                                                                                                                           Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-4-2005

Sikirica v. Nationwide Ins Co
Precedential or Non-Precedential: Precedential

Docket No. 04-2035




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                                           PRECEDENTIAL

     IN THE UNITED STATES COURT OF APPEALS
              FOR THE THIRD CIRCUIT

                       Case No: 04-2035

                JEFFREY J. SIKIRICA, ESQ.,
                as Trustee of Pittsburgh Beauty
                        Academy, Inc.

                               v.

            NATIONWIDE INSURANCE COMPANY

                     Jeffrey J. Sikirica,
                                Appellant
                   ____________________

       On Appeal from the United States District Court
          for the Western District of Pennsylvania
               District Court No. 02-CV-1283
         District Judge: The Honorable Joy F. Conti

                   ____________________

                   Argued January 11, 2005

    Before: ROTH and CHERTOFF * , Circuit Judges, and
               SHAPIRO ** , District Judge.

                     (Filed: August 4, 2005)




       *
          Judge Chertoff heard oral argument in this case but
resigned prior to the time the opinion was filed. The opinion
is filed by a quorum of the panel. 28 U.S.C. § 46(d).
       **
          Honorable Norma L. Shapiro, Senior District Judge
for the United States District Court for the Eastern District of
Pennsylvania, sitting by designation.
Marvin Leibowitz, Esq.
Suite 619, Corporate Center
One Bigelow Square
Pittsburgh, PA 15219
       Counsel for Appellant

L. John Argento, Esq.
Swartz Campbell, LLC
4750 U.S. Steel Tower
600 Grant Street
Pittsburgh, PA 15219
       Counsel for Appellee
                  ____________________

                  OPINION OF THE COURT
                   ____________________

SHAPIRO, District Judge.
        Jeffrey Sikirica, Esq. (“Sikirica”), acting as bankruptcy
trustee for the estate of the Pittsburgh Beauty Academy
(“PBA”), brought this action against Nationwide Insurance
Company (“Nationwide”) for bad faith and breach of contract.
Nationwide removed the action to federal court, and Sikirica
moved for remand to state court. The District Court denied
the motion to remand, and granted Nationwide’s motion for
judgment on the pleadings. Sikirica appeals.
  I. FACTUAL BACKGROUND AND PROCEDURAL
                 HISTORY
       This litigation arose out of a class action in state court
against PBA for fraud and consumer protection violations.
Nationwide had previously issued PBA an insurance policy
(“the Policy”) under which Nationwide agreed to indemnify
and defend PBA against various legal claims. Nationwide
notified PBA that the Policy did not cover PBA for the class
action allegations, and Nationwide refused to defend or
indemnify PBA. Judgment was entered against PBA in the
underlying class action. PBA filed for bankruptcy, and
Sikirica, as trustee for PBA, sued Nationwide in state court
for breach of contract and bad faith in failing to defend and

                                2
indemnify PBA. Nationwide removed the action to federal
court. The District Court denied Sikirica’s motion to remand.
Nationwide moved for judgment on the pleadings. The
District Court, granting judgment in favor of Nationwide,
held the bad faith claim was barred by the statute of
limitations, and the policy did not cover intentional and
fraudulent conduct. Sikirica now appeals.
        The underlying events occurred in 1985, when Victoria
Cinski (“Mrs. Cinski”) went to PBA to have her hair colored
by a PBA student. She signed a release purporting to absolve
PBA of all liability in exchange for student-provided services
at a reduced price. The Beauty Culture Act, 63 Pa. Cons. Stat.
Ann. § 513 (1996), prohibits cosmetology schools from
charging more than the cost of materials when students render
the services. Mrs. Cinski was charged $9.15, but the cost of
the materials was only $7.06. She also suffered serious
injuries from the hair coloring.
        Mrs. Cinski and her husband filed a state court action
against PBA for fraudulent misrepresentation, negligence,
personal injury, unjust enrichment, loss of consortium, and
violations of the Unfair Trade Practices and Consumer
Protection Law (“UTPCPL”), 73 Pa. Cons. Stat. Ann. §§ 201-
1 to -9.3 (2005). Her complaint included class action
allegations on behalf of all persons overcharged by PBA.
       The trial court severed Mrs. Cinski’s individual claims
from the class action claims. Nationwide defended PBA in
the individual action, but denied coverage and defense for the
class action in a letter to PBA dated February 22, 1991:
      Please be advised that Nationwide Insurance
      Company is denying coverage and any further
      defense cost pertaining to the class action
      allegations contained in the Complaint filed in
      the Court of Common Pleas of Allegheny
      County, Pennsylvania, by Victoria Lynn Cinski
      and Brian Cinski, her husband, individually and
      on behalf of others similarly situated, vs.
      Pittsburgh Beauty Academy, Inc., No. GD87-
      14137. Our denial of coverage and further

                              3
       defense cost pertains only to the class action
       allegations beginning with Paragraph 55 and
       extending through Paragraph 61(h).
       The class allegations cited would not fall within
       the insuring agreement for bodily injury or
       property coverage, nor would it fall within the
       coverage extended for personal or advertising
       injury. The insurance does not apply to
       advertising injury arising out of incorrect
       description or mistake in advertising of goods,
       products or services sold, offered for sale, or
       advertised.
       Please be advised that the firm of Reale, Fossee
       and Ferry will continue to represent Pittsburgh
       Beauty Academy under the same reservation
       outlined in our letter of January 9, 1988 for the
       remaining allegations pertaining to the
       individual action of Victoria Lynn Cinski.
App. at 111.
     The individual action went to trial in 1993. The trial
court dismissed Mrs. Cinski’s UTPCPL claim, but allowed
the personal injury claims to go to trial; she prevailed. On
appeal, the Pennsylvania Superior Court reinstated the
UTPCPL claim because PBA overcharged Mrs. Cinski and
deliberately misled her as to the reduced price. The Superior
Court held that, “the trial court should have awarded appellant
$100 under the Act for her direct damages from appellee’s
deliberate misrepresentation,” but found no fraud, “as
appellant has not shown proof of reliance or fraud, and the
misrepresentation is de-minimus [sic]...” Cinski v. Pittsburgh
Beauty Acad., Inc., 644 A.2d 802 (Pa. Super. Ct. 1994).
     The class action subsequently proceeded to trial on three
claims alleging fraudulent misrepresentation, unjust
enrichment, and violations of the UTPCPL. A verdict was
entered for the class, and the court awarded $100 to each class
member with attorneys’ fees and costs, a total judgment of
approximately $290,000. Sikirica appealed to the


                               4
Pennsylvania Superior Court. On March 27, 2001, the
Superior Court affirmed because its prior ruling in Mrs.
Cinski’s individual action, “if not the law of the case, is at
least res judicata or collateral estoppel as to PBA’s issues” in
the class action. Cinski v. Pittsburgh Beauty Acad., Inc., 777
A.2d 497 (Pa. Super. Ct. 2001).
      On April 26, 2002, Sikirica, as Trustee, initiated a state
court action against Nationwide by writ of summons for its
failure to defend and indemnify PBA in the class action. The
complaint, filed and served on July 8, 2002, set forth six
claims. Count I alleged bad faith insurance practices under 42
Pa. Cons. Stat. Ann. § 8371 (1998)1 for Nationwide’s refusal
to defend and indemnify PBA. Counts II through VI alleged
breach of contract for failure to defend and indemnify under
five sections of the Policy: 1) the Comprehensive General
Liability section; 2) the Personal Injury and Advertising
section; 3) the Professional Liability section; 4) the
Contractual Liability section; and 5) the Comprehensive
Crime Coverage section.
      Nationwide removed to federal court on July 22, 2002.
Sikirica, arguing there was no diversity jurisdiction and



       1
           42 Pa. Cons. Stat. Ann. § 8371 provides:

       In an action arising under an insurance policy, if
       the court finds that the insurer has acted in bad
       faith toward the insured, the court may take all
       of the following actions:

       (1) Award interest on the amount of the claim
       from the date the claim was made by the insured
       in an amount equal to the prime rate of interest
       plus 3%.

       (2) Award punitive damages against the insurer.

       (3) Assess court costs and attorney fees against the
       insurer.

                                5
Nationwide did not timely remove, moved for remand to the
state court. The District Court, ruling that Nationwide timely
removed within the 30-day time period for removal that
accrued when Sikirica filed the complaint, denied the motion.2
Nationwide filed a motion for judgment on the pleadings
under Fed. R. Civ. P. 12(c).3 The District Court, adopting the
magistrate judge’s report and recommendation, granted the
motion.4 The court found the bad faith claim was barred by
the statute of limitations. On the breach of contract claims,
the court found Nationwide had no duty to defend because the
class action complaint alleged only intentional conduct and
the Policy did not cover intentional misconduct.
  II. JURISDICTION AND STANDARD OF REVIEW
      This court has jurisdiction over an appeal from a final
decision of the District Court under 28 U.S.C. § 1291. There
is subject matter jurisdiction under 28 U.S.C. § 1332.



       2
          Sikirica also argued the court lacked diversity
jurisdiction. The District Court rejected the argument, and
Sikirica does not raise this issue on appeal.
       3
           Rule 12(c) provides:

       Motion for Judgment on the Pleadings. After
       the pleadings are closed but within such time as
       not to delay the trial, any party may move for
       judgment on the pleadings. If, on a motion for
       judgment on the pleadings, matters outside the
       pleadings are presented to and not excluded by
       the court, the motion shall be treated as one for
       summary judgment and disposed of as provided
       in Rule 56, and all parties shall be given
       reasonable opportunity to present all material
       made pertinent to such a motion by Rule 56.
       4
         The District Court applied Pennsylvania law on all
substantive issues. At oral argument, the parties agreed that
Pennsylvania law applies.

                                  6
     The standard of review for subject matter jurisdiction is
plenary. Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d
392, 396 (3d Cir. 2004). The party asserting jurisdiction bears
the burden of showing the action is properly before the federal
court. Id. The statute governing removal, 28 U.S.C. § 1441,
must be strictly construed against removal. Id.
      The standard of review for a motion for judgment on the
pleadings is plenary. Jablonski v. Pan Am. World Airways,
Inc., 863 F.2d 289, 290 (3d Cir. 1988). Judgment will not be
granted unless the movant clearly establishes there are no
material issues of fact, and he is entitled to judgment as a
matter of law. Soc’y Hill Civic Ass’n v. Harris, 632 F.2d
1045, 1054 (3d Cir. 1980). We must view the facts presented
in the pleadings and the inferences to be drawn therefrom in
the light most favorable to the nonmoving party. Id.
      Interpretation of an insurance policy is a question of law,
and review is plenary. Westport Ins. Corp. v. Bayer, 284 F.3d
489, 496 (3d Cir. 2002). In construing the policy, if the words
of the policy are clear and unambiguous, the court must give
them their plain and ordinary meaning. Pac. Indem. Co. v.
Linn, 766 F.2d 754, 760-61 (3d Cir. 1985). When a term is
ambiguous, and the intention of the parties cannot be
discerned from the policy, the court may look to extrinsic
evidence of the purpose of the insurance, its subject matter,
the situation of the parties, and the circumstances surrounding
the making of the contract. Id. at 761. Ambiguous terms
must be strictly construed against the insurer, but the policy
language must not be tortured to create ambiguities where
none exist. Id.
                      III. DISCUSSION
A. Sikirica’s Motion to Remand for Untimely Removal
     Sikirica contends Nationwide did not remove to federal
court within 30 days of its receipt of service of process as
required by 28 U.S.C. § 1446(b). This argument requires us
to determine when the 30-day period for removal began.
     Sikirica demanded $300,000 in a letter to Nationwide
dated April 5, 2002. The writ of summons informing

                               7
Nationwide of the parties’ citizenship was served on
Nationwide on April 29, 2002. Sikirica argues these two
documents together constitute sufficient notice of diversity
jurisdiction to trigger the 30-day period upon service of the
writ of summons. If so, removal was untimely because
Nationwide did not file a petition for removal until July 22,
2002, more than 30 days after the writ of summons was
served.
      The District Court, relying on Foster v. Mutual Fire,
Marine & Inland Insurance Co., 986 F.2d 48 (3d Cir. 1993),
held that the letter together with the writ of summons did not
constitute notice of diversity jurisdiction. The District Court
found Nationwide did not receive notice of diversity
jurisdiction until the complaint was filed and served on July 8,
2002. Because the action was removed on July 22, 2002, less
than 30 days later, the court held removal was timely and
denied Sikirica’s motion to remand.
      The question is whether the 30-day period under 28
U.S.C. § 1446(b) began when Nationwide received the writ of
summons or the complaint. Section 1446(b) contains two
paragraphs governing when the 30-day period begins. The
first paragraph provides:
     The notice of removal of a civil action or
     proceeding shall be filed within thirty days after the
     receipt by the defendant, through service or
     otherwise, of a copy of the initial pleading setting
     forth the claim for relief upon which such action or
     proceeding is based, or within thirty days after the
     service of summons upon the defendant if such
     initial pleading has then been filed in court and is
     not required to be served on the defendant,
     whichever period is shorter.
28 U.S.C. § 1446(b) (emphasis added). The second paragraph
applies only if the initial pleading does not set forth the
grounds for removal:
     If the case stated by the initial pleading is not
     removable, a notice of removal may be filed within


                               8
     thirty days after receipt by the defendant, through
     service or otherwise, of a copy of an amended
     pleading, motion, order or other paper from which
     it may first be ascertained that the case is one which
     is or has become removable, except that a case may
     not be removed on the basis of jurisdiction
     conferred by section 1332 of this title more than 1
     year after commencement of the action.
Id. (emphasis added).
      Sikirica contends the phrase “other paper” in the second
paragraph encompasses informal correspondence between the
parties, such as the demand letter he sent to Nationwide on
April 5, 2002. The complaint stated grounds for diversity
jurisdiction, so the second paragraph does not apply if the
complaint is the “initial pleading.” The “other paper”
language of the second paragraph would apply only if the writ
of summons could be considered the “initial pleading.”
      In Foster, this court considered the meaning of “initial
pleading” in the context of the first paragraph of Section
1446(b). Foster, 986 F.2d at 49. The plaintiff in Foster filed
a praecipe for writ of summons in the Commonwealth Court
of Pennsylvania and served the writ of summons on the
defendant. Id. The complaint was filed and served on the
defendant several months later, and the defendant filed a
notice of removal within 30 days of receiving the complaint.
Id. This court held that 28 U.S.C. § 1446(b) “requires
defendants to file their Notices of Removal within thirty days
after receiving a writ of summons, praecipe, or complaint
which in themselves provide adequate notice of federal
jurisdiction as noted above.” Id. at 54 (emphasis added).
Foster also rejected the notion that correspondence, together
with the summons, could provide notice because “anything
considered a pleading must be something of the type filed
with a court.” Id. The District Court in this case held that
under Foster the defendant did not have notice until the
complaint was received because the writ of summons alone
did not establish federal jurisdiction, and Mrs. Cinski's
demand letter was not a pleading of the type filed with a


                               9
court.
      The continuing authority of Foster has been placed in
doubt by Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc.,
526 U.S. 344 (1999). In Murphy Bros., the Supreme Court
considered whether a complaint sent by facsimile, but not
formally served on the defendant, could provide notice of
removability under the first paragraph of 28 U.S.C. § 1446(b).
Id. at 347-48. The plaintiff argued the 30-day removal period
started when the complaint was faxed because the statute
provides that the period starts “after the receipt by the
defendant, through service or otherwise, of a copy of the
initial pleading.” 28 U.S.C. § 1446(b) (emphasis added). The
Court rejected this contention, and held that “a named
defendant's time to remove is triggered by simultaneous
service of the summons and complaint, or receipt of the
complaint, ‘through service or otherwise,’ after and apart
from service of the summons, but not by mere receipt of the
complaint unattended by any formal service.” Murphy Bros.,
526 U.S. at 347-48. By contrast, Foster held the 30-day
period begins when the defendant receives “a writ of
summons, praecipe, or complaint which in themselves”
provide notice of federal jurisdiction, Foster, 986 F.2d at 54
(emphasis added), whereas the literal wording of Murphy
Bros. requires the filing or receipt of a complaint before the
30-day period begins.
      Not all courts have interpreted Murphy Bros. to require
the filing or receipt of a complaint before the 30-day period
begins. See Whitaker v. Am. Telecasting, Inc., 261 F.3d 196
(2d Cir. 2001); Sprague v. ABA, 166 F. Supp. 2d 206 (E.D.
Pa. 2001). In Whitaker, a plaintiff in New York state court
served the defendants with copies of a summons with notice,
but no complaint. He served the complaint more than two
months later, and the defendants removed to federal court
soon after. Whitaker, 261 F.3d at 199. Plaintiff, arguing
removal was untimely, moved for remand. Id. at 200. The
district court concluded removal was timely because Murphy
Bros. had interpreted the “initial pleading” language of
1446(b) to mean “complaint” and the defendants had removed
within 30 days of receipt of the complaint. Id.

                              10
      The Court of Appeals for the Second Circuit rejected the
district court's interpretation of Murphy Bros. Id. at 205. The
Second Circuit read Murphy Bros. solely as an interpretation
of the “service or otherwise” language of Section 1446(b), not
as an interpretation of “initial pleading.” Id. at 202. The
court stated that Murphy Bros. used the term “complaint” in
place of “initial pleading” in its analysis of Section 1446(b)
merely because the initial pleading served in Murphy Bros.
was a complaint.5 Id. Looking to the plain language of
Section 1446(b), the court reasoned that “initial pleading”
does not necessarily mean “complaint,” so the statute does not
require the receipt of a complaint to trigger the removal
period. Id. at 203. The court concluded that “a summons
with notice may serve as an initial pleading under section
1446(b).” Id. at 205. The court then declined to remand the
case to state court because the summons did not state the
citizenship of the parties, and therefore failed to provide
notice of federal diversity jurisdiction; the 30-day period was
not actually triggered by receipt of the summons, but receipt
of the complaint, so removal was timely. Id. at 206.
      A summons may not serve as an initial pleading under
Murphy Bros. First, the Supreme Court's use of the term
“complaint” to mean “initial pleading” in Murphy Bros. was
not merely an inadvertent accommodation of the facts. The
Court, addressing the situation where a complaint is received
after service of the summons, explicitly held that the time to
remove is triggered by “receipt of the complaint, ‘through
service or otherwise,’ after and apart from service of the
summons. . .” Murphy Bros., 526 U.S. at 348 (emphasis
added). If the Court had intended that a summons could be
the initial pleading, its holding would not have distinguished
between receipt of the complaint and service of the summons.
     Second, Murphy Bros. cited the legislative history of



       5
          In quoting Section 1446(b), the Court in Murphy
Bros. substituted “complaint” for the phrase “initial pleading
setting forth the claim for relief upon which such action or
proceeding is based.” Murphy Bros., 526 U.S. at 347.

                              11
Section 1446(b) in which Congress stated its intent to
eliminate the situation wherein a defendant who has not
received the complaint must decide whether to remove
“before he knows what the suit is about.” Id. at 352. The
Second Circuit, noting that New York law requires the
summons to state the nature of the action and the relief
sought6 , reasoned that a writ of summons satisfies this
purpose. Whitaker, 261 F.2d at 204. In Pennsylvania, there is
generally no such requirement. See Pa. R. Civ. P. 1351.7 The
model form for a general writ of summons under
Pennsylvania law merely contains the plaintiff’s name, the
defendant’s name, and notice that an action has been
commenced, with the county, the date, the name of the
prothonotary or clerk, and the deputy. Id. This is insufficient
to notify the defendant “what the action is about.” The writ of
summons in this case contained no information about the
nature of the action. See App. at 241.
      Finally, Murphy Bros. noted that Congress amended the
statute partly to provide for uniform operation across the
nation. Murphy Bros., 526 U.S. at 351. We would impede
this purpose by adopting the Whitaker rule in the Third
Circuit, since defendants in Pennsylvania could be required to
decide whether to remove without seeing the complaint or
knowing the nature of the cause of action, whereas defendants
in Delaware and New Jersey would always have such notice.
     We therefore hold that Murphy Bros. implicitly
overruled Foster, and a writ of summons alone can no longer


       6
          “If the complaint is not served with the summons,
the summons shall contain or have attached thereto a notice
stating the nature of the action and the relief sought, and,
except in an action for medical malpractice, the sum of money
for which judgment may be taken in case of a default.” N.Y.
C.P.L.R. § 305(b) (LEXIS through 2005).
       7
        This issue does not arise under New Jersey or
Delaware law because the complaint must be served with the
summons. See N.J.Rules 4:4-3 (2005); De.R.Super.Ct.R.C.P.
4(e) (LEXIS through 2005).

                              12
be the “initial pleading” that triggers the 30-day period for
removal under the first paragraph of 28 U.S.C. § 1446(b).8
      Although Murphy Bros. only interpreted the phrase
“initial pleading” in the first paragraph, both paragraphs of
Section 1446(b) use the phrase “initial pleading,” and much of
the other language is also identical. Statutes must be
construed “as a symmetrical and coherent regulatory scheme,
one in which the operative words have a consistent meaning
throughout.” Gustafson v. Alloyd Co., 513 U.S. 561, 569
(1995). Since the “initial pleading” language is identical, the
Supreme Court’s interpretation of “initial pleading” to mean
“complaint” in the first paragraph of Section 1446(b) must
also apply to the second paragraph.
      The “initial pleading” here was the complaint, not the
summons, but the complaint provided notice of the grounds
for federal diversity jurisdiction, so the second paragraph of
Section 1446(b) does not apply; Sikirica’s reliance on “other
papers” is unfounded. Nationwide did not receive notice of
federal diversity jurisdiction before the complaint was filed on
July 8, 2002. The action was timely removed on July 22,
2002, less than 30 days later; the District Court’s denial of
the motion to remand was not in error.
B. Statute of Limitations for Sikirica’s Bad Faith Claim
      The District Court held Sikirica’s claim for bad faith
under 42 Pa. Cons. Stat. § 8371 was barred by the statute of
limitations. The court applied a two-year limitations period
that began to run on February 22, 1991, when Nationwide
informed PBA by letter of its refusal to defend and indemnify
PBA in the class action. Sikirica contends the limitations
period did not accrue until the Pennsylvania Superior Court



       8
           An en banc panel is not necessary to overrule Foster.
“It is this court’s tradition that a panel may not overrule or
disregard a prior panel decision unless that decision has been
overruled by the Supreme Court or by our own court sitting en
banc.” Blair v. Scott Specialty Gases, 283 F.3d 595, 610-11
(3d Cir. 2002) (emphasis added).

                               13
denied PBA’s appeals on March 27, 2001. The writ of
summons for this action issued on April 26, 2002, more than
eleven years after Nationwide’s initial denial of coverage, but
less than two years after the class action judgment against
PBA was final.
     Section 8371 does not include a limitations period, and
the Pennsylvania Supreme Court has not ruled on the issue.
Without an opinion from the state’s highest court, a federal
court must predict how that court would rule. See Packard v.
Provident Nat’l Bank, 994 F.2d 1039, 1046 (3d Cir. 1993). In
doing so, the federal court may consider lower state court
precedents to be more predictive than conflicting federal court
precedents. Id. at 1047.
      In Haugh v. Allstate Insurance Co., 322 F.3d 227 (3d
Cir. 2003), this court predicted the Pennsylvania Supreme
Court would apply the two-year tort statute of limitations in
actions under Section 8371, rather than the four-year contract
limitations period or the six-year catch-all limitations period
of 42 Pa. Cons. Stat. § 5527 (2004), because a bad faith claim
sounds in tort. Haugh, 322 F.3d at 235-36. A majority of the
lower state courts have also ruled that a two-year limitations
period applies. See Ash v. Cont’l Ins. Co., 861 A.2d 979, 982
(Pa. Super. Ct. 2004). Although the outcome of this case does
not turn on whether the limitations period is two, four or six
years, we apply the two-year limitations period as predicted
by Haugh.
      When the statute of limitations begins to run is an issue
of first impression.9 Sikirica contends the refusal to defend
and the refusal to indemnify are two independent events in
determining the accrual of the statute of limitations in a
statutory bad faith claim. Relying on Moffat v. Metropolitan


       9
         The Pennsylvania Supreme Court has not ruled on
this. In Haugh, this court suggested in dicta that the statute
accrued when the insured was made aware of the insurer’s
breach, but the record was factually incomplete, so the court
did not decide when the limitations period accrued. See
Haugh, 322 F.3d at 231-32.

                               14
Casualty Insurance Co., 238 F. Supp. 165, 175 (M.D. Pa.
1964), Sikirica argues the statute of limitations in an action
seeking the cost of defense accrues when the defense has been
completed, and a bad faith claim for refusal to indemnify
accrues when judgment in the underlying action is final.10
      The plaintiff in Moffat alleged breach of contract, not
bad faith. The federal district court in Moffat did not have the
benefit of state court rulings on this issue, because no bad
faith tort claim existed under Pennsylvania law in 1964. See
D'Ambrosio v. Pa. Nat’l Mut. Cas. Ins. Co., 431 A.2d 966
(Pa. 1981).
      The District Court, rejecting Sikirica’s argument, relied
on Adamski v. Allstate Insurance Co., 738 A.2d 1033 (Pa.
Super. Ct. 1999), in which the Pennsylvania Superior Court
held a claim for bad faith under 42 Pa. Cons. Stat. Ann. §
8371 accrued when the insurer first provided definite notice
of a refusal to indemnify or defend. See also Haugh, 322
F.3d at 235-36; Simon Wrecking Co. v. AIU Ins. Co., 350 F.
Supp. 2d 624 (E.D. Pa. 2004) (statute of limitations started
running at the point of initial clear denial); Ash v. Cont’l
Ins.Co., 861 A.2d 979 (Pa. Super. Ct. 2004) (starting two-year



       10
           Sikirica relies on a footnote in Haugh v. Allstate
Insurance Co. noting decisions from the Tenth and Eleventh
Circuits and the Arizona Supreme Court. Haugh, 322 F.3d at
231 n.6 (citing Torrez v. State Farm Mut. Auto. Ins. Co., 705
F.2d 1192, 1202 (10th Cir. 1982) (bad faith claim did not
accrue until judgment was final); Boyd Bros. Transp. Co. v.
Fireman’s Fund Ins. Co., 540 F. Supp. 579, 582 (M.D. Ala.
1982) (bad faith claim would not accrue until underlying
litigation was concluded), aff’d, 729 F.2d 1407 (11th Cir.
1984); Taylor v. State Farm Mut. Auto. Ins. Co., 913 P.2d
1092, 1097 (Ariz. 1996) (bad faith claim for refusal to settle
accrues when the underlying judgment becomes final)).
Haugh did not adopt the holdings of those cases; it merely
cited the rule in other jurisdictions. This is a question of
Pennsylvania law; those cases are informative, but certainly
not binding.

                               15
limitations period at initial denial of coverage). In general,
the statute of limitations begins to run when a right to institute
and maintain suit arises. Crouse v. Cyclops Indus., 745 A.2d
606, 611 (Pa. 2000). A bad faith claim arises upon a
“frivolous or unfounded refusal to pay proceeds of policy.”
Adamski, 738 A.2d at 1036 (quoting Black’s Law Dictionary
139 (9th ed. 1990)). See also Rottmund v. Cont’l Assurance
Co., 813 F. Supp 1104, 1108-09 (E.D. Pa. 1992). Adamski
held the statute accrued when the insurer denied liability
because this was when the refusal to pay first occurred.
Adamski, 738 A.2d at 1042.
      In an argument similar to Sikirica’s, the plaintiff in
Adamski had contended the insurer committed numerous
separate and distinct acts of bad faith: refusal to defend or
indemnify, denial of liability protection without first seeking
declaratory judgment, failure to settle, lack of an adequate
basis for denying protection, and failure to conduct a diligent
investigation. Id. at 1037-38. Adamski rejected this argument
and held that each of these alleged acts was related to the
initial denial of coverage, not a separate act of bad faith. Id.
at 1042. See also McGrath v. Fed. Ins. Co., No. CIV.A. 91-
1550, 1991 WL 185247 at *1 (E.D. Pa. Sept. 17, 1991)
(alleged continued bad faith acts arise from original denial of
coverage); Wazlawick v. Allstate Ins. Co., No. CIV.A.90-
3329, 1990 WL 294273 at *1 (E.D. Pa. Sept. 28, 1990)
(denial of coverage is not a continuing act of bad faith). We
reject Sikirica’s argument to the contrary.
      Sikirica attempts to distinguish Adamski because it
required a clear and unequivocal refusal to defend or
indemnify, and Nationwide only refused to defend or
indemnify PBA against the class action allegations.
Nationwide’s letter of denial unambiguously informed PBA
of its refusal to defend, indemnify or protect it against the
class action allegations of the complaint. These claims were
clearly delineated in Nationwide’s letter as “the class action
allegations beginning with Paragraph 55 and extending
through Paragraph 61(h).” App. at 111. Nationwide provided
clear notice of its denial of coverage and refusal to defend the
class action allegations in its letter of February 22, 1991.

                               16
     The writ of summons for this action issued more than
two years after Nationwide’s letter of denial. Applying the
Adamski rule, Sikirica’s bad faith claim is barred by the two-
year statute of limitations.
C. Sikirica’s Breach of Contract Claims
     Sikirica alleges a breach of contract arising out of
Nationwide’s refusal to defend and indemnify PBA. The
District Court found the Policy did not cover the intentional
conduct alleged in the class action allegations of the
complaint. Sikirica argues Nationwide had a duty to defend
and indemnify PBA under four sections of the Policy: 1) the
Comprehensive General Liability section; 2) the Professional
Liability section; 3) the Contractual Liability section; and 4)
the Comprehensive Crime Coverage section.11
      Under Pennsylvania law, an insurer has a duty to defend
if the complaint filed by the injured party potentially comes
within the policy's coverage. Pacific Indem. Co. v. Linn, 766
F.2d 754, 760 (3d Cir. 1985). The duty to defend is a distinct
obligation, different from and broader than the duty to
indemnify. Erie Ins. Exch. v. Muff, 851 A.2d 919, 925 (Pa.
Super. Ct. 2004); Atl. Mut. Ins. Co. v. Brotech Corp., 857 F.
Supp. 423 (E.D. Pa. 1994), aff'd, 60 F.3d 813 (3d Cir. 1995).
Because the duty to defend is broader than the duty to
indemnify, there is no duty to indemnify if there is no duty to
defend. See Mut. Benefit Ins. Co. v. Haver, 725 A.2d 743,
746 n.1 (Pa. 1999); Erie Ins. Exch. v. Claypoole, 673 A.2d
348, 356 n.3 (Pa. Super. Ct. 1996). After determining the
scope of coverage under a policy, the court must examine the
complaint in the underlying action to determine whether it
triggers coverage. Gen. Accident Ins. Co. of Am. v. Allen, 692
A.2d 1089, 1095 (Pa. 1997). If the complaint avers facts that
might support recovery under the policy, coverage is triggered
and the insurer has a duty to defend. Id. Both the duty to
defend and the duty to indemnify “flow from a determination


       11
          Sikirica does not appeal the District Court’s adverse
ruling on the claim for breach of contract under the Personal
Injury and Advertising section of the Policy.

                               17
that the complaint triggers coverage.” Id.
     1. The Comprehensive General Liability Section
     Sikirica alleges Nationwide had a duty to defend and
indemnify PBA under the Comprehensive General Liability
section of the policy. This section states, in relevant part:
     The company will pay on behalf of the insured all
     sums which the insured shall become legally
     obligated to pay as damages because of
              A. bodily injury or
              B. property damage
     to which this insurance applies, caused by an
     occurrence, and the company shall have the right
     and duty to defend any suit against the insured
     seeking damages. . .
      The term “occurrence” is defined under the Policy as “an
accident, including continuous or repeated exposure to
conditions, which results in bodily injury or property damage
neither expected nor intended from the standpoint of the
insured.” The term “accident” does not include intentional
acts by the insured. See M. Schnoll & Son, Inc. v. Standard
Accident Ins. Co., 154 A.2d 431 (Pa. Super. Ct. 1959)
(defining “accident” when the term is not defined in the
policy).
      Sikirica argues the misconduct for which PBA was held
liable was not intentional, but negligent, and hence covered as
an “occurrence” or “accident.” He contends the underlying
complaint alleged negligent misrepresentation because the
Superior Court found that PBA was not liable for fraud or
intentional conduct. The Superior Court’s finding that there
was no fraud was not based on lack of intent. The court made
no finding of negligent misrepresentation. To the contrary,
the court stated the pricing misrepresentation by PBA was
“deliberate.” Its finding there was no fraud was based on lack
of reliance and the negligible extent of the misrepresentation.
     Sikirica points to no allegations or facts in the complaint


                              18
that aver accidental or negligent conduct. Sikirica argues a
claim under Section 201-2(4)(xi)12 of the UTPCPL is
“analogous to the tort of negligent misrepresentation.” He
cites Westport Insurance Corp. v. Bayer, 284 F.3d 489 (3d
Cir. 2002) (lawyer negligently endorsed a Ponzi scheme), but
it did not involve a claim under the UTPCPL. The additional
cases Sikirica cites from other states or circuits do not
interpret the UTPCPL.
      Sikirica cites Delucido v. Terminix, 676 A.2d 1237,
1240-41 (Pa. Super. Ct. 1996), in arguing that the UTPCPL
creates liability for misleading statements even in the absence
of intentional fraud. In Delucido, the Pennsylvania Superior
Court noted that the UTPCPL “encompasses an array of
practices which might be analogized to passing off,
misappropriation, trademark infringement, disparagement,
false advertising, fraud, breach of contract, and breach of
warranty.” Delucido, 676 A.2d at 1240 (quoting Gabriel v.
O'Hara, 534 A.2d 488, 494 (Pa. Super. Ct. 1987)). The court
did not compare any claim under UTPCPL to negligent
misrepresentation or interpret Section 201-2(4)(xi).
      The relevant sections of the class action complaint aver
the following violations of the UTPCPL:
     28. The unlawful method, act or practice was:
     a. engaging in fraudulent conduct which creates a
     likelihood of confusion or misunderstanding in that
     the defendant both stated and implied that it had a
     right to charge for the services of students when it
     did not.
     b. Making false or misleading statements of fact
     concerning the reasons for existence or amounts of


       12
          Section 201-2(4) of the UTPCPL defines twenty-
one different acts comprising "unfair methods of competition"
or "unfair or deceptive acts or practices.” Section 201-
2(4)(xi) prohibits “[m]aking false or misleading statements of
fact concerning the reasons for, existence of, or amounts of
price reductions.”

                              19
     price reductions. The defendant stated falsely and
     mislead the plaintiff by saying that the reason for
     the price reduction was that students were to be
     used and lawfully compensated when it was not.
These claims aver false, fraudulent, or misleading conduct,
but not negligence or accidental conduct.
      Several factual allegations in the complaint also
demonstrate the plaintiffs were not alleging negligent
misrepresentation on behalf of the class. For example,
Paragraph 4 avers, “Defendant knew that it is illegal to charge
for the services of students except for a reasonable cost of
materials.” Count I alleges “fraudulent misrepresentation,”
averring in paragraph 18 that “defendant school of
cosmetology knew that it was not permitted to make a charge
for the services of students” and “defendant knew that the
reason given for the discount was likely to cause confusion.”
     Considering the complaint’s numerous factual
allegations and claims of intentional fraud, none of the class
action claims can be construed as averring negligent or
unintentional conduct. The alleged conduct could not be an
“accident” or “occurrence”; Nationwide had no duty to
defend or indemnify PBA under the Comprehensive General
Liability section.
     2. The Professional Liability Section
     Sikirica alleges breach of contract for Nationwide’s
refusal to defend or indemnify PBA under the Professional
Liability section of the Policy. This section obligates
Nationwide:
     To pay on behalf of the insured all sums which the
     Insured shall become legally obligated to pay as
     damages because of BODILY INJURY
     SUSTAINED BY ANY PERSON, and INJURY
     TO OR DESTRUCTION OF PROPERTY
     CAUSED BY ACCIDENT, arising out of the
     hazards hereinafter defined.
This provision only covers bodily injury and damage to


                              20
property “caused by accident.” The class action allegations of
the complaint do not allege bodily injury. The class action
complaint does not allege PBA’s damage to property was
accidental; Nationwide had no duty to defend or indemnify
PBA under this section of the Policy.13
     3. The Contractual Liability Section
      Sikirica alleges breach of contract for Nationwide’s
refusal to defend or indemnify PBA under the Contractual
Liability section of the Policy. This section modifies an
exclusion provision in the Comprehensive General Liability
section of the policy. The Comprehensive General Liability
section creates coverage for an “occurrence” or “accident,”
but an exclusion provision states, in relevant part:
     This insurance does not apply:
              (a) to liability assumed by the insured
              under any contract or agreement except
              an incidental contract. . .
The Contractual Liability provision states, in relevant part:
     The definition of incidental contract [in the
     Comprehensive General Liability section] is
     extended to include any oral or written contract or
     agreement relating to the conduct of the named
     insured’s business.
The Contractual Liability provision broadens the definition of
“incidental contract” as used in the exception to the exclusion
provision, but it does not extend coverage of the Policy to
injury or damages that are not the result of an “occurrence” or
“accident.” Because the complaint does not allege any
conduct that would be covered as an “occurrence” or
“accident,” Nationwide had no duty to defend or indemnify
PBA under this section of the Policy.
     4. The Comprehensive Crime Coverage



       13
          Nationwide did defend PBA against Mrs. Cinski’s
personal injury claim.

                               21
     Endorsement Section
     Sikirica alleges breach of contract for Nationwide’s
refusal to defend or indemnify PBA under the Comprehensive
Crime Coverage Endorsement section of the Policy. Sikirica
contends Nationwide had a duty to defend under the “Loss
Inside the Premises Coverage” provision of this section that
covers:
     Loss of Money and Securities by the actual
     destruction, disappearance or wrongful abstraction
     thereof within the Premises or within any Banking
     Premises or similar recognized places of safe
     deposit.
     Loss of (a) other property by Safe Burglary or
     Robbery within the Premises or attempt thereat, and
     (b) a locked cash drawer, cash box, or cash register
     by felonious entry into such container within the
     Premises or attempt thereat or by felonious
     abstraction of such container from with the
     Premises or attempt thereat.
     Damage to the Premises by such Safe Burglary,
     Robbery or felonious abstraction, or by following
     burglarious entry into the Premises or attempt threat
     [sic], provided with respect to damage to the
     Premises the insured is the owner thereof or is
     liable for such damages.
     Sikirica claims “wrongful abstraction” includes the
overcharges for which PBA was sued, and that the
overcharges occurred “within the Premises.” The resultant
losses were suffered by PBA patrons, not PBA, but Sikirica
contends that no language in this provision explicitly limits
coverage to losses suffered by PBA.
      The introductory clause to this section states that the
insurer agrees “to pay the insured for” the losses defined in
the subsequent provisions, implying the insured is covered for
its own losses, not losses it causes third parties. Other
provisions in the same section also state or imply that third
party losses are not covered. The “Loss Outside the Premises

                              22
Coverage” provision provides coverage for:
     Loss of Money and Securities by the actual
     destruction, disappearance or wrong abstraction
     thereof outside the Premises while being conveyed
     by a Messenger or any armored motor vehicle
     company, or while within the living quarters in the
     home of any Messenger.
     Loss of other property by Robbery or attempt
     thereat outside the Premises while being conveyed
     by a Messenger or any armored motor vehicle
     company, or by theft within the living quarters in
     the home of any Messenger.
This provision covers PBA for the loss of its own assets only.
      Sikirica argues that PBA must be indemnified for
intentionally overcharging its own customers, in violation of
Pennsylvania’s public policy prohibiting insurance coverage
for intentional torts or criminal acts. See Agora Syndicate,
Inc. v. Levin, 977 F. Supp. 713, 716 (E.D. Pa. 1997) (citing
State Farm Mut. Auto. Ins. Co. v. Martin, 660 A.2d 66, 68
(Pa. Super. Ct. 1995)). The Comprehensive Crime Coverage
Endorsement section should not be construed to provide PBA
coverage for overcharging its own customers.
      The complaint’s class action allegations do not claim
PBA suffered any loss from overcharging its customers. To
the contrary, the complaint alleges PBA was unjustly enriched
as the result of its illegal practices. The class action
complaint alleges no conduct covered by this or any other
section of the Policy; Nationwide had no duty to defend or
indemnify PBA.
                     IV. CONCLUSION
     For the reasons above, the District Court did not err in
denying Sikirica’s motion to remand and granting
Nationwide’s motion for judgment on the pleadings. The
judgment is affirmed.




                              23
