Court Opinion

ID: 6316679
Source: CourtListenerOpinion
Date Created: 2022-02-23 15:02:26.75418+00
Date Added: 2024-06-11T09:00:30.481328
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

       COMMERCE ASSOCIATES, LP,                      )
                                                     )
                  Plaintiff,                         )
                                                     )
                           v.                        )   C.A. No. N18C-01-303 EMD
                                                     )
       HANOVER INSURANCE COMPANY,                    )
                                                     )
                   Defendant.                        )

                                    Submitted: November 12, 2021
                                     Decided: February 22, 2022

                          Upon Defendant’s Motion for Summary Judgment
                                             DENIED
       Upon Plaintiff’s Motion for Summary Judgment on the Issue of Hanover’s Duty to Defend
                                            GRANTED

Paul D. Sunshine, Esquire, Reger Rizzo & Darnell, LLP, Wilmington, Delaware, James L.
Griffith, Jr., Esquire, Reger Rizzo & Darnell, LLP, Philadelphia, Pennsylvania, Attorneys for
Plaintiff Commerce Associates, LP.

William A. Crawford, Esquire, Franklin & Prokopik, Newark, Delaware, Attorney for Defendant
Hanover Insurance Company.

DAVIS, J.

                                      I.      INTRODUCTION

           This is a breach of contract action involving two insurance policies (the “Insurance

Policies”). Defendant Hanover Insurance Company (“Hanover”) issued the Insurance Policies.

Plaintiff Commerce Associates, LP (“CALP”) commenced this action against Hanover on

January 24, 2018.1 CALP asserts that Hanover breached the Insurance Policies by not defending

or indemnifying CALP in a lawsuit brought by Aldo Patrone (the “Underlying Litigation”). In

the Underlying Litigation, Mr. Patrone sued CALP, alleging that he was injured while working

1
    D.I. No. 1.
on an HVAC system in a property owned by CALP. CALP denies any negligence and further

denies that its actions or inactions proximately caused Mr. Patrone’s alleged injuries. CALP

asserts that Hanover has breached its obligations under the Insurance Policies by refusing to

defend and indemnify CALP. CALP filed an amended complaint for declaratory judgment on

April 23, 2018.2

        On July 16, 2021, Hanover filed Defendant’s Motion for Summary Judgment (the

“Hanover Motion”).3 Hanover argues that that CALP is not an insured or additional insured

under the Insurance Policies and, as such, is excluded from coverage in relation to the

Underlying Litigation. On August 13, 2021, CALP filed (i) Opposition of Plaintiff to Hanover’s

Motion for Summary Judgment;4 and (ii) Plaintiff Motion for Summary Judgment on the Issue of

Hanover’s Duty to Defend (the “CALP Motion”).5 On September 1, 2021, Hanover filed its

Opposition to Plaintiff’s Motion for Summary Judgment.6 The Court held a hearing on the

Hanover Motion and the CALP Motion on November 12, 2021.7 At the conclusion of the

hearing, the Court took both motions under advisement.

        This is the Court’s decision on the motions. For the reasons set forth more fully below,

the Hanover Motion is DENIED and the CALP Motion is GRANTED.

                                  II.    RELEVANT FACTS

    A. THE PARTIES

        CALP is a limited partnership formed in State of Delaware which does business at One

Commerce Center, 1201 North Orange Street, Wilmington, Delaware.8 CALP was formed in

2
  D.I. No. 15.
3
  D.I. No. 56.
4
  D.I. No. 57.
5
  D.I. No. 58.
6
  D.I. No. 59.
7
  D.I. No. 60.
8
  Am. Compl. ¶ 1.

                                                2
1981.9 “CALP does business as Stat Office Solutions and Stat International.”10 “CALP’s

business is under the ‘exclusive management’ of its general partner, Commerce Building, Inc.

(CBI).”11 Richard Stat is the sole director, sole officer, and the chief executive officer of CBI.12

        Hanover is an insurance company authorized to do business in the State of Delaware.13

    B. ONE COMMERCE CENTER

        CALP acquired real property in 1981 and “caused an eleven-story commercial office

building (One Commerce Center []) to be erected.”14 “In 1983 CALP, by Declaration, caused

[One Commerce Center] to become a commercial condominium subject to the Delaware Unit

Property Act (DUPA), 25 Del. C. § 2201 et seq.”15 One Commerce Center is comprised of

common elements and units.16 There are eleven office units, “each of which fully occupies its

own elevated floor in the building.”17 Governmental or commercial entities own each unit at

One Commerce Center.18 CALP owns four units which are located on floors seven, eight, nine,

and ten.19

9
  Opposition of Plaintiff Commerce Associates L.P. to Hanover’s Motion for Summary Judgment (hereinafter
“CALP’s Opp.”) at 1.
10
   CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶ 6; Defendant’s Motion for Summary Judgment (hereinafter
“Hanover’s Mot.”), Ex. A (Patrone Third Am. Compl.) ¶ 2.
11
   CALP’s Opp. at 1 (citing CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶¶ 1-2).
12
   CALP’s Opp. at 2 (citing CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶¶ 1-2).
13
   Am. Compl. ¶ 2.
14
   CALP’s Opp. at 2 (citing CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶¶ 7-9; Ex. 5; Ex. 6 (One Commerce
Center Declaration) at Sched. 2.2).
15
   CALP’s Opp. at 2 (citing CALP’s Opp., Ex. 6 (One Commerce Center Declaration)). Hanover argues that this
assertion is “contrary to the facts and the exhibits submitted by CALP” and that the argument is beyond the scope of
Hanover’s Motion and as such, should be struck by the Court. Defendant’s Opposition to Plaintiff’s Motion for
Summary Judgment (hereinafter “Hanover’s Opp.”) at 2, fn. 6.
16
   CALP’s Opp., Ex. 6 (One Commerce Center Declaration) § 5 and Sched. 5.1 and 5.2.
17
   Id.
18
   See Hanover’s Mot., Ex. D at 30, #4.
19
   Id.

                                                         3
     C. THE CONDOMINIUM COUNCIL

        The One Commerce Center Code of Regulations (the “Code of Regulations”) governs

administration and management of the One Commerce Center.20 The Code of Regulations set

forth the rights and duties of the condominium owners, including CALP, and One Commerce

Center Condominium Council (the “Council”).21 Relevant to the present matters, the Code of

Regulations provide:

                                                   ARTICLE IV

                  ELECTION OF COUNCIL MEMBERS, TERM AND LIABILITY

        4.1 Number, Qualification, and Compensation
        …
        4.1.2 Elected by Unit Owners. After the Organizational meeting there shall be as
        many members of Council as there are unit owners each of whom shall be appointed
        as a member of Council by the respective unit owner.

        4.1.3 Qualification. All Council members shall be either residents of the of the
        State of Delaware or unit owners, or duly elected officers or general partners of unit
        owners, and shall be bondable. A newly elected Council member shall qualify for
        office by attending the annual meeting of the Council.22
        …

        4.5 Liability of Council Members

        4.5.1 Disclosed Agents. The status of Council members in exercising their powers
        as established under the Declaration, Code of Regulations, Rules of Conduct, and
        the Delaware Unit Property Act, all as amended from time to time, shall be that,
        and solely that, of disclosed agent. . . .23

CALP became a member of the Council in 1983 and as owner of four units has about 37% of the

voting power.24

20
   Am. Compl. ¶ 4.
21
   Id.
22
   CALP’s Opp., Ex. 7 (hereinafter “Code of Regulations”) at 10.
23
   Id. at 12.
24
   CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶¶ 11-12. See also CALP’s Opp., Ex. 6 (One Commerce Center
Declaration) at Sched. 5.3.

                                                      4
     D. OWNERSHIP AND MAINTENANCE OF HVAC COMPONENTS

        The Council has exclusive maintenance and repair responsibility of commonly owned

HVAC components.25 The commonly owned HVAC components include “[a]ny mechanical

units which service either all units or the Common Elements, such as central cooling tower,

boiler, common circulating pumps, pipes or wires up to branch line service.”26 However, “[a]ll

HVAC equipment and all pipes, wires, ducts and cables which service only one Unit are part of

that Unit, wherever same are located.”27

        The Code of Regulations allows unit-owners to ask the Council to arrange for

maintenance of unit HVAC components.28 The Code of Regulations section 7.3.2 “Unit

Maintenance by Council” states:

        Notwithstanding that all cleaning, repairs, maintenance, and replacements required
        in connection with any unit exclusive of common elements shall be the
        responsibility of the various unit owners, the Council may, at its option, undertake
        to arrange for cleaning, repairs, maintenance, and replacements which are the unit
        owner’s responsibility if the unit owner so requests and deposits with the Council
        in advance an amount of money estimated by the Council as being sufficient to
        meet the cost of the work to be done. Any excess will be refunded, and any
        deficiency will be assessed, to the unit owner. . . .29

        Since 1991, at the request of CALP and the unit owners, the Council agreed to arrange

for maintenance of the building’s 62 unit-owned heat pumps and on all common HVAC

equipment.30 The Council prepared budgets showing the cost of payments to heat pump

25
   Code of Regulations at 17-20, §§ 7.1.1 – 7.2.2.
26
   CALP’s Opp., Ex. 6 (One Commerce Center Declaration) at Sched. 5.2.
27
   Id. at Sched. 5.1.
28
   Code of Regulations at 21-22, § 7.3.2.
29
   Id.
30
   CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶ 13; CALP’s Opp., Ex. 8 (1991 and 1992 Council Meeting
Minutes) at CALP HAN 00159 and 00165. See also CALP’s Opp., Ex. 11 (showing Council’s payments to HVAC
vendors dating back to 2001).

                                                     5
maintenance vendors.31 Each unit owner paid annual dues and fees, part of which paid for the

heat pump maintenance vendors.32

        The Council hired Builders & Managers, Inc. (“BMI”) to manage the property and

directed BMI to arrange the heat pump maintenance services.33 Linda Grund was a BMI

employee who served as “General Manager” for the Council, “Center Manager” for CALP d/b/a

“Stat Office Solutions,” and performed other functions for BMI.34 Ms. Grund was not a member

of the Council.35 “Ms. Grund was authorized to sign contracts with HVAC vendors to provide

heat pump maintenance.”36 DVL Group, Inc. (“DVL”) provided heat pump maintenance for One

Commerce Center during the 2016-2017 period, the period in which the alleged accident with

Mr. Patrone occurred.37 “Ms. Grund signed the contracts with DVL.”38

     E. THE HANOVER INSURANCE POLICIES

        The Council was the named insured in the Insurance Policies—a commercial insurance

policy and an umbrella liability policy issued by Hanover.39 Hanover issued a Commercial

General Liability policy to insured “One Commerce Center,” a partnership, for the policy period

7/15/2016 – 7/15/2017.40 The Policy Declarations designate the business as “CONDOMINIUM”

and “CONDO ASSN: COMM’L-OFFICE OCC INCL CTRS.”41 The Commercial General

31
   CALP’s Opp., Ex. 9; CALP’s Opp., Ex. 10.
32
   Id.
33
   CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶¶ 16, 23; CALP’s Opp., Ex. 13(a and b); CALP’s Opp. Ex. 9;
CALP’s Opp., Ex. 10.
34
   CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶¶ 17-18.
35
   Id.
36
   Id. ¶ 19; See CALP’s Opp., Ex. 14 and Ex. 15 at the signature pages.
37
   CALP’s Opp., Ex. 14; CALP’s Opp., Ex. 15.
38
   CALP’s Opp. at 6 (citing CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶ 20; CALP’s Opp., Exs. 14, 15).
Further, CALP notes that Ms. Grund assigned these contracts CALP’s tax identification number and not the
Councils. Compare CALP’s Opp., Ex. 14 and Ex. 15 with CALP’s Opp., Ex. 16.
39
   Am. Compl. ¶ 5. The two insurance policies were designated as follows: the commercial insurance policy was
Policy No. OHQ-A985296 and the umbrella policy was Policy No. OHQ-A985296-00. Id.
40
   Hanover’s Mot., Ex. C (hereinafter “The Policies”) at 16.
41
   Id. at 17.

                                                       6
Liability policy had liability limits of $1,000,000 per occurrence subject to a $2,000,000

aggregate.42 The policy also provides Umbrella limits of $2,000,000 per claim and $2,000,000

aggregate limits.43

          Under the Commercial General Liability policy, the Businessowners Coverage Form,

391-1003 06/09, states:

          SECTION II - LIABIILTY
          A. Coverages
          1. Business Liability
              a. We will pay those sums that the insured becomes legally obligated to pay
                 as damages because of “bodily injury”, “property damage” or “personal and
                 advertising injury” to which this insurance applies. We will have the right
                 and duty to defend the insured against any “suit” seeking those damages.
                 However, we will have no duty to defend the insured against any “suit”
                 seeking damages for “bodily injury”, “property damage” or “personal and
                 advertising injury”, to which this insurance does not apply. We may at our
                 discretion, investigate any “occurrence” and settle any claim or “suit” that
                 may result.
                 But:
                 (1) The amount we will pay for damages is limited as described in
                      Paragraph D – Liability and Medical Expenses Limits of Insurance
                      in SECTION II – LIABILITY; and
                 (2) Our right and duty to defend end when we have used up the applicable
                      limit of insurance in the payment of judgments or settlements or
                      medical expenses.
                 No other obligation or liability to pay sums or perform acts or services is
                 covered unless explicitly provided for under Paragraph f. Coverage
                 Extension – Supplementary Payments.44
          ...

          C. Who Is An Insured
          1. If you are designated in the Declaration as:
          ...
               b. A partnership or joint venture, you are insured. Your members, your partners
                  and their spouses are also insureds, but only with respect to the conduct of
                  your business.45

42
   Id. at 16.
43
   Id. at 16, 23.
44
   Id. at 18.
45
   Id. at 19-20.

                                                   7
The Commercial Liability Umbrella Policy, provides the following with respect to coverages:

        SECTION I – COVERAGES
        COVERAGE A – BODILY INJURY AND PROPERTY DAMAGE
        LIABILITY
             1. Insuring Agreement
                 a. We will pay on behalf of the insured the “ultimate net loss” in excess
                    of the “retained limit” because of “bodily injury” or “property
                    damage” to which this insurance applies. We will have the right and
                    duty to defend the insured against any “suit” seeking damages for
                    such “bodily injury” or “property damage” when the “underlying
                    insurance” does not provide coverage or the limits of “underlying
                    insurance” have been exhausted. When we have no duty to defend,
                    we will have the right to defend, or to participate in the defense of,
                    the insured against any other “suit” seeking damages to which this
                    insurance may apply. However, we will have no duty to defend the
                    insured against any “suit” seeking damages for “bodily injury” or
                    “property damage” to which this insurance does not apply. At our
                    discretion, we may investigate any “occurrence” that may involve
                    this insurance and settle any resultant claim or “suit”, for which we
                    have the duty to defend. But:
                    (1) The amount we will pay for the “ultimate net loss” is limited as
                        described in Section III – Limits of Insurance; and
                    (2) Our right and duty to defend ends when we have used up the
                        applicable limit of insurance in the payment of judgments or
                        settlements under Coverages A or B.
                        No other obligation or liability to pay sums or perform acts or
                        services is covered unless explicitly provided for under
                        Supplementary Payments – Coverages A or B.46

     F. THE UNDERLYING LITIGATION

        Mr. Patrone and Madelyn Patrone (the “Patrones”) sued CALP for injuries that Mr.

Patrone allegedly sustained on February 27, 2017, while working as an HVAC mechanic on the

ninth floor of 1201 North Orange Street, Wilmington, Delaware (the “Premises”).47 The

Patrones filed the original complaint on August 7, 2017.48

46
   Id. at 24.
47
   Am. Compl. ¶ 8 (citing Ex. A (Complaint in Patrone v. Commerce Associates, LP, et al, filed in the Superior
Court of Delaware, C.A. No. N17C-08-086 EMD)).
48
   CALP’s Opp., Ex. 17 (Copy of the Complaint in the Underlying Litigation).

                                                         8
        The Patrones filed the Third Amended Complaint on February 22, 2019.49 In the Third

Amended Complaint, the Patrones allege that Mr. Patrone was a business invitee performing

preventive maintenance on a Bosch Water Source heat pump when Mr. Patrone came into

contact with unmarked electrical wires.50 Upon contact, Mr. Patrone “was caused to be shocked

an electrocuted and fell with force and violence off of a six foot ladder onto the ground” causing

Mr. Patrone to sustain personal injuries.51 CALP denies that it was negligent in any respect and

further denies that its actions or inactions proximately caused Mr. Patrone’s injuries.52 CALP

has tendered the defense of the Underlying Litigation to Hanover.

     G. THE PRESENT LITIGATION

        In the present litigation CALP filed for declaratory judgment against Hanover.53 CALP

argues that it was insured by Hanover and that Hanover breached its obligations under the

Insurance Policies by refusing CALP’s tender of defense in the Underlying Litigation. Further,

because of Hanover’s breach, CALP claims that it has incurred damages, and will continue to

incur damages, including attorneys’ fees, costs of litigation, and notwithstanding its denial of

negligence and proximate cause, could potentially be held liable for the alleged damages of Mr.

Patrone.54

        The Hanover Motion was filed on July 16, 2021.55 Hanover argues that CALP is not an

Insured or additional insured and as such is excluded from coverage in relation to the Underlying

Litigation. CALP opposes the Hanover Motion.56 In the CALP Motion, CALP moved for

49
   Hanover’s Mot., Ex. A (Patrone Third Am. Compl.).
50
   Hanover’s Mot. at 2-3 (citing Ex. A (Patrone Third Am. Compl.) ¶¶ 9-10).
51
   Id.
52
   Am. Compl. ¶ 10.
53
   D.I. No. 15.
54
   Am. Comp. ¶ 13.
55
   D.I. No. 56.
56
   D.I. No. 57.

                                                        9
summary judgment on Hanover’s duty to defend.57 On September 1, 2021, Hanover filed its

opposition to the CALP Motion.58 The Court held a hearing on both motions on November 12,

2021.59

                                 III.   PARTIES’ CONTENTIONS

     A. THE HANOVER MOTION

          In the Hanover Motion, Hanover argues that CALP is not an Insured or additional

Insured as defined in the Insurance Policies and, as such, is excluded from coverage in relation to

the Underlying Litigation. Further, Hanover asserts that it has no duty to indemnify or reimburse

CALP for defense costs given that CALP is excluded from coverage.

          CALP opposes the Hanover Motion and argues that it is entitled to a defense by Hanover

because it is an Insured under the Insurance Policies. CALP argues it is an Insured because it is

a member of the Council, and it is being sued for acts undertaken in pursuit of council business.

     B. THE CALP MOTION

          CALP has moved for summary judgment on the issue of Hanover’s duty to defend CALP

in the Underlying Litigation. CALP incorporates and relies on the arguments made in its

opposition to the Hanover Motion. CALP asks the Court to (i) grant judgment on the issue of

duty to defend, and (ii) declare that Hanover is obligated to pay CALP’s attorneys’ fees and costs

incurred in connection with the defense of the Underlying Litigation.

          Hanover argues that CALP is not a member of the Council because CALP is not listed as

a member and therefore CALP is not an Insured. Further, Hanover argues that CALP has failed

57
   D.I. No. 58.
58
   D.I. No. 59.
59
   D.I. No. 60.

                                                10
to provide any evidence of contracts or agreements requiring the Council provide coverage to

CALP or to list CALP as an additional insured.

                                      IV.      STANDARD OF REVIEW

         The standard of review on a motion for summary judgment is well-settled. The Court’s

principal function when considering a motion for summary judgment is to examine the record to

determine whether genuine issues of material fact exist, “but not to decide such issues.”60

Summary judgment will be granted if, after viewing the record in a light most favorable to a

nonmoving party, no genuine issues of material fact exist and the moving party is entitled to

judgment as a matter of law.61 If, however, the record reveals that material facts are in dispute,

or if the factual record has not been developed thoroughly enough to allow the Court to apply the

law to the factual record, then summary judgment will not be granted.62

         The moving party bears the initial burden of demonstrating that the undisputed facts

support his claims or defenses.63 If the motion is properly supported, then the burden shifts to

the non-moving party to demonstrate that there are material issues of fact for the resolution by

the ultimate factfinder.64

                                              V.       DISCUSSION

         Hanover has moved for summary judgment on the duty to defend, indemnify and

reimburse defense costs. CALP has moved for summary judgment on the duty to defend and

asks the Court to award attorneys’ fees and costs incurred in connection the defense of the

60
   Merrill v. Crothall-American Inc., 606 A.2d 96, 99-100 (Del. 1992) (internal citations omitted); Oliver B. Cannon
& Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322, 325 (Del. Super. 1973).
61
   Id.
62
   Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962); see also Cook v. City of Harrington, 1990 WL 35244 at
*3 (Del. Super. Feb. 22, 1990) (citing Ebersole, 180 A.2d at 467) (“Summary judgment will not be granted under
any circumstances when the record indicates . . . that it is desirable to inquire more thoroughly into the facts in order
to clarify the application of law to the circumstances.”).
63
   Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1970) (citing Ebersole, 180 A.2d at 470).
64
   See Brzoska v. Olsen, 668 A.2d 1355, 1364 (Del. 1995).

                                                           11
Underlying Litigation. Both motions require the Court to rule on the extent of Hanover’s

obligation to defend in the Underlying Litigation. Neither party has made arguments beyond

whether CALP is an Insured under the Insurance Policies. Therefore, the Court’s finding on

whether CALP is an Insured as defined in the Insurance Policies, will determine if CALP is

entitled to coverage, including the duty to defend.

         A. INSURANCE INTERPRETATION PRINCIPLES

         Insurance policies are contracts.65 The interpretation of contractual language, including

in insurance policies, “is a question of law.”66 The principles governing the interpretation of an

insurance contract are well-settled. In attempting to resolve a dispute over the proper

interpretation of an insurance policy, “a court should first seek to determine the parties’ intent

from the language of the insurance contract itself.”67

         In reviewing the terms of an insurance policy, the Court considers “the reasonable

expectations of the insured at the time of entering into the contract to see if the policy terms are

ambiguous or conflicting, contain a hidden trap or pitfall, or if the fine print takes away that

which has been provided by the large print.”68 Ambiguity exists when the disputed term “is

65
   Northrop Grumman Innovation Sys., Inc. v. Zurich Am. Ins. Co., 2021 WL 347015, at *7 (Del. Super. Feb. 2,
2021) (citation omitted).
66
   O’Brien v. Progressive N. Ins. Co., 785 A.2d 281, 286 (Del. 2001); see Eagle Force Holdings, LLC v. Campbell,
187 A.3d 1209, 1232 (Del. 2018) (“Whether [a] contract’s material terms are sufficiently definite [is] mostly, if not
entirely, a question of law.” (citation omitted)); Exelon Generation Acquisitions, LLC v. Deere & Co., 176 A.3d
1262, 1232 (Del. 2017) (same).
67
   Alstrin v. St. Paul Mercury Ins. Co., 179 F. Supp. 2d 376, 388 (D. Del. 2002); see also Emmons v. Hartford
Underwriters Ins. Co., 697 A.2d 742, 745 (Del. 1997) (“The scope of an insurance policy's coverage . . . is
prescribed by the language of the policy.”) (citing Rhone–Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616
A.2d 1192, 1195–96 (Del. 1992); Playtex FP, Inc. v. Columbia Cas. Co., 622 A.2d 1074, 1076–77 (Del. Super.
1992) (citing E.I. du Pont de Nemours & Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985)); Kaiser
Aluminum Corp. v. Matheson, 681 A.2d 392, 395 (Del. 1996).
68
   E.I. du Pont de Nemours & Co. v. Admiral Ins. Co., 1996 WL 111205, at *2 (Del. Super. Jan. 30, 1996) (citation
omitted); see Steigler v. Ins. Co. of N. Am., 384 A.2d 398, 401 (Del. 1978) (“[A]n insurance contract should be read
to accord with the reasonable expectations of the purchaser so far as the language will permit.”) (quoting State Farm
Mut. Auto. Ins. Co. v. Johnson, 320 A.2d 345, 345 (Del. 1974) (internal quotation marks omitted)).

                                                         12
fairly or reasonably susceptible to more than one meaning.”69 Absent any ambiguity, contract

terms should be accorded their plain, ordinary meaning.70 If an insurance policy contains an

ambiguous term, then the policy is to be construed in favor of the insured to further the contract’s

purpose and against the insurer, as the insurer drafts the policy and controls coverage.71

         When determining an insurer’s duty to defend a claim asserted against an insured, the

Court will look to the allegations in the underlying complaint to decide whether the action

against the policy holder states a claim covered by the policy.72 Generally, an insurer’s duty to

defend is broader than its duty to indemnify an insured.73 An insurer has a duty to defend where

the factual allegations in the underlying complaint potentially support a covered claim.74 The

insurer will have a duty to indemnify only when the facts in that claim are actually established.75

         The Court generally will look to two documents in its determination of the insurer’s duty

to defend: the insurance policy and the pleadings of the underlying lawsuit.76 The duty to defend

69
   Alta Berkeley VIC. V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012).
70
   See id.; see also Goggin v. Nat'l Union Fire Ins. Co. of Pittsburgh, 2018 WL 6266195, at *4 (Del. Super. Nov. 30,
2018); IDT Corp. v. U.S. Specialty Ins. Co., 2019 WL 413694, at *7 (Del. Super. Jan. 31, 2019).
71
   See Alstrin, 179 F. Supp. 2d at 390 (“Generally speaking, however, Delaware . . . courts continue to strictly
construe ambiguities within insurance contracts against the insurer and in favor of the insured in situations where the
insurer drafted the language that is being interpreted regardless of whether the insured is a large sophisticated
company.”) (citations omitted); Nat’l Union Fire Ins. Co. v. Rhone–Poulenc Basic Chems. Co., 1992 WL 22690, at
*8 (Del. Super. Jan. 16, 1992) (“Application of the [contra proferentem] doctrine turns not on the size or
sophistication of the insured, but rather on the fact that the policy language at issue is drafted by the insurer and is
not negotiated.” (citation omitted)).
72
   Am. Ins. Group v. Risk Enter. Mgmt., Ltd., 761 A.2d 826, 829 (Del. 2000) (“The rationale underlying this
principle is that the determination of whether a party has a duty to defend should be made at the outset of the case,
both to provide the insured with a defense at the beginning of the litigation and to permit the insurer, as the
defraying entity, to control the defense strategy.”).
73
   Liggett Group, Inc. v. Ace Property and Cas. Ins. Co., 798 A.2d 1024, 1030 (Del. 2002).
74
   DynCorp v. Certain Underwriters at Lloyd’s, London, 2009 WL 3764971, at *3 (Del. Super. Nov. 9, 2009).
75
   LaPoint v. AmerisourceBergen Corp., 970 A.2d 185, 197 (Del. 2009) (“‘As a general rule, ‘decisions about
indemnity should be postponed until the underlying liability has been established’’ because a declaration as to the
duty to indemnify ‘may have no real-world impact if no liability arises in the underlying litigation.’”) (quoting
Molex Inc. v. Wyler, 334 F.Supp.2d 1083, 1087 (N.D. Ill. 2004)).
76
   Virtual Business Enterprises, LLC v. Maryland Cas. Co., 2010 WL 1427409, at *4 (Del. Super. Apr. 9, 2010).

                                                          13
arises where the insured can show that the underlying complaint, read as a whole, alleges a risk

potentially within the coverage of the policy.77

         B. CALP IS AN INSURED

         Hanover argues that CALP is not an “Insured” as defined by the applicable policies and

as such, is excluded from any coverage afforded by those policies. Further, Hanover asserts that

it has no duty to defend the insured against any lawsuit “to which this insurance does not

apply.”78 Hanover argues that there is no evidence of any contracts or other agreements

requiring One Commerce to provide coverage to CALP or to list CALP as an additional insured

on the Insurance Policies.

         CALP argues that it is an Insured under the policy that Hanover issued to the Council and

that the policy obligates Hanover to defend CALP in the Underlying Litigation.79 CALP asserts

that all doubt and ambiguity in the underlying pleadings should be resolved against Hanover.80

Further, CALP alleges that CALP is a member or partner of the Council and was acting with

respect to the conduct of the Council’s business.81

         The Declaration designates “One Commerce Center” a partnership, for the policy period

7/15/2016 – 7/15/2017.82 The Policy Declarations designate the business as “CONDOMINIUM”

and “CONDO ASSN: COMM’L-OFFICE OCC INCL CTRS.”83 Both CALP and Hanover agree

that the Council is the named Insured. The parties disagree whether CALP is an Insured

pursuant to its partnership or membership of the Council. Section C regarding who is an Insured

states that “[i]f you are designated in the Declaration as: . . . A partnership or joint venture, you

77
   Cont’l Cas. Co. v. Alexis I. duPont Sch. Dist., 317 A.2d 101, 103 (Del. 1974).
78
   Hanover’s Mot. at 10 (citing The Policies at 18).
79
   CALP’s Opp. at 10.
80
   Id. (citing Pac. Ins. Co. v. Liberty Mut. Ins. Co., 956 A.2d 1246, 1255 (Del. 2008)).
81
   Id.
82
   The Policies at 16.
83
   Id. at 17.

                                                          14
are insured. Your members, your partners and their spouses are also insureds, but only with

respect to the conduct of your business.”84 Given these terms, the Court must rule on: (1)

whether CALP is a member or partner of the Council and (2) whether CALP was acting with

respect to the conduct of the Council’s business.

        i.       CALP is a member of the Council

        Hanover contends that the Council is designated in the Declarations as a partnership.

However, Hanover argues that there is no evidence in the record that supports CALP’s assertion

it is a member of the Council.85 Further, Hanover asserts that only the terms of the Code of

Regulations set forth the requirements for qualification to be a member of the Council and the

Code does not automatically make a unit owner a member of the Council.86

        CALP argues that at all relevant times, CALP was a member of the Council and the

owner of several floors of the Premises.87 CALP cites to DUPA’s definition of a council to

support the argument “that a Council member can be a business entity unit owner that it is

represented by a natural individual.”88 CALP also refers to the Code of Regulations Section

4.1.3 which specifies the qualification for Council members as “either residents of the of the

State of Delaware or unit owners, or duly elected officers or general partners of unit owners, and

shall be bondable.”89 Further, the Code of Regulations notes that “[a] newly elected Council

member shall qualify for office by attending the annual meeting of the Council.”90 CALP asserts

that Richard Stat is the duly elected and sole director of the corporate general partner of CALP

84
   Id. at 19-20 (emphasis added).
85
   Hanover’s Mot. at 11. Hanover asserts that CALP’s argument that it is a member of the Council by virtue of its
ownership interest in the building and therefore is an insured pursuant to the “Who Is An Insured” clause in the
Policy’s Businessowners’ Coverage Form is unsubstantiated. Id.
86
   Id. at 12.
87
   Am. Compl. ¶ 3.
88
   CALP’s Opp. at 11.
89
   Id. (citing Code of Regulations at 10).
90
   Id.

                                                        15
and as such he has the exclusive ability to act for CALP. CALP contends that Richard Stat’s

presence on the Council as the only individual person authorized to manage and act for CALP is

compelling and persuasive evidence that CALP is a Council member.

        CALP also claims that the Patrones characterize CALP as a member of the Council in

their pleadings because they identify CALP as the Council’s agent. CALP notes that the Code of

Regulations states that “[t]he status of Council members in exercising their powers . . . shall be

that, and solely that, of disclosed agents.”91 In the Underlying Litigation, the Patrones state that

CALP is the Council’s agent, and CALP argues that such allegations alone are sufficient to

identify CALP as a member for purposes of the duty to defend.92

        The Court finds that CALP is a member of the Council. CALP’s arguments are

persuasive. Hanover has not asserted any arguments to contradict CALP’s membership beyond

the claim that Richard Stat is listed as a member of the Council and not CALP, and the argument

that the terms of the Code of Regulations do not “automatically turn a unit owner into a member

of the Council.”93 The Court need not find that the Code of Regulations automatically turns a

unit owner into a member of the Council. Instead, the Court finds that the historical

documentation supports the finding that CALP, through Richard Stat, is a member of the

Council.

        As delineated in the Code of Regulations Section 4.1.2, each unit owner appoints a

member to the Council.94 CALP owns four units which are located on floors seven, eight, nine,

and ten.95 CALP’s business is under the ‘exclusive management’ of its general partner, CBI, and

91
   Code of Regulations, § 4.5.1.
92
   CALP’s Opp. at 12.
93
   Hanover’s Opp. at 3.
94
   Code of Regulations at 10, § 4.1.2.
95
   See Hanover’s Mot., Ex. D at 30, #4.

                                                 16
Richard Stat is the sole director, sole officer, and chief executive officer of CBI.96 CALP

became a member of the Council in 1983 and, as owner of four units, has about 37% of the

voting power.97

        The Council’s meeting minutes from December 9, 2015, support the notion that Richard

Stat was acting on behalf of CALP. The meeting minutes read in part “Council Owners are

represented by Rich Heffron (1&2), Michael Scali (3), Mel Monzack (4), David Williams (5&6),

Richard Stat (7-10) and Jason Danner (11).”98 The numbers next to Richard Stat’s name indicate

that he is the representative on the Council for the owners of the units on floors 7 through 10.

Further, the meeting minutes proceed by stating “[t]hese owners elected the following

individuals as council members for 2016: . . . Richard Stat (7-10).”99 The Court finds that these

undisputed facts along with those presented by CALP are persuasive and establish that CALP is

a member of the Council and is represented on the Council by Richard Stat.

        ii.       CALP is sued with respect to the conduct of the Council’s business

        For CALP to qualify as an Insured, CALP must have been sued in the Underlying

Litigation with respect to the conduct of the Council’s business.100

        Hanover asserts that because the HVAC pump serviced by Mr. Patrone was located

within CALP’s individual unit, its maintenance was CALP’s responsibility and not the

Council.101 Hanover argues that while a unit owner may request the Council arrange for

96
   CALP’s Opp. at 1-2 (citing CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶¶ 1-2).
97
   CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶¶ 11-12. See also CALP’s Opp., Ex. 6 (One Commerce Center
Declaration) at Sched. 5.3.
98
   CALP’s Opp., Ex. 13(a) at CALP_HAN_00227.
99
   Id.
100
    See The Policies at 19-20.
101
    Hanover’s Mot. at 13.

                                                     17
maintenance which is the unit owner’s responsibility, CALP has not provided evidence to

establish that it made such a request.102

         Hanover argues that Ms. Grund executed the contract for the service of the heat pump on

behalf of the “customer” and Ms. Grund is not listed as a 2017 member of the Council.103

Further, Hanover asserts that there is no evidence of CALP making an advance deposit with the

Council to accompany any request as required under Section 7.3.2 of the Code of Regulations.104

         CALP contends that it is clear on its face that a Council member is conducting Council’s

business.105 CALP begins its argument by noting that the Court should construe the policy

language “with respect to the conduct of [the Council’s] business” broadly.106 CALP notes that

the purpose behind “the conduct of the business” language is to avoid misuse by members and

partners of the Insured to cover unrelated commercial or personal risks, and not to eliminate

coverage where the claim arises from an ordinary function of the Insured.107

         Here, CALP argues that it has been sued “with respect to the conduct of [the Council’s

business]” because the Council has arranged for maintenance services for the heat pumps that

belong to the unit owners for years.108 Further, CALP asserts that as a member of the Council, it

took part in the authorization and approval of the Council’s business in this regard.109

         The Court finds Hanover’s argument about Ms. Grund not being listed as a member of

the Council to be unconvincing. Ms. Grund was authorized to sign contracts with HVAC

vendors to provide heat pump maintenance and signed the relevant contract with DVL pursuant

102
    Id. at 14.
103
    Id.
104
    Id.
105
    CALP’s Opp. at 12.
106
    Id. at 13 (citing Pac. Ins. Co., 956 A.2d at 1256-57 (concluding that a phrase in an insurance policy “arising out
of” is to be given a broad meaning)).
107
    Id.
108
    Id. at 13-14; The Policies at 20.
109
    CALP’s Opp. at 14.

                                                          18
to her responsibilities as General Manager for the Council.110 Additionally, CALP has presented

sufficient evidence to establish that it, and all unit owners, pre-paid annual dues and fees, part of

which paid for the heat pump maintenance vendors.111

        An insurer’s duty to defend is generally broader than its duty to indemnify.112 An insurer

has a duty to defend where the factual allegations in the underlying complaint potentially support

a covered claim.113 Here, CALP argues that it “need not establish [that] every theory in the

[underlying] complaint falls under the scope of the Policy . . . [it] only need[s] to establish one to

be entitled to a defense.”114

        At the time of the alleged injury, Mr. Patrone was performing work pursuant to a contract

which his employer, DLV, had made with the Council.115 Further, pursuant to the Code of

Regulations, the Council was authorized to contract with DVL to perform maintenance and

repair services and the Council had arranged for HVAC services to be regularly performed for

years on individual units.116 In their Third Amended Complaint, the Patrones allege that CALP

acted as agent of the Council specifically with respect to the maintenance contract at issue.117

Given these facts, the Court finds that CALP was sued with respect to the conduct of the

Council’s business and is an Insured.

        The Court finds that CALP is an Insured and is being sued with respect to the conduct of

the Council’s business. Hanover has not presented any further argument that CALP is not

110
    CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶¶ 17-19; See CALP’s Opp., Ex. 14 and Ex. 15 at the signature
pages.
111
    CALP’s Opp., Ex. 9; CALP’s Opp., Ex. 10.
112
    Liggett Group, Inc. v. Ace Property and Cas. Ins. Co., 798 A.2d 1024, 1030 (Del. 2002).
113
    DynCorp v. Certain Underwriters at Lloyd’s, London, 2009 WL 3764971, at *3 (Del. Super. Nov. 9, 2009).
114
    CALP’s Opp., at 15 (citing Pac. Ins. Co., 856 A.2d at 1255).
115
    See CALP’s Opp., Ex. 14 and Ex. 15 (listing 62 heat pumps to be serviced by DVL).
116
    Code of Regulations at 21-22, § 7.3.2. See CALP’s Opp., Ex. 21 (Affidavit of Richard Stat) ¶ 13; CALP’s Opp.,
Ex. 8 (1991 and 1992 Council Meeting Minutes) at CALP HAN 00159 and 00165. See also CALP’s Opp., Ex. 11
(showing Council’s payments to HVAC vendors dating back to 2001).
117
    Hanover’s Mot., Ex. A (Patrone Third Am. Compl.).

                                                       19
entitled to the duty to defend. As such, it is not necessary for the Court to engage in further

analysis and the Hanover Motion is denied and the CALP Motion is granted.118

                                            VI.     CONCLUSION

        For the reasons set forth above, the Court DENIES the Hanover Motion and GRANTS

the CALP Motion.

Dated: February 22, 2022
Wilmington, Delaware

                                                   /s/ Eric M. Davis
                                                   Eric M. Davis, Judge

cc: File&ServeXpress

118
   The Court grants CALP’s Motion but is not going to set a payment schedule as CALP requests in its Motion. The
Insurance Policies control as to how defense costs should be reimbursed, advanced or otherwise paid.

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