An insured’s admission in an
answer to a declaratory judgment complaint dispositive of coverage was not
considered by the Middle District of Pennsylvania. Instead, the court looked
only to the allegations in the underlying complaint and held that an insurer had
a duty to defend its insured.
The insured was sued in an
underlying bodily injury lawsuit arising from a motor vehicle accident. In the
complaint against the insured, the underlying plaintiff alleged that the
vehicle driven by the insured’s employee was an auto covered under the
insurer’s policy. The insurer then filed a declaratory judgment action in the
United States District Court for the Middle District of Pennsylvania, seeking a
ruling it owed no coverage to the insured for the underlying action because the
vehicle operated by its employee was not, in fact, a covered auto.
In its answer to the insurer’s declaratory
judgment complaint, the insured admitted that its employee was not driving a
vehicle covered by the insurer’s policy and also admitted that the allegation
by the underlying plaintiff in the underlying complaint that the vehicle was a
covered auto was false. Relying on the insured’s admissions, the insurer filed
a motion for judgment on the pleadings, which was denied, and then filed a
motion for reconsideration.
The reconsideration motion was also
denied, since the district court reiterated that under long-standing
Pennsylvania law, an insurer’s duty to defend is based solely on the factual
allegations in the underlying complaint compared to the scope of coverage of
the insurance policy. In recounting the basis of this rule, the district court explained
that since an insured cannot use extrinsic evidence to trigger the insurer’s
duty to defend, an insurer also cannot use such evidence to extinguish its
Generally, Pennsylvania courts
have found that if an underlying complaint triggers a duty to defend, the duty
continues until it is clear that the plaintiff in an underlying action cannot
recover under the terms of the policy.
(Noting “If the complaint filed against the insured avers facts which would
support a recovery that is covered by the policy, it is the duty of the insurer
to defend until such time as the claim is confined to a recovery that the
policy does not cover.”) Thus, the district court case poses the question of
what evidence is required to clearly establish that there can be no recovery
under the policy, and thus, the duty to defend.
MMG Insurance Co. v. Guiro, Inc. and Leonardo D. Lopez, docket number 1:19-cv-0075-JEJ.
& Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 2 A.3d 526, 541 (Pa.
2010); see also, Erie Ins. Exch. v. Transamerica Ins. Co., 533 A.2d
1363, 1368 (Pa. 1987)