A Pennsylvania trial court has ruled that an umbrella insurance policy issued to a corporation did not cover a lawsuit filed against its president in his individual capacity.
The Case
Jeremy J. André, a sanitation worker employed by Chesmont Disposal Company, LLC, a curbside recycling company, was crushed to death in Phoenixville, Pennsylvania, by a trash collection truck that he had been operating in the scope of his employment. The truck was used by Chesmont in the course of its business and was registered in the name of Stephen P. Koons, a part-owner of Chesmont. Mr. Koons also was the owner of a concrete company, "Miller Concrete," also known as "Koons d/b/a/Miller Concrete."
Mr. André's estate sued Koons, d/b/a Miller Concrete, for negligence. Specifically, the estate alleged that the trash collection truck was equipped with a system (the "PTO System") designed to keep the vehicle stationary while the transmission was engaged in the drive mode and while the driver operated the trash loading and unloading controls that were housed on the exterior side of the truck. According to the estate, the PTO System failed, the truck began to move, and Mr. André was crushed to death as he reached into the cabin in an effort to pull the brakes of the moving vehicle. The estate contended that Koons d/b/a Miller Concrete was negligent by failing to keep the PTO system in proper working condition.
At the time of the accident, the truck was insured by Chesmont under a policy from XL Insurance America, Inc. Chesmont also was covered under a commercial excess form and umbrella liability policy issued by Greenwich Insurance Company. In addition, Erie Insurance Exchange provided commercial insurance and automobile insurance coverage (the "Erie Policy") to Koons d/b/a/ Miller Concrete, and it provided Koons d/b/a/ Miller Concrete with a business catastrophe liability policy.
Mr. Koons tendered a claim to Erie under the Erie Policy, and a claim to Greenwich under the Greenwich umbrella policy; Erie accepted the tender but Greenwich did not.
Subsequently, Erie settled the estate's action on behalf of Koons d/b/a Miller Concrete, stepped into the shoes of Mr. Koons by way of subrogation, and filed an action seeking a declaratory judgment in its favor and against Greenwich. Specifically, Erie sought to recover from Greenwich the attorneys' fees, costs, and a pro-rata percentage of the indemnity payments that Erie had expended in its defense of Mr. Koons.
In response, Greenwich contended that it had no duty to defend Mr. Koons in the estate's lawsuit because the estate had sued him in his individual capacity – that is, as Koons d/b/a/ Miller Concrete, owner of the truck – and he was not an insured under the Greenwich umbrella policy.
The insurers moved for summary judgment.
The Greenwich Umbrella Policy
The Greenwich umbrella policy stated:
I—Insuring AgreementsThe Court's Decision***
Coverage B—Umbrella Occurrence Based Liability Coverage Over Self Insured Retention.
A. The Company [Greenwich] will pay on behalf of the Insured [Chesmont] those sums in excess of the Self-Insured Retention that the Insured becomes legally obligated to pay as damages by reason of liability imposed by law … because of Bodily Injury, Property Damage, Personal Injury or Advertising Injury….
VI—Definitions
***
Insured under Coverage B Means:
1. the Named Insured;
2. ***;
3. your partners, joint venture members, executive officers, employees, directors, stockholders, volunlears [sic] while acting in the scope of their duties as such….
The court granted Greenwich's motion.
In its decision, the court first found that Mr. Koons was not an insured in his individual capacity as the title holder of the trash collection truck.
It explained that the policy stated that the "Named Insured" was Chesmont and Chesmont's partners, joint venture members, executive officers, employees, directors, stockholders, and volunteers. Thus, the court continued, Mr. Koons, in his capacity as the president and managing member of Chesmont, appeared to qualify as an "insured" under the Greenwich umbrella policy.
However, the court continued, Mr. Koons had not been sued in his capacity as a partner, joint venture member, executive officer, employee, director, or stockholder of Chesmont but as "Koons d/b/a Miller Concrete," who had purchased the trash collection truck, had received title to it, was its registered owner at the time of the accident, and, as alleged, had negligently allowed Mr. André to use the defective truck.
Mr. Koons, the court ruled, had been sued "in his capacity as [a] businessman engaged in the activities of Miller Concrete, not in his capacity as the president and managing member of Chesmont," and the Greenwich umbrella policy did not apply to Koons d/b/a/ Miller Concrete.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].