Unitrin Direct Insurance Co. v. Esposito

Citation: 276 F. Supp. 3d 316Docket: CIVIL ACTION NO. 16-5239

Court: District Court, E.D. Pennsylvania; April 5, 2017; Federal District Court

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Unitrin Direct Insurance Company seeks a declaration of no duty to defend or indemnify insured Michael Esposito in a state court action arising from allegations of assault. Unitrin claims that the incident does not meet the policy's definition of an "occurrence" and that coverage is excluded due to the intentional nature of the alleged harm. Esposito counters that federal jurisdiction is lacking and that indispensable parties have not been joined, but these arguments are found to lack merit. 

The court denies Unitrin's motion for a declaration of no duty to defend Esposito, concluding that Unitrin has not met its burden of proof. Although the allegations do not align with the policy's "occurrence" definition, the policy's exclusion for intentional conduct allows for coverage if the insured acts in self-defense. Since Esposito asserts that he acted in defense of himself and his wife during the incident, Unitrin is obligated to defend him. 

If a jury finds against Esposito, Unitrin will have no duty to indemnify; conversely, if the jury finds in his favor, the indemnity issue will become moot. The underlying incident involved Esposito physically assaulting Mark Anderson, leading to significant injuries, and Anderson's lawsuit includes claims of negligence and assault. Unitrin is currently defending Esposito under a reservation of rights as the court assesses whether any claims are potentially covered by the insurance policy. The interpretation of the insurance contract is deemed a legal question, and the court will consider the pleadings and attached documents in evaluating the motion for judgment on the pleadings.

A motion for judgment on the pleadings can be granted only if the nonmovant cannot succeed under any set of facts. The court must interpret the insurance policy and the state court complaint, adhering to the plain language of the insurance contract as a whole. If the language is clear and unambiguous, it must be applied as written; ambiguities are construed in favor of the insured. An insurer must prove that a policy exclusion applies, and such exclusions are strictly interpreted against the insurer. 

The duty of an insurance carrier to defend is broader than its duty to indemnify, meaning it may have to defend a claim even if it does not ultimately need to indemnify. The underlying complaint's factual allegations are accepted as true, and doubts regarding coverage are resolved in favor of the insured. The focus is on the substance of the allegations, rather than the plaintiff's framing, to prevent avoidance of policy exclusions. An insurer is obliged to defend against any suit that may fall within the policy's coverage, regardless of whether the claims are groundless. If any claim within a multiple-claim complaint is potentially covered, the duty to defend remains until no further recovery on a covered claim is possible.

Unitrin's policy provides coverage for damages from claims against an ‘insured’ for ‘bodily injury’ or ‘property damage’ resulting from an ‘occurrence,’ defined as an ‘accident.’ The term "accident" is not explicitly defined, so it is interpreted based on its common meaning. Unitrin asserts that it has no duty to defend or indemnify Esposito because the bodily injury cited in the underlying action stems from intentional acts, specifically Esposito's guilty plea to assault, rather than an accident. While a negligence claim could compel Unitrin to provide a defense, the underlying complaint does not allege negligence on Esposito's part; it explicitly identifies his actions as intentional. The court emphasizes that the factual allegations, rather than the legal theories presented, dictate coverage. The only relevant allegation against Esposito relates to his assault on Anderson, not any accidental conduct. Although Unitrin cites a policy exclusion for expected or intended injuries, it is predicated on the notion that Esposito's actions were intentional, thereby negating coverage for resulting injuries.

Exclusion E.l of the insurance policy specifies that coverage does not apply if the injury differs in kind, quality, or degree from what was expected or intended, or if it is caused by a different person or property than anticipated. However, this exclusion does not apply to bodily injury or property damage resulting from an insured's reasonable use of force to protect others or themselves. The language creates ambiguity, as established in Stidham v. Millvale Sportsmen’s Club, leading to a legal interpretation that favors coverage against the insurer. The policy's definition of an occurrence conflicts with the exclusion's qualifying language, as self-defense is deemed an intentional act, yet remains covered under the policy.

Esposito claims he acted in self-defense for himself and his wife, with disputed evidence regarding the nature of his actions—whether they were defensive or unjustified. If it is proven that he used reasonable force, coverage applies; if not, it does not. Unitrin, the insurer, must defend Esposito in the underlying lawsuit as long as the allegations potentially fall within the policy's coverage parameters. The insurer's duty to indemnify arises only if Esposito is found liable for covered claims; however, if he is not acting in self-defense, indemnification is not warranted.

The conclusion indicates a legal dispute regarding whether Esposito's actions fall under the exception to the Expected or Intended Injury Exclusion. Consequently, Unitrin's motion for judgment on the pleadings, which seeks a declaration that it does not need to defend Esposito, is denied. The case is brought under the Federal Declaratory Judgment Act, with jurisdiction based on the diversity of citizenship. Esposito also contends that the complaint should be dismissed due to the plaintiff and a co-defendant's absence, as they are indispensable parties in the underlying state action.

An injured claimant is not deemed an indispensable party in a declaratory judgment action involving an alleged tortfeasor and their insurer, as established in Liberty Mutual Ins. Co. v. Treesdale, Inc. and supported by subsequent cases. The underlying action has been transferred to the Court of Common Pleas of Delaware County. The parties have not addressed the potential preclusive effect of Esposito’s guilty plea to assault, which raises issues regarding the statutory definition of assault, the potential divisibility of the statute, and whether the plea limits Esposito's ability to assert a justification defense. The document references various exhibits, including a letter from Unitrin Direct Insurance Co. regarding Esposito, and the Unitrin Homeowner’s Insurance Policy outlining coverage for bodily injury, defined as including bodily harm, sickness, or disease, as well as related losses.