1. MY FAULT, YOUR PROBLEM: RISK TRANSFER, INDEMNIFICATION AGREEMENTS, AND ADDITIONAL INSURED PROVISIONS Brigid Q. Alford, Esquire Marshall Dennehey Warner Coleman & Goggin Shareholder 100 Corporate Center Drive Suite 201 Camp Hill, PA 17011 (717) 651-3710 (717) 651-3707 - Fax bqalford@mdwcg.com Christopher M. Reeser, Esquire Marshall Dennehey Warner Coleman & Goggin Shareholder 100 Corporate Center Drive Suite 201 Camp Hill, PA 17011 (717) 651-3509 (717) 651-3707 – Fax cmreeser@mdwcg.com

2. Molettier v. CVS, Unreported Superior Court Decision Slip and fall on ice in a CVS parking lot CVS had a contract with Campenelli Landscaping for snow and ice removal Campenelli had a subcontract with Cenova Cenova had a subcontract with George Allen & Sons Case went to verdict – Plaintiff awarded $250,000 85% attributable to CVS 15% attributable to Cenova

3. CVS Filed Post-Trial Motions CVS cited its subcontract with Campenelli and Cenova Cenova agrees to indemnify, hold harmless and defend CVS and Campenelli against all liability arising from the acts or omissions of Cenova, its agents or snow plow and/or ice removal contractors engaged to remove snow and ice from the properties owned or leased by CVS On post-trial motions, the court agrees that Cenova has to indemnify CVS and pay the entire verdict, plus $89,000 of attorney's costs and fees

4. Superior Court On Appeal Evaluates under the Perry-Ruzzi Rule  Perry v. Payne, 66 A.2d 553 (Pa. 1907)  Ruzzi v. Butler Petroleum, 588 A.2d 1 (Pa. 1991) Critical of the words "any and all liability" - words of general import "Any and all liability" - not clear enough

5. Superior Court Analysis CVS argued it should be indemnified even if 99% at fault Cenova said clause protects CVS to be indemnified for comparative fault of another party Superior Court said clause not clear enough CVS is the drafter so it is construed against them Clause is not clear and unequivocal that the intent was to require Cenova to indemnify CVS and therefore, trial court was reversed

6. Lesson Language of indemnification clauses must be specific If a party is seeking indemnification for its own negligence, the agreement must specifically say that If your insured is in the position of CVS – do not expect to close your file If your insured is in the position of Cenova – you have a basis to deny the tender Solution – educate insureds on the front-end about proper indemnification language

7. Sufficiently Specific Indemnification Clauses Woodburn v. Consolidation Coal Co., 590 A.2d 1273 (Pa. Super. 1991) Agreement to indemnify a party as to all claims except those in which the indemnified party is "solely negligent" is sufficiently specific If CVS' contract called for indemnification unless it was 100% liable, then Cenova would have had to fully indemnify CVS

8. Hershey Foods Corp. v. General Electric Service Co., 619 A.2d 285 (Pa. Super 1992) Party seeking indemnification indemnified for any claim "regardless of whether or not it is caused in part by a party indemnified hereunder."

9. Pass Through Indemnification Provisions - Bernados v. SuperFresh, 863 A.2d 478 (Pa. 2004) Common in construction cases Mrs. Bernados injured at a construction site inside of a SuperFresh General contractor for the project is Acciavati Associates Goldsmith Associates is the subcontractor SuperFresh had a contract with the general contractor to indemnify SuperFresh for all incidents except where SuperFresh was solely negligent – valid provision

10. General Contractor (Acciavati) Had "Pass-Through" Indemnification Agreement The parties settled with the Plaintiff for $200,000 and agreed to each pay a third The parties agreed to litigate who was responsible under the indemnification agreements Trial Court held SuperFresh was not solely negligent General contractor had to indemnify SuperFresh Subcontractor had to pay remaining one-third Pass Through Indemnification Provisions - Bernados v. SuperFresh, 863 A.2d 478 (Pa. 2004)

11. Superior Court Appeal The Superior Court decided that the language of the pass- through provision between the general contractor and the subcontractor applied General contractor was required to indemnify SuperFresh under their agreement General contractor's liability passed through to subcontractor who was responsible for the entire $200,000 Subcontractor appeals to the Supreme Court

12. Supreme Court Analysis Subcontractor (Goldsmith) agrees to perform and assume all obligations and liabilities of general contractor (Acciavati) under the general contract for the work Subcontractor hereby releases general contractor and SuperFresh from any and all claims... for personal injury... arising out of any matter occurring at location of the work... and further, subcontractor agrees to indemnify and hold harmless general contractor and SuperFresh... from and against any claim, loss, damage, liability or expense... occurring to any property or for personal injury... as may result or arise from the performance, lack of performance, or improper performance of the work whether such matter may arise or occur on the location of the work...

13. Supreme Court Holding The Supreme Court held the agreement did not clearly express the parties' intentions regarding the issue of indemnification "Pass-through provisions" involve indemnification for acts of another party's negligence Contract language must be clear and specific

14. Supreme Court Holding The Supreme Court held that the agreement could mean subcontractor would indemnify general contractor only in the event of Goldsmith's negligence Since the agreement was not clear, it was not entered

15. Indemnification for Non-Negligent Parties - Mace v. Atlantic Refining & Marketing Corp., 785 A.2d 491 (Pa. 2001) Case arises out of an incident at an A-Plus convenience store in Philadelphia A-Plus franchise had an agreement with Atlantic Refining that it would defend Atlantic from all claims arising out of the operation of the store except any damage or loss caused solely by Atlantic

16. Incident on the property results in a customer lawsuit Atlantic tendered to the franchisee Franchisee denies the tender on the basis that there may be independent negligence Atlantic files a Motion for Summary Judgment which is granted Indemnification for Non-Negligent Parties - Mace v. Atlantic Refining & Marketing Corp., 785 A.2d 491 (Pa. 2001)

17. Perry-Ruzzi Rule found to be inapplicable to post-trial claim for indemnification for defense costs Party seeking indemnification had been adjudicated a non- negligent party Lesson from the Case  Even if a defense tender can be rejected early in the case, tendering party may be in a position to seek reimbursement of fees and costs if it is found not have been negligent Indemnification for Non-Negligent Parties - Mace v. Atlantic Refining & Marketing Corp., 785 A.2d 491 (Pa. 2001)

18. Workers' Compensation Indemnification Agreements The Worker's Compensation Act provides that an employee cannot sue an employer for injuries within the scope of employment Employer also cannot be joined as an Additional Defendant in absence of a written indemnification agreement entered into by employer before date of injury 77 P.S. §481(b)

19. An indemnification agreement must be in effect on date of lawsuit Indemnification agreement must use specific language indicating employer intends to waive worker's compensation immunity General language not sufficient Language calling for indemnification for "any and all claims" not good enough Workers' Compensation Indemnification Agreements

20. Concluding Thoughts on Indemnification Almost every tender can be denied as premature Some tenders are clearly going to be invalid Violate Perry-Ruzzi rule Not much risk of paying attorney's fees to non-negligent party If you owe a defense – why not pick it up Tendering party become as much of an adversary Ultimately may be paying for a second attorney's fees

21. The Additional Insured AI becomes a party to another's liability insurance policy AI has direct & independent rights against another's insurance company Contractual Indemnity Rights Created by a clause in an agreement or contract An Indemnitee is not an Insured AI Rights Created by language of the insurance policy AI Endorsement or "blanket" coverage

22. The Practical Difference Between Indemnitee and Additional Insured Indemnitee can't sue insurance company directly for breach of insurance policy Indemnitee can't sue insurance company for bad faith

23. Where Are AI Provisions Found? Policies insuring building contractors  AI = property owner Policies insuring entities working for govt. entity  AI = "the man" Policies insuring commercial real estate tenants  AI = lessor Policies insuring sub-contractors  AI = the general

24. The AI's BIG Question: What Am I Insured Against? It depends - Read the policy - It's not "always the same" Insured against vicarious liability for acts of the Named Insured Everyone's a party-defendant Jury finds Named Insured wasn't negligent Jury finds that AI was negligent No coverage for damages due to AI's independent negligence

25. Coverage for AI's Own Negligence Insured for "any work" performed Named Insured on AI's behalf Court: All liability arising in connection with the Named Insured's "work" includes liability arising from the negligence of AI Insured for liability "arising out of" Named Insured's operations Court: Coverage for AI's own negligence included

26. "Standard" ISO AI Endorsement Which one? Don't assume it's the latest version PA: 4-year SOL for contract actions AI Endorsement may be older than you think Generally, AI only needs to show:  Broad causal relationship  "Arising out of" = "but for"

27. Newer versions of CG 20 10 ISO form Coverage for damage caused, in whole or in part, by the acts or omissions of NI in performance of ongoing or completed operations for AI No duty to defend AI if complaint fails to allege injuries were caused in whole or in part by NI's negligence 2013 amendments to CG 20 10 Limit scope to only that required by underlying contract between NI & AI No appellate decisions yet

28. Additional Considerations ("other things to worry about") If contract requires NI to "name" the other party as AI,  AI will likely be presumed insured on the policy AI coverage in contract + "causal link" = Full 'dollar one' defense for AI in underlying action - from day one  Different from party seeking defense as contractual indemnitee - may be no duty to defend until liability proven in underlying action If AI under policy, what other policy definitions, terms, conditions, exclusions apply?  Injury during ongoing or completed operations  Priority of policies -- NI policy v. AI's own CGL policy

29. The Papers You Still Need in a Paperless World NI's CGL policy AI's CGL policy ALL contracts between NI & AI Exhibits Addendums ALL pleadings among parties to litigation Usually more than Joe v. Sam PA still a "4 corners" state

30. Conclusion Case Law - always subject to change or interpretation Changing ISO forms Facts unique to claim in question PA's appellate judiciary When in doubt… Acknowledge tender promptly Gather documents Dial 1-800-who's-our-coverage-attorney

31. Thank you! Questions? Brigid Q. Alford, Esquire Marshall Dennehey Warner Coleman & Goggin Shareholder 100 Corporate Center Drive Suite 201 Camp Hill, PA 17011 (717) 651-3710 (717) 651-3707 - Fax bqalford@mdwcg.com Christopher M. Reeser, Esquire Marshall Dennehey Warner Coleman & Goggin Shareholder 100 Corporate Center Drive Suite 201 Camp Hill, PA 17011 (717) 651-3509 (717) 651-3707 – Fax cmreeser@mdwcg.com