer Jr.’s blood zinc level to be 216 micrograms/deciliter, more than seven times OSHA's acceptable level of 30. The Mercers allege that the May 13 letter falsified Mercer Jr.’s blood lead level, because a lead level of 35 and zinc level of 216 cannot biologically exist simultaneously. They further allege that Mercer Jr.’s elevated zinc level put MPN on notice that lead was accumulating in his brain. MPN, upon notice of Mercer Jr.’s abnormal zinc levels, was required to remove Mercer Jr. from his work duties and provide him with medical removal benefits. It failed to do so. Instead, for the next six months MPN concealed from Mercer Jr. the May 13 letter while lead continued to accumulate in his brain.

On November 2, 2016, Dr. Andrew Bandulak reviewed Mercer Jr.’s zinc level and ordered MPN to immediately remove Mercer Jr. from further lead exposure pending a medical evaluation and toxicology consult. Defendants did not inform Mercer Jr. of Dr. Bandulak's order, so he continued to work. On November 19, 2016, an MPN employee named Romeo handed Mercer Jr. the May 13 letter, along with a written instruction to see a doctor. At the same time, Romeo threatened to fire Mercer Jr. "with no money" if his "zinc got any higher." Mercer Jr. interpreted Romeo's statement to mean that his zinc level was high but not dangerously so, and thus continued to solder parts into radiators for MPN until his termination on November 17, 2017. As a consequence of Defendants’ conduct, Mercer Jr. suffered permanent brain damage.

Based on these allegations, the Mercers sued MPN and Newell for: (1) fraudulent misrepresentation; (2) medical monitoring; (3) battery; and, (4) intentional infliction of emotional distress. Mercer III, who allegedly resided with Mercer Jr. while the latter was employed with MPN, is a plaintiff in the underlying action only with respect to the medical monitoring claim. Although Mercer III was never an MPN employee, he alleges that he too suffered lead exposure due to secondary lead contamination in the Mercer residence caused by MPN's failure to prevent lead accumulation in its assembly plant. Unlike Mercer Jr., Mercer III does not presently allege any active symptoms associated with lead exposure.

B. The Zenith Policy

Zenith issued three identical insurance policies to MPN for three annual policy periods spanning March 17, 2015 to March 17, 2018 (the "Policy").¹ The Policy contains two coverage parts: Part One – Workers’ Compensation Insurance ("Part One"), and Part Two – Employers’ Liability Insurance ("Part Two").

Part One provides MPN with workers’ compensation insurance as follows:

A. How This Insurance Applies This Workers’ Compensation Insurance applies to bodily injury by accident or bodily injury by disease. Bodily injury includes resulting death.

1. Bodily injury by accident must occur during the policy period.

2. Bodily injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily injury by disease must occur during the policy period.

Pursuant to Part One, Zenith is obligated to pay "promptly when due benefits required of you by the workers’ compensation law." The Policy defines "workers’ compensation law" as the workers’ compensation statutes of Pennsylvania and other states. Part One also requires Zenith to defend claims for workers’ compensation benefits:

C. We Will Defend

We have the right and duty to defend at our expense any claim, proceeding or suit against you for benefits payable by this insurance.

We have the right to investigate and settle these claims, proceedings or suits.

We have no duty to defend a claim, proceeding or suit that is not covered by this insurance.

Part Two provides MPN with employers’ liability insurance as follows:

This Employers’ Liability Insurance applies to bodily injury by accident or bodily injury by disease. Bodily injury includes resulting death.

1. The bodily injury must arise out of and in the course of the injured employee's employment by you.

2. The employment must be necessary or incidental to your work in a state or territory listed in Item 3.A of the Information Page.

3. Bodily injury by accident must occur during the policy period.

4. Bodily injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily injury by disease must occur during the policy period.

Part Two's coverage provision provides, in relevant part:

B. We Will Pay

We will pay all sums that you legally must pay as damages because of bodily injury to your employees, provided the bodily injury is covered by this Employers’ Liability Insurance.

The damages we will pay, where recovery is permitted by law, include damages:

...

3. For consequential bodily injury to a spouse, child, parent, brother or sister of the injured employee; provided that these damages are the direct consequence of bodily injury that arises out of and in the course of the injured employee's employment by you.

With respect to defense, Part Two provides:

D. We Will Defend

We have the right and duty to defend, at our expense, any claim, proceeding or suit against you for damages payable by this insurance. We have the right to investigate and settle these claims, proceedings and suits.

We have no duty to defend a claim, proceeding or suit that is not covered by this insurance. We have no duty to defend or continue defending after we have paid our applicable limit of liability under this insurance.

Part Two of the Policy contains several exclusions, two of which are relevant here. Pursuant to Exclusion C.4, there is no coverage for "[a]ny obligation imposed by a workers’ compensation, occupational disease, unemployment compensation, or disability benefits law, or any similar law." Pursuant to Exclusion C.5, coverage is unavailable for "[b]odily injury intentionally caused or aggravated by you."

C. The Coverage Dispute

Shortly after learning it had been sued, MPN notified Zenith of the underlying action to seek coverage for itself and Newell pursuant to Part Two of the Policy. Zenith denied MPN's tender and informed MPN of its positions that: (1) Newell is not insured under the Policy; and, (2) any liability coverage for MPN is barred by Exclusions C.4 and C.5. To date, Zenith has not participated in the underlying action.

MPN and Newell filed preliminary objections in the underlying action which the Court of Common Pleas sustained, dismissing the action. The Mercers appealed. The court then issued an opinion explaining first that the Mercers’ claims against MPN were barred by the exclusivity provision of the Pennsylvania Workers’ Compensation Act and, second, that the Mercers’ claims against Newell failed because they did not plead that Newell personally committed any of the actions underlying these claims.² The question of coverage under the Policy was not addressed in the state court proceedings, and the Mercers’ appeal of the Common Pleas Court's decision is currently pending before the Pennsylvania Superior Court.

Here, Zenith seeks a declaration that it does not have a duty to defend and is not required to indemnify Defendants in the underlying action and has moved, pursuant to Federal Rule of Civil Procedure 12(c), for judgment on the pleadings.³ Defendants, who have sought in a counterclaim a declaratory judgment to the contrary, to wit, that Zenith is obligated to defend them and is required to indemnify them, are requesting, pursuant to Federal Rule of Civil Procedure 56, partial summary judgment solely on their contention that Zenith has a duty to defend.

II. LEGAL STANDARD

"[S]ummary judgment is appropriate where there ‘is no genuine issue as to any material fact’ and the moving party is ‘entitled to a judgment as a matter of law.’ " Alabama v. North Carolina , 560 U.S. 330, 344, 130 S.Ct. 2295, 176 L.Ed.2d 1070 (2010) (quoting Fed. R. Civ. P. 56(c) ). "A motion for judgment on the pleadings is a procedural hybrid of a motion to dismiss and a motion for summary judgment." Westport Ins. Corp. v. Black, Davis & Shue Agency, Inc. , 513 F. Supp.2d 157, 162 (M.D. Pa. 2007). Like a ...