2014 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-10-2014

Camico Mutual Insurance Co v. Heffler, Radetich

& Saitta

Precedential or Non-Precedential: Non-Precedential

Docket No. 13-3619

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Recommended Citation

"Camico Mutual Insurance Co v. Heffler, Radetich & Saitta" (2014). 2014 Decisions. Paper 1068.

http://digitalcommons.law.villanova.edu/thirdcircuit_2014/1068
NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 13-3619

____________

CAMICO MUTUAL INSURANCE CO.

v.

HEFFLER, RADETICH & SAITTA, L.L.P.,

 Appellant

____________

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania

(E.D. Pa. 2-11-cv-04753)

District Judge: Honorable Jan E. DuBois

____________

Submitted Pursuant to Third Circuit LAR 34.1(a)

September 8, 2014

Before: FISHER, JORDAN and HARDIMAN, Circuit Judges.

(Filed: October 10, 2014)

____________

OPINION OF THE COURT

____________

FISHER, Circuit Judge.

Heffler, Radetich & Saitta, L.L.P. (“Heffler”) appeals the district court’s grant of 

summary judgment to CAMICO Mutual Insurance Company (“CAMICO”) and denial of 

Heffler’s cross-motion for partial summary judgment regarding an insurance coverage 

dispute. For the reasons stated below, we will affirm.
2

I.

We write principally for the parties, who are familiar with the factual context and 

legal history of this case. Therefore, we will set forth only those facts that are necessary 

to our analysis.

CAMICO and Heffler entered into a claims-made Accountants Professional 

Liability Insurance Policy that was in effect from January 23, 2008 to January 23, 2009. 

This policy provided insurance for claims brought against Heffler, an accounting firm 

that, among other tasks, distributes settlement funds to claimants in class action suits. The 

policy insured both Heffler and others, including former Heffler employees.

In 2002, the Eastern District of Missouri approved a $490 million settlement in a 

class action against BankAmerica Corporation. Heffler was appointed by the court as the 

claims administrator, and Christian Penta, a senior claims analyst at Heffler from 2001 to 

2004, was assigned to help administer the settlement. Heffler was paid for the work Penta 

performed and for other services it provided. Penta, while employed at Heffler and 

afterwards, defrauded three separate class actions, including the BankAmerica class 

action, of tens of millions of dollars by working with co-conspirators to file false claims.

Penta took a number of actions to further the fraud. He had his co-conspirators 

deliver their fraudulent claims directly to him so that he could ensure the claims were 

timely processed and approved for payment. In addition, he personally approved the 

fraudulent claims or otherwise ensured that the claims were approved by other Heffler 
3

employees. Penta did not pocket the proceeds of these claims directly; rather, he was later 

given a portion of the fraudulently-obtained funds by the co-conspirators.

1 On September 

11, 2008, Penta and his co-conspirators were charged with mail fraud and wire fraud. 

Penta pleaded guilty. Subsequently, David Oetting, a member of the BankAmerica class,

brought a class-action suit against Heffler in the Eastern District of Pennsylvania seeking 

damages resulting from Penta’s crimes. This suit was captioned Oetting v. Heffler. The 

suit alleged, among other claims, a breach of fiduciary duty, accountant malpractice, and 

negligent supervision.

Heffler notified CAMICO of its potential liability associated with Penta’s actions 

on June 13, 2008, within the effective period of the CAMICO policy. CAMICO funded 

Heffler’s defense, but subsequently advised Heffler that it reserved its right to recover 

costs and expenses relating to the defense that exceeded a $100,000 sub-limit in the 

policy concerning misappropriation, misuse, theft, or embezzlement. CAMICO later filed 

suit against Heffler with four causes of action: first, a declaratory judgment that 

CAMICO owed Heffler no defense or obligation beyond the $100,000 sub-limit; second, 

a claim for unjust enrichment; third, a claim for money had and received; and fourth, a 

claim for recovery of overpayment. Heffler, in response, filed counterclaims for a 

declaratory judgment that CAMICO’s duty to defend and indemnify was not limited by 

the $100,000 sub-limit and for bad faith. The parties then filed cross-motions for 

 

1

Penta’s indictment stated that for his role in the larger scheme, Penta received 

about 10% of the total fraud proceeds, or approximately $4 million.
4

summary judgment. The district court granted CAMICO summary judgment as to the 

declaratory judgment claim, the claim for money had and received, and the claim for 

recovery of overpayment. It further denied Heffler’s cross-motion for partial summary

judgment and entered a final judgment in favor of CAMICO. Heffler timely appealed.

II.

The district court had jurisdiction under 28 U.S.C. § 1332(a)(1). This Court has 

appellate jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over a district 

court’s order resolving cross-motions for summary judgment. Tristani ex rel. Karnes v. 

Richman, 652 F.3d 360, 366 (3d Cir. 2011). To determine whether summary judgment is 

appropriate, we apply the same standard as the district court. Id. Summary judgment is 

appropriate when “the movant shows that there is no genuine dispute as to any material 

fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). 

III.

Heffler puts forward two arguments. First, it contends that the policy sub-limit for 

misappropriation, misuse, theft, or embezzlement does not apply. Second, it asserts that 

CAMICO is not entitled to recoup litigation costs from Heffler that are in excess of the 

sub-limit. Neither of these arguments is persuasive. 

A.

The district court held that CAMICO’s defense and indemnification obligations in 

the Oetting action are capped by a policy sub-limit of $100,000. This sub-limit applies to 
5

“Damages and Claim Expenses for each covered Claim arising from, related to or in 

connection with any Insured’s misappropriation, misuse, theft or embezzlement of 

funds.” J.A. 556. Former Heffler employees are considered an Insured when performing 

“Professional Services for the benefit of the Named Insured or a Predecessor Firm on or 

after the Retroactive Date.” Heffler is the Named Insured. In concluding that the sublimit applied, the district court recognized that Penta engaged in misappropriation, 

misuse, theft, or embezzlement of funds; that Penta was performing Professional Services 

for Heffler’s benefit after the Retroactive Date; and that Penta was an Insured. We agree 

with each of these conclusions, which are beyond legitimate dispute on the record.

In interpreting an insurance contract, a court is “to ascertain the intent of the 

parties as manifested by the language of the written instrument.” Gene & Harvey 

Builders, Inc. v. Pa. Mfrs. Ass’n Ins. Co., 517 A.2d 910, 913 (Pa. 1986) (quoting 

Standard Venetian Blind Co. v. Am. Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983)) 

(internal quotations marks omitted).

2 When a provision is ambiguous, “[it] is to be 

construed in favor of the insured and against the insurer . . . . Where, however, the 

language of the contract is clear and unambiguous, a court is required to give effect to 

that language.” Id. (citation omitted).

We first look to the contract to determine whether Penta’s conduct constitutes 

misappropriation, misuse, theft, or embezzlement of funds. “[A] court construes [w]ords 

 

2

The parties agree that Pennsylvania law applies to this contract. J.A. 10.
6

of common usage [in a contract] . . . according to their natural, plain, and ordinary sense.” 

Liberty Mut. Ins. Co. v. Sweeney, 689 F.3d 288, 293 (3d Cir. 2012) (second alteration in 

the original) (internal quotation marks omitted). On the other hand, “if technical words 

are used, they will be construed in their technical sense unless a contrary intention clearly 

appears.” Blue Anchor Overall Co. v. Pa. Lumbermens Mut. Ins. Co., 123 A.2d 413, 415 

(Pa. 1956).

Misappropriation, theft, and embezzlement are technical words with specific legal 

meanings, while misuse is a word of common usage. After an extended discussion of the 

technical and common meanings of these words, the district court held that Penta’s 

behavior satisfied the definition of each of those terms. For example, it defined 

misappropriation as “[t]he application of another’s property or money dishonestly to 

one’s own use.” J.A. 15 (citing Black’s Law Dictionary 1019 (8th ed. 2004)). The 

underlying Amended Complaint in the Oetting action shows that Penta approved false 

claims submitted by Penta and his co-conspirators. These claims funneled funds to which

class members were entitled to Penta and his co-conspirators instead. This is the 

“application of another’s . . . money dishonestly to one’s own use.” Penta at least 

misappropriated funds, behavior sufficient to invoke the applicable sub-limit.3

Next, we must determine whether Penta was performing Professional Services for 

the benefit of Heffler. Professional Services are “any professional services performed by 

 

3 We note, without deciding, that Penta may have also engaged in misuse, theft, or 

embezzlement, as the district court decided.
7

an Insured as long as the fees or commissions, if any, or other benefits from such services 

inure to the benefit of [Heffler].” J.A. 560. Assuming for the moment that Penta was an 

Insured, Heffler’s sole argument that Penta’s actions were not Professional Services is 

that none of the fees, commissions, or other benefits derived from the actions Penta took 

in furtherance of the fraud scheme inured to the benefit of Heffler. This view is far too 

narrow. If this were in fact the case, it is hard to imagine a situation in which the sublimit at issue would apply. Whenever an employee was engaged in independent criminal 

conduct of this type—the benefits of which by definition would not inure to Heffler—he 

would immediately move outside the ambit of the contractual sub-limit applicable to an 

employee’s misappropriation, misuse, theft, or embezzlement of funds.

This narrow interpretation would thus render the provision at issue superfluous. 

“[N]o provision of a contract should be treated as surplusage or redundant if any 

reasonable meaning consistent with other parts of the agreement can be given to it.” Wyo.

Valley W. Sch. Dist. v. Nw. Sch. Dist., 695 A.2d 949, 953 (Pa. Commw. Ct. 1997). There 

is another reasonable meaning of this provision consistent with the entirety of the 

agreement that does not render it surplusage. We agree with the district court that “the 

sub-limit provision applies to employees who engage in misappropriation, misuse, theft, 

or embezzlement of funds in connection with their employment for Heffler, and who are 

providing benefits to Heffler through their general employment.” J.A. 20. As explained 

above, Penta at least engaged in misappropriation. In addition, neither party contends that 
8

Penta was not employed by Heffler, nor do they contend that his general employment did 

not provide benefits to Heffler. Thus, because Penta was engaged in the professional 

service of claims administration at the time that he was employed by Heffler, and the 

benefits of this claims administration inured to Heffler, Penta performed Professional 

Services as defined by the insurance policy.

Finally, we examine the contract to assess whether Penta qualified as an Insured 

under the policy. The insurance policy states that “[e]ach of the following Persons is an 

Insured, but only while performing Professional Services for the benefit of the Named 

Insured or a Predecessor Firm on or after the Retroactive Date: . . . [a] current or former 

. . . employee of a Named Insured.” J.A. 557-58. Penta, as both sides acknowledge, is a 

former employee of Heffler. The parties disagree, however, as to what the “only while 

performing Professional Services” language means. There is thus very little in dispute, 

and a short explanation of insurance policies will clarify the disagreement.

There are two general types of insurance policies: claims-made policies and 

occurrence policies. “A claims made policy, as opposed to an occurrence policy, protects 

the policy holder against claims made during the life of the policy, rather than against 

occurrences which happen during the policy period and for which claims may arise later.” 

Twp. of Ctr., Butler Cnty., Pa. v. First Mercury Syndicate, Inc., 117 F.3d 115, 118 (3d 

Cir. 1997) (internal quotation marks omitted). The policy at issue is a claims-made 

policy. J.A. 553. Thus, under the terms of the policy, CAMICO was obligated to insure 
9

claims made during the policy period if the conduct underlying those claims was 

undertaken by a former employee, such as Penta, while performing Professional Services. 

Heffler argues that Penta did not work for Heffler, and therefore was not performing 

Professional Services for Heffler, at the time the claim was made. It contends that Penta 

therefore was not an Insured when the claim was made. This argument is unavailing—the 

plain language of the contract dictates otherwise. The terms of the policy state that former 

Heffler employees are considered Insureds while performing Professional Services for 

Heffler’s benefit after the Retroactive Date. Penta’s conduct was certainly performed 

after the Retroactive Date of January 1, 1943. Both parties agree on this point. In 

addition, as discussed above, his conduct qualifies as Professional Services. We hold that 

Penta’s status as an Insured is determined at the time the conduct in question occurred,

and that he is therefore an Insured to whom the sub-limit applies.

C.

The district court further held that CAMICO is entitled to recoup its litigation 

costs from Heffler in excess of the sub-limit. As such, it awarded CAMICO $87,531.76 

in fees and costs incurred in defending the underlying Oetting action. We agree with the 

district court.

In Pennsylvania, insurers normally may not recoup costs expended in defense of 

an insured party. “[A]n insurer is not entitled to be reimbursed for defense costs absent an 

express provision in the written insurance contract.” Am. & Foreign Ins. Co. v. Jerry’s 
10

Sport Ctr., Inc., 2 A.3d 526, 529 (Pa. 2010). This is only the case, however, “[w]here the 

insurance contract is silent about the insurer’s right to reimbursement of defense costs.” 

Id. at 544. Thus, reimbursement is possible when a contract expressly provides for it.

In the instant case, the insurance contract provides that “[i]f [CAMICO] pays any 

Claim Expenses or Damages . . . in excess of the applicable Limit of Liability, [Heffler]

shall reimburse [CAMICO] these amounts within thirty (30) days of [CAMICO’s] 

request.” J.A. 557. This is an “express provision in the written insurance contract,” Am. & 

Foreign Ins. Co., 2 A.3d at 526, within the scope of Pennsylvania precedent. The plain 

language of the contract states that Heffler is obligated to reimburse CAMICO if 

CAMICO pays expenses or damages in excess of any applicable sub-limit. Because we 

will affirm the district court’s ruling that the $100,000 sub-limit applies, Heffler is 

obligated to reimburse CAMICO, and we will affirm the district court’s award of 

litigation costs and fees.

IV.

For the reasons set forth above, we will affirm the order of the district court.