Court Opinion

ID: 1015989
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:42:03.055076+00
Date Added: 2024-06-11T15:38:40.799981
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 04-2293

JOSEPH TANKOVITS; ANITA TANKOVITS,

                                                         Plaintiffs,

           and

SCOTTSDALE INSURANCE COMPANY,

                                   Intervenor/Plaintiff - Appellee,

           versus

DEL SUPPO, INCORPORATED,

                                  Intervenor/Defendant - Appellant.

Appeal from the United States District Court for the Northern
District of West Virginia, at Wheeling. Frederick P. Stamp, Jr.,
District Judge. (CA-03-69)

Argued:   March 17, 2005                   Decided:   April 29, 2005

Before KING and GREGORY, Circuit Judges, and HAMILTON, Senior
Circuit Judge.

Vacated and remanded by unpublished per curiam opinion.

ARGUED: Patrick Joseph McDermott, MCDERMOTT & BONENBERGER,
P.L.L.C., Wheeling, West Virginia, for Appellant. Renatha Susan
Garner, MACCORKLE, LAVENDER, CASEY & SWEENEY, P.L.L.C., Charleston,
West Virginia, for Appellee.       ON BRIEF: Heather M. Wright,
MACCORKLE, LAVENDER, CASEY & SWEENEY, P.L.L.C., Morgantown, West
Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

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PER CURIAM:

       This appeal presents an insurance coverage dispute between

Scottsdale Insurance Company (Scottsdale) and its insured Del

Suppo, Inc. (Del Suppo), a swimming pool contractor.   The primary

issue on appeal is whether the complaint in a civil action filed

against Del Suppo by its customers Joseph and Anita Tankovits (the

Tankovitses) triggered liability coverage (i.e., duties to defend

and indemnify) under the “Professional Liability Coverage Part” of

the insurance policy that Scottsdale had issued to Del Suppo for

the policy period February 28, 2001 to February 28, 2002.    (J.A.

36).    We resolve this issue in favor of Del Suppo, and therefore,

vacate the district court’s grant of summary judgment in favor of

Scottsdale and remand for further proceedings consistent with this

opinion.

                                 I.

       A.   The Insurance Policy At Issue.

       Scottsdale, an Ohio corporation with its principal place of

business in Arizona, issued an insurance policy in Pennsylvania to

Del Suppo for the policy period February 28, 2001 to February 28,

2002 (the Policy).     The first page of the Policy is entitled

“COMMON POLICY DECLARATIONS,” and it specifies that the Policy

“consists of the following coverage parts for which a premium is

indicated.”    (J.A. 36).   The declarations page then proceeds to

                                - 3 -
list   seven     separate   coverage     parts:      (1)    Commercial      General

Liability Coverage Part; (2) Commercial Property Coverage Part; (3)

Commercial      Crime    Coverage   Part;   (4)     Commercial     Inland       Marine

Coverage Part; (5) Commercial Auto (Business Auto or Truckers)

Coverage    Part;    (6)    Commercial     Garage    Coverage     Part;    and    (7)

Professional      Liability     Coverage    Part.      With      respect    to    the

Commercial General Liability Coverage Part, under the heading

“Premium,” the declarations page states “$              3,691       .”    Id.    With

respect to the Professional Liability Coverage Part, under the

heading “Premium,” the declarations page states “$                 INCLUDED         .”

Id.    With respect to the other five listed coverage parts, under

the heading “Premium,” the declarations page states “$                            NOT

COVERED     .”    (J.A. 36).

       The Commercial General Liability Coverage Form, which is the

part of the Policy detailing the terms, conditions, and exclusions

of the Commercial General Liability Coverage Part, provides that

Scottsdale agrees to pay those sums that Del Suppo “becomes legally

obligated to pay as damages because of ‘bodily injury’ or ‘property

damage’    to    which   this   insurance    applies.”        (J.A.      45).     The

Commercial General Liability Coverage Form further provides that

Scottsdale will have the “right and duty to defend” Del Suppo

“against any ‘suit’ seeking those damages.”                Id.

       According to the Commercial General Liability Coverage Form,

“[t]his insurance applies to ‘bodily injury’ and ‘property damage’

                                     - 4 -
only if: (1) The ‘bodily injury’ or ‘property damage’ is caused by

an ‘occurrence’ that takes place in the ‘coverage territory’; and

(2) The ‘bodily injury’ or ‘property damage’ occurs during the

policy period.”      (J.A. 45).     The General Liability Coverage Form

defines   the   term     “occurrence”     as:    “an   accident,    including

continuous or repeated exposure to substantially the same general

harmful conditions.”       (J.A. 56).

     Of relevance in the present appeal, the Commercial General

Liability     Coverage    Form    specifies     numerous   exclusions      from

coverage, including an exclusion for bodily injury or property

damage for which Del Suppo is obligated to pay “by reason of the

assumption of liability in a contract or agreement” (the Contract

Exclusion).     (J.A. 45).       Another exclusion excludes coverage of

property damage to “[t]hat particular part of any property that

must be restored, repaired or replaced because ‘your work’ was

incorrectly performed on it” (the Property Damage Caused By Your

Work Exclusion).     (J.A. 48).     Additionally, the Commercial General

Liability Coverage Form excludes coverage of property damage to Del

Suppo’s product “arising out of it or any part of it” (the Damage

To Your Product Exclusion) and to Del Suppo’s work “arising out of

it or any part of it and included in the ‘products-completed

operations hazard’” (the Damage to Your Work Exclusion).             Id.

     At the heart of the dispute on appeal is an endorsement to the

Policy    entitled     “ERRORS   AND    OMISSIONS   EXTENSION”     (the    E&OE

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Endorsement).      (J.A. 62).       The E&OE Endorsement is reproduced as

follows:
            THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

                  ERRORS AND OMISSIONS EXTENSION

     This endorsement modifies insurance provided under the following:

            COMMERCIAL GENERAL LIABILITY COVERAGE PART

     Description of Operations:      SWIMMING POOL CONTRACTOR

     In consideration of an additional premium, and subject to the
     conditions and exclusions in the coverage form, the coverage
     afforded by this endorsement shall apply to sums which you shall
     become legally obligated to pay as a result of “bodily injury” or
     “property damage” due to any negligent act, error or omission
     committed during the policy period in the conduct of the operations
     shown above, whether committed by you or by any person for whom you
     are legally responsible.

     Additional Premium: $        INCL

Id. Notably, this endorsement makes no mention of the Professional

Liability Coverage Part.

     In remarkable contrast to the Commercial General Liability

Coverage Part, the Policy does not contain a corresponding coverage

form with respect to the Professional Liability Coverage Part.

Indeed, besides the declarations page, the only two places the

phrase “professional liability” is mentioned in the Policy are:

(1) in the “PROFESSIONAL LIABILITY DEDUCTIBLE ENDORSEMENT,” which

endorsement sets the deductible “under the PROFESSIONAL LIABILITY

Coverage” at $500 per claimant (J.A. 63); and (2) the “NUCLEAR

ENERGY     LIABILITY     EXCLUSION        ENDORSEMENT,”       which      lists   the

                                         - 6 -
Professional Liability Coverage Part as one of the coverage parts

modified by that endorsement.

     B.   The Litigation.

     Pursuant to a written contract executed on May 17, 2001, the

Tankovitses contracted with Del Suppo for Del Suppo to construct

and install an in ground swimming pool and related improvements

(e.g., sidewalk) at their home in Ohio County, West Virginia.

Highly dissatisfied with the completed project, on May 16, 2003,

the Tankovitses brought a civil action against Del Suppo in the

United States District Court for the Northern District of West

Virginia, based upon diversity jurisdiction.1        28 U.S.C. § 1332.

The Tankovitses’ complaint alleged two causes of action:              (1)

breach of contract; and (2) negligent performance.      Both causes of

action involved allegations of poor workmanship on the part of Del

Suppo in constructing/installing the in ground swimming pool and

related improvements at the Tankovitses’ home in West Virginia. In

the negligence cause of action, the Tankovitses alleged that Del

Suppo had held itself out as having special knowledge and expertise

in the construction and installation of swimming pools and related

improvements.    The   Tankovitses’     complaint   alleged   no   bodily

injuries and sought damages in excess of $75,000 “sufficient to

compensate [them] for their damages as a consequence of [Del

     1
      The Tankovitses are citizens and residents of West Virginia,
while Del Suppo is a Pennsylvania corporation with its principal
place of business in Donora, Pennsylvania.

                                - 7 -
Suppo’s] negligence and breach of contract, together with both pre-

judgment and post judgment interest, costs and attorney fees as

allowed by law.”      (J.A. 14).

     On November 10, 2003, pursuant to Federal Rule of Civil

Procedure 24, Scottsdale moved to intervene in the Tankovitses’

civil action against Del Suppo in order to file a complaint for a

declaratory judgment declaring that Scottsdale “has no duty to

defend or to provide coverage in connection with the allegations

and claims asserted against Del Suppo, Inc., by the Plaintiffs

herein . . . .”        (J.A. 96).       Scottsdale’s proposed intervenor

complaint also sought an award of attorney fees and costs from Del

Suppo.     On    December     18,    2003,    the    district      court    granted

Scottsdale’s motion to intervene.

     Scottsdale subsequently filed a motion for summary judgment.

In its Memorandum of Law in support of its motion for summary

judgment, Scottsdale argued that coverage was unavailable under the

Commercial General Liability Coverage Part because:                        “(1) the

damages   alleged     by    the    Tankovitses      were    not    caused    by    an

‘occurrence’ as that term is defined in the policy; and (2) the

claims asserted by the Tankovitses are essentially contractual in

nature, and coverage for contractual liability is specifically

excluded, as is coverage for business risks, such as defective

construction.”      (J.A.     116).     Scottsdale         asserted   that    under

applicable   choice    of    law    rules,    Pennsylvania        substantive     law

                                      - 8 -
governed its coverage dispute with Del Suppo because the Policy was

issued in Pennsylvania. Scottsdale presented no argument regarding

the availability of coverage under the Professional Liability

Coverage Part of the Policy.

     In     its    responsive     memorandum,        Del     Suppo    agreed      that

Pennsylvania       substantive     law     applied      to    the    dispute,      but

nonetheless opposed Scottsdale’s motion for summary judgment on two

grounds.    First, Del Suppo argued that coverage existed under an

endorsement to the Commercial General Liability Coverage Form

entitled “BROADENED PROPERTY DAMAGE COVERAGE FOR SWIMMING POOLS.”

(J.A. 70).        Second, and of specific relevance in the present

appeal, Del Suppo argued that the allegations in the Tankovitses’

complaint    triggered       coverage    under    the   Professional       Liability

Coverage Part, which had no limiting language or exclusions as

compared to the Commercial General Liability Coverage Part.                         In

support of its claim of coverage under the Professional Liability

Coverage Part, Del Suppo focused upon the allegations in the

Tankovitses’ complaint alleging that it had held itself out as

having special knowledge and expertise in the construction and

installation      of   swimming   pools    and     related    improvements,       but

negligently constructed and installed the swimming pool and related

improvements at the Tankovitses’ home.

     In     its    Reply     Memorandum,        Scottsdale     argued      that    the

allegations       in   the   complaint   triggered      neither      the   broadened

                                        - 9 -
property damage endorsement nor the Professional Liability Coverage

Part.    With respect to the Professional Liability Coverage Part,

Scottsdale      took     the     position     that     the     E&OE     Endorsement

unambiguously     constitutes      the   whole    of   professional       liability

coverage under the Professional Liability Coverage Part.                        Then,

because the E&OE Endorsement expressly provides that any coverage

provided under it is “subject to the conditions and exclusions in

the    [Commercial     General    Liability]     coverage      form,”    Scottsdale

contended that coverage under the E&OE Endorsement was excluded in

this case by the Contract Exclusion, the Property Damage Caused By

Your Work Exclusion, the Damage To Your Product Exclusion, and/or

the Damage To Your Work Exclusion.

       The district court granted Scottsdale’s motion for summary

judgment.      The district court held that no coverage existed under

the    Commercial      General    Liability     Coverage      Part    because    the

Tankovitses’     complaint       did   not   allege    facts    constituting      an

“occurrence” as that term is defined in the Commercial General

Liability Coverage Form.          Alternatively, the district court held

that     the    Contract       Exclusion     applied     to     deny      coverage.

Additionally, the district court held that no coverage existed

under the broadened property damage endorsement to the Commercial

General Liability Coverage Part. With respect to Del Suppo’s claim

of coverage under the Professional Liability Coverage Part, the

district court agreed with Scottsdale’s position that the E&OE

                                       - 10 -
endorsement constituted the sum total of professional liability

coverage provided under the Policy and under such endorsement, no

coverage existed.

     The district court entered judgment in favor of Scottsdale on

September 7, 2004.        The Tankovitses subsequently settled their

claims    against   Del   Suppo,   resulting   in   the    district   court

dismissing the entire action with prejudice on October 25, 2004.

This timely appeal followed.

                                    II.

     We review the district court’s grant of summary judgment in

favor of Scottsdale de novo.       Higgins v. E.I. DuPont de Nemours &

Co., 863 F.2d 1162, 1166-67 (4th Cir. 1988).              Accordingly, the

questions before us on de novo review are whether any genuine

issues of material fact exist for the trier of fact, and if not,

whether Scottsdale was entitled to judgment as a matter of law.

Fed. R. Civ. P. 56(c).

                                    III.

     A.     Arguments by the Parties.

     On appeal, Del Suppo does not challenge the district court’s

finding of no coverage under the Commercial General Liability

Coverage Part.      Rather, Del Suppo takes issue solely with the

district court’s finding of no coverage under the Professional

                                   - 11 -
Liability Coverage Part.             According to Del Suppo, the Policy is

ambiguous      regarding     the     scope   of   coverage      provided      by   the

Professional Liability Coverage Part, and therefore, under the

well-settled rule of Pennsylvania law that any ambiguity in an

insurance   policy      must    be    construed    against      the   drafter,     the

district court should have construed the ambiguity in favor of

liability   coverage       in   this   case.      As    part    of    its   ambiguity

argument,   Del      Suppo    contends   that     any   potential      professional

liability coverage under the E&OE Endorsement is illusory at best

because the endorsement is gutted by the qualifying language making

it   subject    to   the     terms,    conditions,      and    exclusions     of   the

Commercial General Liability Coverage Form.

      On appeal, Scottsdale continues to adhere to its position that

the E&OE Endorsement unambiguously constitutes the sum total of

professional liability coverage under the Policy, and the same

exclusions which apply to deny coverage under the Commercial

General Liability Coverage Part apply equally to deny Del Suppo

coverage under the Professional Liability Coverage Part. Moreover,

Scottsdale denies that coverage under the E&OE Endorsement is

illusory.   In this regard, Scottsdale proffers that coverage under

the E&OE Endorsement would be triggered by an allegation that Del

Suppo   negligently        designed    the   swimming     pool,      and    that   such

negligent design work proximately caused bodily injury. Scottsdale

also asserts that the E&OE Endorsement modifies the Commercial

                                       - 12 -
General Liability Coverage Form to provide coverage for any bodily

injury or property damage occurring after expiration of the Policy

on February 28, 2002, as long as the alleged error or omission on

the part of Del Suppo that allegedly caused the bodily injury or

property damage took place during the policy period.                At oral

argument, Scottsdale characterized this circumstance as turning the

Policy into a “claims made” policy as opposed to an “occurrence”

policy.

     B.     Applicable Law.

     Under   Pennsylvania     substantive   law,   which    Del   Suppo   and

Scottsdale agree governs resolution of their coverage dispute,

“[t]he task of interpreting a contract is generally performed by a

court rather than by a jury.      The goal of that task is, of course,

to ascertain the intent of the parties as manifested by the

language of the written instrument.”        Standard Venetian Blind Co.

v. American Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983).                If

language of an insurance policy is clear and unambiguous, the role

of the court is to enforce the policy as written.            Gene & Harvey

Builders, Inc. v. Pennsylvania Mfrs.’ Ass’n, 517 A.2d 910, 913 (Pa.

1986).    However, if language in an insurance contract is ambiguous

the ambiguity must be construed in favor of the insured and against

the insurer as the drafter. Id.; Fleishman v. General Am. Life Ins.

Co., 839 A.2d 1085, 1088 (Pa. Super. Ct. 2003).            The existence or

nonexistence of ambiguity in an insurance contract presents a

                                  - 13 -
question of law.      Herr v. Grier, 671 A.2d 224, 226            (Pa. Super. Ct.

1995).      “[C]ontractual terms are ambiguous if they are subject to

more    than    one   reasonable     interpretation        when   applied   to   a

particular set of facts.” Madison Constr. Co. v. Harleysville Mut.

Ins. Co., 735 A.2d 100, 106 (Pa. 1999).               Notably, a court must not

“distort the meaning of the language or resort to a strained

contrivance in order to find an ambiguity.”                Id.

       C.      Analysis.

       Here, the overarching question before us on appeal is whether

the Policy, when applied to the particular set of facts in this

case, is ambiguous regarding the scope of professional liability

coverage.       We answer this question in the affirmative.

       The structure and language of the Policy, when applied to the

facts of this case, no doubt create ambiguity regarding the scope

of liability coverage provided Del Suppo under the Professional

Liability Coverage Part of the Policy.                  First, the declarations

page expressly lists the Professional Liability Coverage Part as a

separate     coverage      part   from    the     Commercial   General   Liability

Coverage Part.        This makes sense given that, as a general rule,

professional liability insurance coverage is tailored to provide

coverage for special risks inherent in the specific profession of

the insured, while commercial general liability insurance coverage

is meant to cover risks generally borne by anyone in a commercial

enterprise. See generally Stevenson v. Hamilton Mut. Ins. Co., 672

                                         - 14 -
N.E.2d 467, 473 (Ind. Ct. App. 1996); Crum and Forster Managers

Corp. v. Resolution Trust Corp., 620 N.E.2d 1073, 1078 (Ill. 1993);

1 Lee R. Russ & Thomas F. Segalla, Couch on Ins. § 1:35 (3d Ed.

Nov. 2004); 9 Lee R. Russ & Thomas F. Segalla, Couch on Ins.

§ 131:38 (3d      Ed. Nov. 2004).   At bottom, the separate listings and

the commonly understood distinct natures of these two types of

liability     coverages     strongly     suggest      that        the    Professional

Liability Coverage Part covers risks distinctively different from

the Commercial General Liability Coverage Part.

     At    this    point,   we   observe      that    the      Commercial     General

Liability Coverage Part has a corresponding coverage form.                      Such

form is quite lengthy and details, through various definitions,

provisions,    and    exclusions,      the    scope       of   liability    coverage

provided Del Suppo under the Commercial General Liability Coverage

Part.     Given this circumstance, one would reasonably expect the

Professional      Liability   Coverage       Part    to    have    a    corresponding

coverage form.       As previously explained, it               does not.     Indeed,

with little substantive content, the phrase “Professional Liability

Coverage” is mentioned in only two other parts in the Policy--in

the Professional Liability Deductible Endorsement and the Nuclear

Energy Liability Exclusion Endorsement.

     Seeking to explain this obvious structural difference in the

Policy, Scottsdale points us to the E&OE Endorsement and claims

that it unambiguously constitutes the sum total of the professional

                                    - 15 -
liability      coverage   provided     under    the   Policy.      In    support,

Scottsdale relies upon the proposition, undisputed by Del Suppo,

that     “errors    and   omissions”      coverage      is     synonymous    with

“professional liability” coverage.              See, e.g., 9 Couch on Ins.

§ 131:38 (3d Ed. 2004).

       Assuming arguendo that Scottsdale’s interpretation of the

Policy    is   a   reasonable   one,    an     at   least    equally   reasonable

interpretation exists which provides Del Suppo liability coverage

with respect to the Tankovitses’ complaint.                     Such reasonable

interpretation is that the E&OE Endorsement does not provide the

sum total of liability coverage under the Professional Liability

Coverage Part, and, in fact, the Tankovitses’ complaint triggers

coverage under such part.        First, the E&OE Endorsement specifies

that it modifies the Commercial General Liability Coverage Part,

but makes no mention of modifying or limiting the Professional

Liability Coverage Part.        Second, the E&OE Endorsement describes

itself as an “EXTENSION.”        Third, the E&OE Endorsement subjects

itself to the same conditions and exclusions in the Commercial

General Liability Coverage Form.             These three circumstances taken

together strongly suggest that the E&OE Endorsement, at most,

modifies the Commercial General Liability Coverage Part to extend,

in some way, the time period of liability coverage already provided

                                     - 16 -
under that part, but covers the same types of risks covered by the

Commercial General Liability Coverage Part.2

      Because     professional      liability       coverage     is    generally

understood to provide coverage for special risks inherent in the

specific profession of the insured, see generally Stevenson, 672

N.E.2d at 473; Crum and Forster Managers Corp., 620 N.E.2d at 1078;

1 Couch on Ins. § 1:35; 9 Couch on Ins. § 131:38,                       one may

reasonably      interpret    the   Policy’s     separate     listing    of   the

Professional Liability Coverage Part as providing coverage for

risks not covered by the Commercial General Liability Coverage Part

and its endorsements. Thus, at least one reasonable interpretation

of the Policy is that Del Suppo is covered for all bodily injury

and property damage claims arising from its negligence, errors,

and/or omissions in the execution of its professional work, i.e.,

in   the   construction     of   swimming   pools    and   the   walkways    that

surround swimming pools. Cf. McCarthy v. Bainbridge, 739 A.2d 200,

203 (Pa. Super. Ct. 1999) (“Medical malpractice liability insurance

provides coverage for amounts the insured (i.e., the doctor) is

held legally liable to pay others because of the doctor’s own

      2
      We agree with Del Suppo that the express language in the E&OE
Endorsement providing that “the coverage afforded by this
endorsement” is “subject to the conditions and exclusions in the
[Commercial General Liability] coverage form,” appears to eliminate
the potential for any coverage under the E&OE Endorsement, thus
making coverage under such endorsement illusory.         Given our
ambiguity analysis, however, we need not actually decide whether
coverage under the E&OE Endorsement is illusory.

                                    - 17 -
negligence and the harm it caused.”), aff’d, 774 A.2d 1246 (Pa.

2001).

     Because the language of the Policy regarding the scope of

professional     liability       coverage      provided      by   the    Policy,        when

applied    to   the    present    set     of     facts,    is   susceptible        of    two

reasonable      interpretations         (one     favoring       Scottsdale    and        one

favoring Del Suppo), the Policy is ambiguous regarding the scope of

the Professional Liability Coverage Part. Madison Constr. Co., 735

A.2d at 106.     Here, the Tankovitses’ complaint:                  (1) alleges that

Del Suppo held itself out as having special knowledge and expertise

in the construction and installation of swimming pools and related

improvements;      and     (2)    alleges        that     Del     Suppo’s    negligent

performance of its various professional duties in connection with

the construction and installation of the swimming pool and related

improvements at their home in West Virginia caused them to suffer

property    damage.       We     have    no    trouble     concluding       that    these

allegations     fall     squarely       within    the     concept   of   professional

liability coverage which is embodied, without limitation, in the

Policy as the Professional Liability Coverage Part listed on the

declarations page.          Because Pennsylvania law requires that we

construe ambiguous policy language against the insurer as the

drafter of the policy and in favor of the insured, Gene & Harvey

Builders, Inc., 517 A.2d at 913; Fleishman, 839 A.2d at 1088, we

hold that the Tankovitses’ complaint triggers liability coverage

                                         - 18 -
(i.e., duties to defend and indemnify) under the Professional

Liability Coverage Part of the Policy. Accordingly, Scottsdale, as

a   matter   of   law,   is   not   entitled   to   a   declaratory   judgment

declaring that it “has no duty to defend or to provide coverage in

connection with the allegations and claims asserted against Del

Suppo, Inc., by the Plaintiffs herein . . . .”               (J.A. 96).   We,

therefore, vacate the judgment in favor of Scottsdale and remand

for further proceedings consistent with this opinion.

                                                        VACATED AND REMANDED

                                     - 19 -