Court Opinion

ID: 9472922
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:14:46.829397+00
Date Added: 2024-06-11T17:43:13.700171
License: Public Domain

WEIS, Circuit Judge,
concurring and dissenting.
Two separate and distinct issues are presented here. The first is Charter Oak’s claim for indemnification, and the second is its claim for reimbursement of the costs of defense.
I. Indemnification
At the outset, it is necessary to clarify one major difference between my analysis and that adopted by my colleagues. The majority maintains that “Charter Oak controlled the litigation in state court and asserted the same claim for indemnity in its cross-claim against Yamaha as it asserts here.” Maj. op. at 270. I am convinced that these claims are not the same.
The cross-claim against Yamaha was grounded on the common law rights of indemnification and contribution among joint tortfeasors. That dispute was resolved in state court. It is, however, a *273claim distinct from that now presented in the federal court — a contractual obligation to indemnify and defend grounded in the Sumitomo insurance policy itself.
Because I find these to be distinct claims, I follow a different route but nevertheless reach the same result on the indemnification issue. As to the costs of defense issue, my analysis leads me to disagree.
Rather than invoke the often amorphous res judicata doctrine, it seems to me that the court should rely on collateral estoppel, or more precisely, issue preclusion. “Res judicata” in its broadest sense describes the various ways in which a prior judgment fen have a preclusive effect on subsequent litigation. Used generically, it may include both “claim preclusion” and “issue preclusion.” See C. WRIGHT, LAW OF THE FEDERAL COURTS § 100A (4th ed. 1983). The prior judgment in this case was handed down by a Pennsylvania court, and, in extending full faith and credit, we give the same effect to that judgment as would the state courts. Migra v. Warren City School District Board of Education, - U.S. -, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984); Allen v. McCurry, 449 U.S. 90, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980); Public Service Mutual Ins. Co. v. Cohen, 616 F.2d 704 (3d Cir.1980).
Pennsylvania requires the concurrence of four elements to establish res judicata. There must be an identity of:
(1) The things sued upon;
(2) The cause of action;
(3) The persons and parties to the action;
(4) The quality or capacity of the parties. Stevenson v. Silverman, 417 Pa. 187, 190, 208 A.2d 786, 787-88 (1965). The “cause of action” test has often been the turning point on whether strict res judicata or claim preclusion should be applied, and so it is here.
In the Peterson state court action, Wodarski’s crossclaim against Yamaha was based on a primary-secondary tort liability relationship. Wodarski contended that as vendor he was a mere conduit, and that ultimate liability for the defective product rested with Yamaha, the manufacturer. See Sochanski v. Sears, Roebuck & Co., 689 F.2d 45 (3d Cir.1982); Burbage v. Boiler Engineering & Supply Co., 433 Pa. 319, 249 A.2d 563 (1969); Burch v. Sears, Roebuck & Co., 320 Pa.Super. 444, 467 A.2d 615 (1983); Mixter v. Mack Trucks, Inc., 244 Pa.Super. 313, 308 A.2d 139 (1973). That is a substantially different claim from the one Charter Oak, as subrogee of Wodarski, is asserting against Sumitomo here. The federal court action is purely contractual, and rests on the terms of the vendor’s endorsement contained in the insurance policy issued by Sumitomo.
That we are confronted with separate causes of action may be illustrated by a scenario in which Wodarski would be denied complete indemnity from Yamaha because his separate negligence contributed to Peterson’s injury together with Yamaha’s defective product. See Burch v. Sears, Roebuck; RESTATEMENT OF RESTITUTION § 93 comment d and § 95 (1937). In that event, however, it is entirely possible that Wodarski would still be entitled to indemnification under the Sumitomo insurance policy.
Strict res judicata or claim preclusion, therefore, cannot be applied to the insurance coverage question. Nevertheless, certain facts necessary to the Peterson judgment were adjudicated in state court, and they have a determinative effect on Wodarski’s (and its subrogee Charter Oak’s) claim for indemnity under the vendor’s endorsement. Included in this category are matters such as whether Wodarski intentionally modified the snowmobile’s throttle mechanism. Because Wodarski and Charter actively contested this issue in the state court, they are bound by the adverse decision there. This results not from res judicata, or claim preclusion, but rather from collateral estoppel, more specifically, issue preclusion.
The Pennsylvania Superior Court, summarizing the differences between res judicata and collateral estoppel, noted that the requirements for the latter were (1) that the issue of fact be the same in both suits, *274even though the cause of action was not identical, and (2) that the party against whom the defense is invoked is identical to or in privity to the party in the first action. Thompson v. Karastan Rug Mills, 228 Pa. Super. 260, 265, 323 A.2d 341, 344 (1974). See also Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979).
Because the causes of action in the state and federal courts here were different, collateral estoppel — issue preclusion, rather than res judicata — claim preclusion, provides the correct rationale. Nevertheless, Sumitomo is not required to indemnify Wodarski or Charter Oak in any event because the facts adjudicated in state court establish that no coverage is owed under the vendor’s endorsement.
II. Duty to Defend
The second issue is whether the insurance policy required Sumitomo to defend Wodarski in the state court action. That question was not litigated in the state court, nor were determinative facts adjudicated there.
It is well settled in Pennsylvania that a carrier’s duty to defend its insured, putative or otherwise, is governed by different principles than those that control the policy obligation to indemnify. Gedeon v. State Farm Mutual Automobile Ins. Co., 410 Pa. 55, 188 A.2d 320 (1963). The insurer’s duty to defend is triggered by the allegations in the personal injury or property damage complaint. When the facts set out in the pleading could come within the policy coverage, the duty to defend arises. Cadwallader v. New Amsterdam Casualty Co., 396 Pa. 582, 152 A.2d 484 (1959). The insurance company is not relieved of its defense obligation until the lawsuit is confined to a claim that the policy does not cover. Id. at 590, 152 A.2d at 489; Lee v. Aetna Casualty & Surety Co., 178 F.2d 750 (2d Cir.1949); see also Pittsburgh Plate Glass Co. v. Fidelity & Casualty Company of New York, 281 F.2d 538 (3d Cir.1960).
The majority concludes that res judicata applies to the duty to defend claim because in state court Wodarski filed a cross-claim against Yamaha asking for “costs of defense.” The cross-claim was pleaded in accordance with Pennsylvania Rules of Civil Procedure 2252(d), which permits one defendant to assert claims against a co-defendant on the ground that the latter is solely liable to the plaintiff or liable for contribution or indemnity to the “joining party.”
In support of its position, the majority finds a difference between the cross-claim procedures of 2252(d) and the procedure for joining third party claims under 2252(a). Such a distinction, however, does not exist. After setting forth a procedure for pleach ing claims against co-defendants in the answer under the heading “New Matter”, Pennsylvania Rule 2252(d) states
“The case shall proceed thereafter as if such party (co-defendant) had been joined by a writ or complaint.”
The quoted sentence makes the point that the procedure specified in subsection (d) is designed to eliminate the circuitous steps of severance of the co-defendant and service with a complaint to join additional defendant, the practice which prevailed under former rules. Thus, subsection (d) does no more than eliminate redundant pleadings which were necessary before subsection (d) was promulgated. See GOODRICH-AMRAM SECOND, § 2252 (d):l (1977).
The rule does not change existing law as to the substantive matters which may be asserted or adjudicated in additional defendant proceedings. In short, under Pennsylvania procedure it makes no difference whether an indemnity claim is asserted against a non-party via Rule 2252(a) or someone already a party through Rule 2252(d).
Res judicata cannot preclude the duty of defense claim asserted against Sumitomo in the federal court. That company was never made a party to the state court action, and thus the breach of contract claim asserted against it here was not litigated there. Nor could it have been.
*275The Pennsylvania Supreme Court held in Stokes v. Loyal Order of Moose Lodge #696, 502 Pa. 460, 466 A.2d 1341 (1983), that a defendant’s claim for insurance coverage may not be litigated by way of additional defendant proceedings in the tort suit brought by a personal injury plaintiff. The court observed that the evidence to establish an insurance company’s obligation is distinct from that which the personal injury plaintiff would present to establish liability against a putative insured. The proper way to resolve the coverage issue, said the court, is by a separate suit. In the case at hand, therefore, Wodarski was not able to join the Sumitomo Insurance Company as additional defendant in the Peterson state court suit.
The cross-claim that Wodarski filed against Yamaha asked for “indemnity or reimbursement against the manufacturer for any and all such liability including costs of defense.” As noted earlier, that common law claim was based on the relationship of manufacturer-retailer. The demand on Yamaha for the cost of defense was based on that premise, not the separate duty to defend set out by the terms of Sumitomo’s policy. The insurance carrier’s duty to defend is separate from any primary-secondary liability relationship between Yamaha and Wodarski.
Pennsylvania law recognizes a cause of action for a claim for reimbursement such as that of Wodarski against Yamaha. In Boiler Engineering and Supply Co. v. General Controls, Inc., 443 Pa. 44, 277 A.2d 812 (1971), the Pennsylvania Supreme Court held that one secondarily liable could recover “defense costs,” including counsel fees for trial and appeal, from the primary tortfeasor. This holding was consistent with the earlier ease of Orth v. Consumers Gas Co., 280 Pa. 118, 124 A. 296 (1924), where a property owner, only secondarily liable, recovered counsel fees, costs of printing appellate briefs, and other expenses from a gas company which was primarily responsible for personal injuries to a pedestrian.
Unquestionably under Pennsylvania law, a person may be entitled to costs of defense from more than one source, and the majority errs in failing to distinguish between the two causes of action — common law and insurance policy — available in this case.
The state court judgment resolved only the primary-secondary tort liability issue and Yamaha’s obligation to pay for Wodarski’s defense on that basis. Sumitomo’s duty to defend was neither presented nor decided in state court. See Haize v. Hanover Ins. Co., 536 F.2d 576 (3d Cir.1976). That question remains open and should be decided in the first instance by the district court.
The facts established in state court, although material to a right of indemnity under the vendor’s endorsement, do not resolve the contractual duty to defend issue. Gedeon v. State Farm Insurance makes clear that under Pennsylvania law a carrier may have a duty to defend an individual even though ultimately it is determined that no right of indemnity exists under the policy.
Since the district court in the case at hand did not rule separately on the duty to defend issue, I would remand for further proceedings to determine that matter. The point at which it became clear that the claims made against Wodarski were outside the policy remains open. The majority concludes that upon the filing of the plaintiff’s pretrial statement in state court “it was clear that the claim to be tried fell outside policy coverage.” I have some doubt on this point, but it should be decided in the first instance by the district court on remand. Even accepting the majority’s conclusion, an allowance for the three year period preceding pretrial is still at issue.
The majority asserts that the delay in demanding a defense from Sumitomo precludes any recovery for costs of defense. Under Pennsylvania law, however, delay is irrelevant when the carrier can show no resulting prejudice. Brakeman v. Potomac Ins. Co., 472 Pa. 66, 371 A.2d 193 *276(1977). Sumitomo suffered no prejudice here.
I would remand to the district court to resolve the cost of defense issue.