American Builders Insurance Co v. Custom Installations Contracti ( 2020 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 19-3291
_____________
AMERICAN BUILDERS INSURANCE COMPANY,
Appellant
v.
CUSTOM INSTALLATIONS CONTRACTING SERVICES, INC.
COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF
LABOR & INDUSTRY; UNINSURED EMPLOYERS GUARANTY FUND;
JAMES SCOTT,
Intervenors in District Court
_____________________________________
On Appeal from the United States District Court for the
Western District of Pennsylvania
(District Court No.: 3-15-cv-00295)
District Judge: Honorable Kim R. Gibson
_____________________________________
Argued on April 22, 2020
(Opinion filed May 29, 2020)
Before: HARDIMAN, RENDELL, and FISHER, Circuit Judges
John A. Bass, Esq.
Ira L. Podheiser, Esq.
Ralph M. Monico, Esq. (Argued)
Burns White
48 26th Street
Burns White Center
Pittsburgh, PA 15222
Counsel for Appellant
Martin A. Dietz, Esq. Suite 505
304 Ross Street
Pittsburgh, PA 15219
Counsel for Appellee
Bruce P. Merenstein, Esq. (Argued)
Schnader Harrison Segal & Lewis
1600 Market Street
Suite 3600
Philadelphia, PA 19103
Counsel for Intervenor Appellee Uninsured Employers Guaranty Fund
Matthew S. Faher, Esq. (Argued)
Rudberg Law Offices
2107 Sidney Street
Pittsburgh, PA 15203
Counsel for Intervenor Appellee James Scott
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O P I N I O N*
RENDELL, Circuit Judge.
American Builders Insurance Company (“American Builders”) appeals the District
Court’s dismissal of its lawsuit against its policyholder, Custom Installations Contracting
Services, Inc. (“Custom”). We will affirm the District Court’s judgment.1
In July 2015, American Builders issued a workers’ compensation insurance policy
to Custom.2 A. 23, 66. American Builders alleges that during the policy application
process, Custom falsely represented that it did not perform roofing work. A. 23, 66-74.
Several months later, during the policy period, a Custom employee, James Scott, Jr., was
injured on the job and subsequently made a claim for workers’ compensation benefits,
which initiated a proceeding before the Pennsylvania Bureau of Workers’ Compensation.
A. 24, 74. American Builders accepted responsibility for Scott’s workers’ compensation
claim by issuing a Notice of Compensation Payable to Mr. Scott. Appellants’ Br. at 3.
American Builders continues to pay Mr. Scott and his medical providers under the
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
1
The District Court had jurisdiction because a “federal court always has jurisdiction to
determine its jurisdiction.” Orie v. Dist. Att’y Allegheny Cty., 946 F.3d 187, 190 n.7 (3d
Cir. 2019) (quoting Zambelli Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412, 418 (3d
Cir. 2010)). We have jurisdiction over this appeal from a final order of the District Court
under 28 U.S.C. § 1291.
2
Because we write for the parties, who are familiar with the facts and the procedural
posture to date, we only include what is necessary to explain our decision.
3
insurance policy it issued to Custom and states that, at the time of this appeal, it has paid
out more than $2,500,000 in wage benefits and compensation for medical care to
Mr. Scott and his medical providers. Appellants’ Br. at 4.
While the workers’ compensation proceeding was pending, American Builders
filed this lawsuit against Custom. A. 22-23. In a two-count complaint, American
Builders alleged that Mr. Scott’s injury occurred while he was performing roofing work,
despite Custom’s representations that it did not do any such work. A. 23, 66-79.
American Builders sought a declaration that, among other things, “the false and
inaccurate facts provided by Custom during the [a]pplication process induced American
[Builders] to sell and issue the Policy to Custom,” that “American [Builders] is entitled to
rescind the Policy based on . . . mutual mistakes of fact,” that “the Policy is hereby
RESCINDED and rendered VOID AB INITIO,” and that “American [Builders] has no
legal or contractual obligation to Custom or its employees, including [Mr.] Scott, under
the rescinded Policy, or under any theory of law or equity.” App. 76. American Builders
also included a cause of action for insurance fraud. A. 23, 75-79. American Builders
eventually moved for summary judgment on its declaratory judgment claim. A. 23.
Custom did not oppose the motion, and the District Court accordingly granted summary
judgment to American Builders. A. 45, 46, 49.
American Builders then filed several petitions in Mr. Scott’s workers’
compensation proceeding. A.24, Appellant’s Br. at 6. American Builders sought to
terminate its obligations to pay Mr. Scott wage benefits or make payments to his medical
providers, or, in the alternative, asked for a review of Mr. Scott’s workers’ compensation
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benefits. A.24, Appellant’s Br. at 6. The other parties to Mr. Scott’s workers’
compensation proceeding opposed the petitions in various ways, and the administrative
law judge issued a temporary stay. A. 24, Appellant’s Br. at 6.
American Builders then returned to federal court and filed a motion for temporary
restraining order and preliminary injunction in this case asking the District Court to
enjoin all parties involved in Mr. Scott’s workers’ compensation case, including
Mr. Scott and Mr. Scott’s medical provider, UPMC Mercy, from attempting to
circumvent enforcement of the Court’s summary judgment order granting rescission of
the insurance policy. A. 25. In response, the District Court issued an order requesting
briefing on whether American Builders’ lawsuit was appropriately before the District
Court. A. 25. American Builders, Mr. Scott, UPMC Mercy, the Pennsylvania
Department of Labor & Industry, and the Pennsylvania Uninsured Employers Guaranty
Fund submitted briefs and other materials in response to this order.3 A. 25-26. American
Builders then conceded that its motion for temporary restraining order and preliminary
injunction was moot and filed a motion for entry of judgment pursuant to Federal Rule of
Civil Procedure 54(b). A. 27.
The District Court dismissed and vacated its order granting summary judgment to
American Builders. App. 48. It ruled that “American Builders’ rescission claim must be
pursued before the [Pennsylvania Bureau of Workers’ Compensation] and the ALJ.”
3
Mr. Scott, the Pennsylvania Department of Labor & Industry, and the Pennsylvania
Uninsured Employers Guaranty Fund have also intervened in this appeal and filed briefs
in opposition to American Builders’ opening brief.
5
Ohio App. 55. The District Court reasoned that if the Pennsylvania workers’ compensation
system allows “workers’ compensation insurance companies [to] receive the benefit of
being shielded from separate bad faith lawsuits,” American Builders, a workers’
compensation insurance company, “also cannot file separate lawsuits for related
insurance claims” like the declaratory judgment and fraud claims at issue in this case.
App. 57.
In reaching this conclusion, the District Court relied on our decision in Winterberg
v. Transportation Insurance Company, in which we held that the exclusivity provision of
the Pennsylvania Workers’ Compensation Act, 77 Pa. Cons. Stat. § 481(a), barred an
injured worker’s insurance bad faith and other common law and statutory claims against
her employer’s workers’ compensation insurance provider. 72 F.3d 318, 320-21 (3d Cir.
1995). The District Court highlighted our statement in Winterberg that “[b]ecause of the
historical background for Pennsylvania’s [workers’] compensation system, courts have
been very cautious about permitting common law litigation in matters arguably connected
with work-related injuries.” Id. at 322 (citing Kuney v. PMA Ins. Co., 578 A.2d 1285,
1286 (Pa. 1990)), in which the Supreme Court of Pennsylvania disallowed an employee’s
tort action against his employer’s insurer for defrauding the employee of his workers’
compensation benefits). American Builders then timely appealed the District Court’s
dismissal of its lawsuit.
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We agree with the District Court’s reasoning and disposition of this case.4 We
continue to approve of our observation in Winterberg, quoted by the District Court, that
courts “have been very cautious about permitting common law litigation in matters
arguably connected with work-related injuries.” Id. at 322. We are also mindful of the
Supreme Court of Pennsylvania’s admonitions in Kuney that the Pennsylvania workers’
compensation statute was “designed and intended to establish exclusive jurisdiction,
practice and procedure in all matters pertaining to such subject matter,” 578 A.2d at 1287
(quoting American Cas. Co. of Reading v. Kligerman, 74 A.2d 169, 172 (Pa. 1950)), and
that “[w]hen the allegations of a claim have as their ultimate basis an injury compensable
under the [Workers’] Compensation Act, the claim must be considered within the
framework of the statute,” id. Accordingly, we will affirm the District Court’s judgment.
4
The parties dispute the standard of review. We do not rule on this question because we
reach the same result whether we review de novo, see, e.g., United States v. Dohou, 948
F.3d 621, 623 (3d Cir. 2020) (“We review the District Court’s jurisdictional holding de
novo.”) (citing United States v. Charleswell, 456 F.3d 347, 351 (3d Cir. 2006)), or for
abuse of discretion, see Reifer v. Westport Ins. Corp., 751 F.3d 129, 137-38 (3d Cir.
2014) (reviewing district court decision to decline jurisdiction over a declaratory
judgment claim for abuse of discretion).
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