                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-12-2004

Pizzini v. Amer Intl Specialty
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-1959




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                                                  NOT PRECEDENTIAL

           UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT


                        No. 03-1959
                        ___________

   LORIS PIZZINI; DONNA PIZZINI; LEONE PIZZINI,
MARACHIARA BACHE; THOMAS BACHE; TULLIA PIZZINI;
   VALERIO PIZZINI; DODIE PETTIT; KEVIN GRAY,

                                         Appellants.

                              v.

         AMERICAN INTERNATIONAL SPECIALTY
             LINES INSURANCE COMPANY
          ___________________________________

        On Appeal from the United States District Court
            for the Eastern District of Pennsylvania
                  (D.C. Civ. No. 99-cv-03297)
           District Judge: Honorable Anita B. Brody
        _______________________________________


        Submitted Pursuant to Third Circuit LAR 34.1(a)
                     on February 10, 2004


Before: SCIRICA, Chief Judge, ROTH and MCKEE, Circuit Judges


                (Opinion filed : July 12, 2004)
                     _______________

                         OPINION
                      _______________
ROTH, Circuit Judge:

         Appellants Loris Pizzini, Donna Pizzini, Leone Pizzini, Mirachiara Bache, Thomas

Bache, Tullia Pizzini, Valerio Pizzini, Dodie Pettit, and Kevin Gray invested in several

Kentucky oil-drilling ventures beginning in 1995. Advising them while making these

investments was Stephen Barry Shellington, a registered representative and agent of the

Equitable Life Assurance Society of the Untied States. Shellington was insured under

professional liability policies issued by American International Specialty Lines Insurance

Company (AISLIC).

         After the investments failed, the appellants sued Shellington in Pennsylvania state

court alleging that he had made material misrepresentations regarding the drilling

ventures. AISLIC took over Shellington’s defense, subject to a reservation of rights. A

condition of AISLIC’s defense was that Shellington cooperate with the counsel provided.

The defense attorneys, selected by AISLIC, deemed it impossible to provide an effective

defense absent Shellington himself testifying, something Shellington steadfastly declined

to do.

         In 1999, without AISLIC’s consent, Shellington negotiated a settlement with

appellants by agreeing to an entry of a judgement in favor of the appellants for the full

amount of each of their losses. Alleging that ASLIC was now Shellington’s assignee

under policies issued in 1995 and 1996, appellants then brought suit in diversity against

AISLIC for indemnity and also statutory bad faith claims arising from Shellington’s

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conduct. The District Court for the Eastern District of Pennsylvania eventually granted

summary judgement dismissing both appellants’ indemnity and bad faith claims. This

appeal followed.

       We have jurisdiction under 28 U.S.C. § 1291. Our review of the District Court’s

order is plenary, and we apply the same standard employed by the District Court under

Fed. R. Civ. P. 56(c). Haugh v. Allstate Ins. Co., 322 F.3d 227, 230 (3d Cir. 2003). We

will affirm the District Court’s grant of summary judgement in favor of AISLIC if it

appears that “there is no genuine issue as to any material fact and that [it] is entitled to a

judgement as a matter of law.” Id. (quoting Fed. R. Civ. P. 56 (c)). In reviewing the

record, we are required to view the inferences to be drawn from the underlying facts in

the light most favorable to the appellants, as the party opposing the motion, and to take

their allegations as true when supported by proper proof whenever these allegations

conflict with those of AISLIC. Id.

       AISLIC initially argues in favor of applying New York law while appellants

maintain applying Pennsylvania law is proper. Yet, “before a choice of law question

arises, there must be a conflict between the potentially applicable bodies of law.” On Air

Entertainment Corp. v. National Indem. Co., 210 F.3d 146, 149 (3d Cir.2000). We agree

with the District Court that in this instance, Pennsylvania and New York law are

consistent when determining whether summary judgement is proper in a situation in

which the Appellants’ claims were not first made and reported during a single policy



                                               3
period. For that reason, there is no conflict and the District Court acted properly in

deciding to apply Pennsylvania law.

       Turning to the substance of the case, appellants first argue that the District Court

erred in not admitting extrinsic evidence in the form of a brochure. This brochure,

appellants claim, may show ambiguity in the policies at issue. However, “the meaning of

a clear and unequivocal written contract must be determined by its contents alone.”

Bohler-Uddeholm Am., Inc. v. Ellwood Group, Inc., 247 F.3d 79, 92 (3d Cir. 2001).

Appellants do not contest that the language of the actual policies is unambiguous; as the

District Court held, the reporting provisions of the policies are clear and unambiguous,

and the relevant terms are defined. Because “[w]here the intention of the parties is clear,

there is no need to resort to extrinsic aids or evidence” we find that the District Court did

not err by declining to admit extrinsic evidence. Id.

       In the alternative, the appellants argue that the District Court should have estopped

AISLIC from denying coverage. Appellants maintain that allowing AISLIC to deny

coverage because of Shellington’s failure to comply with the policies’ reporting

requirements resulted in both Shellington and the appellants being impermissibly misled.

Appellants also argue that in any event AISLIC has waived this defense. Regarding the

purported waiver, we initially note that waiver or estoppel cannot create an insurance

contract where none existed under Pennsylvania law. See Wasilko v. Home Mut. Cas.

Co., 232 A.2d 60, 63 (Pa. Super. Ct. 1967) (citing Donovan v. New York Cas. Co., 94



                                              4
A.2d 570 (Pa. 1953)). Thus, AISLIC did not waive its right to deny coverage under either

the 1995 or 1996 policies because of Shellington’s failure to cooperate with the defense

AISLIC provided. To the extent that AISLIC did not specifically state that this would be

a ground on which to deny coverage in its reservation of rights letters, the letters

nevertheless did contain language reserving the right to raise other issues and defenses

that might affect coverage. Thus, AISLIC did not waive this defense. As to estoppel, the

appellants would have to demonstrate “actual prejudice, that is, when the failure to assert

all possible defense causes the insured to act to his detriment in reliance thereon” in order

to prevail. Mendel v. Homes Ins. Co., 806 F. Supp. 1206, 1215 (E.D. Pa. 1992). Given

that AISLIC’s letters unequivocally communicated its intention to reserve its rights, we

agree with the District Court that no reasonable juror would conclude that Shellington or

the appellants would have suffered actual prejudice.

       Appellants’ suggestion that they may have detrimentally relied on -- and indeed

may have been induced by -- the policies’ lack of specificity is merely a permutation of

the above argument, and is similarly swallowed by the language of the policies. The

policies’ language put appellants on notice that the insurance company was reserving

their right to later raise defenses, even though individual defenses were not spelled out.

Appellants could not detrimentally rely on the absence of a specific laundry list of

defenses when the insurance company clearly stated that there was a possibility of other

defenses being raised.



                                              5
       Finally, appellants argue that even though the District Court held their assigned

policy claims invalid, a statutory bad faith claim should not be precluded. We do not

agree. Having already found that appellants can enforce no right under either policy, they

lack the predicate action needed to pursue a 42 P.S. § 8371 bad faith claim. Polselli v.

Nationwide Mut. Fire Ins. Co., 126 F.3d 524, 530 (3d Cir. 1997). This being the case,

appellants’ bad faith claim is not sustainable.

       For the reasons stated above, we will affirm the judgment of the District Court.




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