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MONARCH, INC. v. ST. PAUL PROPERTY & LIABILITY INSURANCE CO.

July 29, 2004.

MONARCH, INC.
v.
THE ST. PAUL PROPERTY AND LIABILITY INSURANCE COMPANY, et al.



The opinion of the court was delivered by: BRUCE KAUFFMAN, District Judge

MEMORANDUM AND ORDER

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.

BACKGROUND

  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 3.

  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).

  ANALYSIS

  A. Appraisal Provision

  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 ...

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