IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

TOLL BROS., INC. : CIVIL ACTION

:

v. :

:

NATIONWIDE PROPERTY AND : NO. 05-1191

CASUALTY INSURANCE CO. :

O’NEILL, J. OCTOBER 13, 2005

MEMORANDUM

Plaintiff, Toll Brothers, Inc., filed an action in this Court against defendant, Nationwide

Property and Casualty Insurance Co., alleging breach of contract, breach of fiduciary duty, and

bad faith for defendant’s failure to defend and indemnify plaintiff against purchasers of a home

constructed by plaintiff with plumbing work subcontracted to an insured of defendant. Before

me now is defendant’s motion to transfer venue, plaintiff’s response, defendant’s reply, and the

parties’ supplementary briefs in response to my Order of July 27, 2005.

BACKGROUND

Toll Brothers is a Pennsylvania corporation with its principal place of business in

Horsham, Pennsylvania. Nationwide is an Ohio corporation with its principal place of business

in Columbus, Ohio that regularly transacts business in Pennsylvania.

In connection with its home construction project in Dublin, Ohio, Toll Brothers

subcontracted its plumbing services to Best Plumbing, a local Ohio company. As required by the

construction agreement between Toll Brothers and its subcontractor, Best Plumbing obtained a

commercial general liability insurance policy from Nationwide. Best Plumbing’s insurance

policy contained an endorsement and certificate of insurance naming Toll Brothers as an

additional insured. 

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In March 2004, Toll Brothers sold a home to Vladimir and Jan Kapustin and contracted

with Best Plumbing to install the home’s plumbing system. Three months after the owner moved

in, a plumbing valve located under the kitchen sink failed, causing the home to flood and suffer

extensive water damage.

After recovering for the property damage caused by the valve failure under their Ohio

homeowners policy with Nationwide, the Kapustins filed a complaint in the Court of Common

Pleas in Franklin County, Ohio alleging negligence, breach of contract, and fraud against Toll

Brothers. Toll Brothers requested defense and indemnification from Nationwide under the Best

Plumbing policy. Nationwide refused, denying that Toll Brothers was covered by Best

Plumbing’s insurance policy. After settling with the Kapustins, Toll Brothers filed the instant

action on March 14, 2005. Both parties agree that venue is proper in the Eastern District of

Pennsylvania under 28 U.S.C. § 1391(a) because Nationwide is subject to personal jurisdiction in

Pennsylvania. See 28 U.S.C. § 1391(c) (2005). However, Nationwide claims that venue is also

proper in the Southern District of Ohio and requests a transfer to that venue for the convenience

of the parties. See 28 U.S.C. § 1404(a) (2005).

On July 27, 2005, I ordered the parties to file supplemental briefs to address the following

issues: (1) whether Pennsylvania or Ohio law governs the insurance contract; (2) whether the

contract of insurance obligated Nationwide to defend Toll Brothers in its dispute with the

Kapustins; (3) whether, as a matter of law, Nationwide may contest its duty to indemnify if it

were found to have failed in its duty to defend; and (4) to what extent it will be necessary, if at

all, to introduce at trial the testimony of the Kapustins and/or an employee or agent of Best

Plumbing. I discuss the parties’ arguments with respect to these issues under the framework for

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Section 1404(a) transfers articulated by the Court of Appeals in Jumara v. State Farm Ins. Co., 55

F.3d 873 (3d Cir. 1995).

DISCUSSION

I. Section 1404(a) Motion to Transfer Venue

In its motion to transfer venue, Nationwide argues that the balance of private and public

factors weighs in favor of transferring this case to the Southern District of Ohio. 28 U.S.C. §

1404(a) provides: “For the convenience of parties and witnesses, in the interest of justice, a

district court may transfer any civil action to any other district or division where it might have

been brought.” There is no dispute that this diversity action could have been brought in either

this District or the Southern District of Ohio.

The purpose of Section 1404(a) is “to prevent the waste of time, energy, and money and

to protect the litigants, witnesses and the public against unnecessary inconvenience and expense,” 

Van Dusen v. Barrack, 376 U.S. 612, 616 (1962) (internal quotations omitted), “not to shift the

inconvenience from one party to another.” Superior Precast, Inc. v. Safeco Ins. Co. of Am., 71 F.

Supp. 2d 438, 446 (E.D. Pa. 1999). Although I have broad discretion to determine whether a

transfer is warranted, a motion to transfer is not to be granted liberally. Stewart Org. v. Ricoh,

Inc., 487 U.S. 22, 29 (1988). The moving party thus bears the burden of establishing that transfer

is proper. In re United States, 273 F.3d 380, 388 (3d Cir. 2001). However, the moving party is

not required to show truly compelling circumstances for change of venue, but rather that all

relevant things considered the case would be better off transferred to another district. Id.

In deciding the present motion to transfer, I must consider “all relevant factors to

determine whether on balance the litigation would more conveniently proceed and the interests

be better served by transfer to a different forum.” Jumara, 55 F.3d at 878. I am guided in this

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1Toll Brothers argues that this case should not be transferred because Nationwide has

failed to demonstrate that transfer is proper under the forum non conveniens doctrine. See Gulf

Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947); Lacey v. Cessna Aircraft Co., 932 F.2d 170, 180

(3d Cir. 1991). In its briefs, Nationwide also on occasion refers to its motion to transfer as a

Section 1404(a) forum non conveniens motion. Despite analogous standards for applying

Section 1404(a)’s transfer of venue for the convenience of the parties and the common law

doctrine of forum non conveniens,

§ 1404(a) transfers are different than dismissals on the ground of forum non conveniens. 

Congress enacted § 1404(a) to permit change of venue between federal courts. Although

the statute was drafted in accordance with the doctrine of forum non conveniens . . . it

was intended to be a revision rather than a codification of the common law. District

courts were given more discretion to transfer under § 1404(a) than they had to dismiss on

grounds of forum non conveniens.

Piper Aircraft Co. v. Reyno, 454 U.S. 235, 253 (1981) (internal citations omitted).

Since the enactment of Section 1404 and Section 1406 (transfer or dismissal for improper

venue) in 1948, the doctrine of forum non conveniens has served a limited purpose: the doctrine

now merely allows a district court to dismiss a case when the more convenient forum is in a

foreign country. See, e.g., Am. Dredging Co. v. Miller, 510 U.S. 443, 447-49, 449 n. 2 (1994)

(“the federal doctrine of forum non conveniens has continuing application only in cases where

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inquiry by a nonexclusive list of private and public interest factors. Courts generally consider the

following private interest factors: (1) the plaintiff’s choice of forum; (2) the defendant’s

preference; (3) where the claim arose; (4) the convenience of the parties; (5) the convenience of

the witnesses, but only to the extent that the witnesses may actually be unavailable for trial in one

of the fora; (6) the location of books and records, similarly limited to the extent that the files

could not be produced in the alternative forum. See id. at 879-80. Courts similarly are guided by

the following public interest factors: (a) the enforceability of the judgment; (b) practical

considerations that could make the trial easy, expeditious, or inexpensive; (c) the relative court

congestion in the competing courts; (d) the local interest in deciding local controversies at home;

(e) the public policies of the fora; (f) and the familiarity of the trial judge with the applicable state

law. See id.1

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the alternative forum is abroad”). By contrast, Section 1404(a) authorizes a district court to

transfer a case to another district court for the convenience of the parties and in the interests of

justice. There nevertheless continues to be substantial confusion between the common law

dismissal doctrine and the federal transfer statute. See, e.g., Nesbitt v. Sears, Roebuck and Co.,

No. 03-6747, 2004 WL 1638137, at *1 (E.D. Pa. Jul. 9, 2004) (referring to motion to transfer as

forum non conveniens motion); Landmark Bldg. Sys., Inc. v. Whiting-Turner Contracting Co.,

No. 02-5782, 2003 WL 21293812, at *1 (E.D. Pa. Apr. 21, 2003) (analyzing Section 1404(a)

transfer motion as forum non conveniens motion). See generally 15 Charles Alan Wright, Arthur

R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3828 (2d ed. 1986) (also 2005

pocket part). While the parties’ assertion of forum non conveniens is malapropos, their

arguments regarding the private and public interest factors under that doctrine are relevant to a

review of similar factors applied in a Section 1404(a) motion to transfer analysis. Compare

Lacey, 932 F.2d at 180 (forum non conveniens) with Jumara, 55 F.3d at 879-80 (Section 1404(a)

transfer).

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A. Private Interest Factors

Nationwide argues that the balance of the private interest factors weighs in favor of

transfer to the Southern District of Ohio because: (i) “the property at issue is in Ohio”; (ii) “every

event, prior lawsuit, and contract relevant to this action arose in Ohio”; (iii) “virtually all the

party and nonparty witnesses and documents material to this litigation are in Ohio”; (iv) “the

Kaputins reside in Ohio”; (v) “each of the Nationwide claims personnel who participated in the

decision to deny Toll’s claims reside in Ohio”; (vi) “the representatives of Best Plumbing who

negotiated the contract pursuant to which indemnification and insurance were sought live in

Ohio;” (vii) “the representatives of Toll who negotiated the Best Plumbing Contract reside in

Ohio”; and (viii) the homeowner’s adjuster responsible for settling the claim with the Kapustins

lives in Ohio. Nationwide asserts that only one private interest factor--plaintiff’s choice of

forum--does not support a transfer of venue to Ohio.

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1. Plaintiff’s Choice of Forum

Plaintiff’s choice of forum is generally a “paramount consideration in any determination

of a transfer request, and that choice . . . should not be lightly disturbed.” Jumara, 55 F.3d at

879-80. Nationwide argues that the preference accorded to plaintiff’s choice of forum is

diminished where none of the operative facts occurred in the plaintiff’s chosen venue. See, e.g.,

Zeevi v. Am. Home Prods. Corp., No. 99-20277, 2002 WL 92902, at *1 (E.D. Pa. Jan. 24, 2002)

(“a plaintiff’s choice of forum receives less weight where none of the operative facts occurred in

the selected forum.”) quoting Extraordinary Props., Inc. v. Nationwide Mut. Ins. Co., No.

99-4305, 2000 WL 66157, at *2 (E.D. Pa. Jan. 24, 2000); Hillard v. Guidant Corp., 76 F. Supp.

2d 566, 569 (M.D. Pa. 1999) (“where none of the operative facts of the action occurred in the

plaintiff’s chosen forum, the choice is afforded less weight.”); Sherwood Group, Inc. v.

Rittereiser, No. 90-2414, 1990 WL 159925, at *3 (D.N.J. Oct 17, 1990) (“when the forum lacks

contact with the transactions or conduct underlying the cause of action, the deference afforded to

plaintiff’s choice of forum is reduced.”); Fitzgerald v. Central Gulf S.S. Corp., 292 F. Supp. 847,

849 (E.D. Pa. 1968) (“where none of the operative facts of the action occur in the forum selected

by the plaintiff, his choice of that forum certainly is entitled to less weight than is ordinarily the

case.”). I agree. I will not accord “paramount consideration” to Toll Brothers’ choice of forum

because, although Toll Brothers resides in Pennsylvania, the situs of the negotiation, contracting,

and performance of the insurance contract appears to be in Ohio. This factor weighs in favor of

transfer.

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2. Defendant’s Preference

Nationwide clearly would prefer to litigate this case in the Southern District of Ohio. 

However, Toll Brothers argues that Nationwide’s preference is negated because Nationwide

forwent its opportunity to resolve this dispute in Ohio by refusing to participate in the arbitration

and eventual settlement of the Kapustins’ action against Toll Brothers. Toll Brothers also argues

that Nationwide’s failure to include a forum selection clause in the insurance contract it drafted

should be weighed in favor of not transferring this case to Ohio.

Courts frequently have treated a forum selection clause “as a manifestation of the parties’

preferences as to a convenient forum” and accorded “substantial consideration” to the parties’

agreement with respect to forum selection. Jumara, 55 F.3d at 880. Toll Brothers now requests

that I accord substantial consideration to the negative pregnant of this principle; Toll Brothers

argues that I should treat Nationwide’s failure to include a choice of law provision in the

insurance contract or certificate of insurance that it drafted as: (i) an acknowledgment by

Nationwide that it may have to defend lawsuits in many states where its various policyholders

reside; and (ii) an ambiguity that should be construed against Nationwide. See Kilmer v. Conn.

Indem. Co., 189 F. Supp. 2d 237, 246 (M.D. Pa. 2002) (“[A]n insurance company that conducts

business with residents of various states should expect to be subject to the tort laws of that state

if the insurer engages in bad faith with respect to the insurance policy.”) quoting Thiele v.

Northern Mut. Ins. Co., 36 F. Supp. 2d 852 (E.D. Wis. 1999) (internal quotations omitted);

Leksi, Inc. v. Fed. Ins. Co., 736 F. Supp. 1331, 1336 (D.N.J. 1990). Toll Brothers contends that

Nationwide implicitly accepted the possibility of defending a lawsuit arising out of the insurance

contract with a Pennsylvania plaintiff. Toll Brothers thus concludes that Nationwide must

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defend this action in this District. If I accept Toll Brothers’ principle as valid, however, I must

also accept as valid the principle that Nationwide implicitly accepted the possibility of defending

a lawsuit arising out of an insurance contract concerning property located in Ohio. The lack of a

forum selection clause thus pits considerations of the plaintiff’s residence and choice of forum

against the location of where the claim arose and, consequently, leads me back to a balancing of

the Jumara factors. The absence of a forum selection clause does not reveal a party’s automatic

acceptance to litigate outside of its home forum. To the extent that the absence of a forum

selection clause creates an ambiguity, it refocuses my determination on the other factors that

traditionally have guided courts in deciding Section 1404(a) motions to transfer.

3. Where the Claim Arose

Nationwide argues that the claim arose in Ohio because: (a) the contract which gave rise

to the Kapustins’ lawsuit against Toll was executed and performed in Ohio; (b) the Kapustins’

property was built and is located in Ohio; (c) the insurance policy between Nationwide and Best

Plumbing, under which Toll Brothers claims coverage, was executed in Ohio; and (d) all of the

decisions to deny Toll Brothers coverage and a defense were made in Ohio by Ohio employees of

Nationwide. Toll Brothers argues that the location of the arbitration or Kapustins’ property is not

relevant to the merits of this case because: (i) the damage to the Kapustins’ property and resulting

arbitration occurred many years ago and has been remedied; and (ii) the instant action centers

upon an insurance policy that allegedly covers Toll Brothers in Pennsylvania. I agree with

Nationwide that this claim arose in Ohio because the insurance contract and certificate of

insurance were negotiated, contracted, and performed of the insurance contract appears to be in

Ohio. This factor weighs in favor of transfer.

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4. Convenience of Parties

Toll Brothers cautions that the role of a Section 1404(a) transfer is not to shift the

inconvenience from one party to another. See Dinterman v. Nationwide Mut. Ins. Co., 26 F.

Supp. 2d 747, 749-50 (E.D. Pa. 1998) (“A court should not grant a transfer simply because the

transferee court is more convenient for the defendants and therefore if the transfer would merely

switch the inconvenience from defendant to plaintiff, the transfer should not be allowed.”). I

agree. This factor does not weigh in favor of transfer.

5. Convenience of Witnesses

Toll Brothers argues that this District is more convenient because Toll’s corporate

personnel reside in Pennsylvania and Nationwide regularly conducts business in Pennsylvania. 

To the extent that Toll Brothers would present the testimony of its corporate personnel, I note

that the law on Section 1404(a) transfers distinguishes between party and nonparty witnesses. 

“[P]arty witnesses are presumed to be willing to testify in either forum despite any

inconvenience. The convenience of non-party witnesses is the main focus.” Hillard, 76 F. Supp.

2d at 570. Therefore, I do not consider inconvenience to Toll Brothers’ corporate personnel as

party witnesses in the present balancing.

Nationwide argues that the Southern District of Ohio is the more convenient venue for the

witnesses because the Kapustins, Best Plumbing, and its managers and employees are located in

Ohio. However, there is a significant question as to whether it will be necessary to have the

testimony of the Kapustins or an agent of Best Plumbing. Toll Brothers argues that the

Kapustins and an agent of Best Plumbing are not necessary witnesses because under

Pennsylvania law the Court need only examine the four corners of the Kapustins’ complaint, the

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certificate of insurance, and the insurance policy to determine whether Nationwide breached its

duty to defend and indemnify Toll Brothers See R.R. Donnelly & Sons Co. v. Fireman’s Fund

Ins. Co., No. 03-6412, 2004 WL 2810065, at *3 (E.D. Pa. Dec. 6, 2004) (“The duty to defend is a

question of law the court decides be examining the policy language and the allegations of the

complaint.”) citing Gene’s Rest., Inc. v. Nationwide Ins. Co., 548 A.2d 246, 246-47 (Pa. 1988)

and Westport Ins. Corp. v. Bayer, 284 F.3d 489, 496 (3d Cir. 2002). Specifically, Toll Brothers

argues that these witnesses are not necessary because the Kapustins’ complaint against Toll

Brothers and settlement with Best Plumbing establishes that Best Plumbing’s faulty plumbing

installation was a cause of the Kapustins’ property damage: “neither party can dispute that

property damage occurred at the Kapustins’ residence as a result of Best Plumbing’s work.”

Moreover, Toll Brothers argues that with respect to Toll Brothers’ bad faith claim the only

necessary witnesses are the parties’ witnesses because all of the bad faith alleged by Toll

Brothers occurred between representatives of Nationwide and Toll Brothers.

Nationwide argues that the Kapustins and an agent of Best Plumbing are indispensable

witnesses because under Ohio law a duty to defend is determined by the allegations in the

Kapustins’ complaint and that complaint does not mention Best Plumbing or its alleged

negligence. To the extent that Toll Brothers bases its duty to defend and duty to indemnify

claims on the insurance contract and certificate, Nationwide also argues that its defense against

such claim is dependent on facts lying outside the face of the complaint: (i) testimonial and

documentary evidence from the Kapustins that their allegations were limited to conduct by Toll

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Brothers; (ii) testimony from an agent of Best Plumbing (or other contractors who worked on the

Kapustin home) that the Kapustin’s complaint was directed solely at Toll Brothers; and (iii) that

the damage to the Kapustin home was caused by Toll Brothers’ negligence.

While Pennsylvania and Ohio may apply different, and evolving, standards for

determining whether an insurer has breached a duty to defend, both focus their analyses on the

insurance document and the complaint. Compare Frog, Switch & Mfg. Co. v. Travelers Ins. Co.,

193 F.3d 742, 746 (3d Cir. 1999) (“An insurer’s duty to defend an insured in litigation is broader

than the duty to indemnify, in that the former duty arises whenever an underlying complaint may

‘potentially’ come within the insurance coverage.”); Air Prods. & Chems. v. Hartford Accident

& Indem. Co., 25 F.3d 177, 179 (3d Cir. 1994) (“Under Pennsylvania law, the issuer of a general

liability insurance policy has a duty to defend its insured when the allegations in the complaint

against it could potentially fall within the coverage of the policy.”); Pac. Indem. Co. v. Linn, 766

F.2d 754, 760 (3d Cir. 1985) (“Under Pennsylvania law, an insurance company is obligated to

defend an insured whenever the complaint filed by the injured party may potentially come within

the policy’s coverage. The obligation to defend is determined solely by the allegations of the

complaint in the action. The duty to defend remains with the insurer until the insurer can confine

the claim to a recovery that is not within the scope of the policy”) (internal citations omitted)

with Willoughby Hills v. Cincinnati Ins. Co., 459 N.E.2d 555, 558 (Ohio 1984) (“Where the

insurer’s duty to defend is not apparent from the pleadings in the action against the insured, but

the allegations do state a claim which is potentially or arguably within the policy coverage, or

there is some doubt as to whether a theory of recovery within the policy coverage has been

pleaded, the insurer must accept the defense of the claim.”); Twin Maples Veterinary Hosp. v.

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Cincinnati Ins. Co., 824 N.E.2d 1027, 1031 (Ohio Ct. App. 2005) (“Where the action alleged

claims that fell within the insurance coverage yet the conduct that prompted the action is so

indisputably outside coverage, the insurer has no duty to defend, so long as the insurance policy

only required the insurer to defend against claims to which the coverage applied.”); Stickovich v.

Cleveland, 757 N.E.2d 50, 70 (Ohio Ct. App. 2001) (“It is well established . . . that insurers are

required to provide a defense when allegations are arguably or potentially within the policy

coverage or when there is some doubt as to whether they state a theory of recovery within the

scope of the policy.”). Because both Pennsylvania and Ohio courts focus their duty to defend

analyses on the insurance contract and complaint, I am doubtful that Nationwide will find it

necessary to have the Kapustins and/or an agent of Best Plumbing testify regarding this claim.

However, the duty to indemnify is separate and distinct from the duty to defend. 

Pennsylvania and Ohio courts look beyond the complaint and insurance document to determine

whether the insured’s claim actually comes within the coverage of the policy. See Pl.’s Br. in

Further Opp. at 8 (“Unlike the duty to defend, the duty to indemnify ‘cannot be determined

merely on the basis of whether the factual allegations of [the underlying complaint] may

potentially state a claim against the [policyholder.]’”) quoting Pac. Indem. Co. v. Linn, 590 F.

Supp. 643, 650 (E.D. Pa. 1984); Def.’s Supp. Resp. Br. at 11 (“Nationwide would have the right

to challenge its duty to indemnify to the extent that any amounts claimed did not fall within the

insurance policy’s coverage, and to verify that there was no collusion between the settling

parties.”). Compare Lucker Mfg. v. The Home Ins. Co., 23 F.3d 808, 821 (3d Cir.1994) (“An

insurer has a duty to indemnify its insured only if it is established that the insured’s damages are

actually within the policy coverage.”); Duff Supply Co. v. Crum & Forster Ins. Co., No. 96-8481,

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1997 WL 255483, *4 (E.D. Pa. May 8, 1997) (“An insurer’s duty to indemnify . . . requires a

higher threshold, as the duty is triggered only when the claim is actually within the policy

coverage.”) (internal citations omitted); Gedeon v. State Farm Mut. Auto. Ins. Co., 188 A.2d 320,

322 (Pa. 1963) (“In order to establish breach of this promise to indemnify, the insured must

demonstrate that the policy covers the particular risk in question.”) with Grange Mut. Cas. Co. v.

Rosko, 767 N.E.2d 1225, 1234 (Ohio Ct. App. 2001) (“An insurer’s duty to defend is distinct

from its duty to indemnify. If the complaint arguably brings the insured’s actions under the

scope of the policy, then the insurer must defend. The duty to defend persists regardless of the

outcome of the underlying lawsuit. The insurer’s duty to indemnify, by contrast, attaches only

where it has been demonstrated that there is, in fact, liability under the policy.”) (internal

citations omitted). Because the duty to indemnify under both Pennsylvania and Ohio law

requires a showing that the insured’s claim actually is covered by the policy, Nationwide may

find it necessary to introduce the testimony and documentation of the Kapustins and/or an agent

of Best Plumbing to determine whether the insurance contract and certificate actually covered the

Kapustins’ claim against Toll Brothers. I therefore find that the convenience of witnesses weighs

in favor of transfer to Ohio.

6. Location of Sources of Proof

Nationwide argues that “[p]ractically everything that is factually relevant to the

background and outcome of this litigation is located in Ohio.” Nationwide offers one

counterpoint: “copies of the letters sent by Toll to Nationwide tendering the defense of the

Kapustins’ action and the individuals who wrote those letters may be in Toll’s Bensalem

headquarters.” However, Nationwide argues that such evidence is not important to the resolution

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I do not address four of the public interest factors--the enforceability of the judgment,

practical trial considerations, relative court congestion, and local interest in local controversies--

because neither party asserts that a judgment would be more or less enforceable in either venue,

that any practical trial considerations support its preferred venue, that there is any significant

difference in the level of congestion between the two venues, or that this dispute is local in

nature.

14

of this case because “there is little dispute that the letters were written and that Nationwide did

not accept the tender.” Nationwide also asserts that certain witnesses and related evidence, with

respect to a number of the Kapustins’ original claims against Toll Brothers that go beyond

allegations regarding Best Plumbing’s services, form a central part of its defense to Toll

Brothers’ claims against Nationwide and are located in Ohio. Toll Brothers argues that

“Nationwide already has in its possession all of the sources of proof necessary for a proper

adjudication of this action [because] Nationwide has been provided with all necessary

documentation regarding the claim, either by its policyholder, Best Plumbing, or Toll [Brothers]

directly.” Because this dispute is likely to focus on the substance of the insurance contract,

certificate of insurance, and the Kapustins’ complaint and because these documents are already in

the possession of each party, the location of these sources of proof does not weigh in favor of

transfer.

B. Public Interest Factors2

1. Public Policies of Fora

Nationwide argues that the Southern District of Ohio should determine whether

Nationwide violated Ohio law because Ohio’s law and public policy, specifically Ohio Rev.

Code Ann. § 2305.31 (West 1975), are designed to protect Ohio citizens by ensuring that a

contractor maintain a financial interest in job safety. See Buckeye Union Ins. Co. v. Zavarella

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Brothers Constr. Co., 699 N.E.2d 127 (Ohio Ct. App. 1997) (holding that subcontractor’s

agreement to have the contractor named as an additional insured under the subcontractor’s

liability policies did not violate the public policy embodied in Section 2305.31 because it could

not be construed as covering the contractor for its own negligence); Liberty Mut. Ins. Group v.

Travelers Prop. Cas., No. 80560, 2002 WL 1933244, at *2-3 (Ohio Ct. App. Aug. 22, 2002)

(holding that subcontractor’s additional insured endorsement did not provide coverage for

construction manager’s negligence but did cover liability arising out of named insured’s

negligence).

Toll Brothers argues that Pennsylvania courts have a countervailing interest in protecting

its corporate citizens from “abusive denial tactics like those employed by Nationwide” because

Nationwide regularly conducts its insurance business in this District and avails itself of the laws

of Pennsylvania. Toll Brothers also asserts that Nationwide was fully aware of the execution of

the construction agreement. Toll Brothers therefore argues that to the extent that the agreement

is void under Section 2305.31, “Nationwide committed bad faith and fraud by promising Toll

insurance under a contract that it never intended to honor” and that Pennsylvania has an interest

in protecting its citizens from such insurance practices. See Thomson v. Prudential Prop. & Cas.

Ins. Co., No. 91-4073, 1992 WL 38132, at *4 (E.D. Pa. Feb. 20, 1992) (“Pennsylvania has a great

interest in protecting its residents from possible misconduct of insurance carriers operating

within its borders.”). The balance of these two interests results in a draw; neither convinces me

that Pennsylvania or Ohio has a greater interest in the protection of its citizens in a case such as

this.

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2. Familiarity of Trial Judge with Applicable State Law

Nationwide focuses its argument on “the complexity and uncertainty of Ohio law.” 

Nationwide argues that where the substantive law of another state will govern the outcome of the

litigation district judges in the forum state are generally more familiar with that state’s law,

processes and guiding public policies than judges in the foreign forum state. See Landmark,

2003 WL 21293812, at *2 (granting motion to transfer in part because the substance of the action

“was governed by Maryland state law, providing a reason to believe that a trial judge in the

District of Maryland would be more familiar with the applicable state law.”); Connors, 248 F.

Supp. 2d at 396 (transferring venue to District of New Jersey based in part on determination that

New Jersey District Judge would be more familiar with applicable law in case governed by New

Jersey state law). For example, Nationwide argues that a district judge in the Southern District of

Ohio would be more familiar with Ohio’ public policy that disfavors certain indemnity

agreements as part of construction contracts. § 2305.31.

Nationwide also argues that this consideration is particularly important where the

applicable state’s law is complicated and uncertain. See Koken v. Lexington Ins. Co., No.

04-2539, 2004 WL 2473432, at *4 (E.D. Pa. Nov. 2, 2004) (denying motion to transfer in part as

district judge would have no difficulty applying foreign state law because not particularly

complex or novel); Busch v. Sea World of Ohio, 95 F.R.D. 336, 341 (W.D. Pa. 1982) (denying

transfer in part because “no complex questions of foreign law”). Nationwide avers that Ohio law

is complex and uncertain because the Ohio standard for an insurer’s duty to defend has

undergone significant revisions in the past twenty years and remains unclear, see Preferred Risk

Ins. Co. v. Gill, 507 N.E.2d 1118, 1122-23 (Ohio 1987); Willoughby, 469 N.E.2d at 556-57;

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17

Motorists Mut. Ins. Co. v. Trainor, 294 N.E.2d 874 (Ohio 1973); Stickovich, 757 N.E.2d at 70,

and Ohio law is in flux with respect to when a breach of a duty to defend could give rise to a

claim for bad faith, see Wagner v. Midwestern Indem. Co., 699 N.E.2d 507, 514-15 (Ohio 1998);

Roberts v. U.S. Fid. & Guar. Co., 665 N.E.2d 664, 667 (Ohio 1996); Zoppo v. Homestead Ins.

Co., 644 N.E.2d 397, 400 (Ohio 1994); Motorists Mut. Ins. Co. v. Said, 590 N.E.2d 1228 (Ohio

1992).

However, the parties dispute whether Ohio or Pennsylvania law governs the insurance

contract with respect to Toll Brothers Nationwide argues that Ohio law governs Toll Brothers’

claims against Nationwide because “the Nationwide policy was issued in Ohio to an Ohio

insured, with respect to a claim arising out of an Ohio construction project for which Ohio

statutory law provides standards of conduct with respect to contracts of indemnification.” Toll

Brothers argues that Pennsylvania law applies because much of the written and oral

communications regarding the negotiation, contracting and nonperformance of the insurance

contract occurred in Pennsylvania. I must therefore determine which state’s law governs the

insurance contract and certificate.

a. Choice of Law

Where, as here, federal jurisdiction is based on diversity of citizenship, I must apply the

choice of law rules of the forum state. St. Paul Fire & Marine Ins. Co. v. Lewis, 935 F.2d 1428,

1431 n. 3 (3d Cir. 1991) citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). 

“Pennsylvania courts generally honor the intent of the contracting parties and enforce choice of

law provisions executed by them.” Kruzits v. Okuma Mach. Tool, Inc., 40 F.3d 52, 55 (3d Cir.

1994) citing Smith v. Commonwealth Nat’l Bank, 557 A.2d 775, 777 (Pa. Super. Ct. 1989). As

Case 2:05-cv-01191-TON Document 14 Filed 10/13/05 Page 17 of 23
3Toll Brothers asserts that the Delaware Superior Court applying Delaware law held in an

unpublished opinion in 1992 that an insurance company’s failure to insert a choice of law

provision in its policy is an ambiguity that must be construed against the insurance company as

the drafter of the policy. See Nat’l Union Fire Ins. Co. v. Rhone-Poulenc Basic Chems. Co., No.

87C-SE-11-1-CV (WBC), slip op. (Del. Super. Ct. Aug. 17, 1992). This case has limited

persuasive value here and in Delaware state courts and the present case involves choice of law

issues under Pennsylvania, not Delaware, law.

4

“[I]n the absence of proof of place of delivery, the residence of the insured is presumed

to be the place of delivery.” Carosella & Ferry, P.C. v. TIG Ins. Co., 189 F. Supp. 2d 249, 252

(E.D. Pa. 2001).

18

discussed above, Toll Brothers argues that the ambiguity caused Nationwide’s failure to include a

forum selection clause in the insurance contract and certificate of insurance that it drafted should

be resolved in favor of applying Pennsylvania law to the insurance contract and certificate. See

Kilmer, 189 F. Supp. 2d at 246 (“[A]n insurance company that conducts business with residents

of various states should expect to be subject to the tort laws of that state if the insurer engages in

bad faith with respect to the insurance policy.”) quoting Thiele, 36 F. Supp. 2d 852 (internal

quotations omitted); Leksi, 736 F. Supp. at 1336.3 However, I will not resolve such an ambiguity

in favor of applying Pennsylvania law without examining Pennsylvania choice of law rules.

Under Pennsylvania choice of law rules, an insurance contract generally is governed by

the law of the state in which the contract was made. J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d

356, 361 (3d Cir. 2004) citing Crawford v. Manhattan Life Ins. Co., 221 A.2d 877, 880 (Pa.

Super. Ct. 1966). “An insurance contract is ‘made’ in the state in which the last act legally

necessary to bring the contract into force takes place.” Id. “In most cases, this last act is delivery

of the policy to the insured and the payment of the first premium by him.” Id. citing Ruhlin v.

N.Y. Life Ins. Co., 106 F.2d 921, 923 (3d Cir. 1939).4 This narrow analysis suggests that Ohio

law applies because the contract and certificate of insurance were delivered to Best Plumbing, the

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19

insured, at its New Albany, Ohio address and to Toll Brothers, the additional insured, at its

Dublin, Ohio address.

However, Toll Brothers argues that a broader approach to Pennsylvania’s hybrid choice

of law analysis reveals that Pennsylvania law applies. See Griffith v. United Air Lines, Inc., 203

A.2d 796 (Pa. 1964). Under Pennsylvania’s hybrid choice of law rules, the “court must first

determine whether there is a false conflict or true conflict between the ostensibly competing

bodies of law.” Babcock & Wilcox Ebensburg Power v. Zurick Am. Ins. Co., 368 F. Supp. 2d

387, 397 (W.D. Pa. 2004) quoting Aircraft Guar. Corp. v. Strato-Lift, Inc., 951 F. Supp. 73, 76-

77 (E.D. Pa. 1997) (internal quotations omitted). “A false conflict exists where only one

jurisdiction’s governmental interests would be impaired by the application of the other

jurisdiction’s law.” Id. at 397 n. 16; Williams v. Stone, 109 F.3d 890, 893 (3d Cir. 1997). By

contrast, a true conflict exists where application of the laws of the two jurisdictions would impair

the interests of either jurisdiction. Id. at 397.

i. False Conflict

Nationwide argues that there is a false conflict here because only Ohio’s interests and

public policies would be damaged by failing to apply its laws to this action. Specifically,

Nationwide argues that Ohio has an interest in the application of Section 2305.31, which, as

discussed above, is designed to ensure that developers take a financial interest in job safety and

to prevent parties to a construction contract from avoiding liability for their own negligent

conduct. See Buckeye, 699 N.E.2d 127 (holding that subcontractor’s agreement to have the

contractor named as an additional insured under the subcontractor’s liability policies did not

violate the public policy embodied in Section 2305.31 because it could not be construed as

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20

covering the contractor for its own negligence); Liberty, 2002 WL 1933244, at *2-3 (holding that

subcontractor’s additional insured endorsement did not provide coverage for construction

manager’s negligence but did cover liability arising out of named insured’s negligence). 

Nationwide further argues that Pennsylvania does not have a similar law or interest at stake and

that Toll Brothers has failed to identify a countervailing Pennsylvania interest.

However, as discussed above, Toll Brothers argues that Pennsylvania courts have an

interest in protecting its corporate citizens from bad faith insurance practices that would be

violated if Ohio law was applied in this case. See Thomson, 1992 WL 38132, at *4

(“Pennsylvania has a great interest in protecting its residents from possible misconduct of

insurance carriers operating within its borders.”). I therefore find there to be a true conflict in

this case.

ii. True Conflict

Where, as here, there is a true conflict with respect to a contract issue, the court must

examine: “(1) the place of negotiation, contracting and performance of the contract in question;

(2) the location of the subject matter of the contract; and (3) the parties’ citizenship” to determine

which forum state has the most interest in the controversy and the most intimate connection with

the outcome. Babcock, 368 F. Supp. 2d at 397 quoting Aircraft Guar. Corp., 951 F. Supp. at 76-

77 (internal quotations omitted).

Toll Brothers argues--without evidentiary support--that most of the “written and oral

communications concerning Toll’s insurance coverage claim and its dispute regarding

Nationwide’s duty to defend and indemnify Toll occurred between Nationwide and Toll’s Bucks

County, Pennsylvania office.” Toll Brothers dismisses the fact that the property damage

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21

occurred in Ohio by arguing that the contract of insurance is the focus of the instant action and a

significant amount of time has passed since the damage to the Kapustin’s property.

Nationwide disagrees and submits the affidavit of Diane Geswein, a former insurance

agent who acted on behalf of Best Plumbing to negotiate the insurance policy and additional

insured certificate, to demonstrate that the insurance contract and its additional insured provision

were negotiated in Ohio. I also note that the certificate of insurance which lists the business

addresses of Best Plumbing, the insured, in New Albany, Ohio and of Toll Brothers, the

additional insured, in Dublin, Ohio, suggests that the insurance contract and the certificate of

insurance were contracted and performed in Ohio. Toll Brothers’ assertion that its agents

communicated with Nationwide in Pennsylvania regarding their dispute over the Kapustins’

complaint and whether Nationwide had a duty to defend and/or indemnify Toll Brothers does not

contradict Nationwide’s evidence that the insurance contract and its certificate were negotiated,

contracted, and performed in Ohio. It is undisputed that the subject matter of the insurance

contract and certificate of insurance was the Kapustins’ home in Ohio. The parties’ citizenship

does not suggest that either forum has greater contacts with this dispute. The evidence thus

suggests that Ohio has a more significant connection with the outcome of this controversy. I

therefore agree with Nationwide that, under Pennsylvania choice of law rules, Ohio law applies

to the insurance contract and certificate of insurance at issue here. Because Ohio law applies to

this action and relevant Ohio law appears to be in flux, the Southern District of Ohio’s familiarity

with Ohio law regarding insurance contracts weighs in favor of transfer.

All relevant things considered, I find that this action should be transferred to the Southern

District of Ohio. Three factors outweigh Toll Brothers’ preference for the Eastern District of

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22

Pennsylvania as its forum of choice: (1) the Kapustins and Best Plumbing, who are likely to be

necessary witnesses to defend against Toll Brothers’ duty to indemnify claim, reside in Ohio; (2)

the insurance contract and certificate of insurance were negotiated, contracted, and performed in

Ohio; and (3) a Judge in the Southern District of Ohio is likely to be more familiar with evolving

insurance contract law in Ohio. I will therefore transfer this case to the Southern District of

Ohio.

An appropriate order follows.

Case 2:05-cv-01191-TON Document 14 Filed 10/13/05 Page 22 of 23
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

TOLL BROS., INC. : CIVIL ACTION

:

v. :

:

NATIONWIDE PROPERTY AND : NO. 05-1191

CASUALTY INSURANCE CO. :

ORDER

AND NOW, this 13th day of October 2005, upon consideration of defendant’s motion to

transfer venue, plaintiff’s response, defendant’s reply, and the parties’ supplementary briefs in

response to my Order of July 27, 2005, it is ORDERED that defendant’s motion is GRANTED. 

This action is TRANSFERRED to the United States District Court for the Southern District of

Ohio.

s/ Thomas N. O’Neill, Jr.

THOMAS N. O’NEILL, JR, J.

Case 2:05-cv-01191-TON Document 14 Filed 10/13/05 Page 23 of 23