Insurance Services – Coverage & Bad Faith Litigation

Key Points:

• Trial court’s denial of insurer’s petition for limited intervention to determine whether coverage exclusion applied was immediately appealable pursuant to Pa. R.A.P. 313(b). 
• Trial court’s denial of petition to intervene under Pa. R.C.P. 2327(1) was erroneous because, unless insurer was permitted to intervene for the limited purpose of submitting a special interrogatory to the jury, the entry of a judgment in the action would impose liability upon insurer to indemnify insured. 
• Pennsylvania Superior Court remanded to trial court to determine whether intervention should be refused under Pa. R.C.P. 2329. 

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In Hannibal v. Solid Waste Services, Inc., 2023 WL 8761934 (Pa. Super. Dec. 19, 2023), the Superior Court reversed a trial court order that had denied Admiral Insurance Company’s (Admiral) petition for limited intervention in an action brought by Ahmed Hannibal (Hannibal) against Admiral’s insured, Solid Waste Services, Inc. d/b/a J.P. Mascaro & Sons, Inc. (Mascaro), and remanded for further proceedings. The appeal was an immediate interlocutory appeal as of right pursuant to Pa. R.A.P. 313, which permits immediate appeals from collateral orders of trial courts. 

Admiral had issued a commercial general liability insurance policy to Mascaro that provided defense and indemnity coverage. The policy excluded coverage for “‘bodily injury,’ ... allegedly or actually arising out of, related to, caused by, contributed to by, or in any way connected to or with the ownership, maintenance, use, or entrustment to others, by or on behalf of any insured of an ‘auto,’ ... ‘Use’ includes, but is not limited to, operation and ‘loading or unloading.’” 

Hannibal was injured when a trash dumpster platform he was standing on moved and caused him to fall and sustain injuries. At the time of the accident, the trash dumpster platform was connected to a dumpster being serviced by Mascaro. 

Hannibal filed suit against Mascaro, asserting that Mascaro was responsible for the maintenance, care, and upkeep of the dumpster; that Mascaro was negligent and careless; and that such negligence and carelessness caused his injuries. The complaint asserted a claim for premises liability and a claim for negligence but no claim based on the ownership, maintenance, or use of an auto. 

Mascaro tendered to Admiral, seeking defense and indemnity coverage under the policy. Admiral agreed to provide a defense to Mascaro subject to a full reservation of rights to deny coverage and withdraw its defense should evidence reveal that the policy did not cover Hannibal’s claims. 

Discovery revealed that the platform on which Hannibal was standing moved because it was resting on a dumpster attached to a Mascaro truck that was pulling away, thereby causing the accident. Admiral subsequently filed a federal declaratory judgment action that was dismissed as premature.

Admiral thereafter sought to intervene in the state trial court action for the limited purpose of submitting a special interrogatory to the jury as to whether Hannibal’s injuries and damages were caused by the ownership, maintenance, or use of any auto. Admiral alleged that, if intervention were denied, the jury would simply be asked if Mascaro was negligent and if such negligence was the proximate cause of Hannibal’s injuries and damages, without specifying the precise manner of such negligence or whether such negligence involved the ownership, maintenance, or use of a vehicle. The special interrogatory would only be submitted if the jury found that Mascaro had been negligent and that such negligence was the proximate cause of Hannibal’s injuries and damages.

Both Hannibal and Mascaro opposed intervention, and the trial court denied intervention without a hearing. Admiral filed a notice of appeal from the putatively interlocutory order to the Superior Court of Pennsylvania.

Since most interlocutory orders in Pennsylvania are not immediately appealable, the Superior Court preliminarily dealt with the issue of whether it had appellate jurisdiction over the order denying limited intervention. The court noted that such an order might be appealable as a collateral order or as an interlocutory order by permission. However, Admiral only appealed on the basis that the order was appealable as a collateral order pursuant to Pa. R.A.P. 313(b). 

Rule 313(b) provides that an interlocutory order is collateral and, therefore, immediately appealable if: (1) it is separable from and collateral to the main cause of action; (2) the right involved is too important to be denied review; and (3) the question presented is such that if review is postponed until final judgment in the case, the claim will be irreparably lost. See Pa. R.A.P. 313(b). The Superior Court determined that the order denying limited intervention was immediately appealable under Rule 313(b). 

Relying on Bogdan v. Am. Legion Post 153 Home Ass’n., 257 A.3d 751, 756 (Pa. Super. 2021), it concluded that the order denying the petition satisfied the separability prong under Rule 313(b) because Admiral’s right to intervene was peripheral to the ultimate resolution of the action brought by Hannibal. Admiral merely sought to ensure that, when the jury would reach its determination as to whether Mascaro was liable to Hannibal, it would make certain factual findings which would resolve the coverage issues.

The Superior Court also found that the order satisfied the second prong of Rule 313(b)—that the right involved was too important to be denied review. The court noted that Admiral sought limited intervention to obtain a clear determination of the basis for any potential jury verdict to assist with subsequent coverage determinations regarding its indemnity obligations in a declaratory judgment action. The court indicated that the petition to intervene was “the only way for Admiral to secure the specific factual reasons for any potential verdict against Mascaro, and, if appropriate, to sustain its burden of establishing—in a subsequent declaratory judgment action—whether any policy exclusions apply to preclude indemnity coverage for any verdict that Hannibal may secure against Mascaro.” 

The Superior Court also decided that if review of the order denying intervention were postponed until after final judgment, the claim would be irreparably lost. Citing Butterfield v. Giuntoli, 670 A.2d 646, 658 (Pa. Super. 1995), the court stated that, if the jury were to return a general verdict against Mascaro, without making any factual determinations necessary to resolve the coverage issues, Admiral would be permanently deprived of the ability to establish whether a policy exclusion applied and precluded indemnity coverage for any judgment against Mascaro. In Butterfield, the Superior Court had affirmed summary judgment in favor of the insured in a declaratory judgment action brought by the insurer because it was the insurer’s burden to prove that the claim was excluded from coverage, and the insurer had failed to seek intervention or request special interrogatories, rendering it impossible to determine the basis of the jury’s findings in order to determine whether a policy exclusion applied.

Finding that the appeal was properly before it, the Superior Court looked to the denial of the petition to intervene. The court stated that who may intervene in an action and when that intervention may be prohibited is determined by Pa. R.C.P. Nos.: 2327 and 2329. 

Pursuant to Pa. R.C.P. 2327, “at any time during the pendency of an action, a person not a party thereto shall be permitted to intervene therein, subject to these rules if (1) the entry of a judgment in such action or the satisfaction of such judgment will impose any liability upon such person to indemnify in whole or in part the party against whom judgment may be entered.” Pa. R.C.P. 2327(1). Pursuant to Pa. R.C.P. 2329: 

[u]pon the filing of the petition and after hearing, of which due notice shall be given to all parties, the court, if the allegations of the petition have been established and are found to be sufficient, shall enter an order allowing intervention; but an application for intervention may be refused, if (1) the claim or defense of the petitioner is not in subordination to and in recognition of the propriety of the action; or (2) the interest of the petitioner is already adequately represented; or (3) the petitioner has unduly delayed in making application for intervention or the intervention will unduly delay, embarrass or prejudice the trial or the adjudication of the rights of the parties.

Pa. R.C.P. 2329.

The trial court had found that Admiral failed to satisfy Rule 2327(1), but the Superior Court disagreed. It concluded that, “unless Admiral is permitted to intervene for the limited purpose of submitting a special interrogatory to the jury, the entry of a judgment in this action will impose liability upon Admiral to indemnify Mascaro.” The court noted that, when the insurer relies upon exclusionary language in the policy as a defense to coverage, the burden shifts to the insurer to prove that the exclusion applies to the facts of the case and that, to sustain that burden, Admiral was required to prove that Hannibal’s injuries and damages were caused, in whole or in part, by the ownership, maintenance, or use of an auto, and sought limited intervention in this action for the sole purpose of submitting a special interrogatory to the jury to make this narrow factual determination. 

The Superior Court opined that, as per Butterfield, 670 A.2d at 658, Admiral would be unable to determine the applicability of its potential coverage defense to any claim asserted against its insured if it was not not permitted to intervene. And Admiral would be obligated to indemnify Mascaro for any judgment imposed against it in the action. 

The Superior Court, therefore, concluded that the trial court manifestly abused its discretion in determining that Admiral failed to satisfy the requirements of Rule 2327(1). It remanded for the trial court to conduct a hearing pursuant to Rule 2329.

So, in sum, there are two large takeaways from Hannibal. First, orders denying coverage counsel petitions for limited intervention into underlying actions are immediately appealable pursuant to Pa. R.A.P. 313. Second, coverage counsel would be wise to attempt to intervene in underlying actions against insureds, pursuant to Butterfield, where there are fact issues relating to whether coverage defenses apply and there is a danger that the verdict could be ambiguous as to those coverage issues.

*Tom is a shareholder in our Scranton, Pennsylvania, office. He can be reached at (570) 496-4612 or taspecht@mdwcg.com. 

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_{Defense Digest, Vol. 30, No. 1, March 2024, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}