Insurer Must Defend Against Lawsuit Over Drug Overdose, Despite Exclusion

An insurer must defend its policyholders against a lawsuit that alleges their drug-dealer son caused the overdose death of a house guest while they were away, a Pennsylvania appellate court ruled.

A three-judge panel with the Pennsylvania Superior Court ruled that a criminal conduct exclusion in a homeowner’s policy issued by Nationwide Property and Casualty Insurance Co. did not bar coverage because the lawsuit included an allegation of negligence.

“For as long as an insurer is potentially obligated to pay damages flowing from at least one claim in the underlying action, the insurer must provide a defense for all the claims,” the panel opinion says.

The ruling affirms a decision by Judge Gary S. Silow with the Montgomery County Court of Common Pleas.

“Based upon my preliminary review of the opinion, the Superior Court made a very sound decision based on language in the policy and it properly determined there is a duty to defend,” said the homeowners’ attorney, Kevin Cornish with High Swartz, in an email. “I feel that there is another central coverage argument that is left unresolved, that the court only addressed in dicta; specifically, the scope of the exclusion for bodily injury resulting from illegal substance use where the defendant’s alleged conduct did not involve illegal substances.”

Stewart Kramer and Valerie Conicello asked Nationwide to defend them against a lawsuit that alleged they were negligent by allowing illegal drugs to be used at their home. Their homeowner’s policy included general liability coverage.

On Sept. 4, 2018, while Kramer and Conicello were out of town, their son Adam Samuel Kramer invited Michael T. Murray Jr. to their home in Plymouth Meeting, in the outskirts of Philadelphia. Murray was found dead the next morning. A coroner determined he was killed by a drug overdose.

Murray’s mother, Laurie S. Cruz, filed a wrongful death lawsuit against the son and his parents, acting as administrator of Murray’s estate. She alleged that Adam Kramer was a known drug user and drug dealer and that the parents were negligent by allowing illicit activity in their house.

According to the lawsuit, Murray had called his mother to inform her that he was spending the night at Adam Kramer’s house. She “expressed hesitation” because Kramer was known to use and sell narcotics. Murray told his mother that he was trying to help Murray and had arranged for him to work at the landscaping company where he was employed. He said that he wanted to make sure Kramer got up early the next day to get to his new job on time.

But paramedics responding to an emergency call found Murray dead at 1:50 a.m. An autopsy revealed he had overdosed on fentanyl, heroin and benzodiazepines, according to the lawsuit. Cruz is seeking damages of at least $50,000.

Nationwide refused to pay for the cost of defense, noting that the homeowner’s policy excluded damages that arise from the use of controlled substances. The parents filed a declaratory action seeking to compel Nationwide to defend them from the suit.

Judge Silow granted the parents summary judgment and Nationwide appealed.

The Superior Court panel said in its opinion that an insurer has a duty to defend a lawsuit if it is potentially obligated to pay damages. If at least one of the claims in a suit triggers coverage, the insurer must defend its policyholder from all of the claims.

Kramer’s and Conicello’s insurance policy excluded coverage for bodily injury or property damage caused by the sale or delivery of controlled substances.

But the appellate court said Cruz’s lawsuit could potentially seek other damages rooted in emotional or mental distress.

“Since these are the types of damages that do not fall under the ambit of the policy’s ‘bodily injury’ definition, the policy’s controlled substance exclusion would not apply to them,” the opinion says.

The panel affirmed the trial court’s decision to grant summary judgment in favor of the homeowners.

Adam Kramer filed for Chapter 7 bankruptcy in November 2020. According to a statement he filed with the bankruptcy court, he had earned $1,080 in income since Jan. 1 of that year. He reported that his parents had paid his $1,000 attorney fee.

Nationwide’s attorney, Sarah Elizabeth Crosley, refused to comment on Thursday. The homeowner’s attorney, Kevin Cornish, could not be reached for comment.