Pennsylvania Superior Court Reports



Appeal from the Order entered in the Court of Common Pleas of Luzerne County,

Civil Division, No(s): CP-35-CR-0000227-1991.



¶ 1 Appellants, Continental Casualty Company and CNA
Insurance Companies, appeal from the April 27, 2005 Order
granting appellees’ motion for declaratory relief.

¶ 2 Appellee, Comptel Corporation (Comptel), was
added to an insurance policy (policy) issued by appellee,
Continental Casualty Company (Continental), that originally
had been issued by Continental to a third party.[fn1]
Comptel is an entity formed and existing under the laws of
New Jersey. Appellee, Budtel Associates, L.P. (Budtel), is a
limited partnership formed under Pennsylvania law. Record,
Complaint at 2. Comptel and Budtel are both engaged in the
payphone business as owners and operators.

¶ 3 On or about November 25, 2002, appellee and
President of Budtel, Barry Shapiro, met with appellee and
President of Comptel, Mark Singer, and executed a document
entitled “Joint Venture Agreement Between Budtel
Associates, LP and Comptel Corporation” (Agreement). Record,
Complaint, Exb. B. The Agreement purported to create a new
entity named Budtel Comptel, LLC (Budtel-Comptel), which
was subsequently organized under the New Jersey Limited
Liability Company Act.[fn2] Id. In relevant part, the
Agreement provided the following:

It is furthermore agreed that by entering into said joint
venture or the termination of the joint venture shall have
no impact on the ownership rights of each entity’s assets
and/or liabilities and that BUDTEL ASSOCIATES, LP and
COMPTEL CORPORATION shall retain their individual
identity, corporate officers, and employees.

. . .

It is furthermore agree[d] that the new entity will
acquire the right to use assets, locations, pay
telephones, including, but not limited to, vehicles,
repair equipment such as tools and parts, offices,
warehouses, employees and the like, excluding any existing
liabilities of Comptel Corporation and Budtel Associates,

Id. at 1-2.

¶ 4 On or about December 9, 2002, a pipe burst at a
warehouse to which Budtel held title, resulting in
approximately $50,000 in water damage to both the structure
and files it contained. Record, Complaint at 6. On December
23, 2002, Comptel President Singer filed a claim with
Continental under the policy issued to Comptel. Record,
Complaint, Exb. D. In doing so, Singer relied on the
following provision contained in the policy:

a. Newly Acquired or Constructed Property

(1) You may extend the insurance provided by this
Coverage Form to apply to:

(a) Your new buildings while being built on the described
premises; and

(b) Buildings you acquire at locations, other than the
described premises.

Record, Complaint, Exb. A, Commercial Property Conditions,
at page 4 of 16.

¶ 5 Continental responded to Singer’s claim by
letter of April 1, 2003. Record, Complaint, Exb. D.
Continental denied Singer’s claim and, in doing so,
asserted Comptel had not “acquired” an interest in the
warehouse by virtue of entering into the Agreement with
Shapiro and Budtel. Id. Continental noted that it read the
policy as only providing coverage, in this instance, to
Comptel and, thus, because Comptel had not acquired
Budtel’s warehouse by virtue of the Agreement, the loss was
not covered by the newly acquired property clause. Id.

¶ 6 On May 14, 2003, appellees commenced this action
by filing a complaint seeking, inter alia, declaratory
relief. Record, Complaint. On February 15, 2005, almost two
years later and after protracted procedural maneuvering by
the parties, appellees filed a motion for declaratory
judgment that the loss would be covered under the newly
acquired property clause. Record, No. 23. The trial court
granted appellees’ motion on April 13, 2005, and shortly
thereafter, entered an Order granting appellants’
application for a determination of finality. Appellants
perfected a timely appeal in this Court and on September
15, 2005, the trial court filed an Opinion outlining its
rationale for applying Pennsylvania law to the matter sub
judice and for determining the warehouse loss was covered
under the newly acquired property clause.

¶ 7 This Court recently noted our standard of review
over a declaratory judgment:

We review the decision of the trial court as we would a
decree in equity and set aside factual conclusions only
where they are not supported by adequate evidence. We give
plenary review, however, to the trial court’s legal

Universal Health Servs. v. Pennsylvania Prop. & Cas. Guar.
Ass’n, 884 A.2d 889, 892 (Pa.Super. 2005), citing O’Brien
v. Nationwide Mut. Ins Co., 689 A.2d 254, 257 (Pa.Super.
1997) (internal citations mitted).

¶ 8 Initially, appellants argue the trial court
erred in applying this Commonwealth’s law rather than New
Jersey law.[fn3] In determining Pennsylvania law was
applicable, the trial court applied a “significant contact
and interest analysis” and noted that even though appellees
were New Jersey entities, the subject property was located
in Pennsylvania. Trial Court Opinion, Conahan, J., 9/15/05,
at 2. The trial court further concluded a choice of law
analysis was not required because there was no evidence
that an actual conflict existed between Pennsylvania and
New Jersey law “on the general insurance policy
construction principal [sic] acceptable in this case.”

¶ 9 There is a split on the question of how we
should decide a choice of law quandary involving a contract
dispute. The trial court relied on a line of cases holding
that the first step in a choice of law analysis under
Pennsylvania law is to determine whether a conflict exists
between the laws of the competing states. Wilson v. Transp.
Ins. Co., 889 A.2d 563, 570 (Pa.Super. 2005), quoting Ratti
v. Wheeling Pittsburgh Steel Corp., 758 A.2d 695, 702
(Pa.Super. 2000), appeal denied, 785 A.2d 90 (2001). If no
conflict exists, further analysis is unnecessary. Id. If a
conflict is found, it must be determined which state has
the greater interest in the application of its law. Id.
Weighing these interests requires a further determination
as to which state had the most significant contacts or
relationships with the insurance contract. Id., citing
Nationwide Ins. Co. v. West, 807 A.2d 916, 921 (Pa.Super.
2002), citing in turn Griffith v. United Airlines, Inc., 203
A.2d 796 (Pa. 1964) (holding the strict lex loci delicti
rule is abandoned in favor of applying a flexible approach
to choice of law questions). We will refer to this rubric
as the Griffith rule.

¶ 10 Appellants assert the general rule in
Pennsylvania is that the law of the state where an
insurance contract is delivered will be the law applied in
construing the contract’s terms by relying on a federal
district court case for support (Crawford rule). Appellants’
brief at 11, citing Travelers Insurance Co. v. Fantozzi,
825 F.Supp. 80, 84 (E.D. Pa. 1993), citing in turn Crawford
v. Manhattan Life. Ins. Co., 221 A.2d 877 (Pa.Super. 1966)
(other citations omitted). Additional support for
appellants’ position also can be found in a 2003 decision of
this Court. Peele v. Atlantic Express Transp. Group, 840
A.2d 1008, 1011 (Pa.Super. 2003) (citation omitted).[fn5]

¶ 11 After careful reflection, we conclude the
spirit and weight of this Commonwealth’s precedents mandate
we follow the Griffith rule in the contract law context.
While we were unable to uncover a case where our Supreme
Court explicitly applies Griffith to a choice of law
analysis centered on a contract dispute, the Griffith rule
is based on the notion that the lex loci delicti rule is,
and has been for quite some time, obsolete as a tool for
dealing with the legal realities imposed by a modern
society. Griffith, supra at 806. This notion, in turn, is
the effect of disillusionment with the most salient
characteristic of the lex loci delicti rule — namely,
a blind adherence to the laws of the place where a tort
arises. To apply the Crawford rule would be to blindly
adhere to an analogous principle — namely, the laws
of the place where a contract is delivered control simply
because the contract was delivered there.

¶ 12 Additionally, this Court’s precedent
overwhelmingly supports our adherence to the Griffith rule.
The Peele Opinion is an anomaly as multiple decisions by
this Court apply the Griffith rule to choice of law
questions centered on contract disputes and, further, Peele
is in conflict with this Court’s most recent precedent,
which applies the Griffith rule in the contract
context.[fn6] See Wilson, supra at 570. Furthermore, the
Crawford rule can be fairly subsumed by the more
comprehensive Griffith rule because the Crawford rule
examines a single contact (where the contract was
delivered) while the Griffith rule, when necessary,
examines all of the contacts that occurred within a
contractual relationship. Consequently, we hold the
Griffith rule controls the choice of law analysis in the
contract context until this Commonwealth’s Supreme Court
instructs otherwise.

¶ 13 Having clarified our choice of law principles,
we now turn to their application. As noted above, our first
inquiry is to determine whether a conflict exists between
the laws of this Commonwealth and the laws of New Jersey.
Wilson, supra at 570.

¶ 14 Appellants concede “that both Pennsylvania and
New Jersey law are similar in their interpretation of
insurance policies.” Appellants’ brief at 11. Our research
substantiates this concession and also reveals, on a more
general level, there is no conflict between Pennsylvania’s
and New Jersey’s rules of contract interpretation.[fn7]
Consequently, we agree with the trial court that
Pennsylvania contract law governs this dispute. See Trial
Court Opinion at 2, accord Wilson, supra at 570.

¶ 15 The trial court found Comptel “acquired” the
damaged Budtel warehouse by virtue of the provision in the
Agreement whereby Comptel allegedly acquired the right to
use Budtel’s warehouse. Trial Court Opinion at 2-3, citing
Federated Mut. Ins. Co. v. Anderson, 920 P.2d 97 (Mont.
1966). The trial court further found the Budtel warehouse
was covered under the newly acquired property clause
because the clause was ambiguous on the issue of whether
Comptel’s acquisition of the right to use property
subsequent to entering into the insurance contract would
extend coverage to such property. Trial Court Opinion at 2,
citing Record, Complaint, Exb. B, Joint Venture Agreement
Between Budtel Associates, LP and Comptel Corporation.

¶ 16 Appellants attack these holdings by raising the
following three issues, which we have renumbered for ease
of disposition:

1. Regardless of the scope of the term ‘acquire,’ Comptel
did not acquire the Stoudt Road Property.

2. The extended policy coverage for ‘newly acquired or
constructed property’ is unambiguous and is clearly not
applicable to the instant loss.

3. No additional premium was paid for the extended
coverage; therefore, the extended coverage endorsement
does not apply.

Appellants’ brief at 18, 11 and 24, respectively.[fn8]

¶ 17 Appellants assert that even if the term
“acquire” can broadly be read to include a right of usage,
this right of usage vested with the entity Budtel-Comptel,
not with Comptel individually. Secondly, they claim the
trial court erred in reading the Agreement by holding
Comptel had “acquired” the Budtel warehouse thereby
triggering coverage under the newly acquired property
clause. See Complaint, Exb. A. supra, Common Policy
Declarations (“You may extend the insurance provided by
this Coverage Form to apply to: (b) Buildings you acquire
at locations, other than the described premises.”).

¶ 18 Assuming for the sake of argument the trial
court was correct in concluding the Agreement provided that
the Budtel warehouse was “acquired,” the trial court erred
in holding that the entity that acquired the Budtel
warehouse was Comptel. The Agreement expressly and
unambiguously provides that “the new entity [Budtel-Comptel]
will acquire the right to use.” Record, Complaint, Exb. B,
Joint Venture Agreement Between Budtel Associates, LP and
Comptel Corporation. The Agreement further provides
unambiguously “that Budtel Associates, LP and Comptel
Corporation shall retain their individual identity,
corporate officers and employees.” Id. The plain language
of the Agreement itself, therefore, demonstrates that
parties did not agree to vest any right of use in Comptel
itself but, rather, in Budtel-Comptel. See Temple Univ. of
the Commonwealth Sys. of Higher Educ. v. Allegheny Health
Educ. and Research Found., 690 A.2d 712, 714-715 (Pa.Super.
1997) (“[W]hen a contract’s meaning is clear and
unequivocal, its meaning must be determined by its contents
alone. It speaks for itself and a meaning cannot be given
to it other than that expressed.”), quoting Steuart v.
McChesney, 444 A.2d 659, 661 (Pa. 1982).

¶ 19 Furthermore, the record reveals Budtel-Comptel
was registered as a business entity under the New Jersey
Limited Liability Company Act, N.J. Stat. Ann. §
42:2B-1 et. seq. Record, Defendant’s Continental Casualty
Insurance Company and CNS Insurance Companies’ Response to
Plaintiff’s Motion for Declaratory Relief, Exb. F.,
Certificate of Formation of Budtel Comptel LLC. This Act
provides that a member of a limited liability company has
no interest in the specific property of the limited
liability company; Pennsylvania’s statutory scheme contains
a similar provision. N.J. Stat. Ann. § 42:2B-43,
Company interest, personal property, accord 15 Pa.C.S.A.
§ 8923, Property. As a matter of law, therefore,
Comptel (as a member) did not own Budtel-Comptel’s (the
limited liability company’s) right to use the Budtel
warehouse by default.

¶ 20 Inasmuch as the Agreement unambiguously
provides Budtel-Comptel would have the right to use the
Budtel warehouse, not Comptel, and inasmuch as Comptel did
not obtain ownership over Budtel-Comptel’s right to use the
warehouse as a matter of law, the trial court’s conclusion
is erroneous. The remaining two issues raised by appellants
are rendered moot by virtue of our resolution of the first
two issues considered.

¶ 21 Order of April 13, 2005 reversed. Case remanded
for proceedings consistent with this Opinion.

¶ 22 Jurisdiction relinquished.

[fn1] The policy is designated as B2057995685. The record
does not disclose when Comptel was added to the policy. The
policy provided a coverage period of June 1, 2002 through
June 1, 2003.

[fn2] See N.J. Stat. Ann. § 42:2B-1 et. seq.

[fn3] The first issue raised by appellants in their
Statement of the Questions Presented reads as follows:

Where the lower court entered a declaratory order in
favor of coverage under the relevant policy of insurance
based on its holding that the loss at issue was covered
under the Newly Acquired or Constructed Property
endorsement, must not the court’s decision based on this
clearly erroneous holding be reversed?

Appellants’ brief at 4. Although the phrasing of this
question fails to clearly state a choice of law issue, the
corresponding argument is titled simply “A. The lower court
erred in holding that New Jersey law should not apply.”
Appellants’ brief at 10.

[fn4] Apparently, the principle to which the trial court was
alluding is the principle in this Commonwealth’s
jurisprudence that when the language of an insurance policy
is ambiguous, the ambiguity must be construed against the
insurer. See e.g., Neuhard v. Travelers Ins. Co., 831 A.2d
602, 604 (Pa.Super. 2003) (citation omitted).

[fn5] As appellants point out, panels of the Third Circuit
Court of Appeals have also applied the Crawford rule,
Crawford v. Manhattan Life. Ins. Co., 221 A.2d 877
(Pa.Super. 1966), to choice of law questions involving
contracts and the federal district courts sitting in
Pennsylvania have followed suit in some instances. See
e.g., Regents of the Mercersburg Coll. v. Republic Franklin
Ins. Co., 458 F.3d 159, 163 (3d. Cir. 2006), citing
McMillan v. State Mut. Life Assurance Co. of Am., 922 F.2d
1073, 1074 (3d. Cir. 1990), accord I.C.D. Indus. v. Federal
Ins. Co., 879 F.Supp. 480, 484 (E.D.Pa. 1995), citing
Jamison v. Miracle Mile Rambler, Inc., 536 F.2d 560, 562
fn.1 (3d. Cir. 1976), but see contra, Melville v. Home
Assurance Co., 584 F.2d 1306 (3d. Cir. 1978), accord Kilmer
v. Connecticut Indem. Co., 189 F.Supp.2d 237, 244 (M.D. Pa.
2002). The Third Circuit’s application of the Crawford rule
began with its analysis in Boase v. Lee Rubber Co., 437
F.2d 527 (3d. Cir. 1970), wherein the court of appeals noted
our Supreme Court had not expressly applied the Griffith
rule, Griffith v. United Airlines, Inc., 203 A.2d 796 (Pa.
1964), to a contract dispute from the time the Griffith
decision was handed down until 1970 and that, consequently,
Crawford was controlling law in the Commonwealth. Boase,
supra at 530-531.

[fn6] See e.g. Wilson v. Transp. Ins. Co., 889 A.2d 563, 570
(Pa.Super. 2005); Sabad v. Fessenden, 825 A.2d 682, 687
(Pa.Super. 2003) (finding that the Griffith analysis
applied to determine what state’s law would govern the
construction of an antenuptual agreement) (citation
omitted); Nationwide Ins. Co. v. West, 807 A.2d 916, 921
(Pa.Super. 2002), (applying the Griffith rule to a choice
of law analysis centering on an insurance coverage
dispute); Hughes v. Prudential Lines, 624 A.2d 1063, 1066
fn.2 (Pa.Super. 1993) (applying the Griffith rubric to a
choice of law analysis centering on a contract dispute)
(citations omitted); Caputo v. Allstate Ins. Co., 495 A.2d
959, 961-962 (Pa.Super. 1985) (following Walter, infra in a
choice of law analysis centered on a contract dispute);
Nationwide Mut. Ins. Co. v. Walter, 434 A.2d 164, 136-137
(Pa.Super. 1981) (“Although no Pennsylvania case clearly so
holds, we think, as explained below, that the evolution of
Pennsylvania conflicts decisions ineluctably leads us to
the conclusion that the Griffith approach will be employed
in contract actions when the occasion arises.”), quoting
Melville, 584 F.2d at 1311.

[fn7] See e.g., Ins. Adjustment Bureau Inc. v. Allstate Ins.
Co., 905 A.2d 462, 468-469 (Pa. 2006) (“The fundamental
rule in contract interpretation is to ascertain the intent
of the contracting parties. In the case of a written
contract, the intent of the parties is the writing itself.
Under ordinary principles of contract interpretation, the
agreement is to be construed against its drafter. When the
terms of a contract are clear and unambiguous, the intent
of the parties is to be ascertained from the document
itself. When, however, an ambiguity exists, parol evidence
is admissible to explain or clarify or resolve the
ambiguity, irrespective of whether the ambiguity is patent,
created by the language of the instrument, or latent,
created by extrinsic or collateral circumstances. A
contract is ambiguous if it is reasonably susceptible of
different constructions and capable of being understood in
more then one sense. While unambiguous contracts are
interpreted by the court as a matter of law, ambiguous
writings are interpreted by the finder of fact.”), accord
Bd. Of Education v. Utica Mut. Ins. Co., 798 A.2d 605, 610
(N.J. 2002) (citations omitted).

[fn8] As stated in footnote three supra, in their Statement
of Questions Presented appellants phrase their issues in a
somewhat verbose manner that does not correspond with their
argument headings. Consequently, we have decided to rely on
the argument headings as appellants’ phrasing of the issues
is inadequate to foreshadow the arguments to come.