Opinion ID: 859167
Heading Depth: 2
Heading Rank: 3

Heading: Duty to Indemnify After Settlement

Text: Donnelly also argues that under our decision in Pacific Indemnity v. Linn, 766 F.2d 754 (3d Cir. 1985), American Western has a duty to indemnify Donnelly because the Underlying Action settled while American Western was believed to have a duty to defend Donnelly. In Linn we held that the duty to indemnify followed the duty to defend where settlement of an underlying action involving multiple theories of liability and several competing insurers made it impossible to determine which of the multiple insurers had a duty to indemnify. Linn, 766 F.2d at 766. However, unlike Linn, this case involves only one insurer and liability is based on a single theory. There is nothing to indicate that in this case settlement made it impossible to determine whether coverage under the Policy was warranted. Linn is therefore inapposite. See, e.g., 12th Street Gym, Inc. v. Gen. Star Indemn. Co., 93 F.3d 1158, 1167 (3d Cir. 1996) (distinguishing Linn where the insured participated in the settlement of the underlying case). Moreover, Pennsylvania courts have explicitly rejected Donnelly‟s expansive reading of Linn, and explained that there is no blanket rule giving rise to a duty to indemnify where the insured settles the underlying action. See, e.g., Regis Ins. Co. v. All Am. Rathskeller, Inc., 976 A.2d 1157, 1161 n.8 (Pa. Super. Ct. 2009). To the contrary, Pennsylvania courts have made clear that the very purpose of filing a declaratory action in an insurance dispute such as this is to determine whether a duty to indemnify exists in the first place. Id. at 1161. In this case, because we hold that American Western does not have a duty to defend Donnelly in connection with the Underlying Action, it follows that 7 American Western does not have a duty to indemnify Donnelly for any amount due pursuant to the settlement of the Underlying Action.