The opinion of the court was delivered by: BRUCE KAUFFMAN, District Judge
Plaintiff Monarch, Inc. ("Plaintiff") brings claims against
Defendants The St. Paul Property and Liability Insurance Co. and
The Northbrook Property and Casualty Insurance Co. ("Defendants")
for breach of contract and violation of the Pennsylvania bad
faith statute, 42 Pa. Cons. Stat. § 8371. Now before the Court is
Defendants' Motion for Summary Judgment (the "Motion").*fn1
For the reasons stated below, the Motion will be granted.
On the basis of diversity jurisdiction, this case was removed
from the Delaware County Court of Common Pleas. Plaintiff's
claims arise from its attempt to collect on an insurance policy
(the "policy") following a fire in May 2000 at the McClatchy
Building in Upper Darby. The parties dispute the extent of
Defendants' liability and whether certain conditions precedent
bar Plaintiff from collecting on the policy at this time. Prior to Plaintiff's formal claim for policy proceeds,
Defendants made two separate payments for property damages: (1)
$100,000 on or about June 20, 2000, and (2) $349,888.42 on or
about February 9, 2001. Motion at 7-9. On or about August 29,
2001, Defendants also paid $147,811.17 claimed for loss of rents.
Id. The total of these payments was $597,699.59.
Plaintiff submitted its Proof of Loss form on August 9, 2002,
seeking $1,570,890.10. Complaint Ex. A. The losses are broken
down into the categories of property damage ($896,628.42); loss
of rents ($147,811.00); and ordinance and law, or "code upgrades"
($531,450.70).*fn2 Id.; Defendants' Supplemental Brief at
Of the amounts listed on the Proof of Loss form, the code
upgrades and a portion of the property damages remain in dispute.
Plaintiff contends that the failure to pay these amounts
constitutes a breach of contract and that Defendants' conduct
violates Pennsylvania's bad faith statute. Plaintiff also claims
that Defendants are liable for the value of a lease with Bally
Total Fitness Corporation ("Bally's") allegedly abandoned due to
the delay in the adjustment process. LEGAL STANDARD
In deciding a motion for summary judgment pursuant to
Fed.R.Civ.P. 56, "[the] test is whether there is a genuine issue of
material fact and, if not, whether the moving party is entitled
to judgment as a matter of law." Medical Protective Co. v.
Watkins, 198 F.3d 100, 103 (3d Cir. 1999) (quoting Armbruster
v. Unisys Corp., 32 F.3d 768, 777 (3d Cir. 1994)). "[S]ummary
judgment will not lie if the dispute about a material fact is
`genuine,' that is, if the evidence is such that a reasonable
jury could return a verdict for the nonmoving party." Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court must
examine the evidence in the light most favorable to the nonmoving
party and resolve all reasonable inferences in that party's
favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986). However, "there can be `no genuine issue as
to any material fact' . . . [where the nonmoving party's]
complete failure of proof concerning an essential element of
[its] case necessarily renders all other facts immaterial."
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
Defendants argue that Plaintiff's claims are barred for failure
to invoke the policy's appraisal provision.*fn3 Pennsylvania
law requires that appraisal provisions be included in all fire insurance policies. 40 Pa. Cons. Stat. § 636; see also Ice
City, Inc. v. Insurance Co. of North America, 314 A.2d 236, 238
(Pa. 1974). When an insurance company admits liability and
disputes only the amount of the loss, appraisal is the favored
method of settling the dispute. Ice City, 314 A.2d at 240.
Appraisal provisions are revocable, however, and an insurance
company "may not assert the existence of the appraisal clause
despite its own failure to comply with the clause as a defense to
the innocent party's action on the policy." Id. at 239.
Accordingly, in Hodges v. Pennsylvania Millers Mutual Insurance
Co., 673 A.2d 973, 975 (Pa. Super. 1996), the Court found that
the defendant had waived the appraisal provision when it first
requested appraisal 23 months after receiving notice of the
plaintiff's loss. Id. The Court considered the circumstances of
that case, including the fact that a trial date had been set, and
concluded that the defendant's request was untimely and did not
bar the plaintiff's claim. Id.
This record is devoid of any evidence that Defendants ever
made a formal request for appraisal. Defendants argued for the
first time that appraisal barred Plaintiff's claims in their
Supplemental Brief on the Motion, which was filed in June, 2004,
approximately 22 months after Plaintiff filed its Proof of Loss
form. This delay is highly prejudicial to Plaintiff, whose litigation has involved multiple Court filings, hearings, and
conferences over the past year. There is no doubt that a prompt
invocation of the appraisal clause would have been a more
efficient way to resolve the dispute. However, given the
circumstances of this case, Defendants' right to invoke appraisal
as a defense has been waived.*fn4
B. Count I: Breach of Contract
To prove breach of contract, Plaintiff must demonstrate (1) the
existence of a contract, including its essential terms, (2) a
breach, and (3) damages resulting therefrom. Corestates Bank,
N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. 1999). In
Pennsylvania, recovery on a breach of contract may include:
whatever damages [were] suffered, provided (1) they
were such as would naturally and ordinarily result
from the breach, or (2) they were reasonably
foreseeable and within the contemplation of the
parties at the time they made the contract, and (3)
they can be proved with reasonable ...