INSURANCE LAW

Duty to Defend and Indemnify • Bad Faith • Declaratory Relief • Additional Insured

Modern Equipment Sales v. Main Street Am. Assurance Co., PICS Case No. 14-0335 (Pa. Super. March 3, 2014) Fitzgerald, J. (9 pages).

Trial court correctly concluded that insurer had no duty to defend or indemnify appellant based on contractors extension endorsement defining additional insured where the underlying complaint did not state a claim relating to insured’s operation or use of a track loader which injured Mr. Rolland. Affirmed.

Mr. Rolland was injured by a track loader leased by appellant to insured, who allowed a landscaping company to use it, who then allowed a 10-year-old to operate it. Appellant filed a declaratory relief action seeking a determination that insurer had a duty to defend and indemnify it in the underlying personal injury action under an endorsement for additional insureds in a commercial general liability insurance policy. Appellant also alleged bad faith. The trial court granted insurer’s motion for summary judgment and denied appellant’s motion for summary judgment.

The endorsement at issue regarding additional insureds allowed coverage for liability only when injury resulted from an insured’s operation or use of leased equipment. The trial court found that appellant’s complaint made no claims relating to the use or operation by insured of the track loader. It only referred to insured’s entrustment of the track loader and insured’s failure to prevent unqualified people from operating the track loader.

Appellant argued on appeal that the trial court erred by failing to recognize that under Pennsylvania law, the concept of “use” included “entrustment.” The claims in the underlying complaint only related to the entrustment of the track loader but appellant argued that the endorsement included appellant as an additional insured by the clause which triggered insurer’s duty to defend and indemnify against injury claims caused by an insured’s maintenance, operation or use of leased equipment. Appellant also argued that the bad faith claim should not have been dismissed because it was a question of fact for a trial.

The court held that the bad faith claim was a question of law on appellate review and therefore the standard of review was de novo, Summers v. Certainteed Corp., 997 A.2d 1152, 1159 (Pa. 2010). Also, the court cited four cases related to interpretation of language in an insurance policy and agreed with the trial court that insurer had no duty to defend or indemnify.