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F.P. WOOL & COMPANY v. VALIANT INSURANCE COMPANY

October 3, 2002

F.P. WOLL & COMPANY, PLAINTIFF
V.
VALIANT INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Louis Pollak, United States District Judge

MEMORANDUM

Currently before this court is a motion for summary judgment filed by defendant Valiant Insurance Company ("Valiant"). After reviewing the parties' submissions on various insurance coverage issues, this court will grant the motion for summary judgment in part and deny it in part.

Procedural Posture

In January 1999, plaintiff F.P. Woll & Company ("Woll") brought a diversity action against Valiant based on an insurance coverage dispute. Both Woll and Valiant filed motions for summary judgment. This court in October 2001 granted leave to Woll to file an amended complaint with an added count of bad-faith denial of its insurance claim. At the same time, the cross-motions for summary judgment were dismissed as moot. On October 18, 2001, Woll did file an amended complaint incorporating a bad-faith claim. In the current motion for summary judgment filed on December 6, 2001, Valiant incorporated its previously mooted motion by reference and thereby raised anew the issues presented in its original summary judgment motion. In addition to its original arguments, Valiant's current motion seeks summary judgment with respect to Woll's newly added bad-faith claim. This court finds that triable issues of fact exist on all but one issue: Woll is not entitled to recover on its claim against Valiant for construction expenses at its new facility.

Factual Background

Woll, a company engaged in the manufacture and production of hair-based cushioning products, held a commercial property insurance policy with Valiant. On January 29, 1996, a fire severely damaged one of two buildings at Woll's Comly Street manufacturing facility in Philadelphia ("the Comly facility"), destroying the factory and offices within. So that it might resume operations promptly, Woll entered into a lease on a building at Sandmeyer Lane in Northeast Philadelphia ("the Sandmeyer facility") in early February, 1996. The lease included the option to purchase, contingent on the level of environmental contamination found at the site (as the Sandmeyer facility was adjacent to a known Superfund site). Woll undertook to test the contamination of the site and discovered the presence of low trichloroethylene and PCB contaminants, along with possible elevated levels of heavy metals. Woll sought to minimize potential environmental liability for any future cleanup of the site, so it sought "Act 2" clearance under the Land Recycling and Environmental Remediation Standards Act, 35 P.S. § 6026. Act 2 clearance would allow the company to obtain a release of liability for remediation of any toxic contaminants on the property at pre-purchase levels as long as the contaminants fell within certain regulatory parameters. Eventually, in July of 1998, Woll purchased the Sandmeyer facility, although the company did not obtain the Act 2 release until later.

The Sandmeyer facility's office space comprised about 2000 square feet, about half the office space that the Comly facility offered. From 1999 until 2000, plaintiff constructed expansions to both the office and warehouse space at the Sandmeyer facility.

The parties reached agreement on some of the claims Woll made in the aftermath of the fire, and, as of May 1998, Woll had received $1,200,726.20 for loss of business income and extra expense, as well as $1,043,971.25 for the loss of the Comly facility. Woll's lawsuit is based upon additional claims it asserts should be paid under its "extra expense" policy with Valiant. Among the claims which Woll alleges are properly payable under the policy are the following: legal and negotiation fees, the cost of environmental testing, construction costs (for the Sandmeyer office, not the Sandmeyer warehouse), and architectural fees (office only). Valiant denies the legitimacy of the claims, taking the position that the costs and fees were not "extra expenses" within the meaning comprehended by the policy.

Standard for Summary Judgment

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The existence of a genuine issue of material fact is reflected in evidence from which a reasonable juror could find for the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). At the summary judgment stage, the court must view the evidence, and draw all reasonable inferences, in the light most favorable to the non-moving party. See Dici v. Commonwealth, 91 F.3d 542, 547 (3d Cir. 1996). However, the non-moving party may not defeat a motion for summary judgment by the mere assertion, not documented by record evidence, that the facts are sufficient to support his or her claims. See Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1362 (3d Cir. 1992), cert. denied, 507 U.S. 912 (1993); O'Donnell v. United States, 891 F.2d 1079, 1082 (3d Cir. 1989). Where the non-moving party "bears the burden of persuasion at trial, the moving party may meet its burden on summary judgment by showing that the nonmoving party's evidence is insufficient to carry that burden." Foulk v. Donjon Marine Co., Inc., 144 F.3d 252, 258 n. 5 (3d Cir. 1998) (quoting Wetzel v. Tucker, 139 F.3d 380, 383 n. 2 (3d Cir. 1998)).

The Policy

Because the parties' dispute stems from different interpretations of the insurance policy, reproducing the relevant "extra expense" provision is appropriate:

Extra Expense means necessary expenses you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss.
(1) We will pay any Extra Expense to avoid or minimize the suspension of business and to continue "operations":

(a) At the described premises; or

(b) At replacement premises or at temporary ...

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