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Harleysville Insurance Co. v. Church Insurance Co.11/16/2005
ainst Cathedral and Capital. He filed an amended complaint on January 11, 2000. Upon receipt of Brown's amended complaint, Capital's principal, Gary Hayman called Harleysville and turned the claim over to them. Hayman informed Harleysville that Cathedral was self-insured. Acting solely on its insured's statement and without any other due diligence investigation of the statement's accuracy, Harleysville referred the lawsuit to outside counsel to defend Capital in the upcoming litigation. Harleysville's counsel entered an appearance on February 6, 2000.
After hearing from Hayman that Cathedral was self-insured, on March 7, 2000, in his claims notes, one of Harleysville's claim adjusters expressed some insight into what would happen if Cathedral were in fact, contrary to Hayman's statement, insured by another company: "Too bad owner is self-insured, or insured [Capital] would be covered under their [Cathedral's commercial insurance] policy." At a later deposition testimony, one of Harleysville's litigation specialists, Barbra Jorgenson, explained Harleysville's general policy of ascertaining or at least attempting to ascertain whether its insured is covered under another policy:
Q: (Church's attorney): And once Harleysville found out that Cathedral was covered by a commercial carrier's policy, Harleysville would have then undertaken some investigation as to whether its insured, Capital, was entitled to coverage under the Cathedral policy; correct?
A: (Ms. Jorgenson): Correct.
On March 16, 2000, Cathedral filed its answer to Brown's amended complaint. At the same time, Cathedral filed the required answers to Form 30 interrogatories. In response to interrogatory six, which asks for a "brief description of any insurance policy, including excess coverage, that is or may be applicable to the litigation" Cathedral answered that Church Insurance Company was its insurance carrier and that the policy was a liability policy with $1,000,000 limits. Cathedral also provided the policy number. According to Harleysville's litigation specialist's testimony, at this point, Harleysville, under its normal procedures, after finding out that Cathedral was covered by a commercial policy, should have undertaken some investigation to determine whether Capital was covered under the policy Church issued to Cathedral. Harleysville never undertook this investigation. Rather than conducting a timely investigation into whether Capital was covered under Cathedral's policy, on March 17, 2000, Harleysville filed Capital's answer to Brown's complaint with a cross-claim against Cathedral. From this point on, Harleysville conducted Capital's defense.
On or about August 21, 2001 all the parties, and their insurance carriers, attended mediation. As a result of the mediation, Church and Brown reached a settlement agreement whereby Church paid $525,000 to settle Brown's claims against Cathedral and the parties signed a joint tortfeasors release. At this point, Harleysville offered $25,000 to resolve Brown's claim against Capital.
With trial scheduled to begin on Monday, September 10, 2001, on Thursday, September 6, Harleysville's attorney sent a letter to Church's attorney inquiring into potential coverage for Capital under the Church policy. Church's attorney responded that Capital was "not named as an additional insured on any policy covering the subject property at the time of Mr. Brown's accident."
On September 7, 2001, one business day before trial, Harleysville purported to tender Capital's defense to Church. Church declined the tender.
After a four day trial in the Superior Court, at which Cathedral, who had already settled, did not appear, the jur
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