In the litigation described, what indemnity and insurance obligations did Greyhound Aramingo Petroleum Co., Inc. undertake with Sunoco, potentially impacting an Aplus franchisee?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
2023, and No. 1403 EDA 2023
In June of 2020, Plaintiffs Sunoco (R&M), LLC and Sunoco, LLC (collectively "Sunoco") filed an action for breach of contract and indemnification against Pennsylvania National Mutual Casualty Insurance Company ("Penn National"), franchisee Greyhound Aramingo Petroleum Co., Inc. ("Greyhound") and Sergey Gorlov arising out of defendants' failure to perform their respective contractual duties to Sunoco with respect to litigation arising out of an accident occurring on September 25, 2014, at a Sunoco-branded gas station located at 2750 Aramingo Avenue in the City of Philadelphia. In its complaint, Sunoco alleges that Defendant Greyhound and non-party SG II, LLC (both of which are owned or controlled by Defendant Gorlov) entered into a dealer franchise agreement with Sunoco and undertook indemnity and insurance obligations as it pertains to the above-
referenced accident. For the Greyhound agreement, Defendant Gorlov also executed a personal guaranty that he too would be personally responsible for any monetary liabilities or obligations that Defendant Greyhound owed Sunoco. In accordance with their obligations under the dealer franchise agreements, both SGII and Defendant Greyhound purchased insurance policies that named Sunoco as an additional insured; SG II purchased its policy through Defendant Penn National. Sunoco alleges that Penn National, Greyhound, and Mr. Gorlov have all breached their contractual obligations to Sunoco with respect to a settlement of the personal injury litigation surrounding the above-referenced accident. Sunoco further brought a claim against Defendant Penn National for bad faith in unreasonably refusing to pay for Sunoco's loss incurred as a result of the personal injury litigation and settlement. Sunoco brought this suit to recover actual damages sustained, plus consequential damages, attorneys' fees, and pre and post-judgment interest to the extent permitted by law. After discovery and motion practice at the trial court level, the judge granted Sunoco's motion for summary judgment for breach of contract against Greyhound. At the same time, the judge granted Penn National and Sergey Gorlov's motions for summary judgment against Sunoco, which negated Sunoco's claims against Penn National and Gorlov as a matter of law. A damages trial was set on Sunoco's damages as a result of Greyhound's breach of contract. At the trial, the judge awarded Sunoco all of the damages it sought in its breach of contract case against Greyhound for failure to defend/indemnify Sunoco in the underlying personal injury case. Specifically, the judge awarded $1.5MM for the underlying settlement amount that Sunoco had to pay, $409,344.07 for unreimbursed defense costs for the underlying litigation, and $379,458.69 for attorney's fees to prosecute this breach of contract claim. The total verdict was $2,288,802.76. Greyhound appealed the verdict to the Superior Court of Pennsylvania. Sunoco also appealed the order granting Penn National's and Gorlov's motions for summary judgment to the same court. The ap
Source: Item 3 — LITIGATION (FDD pages 14–15)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, a pending litigation case involves Sunoco (R&M), LLC and Sunoco, LLC versus Pennsylvania National Mutual Casualty Insurance Company, Greyhound Aramingo Petroleum Co., Inc., and Sergey Gorlov. In this case, Greyhound Aramingo Petroleum Co., Inc. ("Greyhound"), a franchisee, entered into a dealer franchise agreement with Sunoco and undertook indemnity and insurance obligations related to an accident on September 25, 2014, at a Sunoco-branded gas station. Sergey Gorlov, who owned or controlled Greyhound and SG II, LLC, also provided a personal guaranty for Greyhound's obligations to Sunoco.
As part of the agreement, both SGII and Greyhound were required to purchase insurance policies naming Sunoco as an additional insured. Sunoco alleges that Penn National, Greyhound, and Mr. Gorlov breached their contractual obligations related to the settlement of a personal injury litigation stemming from the accident. Sunoco sought to recover actual damages, consequential damages, attorneys' fees, and pre- and post-judgment interest. The court granted Sunoco's motion for summary judgment against Greyhound for breach of contract but granted Penn National and Gorlov's motions for summary judgment against Sunoco.
At trial, Sunoco was awarded $1.5 million for the underlying settlement amount, $409,344.07 for unreimbursed defense costs, and $379,458.69 for attorney's fees, totaling $2,288,802.76. Greyhound appealed the verdict, and Sunoco appealed the order granting Penn National's and Gorlov's motions for summary judgment. Both appeals are pending. This case illustrates the importance of fulfilling indemnity and insurance obligations in franchise agreements, as failure to do so can result in significant financial liabilities for the franchisee. While this litigation does not directly involve Aplus, it highlights the potential risks and responsibilities associated with franchise agreements, particularly concerning indemnity and insurance.