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NON - PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 BENSALEM RACING ASSOCIATION, INC. AND KEYSTONE TURF CLUB, INC. , Appellants

v.

ACE PROPERTY AND CASUALTY INSURANCE COMPANY : : : : : : : : : : : : IN THE SUPERIOR COURT OF

PENNSYLVANIA

No. 530 EDA 2017

Appeal from the Order Entered January 24, 2017 In the Court of Common Pleas of Philadelphia County Civil Division at

No(s): February Term, 2016 No. 04858

BEFORE: PANELLA, J., DUBOW, J., and RANSOM, J. MEMORANDUM BY DUBOW, J.: FILED NOVEMBER 30, 2017 Appellants, Bensalem Racing Association, Inc. and Keystone Turf Club,
Inc. ( collectively, “Parx”) , appeal from the January 24, 2017 Order entered in
the Philadelphia County Court of Common Pleas granting summary judgment in favor of Appell ee , ACE Property and Casualty Insurance Company (“ACE”) , as to Parx’s Breach of Contract claim, and dismissing Parx’s Bad Faith claim. After careful review, we vacate an d remand with instructions

.

The Underlying Action (“ Calderon Action”) In 2012, the widow of a jockey who sustained fatal injuries while working at Parx Racetrack filed a Wrongful Death and Survival Action againstJ

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Parx (the “ Calderon Action”) 1 The a ction included a negligence claim against
Parx based on theories of direct liability and vicarious liability, and sought punitive damages. 2 The plaintiff did not name any Parx employees individually as defendants in that action.
A CE insured Parx under a n Apr il 12, 2010 commercial umbrella liability policy with a limit of $25,000,000.00 for each occurrence and in the aggregate. The policy did not contain a written exclusion for punitive damages. ACE provided counsel to represent Parx. At trial, on April 2, 2014, counsel for the parties informed the court that they agreed that a finding against Parx on the verdict sheet is a finding as to all defendants in that action and that the “actions and conduct or failures to act on behalf of any of the defendants’ ag ents or employees is attributed to” Parx (the “Stipulation”).
Calderon N.T., 4/2/14, at 4.

_________________ __________ ______ ____ _______ 1 See Calderon v. Bensalem Racing Association, Inc., et al. , Case No. 120502939, Philadelphia County Court of Common Pleas.

2 See , e.g. , Calderon Second Amended Complaint, 3/14/14, at ¶¶ 7, 10, 13, 16, 19, 24, 34 , 36 (“All defendants herein are vicariously liable to plaint iff for injuries sustained as a result of the negligence of persons or entities whose conduct was under their control or right to control and which conduct directly and proximately caused plaintiff’s injuries.”) (emphasis added), and 83

. See also Trial Ct . Op., 3/27/17, at 7 (noting, “in the underlying case[,] vicarious liability was not the sole negligence theory against Parx.”) (emphasis added )

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At trial, the plaintiff presented evidence that Parx was both directly liable as owner of the property and vicariously liable for the acts or omissions of its empl oyees , and the trial court instructed the jury accordingly

. 3 On April 9, 2014, the jury returned a verdict in favor of the plaintiff, awarding her compensatory damages and $5,000,000.00 in punitive damages. 4 Parx filed Post

- Trial Motions, which the trial court denied. Parx then filed an appeal to this Court. While the appeal was pending, P arx entered into a settlement agreement with the Calderon plaintiff . Parx agreed to pay the compensatory and delay damages award immediately, and the part ies agreed to reduce the punitive damages award to $2,647,490.00. A CE , on behalf of Parx, paid the compensatory and delay damages portion of the settlement.
A CE , however, declined to pay the plaintiff for the punitive damage s award, so Parx paid the punitive damages award directly to the plaintiff

. The Instant Action
On March 3 , 2016, Parx filed the instant action against ACE asserting Breach of Contract and Bad Faith for failing to indemnify ACE for the punitive

_________________ __________ ______ ____ _______ 3 See Calderon Jury Instructions, N.T., 4/8/14 P.M. Session, at 20

- 21, 24

- 25, 45

4 Compensatory and delay damages totaled $7,764,429.00.J

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damages component of the settlement it had paid directly to the Calderon plaintiff. On April 22, 2016, A CE filed an Answer and New Matter to the Complaint

. 5 On June 3, 2016, Parx filed a Motion for Summary Judgment. On July 28, 2016, ACE filed a Response and C ross - Motion for Summary Judgment. 6 On January 23, 2017, the trial court granted A CE ’s Motion for Summary Judgment . The trial court, relying on this Court’s holding in Esmond v.
Liscio , 224 A.2d 793 (Pa. Super. 19 6 6), concluded that, as a matter of public policy, ACE is not responsible for indemnifying PARX for its payment of the punitive damages award . Parx timely appealed. 7 Parx raises the following three issues for review:
1. Did the Court of Common Pleas err by placing the burden on Parx Racing

— the insur ed

— to establish that the punitive damages award in the underlying action was based solely on vicarious liability and disregarding this Court’s holding in Butterfield [ v. Giuntoli , 670 A.2d 646 (Pa. Super. 1995)] that an insurer seeking to preclude coverage for punitive damages based on public policy grounds has “the burden to

_________________ __________ ______ ____ _______ 5 ACE also filed a Motion to Stay and Sever the Bad Faith Claim, which Parx did not oppose. The trial court granted the Motion on July 18, 2016.

6 O n October 12, 2016, ACE filed an additional Motion for Summary Judgment reiterating the grounds for relief set forth in its earlier Cross

- Motion for Summary Judgment

. Because the issues raised in this Motion were identical to those raised in ACE’s Cross

- Motion, the trial court entered one Order which disp osed of both Motions for Summary Judgment.

7 The trial court did not order Parx to file a Pa.R.A.P. 1925(b) Statement.J

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- show that the jury assessed the punitive damages solely on the basis of direct liability[?]” 2. Did the Court of Common Pleas err when it improperly weighed the evidence in the underlying wrongful death action and interjected its own judgment as to why the jury in that action awarded punitive damages when the jury’s actual basis for awarding punitive damages is impossible to know and, based on the evidence presented, the closing arguments, and jury instructions in the underlying action, the punitive damages award could have been based on vicarious liability[?] 3. Can [A CE ] meet its burden to prove the punitive damages award as excluded from coverage and meet its burden to show that the jury in the underlying action assessed punitive damages based solely on direct liability given that [A CE ] failed to follow the instruction in Butterfield and submit specific interrogatories to the Calderon jury in the underlying action?
Parx’s Brief at 5

- 6. Our s tandard of review on an appeal from the grant of a moti on for summary judgment is well settled. “ A reviewing court may disturb the order of the trial court only where it is established that the court committed an error of law or abused its discretion. ” Krauss v. Trane U.S. Inc. , 104 A.3d 556, 562

- 63 (Pa. Super. 2014) (citations omitted). “ As with all questions of law, our review is plenary. ” Id. at 563. We view the record in the light most favorable to the non

- moving party, and all doubts as to the ex istence of a genuine issue of material fact must be resolved against the moving party. Only where there is no genuine issue as to any material fact and it is clear that the moving party is entitled to a judgment as a matter of law will summary judgment be entered. Motions for summary judgment necessarily and directly implicate the plaintiff’s proof of the elements of [its] cause of action. Summary judgment is proper if, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at trial hasJ

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failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury. Thus, a record that supports summary judgment will either (1) show the material facts are undisputed or (2) contain insufficient evidence of facts to make out a prima facie cause of action or defense and, therefore, there is no issue to be submitted to the jury. H & R Block Tax Servs., Inc. v. Zarilla , 69 A.3d 246, 248 (Pa. Super. 2013) (citations omitted). Juries award punitive damages to punish a tort feasor’s outrageous conduct and to deter future outrageous conduct. Butterfield , 670 A.2d at 654. Consequently , i t is well

- settled in Pennsylvania that a claim for punitive damages against a tortfeasor who is directly liable for outrageous and
wanton mis conduct is excluded from insurance coverage as a matter of law. See , e.g. , Esmond , 224 A.2d at 799 (“[P]ublic policy does not permit a tortfeasor . . . to shift the burden of punit ive damages to his insurer.”). However, it is not against public policy to allow “one who is only vicariously liable for punitive damages to shift the burden of satisfying the judgment to his insurer.” Id. at 800 (emphasis added)

. See also Butterfield , 670 A.2d at 655. Pennsylvania public policy, therefore, distinguishes betw een outrageous acts committed by corporate management directly and those committed by a corporate agent or employee and for which the corporate entity is vicariously liable. Butterfield , 670 A.2d at 655

. In Esmond , this Court considered whether an automo bile insurance company was responsible for the punitive damages portion of an award to anJ

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injured pedestrian. In that case, the owner of the insured vehicle gave permission to a family friend to operate the vehicle. While operating the vehicle, the frien d struck and injured the pedestrian. Immediately following the accident, the owner’s son, who was a passenger in the vehicle, intentionally opened his car door into the pedestrian, causing him further injury. This Court concluded that because the vehicle operator had permission to operate the vehicle, his insurance company was liable for the compensatory damages owed to an injured pedestrian. However, the insurer was not liable for the punitive damages awarded because they arose from an intentional

assau lt by the owner’s son on the pedestrian. Esmond , 224 A.2d at 799. Almost thirty years later, i n Butterfield , this Court again took up the issue of the insurability of punitive damages, but in the context of corporate vicarious liability. In Butterfield , this Court considered whether punitive damages based on a theory of vicarious liability in a medical malpractice action are insurable as a matter of law. The Butterfield C ourt held that, in order to establish a coverage obligation, first “the insured mu st show that the policy covers its claim[.]” Butterfield , 670 A.2d 651. Then, “the burden shifts to the insurer to establish an exclusion[]” on the basis of public policy. Id. at 651

- 52. Thus, the Butterfield Court clarified: where the insured can show that its policy covers the claim, the insurer then bears the burden of establishing that the jury awarded punitive damages solely on the basis of direct liability. Id. at 651

- 52, 657. If the insurer is unable to prove the basis for the jury’s imposition of punitive damages, whether it be the insured’s directJ

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or vicarious liability, or both, the insurer cannot sustain its burden as a matter of law. Butterfield , 670 A.2d at 657. Parx avers that the trial court erred in ignoring the precedent set in
Butt erfield , and in instead relying on Esmond and requiring Parx to carry the burden of proof

. Parx’s Brief at 37

- 38.
Parx further argues that the trial court erred when it “guess[ed] at the basis for the jury’s award of punitive damages. ” Id. at 38. Parx asserts that the evidence

— including the language in the Calderon Complaint, the S tipulation between the parties, the court’s instructions to the jury, the evidence at trial, and counsel’s closing arguments in the Calderon trial

— indicated that the jury could have based its punitive damages award on Parx’s vicarious liability. 8 Id. at 38

- 44

. Parx notes that, rather than consider all of

_________________ __________ ______ ____ _______ 8 Parx also directs this Court’s attention to discussions that occurred regarding jury instructions between the court and counsel in t he Calderon trial outside the presence of the jury. Parx’s Brief at 39. When discussing the points for charging the jury, the court noted the parties’ stipulation, explaining that it thought that “we kind of agreed at the beginning we are not going to di vide things up into corporate responsibility . . . as opposed to actual negligence of one of the servants of the corporation. I thought we were basically going to say that when we are talking about liability on behalf of Parx, it’s for any one of its off icers and employees. ” Calderon N.T., 4/7/14 P.M. Session, at 68

- 69. Additionally, c ounsel for the Calderon plaintiff argued that the court should instruct the jury on punitive damages for the acts of Parx employees because “everything they were doing was in their capacity as an employee of Parx and in furtherance of their scope of employment for Parx.” Calderon N.T., 4/8/14 , at 14

- 15. The court responded to this argument by indicating, “[t]hat’s going to be clear. That will be clear.” Id. at 15. Alth ough, these statements are not evidence of the basis for the jury’s punitive damages award, they demonstrate that the issue of vicarious liability had been discussed and formed a portion of the jury instructions.J

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the trial testimony and the entire Calderon record, the trial court confined its analysis to the Calderon court’s post

- verdict Opinion denying Parx’s Post

Trial Motion on the issue of punitive damages. Id. at 46

- 47. Last, Parx argues that, had the trial court applied Butterfield , the evidence would have demonstrated that Appellee was incapable as a matter of law of prov ing that the punitive damages award had been b ased solely on direct liability. Parx notes, inter alia , that the Calderon jury did not answer specific interrogatories or otherwise indicate the basis for its award

. Id. at
44

- 46. In the instant case, we must first determine which party had the burden of proving the basis for the jury’s award of punitive damages. T he parties
agree that Parx’s policy does not exclude coverage for punitive damages. A s articulated in Butterfield , the burden then shifted to A CE to prove as a matter of law that public policy bars coverage for the punitive damages. In order to meet this burden, A CE ha d to prove that the Calderon jury awarded punitive damages based solely on Parx’s direct liability. Thus, the trial court e rred as a matter of law when it placed upon Parx the burden of proving “that the punitive award was based solely on vicarious liability as required by Esmond and its progeny.” Trial Ct. Op. at 5 (emphasis in original)

. 9 Having determined that A CE had the burden to establish that the jury’s punitive damages award was based solely on Parx’s direct liability, we now

_________________ __________ ______ ____ _______ 9 We, thus, disagree with the trial court that Parx’s reliance on the precedent established in Butterfield is “misplaced.” Trial Ct. Op. at 7.J

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consider whether Appellee met this burden as a matter of law. We again turn
to Butterfield for guidance. In considering whether the insurer in B utterfield had met its burden of proving that the basis of the jury’s award was the insured’s direct liability, th e Butterfield Court first noted that the jury had not been given specific interrogatories. Id. at 655

- 57. Th e Court next reviewed the tria l court’s instructions to the jury, and determin ed that the trial court had instructed the jury on principles of both vicarious and direct negligence. Id. at 657. Observing that there was a distinct absence of specific evidence that , as a matter of law, the jury’s verdict was based solely on the insured’s direct liability, the Butterfield Court concluded that the insurer had failed to meet its burden of proving that the punitive damages were excluded from coverage. Id. Thus, we reversed the trial court ’s determination that the insurance company was not required to insure the punitive damages award.
As in Butterfield , the Calderon jury did not answer specific interrogatories which would have supported the trial court’s determination here that the pu nitive damages were attributable only to Parx’s direct liability.
ACE , in fact, presented no evidence to support such a conclusion , and a s discussed below , the nature of the underlying action and the trial court’s instruction to the jury demonstrate that the trial court erred as a matter of law in finding that the plaintiff’s punitive damages award was based solely on Parx’s direct negligence

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Moreover , t he trial court expressly found that the plaintiff in Calderon sought recovery based on Parx’s direct a nd vicarious liability. See Trial Ct. Op. at 7 (noting that “vicarious liability was not the sole th eory of negligence against Parx ” ) (emphasis added)

. The evidence in the record amply supports this conclusion

. See Calderon Second Amended Complaint, 3/14/14, at ¶ 36 (emphasis added) , Calderon Stipulation, N.T., 4/2/14, at 4, Ca lderon Jury Instructions, N. T., 4/8/14 P.M. Session, at 20

- 21 , 24

- 25, 45 Given th at the trial court instructed the jury on vicarious liability concepts, and in light of (1) t he nature of the Calderon plaintiff ’s cause of action against Parx; (2) the stipulation of the parties in the Calderon Action

a gree ing that Parx assumed liability for the actions or failures to act of its employees or agents ; and (3) the absence of specifi c interrogatories, we conclude that ACE failed to meet i t s burden to demonstrate that the Calderon jury based its punitive damages award solely on Parx’s direct negligence

. We, thus, conclude the trial court erred as a matter of law in granting summary ju dgment in favor of A CE

. Moreover, based on the foregoing and our review of the record, we conclude that ACE cannot sustain its burden of proving the Calderon jury awarded punitive damages solely on the basis of direct liability

. Accordingly , summary judgment must be entered in favor of Parx on Parx’s Breach of Contract claim.J

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Order vacated. Case remanded for entry of j udgment in favor of Parx on Parx’s Breach of Contract claim and for reinstatement of , and further proceedings on, Parx’ s Bad Faith claim. Jurisdiction relinquished. Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 11/30/2017