NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

______________ No. 17

- 3477

______________ FREDERICK MUTUAL INSURANCE CO. , Appellant

v. DONALD HALL, INDIVIDUALLY AND TRADING AS HALLSTONE, INC.; MARIA A. HALL, INDIVIDUALLY AND TRADING AS HALLSTONE, INC.; HALLSTONE, INC.; R. LEE HULKO; BRADLEY B. FAIR

______________ On Appeal from the United States District Court for the Ea stern District of Pennsylvania (D.C. Civ . No. 2

- 1 5

- c v - 0 3354 ) Honorable J. Curtis Joyner , D istrict Judge

______________ Submitted under Third Circuit LAR 34.1(a)

November 5 , 2018
BEFORE: HARDIMAN, KRAUSE , and GREENBERG, Circuit Judges

(Filed : November 8, 2018 )

______________ OPINION *

______________

____________________ *This di sposition is not an opinion of the full c ourt and pursuant to I.O.P. 5.7 does not constitute binding precedent.2

GREENBERG, Circuit Judge

. I. I NTRODUCTION Plaintiff

- Appellant Frederick Mutual Insurance Company (“Frederick”) has filed this appeal in a dec laratory judgment action in which it sought to have the D istrict C ourt declare that it did not have the duty to defend and indemnify Defendant

- Appellee Hallstone, Inc. (“Hallstone”) under an insurance policy that Frederick issued to Hallstone
in a state co urt action against Hallstone . After holding a bench trial, the C ourt entered judgment for Hallstone, finding that the policy obligated Frederick to defend Hallstone in the state court action. We will reverse.

II. FACTUAL BACKGROUND We rely on the D istr ict C ourt’s findings of fact during its bench trial. Defendant

Appellees Donald and Mar ie Hall formed Hallstone to provide stone masonry work for residential premises . On the advice of a builder, Donald Hall (“Hall”) , a principal in Hallstone, approached the Fraser Insurance Agency (“Fraser”) to obtain an insurance policy to provide in Hall’s words “maximum,” “soup to nuts” coverage for Hallstone.
Fraser obtained a liability policy from Frederick for Hallstone

. Hall and Frederick did not have direct con tact and Hall never asked for or received a copy of the p olicy
Frederick issued

. Beginning in or around March 2006, Defendant

- Appellees R. Lee Hulko and Bradley B. Fair (“the Customers”) contracted with Hallstone to provide custom stone

m asonry work for th eir home. This project obviously was a substantial undertaking as it3

took several years to complete and the Customers paid nearly $300,000 for the project. In April 2014, the Customers discovered that som e of the stone masonry work that Hallstone had und ert a k en had been damaged and required substantial repairs ultimately

cost ing $352,294. The C ustomers attribute d the damage to what they regarded was Hallstone’s substan dard and defective work and consequently they filed a state court action in Pennsylvan ia against Hallstone alleging breach of warranty, negligence, and related statutory claims. While defending Hallstone in the state court act ion, Frederick filed this declaratory judgment action in the District C ourt, seeking a determination that it did not have a duty under its policy to defend and indemnify Hallstone for its defective workmanship. Frederick filed a motion for summary judgment but the Court denied the motion as it found that there was a question of fact on the question of whether Hall rece ived a copy of the insurance poli cy from Frederick. At the ensuing bench trial, the Court found that the insurance policy unambiguously excl uded faulty workmanship coverage. But the Court also found that Hall believed the policy provided coverage ‘ “if so mething was done inadvertently ’ , or if his business did something and someone made a claim against his business that he might be liable for,” Frederick Mut. Ins. Co. v. Hall , No. 15

- 3354, 2017 WL 4883157, at *2 (E.D. Pa. Oct. 30, 2017), and that Frederick never provided Hall with a copy of the policy to contradict his belief. Id . at *10. The Court’s ultimate finding was
that Hallstone had a reasonable expectation of workmanship coverage, and , accordingly, it entered judgment for Hallstone.4 III. DISCUSSI ON The Dist rict C ourt had diversity of citizenship jurisdiction under 28 U.S.C. § 1332(a). We have jurisdiction under 28 U.S.C. § 1291. We review the Co urt’s findings of fact for clear error, and review its conclusions of law de novo

. See Clientron Corp . v. Devon IT, Inc. , 894 F.3d 568, 575

- 76 (3d Cir. 2018). This matt er is governed by Pennsylvania l aw . In reaching its decision, the D istrict C ourt found that the insurance policy unambiguously excluded coverage for the faulty workmanship claims the Custo mers made in the underlying state court action , a conclusion with which we concur . That finding should have been the end of the C ourt’s inquiry.
It is well

- settled that when policy language is unambiguous, w e give effect to that language. It is also well

- settled that the focus of any inquiry regarding issues of coverage under an insurance policy is the reasonable expectation s of the insured. An insured, however, may not complain that its reasonable expectations have been frustrated when the applicable po licy limitations are clear and unambiguous. Millers Capital Ins. Co. v . Gambone Bros. Dev . Co. , 941 A.2d 706, 717 (Pa. Sup er . Ct. 2007) (citations omitted). “[G]enerally, courts cannot invoke the reasonable expectation doctrine to create an ambiguity whe re the policy itself is unambiguous.” Matcon Diamond, Inc. v. Penn Nat’l Ins. Co. , 815 A.2d 1109, 1114 (Pa. Sup er . Ct. 2003). Having found the p olicy unambiguous, the C ourt should have entered judgment for Frederick. Nevertheless, the District Court , re lying heavily on Tonkovic v. State Farm Mut.
Auto. Ins. Co. , 521 A.2d 920 (Pa. 1987), held that the facts of this case warranted the5

application of the reasonable expectation doctrine. In Tonkovic , an insured specifically had sought to obtain disability i nsurance from an insurance company that would cover his mortgage payments in the event he was disabled in an accident, even if he was entitled to workmen’s compensation benefits by reason of his injury

. Id. at 921. Yet, notwithstanding the circumstance t hat he made his intentions clear to the insurance agent and in his insurance application, the company issued him a policy that excluded disability payments when workmen’s compensation was available to an insured as a result of an accident

. Id. at 922. Al though the agent contended Tonkovic had received a copy of the policy that unambiguously contained the exclusion, substantial evidence was presented at trial that he did not receive a copy of the policy. Id. Finding the company liable, the Pennsylvania S upreme Court held that there was a crucial distinction between cases where one applies for a specific type of coverage and the insurer unilaterally limits that coverage, resulting in a policy quite different from what the insured requested, and cases where the insured received precisely the coverage that he requested but failed to read the policy to discover clauses that are the usual incident of the coverage applied for. When the insurer elects to issue a policy differing from what the insured requested a nd paid for, there is clearly a duty to advise the insured of the changes so made. The burden is not on the insured to read the policy to discover such changes, or not read it at his peril. Id. at 925. In contrast, Hall did not apply for the specific typ e of insurance coverage he now
claims that he expected as he asked in general terms for “ soup to nuts ” coverage though a broad term that was not specific . Thus, Frederick could regard Hall’s application for insurance as seeking a general liability insuran ce policy. However, “[a] liability policy does not provide a guarantee of the policyholder’s workmanship.” Standard Venetian6

Blind Co. v. Am. Empire Ins. Co. , 469 A.2d 563, 567 (Pa. 1983) (Hutchinson, J., concurring). “ Such a guarantee is not within its coverage. I do not believe a businessman of ordinary intelligence could reasonably expect to obtain a defense against and indemnity for the cost of properly performing his contract or replacing his failed product under a liability policy. ” Id. (citing Sel ected Risks Ins. Co. v. Bruno , 718 F.2d 67 (3d Cir. 1983)). A businessman purchases a liability insurance policy to transfer the risk and cost of unexpected and unintended happenings (occurre nces) to his insurance company. The company agrees to assume tha t risk for a calculated premium. The company does not, however, provide a guarantee of the businessman's workmanship or his products for that premium and typically protects itself against such claims by excluding coverage for property in the care, custody or control of the insured or property as to which the insured for any purpose is exercising control or by language

. . . . There is usually some form of insurance available to cover injury to or destruction of the excluded property at a higher premium wh ich is commensurate with the risk. The exclusion is to eliminate securing the same coverage under a lia bility policy at cheaper rates. Id. at 571 (internal quotation marks omitted) (quoting F.D. Cooke, Jr., Care Custody or Control Exclusions , 1959 Ins. L .J. 7, 10, (1959)

. In Venetian Blind , the Pennsylvania Supreme Court rejected the insured’s argument that it neither was made aware of nor understood the excl usion of workmanship coverage from its policy, as it found that “ the lack of knowledge or unde rstanding of a clearly drafted exclusion clause in a written contract of insurance executed by both parties does not render the clause unenforceable. ” Id. at 564. Although Hall argues that he never received a copy of the policy , a contention that we acce pt , and therefore he was unaware of the exclusion, this circumstance does not change the fact that he was seeking7

general liability insurance. A t no point did he specify that he desired the more costly workmanship insurance. As the court held in Matcon , an insured’s failure to request or bargain for a particular coverage precludes a court from finding that the insured expected such coverage, whether or not the insured received a copy of the policy. 815 A.2d at
1115. Even if we agree d with the District C ourt’s invocation of the reasonable expectation doctrine, Pennsylvania case law makes clear that the Court’s application of the doctri ne was flawed. As we have held under Pennsylvania law, “[o]nly objectively reasonable expectations are protected[.]” Sel ected Risk , 718 F.2d at 71. Hall’s claim that he expected Hallstone’s “maximum,” “soup to nuts” liability policy to include workmanship coverage is no more reasonable than if a purchaser of auto insurance
expe cted his policy to cover repairs if his car br eaks down, even if he asked for “soup to nuts” coverage. See id. (holding that the insured was not reasonable to expect his basic homeowner’s insurance policy to provide coverage for intentional criminal acts). It is simply not the kind of coverage insur ance agents and insurance companies expect to provide unless the insured explicitly requests such coverage. If we were to allow an insured to override the plain language of a policy limitation anytime he or she was dissatisfied with the limitation by simpl y invoking the reasonable expectations doctrine, the language of insurance policies would cease to have meaning and, as a consequence, insurers w ould be unable to project risk. The inability to project risk would dissuade insurers from doing business in t he Commonwealth and the net result would be an increase in premiums for consumers. We refuse to set such a deleterious sequence of events into motion.8

Millers , 941 A.2d at 717

- 18. Accordingly, we will reverse the D istrict C ourt’s judgment
entered on Oct ober 30, 2017, for Hallstone, and will remand the matter to that Court to enter judgment for Frederick. See 28 U.S.C. § 2106.