NOT PRECEDENTIAL 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

________________ 

No. 20-2544 

________________ 

CARL HEMPHILL; MJC LABOR SOLUTIONS, LLC, 

 Appellants 

v. 

LANDMARK AMERICAN INSURANCE COMPANY 

________________ 

Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. Civil Action No. 2-19-cv-05260) 

District Judge: Honorable Gerald A. McHugh 

________________ 

Argued on June 24, 2021 

Before: CHAGARES, Chief Judge, PORTER and ROTH, Circuit Judges 

(Opinion filed: April 5, 2023) 

David M. Barry ARGUED 

#578 

104 South Wayne Avenue 

Wayne, PA 19087 

 Counsel for Appellants 

Brian C. Bassett ARGUED 

Traub Lieberman Straus & Shrewsberry 

71 South Wacker Drive 
2 

Suite 2110 

Chicago, IL 60606 

Gerald J. Valentini 

Deasey, Mahoney & Valentini 

1601 Market Street 

Suite 3400 

Philadelphia, PA 19103 

 Counsel for Appellee 

________________ 

OPINION*

________________ 

ROTH, Circuit Judge 

I. 

 In this insurance coverage dispute, appellant Carl Hemphill asks us to find that his 

liability insurer, appellee Landmark American Insurance Co., is obligated to defend him 

in a lawsuit by a former employee. That employee brought a panoply of claims against 

Hemphill in his original complaint. None is covered by Hemphill’s policy with 

Landmark. And, for reasons discussed below, Hemphill may not demand coverage based 

on Landmark’s earlier defense of him in a similar but unrelated lawsuit. So we will 

affirm the District Court’s order finding Landmark had no duty to defend Hemphill. 

II. 

A. 

*

 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not 

constitute binding precedent. 
3

Carl Hemphill and MJC Labor (together, Hemphill) provide temporary employee

placement and visa application processing services to workers from Mexico and Central

America. Hemphill is insured by a miscellaneous professional liability (MPL) policy

with Landmark, covering claims “arising out of [] negligent act[s], error[s] or

omission[s]” “in the rendering or failure to render . . . permanent and/or temporary

placement services[.]”1

In May 2018, former MJC client Jose Castillo filed an action against Hemphill (the

Castillo Lawsuit), alleging violations of federal human trafficking, wage-and-hour, and

unfair trade practices laws, as well as claims for breach of contract and unjust enrichment. 

Castillo alleged that he signed an employment contract with one of Hemphill’s companies

providing a specific start date, hours of employment, wages, and job duties. He was issued

an H-2B work visa in March 2015 and expected to leave for the United States immediately,

but Hemphill delayed his employment for more than a month. When Castillo eventually

arrived in the U.S., Hemphill and his wife confiscated his passport; housed him in

conditions he described as “filthy,” overcrowded, and vermin-infested;

2 assigned him tasks

outside the scope of his employment contract; and considerably underpaid him. In July,

after Hemphill sent Castillo a series of hostile and threatening text messages when he did

not report to work, Castillo contracted the National Human Trafficking Hotline and was

connected with his current counsel. Hemphill then reported Castillo to the police, who

charged him with trespassing and making terroristic threats. Castillo’s lawsuit followed.

1 Appx. 35–36 (Compl. ¶ 13); Appx. 77, 79. 

2 Appx. 111 (Castillo Compl. ¶¶ 135–39). 
4

The parties have since settled the Castillo Lawsuit, but the reimbursement of legal defense

costs, incurred in the underlying suit, remain in dispute.

B.

Hemphill sought coverage in the Castillo Lawsuit under his MPL policy with

Landmark. Landmark declined to defend Hemphill on the grounds that Castillo’s

allegations arose from Hemphill’s intentional actions, occurring after Castillo had been

placed as an employee, rather than from negligent actions in providing placement

services. Hemphill then filed this action seeking a declaration that Landmark was

required to defend him in the Castillo Lawsuit. The District Court agreed with

Landmark’s interpretation of the policy and dismissed the action under Federal Rule of

Civil Procedure 12(b)(6). Hemphill appealed.

The Castillo Lawsuit proceeded to a bench trial in June 2021, after which the

District Court ordered the parties to mediate. Castillo moved to conform his complaint

with the evidence introduced at trial under Federal Rule of Civil Procedure 15(b)(2),

arguing that the parties had tried a claim for negligent misrepresentation by implied

consent. The District Court granted Castillo’s motion,

3 and, on July 7, 2021, Castillo

filed an amended complaint, including a negligent misrepresentation claim.

4

3 Case No. 18-1837, ECF No. 89–90. 4 Case No. 18–1837, ECF No. 92. 
5

III.5

We review a district court’s dismissal under Rule 12(b)(6) de novo.

6 We also

exercise plenary review over a district court’s determination of the scope of coverage of

an insurance contract.7

 If the underlying complaint “avers facts that might support

recovery under the policy, coverage is triggered and the insurer has a duty to defend.”8

 

We view the complaint’s allegations as true and liberally construe them in favor of the

insured.9

IV.

We first clarify the scope of our inquiry in light of Castillo’s amended complaint. 

Under Pennsylvania law,

10 “[t]he question of whether a claim against an insured is 

potentially covered is answered by comparing the four corners of the insurance contract 

to the four corners of the complaint.” 11 While the majority of states have made an 

exception to the “four corners” rule when evidence puts an insurer on notice of an 

5 The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction under 

28 U.S.C. § 1291. 

6 Phillips v. Cnty. of Allegheny, 515 F.3d 224, 230 (3d Cir. 2008) (citation omitted). 

7 Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir. 2005) (citation omitted). 8 Id. at 226 (citing Gen. Accident Ins. Co. of Am. v. Allen, 692 A.2d 1089, 1095 (Pa. 

1997)). 9 Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660, 673 (3d Cir. 2016) (citation omitted). 10 The District Court properly found that Pennsylvania law applies to this action, because 

Hemphill and MJC resided in Pennsylvania at the time the Landmark policy was signed.

See Crawford v. Manhattan Life Ins. Co. of New York, 221 A.2d 877, 880 (Pa. Super. Ct. 

1966). 

11 Am. & Foreign Ins. Co. v. Jerry’s Sport Center, Inc., 2 A.3d 526, 541 (Pa. 2010). 
6

unpleaded claim, Pennsylvania has not.12 To the contrary, courts applying Pennsylvania 

law must not stray from the operative complaint in determining duty-to-defend issues, 

even when later proceedings reveal the existence of a covered claim. 13 Thus, Castillo’s 

original complaint controls Landmark’s obligations up to the time he filed his amended 

complaint.

We limit our inquiry to Landmark’s duty to defend Castillo’s original complaint, 

which is the parties’ sole focus on appeal.

14 The District Court found that 1) Hemphill 

could not expect Landmark to cover him for any claim not listed in the Landmark policy, 

and 2) Castillo’s first complaint does not allege a covered claim. Hemphill appeals both 

findings, but his arguments fail.

B.

Hemphill first argues that he had a reasonable expectation of coverage in the Castillo

Lawsuit after Landmark defended him in an earlier, similar class action (the Urrutia

Lawsuit). We disagree and affirm the District Court’s finding that Hemphill may not claim

benefit of the reasonable expectations doctrine here.

12 See Lupu v. Loan City, LLC, 903 F.3d 382, 390–92 (3d Cir. 2018) (discussing 

Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Comm. Union Ins. Co., 908 A.2d 888, 896

(Pa. 2006)); cf. Walter Well Sols. Serv. Grp., Inc. v. Consol. Ins. Co., 881 N.W.2d 285, 

304 (Wis. 2016) (Bradley, J., dissenting) (collecting cases from 31 states recognizing 

exception to “four corners” rule). 

13 See Lupu, 903 F.3d at 392. 

14 See, e.g., Trs. Of Nat. Elevator Indus. Pension, Health Benefit and Educ. Funds v. 

Lutyk, 332 F.3d 188, 193 (3d Cir. 2003) (declining to address issues not raised before 

district court or on appeal). This Court ordered the parties to provide a status update on 

August 11, 2021. The parties’ joint update does not state whether Landmark disputes its 

duty to defend the Castillo Lawsuit following the amended complaint. 
7

“[T]he proper focus for determining issues of insurance coverage is the reasonable

expectations of the insured.”15 “[I]n most cases the language of an insurance policy will

provide the best indication of the parties’ reasonable expectations.” 16 An insured’s

reasonable expectations may occasionally prevail over the express terms of a contract,17

but only “‘in very limited circumstances’ to protect non-commercial insureds from policy

terms not readily apparent and from insurer deception.”18 For example, courts have

found insureds reasonably anticipated coverage where insurers hid crucial coverage

terms,19 unilaterally changed policy language,20 or otherwise deceived them.

21 Absent

these few exceptions, “an insured may not complain that his or her reasonable

expectations were frustrated by policy limitations that are clear and unambiguous.”22

Hemphill does not argue that the Landmark policy language is facially unclear or

that Landmark engaged in deceptive tactics. Instead, he claims that the mere fact that

15 Reliance Ins. Co. v. Moessner, 121 F.3d 895, 903 (3d Cir. 1997) (citations omitted). 

16 Bensalem Twp. v. Int’l Surplus Lines Ins. Co., 38 F.3d 1303, 1309 (3d Cir. 1994). 

17 See id.; see also Newchops Rest. Comcast LLC v. Admiral Indem. Co., 507 F. Supp. 3d 

616, 621 (E.D. Pa. 2020) (finding “a court’s decision to look beyond the policy language 

is not erroneous under all circumstances”) (quoting Safe Auto Ins. Co. v. Berlin, 991 A.2d 

327, 332 (Pa. Super. Ct. 2010)).

18 Liberty Mutual Ins. Co. v. Treesdale, Inc., 418 F.3d 330, 344 (3d Cir. 2005) (quoting 

Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100, 109 n.8 (Pa. 1999)). 19 See Collister v. Nationwide Life Ins. Co., 388 A.2d 1346, 1353 (Pa. 1978). 20 See UPMC Health Sys. v. Metro. Life Ins. Co., 391 F.3d 497, 503–04 (3d Cir. 2004); 

Bensalem Twp., 38 F.3d at 1309. 21 See, e.g., Downey v. First Indem. Ins., 214 F. Supp. 3d 414, 424 (E.D. Pa. 2016)

(applying reasonable expectations doctrine where insured claimed insurer misrepresented 

scope of coverage); West Am. Ins. Co. v. Park, 933 F.2d 1236, 1238–39 (3d Cir. 1991) 

(applying reasonable expectations doctrine where policy language unambiguously 

conferred coverage but insurer invoked public policy exception and denied coverage). 22 Treesdale, 418 F.3d at 344 (internal quotation marks and citation omitted); see Millers 

Cap. Ins. Co v. Gambone Bros. Dev. Co., Inc., 941 A.2d 706, 717 (Pa. Super. Ct. 2007).
8

Landmark defended the Urrutia Lawsuit created a reasonable expectation that it would

defend the Castillo Lawsuit. No authority supports finding a duty to defend when the

insured’s expectation of coverage arises solely from the insurer’s conduct in another,

unrelated transaction. Indeed, Pennsylvania law instructs us to “examine the totality of

the insurance transaction involved” 23—not the totality of all other transactions between

the parties. This rule applies even when no aspects of the transaction at issue create an

expectation of coverage. Here, the scope of coverage in the Landmark policy is clear. 

Thus, Hemphill’s expectations do not carry the day.

Even if Hemphill could take advantage of the reasonable expectations doctrine,

Landmark’s earlier conduct could not have given him a reasonable expectation of

coverage in the Castillo Lawsuit. Landmark subjected its defense of the Urrutia Lawsuit

to a complete reservation of rights. In its letter agreeing to defend the lawsuit, Landmark

stated that nothing in the letter, “nor any further actions taken by Landmark, should be

construed as a waiver of any rights or defenses . . . that may be available now or at any

point in time.”24 Hemphill could not reasonably expect that such a limited acceptance of

coverage would extend to a separate, unrelated lawsuit.

B.

Putting aside Landmark’s prior defense, the scope of its duty to defend is governed

by the policy’s plain language, which extends coverage only to claims alleging “negligent

act[s], error[s], or omission[s] . . . in the performance of providing . . . employee

23 Treesdale, 418 F.3d at 344 (quoting Moessner, 121 F.3d at 903). 

24 Appx. 208. 
9 

placement services.”25 The question is whether Castillo’s first complaint alleges 

negligence by Hemphill or MJC in providing Castillo placement services. It does not. 

 “[A]n insurer’s duty to defend . . . [is] determined solely from the language of the 

complaint against the insured.” 26 Courts determine whether a complaint states a covered 

claim by looking at the factual allegations of the underlying complaint, not the causes of 

action asserted.27 “[I]t is the potential, rather than the certainty, of a claim falling within 

the insurance policy that triggers the insurer’s duty to defend.” 28

The first Castillo complaint does not expressly allege a cause of action for 

negligent misrepresentation. Hemphill argues it does so impliedly by alleging facts 

showing he misled Castillo about his start date and housing. We are unpersuaded. A 

plaintiff alleging negligent misrepresentation under Pennsylvania law must show: “(1) a 

misrepresentation of a material fact; (2) made under circumstances in which the 

misrepresenter ought to have known its falsity; (3) with an intent to induce another to act

on it; and (4) which results in injury to a party acting in justifiable reliance on the 

misrepresentation.”29 Castillo’s unfair trade practices claim alleged that Hemphill 

“deceiv[ed]” Castillo “about rental housing in which he would be living.”30 But Castillo 

does not allege that Hemphill or MJC ever represented to him that his housing conditions 

25 Appx. 77, 79. 

26 Kvaerner Metals Div., 908 A.2d at 896. 27 Mutual Ben. Ins. Co. v. Haver, 725 A.2d 743, 745 (Pa. 1999) (citation omitted). 

28 Lexington Ins. Co. v. Charter Oak Fire Ins. Co., 81 A.3d 903, 911 (Pa. Super. Ct. 

2013). 

29 Milliken v. Jacono, 60 A.3d 133, 141 (Pa. 2012) (quoting Heritage Surveyors & 

Eng’rs, Inc. v. Nat. Penn Bank, 801 A.2d 1248, 1252 (Pa. Super. Ct. 2002)). 

30 Appx. 134 (Castillo Compl. ¶ 380). 
10

would be sanitary or not crowded, or that he would not have accepted Hemphill’s

employment offer had he known that the housing conditions were subpar. As for

Castillo’s start date, his allegations amount to nothing more than a breach-of-contract

claim: he alleges that his contracted-for start date was delayed and that he lost money

and employment opportunities as a result. Landmark expressly carved out breach-ofcontract claims in its policy with Hemphill.31 It has no duty to defend this one, or any

other claim in Castillo’s first complaint.32

V.

For the reasons stated above, we will affirm the judgment of the District Court.

31 Even if Castillo’s breach-of-contract claim could somehow be interpreted to state a 

misrepresentation claim (it cannot), it would fail in light of the gist-of-the action doctrine. 

See Knight v. Springfield Hyundai, 81 A.3d 940, 950 (Pa. Super. Ct. 2013). 

32 For the same reasons, we reject Hemphill’s argument that Landmark created a “latent 

ambiguity” in the policy by finding Urrutia had potentially stated a covered claim but 

Castillo had not.