Indalex, Inc. v. Nat’l Union Fire Ins. Co., 99 A.3d 926 (Pa. 2014)
In a per curiam decision without a published opinion, the Pennsylvania Supreme Court denied National Union Fire Insurance Company of Pittsburgh’s (“National”) appeal from a Superior Court decision holding that National had a duty to defend its insured, Indalex, Inc. (“Indalex”) in multiple state court lawsuits. The Superior Court opinion, reported at 83 A.3d 418, highlighted the limits of prior case law and confirmed an insurer’s duty to defend under commonly-used commercial general liability policy language when the underlying claimant alleges personal injury or damage to other property resulting from the insured’s negligence.
In the underlying lawsuits against Indalex, property owners claimed that windows and doors it manufactured were defective, resulting in water intrusion that caused property damage, such as cracked walls, as well as personal injury. The plaintiffs in those cases asserted counts for strict liability, negligence, breach of warranty, and breach of contract. National denied coverage for the lawsuits, claiming that the suits did not trigger its duty under Pennsylvania law.
Indalex sued National seeking a declaration of coverage, and the trial court granted National summary judgment under Pennsylvania case law that had found no duty to defend under similar facts. In reversing, the Superior Court distinguished the cases relied upon by National and the trial court. While it did not depart from the rationale of those decisions, the Superior Court clearly defined their respective limitations and explained the distinguishing factors at play in Indalex’s suit that support coverage under Pennsylvania law.
The court affirmed that there is no occurrence triggering coverage under a standard general liability policy where the underlying claims are limited to breach of contract and the only damages are to the insured’s work or product itself. In contrast, where the plaintiff in the underlying litigation asserts a tort claim and alleges personal injury or damage to property other than the insured’s work or product itself, there is an occurrence triggering the insurer’s duty to defend.
Significantly, the court rejected the argument that an insurer may use the gist of the action doctrine to deny coverage where the underlying plaintiff’s tort claim merely alleges a breach of a contractual obligation recast as a negligence count. The court found that allowing an insurer to deny coverage based on its position that the plaintiff has no valid tort claim would be inconsistent with the duty to defend, which is triggered when a claim is potentially covered on the face of the plaintiff’s allegations. Thus, the insurer must defend its insured if the underlying complaint contains a claim within the scope of the policy’s coverage, and it must continue to do so until the court presiding over the underlying action determines that the gist of the action or a similar doctrine bars the potentially covered claim.