On Appeal from the United States District COurt for the Eastern District of Pennsylvania, D.C. Civil No. 87-1186.
Sloviter and Becker, Circuit Judges and Barry, District Judge*fn*
Vito Vinciguerra, a security guard, attacked and killed Ronald F. Trahey, his fellow employee, while both were on assignment for their employer, Allied Security, Inc. (Allied). In a wrongful death action brought by the estate of Trahey against Allied in the Philadelphia County Court of Common Pleas, the jury found that Vinciguerra killed Ronald Trahey "because of reasons personal to him and not directed against the victim as an employee or because of his employment." App. at 278. The parties agree that this finding established that the killing was not covered by the Pennsylvania Workmen's Compensation Act, which provides that "an injury caused by an act of a third person intended to injure the employe because of reasons personal to him, and not directed against him as an employe or because of his employment" does not qualify as an "injury arising in the course of employment" for purposes of the Act. Pa.Stat.Ann. tit. 77, § 411(1) (Purdon Supp. 1988). The jury found that negligence on the part of Allied "in the hiring, retention, placement, supervision or control" of Vinciguerra was a substantial factor in Trahey's death, and assessed $800,000 in damages against the company. App. at 278-79.
Forum Insurance Company (Forum) insured Allied under a Security Guard Policy which covered its obligation to pay damages for personal injury or property damage arising out of its security guard services and by reason of any negligence or dishonesty committed by its employees while providing security guard services. Forum assumed defense of Allied in the Trahey estate suit under a reservation of rights. It then brought a diversity suit for a declaratory judgment against Allied, the Trahey estate, and Liberty Mutual Insurance Company (Liberty), which had issued a "Workers' Compensation and Employers' Liability" policy to Allied. Forum asked the court to declare that Forum had no obligation to provide a defense or coverage of the estate's claim, arguing that the wrongful death suit came within the coverage of Liberty's policy and was expressly excluded from coverage under the Forum policy. The district court agreed with Forum's contentions and granted summary judgment in its favor, holding Forum had no obligation to provide a defense or coverage to Allied and that Liberty is liable for the reasonable costs and expenses that have been or will be incurred in connection with the defense of the Trahey action.
This appeal by Allied and Liberty requires us to conduct a plenary review of the district court's construction of the Liberty and Forum insurance policies.*fn1 Under Pennsylvania law, we must initially look at the policies and determine, as a matter of law, whether the language is unambiguous. Commercial Union Ins. Co. v. Pittsburgh Corning Cope., 789 F.2d 214, 217 (3d Cir. 1986). If the language of the insurance policies is unambiguous, then we must construe the language as a matter of law. Id.
The insurance policy issued by Forum to Allied on September 1, 1981 provides coverage, inter alia, for "all sums for which the insured shall become legally obligated to pay as damages . . . by reason of any negligent act, error or omission committed by the Named Insured in the conduct of Security Guard Services, or any act of dishonesty committed by an employee of the Named Insured while in the course of employment providing Security Guard Services." App. at 9. The policy excludes claims "arising out of . . . (2) Any obligation for which the Named Insured or any carrier as his insurer may be held liable under any workers compensation, unemployment compensation or disability benefits law, or under any similar law; (3) Bodily injury, sickness or disease, including death or disability at any time resulting therefrom to any employee of the Named Insured arising out of and in the course of his employment by the Named Insured or to any obligation of the Named Insured to indemnify another because of damages arising out of such injury." App. at 10 (emphasis added). The policy limit of the Forum insurance is $1,000,000.
The insurance policy issued by Liberty provides for two types of coverage. Under Coverage A, "Workers Compensation, " Liberty agreed to cover all compensation required by "the workers' compensation law." App. at 46. Under Coverage B, "Employers Liability," Liberty agreed "[t]o pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury by accident or disease, including death at any time resulting therefrom, (a) sustained . . . by any employee of the insured arising out of and in the course of his employment by the insured . . . ." Id. Coverage B contains a $100,000 cap.
The district court concluded that the death of Trahey arose "out of and in the course of his employment" and therefore that his estate's wrongful death claim fell within Coverage B of the Liberty policy, and was excluded by exclusion (3) from the Forum policy. The court, applying the canon of contract construction that contracts should be read to give effect to all provisions, reasoned that exclusion (3) of the Forum policy was intended to reach injuries other than those covered by workers' compensation; otherwise, exclusions (2) and (3) would be synonymous, and clause (3) would be a superfluity. Finding the allegations contained in the complaint filed in the wrongful death suit to be covered by Liberty's and not Forum's policy, the district court held that Liberty was obligated to indemnify Allied to the extent of its policy limit, and to pay the costs and expenses that had been or would be incurred in defending Allied against the Trahey suit.
We consider first Allied's argument that the district court erred in holding that the injury to and subsequent death of Trahey was one "arising in the course of his employment." We must apply Pennsylvania law. Fortunately, there is a Pennsylvania Supreme Court decision directly interpreting the meaning of the clause "arising out of and in the course of employment." In McCabe v. Old Republic Insurance Co., 425 Pa. 221, 228 A.2d 901 (1967), McCabe, the employer, sought to recover from the insurer part of the judgment McCabe was required to pay when one of its employees was injured in the construction of a trench. The policy excluded from coverage liability on the part of McCabe for injuries or death of an employee "arising out of and in the course of his employment by the insured."
McCabe, as Allied here, attempted to argue that this term was ambiguous. The Supreme Court rejected that contention, holding instead that "[w]e cannot agree that any ambiguity exists." Id. at 903. The Court held that "'arising out of means causally connected with, not promixately caused by. 'But for' causation, i.e., a cause and result relationship, is enough to satisfy this provision of the policy." 425 Pa. at 224, 228 A.2d at 903 (emphasis deleted) ...