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Harleysville Insurance Co. v. Church Insurance Co.11/16/2005
he Church policy. By not determining Capital's rights under the Church policy and by conducting the pre-trial defense of Capital, Harleysville waived Capital's right to a defense by Church.
Accordingly, the trial judge settled the responsibilities of the insurance companies as follows:
Church, as the primary insurer for Cathedral and Capital, is responsible for the amount of the judgment up to Church's policy limits as well as the resulting post-judgment interest on that amount. Because Harleysville waived Church's duty to defend Capital, Church is responsible only for the defense costs associated with its defense of Cathedral (including the post-trial costs associated with the case at bar) and does not have to reimburse Harleysville for its defense of Capital. Harleysville as the excess insurer is responsible for the amount of the judgment that exceeds the policy limits of the Church policy and the resulting post-judgment interest on that amount. Having waived Capital's right to a defense from Church, Harleysville is responsible for the defense cost associated with its defense of Capital (including the post-trial costs associated with the case at bar) and does not have a right to be reimbursed for defense costs from Church.
Discussion
We agree with the reasoning in the trial judge's opinion. Accordingly, we affirm on the basis thereof. We write separately to clarify why Harleysville waived its right to recoup its defense costs in this case. The trial judge correctly noted that "Capital was not required to give additional notice to Church because the notice requirement was fulfilled when Cathedral notified Church of Brown's claim and requested indemnity." The trial judge also correctly noted that "Church knew or should have known from the investigation it performed that Capital was the real estate manager and was potentially an additional insured under the Cathedral policy." Church, therefore, had the initial duty to notify Capital that it was potentially an additional insured under the Church's policy. Finally, the trial judge correctly noted that "as an insurer under the Church policy issued to Cathedral, Church had a duty to defend Capital. Capital had a right to be defended or to 'knowingly' waive that defense." The trial judge's opinion, however, does not sufficiently explain how Capital, through Harleysville, knowingly waived its right to a defense from Church when Church was under an initial obligation to know that Capital was an additional insured and to notify Capital of the available coverage.
In its opening brief, Harleysville contends that it "did not know that Capital was insured under the Church policy. For its part, Church did everything it could to keep that information from Harleysville." Harleysville continues "because the record clearly shows that Harleysville was unaware that Capital was insured under the Church policy until long after the underlying litigation ended, the court erred as matter of law in concluding that Harleysville waived Capital's rights to a defense.." Harleysville's contentions are without merit. The record clearly shows that Harleysville, had it followed its customary procedures and conducted an investigation into potential coverage after its own insured notified Church of the occurrence and after being put on notice by Church's answer to the Form 30 interrogatories, would have discovered Church's obligation to defend and indemnify Capital under the policy Church issued to Cathedral
Harleysville and Capital claim that they initially had no knowledge of the Church policy covering Cathedral. For some reason, on January 31, 2000, Hayman informed Harleysville that Cathedral was self-insured. Remarkably eno
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