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Farm Family Casualty Co. v. Cumberland Insurance Company, Inc.

Superior Court of Delaware, Kent

October 2, 2013

FARM FAMILY CASUALTY COMPANY, As Subrogee of M. Virginia Richardson and As Assignee of KNICELEY'S INC., Plaintiff,
CUMBERLAND INSURANCE COMPANY, INC., a foreign corporation, DOWNES INSURANCE ASSOCIATES, INC., a Delaware corporation, HARRINGTON INSURANCE AGENCY, INC., Individually and as successor-in-interest to Downs Insurance Associates, Inc., and Marve AGENCY, INC., a Delaware corporation, Defendants.

Submitted: June 6, 2013

Upon Consideration of Defendant Harrington's Motion For Summary Judgment Against Farm Family GRANTED.

Upon Consideration of Defendant Harrington's Motion To Amend Answer GRANTED.

Upon Consideration of Defendant Harrington's Motion For Summary Judgment Against Downes GRANTED.

Michael R. Abbott, Esq., and David C. Malatesta, Esq., Kent & McBride, Wilmington, Delaware. Attorneys for Plaintiffs.

Krista R. Samis, Esq., Eckert, Seamans, Cherin& Mellott, Wilmington, Delaware. Attorney for Defendant Marvel Agency, Inc.

Kashif I. Chowdhry, Esq, Parkowski, Guerke& Swayze, Dover, Delaware. Attorney for Defendant Downes Insurance Associates, Inc.

James S. Yoder, Esq., and Sean A. Meluney, Esq., White & Williams, Wilmington, Delaware.Attorneys for Defendant Harrington Insurance Agency.

Stephen P. Casarino, Esq., Casarino, Christman, Shalk, Ransom & Doss, Wilmington, Delaware.Attorney for Cumberland Insurance Company.


VAUGHN, President Judge

Plaintiff Farm Family Casualty Insurance Co. ("Farm Family")[1] has asserted various claims against insurance brokers Downes Insurance Associates, Inc. ("Downes") and Harrington Insurance Agency, Inc. ("Harrington") (collectively, the "Broker Defendants"), for their failure to secure appropriate insurance coverage for Kniceley's, Inc.'s ("Kniceley") lead paint abatement business.[2] Additionally, Harrington has moved to amend its answer to assert cross-claims against co-defendant Downes that are related to an indemnification agreement. Now before the Court are Harrington's motion for summary judgment against Farm Family, Harrington's motion to amend its answer and Harrington's motion for summary judgment against cross-claim defendant Downes.


The Underlying Action

The precursor to this action was an underlying lawsuit where a child, Jose LaTorre ("LaTorre"), suffered serious personal injuries and impairment caused by lead poisoning.[3] The child's injuries resulted from exposure to lead paint located within a rental property owned by M. Virginia Richardson ("Richardson").

In November of 2004, it was discovered that LaTorre had an elevated blood-lead level. On December 13, 2004, after an inspection of the home indicated the presence of lead-based paint, the Delaware Division of Public Health ordered Richardson to reduce the levels of lead paint present on the property in order to bring them into compliance with state standards. Richardson hired Kniceley, a licensed lead abatement company, to handle the situation. Kniceley performed the abatement work in February and March of 2005. On March 11, 2005, subcontractor Batta Associates, Inc. ("Batta") informed Richardson that the work had been completed and that the premises had been cleared for lead dust. On August 30, 2005, LaTorre again tested positive for high blood-lead levels.[4] The State's subsequent inspection confirmed that lead dust and paint were still present in the house.

A representative of LaTorre filed a lawsuit against Richardson on May 11, 2006. Richardson filed a third-party complaint against Kniceley and Batta on May 20, 2008 that sought contribution for their negligent failure to properly remove the lead-based paint from her home, resulting in injuries to LaTorre.

On July 8, 2008, Cumberland Insurance Company, Inc. ("Cumberland") informed Kniceley that it was denying coverage for the negligence claim brought by Richardson pursuant to a Total Pollution Exclusion Endorsement (the "total pollution exclusion") contained in the Policy. In its letter to Kniceley, Cumberland explained that "there [was] no coverage for [the] claim as presented" because the law suit was "based on [the] allegation of the release of 'pollutants' as a result of the work performed."[5]

On March 30, 2011, Richardson obtained a $350, 000 (plus costs and interest) consent judgment against Kniceley after the parties agreed to a settlement.

The Procurement of the Policy and the Brokers

In the Fall of 2002, Donald Kniceley ("Mr. Kniceley") contacted Downes, an insurance broker, to help him obtain a commercial general liability policy (the "Policy") for his painting and paint removal business. After completing the preliminary application and risk investigation processes, Downes submitted an insurance application to Cumberland on November 11, 2002. Cumberland reviewed the application and issued the Policy to Kniceley. With Downes' assistance, Kniceley renewed the Policy annually through November 2005. The Policy was in effect from November 11, 2004 to November 11, 2005, during which the aforementioned lead-paint abatement of Richardson's home occurred. It is undisputed that each iteration of the Policy contained the total pollution exclusion.

On March 13, 2006, Downes and Harrington executed an "Agreement for the Purchase of Assets" (the "Purchase Agreement") wherein Downes sold its property and casualty insurance businesses to Harrington. Relevant provisions of the Purchase Agreement will be discussed later in this opinion.

Downes remained the broker of record for Kniceley until September 18, 2006, when the broker was formally changed to Harrington. Farm Family asserts that Harrington performed brokerage services for Kniceley after acquiring the assets of Downes, including: "(1) collecting and mailing policy premium checks from Kniceley to its insurer(s); (2) communicating with Kniceley (3) providing Certificates of Insurance to third parties on behalf of Kniceley; (4) resolving notice of cancellation issues for nonpayment or late payment of premiums; and (5) confirming Kniceley's policy reinstatements with its insurer upon receiving notices of cancellation."[6]Kniceley decided to end its relationship with Harrington before the annual renewal of the Policy's coverage was slated to occur on November 11, 2006. It appears that Harrington was made aware of the change in broker by November 9, 2006 at the latest. Kniceley appointed Marvel Agency, Inc. ("Marvel") to replace Harrington as its insurance broker.

Procedural Facts

On July 7, 2011, Farm Family filed the complaint in this action against Cumberland and the Broker Defendants. Farm Family alleged that the Policy actually covered the claim filed by Richardson, and contended, alternatively, that if it did not, Cumberland, along with the Broker Defendants, made erroneous representations that the Policy would provide coverage for Kniceley's lead-based paint activities. Farm Family asserted three counts against Cumberland: (1) breach of contract, (2) breach of the duty of fair dealing, and (3) consumer fraud. The plaintiff asserted five counts against the Broker Defendants: (4) negligence, (5) breach of contract, (6) consumer fraud, (7) negligent misrepresentation and (8) equitable fraud. Harrington has moved to ...

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