Court Applied Pennsylvania Law in Asbestos Coverage Case Based on Insured’s Residence

York Int’l Corp. v. Liberty Mut. Ins. Co., No. 1:10-CV-0692 (M.D. Pa. Oct. 13, 2015)

This decision involves a dispute over whether Pennsylvania or New York law would apply to an insurer’s duty to defend and indemnify an insured for asbestos-related claims. Due to the passage of more than 50 years between the period covered by the relevant policies and the initiation of the lawsuit, no party with firsthand knowledge of the negotiation and consummation of the policies could be identified, and complete copies of the policies could not be located. The policies’ declarations pages listed an address for the insured in New York. However, the insured representative resided in Pennsylvania at all relevant times. The insurer submitted an affidavit of a consultant and former longtime employee, testifying as to the role of the person listed as the insured’s representative on the declarations pages in negotiating and acquiring the policies. The insured moved to strike portions of the affidavit; in granting the motion, the court held that Pennsylvania law applied.

In a motion for reconsideration, the insurer argued that the court’s decision to strike three paragraphs of the affidavit was contrary to Federal Rule of Evidence 406, which deals with evidence of the routine practice of an organization.

The court admitted one paragraph, which established that the insurer would have sent the policy to the New York address on the declarations pages. However, the court did not alter its holding regarding choice of law. The court reasoned that the representative listed on the declarations pages would have forwarded the policy to Pennsylvania for execution. Under Pennsylvania law, “[i]t is unclear whether . . . a contract sent from an insurer to an insured’s broker, which forwards the contract to the insured, is considered delivered at the place of the broker or the insured.”  Based on the uncertainty and the lack of any credible evidence as to whether the person listed on the declarations page was acting as the plaintiff’s broker, the court relied on Pennsylvania default rule that “delivery is presumed at the insured’s residence.”

The court upheld its previous ruling striking from the affidavit two other paragraphs that dealt with the affiant’s conclusions regarding what the insured’s designee would have done with the policies, assuming he was an insurance broker. The court reasoned that there was no independent basis for the conclusion that the insured’s representative was an insurance broker and that the affiant did not have personal knowledge of whether or not he was. Moreover, because the insurer did not have a standard practice of working with insurance brokers, there wasn’t sufficient evidence to establish the insurer’s habitual manner of working with insurance brokers. As a result, the portions of the affidavit could not be admitted.

Read the full decision here.