Doesn’t anybody read this stuff?
In a case described by the trial court as a “comedy of errors,” MAK Services, Inc., which was exclusively in the business of snow and ice removal, was issued a policy by Selective Way Insurance Company that excluded bodily injury, property damage, or personal and advertising injury arising out of snow and ice removal that are performed for others by the insured or by any contractors or subcontractors working on the insured’s behalf.
On or about October 30, 2011, Oscar Gordon slipped and fell on ice while walking through a parking lot on the premises of the Valley Forge Marketplace in Norristown, Pennsylvania, which was a client of MAK Services. Oscar and his wife filed a lawsuit seeking damages for Oscar’s resulting injuries and his wife’s loss of consortium, naming MAK Services as one of several defendants and asserting that MAK had been negligent in removing snow and ice from the lot.
On May 1, 2013, Selective Way appointed defense counsel to represent MAK Services and contemporaneously sent a reservation of rights letter to MAK that stated, among other things, that the insurer reserved the right to decline coverage for the claim and to withdraw assigned defense counsel.
The letter did not acknowledge or discuss the snow and ice removal exclusion in the policy. That same day, defense counsel retained by Selective Way entered an appearance on behalf of MAK Services. For the next 18 months, Selective Way represented MAK Services in all aspects of its defense against the Gordons’ claims.
On November 13, 2014, Selective Way filed a complaint seeking a declaratory judgment against MAK Services. In pertinent part, Selective Way averred that MAK Services’ “potential negligence is based solely upon ice and snow removal activity, and the [Policy] specifically excludes a defense and indemnity for any damages arising from snow and ice removal activity … .” As such, Selective Way requested a judgment declaring that Selective Way: (1) did not owe MAK Services a defense in the Gordons’ civil action; (2) did not owe indemnity to MAK Services for the claims in the Gordons’ civil action; and (3) may withdraw its defense of MAK Services in the underlying case.
On June 3, 2015, MAK Services filed an answer with new matter and counterclaim that: (1) requested a declaratory judgment that Selective Way had an ongoing requirement to both defend and indemnify MAK Services with respect to the Gordons’ civil action; (2) argued that Selective Way should be estopped from ceasing its representation and indemnification of MAK Services; (3) raised a claim of fraud against Selective Way; and (4) asserted a claim against Selective Way for statutory and common law bad faith.
On October 23, 2018, MAK Services filed a motion for summary judgment, arguing that the language contained in Selective Way’s May 1, 2013, reservation of rights letter was “insufficient to properly preserve the potential coverage defense of the Snow and Ice Removal exclusion,” and that Selective Way should be estopped from raising the exclusion.
On November 21, 2018, Selective Way filed a cross motion for summary judgment, arguing that the reservation of rights letter was sufficient to preserve the efficacy of the snow and ice removal exclusion.
On April 16, 2019, the court granted Selective Way’s motion, awarding the declaratory relief requested and entering summary judgment in favor of the insurer. MAK Services appealed. The court ordered MAK Services to file a concise statement of errors pursuant to a state statute. MAK Services complied, and the court issued an opinion under the Pennsylvania rules of civil procedure.
On appeal, MAK Services presented two issues for consideration:
Did the trial court err as a matter of law in finding that the reservation of rights issued by [Selective Way] on May 1, 2013, which did not reference the snow and ice removal exclusion in the policy as a potential coverage defense, fully and fairly advised [MAK Services] of [Selective Way’s] coverage position?
Did the trial court err as a matter of law in holding that [Selective Way] did not waive the coverage defense of the snow and ice removal exclusion when it failed to reference that exclusion in its May 1, 2013, reservation of rights, raising it for the first time only in the November 13, 2014, summary judgment complaint?
The appellate court noted that, while an insurer does not automatically waive claims related to policy exclusions by mounting a defense of an insured, it is still required to provide the insured timely and sufficient notice of any such reservation of rights.
Selective Way’s reservation of rights letter stated that the defense against the Gordons’ case constituted a “potentially covered” claim under the policy and informed MAK Services that defense counsel was being appointed. Thereafter the letter indicated that Selective Way generally reserved all of its rights under “applicable law, insurance regulations, and policy provisions,” including the right to deny coverage. The letter, the court observed, failed to specifically identify any emergent coverage issues.
While the language in Selective Way’s letter may have sufficiently apprised MAK Services that future exigencies might affect coverage, it provided no notice whatsoever of the existing coverage issue that appeared on the face of the policy, i.e., the snow and ice removal exclusion. A complete review of the policy would have immediately revealed the existence of this exclusion. Such a revelation would have vitiated any obligation that Selective Way had to defend or indemnify MAK Services with equal speed. Instead, the boilerplate language relied on by Selective Way obfuscated this absolute defense to coverage and caused MAK Services to reach the reasonable conclusion that there was no pressing need to secure backup counsel.
Given Selective Way’s failure to “clearly communicate” its coverage position and the inherently speculative nature of determining how the case might have unfolded differently had the insurer acted with appropriate diligence, the court said, prejudice could be fairly presumed in this instance.
The court held that the trial court erred as a matter of law in: (1) holding that Selective Way was not estopped from raising the snow and ice removal exclusion; and (2) granting summary judgment to Selective Way on the basis of that exclusion. Accordingly, the court reversed the order granting summary judgment to Selective Way and remanded the case for further proceedings consistent with this opinion.
Selective Way Insurance Company v. MAK Services, Inc.—Superior Court of Pennsylvania—April 24, 2020—No 1289 EDA 2019.