UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-2293
JOSEPH TANKOVITS; ANITA TANKOVITS,
Plaintiffs,
and
SCOTTSDALE INSURANCE COMPANY,
Intervenor/Plaintiff - Appellee,
versus
DEL SUPPO, INCORPORATED,
Intervenor/Defendant - Appellant.
Appeal from the United States District Court for the Northern
District of West Virginia, at Wheeling. Frederick P. Stamp, Jr.,
District Judge. (CA-03-69)
Argued: March 17, 2005 Decided: April 29, 2005
Before KING and GREGORY, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Vacated and remanded by unpublished per curiam opinion.
ARGUED: Patrick Joseph McDermott, MCDERMOTT & BONENBERGER,
P.L.L.C., Wheeling, West Virginia, for Appellant. Renatha Susan
Garner, MACCORKLE, LAVENDER, CASEY & SWEENEY, P.L.L.C., Charleston,
West Virginia, for Appellee. ON BRIEF: Heather M. Wright,
MACCORKLE, LAVENDER, CASEY & SWEENEY, P.L.L.C., Morgantown, West
Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
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PER CURIAM:
This appeal presents an insurance coverage dispute between
Scottsdale Insurance Company (Scottsdale) and its insured Del
Suppo, Inc. (Del Suppo), a swimming pool contractor. The primary
issue on appeal is whether the complaint in a civil action filed
against Del Suppo by its customers Joseph and Anita Tankovits (the
Tankovitses) triggered liability coverage (i.e., duties to defend
and indemnify) under the “Professional Liability Coverage Part” of
the insurance policy that Scottsdale had issued to Del Suppo for
the policy period February 28, 2001 to February 28, 2002. (J.A.
36). We resolve this issue in favor of Del Suppo, and therefore,
vacate the district court’s grant of summary judgment in favor of
Scottsdale and remand for further proceedings consistent with this
opinion.
I.
A. The Insurance Policy At Issue.
Scottsdale, an Ohio corporation with its principal place of
business in Arizona, issued an insurance policy in Pennsylvania to
Del Suppo for the policy period February 28, 2001 to February 28,
2002 (the Policy). The first page of the Policy is entitled
“COMMON POLICY DECLARATIONS,” and it specifies that the Policy
“consists of the following coverage parts for which a premium is
indicated.” (J.A. 36). The declarations page then proceeds to
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list seven separate coverage parts: (1) Commercial General
Liability Coverage Part; (2) Commercial Property Coverage Part; (3)
Commercial Crime Coverage Part; (4) Commercial Inland Marine
Coverage Part; (5) Commercial Auto (Business Auto or Truckers)
Coverage Part; (6) Commercial Garage Coverage Part; and (7)
Professional Liability Coverage Part. With respect to the
Commercial General Liability Coverage Part, under the heading
“Premium,” the declarations page states “$ 3,691 .” Id. With
respect to the Professional Liability Coverage Part, under the
heading “Premium,” the declarations page states “$ INCLUDED .”
Id. With respect to the other five listed coverage parts, under
the heading “Premium,” the declarations page states “$ NOT
COVERED .” (J.A. 36).
The Commercial General Liability Coverage Form, which is the
part of the Policy detailing the terms, conditions, and exclusions
of the Commercial General Liability Coverage Part, provides that
Scottsdale agrees to pay those sums that Del Suppo “becomes legally
obligated to pay as damages because of ‘bodily injury’ or ‘property
damage’ to which this insurance applies.” (J.A. 45). The
Commercial General Liability Coverage Form further provides that
Scottsdale will have the “right and duty to defend” Del Suppo
“against any ‘suit’ seeking those damages.” Id.
According to the Commercial General Liability Coverage Form,
“[t]his insurance applies to ‘bodily injury’ and ‘property damage’
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only if: (1) The ‘bodily injury’ or ‘property damage’ is caused by
an ‘occurrence’ that takes place in the ‘coverage territory’; and
(2) The ‘bodily injury’ or ‘property damage’ occurs during the
policy period.” (J.A. 45). The General Liability Coverage Form
defines the term “occurrence” as: “an accident, including
continuous or repeated exposure to substantially the same general
harmful conditions.” (J.A. 56).
Of relevance in the present appeal, the Commercial General
Liability Coverage Form specifies numerous exclusions from
coverage, including an exclusion for bodily injury or property
damage for which Del Suppo is obligated to pay “by reason of the
assumption of liability in a contract or agreement” (the Contract
Exclusion). (J.A. 45). Another exclusion excludes coverage of
property damage to “[t]hat particular part of any property that
must be restored, repaired or replaced because ‘your work’ was
incorrectly performed on it” (the Property Damage Caused By Your
Work Exclusion). (J.A. 48). Additionally, the Commercial General
Liability Coverage Form excludes coverage of property damage to Del
Suppo’s product “arising out of it or any part of it” (the Damage
To Your Product Exclusion) and to Del Suppo’s work “arising out of
it or any part of it and included in the ‘products-completed
operations hazard’” (the Damage to Your Work Exclusion). Id.
At the heart of the dispute on appeal is an endorsement to the
Policy entitled “ERRORS AND OMISSIONS EXTENSION” (the E&OE
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Endorsement). (J.A. 62). The E&OE Endorsement is reproduced as
follows:
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
ERRORS AND OMISSIONS EXTENSION
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
Description of Operations: SWIMMING POOL CONTRACTOR
In consideration of an additional premium, and subject to the
conditions and exclusions in the coverage form, the coverage
afforded by this endorsement shall apply to sums which you shall
become legally obligated to pay as a result of “bodily injury” or
“property damage” due to any negligent act, error or omission
committed during the policy period in the conduct of the operations
shown above, whether committed by you or by any person for whom you
are legally responsible.
Additional Premium: $ INCL
Id. Notably, this endorsement makes no mention of the Professional
Liability Coverage Part.
In remarkable contrast to the Commercial General Liability
Coverage Part, the Policy does not contain a corresponding coverage
form with respect to the Professional Liability Coverage Part.
Indeed, besides the declarations page, the only two places the
phrase “professional liability” is mentioned in the Policy are:
(1) in the “PROFESSIONAL LIABILITY DEDUCTIBLE ENDORSEMENT,” which
endorsement sets the deductible “under the PROFESSIONAL LIABILITY
Coverage” at $500 per claimant (J.A. 63); and (2) the “NUCLEAR
ENERGY LIABILITY EXCLUSION ENDORSEMENT,” which lists the
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Professional Liability Coverage Part as one of the coverage parts
modified by that endorsement.
B. The Litigation.
Pursuant to a written contract executed on May 17, 2001, the
Tankovitses contracted with Del Suppo for Del Suppo to construct
and install an in ground swimming pool and related improvements
(e.g., sidewalk) at their home in Ohio County, West Virginia.
Highly dissatisfied with the completed project, on May 16, 2003,
the Tankovitses brought a civil action against Del Suppo in the
United States District Court for the Northern District of West
Virginia, based upon diversity jurisdiction.1 28 U.S.C. § 1332.
The Tankovitses’ complaint alleged two causes of action: (1)
breach of contract; and (2) negligent performance. Both causes of
action involved allegations of poor workmanship on the part of Del
Suppo in constructing/installing the in ground swimming pool and
related improvements at the Tankovitses’ home in West Virginia. In
the negligence cause of action, the Tankovitses alleged that Del
Suppo had held itself out as having special knowledge and expertise
in the construction and installation of swimming pools and related
improvements. The Tankovitses’ complaint alleged no bodily
injuries and sought damages in excess of $75,000 “sufficient to
compensate [them] for their damages as a consequence of [Del
1
The Tankovitses are citizens and residents of West Virginia,
while Del Suppo is a Pennsylvania corporation with its principal
place of business in Donora, Pennsylvania.
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Suppo’s] negligence and breach of contract, together with both pre-
judgment and post judgment interest, costs and attorney fees as
allowed by law.” (J.A. 14).
On November 10, 2003, pursuant to Federal Rule of Civil
Procedure 24, Scottsdale moved to intervene in the Tankovitses’
civil action against Del Suppo in order to file a complaint for a
declaratory judgment declaring that Scottsdale “has no duty to
defend or to provide coverage in connection with the allegations
and claims asserted against Del Suppo, Inc., by the Plaintiffs
herein . . . .” (J.A. 96). Scottsdale’s proposed intervenor
complaint also sought an award of attorney fees and costs from Del
Suppo. On December 18, 2003, the district court granted
Scottsdale’s motion to intervene.
Scottsdale subsequently filed a motion for summary judgment.
In its Memorandum of Law in support of its motion for summary
judgment, Scottsdale argued that coverage was unavailable under the
Commercial General Liability Coverage Part because: “(1) the
damages alleged by the Tankovitses were not caused by an
‘occurrence’ as that term is defined in the policy; and (2) the
claims asserted by the Tankovitses are essentially contractual in
nature, and coverage for contractual liability is specifically
excluded, as is coverage for business risks, such as defective
construction.” (J.A. 116). Scottsdale asserted that under
applicable choice of law rules, Pennsylvania substantive law
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governed its coverage dispute with Del Suppo because the Policy was
issued in Pennsylvania. Scottsdale presented no argument regarding
the availability of coverage under the Professional Liability
Coverage Part of the Policy.
In its responsive memorandum, Del Suppo agreed that
Pennsylvania substantive law applied to the dispute, but
nonetheless opposed Scottsdale’s motion for summary judgment on two
grounds. First, Del Suppo argued that coverage existed under an
endorsement to the Commercial General Liability Coverage Form
entitled “BROADENED PROPERTY DAMAGE COVERAGE FOR SWIMMING POOLS.”
(J.A. 70). Second, and of specific relevance in the present
appeal, Del Suppo argued that the allegations in the Tankovitses’
complaint triggered coverage under the Professional Liability
Coverage Part, which had no limiting language or exclusions as
compared to the Commercial General Liability Coverage Part. In
support of its claim of coverage under the Professional Liability
Coverage Part, Del Suppo focused upon the allegations in the
Tankovitses’ complaint alleging that it had held itself out as
having special knowledge and expertise in the construction and
installation of swimming pools and related improvements, but
negligently constructed and installed the swimming pool and related
improvements at the Tankovitses’ home.
In its Reply Memorandum, Scottsdale argued that the
allegations in the complaint triggered neither the broadened
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property damage endorsement nor the Professional Liability Coverage
Part. With respect to the Professional Liability Coverage Part,
Scottsdale took the position that the E&OE Endorsement
unambiguously constitutes the whole of professional liability
coverage under the Professional Liability Coverage Part. Then,
because the E&OE Endorsement expressly provides that any coverage
provided under it is “subject to the conditions and exclusions in
the [Commercial General Liability] coverage form,” Scottsdale
contended that coverage under the E&OE Endorsement was excluded in
this case by the Contract Exclusion, the Property Damage Caused By
Your Work Exclusion, the Damage To Your Product Exclusion, and/or
the Damage To Your Work Exclusion.
The district court granted Scottsdale’s motion for summary
judgment. The district court held that no coverage existed under
the Commercial General Liability Coverage Part because the
Tankovitses’ complaint did not allege facts constituting an
“occurrence” as that term is defined in the Commercial General
Liability Coverage Form. Alternatively, the district court held
that the Contract Exclusion applied to deny coverage.
Additionally, the district court held that no coverage existed
under the broadened property damage endorsement to the Commercial
General Liability Coverage Part. With respect to Del Suppo’s claim
of coverage under the Professional Liability Coverage Part, the
district court agreed with Scottsdale’s position that the E&OE
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endorsement constituted the sum total of professional liability
coverage provided under the Policy and under such endorsement, no
coverage existed.
The district court entered judgment in favor of Scottsdale on
September 7, 2004. The Tankovitses subsequently settled their
claims against Del Suppo, resulting in the district court
dismissing the entire action with prejudice on October 25, 2004.
This timely appeal followed.
II.
We review the district court’s grant of summary judgment in
favor of Scottsdale de novo. Higgins v. E.I. DuPont de Nemours &
Co., 863 F.2d 1162, 1166-67 (4th Cir. 1988). Accordingly, the
questions before us on de novo review are whether any genuine
issues of material fact exist for the trier of fact, and if not,
whether Scottsdale was entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(c).
III.
A. Arguments by the Parties.
On appeal, Del Suppo does not challenge the district court’s
finding of no coverage under the Commercial General Liability
Coverage Part. Rather, Del Suppo takes issue solely with the
district court’s finding of no coverage under the Professional
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Liability Coverage Part. According to Del Suppo, the Policy is
ambiguous regarding the scope of coverage provided by the
Professional Liability Coverage Part, and therefore, under the
well-settled rule of Pennsylvania law that any ambiguity in an
insurance policy must be construed against the drafter, the
district court should have construed the ambiguity in favor of
liability coverage in this case. As part of its ambiguity
argument, Del Suppo contends that any potential professional
liability coverage under the E&OE Endorsement is illusory at best
because the endorsement is gutted by the qualifying language making
it subject to the terms, conditions, and exclusions of the
Commercial General Liability Coverage Form.
On appeal, Scottsdale continues to adhere to its position that
the E&OE Endorsement unambiguously constitutes the sum total of
professional liability coverage under the Policy, and the same
exclusions which apply to deny coverage under the Commercial
General Liability Coverage Part apply equally to deny Del Suppo
coverage under the Professional Liability Coverage Part. Moreover,
Scottsdale denies that coverage under the E&OE Endorsement is
illusory. In this regard, Scottsdale proffers that coverage under
the E&OE Endorsement would be triggered by an allegation that Del
Suppo negligently designed the swimming pool, and that such
negligent design work proximately caused bodily injury. Scottsdale
also asserts that the E&OE Endorsement modifies the Commercial
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General Liability Coverage Form to provide coverage for any bodily
injury or property damage occurring after expiration of the Policy
on February 28, 2002, as long as the alleged error or omission on
the part of Del Suppo that allegedly caused the bodily injury or
property damage took place during the policy period. At oral
argument, Scottsdale characterized this circumstance as turning the
Policy into a “claims made” policy as opposed to an “occurrence”
policy.
B. Applicable Law.
Under Pennsylvania substantive law, which Del Suppo and
Scottsdale agree governs resolution of their coverage dispute,
“[t]he task of interpreting a contract is generally performed by a
court rather than by a jury. The goal of that task is, of course,
to ascertain the intent of the parties as manifested by the
language of the written instrument.” Standard Venetian Blind Co.
v. American Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983). If
language of an insurance policy is clear and unambiguous, the role
of the court is to enforce the policy as written. Gene & Harvey
Builders, Inc. v. Pennsylvania Mfrs.’ Ass’n, 517 A.2d 910, 913 (Pa.
1986). However, if language in an insurance contract is ambiguous
the ambiguity must be construed in favor of the insured and against
the insurer as the drafter. Id.; Fleishman v. General Am. Life Ins.
Co., 839 A.2d 1085, 1088 (Pa. Super. Ct. 2003). The existence or
nonexistence of ambiguity in an insurance contract presents a
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question of law. Herr v. Grier, 671 A.2d 224, 226 (Pa. Super. Ct.
1995). “[C]ontractual terms are ambiguous if they are subject to
more than one reasonable interpretation when applied to a
particular set of facts.” Madison Constr. Co. v. Harleysville Mut.
Ins. Co., 735 A.2d 100, 106 (Pa. 1999). Notably, a court must not
“distort the meaning of the language or resort to a strained
contrivance in order to find an ambiguity.” Id.
C. Analysis.
Here, the overarching question before us on appeal is whether
the Policy, when applied to the particular set of facts in this
case, is ambiguous regarding the scope of professional liability
coverage. We answer this question in the affirmative.
The structure and language of the Policy, when applied to the
facts of this case, no doubt create ambiguity regarding the scope
of liability coverage provided Del Suppo under the Professional
Liability Coverage Part of the Policy. First, the declarations
page expressly lists the Professional Liability Coverage Part as a
separate coverage part from the Commercial General Liability
Coverage Part. This makes sense given that, as a general rule,
professional liability insurance coverage is tailored to provide
coverage for special risks inherent in the specific profession of
the insured, while commercial general liability insurance coverage
is meant to cover risks generally borne by anyone in a commercial
enterprise. See generally Stevenson v. Hamilton Mut. Ins. Co., 672
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N.E.2d 467, 473 (Ind. Ct. App. 1996); Crum and Forster Managers
Corp. v. Resolution Trust Corp., 620 N.E.2d 1073, 1078 (Ill. 1993);
1 Lee R. Russ & Thomas F. Segalla, Couch on Ins. § 1:35 (3d Ed.
Nov. 2004); 9 Lee R. Russ & Thomas F. Segalla, Couch on Ins.
§ 131:38 (3d Ed. Nov. 2004). At bottom, the separate listings and
the commonly understood distinct natures of these two types of
liability coverages strongly suggest that the Professional
Liability Coverage Part covers risks distinctively different from
the Commercial General Liability Coverage Part.
At this point, we observe that the Commercial General
Liability Coverage Part has a corresponding coverage form. Such
form is quite lengthy and details, through various definitions,
provisions, and exclusions, the scope of liability coverage
provided Del Suppo under the Commercial General Liability Coverage
Part. Given this circumstance, one would reasonably expect the
Professional Liability Coverage Part to have a corresponding
coverage form. As previously explained, it does not. Indeed,
with little substantive content, the phrase “Professional Liability
Coverage” is mentioned in only two other parts in the Policy--in
the Professional Liability Deductible Endorsement and the Nuclear
Energy Liability Exclusion Endorsement.
Seeking to explain this obvious structural difference in the
Policy, Scottsdale points us to the E&OE Endorsement and claims
that it unambiguously constitutes the sum total of the professional
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liability coverage provided under the Policy. In support,
Scottsdale relies upon the proposition, undisputed by Del Suppo,
that “errors and omissions” coverage is synonymous with
“professional liability” coverage. See, e.g., 9 Couch on Ins.
§ 131:38 (3d Ed. 2004).
Assuming arguendo that Scottsdale’s interpretation of the
Policy is a reasonable one, an at least equally reasonable
interpretation exists which provides Del Suppo liability coverage
with respect to the Tankovitses’ complaint. Such reasonable
interpretation is that the E&OE Endorsement does not provide the
sum total of liability coverage under the Professional Liability
Coverage Part, and, in fact, the Tankovitses’ complaint triggers
coverage under such part. First, the E&OE Endorsement specifies
that it modifies the Commercial General Liability Coverage Part,
but makes no mention of modifying or limiting the Professional
Liability Coverage Part. Second, the E&OE Endorsement describes
itself as an “EXTENSION.” Third, the E&OE Endorsement subjects
itself to the same conditions and exclusions in the Commercial
General Liability Coverage Form. These three circumstances taken
together strongly suggest that the E&OE Endorsement, at most,
modifies the Commercial General Liability Coverage Part to extend,
in some way, the time period of liability coverage already provided
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under that part, but covers the same types of risks covered by the
Commercial General Liability Coverage Part.2
Because professional liability coverage is generally
understood to provide coverage for special risks inherent in the
specific profession of the insured, see generally Stevenson, 672
N.E.2d at 473; Crum and Forster Managers Corp., 620 N.E.2d at 1078;
1 Couch on Ins. § 1:35; 9 Couch on Ins. § 131:38, one may
reasonably interpret the Policy’s separate listing of the
Professional Liability Coverage Part as providing coverage for
risks not covered by the Commercial General Liability Coverage Part
and its endorsements. Thus, at least one reasonable interpretation
of the Policy is that Del Suppo is covered for all bodily injury
and property damage claims arising from its negligence, errors,
and/or omissions in the execution of its professional work, i.e.,
in the construction of swimming pools and the walkways that
surround swimming pools. Cf. McCarthy v. Bainbridge, 739 A.2d 200,
203 (Pa. Super. Ct. 1999) (“Medical malpractice liability insurance
provides coverage for amounts the insured (i.e., the doctor) is
held legally liable to pay others because of the doctor’s own
2
We agree with Del Suppo that the express language in the E&OE
Endorsement providing that “the coverage afforded by this
endorsement” is “subject to the conditions and exclusions in the
[Commercial General Liability] coverage form,” appears to eliminate
the potential for any coverage under the E&OE Endorsement, thus
making coverage under such endorsement illusory. Given our
ambiguity analysis, however, we need not actually decide whether
coverage under the E&OE Endorsement is illusory.
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negligence and the harm it caused.”), aff’d, 774 A.2d 1246 (Pa.
2001).
Because the language of the Policy regarding the scope of
professional liability coverage provided by the Policy, when
applied to the present set of facts, is susceptible of two
reasonable interpretations (one favoring Scottsdale and one
favoring Del Suppo), the Policy is ambiguous regarding the scope of
the Professional Liability Coverage Part. Madison Constr. Co., 735
A.2d at 106. Here, the Tankovitses’ complaint: (1) alleges that
Del Suppo held itself out as having special knowledge and expertise
in the construction and installation of swimming pools and related
improvements; and (2) alleges that Del Suppo’s negligent
performance of its various professional duties in connection with
the construction and installation of the swimming pool and related
improvements at their home in West Virginia caused them to suffer
property damage. We have no trouble concluding that these
allegations fall squarely within the concept of professional
liability coverage which is embodied, without limitation, in the
Policy as the Professional Liability Coverage Part listed on the
declarations page. Because Pennsylvania law requires that we
construe ambiguous policy language against the insurer as the
drafter of the policy and in favor of the insured, Gene & Harvey
Builders, Inc., 517 A.2d at 913; Fleishman, 839 A.2d at 1088, we
hold that the Tankovitses’ complaint triggers liability coverage
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(i.e., duties to defend and indemnify) under the Professional
Liability Coverage Part of the Policy. Accordingly, Scottsdale, as
a matter of law, is not entitled to a declaratory judgment
declaring that it “has no duty to defend or to provide coverage in
connection with the allegations and claims asserted against Del
Suppo, Inc., by the Plaintiffs herein . . . .” (J.A. 96). We,
therefore, vacate the judgment in favor of Scottsdale and remand
for further proceedings consistent with this opinion.
VACATED AND REMANDED
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