(E.D. Pa. 1991) (same). In their opposition to Pacific's motion, the Parascos concede that the documents submitted to the banks were fraudulent, but argue that a jury issue has been raised as to whether Mr. Parasco attempted to conceal his bank fraud from Pacific, and alternatively, that the misrepresentations were not material. We now examine these arguments.
With respect to the first contention, we conclude that the record establishes beyond reasonable dispute that Mr. Parasco made misrepresentations under oath regarding both the bank fraud he committed in connection with the loan applications and the attempts he made to sell the house prior to the fire. In reaching this conclusion, we are mindful that the summary judgment standard requires us to view the evidence in the light most favorable to the non-moving party. We also note, however, that the party opposing the motion cannot "simply rest on mere denials," but must instead point to specific facts showing that there is a genuine issue for trial. First Nat'l Bank v. Lincoln Nat'l Life Ins. Co., 824 F.2d 277, 282 (3d Cir. 1987).
First, we conclude that Mr. Parasco swore falsely with respect to his interaction with Blue Ball. During the course of his examination, Mr. Parasco testified that he did not submit tax returns in connection with the loan application and that he did not remove the fraudulent tax returns from the Blue Ball loan file before he turned it over to Pacific. The unrebutted affidavit of the Blue Ball executive with whom Mr. Parasco interacted states Mr. Parasco submitted the fraudulent 1991 and 1992 tax returns with his loan application, and that the file contained the fraudulent tax returns when it was turned over to Mr. Parasco. Mr. Parasco has not pointed to any fact of record that would tend to cast doubt on the Blue Ball executive's affidavit. Thus, we must conclude that Mr. Parasco made misrepresentations to Pacific regarding the Blue Ball loan application in an effort to conceal his bank fraud from his insurer.
Moreover, we are compelled to conclude that Mr. Parasco lied to Pacific when he testified that he did not intend to deceive Great Valley and Boyertown by submitting the fraudulent tax returns. Mr. Parasco's argument here is that the fraudulent tax returns were not tax returns at all, but instead mere "speculations" of income. This assertion is belied, however, by the unrebutted evidence provided by the bank executives, who have averred that they required copies of tax returns filed with the government in processing loan applications. Moreover, Mr. Parasco has conceded that he forged his tax preparer's signature on the tax returns submitted with the loan applications. This is powerful, convincing evidence of an intent to deceive: Mr. Parasco obviously wanted the banks to believe that the tax returns had been prepared by an accountant. Accordingly, since Mr. Parasco has identified no fact of record from which a jury could infer that the fraudulent tax returns were not submitted to the banks for the purpose of deceiving them, the evidence leaves no doubt that Mr. Parasco lied to Pacific in this respect as well.
Finally, we conclude that the only reasonable conclusion a jury could reach is that Mr. Parasco made misrepresentations to Pacific regarding efforts he had undertaken to sell the house before the fire. As we noted above, Mr. Parasco testified that he was not actively trying to sell the house at the time of the fire, and that he had no specific date in mind as to when he might list the house for sale. Mr. Parasco further stated that no one had informed him that the house would sell for considerably less than $ 400,000. Again, however, Mr. Parasco's statements are flatly rebuked by the record. The affidavits submitted by the real estate agents Mr. Parasco contacted indicate that he attempted to place the house on the market on the very morning of the fire, and that he had been told that the house would more likely sell for $ 180,000 to $ 200,000.
Indeed, in their opposition to the instant motion, the Parascos do not contest these affidavits, but instead argue that summary judgment should be denied since there is no evidence of either a contract to sell the house or the placement of "for sale" signs on the property. Of course, this argument evades the issue. Mr. Parasco was asked if he was actively trying to sell the house during the time leading up to the fire. He responded that he had no such plans. The record indicates, however, that he had indeed undertaken such efforts. Accordingly, we must also conclude that Mr. Parasco made misrepresentations to Pacific regarding the attempts he made to sell the house.
The Parascos' alternative argument is that the misrepresentations are not material. The question of materiality is generally considered one of fact and law, but if the facts misrepresented are so obviously important that "reasonable minds cannot differ on the question of materiality," then the question becomes one of law that the court can decide at the summary judgment stage. Gould v. American-Hawaiian S.S. Co., 535 F.2d 761, 771 (3d Cir. 1976); see Fine Bellefonte Underwriters Ins. Co., 725 F.2d 179, 183 (2d. Cir.) (where statements are indisputably made and indisputably false, "the question seems purely one of law"), cert. denied, 469 U.S. 874, 83 L. Ed. 2d 162, 105 S. Ct. 233 (1984). In the context of an insurer's post-loss investigation, "the materiality requirement is satisfied if the false statement concerns a subject relevant and germane to the insurer's investigation as it was then proceeding." Fine, 725 F.2d at 183; see Long v. Insurance Co. of N. Am., 670 F.2d 930, 934 (10th Cir. 1982) ("a misrepresentation will be considered material if a reasonable insurance company, in determining its course of action, would attach importance to the fact misrepresented").
The Parascos argue that the fire's cause was accidental in nature; and that as a result, the misrepresentation of facts that tend to show that the Parascos had a motive to commit arson is immaterial to the issue at hand. The Second Circuit has considered and rejected this precise argument, concluding that the issue of materiality is to be determined with regard to the time the investigation is proceeding, as follows:
It thus appears that materiality of false statements is not determined by whether or not the false statements deal with a subject matter later determined to be unimportant because the fire and loss were caused by factors other than those with which the statements dealt. False sworn answers are material if they might have affected the attitude and action of the insurer. They are equally material if they may be said to have been calculated either to discourage, mislead or deflect the company's investigation in any area that might seem to the company, at that time, a relevant or productive area to investigate.
Fine, 725 F.2d at 184.
The false statements at issue in the instant case, in light of the standard set forth above, are clearly material to Pacific's investigation of the loss. At the time Pacific launched its investigation, it had knowledge that both the fire marshal and an independent cause and origin investigator had concluded that the fire was incendiary in nature. Thus, the steps it took to ascertain whether the Parascos had some motive to commit arson were entirely reasonable and prudent. Inquiries into whether the Parascos were in a stable financial posture were therefore material to the issue of motive. See Stover v. Aetna Casualty & Sur. Co., 658 F. Supp. 156, 160 & n.3 (S.D. W.Va. 1987) (noting that the financial state of the insured is a material line of inquiry in cases of arson). Once Pacific determined that the Parascos had lied to the banks in order to obtain the loans and that their financial state was somewhat precarious, it fashioned the theory that Mr. Parasco needed to sell the house quickly, in order to repay the banks before the monthly payments began to accumulate.
It pursued this theory by questioning Mr. Parasco as to the attempts he made to sell the house in the months leading up to the fire. Such information was likewise material, as it also concerned the issue of motive.
The undisputed facts before us compel the conclusion that during the course of Pacific's investigation of the loss at issue, Mr. Parasco made misrepresentations concerning both the fraud he perpetrated on the banks during the loan application process and his efforts to sell the house prior to the fire. Moreover, we have concluded that these misrepresentations concerned issues material to the investigation. Thus, there can be no dispute that the Parascos breached the fraud and concealment clause of the insurance policy; and as a result, they cannot recover under the contract. Accordingly, we will award summary judgment to Pacific as to the Parascos' contract claim.
C. Extra-Contractual Claims
Pacific argues that it is entitled to summary judgment as to the Parascos' three extra-contractual claims as well. We turn now to address these issues.
1. Breach of Covenant of Fair Dealing and Bad Faith Claims
In the second and third counts of their complaint, the Parascos contend that they are entitled to relief on the grounds that Pacific breached the covenant of utmost fair dealing and committed bad faith under 42 Pa. Cons. Stat. Ann. § 8371. Under § 8371, the court is empowered to provide relief in the form of pre-judgment interest, punitive damages, and costs and attorney's fees in the event it finds that an insurer acted in bad faith toward its insured in any action arising under an insurance policy. While § 8371 does not define bad faith, our Court of Appeals has recognized that the term has acquired a "peculiar and universally acknowledged meaning" in the insurance context, as follows:
"Insurance. 'Bad faith' on the part of insurer is any frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith."