Court Opinion

ID: 2814944
Source: CourtListenerOpinion
Date Created: 2015-07-07 19:12:22.394036+00
Date Added: 2024-06-11T11:30:34.267076
License: Public Domain

J-E04001-14

                              2015 PA Super 146

SELECTIVE WAY INSURANCE                 :   IN THE SUPERIOR COURT OF
COMPANY,                                :        PENNSYLVANIA
                                        :
                  Appellant             :
                                        :
           v.                           :
                                        :
HOSPITALITY GROUP SERVICES, INC.;       :
HOSPITALITY GROUP SERVICES, INC.        :
t/d/b/a RAMADA INN; HOSPITALITY         :
GROUP    SERVICES,   INC.   t/d/b/a     :
RAMADA     OF    LIGONIER;      and     :
HOSPITALITY GROUP SERVICES, INC.        :
t/d/b/a  RAMADA    OF     HISTORIC      :
LIGONIER; ROGER N. ALMS; ROSE M.        :
ALMS    and   TERRI    NEMCHECK,        :
INDIVIDUALLY        AND          AS     :
ADMINISTRATRIX OF THE ESTATE OF         :
SEAN M. NEMCHECK, DECEASED,             :
                                        :
                  Appellees             :   No. 1430 WDA 2013

                    Appeal from the Order August 8, 2013,
                Court of Common Pleas, Westmoreland County,
                       Civil Division at No. 3543 of 2012

BEFORE: GANTMAN, P.J., FORD ELLIOTT, P.J.E., BENDER, P.J.E., PANELLA,
        DONOHUE, SHOGAN, MUNDY, OLSON and OTT, JJ.

OPINION BY DONOHUE, J.:                             FILED JULY 07, 2015

      Selective Way Insurance Company (“Selective”) appeals from the

August 8, 2013 order entered by the Westmoreland County Court of

Common Pleas granting the motions for summary judgment filed by the

appellees in this case.   The trial court granted the motions for summary

judgment based on its conclusion that the statute of limitations barred

Selective’s request for a declaratory judgment regarding its duty to defend
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and indemnify Hospitality Group Services Inc., Hospitality Group Services,

Inc. t/d/b/a Ramada Inn, Hospitality Group Services, Inc. t/d/b/a Ramada of

Ligonier, Hospitality Group Services, Inc. t/d/b/a Ramada of Historic

Ligonier, Roger N. Alms and Rose M. Alms (collectively, “Hospitality Group”)

in a lawsuit filed by Terri Nemcheck, individually and as administratrix of the

estate   of   Sean   M.   Nemcheck,   deceased   (“the   Nemcheck     Action”).

Specifically, the trial court found that, as a matter of law, the statute of

limitations for an insurance carrier to file a declaratory judgment action

regarding its duty to defend and indemnify its insured begins to run at the

time the insurance company receives the civil complaint in an action against

its insured. Following our review of the law in this area, we conclude that

this is an incorrect statement.   Instead, the statute of limitations for the

filing of a declaratory judgment action brought by an insurance company

regarding its duty to defend and indemnify begins to run when a cause of

action for a declaratory judgment arises. This requires a determination by

the trial court of when the insurance company had a sufficient factual basis

to support its contentions that it has no duty to defend and/or indemnify the

insured.1

1
     As stated, we hold that the statute of limitations begins to run for the
filing of a declaratory judgment action by an insurance company regarding
its duty to defend and indemnify an insured in a third party’s action when
the insurance company has a sufficient factual basis for it to conclude that
the insurance policy does not provide coverage for any of the claims raised
in the third party’s action. The learned Dissent appears to agree with this

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      A summary of the relevant facts and procedural history is as follows.

On February 19, 2006, the vehicle driven by seventeen-year-old Sean

Nemcheck left the road and struck a fence, causing debris to strike him in

the head.   The vehicle ended up submerged in a six-foot-deep pond.          He

died as a result of this accident. His blood alcohol level at the time of his

death was 0.14 g/ml. The accident occurred after he worked a shift in the

kitchen and banquet hall of the Ramada Inn in Ligonier. Sean Nemcheck’s

shift began at 11:00 a.m. on February 18, 2006 and lasted until 3:06 a.m.

on February 19, 2006. Sean Nemcheck consumed alcohol that he allegedly

obtained from the Ramada Inn during his sixteen-hour shift.

      On August 1, 2007, Terri Nemcheck (“Nemcheck”) filed the complaint

to commence the Nemcheck Action, which sounded in negligence per se,

negligent supervision/management, and ordinary negligence, and included a

claim for punitive damages. Hospitality Group had previously sent a copy of

determination. See Diss. Op. at 2 (Ford Elliott, P.J.E., dissenting) (“the
statute of limitations for filing a declaratory judgment action begins to run
when the insurer is on notice of a coverage dispute, be it upon the review of
the complaint, the completion of discovery, the ultimate resolution of the
underlying lawsuit, or any other event which would provide actual notice”).
We and the Dissent appear to disagree only with respect to this Court’s
authority to make the factual determination as to when Selective in fact had
a sufficient factual basis to conclude that it did not have a duty to defend
and indemnify Hospitality Group in the Nemcheck Action, triggering the
running of the statute of limitations for Selective to file a declaratory
judgment action. See id. 6-7, 8. Although we typically would remand the
case for the trial court to analyze and decide when Selective had a sufficient
factual basis to trigger the running of the statute of limitations, we do not do
so in this case because, as stated infra, the case is technically moot based
upon the settlement reached in the Nemcheck Action.

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the complaint to Selective, through which Hospitality Group had three

policies of insurance at the time of Sean Nemcheck’s death – a general

liability policy, a liquor liability policy, and a commercial umbrella policy.

Selective provided a defense subject to a reservation of rights.            In its

reservation of rights letter dated July 31, 2007, Selective advised Hospitality

Group that it was unsure whether it had a duty to defend and/or indemnify

Hospitality Group in the Nemcheck Action and that coverage counsel would

review the complaint and pertinent case law.

      Selective filed a complaint on June 6, 2012, and an amended

complaint on October 29, 2012, seeking a declaration that it had no duty to

defend or indemnify Hospitality Group in the Nemcheck Action. Nemcheck

and Hospitality Group filed preliminary objections to the amended complaint

on November 14 and 15, 2012, respectively, which the trial court overruled

on February 14, 2013.      Nemcheck and Hospitality Group each filed an

answer,   new   matter   and   counterclaim2   on   March   1   and   6,    2013,

respectively, asserting therein, in relevant part, that the statute of

limitations barred Selective from obtaining the relief it sought. On March 22,

2013, Selective filed replies to the new matters, denying, inter alia, that the

applicable statute of limitations barred its declaratory judgment action.

2
  The counterclaims filed by the appellees sounded in bad faith based upon
Selective’s handling of Hospitality Group’s claim. On March 15, 2013, the
parties stipulated to the discontinuance of the counterclaims.

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      On May 31, 2013 and June 4, 2013, respectively, Hospitality Group

and Nemcheck filed motions for summary judgment on several bases,

including the running of the four-year statute of limitations applicable in

declaratory judgment actions.    Selective filed its own motion for summary

judgment on June 4, 2013 and filed responses in opposition to the appellees’

motions for summary judgment on July 1, 2013. Nemcheck and Hospitality

Group filed responses to Selective’s motion for summary judgment on July 1

and 3, 2013, respectively.

      On August 8, 2013, the trial court filed an opinion and order granting

the motions for summary judgment filed by the appellees based upon its

finding that the four-year statute of limitations began to run for the filing of

a declaratory judgment action regarding Selective’s duty to defend and

indemnify Hospitality Group in the Nemcheck Action “[a]t the moment

Selective became aware of the allegations in the [c]omplaint[.]” Trial Court

Opinion and Order, 8/8/13, at 3.      It therefore found untimely Selective’s

complaint seeking a declaratory judgment, as it was filed nearly five years

after Selective received the Nemcheck complaint.        The trial court further

stated that, “based upon this determination, we [sic] need not address

whether there is liability coverage for compensatory and punitive damages

or an obligation to defend Defendants Hospitality Group under the terms of

the insurance policy.”    Id. at 4-5.      Nonetheless, in its order granting

summary judgment in favor of Nemcheck and Hospitality Group, the trial

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court stated: “It is further ORDERED that the package of policies at issue in

the [c]omplaint for [d]eclaratory [j]udgment provide coverage for the claims

made [in the Nemcheck Action.]” Id. at 7 (emphasis in the original).

      On September 5, 2013, Selective filed a notice of appeal and timely

complied with the trial court’s order for the filing of a concise statement of

errors complained of on appeal pursuant to Pa.R.A.P. 1925(b). On October

3, 2013, the trial court issued a statement in lieu of a written opinion

pursuant to Pa.R.A.P. 1925(a), stating that it adequately addressed in its

August 8, 2013 opinion and order all of the issues Selective raised on

appeal. On May 9, 2014, this Court sua sponte listed the case to be heard

before the Court en banc.

      On appeal, Selective presents the following issues for our review:

            [1.] Whether Selective Way’s complaint for
            declaratory judgment is timely within the statute of
            limitations?

            [2.] Whether unambiguous policy exclusions relieve
            Selective Way of its duty to defend and indemnify
            Hospitality Group against claims made in the
            Nemcheck Action?

Selective’s Brief at 5.

      Prior to addressing the merits of the issues raised, we must first

determine whether the issues presented in the appeal before us are moot.

Following the filing of this appeal, but prior to oral argument before this

Court en banc, Selective reached a settlement in the Nemcheck Action,

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which Nemcheck and Hospitality Group contend renders the issues on appeal

before us moot and unreviewable. Nemcheck’s Supplemental Brief at 3-11;

Hospitality Group’s Supplemental Brief (Mootness) at 3-8.           Selective

concedes that the settlement renders moot the issues raised on appeal.

Selective’s Supplemental Brief at 14.    Selective asserts, however, that its

claim regarding the timeliness of its declaratory judgment action qualifies as

an exception to the mootness doctrine, permitting this Court to decide the

issue on its merits. Id. at 15-16. Selective makes no argument regarding

the reviewability of the second issue raised on appeal concerning its duty to

defend and indemnify Hospitality Group in the Nemcheck Action.

      The mootness doctrine requires that there is an actual case or

controversy at all stages of review. Pilchesky v. Lackawanna Cnty., 88

A.3d 954, 964 (Pa. 2014).       “[A]n issue may become moot during the

pendency of an appeal due to an intervening change in the facts of the

case[.]” Id. “An issue before a court is moot if in ruling upon the issue the

court cannot enter an order that has any legal force or effect.” Johnson v.

Martofel, 797 A.2d 943, 946 (Pa. Super. 2002).       Appellate courts in this

Commonwealth have recognized three exceptions, permitting decision on an

issue despite its mootness: “1) the case involves a question of great public

importance, 2) the question presented is capable of repetition and apt to

elude appellate review, or 3) a party to the controversy will suffer some

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detriment due to the decision of the trial court.” In re D.A., 801 A.2d 614,

616 (Pa. Super. 2002) (en banc) (citations omitted).

      Selective contends that the question of the running of the applicable

statute of limitations in this case satisfies all three of the exceptions, but

specifically concentrates on the third exception, maintaining that “Selective

will suffer a detriment in a collateral legal proceeding if the order of the trial

court remains in effect.” Selective’s Supplemental Brief at 15. According to

Selective, while this case was pending on appeal, Hospitality Group initiated

a lawsuit against Selective for breach of contract and bad faith (“the

Hospitality Group Action”).3    Id. at 10.    Selective states that Hospitality

Group bases its action, in part, on Selective filing its declaratory judgment

action beyond the expiration of the applicable statute of limitations. Id. at

3
   The certified record on appeal does not contain any information relating to
the Hospitality Group Action.           Although Selective included in its
supplemental reproduced record the complaint and correspondence related
to the Hospitality Group Action, this does not allow us to consider the
documents in deciding the appeal, as we may not consider documents solely
included in the reproduced record. See Krafft v. Downey, 68 A.3d 329,
338 n.11 (Pa. Super. 2013), appeal denied, 83 A.3d 169 (Pa. 2013).
Hospitality Group, however, agrees that it filed the Hospitality Group Action
and that it alleges bad faith by Selective in its handling of Hospitality Group’s
claim regarding the Nemcheck Action. Hospitality Group’s Supplemental
Brief (Mootness) at 7. Hospitality Group further agrees that “one of the
allegations of bad faith […] is that Selective [] filed its [d]eclaratory
[j]udgment [a]ction after the expiration of the statute of limitations.” Id.
As only the existence of the collateral legal proceeding in which Hospitality
Group raises this claim is necessary for us to decide whether Selective’s
claim satisfies an exception to the mootness doctrine, the absence from the
certified record of information associated with the Hospitality Group Action
does not hamper our review.

                                      -8-
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10-11. Selective argues that “[i]f this appeal is not heard and the trial court

order stands, the issue of whether Selective untimely filed is declaratory

judgment action has been adjudicated and Selective may be liable to its

insureds for breach of contract and bad faith in the Hospitality Group

Action.” Id. at 15. Thus, Selective asserts that if the first issue it raises in

the instant appeal is dismissed as moot, “Selective would suffer detrimental

consequences in [the] collateral bad faith proceeding.” Id. at 15-16.

      Hospitality Group and Nemcheck disagree that any of the exceptions to

the mootness doctrine apply to permit this Court to review the issues raised

by Selective on appeal.    Hospitality Group acknowledges that its bad faith

action against Selective is pending and that it raises claims therein based

upon Selective filing the declaratory judgment action beyond the expiration

of the statute of limitations.       Hospitality Group’s Supplemental Brief

(Mootness) at 7. It asserts, however, that by deciding the issue of whether

the trial court erred by finding that Selective filed its declaratory judgment

action out of time in this appeal, “this Court would be rendering an advisory

opinion for the [t]rial [c]ourt to follow in deciding this particular facet of the

bad faith claim.” Id. Hospitality Group does not directly address Selective’s

claim that it would suffer a detriment in the Hospitality Group Action absent

our review of the first issue raised in the instant appeal.

      Nemcheck asserts that Selective will not suffer a detriment because of

the trial court’s decision, positing that Selective’s argument in this respect is

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“mere hyperbole.”       Nemcheck’s Supplemental Brief at 10.             Rather,

Nemcheck states that the declaratory judgment action and the Hospitality

Group Action are based on different sets of facts, governed by different legal

standards, and decided pursuant to different burdens of proof.       Id. Thus,

the trial court’s decision in the Hospitality Group Action is not “dependent

upon” the trial court’s determination in the declaratory judgment action,

which, according to Nemcheck, is what case law discussing this exception to

the mootness doctrine requires. Id. (emphasis in the original).

      Initially, we note that case law discussing the third exception to the

mootness doctrine expressly requires only that a party “will suffer some

detriment due to the trial court’s decision,” which can be “collateral legal

consequences of the court order.” In re L.Z., 91 A.3d 208, 212 (Pa. Super.

2014) (en banc) (emphasis added), rev’d on other grounds, 111 A.3d 1164

(Pa. 2015). Although Nemcheck is correct that the Hospitality Group Action

differs in many respects from the declaratory judgment action in this matter,

the legal conclusion reached by the trial court in the declaratory judgment

action – that the statute of limitations expired prior to Selective filing its

complaint – would nonetheless be binding on the trial court in the Hospitality

Group Action. “Collateral estoppel, or issue preclusion, is a doctrine which

prevents re-litigation of an issue in a later action, despite the fact that it is

based on a cause of action different from the one previously litigated.”

Griffin v. Cent. Sprinkler Corp., 823 A.2d 191, 195 n.3 (Pa. Super. 2003)

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(quoting Balent v. City of Wilkes-Barre, 669 A.2d 309, 313 (Pa. 1995))

(internal citations omitted).

            Collateral estoppel applies if (1) the issue decided in
            the prior case is identical to one presented in the
            later case; (2) there was a final judgment on the
            merits; (3) the party against whom the plea is
            asserted was a party or in privity with a party in the
            prior case; (4) the party or person privy to the party
            against whom the doctrine is asserted had a full and
            fair opportunity to litigate the issue in the prior
            proceeding and (5) the determination in the prior
            proceeding was essential to the judgment.

Weissberger v. Myers, 90 A.3d 730, 733 (Pa. Super. 2014) (citation

omitted).

      Here, the question of whether Selective filed its declaratory judgment

action out of time meets all of the elements of collateral estoppel.      It is

uncontested that in the Hospitality Group Action, Hospitality Group bases

several allegations of bad faith in its complaint upon Selective filing its

complaint for declaratory judgment after the expiration of the statute of

limitations and that the expiration of the statute of limitations was the basis

for the dismissal of the declaratory judgment action.         See Hospitality

Group’s Supplemental Brief (Mootness) at 7; Selective’s Supplemental Brief

at 10. The trial court finally decided the question of whether the applicable

statute of limitations ran prior to Selective filing its complaint in the

declaratory judgment action.    Selective (the party against which collateral

estoppel would be asserted) was a party to the declaratory judgment action

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and had a full opportunity to litigate the statute of limitations issue at that

time. Selective fully briefed its arguments and does not contend on appeal

that it was somehow denied the opportunity to present its case on the issue.

See, e.g., Spisak v. Edelstein, 768 A.2d 874, 877-78 (Pa. Super. 2001)

(finding the appellant had a full and fair opportunity to litigate issue where

the issue was raised before the trial court in a prior action, the trial court

ruled on that issue, and the appellant failed to seek reconsideration of the

trial court’s decision or file an appeal). The trial court rendered a decision

on   the   merits   of   the   statute    of   limitations   question,   which   was

unquestionably essential to its decision, as it dismissed the declaratory

judgment action on that basis.       Cf. Griffin, 823 A.2d at 195 (finding the

doctrine of collateral estoppel inapplicable on the question of whether the

statute of limitations had run as the prior order did not decide the statute of

limitations question on the merits; the court dismissed the appellants’

petition for failure to file a supporting brief).

      As the doctrine of collateral estoppel applies to the statute of

limitations question, we conclude that Selective would suffer a detriment in

the Hospitality Group Action if we were to forego appellate review of the trial

court’s decision. Absent our review of this issue, the trial court’s finding that

Selective filed its complaint in the declaratory judgment action out of time

would be binding on the trial court in the Hospitality Group Action and could

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provide a basis of liability for bad faith, as Selective would be precluded from

re-litigating this question.

      The second issue raised by Selective on appeal, regarding whether it in

fact had a duty to defend and/or indemnify Hospitality Group in the

Nemcheck Action, does not satisfy any of the exceptions to the mootness

doctrine. First, the great public importance exception is rarely invoked by

appellate courts to decide moot issues, see In re Gross, 382 A.2d 116, 122

(Pa. 1978), and in the absence of advocacy from Selective that this issue

somehow satisfies this exception to the mootness doctrine, we decline to so

find sua sponte.

      Second, the substantive question as to whether or not Selective had a

duty to defend and/or indemnify Hospitality Group is not likely to evade

review such that the second exception to the mootness doctrine applies. To

the contrary, our research reveals that this Court has previously been able

to timely decide appeals from declaratory judgment actions concerning an

insurance company’s duty to defend a policyholder based upon the language

of the insurance policy at issue. See, e.g., State Farm Fire & Cas. Co. v.

DeCoster, 67 A.3d 40 (Pa. Super. 2013); Old Guard Ins. Co. v. Sherman,

866 A.2d 412 (Pa. Super. 2004). We note that the appellate timeline in this

case was unusually lengthy because of the certification for en banc review.

      Lastly, Selective will not suffer a detriment if we do not decide the

coverage issue in this appeal.      We observe that the trial court made

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contradictory statements in its opinion and order, first stating that because it

was dismissing the declaratory judgment action on timeliness grounds, the

trial court “need not address whether there is liability coverage for

compensatory and punitive damages or an obligation to defend [] Hospitality

Group under the terms of the insurance policy.”         Trial Court Opinion and

Order, 8/8/13, at 4-5. In the same opinion and order, the trial court stated

that the insurance policies at issue “provide coverage for the claims made

[in the Nemcheck Action.]” Id. at 7. The doctrine of collateral estoppel is

inapplicable to this latter conclusion, however, because this determination

was not “essential to the judgment” in the declaratory judgment action.

See Weissberger, 90 A.3d at 733. The trial court dismissed the case based

upon its finding that the statute of limitations elapsed prior to Selective filing

its complaint.   Thus, the trial court’s statement that the policies at issue

provide coverage for the claims made in the Nemcheck Action is not binding

upon the trial court in the Hospitality Group Action, providing us no basis to

review this otherwise moot question.4

      Having found that the first issue on appeal is properly before us for

review, we now turn to address its merits. We review a trial court’s decision

4
   In its appellate brief, Selective states that it only included argument on
the second issue in an abundance of caution to avoid a finding of waiver on
appeal. Selective’s Supplemental Brief at 25. In their briefs on appeal,
Hospitality Group and Nemcheck agree that the trial court did not decide the
substantive question of whether the insurance policies at issue provide
coverage for the claims raised in the Nemcheck Action. See Hospitality
Group’s Brief at 14; Nemcheck’s Brief at 29.

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to grant summary judgment for an abuse of discretion or error of law. PHH

Mortgage Corp. v. Powell, 100 A.3d 611, 616 (Pa. Super. 2014).            Our

scope of review is plenary. Id.

     The trial court found that Selective filed its complaint for declaratory

judgment beyond the applicable four-year statute of limitations. Trial Court

Opinion and Order, 8/8/13, at 4. Relying on Aetna Cas. & Sur. Co. v. Roe,

650 A.2d 94, 100 (Pa. Super. 1994), the trial court stated that “an analysis

with respect to coverage is dependent upon the allegations in the

[c]omplaint, just as an analysis with respect to the insurer’s obligation to

defend is dependent upon the allegations in the [c]omplaint.”      Trial Court

Opinion and Order, 8/8/13, at 4.    The trial court thus concluded that the

statute of limitations began to run when Selective received the complaint in

the Nemcheck Action, as “that moment was Selective’s first opportunity to

‘compare the four corners of the insurance contract with the four corners of

the complaint,’” and that the declaratory judgment action, filed nearly five

years thereafter, was untimely. Id. at 3-4.

     Selective asserts that this conclusion constitutes an error of law.

Selective contends that the trial court confused and combined the standards

for an insurer’s duty to defend an insured and the standard for the running

of the statute of limitations for a declaratory judgment action.   Selective’s

Substituted Brief at 12.    According to Selective, an actual controversy

regarding its duty to defend did not arise in this case when it received the

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complaint in the Nemcheck Action, as it provided a defense pursuant to its

reservation of rights letter. Id. at 14. “Rather, the logical triggering point

[for the running of the statute of limitations] is when the carrier denies

coverage to the insured.” Id. at 22.

      Selective asserts that the denial of coverage also triggers the statute

of limitations for a declaratory judgment action regarding an insurance

company’s duty to indemnify.      Id.     Selective states that the trial court’s

finding that the statute of limitations had run on a declaratory judgment

action concerning Selective’s duty to indemnify Hospitality Group in the

Nemcheck Action was erroneous.          Citing case law from the United States

District Court for the Western District of Pennsylvania, Selective states that

the duty to indemnify does not arise until “the insured is held liable for a

claim actually covered by the policy.”        Id. at 21 (quoting USX Corp. v.

Adriatic Ins. Co., 99 F.Supp.2d 593, 611 (W.D. Pa. 2000), aff’d, 345 F.3d

190 (3d Cir. 2003)).

      In the alternative, Selective argues that if this Court is inclined to find

that the triggering event for the running of the statute of limitations for the

filing of a declaratory judgment action on its duty to defend and indemnify

was when Selective was aware that the claims made in the Nemcheck Action

fell outside of the coverage provided under the insurance policies, then the

statute of limitations did not begin to run until February 13, 2009 – the date

of the deposition of Matthew White (“White”).         Id. at 23.   According to

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Selective, White’s testimony at his deposition “was the first record evidence

that placed this claim outside of the coverage afforded in the [p]olicy.” Id.

      Hospitality Group agrees with the trial court’s determination regarding

when the statute of limitations began to run as to both Selective’s duty to

defend and indemnify Hospitality Group in the Nemcheck Action. Hospitality

Group’s Brief at 7-8. Hospitality Group asserts that from the standpoint of

an insurer, an actual controversy exists as to whether it has a duty to

defend and/or indemnify an insured once the insurer is aware “that certain

facts of the claim do not fit within the confines of the policy coverage

provisions.”   Hospitality Group’s Supplemental Brief at 4.        According to

Hospitality Group, in claiming that it did not have a duty to defend and/or

indemnify Hospitality Group in the Nemcheck Action, Selective relied upon

information    contained   in   Nemcheck’s    complaint   and   Selective’s    own

reservation of rights letter.     Hospitality Group’s Brief at 11-12.         Thus,

Selective’s comparison of Nemcheck’s complaint and the insurance policies

at issue “should have enabled Selective to timely file its [d]eclaratory

[j]udgment [a]ction” within four years of receiving the complaint in the

Nemcheck Action, as an actual controversy arose at that time. Id. at 12.

      Hospitality Group further asserts that the record belies Selective’s

contention that White’s deposition is an appropriate trigger for the running

of the statute of limitations on the declaratory judgment action in question.

Hospitality Group states that Selective paid the attorneys’ fees for counsel to

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represent Hospitality Group in the Liquor Code Enforcement proceeding, at

which White provided testimony that comported, in relevant part, with his

deposition testimony in the Nemcheck Action.       Id. at 12-13.     The Liquor

Code Enforcement hearing, the findings of fact by the administrative law

judge, the appeal to the Liquor Control Board, and the resolution of the de

novo appeal to the trial court all occurred more than four years prior to

Selective filing its complaint for declaratory judgment.5   Id. at 13.    Thus,

Hospitality Group argues that to the extent this Court is inclined to find that

the   complaint contained insufficient    information to    create   an actual

controversy, Selective still had all of the information it claims to have

needed more than four years prior to the filing of its declaratory judgment

action, rendering Selective’s alternative argument meritless. Id.

      Like Hospitality Group, Nemcheck agrees with the trial court’s

conclusion that the statute of limitations ran for the filing of a declaratory

judgment action concerning Selective’s duty to defend and indemnify

Hospitality Group in the Nemcheck Action.        Nemcheck’s Brief at 33-35.

Nemcheck further asserts that although an actual controversy could arise

prior to an insurance company’s receipt of a civil complaint, thus triggering

the running of the statute of limitations for a declaratory judgment action,

5
  We observe that while represented by the same counsel, Hospitality Group
further appealed this decision to the Commonwealth Court, which affirmed
the trial court’s decision in a memorandum opinion on June 18, 2009. See
Pennsylvania State Police v. Hospitality Grp. Servs., Inc., 2009 WL
9101457 (Pa. Commw. June 18, 2009).

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“the obligation of the insurer to determine whether the claim is covered

begins, at the very latest, on the date on which the complaint is received.”

Id. at 35-36 (emphasis in the original).      According to Nemcheck, “[i]f the

basis for questioning the existence of coverage is apparent from the face of

the complaint, the ability of the insurer (or the insured) to file a declaratory

judgment action begins no later than on that date, as an actual controversy

exists.” Id. at 36; see also id. at 39 (“The filing of a complaint against the

insured is the specific time at which the Pennsylvania Appellate Courts

contemplate that an insurer will make a determination of coverage and, in

the face of uncertainty, file a declaratory judgment action. See, e.g.[,] Am.

& Foreign Ins. Co. [v. Jerry’s Sport Ctr., Inc.], 2 A.3d [526,] 541-542

[(Pa. 2010)].”).    As Selective identified several bases that potentially

negated its duty to defend and/or indemnify Hospitality Group in the

Nemcheck Action in its July 31, 2007 letter, all of which were clearly

apparent on the face of the complaint, the statute of limitations for its filing

of a declaratory judgment action commenced on that date. Id. at 37.

      The law is clear that when an insured who has been sued requests

coverage under a policy of insurance, the insurer is required to accept all of

the allegations contained in the third party’s complaint as true and provide a

defense if there is a chance that the injury alleged could potentially fall

within the scope of the policy. Am. & Foreign Ins. Co., 2 A.3d at 541.

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                The 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. An insurer may
            not justifiably refuse to defend a claim against its
            insured unless it is clear from an examination of the
            allegations in the complaint and the language of the
            policy that the claim does not potentially come within
            the coverage of the policy.

Id. (internal citations omitted).   “[T]he duty to defend is not limited to

meritorious actions; it even extends to actions that are groundless, false, or

fraudulent as long as there exists the possibility that the allegations

implicate coverage.”   Id. (citations and quotation marks omitted).      “The

duty to defend persists until an insurer can limit the claims such that

coverage is impossible.”   Lexington Ins. Co. v. Charter Oak Fire Ins.

Co., 81 A.3d 903, 911 (Pa. Super. 2013) (emphasis omitted).

      Like the duty to defend, an insurance company’s duty to indemnify an

insured in a third party’s action “flow[s] from a determination that the

complaint triggers coverage.”   Gen. Acc. Ins. Co. of Am. v. Allen, 692

A.2d 1089, 1095 (Pa. 1997). The substantive duty of an insurance company

to indemnify its insured in a third party’s action, however, “arises only when

the insured is determined to be liable for damages within the coverage of

the policy.” Regis Ins. Co. v. All Am. Rathskeller, Inc., 976 A.2d 1157,

1161 (Pa. Super. 2009) (citation omitted).

      Although not required by law, a party may initiate a declaratory

judgment action for the court to make a determination of coverage of a

                                    - 20 -
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claimed injury under an insurance policy. Aetna Cas. & Sur. Co., 650 A.2d

at 99. “Declaratory judgments are nothing more than judicial searchlights,

switched on at the behest of a litigant to illuminate an existing legal right,

status or other relation.” Wagner v. Apollo Gas Co., 582 A.2d 364, 365

(Pa. Super. 1990) (citation omitted).         The Declaratory Judgments Act6

empowers courts “to declare rights, status, and other legal relations whether

or not further relief is or could be claimed,” and these declarations “have the

force and effect of a final judgment or decree.” 42 Pa.C.S.A. § 7532. To

bring a declaratory judgment action,

             there must exist an actual controversy[, as]
             [d]eclaratory judgment is not appropriate to
             determine rights in anticipation of events which may
             never occur. It is an appropriate remedy only where
             a case presents antagonistic claims indicating
             imminent and inevitable litigation.

Bromwell v. Michigan Mut. Ins. Co., 716 A.2d 667, 670 (Pa. Super.

1998).

       This Court has held that the four-year catchall statute of limitations is

appropriate for declaratory judgment actions regarding the parties’ rights

and duties under a contract. Wagner, 582 A.2d at 366; see 42 Pa.C.S.A.

§ 5525(a)(8) (stating that a four-year statute of limitations applies to “[a]n

action upon a contract, obligation or liability founded upon a writing not

6
    42 Pa.C.S.A. §§ 7531-7541.

                                     - 21 -
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specified in paragraph (7), under seal or otherwise, except an action subject

to another limitation specified in this subchapter”).

      The statute of limitations for a cause of action begins to run “from the

time the cause of action accrued.”            42 Pa.C.S.A. § 5502(a).          “In

Pennsylvania, a cause of action accrues when the plaintiff could have first

maintained the action to a successful conclusion.”         Fine v. Checcio, 870

A.2d 850, 857 (Pa. 2005).       It is clear that the legislature intended for

declaratory judgments to be subject to a limitations period.                  See

42 Pa.C.S.A. 7538(a) (stating that “[j]udicial relief based on a declaratory

judgment or decree may be granted whenever necessary or proper subject

to Chapter 55 (relating to limitation of time)”).       It provided no indication,

however, as to the appropriate limitations period for a declaratory judgment

action.

      Pennsylvania case law on this issue is scarce and provides little

guidance in the matter before us.7 Although this Court in Wagner held that

7
   Case law from other jurisdictions likewise sheds little light on the subject.
We agree with the assessment of the law provided by now-retired Judge
Charles E. Moylan, Jr., formerly of the Court of Special Appeals of Maryland,
that “[t]he case law throughout the country on this admittedly esoteric
subject is extremely skimpy.” Commercial Union Ins. Co. v. Porter
Hayden Co., 698 A.2d 1167, 1193 (Md. Ct. Spec. App. 1997). A case
decided by the California Supreme Court in 1944, followed by three of our
sister states, holds that the statute of limitations for a declaratory judgment
action begins to run when a breach occurs. Maguire v. Hibernia Sav. &
Loan Soc., 146 P.2d 673, 681 (Cal. 1944); see also Niles v. Eldridge, 828
N.W.2d 521, 526 (N.D. 2013); Commercial Union Ins. Co., 698 A.2d at
1193; W. Cas. & Sur. Co. v. Evans, 636 P.2d 111, 114-15 (Ariz. Ct. App.

                                     - 22 -
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the four-year catchall statute of limitations contained in section 5525(a)(8)

applies to declaratory judgment actions concerning the parties’ rights and

duties under a written contract, the Wagner Court did not specify when the

statute of limitations for such an action begins to run. 8   In Wagner, both

parties allegedly breached the written contract concerning the Wagners’

provision of natural gas to Apollo – Apollo in 1974 and 1975, when it failed

to pay price increases, and the Wagners in 1975, when they ceased

providing gas to Apollo, and again in 1981, when they removed their gas

meter. Wagner, 582 A.2d at 365. The parties began to correspond with

one another in or around March of 1985 about resuming the sale of gas, but

could not agree on the terms. Id. at 366-67. The Wagner Court did not

find any of the aforementioned alleged breaches or the disagreement as to

the terms of the contract triggered the limitations period for a declaratory

judgment action, as it found “no indication that a controversy arose as to the

1981). The Maguire decision states that a declaratory judgment action can
be brought prior to a breach without triggering the running of the statute of
limitations if there exists an actual controversy. Id. This does not comport
with Pennsylvania law regarding the commencement of the limitations
period. See 42 Pa.C.S.A. § 5502(a) (“The time within which a matter must
be commenced under this chapter shall be computed … from the time the
cause of action accrued[.]”); Fine, 870 A.2d at 857 (“In Pennsylvania, a
cause of action accrues when the plaintiff could have first maintained the
action to a successful conclusion.”). Furthermore, we observe that
Maryland’s adherence to Maguire’s holding in this respect is questionable.
See Allied Inv. Corp. v. Jasen, 731 A.2d 957, 967 (Md. 1999).
8
  Neither the trial court nor any party contends that the section 5525(a)(8)
four year catchall statute of limitations identified in Wagner is improper.
We therefore do not address this question.

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continued validity of the contract” at any of those times.            Id. at 367.

Rather, without specifying a date or the triggering event, the Court found

that “the present controversy ripened into a cause of action for declaratory

judgment in 1987,” which was the same year the Wagners filed their

declaratory judgment action. Id.

      The only other Pennsylvania appellate case to discuss (albeit briefly

and in a footnote) the triggering event for the running of the statute of

limitations for the filing of a declaratory judgment action is Zourelias v.

Erie Ins. Grp., 691 A.2d 963 (Pa. Super. 1997).           In that case, Zourelias

suffered injuries in a car accident that occurred in 1986. Id. at 964. The

court dismissed his personal injury suit because his attorney filed it beyond

the applicable limitations period.     Id.     Zourelias then brought a legal

malpractice action against his former attorney and obtained a judgment of

$100,000 for the attorney’s professional negligence in 1995, but the

attorney did not have insurance coverage for professional negligence and

had no known assets.     Id.    Zourelias contacted his automobile insurance

carrier that was insuring him at the time of the accident seeking $50,000.00

in underinsured or $100,000.00 in uninsured motorist benefits.           Id.     The

insurance company denied coverage.           Id.   On May 31, 1996, Zourelias

commenced     a   declaratory   judgment      action   asserting   entitlement    to

underinsured or uninsured motorist benefits from the insurance company.

Id.   The insurance company contended that the statute of limitations had

                                     - 24 -
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expired, but this Court disagreed. We stated that because a cause of action

for a declaratory judgment does not accrue until there is an actual

controversy, the statute of limitations did not begin to run in that case until

the insurance company denied the insured’s request for coverage.            Id. at

964 n.2.   We therefore found timely the declaratory judgment action filed

within four years of the insurance company denying coverage. Id.

       In the absence of a rule promulgated by our Supreme Court or a

statute stating otherwise, the statute of limitations commences to run, in

relevant part, when “the cause of action accrued.” 42 Pa.C.S.A. § 5502(a)-

(b).   In light of this clear, unambiguous directive by the Pennsylvania

Legislature, we are unable to adopt an alternative trigger for the

commencement of the statute of limitations.         See 1 Pa.C.S.A. § 1921(b)

(“When the words of a statute are clear and free from all ambiguity, the

letter of it is not to be disregarded under the pretext of pursuing its spirit.”).

       For that reason, we disagree with Selective that Zourelias is

instructive in the case at bar and that the denial of coverage is the

appropriate point to begin the limitations period for a declaratory judgment

action filed by an insurance company.       A cause of action for a declaratory

judgment accrues when an actual controversy exists between the parties.

Com., Office of Governor v. Donahue, 98 A.3d 1223, 1229 (Pa. 2014).

Our Supreme Court has stated that “[t]he court’s role in the declaratory

judgment action is to resolve the question of coverage to eliminate

                                      - 25 -
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uncertainty. If the insurer is successful in the declaratory judgment action,

it is relieved of the continuing obligation to defend.” Am. & Foreign

Ins., 2 A.3d at 542 (emphasis added).       Thus, according to our Supreme

Court, if an insurance company is uncertain about its duty to defend an

insured in a third party’s action, it is expected and anticipated that the

insurance company will bring a declaratory judgment action concerning its

duty to defend prior to denying coverage to an insured.        The denial of

coverage certainly could be when an actual controversy arises between an

insurance company and an insured, warranting the filing of a declaratory

judgment action.   See, e.g., Zourelias, 691 A.2d at 964; see also 42

Pa.C.S.A. § 7534 (“A contract may be construed [under the Declaratory

Judgments Act] either before or after there has been a breach thereof.”). It

cannot, however, be the only basis for finding an actual controversy exists

as Selective advocates. Such a holding (that the denial of coverage is the

point in time when an actual controversy arises) would eliminate an

insurance company’s ability to bring a declaratory judgment action prior to

denying or terminating the provision of a defense for an insured, which is in

direct contravention to the above-quoted statement by our Supreme Court.

     Selective’s argument that the statute of limitations for it to file a

declaratory judgment action regarding its duty to indemnify an insured in a

third party’s action should not commence until it denies coverage fails for

the same reason.    We agree with Selective that an insurance company’s

                                   - 26 -
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substantive duty to indemnify an insured in a third party’s action does not

arise until there is a verdict. See Selective’s Substituted Brief at 21; Regis

Ins. Co., 976 A.2d at 1161.         A declaration regarding an insurance

company’s duty to defend, however, is inextricably intertwined with its duty

to indemnify because both are based upon a determination of whether the

insurance policy in question provides coverage for the claims made.      See

Gen. Acc. Ins. Co. of Am., 692 A.2d at 1095 (“Although the duty to defend

is separate from and broader than the duty to indemnify, both duties flow

from a determination that the complaint triggers coverage.”); Mut. Ben.

Ins. Co. v. Haver, 725 A.2d 743, 747 (Pa. 1999) (“[I]n determining

whether a carrier has a duty to defend or indemnify an insured we look to

the complaint filed against the insured.”). If an insurance company does not

have a duty to defend an insured in a third party’s action, it cannot have a

duty to indemnify. Am. Nat. Prop. & Cas. Companies v. Hearn, 93 A.3d

880, 884 (Pa. Super. 2014).

               The question before a court in a declaratory
            judgment action is not whether the insurer owes
            indemnification in a specific amount, which would
            be a premature inquiry absent a full resolution of the
            underlying action. Instead, the question is whether
            the insurer has a duty to indemnify the insured in
            the event of liability in the underlying action. A
            court can answer such a question because it is within
            the scope of a court’s power pursuant to the
            Declaratory Judgments Act.

Id. (emphasis in the original).

                                    - 27 -
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      The question of an insurance company’s duty to indemnify an insured

in a third party’s action is properly considered in a declaratory judgment

action at the same time as the court determines whether an insurance

company has a duty to defend.        Id. at 1096.    We acknowledge that a

declaration that an insurance company has a duty to defend will yield only “a

conditional obligation to indemnify in the event the insured is held liable for

a claim covered by the policy.”    Gen. Acc. Ins. Co. of Am., 692 A.2d at

1095 (citation omitted).    Nonetheless, for purposes of determining the

triggering event for the commencement of the statute of limitations to file a

declaratory judgment action, we cannot disentangle the duty to indemnify

from the duty to defend because both relate to the question of whether the

policy provides coverage. Id.

      We also disagree with the trial court’s conclusion that the statute of

limitations for filing a declaratory judgment action necessarily began to run

on Selective’s duty to defend and indemnify Hospitality Group on the date

Selective received the complaint in the Nemcheck Action.          There is no

antagonistic claim, actual controversy, or inevitable litigation from the

insurance company’s point of view until it concludes that the claims made in

a third party’s action are “confined to a recovery that the policy does not

cover.” See Am. & Foreign Ins. Co., 2 A.3d at 542; Bromwell, 716 A.2d

at 670. Until an insurance company has a sufficient factual basis to decline

to defend (and thus, decline to indemnify) its insured in a third party’s

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action, there is no justiciable controversy for the trial court to decide, and no

cause of action for declaratory judgment. See Donahue, 98 A.3d at 1229;

Bromwell, 716 A.2d at 670.

      It is true that in some cases – including American & Foreign

Insurance Co. and Aetna Casualty & Surety Co., upon which the

appellees and the trial court rely – the receipt of the complaint by the

insurance company would trigger the running of the limitations period for

filing a declaratory judgment action regarding an insurance company’s duty

to defend and indemnify.         Common to both American & Foreign

Insurance Co. and Aetna Casualty & Surety Co. is that the respective

insurance companies made a determination based solely on the complaint or

amended complaint that the defense and indemnification requests made

were for claims that the insurance policies did not provide coverage.9 Thus,

9
    In American & Foreign, the insurance company provided the insured
with commercial liability and umbrella policies, which insured against, inter
alia, bodily injury. Am. & Foreign Insurance Co., 2 A.3d at 529. During
the coverage period, the insured was named as a defendant in a lawsuit filed
against numerous firearms wholesalers and distributers brought by the
National Association for the Advancement of Colored People and the National
Spinal Cord Injury Association. The complaint alleged that the defendants
caused bodily injury to association members and “sought injunctive relief
and monetary damages to establish a fund for the education, supervision
and regulation of gun dealers,” but not damages to compensate the
association members injured.       Id.   The insured sought defense and
indemnification, asserting that the complaint fell under the “bodily injury”
coverage provided.      Id.   The insurance company provided a defense
pursuant to a reservation of rights. Id. Several months later, following the
receipt of the fourth amended complaint in the underlying action, the
insurance company informed the insured that it did not believe it was under

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a comparison of the four corners of the complaints with the four corners of

the insurance policies in those cases promptly provided the insurers with a

basis to seek a declaration that the companies had no duty to defend or

indemnify the insureds. See Am. & Foreign Ins. Co., 2 A.3d at 529-31;

Aetna Casualty & Surety Co., 650 A.2d at 96-97, 100.

a duty to defend or indemnify and filed a declaratory judgment action for
such a declaration. Id. at 530. The trial court found that the insurance
company did not have a duty to defend – the insurance policy would
compensate a claimant for damages resulting from a physical injury, and the
complaint sought damages not for bodily injury but as a contribution to a
fund designed to educate, supervise and regulate gun dealers. Id. at 531.
As such, the trial court granted summary judgment in favor of the insurance
company, and this Court affirmed. Id.

In Aetna Casualty, the complaint at issue alleged that the insureds, a
teacher and her husband, committed unspeakable acts of sexual, physical
and mental abuse of three of the insured-wife’s four-year-old female
students. Aetna Casualty & Surety Co., 650 A.2d at 96. The victims and
their parents sought actual damages for money expended to treat the
physical and mental injuries sustained as a result of the insured’s intentional
conduct and punitive damages for the insureds’ “outrageous conduct in
wanton and reckless disregard of minor-plaintiffs’ rights.” Id. at 96-97. The
abuse allegedly occurred at the school and at the insureds’ home, and the
insureds thus sought coverage under their homeowner’s insurance policy
they had through the insurer. Id. at 97. The insurance company did not
provide a defense, and instead filed a declaratory judgment action seeking a
declaration based upon the allegations contained in the complaint. Id. at
97. After examining the insurance policy (which excluded medical payments
resulting from bodily injury expected or intended by the insured and
personal injury caused by a violation of the law) and the complaint (which,
as noted, sought actual damages for medical expenses resulting from the
insureds’ intentional conduct and punitive damages), the trial court granted
summary judgment in favor of the insurance company. Id. at 97; see also
id. at 100 (stating that as a matter of law, “an insurer owes no duty to
indemnify an insured on an award of punitive damages”). On appeal, this
Court affirmed. Id. at 100.

                                    - 30 -
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     Contrary to the trial court’s conclusion in the case at bar, however, the

receipt of the complaint does not ipso facto begin the four-year limitations

period for an insurance company to file a declaratory judgment action

regarding its duty to defend and indemnify an insured. Rather, the statute

of limitations for a declaratory judgment action brought by an insurance

company regarding its duty to defend and indemnify begins to run when a

cause of action for a declaratory judgment accrues.     See 42 Pa.C.S.A. §§

5502(a), 7538(a).   This requires a determination of when the insurance

company had a sufficient factual basis to present the averments in its

complaint for declaratory judgment that the insurance policy at issue does

not provide coverage for the claims made in the third party’s action. It is

possible for the insurance company to possess sufficient information at the

time it receives a complaint to cause the statute of limitations to begin to

run; or that may not occur until the case develops and the claim is

winnowed down to a recovery the insurance company believes is not covered

by the policy of insurance. This requires the trial court to determine when

the insurance company had a sufficient factual basis to support its

contentions (as set forth in its complaint for declaratory judgment) that it

has no duty to defend or indemnify the insured.

     In this case, the trial court made no assessment of when Selective had

sufficient information for it to reach its conclusion that the policies in

question did not provide coverage for the claims made against Hospitality

                                   - 31 -
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Group in the Nemcheck Action. The trial court decided that Selective filed its

declaratory judgment action out of time solely based upon the date Selective

received the complaint in the Nemcheck Action.        See Trial Court Opinion,

8/7/14, at 3-4.    The parties raise competing arguments regarding when

Selective had sufficient information to know that the policies of insurance did

not provide coverage for the claims raised in the Nemcheck Action. This is a

question of fact to be decided in the trial court in the first instance.     We

therefore reverse the trial court’s order granting summary judgment on that

basis.10

      We would be remiss if we failed to highlight the esoteric nature of this

decision. In the case before us, there was no determination on the merits of

whether Selective in fact had a duty to defend or indemnify Hospitality

Group in the Nemcheck Action. By finding that the statute of limitations had

run on Selective’s ability to file a declaratory judgment action, the trial court

simply foreclosed Selective from obtaining a predetermination of whether it

had a duty to provide a defense in the action or indemnification in the event

of a finding that Hospitality Group was liable. The trial court did nothing to

impair or affect Selective’s ability to decide on its own whether it had a duty

to defend and/or indemnify Hospitality Group in the Nemcheck Action.

10
    As previously stated, we do not remand this case for the trial court to
make the necessary factual determination of when Selective had a sufficient
factual basis to trigger the running of the statute of limitations because the
case is technically moot. See supra, n.1.

                                     - 32 -
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     We reiterate that an insurance company is not required to file a

declaratory judgment action prior to withdrawing its defense or refusing to

defend or indemnify an insured in a third party’s action. As stated above, a

declaratory judgment action is simply a “judicial searchlight[]” to determine

whether or not there exists a legal right, status or duty. Wagner, 582 A.2d

at 365; 42 Pa.C.S.A. § 7532. While a judicial declaration constitutes a final

determination of the legal rights and duties of the parties arising under an

insurance policy, Gen. Acc. Ins. Co. of Am., 692 A.2d at 1094; 42

Pa.C.S.A. § 7532, a declaration that the insurance company owes no duty to

defend and/or indemnify an insured in a third party’s action does little more

than protect the insurance company from a later action sounding in breach

of contract or bad faith based upon the insurance company’s refusal to

defend and/or indemnify the insured.        Thus, despite the trial court’s

conclusion that Selective filed its declaratory judgment action out of time,

Selective was free to withdraw its defense and/or refuse to indemnify

Hospitality Group in the Nemcheck Action if it determined that the insurance

policies in question did not provide coverage for the claims made.

     Order reversed. Jurisdiction relinquished.

     Gantman, P.J., Bender, P.J.E. and Judges Olson and Ott join the

Opinion.

     Ford Elliott, P.J.E. files a Dissenting Opinion in which Judges Panella

and Shogan join and Mundy, J. concurs in the result.

                                   - 33 -
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     Mundy, J. files a Dissenting Opinion.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 7/7/2015

                                   - 34 -