The Pennsylvania Superior Court took an expansive reading of insurers’ obligations to commercial policyholders in a December ruling, concluding that a general liability coverage provider is required to defend product liability claims. The appeals court reversed a trial court ruling granting summary judgment to National Union Fire Insurance Co. of Pittsburgh, Pa., concluding that a series of lawsuits filed against door and window manufacturer Indalex Inc. triggered the company’s insurance policy.
The three-judge panel found that because the company’s defective products allegedly led to other damaged property as well as personal injuries, these counted as “occurrences” under the policy. “Simply stated, because appellants set forth tort claims based on damages to persons or property other than the insured’s product, we cannot conclude that the claims are outside the scope of the coverage,” Judge Jacqueline Shogan said in the opinion. Inadlex sued its insurer in the Allegheny County Court of Common Pleas in 2007, arguing that it was entitled to coverage under its commercial umbrella policy. There have been multiple out-of-state lawsuits filed by homeowners and property owners against the company. It’s claimed that design and manufacturing defects in the company’s doors and windows led to mold and cracked walls along with personal injuries.
National Union responded that under Pennsylvania law, there were no “occurrences” that triggered the policy, and in 2012, the trial court agreed, dismissing Indalex’s claims. The company then appealed, arguing the trial court had improperly relied on an earlier Pennsylvania Supreme Court case, Kvaerner Metals Division of Kvaerner U.S. Inc. v. Commercial Union Insurance. Co. In that case, the Supreme Court ruled that because a complaint about a product had alleged that faulty workmanship had damaged the product itself, it did not trigger an insurance policy.
Indalex, however, argued that its case was distinct from the Kvaerner case because the flawed workmanship to the doors and windows caused damages elsewhere. The Superior Court ultimately agreed, concluding that these damages qualified as an “occurrence.” In doing so, the court specifically rejected the application of the “gist of action” theory to bar tort claims in insurance coverage disputes. In Pennsylvania law, the doctrine serves to prevent Plaintiffs from reshaping breach of contract claims into tort claims. Judge Shogan wrote in his order:
Ultimately, because the gist of the action doctrine has never been adopted by our Supreme Court in an insurance coverage context, we are convinced that, at this juncture of a duty to defend claim, applying the gist of the action doctrine is inappropriate.
It would appear, based on the existing case law in Pennsylvania, that coverage under a liability insurance policy of the sort involved in this case should be afforded by the carrier.
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