Insurers, Agents and Brokers Sophisticated Relationships Expensive
Three sophisticated commercial parties in the insurance industry entered
into what appears, in hindsight, to be a somewhat unsophisticated
business arrangement. That arrangement led to complex litigation, which
generally isn't a good thing for a business arrangement to lead to.
In American Builders Insurance Company v. Keystone Insurers Group and
Ebensburg Insurance Agency, No. 4:19-CV-01497, United States District
Court, M.D. Pennsylvania (August 4, 2023) plaintiff American Builders
Insurance Company (“ABIC”) sued Defendant Ebensburg Insurance Company
(“Ebensburg”) for its allegedly tortious misrepresentations in an
application to ABIC for workers' compensation insurance coverage on
behalf of Ebensburg's customer, Custom Installations Contracting
Services, Inc. (“Custom”).
On Custom's application, Ebensburg indicated that Custom didn't engage
in roofing work and only operated at fifteen feet above the ground or
lower. On that basis, ABIC issued Custom a workers' compensation
insurance policy. Later, a Custom employee fell twenty-five feet from a
rooftop while working on a commercial roofing job. The employee filed
for workers' compensation benefits, which ABIC unsuccessfully opposed.
BACKGROUND
Keystone essentially operated as a sort of “matchmaker,” connecting ABIC
to its network of Retail Agencies. Ebensburg is one of the Retail
Agencies that is part of the Keystone association. Its relationship with
Keystone is governed by a Franchise Agreement.
Custom's Relationship with Ebensburg
Because Custom had never sought workers' compensation insurance before,
it obtained a policy through the Commonwealth's State Workers' Insurance
Fund (“SWIF”). The SWIF ACORD application indicated that:
In 2015, Custom approached Ebensburg again to inquire about switching to
a private workers' compensation insurer for more favorable rates
The James Scott Injury
In September 2015, Custom was engaged in a commercial roofing job in New
Galilee, Pennsylvania. James Scott had just began working for Custom.
He stepped through a skylight and fell from over twenty feet to the
ground, incurring serious injuries.
The Western District Litigation and Workers' Compensation Proceeding
Following Judge Gibson's order dismissing ABIC's federal claims, the
workers' compensation litigation continued. Judge Gallishen ultimately
denied ABIC's petitions. The Pennsylvania Workers' Compensation Appeals
Board later affirmed Judge Gallishen's decision.
ANALYSIS
ABIC argued that the limitations period on its claims should be tolled
under either the fraudulent concealment or inherent fraud doctrine.
On the day Scott was injured ABIC was aware that Scott “fell through a
roof.” On September 14, 2015, ABIC became aware of the
misrepresentations in Custom's application.
The Court concluded that those facts are sufficient to give ABIC inquiry
notice of its potential claims against Ebensburg because it knew that
Ebensburg had sole access to the mechanism that caused its injury.
The common thread in these elements is that ABIC knew that the alleged
misrepresentation negligently or fraudulently came from two potential
sources, Custom or Ebensburg (or both), and it knew that Ebensburg had
access to eQuotes, the mechanism that caused its injury.
