The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge
MEMORANDUM OPINION AND ORDER OF COURT
In June of 2002, Plaintiff Lawrence Hartman, Jr. ("Hartman" or "Plaintiff") filed this insurance action against defendant Motorists' Mutual Insurance Company ("Motorists'" or "Defendant") in the Court of Common Pleas of Allegheny County. The gravamen of the case is that Defendant failed to pay for the damage caused to Plaintiff's new building when a ceiling-mounted oil furnace leaked approximately five (5) gallons of home heating oil into the building. Defendant contends that the loss is not covered under the terms of Plaintiff's insurance policy.
Defendant removed the case to the United States District Court for the Western District of Pennsylvania. The case was initially assigned to the Honorable Robert J. Cindrich, and was reassigned to the undersigned on October 10, 2002. The case was then referred to United States Magistrate Judge Amy R. Hay, who allowed Plaintiff to file a Second Amended Complaint. See Document No. 31. The Second Amended Complaint states claims under Pennsylvania law for breach of contract and bad faith under 42 Pa.C.S. § 8371. Magistrate Judge Hay subsequently issued a Report and Recommendation which recommended that the Court deny the Motion for Summary Judgment filed by Defendant. Document No. 41. Defendant's objections thereto were overruled, and the Report and Recommendation was adopted as the opinion of the Court. The case was then referred back to the undersigned for trial. A non-jury trial commenced on February 22, 2005 and concluded the next day. A transcript of the proceedings was ordered, and the Court afforded the parties an opportunity to submit post-trial proposed findings of fact and conclusions of law. Hartman has filed his PROPOSED FINDINGS OF FACT, ARGUMENT AND CONCLUSIONS OF LAW (Document No. 77). Defendant has filed DEFENDANT'S POST-TRIAL PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW (Document No. 78), as well as DEFENDANT'S POST-TRIAL BRIEF (Document No. 79). The issues have been fully briefed, and the matter is ripe for disposition. Accordingly, the Court enters the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a). For the reasons that follow, the Court finds in favor of Plaintiff on the claim of breach of contract, but finds in favor of Defendant on the claim of bad faith.
1. Plaintiff is the owner and operator of a business located at 5316 National Pike, Markleysburg, Pennsylvania 15459. Plaintiff's business includes the sale of all-terrain vehicles, outdoor equipment, gasoline and other products. Joint Stipulation, ¶ 1.
2. Defendant is an insurance company with offices and a principal place of business in Columbus, Ohio. Defendant is licensed to conduct business in Pennsylvania and maintains a claims office at 2674 Monroeville Boulevard in Monroeville, Pennsylvania. Id. at ¶ 2.
3. On or about June 10, 1999, Plaintiff purchased a Motorists' Mutual business insurance policy (the "Policy") from Lee-Weaver Insurance Agency, located in Washington, Pennsylvania. Id. at ¶ 3. The Policy provided property, inland marine general liability, auto, garage umbrella coverage and workers' compensation insurance for Plaintiff's business operations, as well as coverage for personal property, loss of use and personal liability. For property damage, the policy included replacement cost coverage subject to the terms, conditions and limitations of the policy. Id. at ¶ 5.
4. Plaintiff dealt exclusively with David Weaver ("Weaver") of the Lee-Weaver Insurance Agency, who was responsible for placing the coverage with Motorists'. Id. at ¶ 3. When Plaintiff inquired into purchasing the policy, Weaver described Motorists' as a "strong, stable company," and gave Plaintiff the names of clients that Weaver represented who also had insurance with Motorists. Id. at ¶ 4.
5. Weaver is an insurance agent and has been an insurance agent since 1986. As an insurance agent he had a business relationship with Motorists' where he was an independent agent who represented and sold insurance products for Motorists'. He represented Motorists' and its products to the general public and was an authorized representative of Motorists' during the relevant time period. He was authorized to sign documents as an authorized representative of the company.*fn1 His agent number for Motorists' Mutual is 8342, and he was authorized by Motorists' to accept premium payments from various clients on behalf of Motorists. Transcript ("T") at 69 - 70.
6. When Plaintiff visited Weaver's office, there was a 4' by 4' sign outside of the office that said "Motorists Mutual Insurance Company" and had the Motorists' Mutual logo on it.
T. at 19 - 20. Many of the policies that Weaver wrote were endorsed with not only Motorists' logo, but also the Lee-Weaver or David Weaver Insurance logo. Motorists' would pre-print the forms that would have both Defendant's logo and Weaver's agency logo on them. T at 73.*fn2
7. Plaintiff believed that Weaver was an agent who worked for Motorists', and sold and took care of their insurance. Weaver had never offered Plaintiff a business policy from any company other than Motorists'. T at 19.
8. Weaver was authorized by Motorists' to make representations to his clients about what coverage he is selling them. He was authorized by Motorists' to say what's in the policy and to respond to Plaintiff's inquiry about what he needed for his business, his construction, and the like. T at 83 - 84. Plaintiff relied upon Weaver's advice in purchasing the policy and dealing with issues that arose during the construction of his business. T at 84.
9. Exhibit 1 is the Policy written for Plaintiff. Defendant's logo was endorsed on the Policy, as was the name "Donald R. Weaver Insurance Inc." T at 71. The policy was signed by Weaver as an authorized representative of Motorists', and Motorists' logo was endorsed on the signature page. T at 74.
10. Prior to the year 2000 Plaintiff's business consisted of a small gas station, a sports shop and a mechanical bay of approximately 30' by 60'. T. at 10. In the year 2000 Plaintiff decided to tear the old building down and reinstall a new building. The new building was 60' by 80'. T at 11. During construction Plaintiff conducted business in a teepee-like device made out of a tarp. A contractor constructed the main part of the building, the electrical and the heating systems, but Plaintiff personally handled the remainder of the construction. T at 12.
11. The roof and attic of the new building were supported by free spanning wooden trusses approximately 80' in length. Attached to and below the trusses was a corrugated steel ceiling. Above the ceiling were 1 1/2 " Styrofoam Dow boards, followed by a layer of clear plastic and blown-in insulation. T at 14. The building was heated by an oil-fired furnace which sat on a platform on top of the lower span of the trusses. T at 14.
12. Plaintiff had Weaver come to his premises and review the construction with him on several occasions. On at least two or three occasions when Weaver visited the premises, and prior to the leak in the furnace, he was shown through the building. T at 23-24. Plaintiff discussed the business coverage for the building with him both on the phone and in person. Numerous construction questions were posed to Weaver during these conversations. T at 23-24.
13. Plaintiff discussed the type of furnace with Weaver on several occasions during the construction of his building. He showed Weaver where the furnace was going to be, where the ducts were going to run and how the system would operate. Plaintiff asked Weaver whether a problem with the furnace would be covered, and if not, what he needed to do to make sure it was covered. Weaver advised Plaintiff that the furnace was covered by his insurance policy.*fn3 T at 25-26.
14. Plaintiff specifically inquired about the possibility of a leak in the oil furnace due to the fact that his parents had a similar problem 10 to 14 years earlier. His parents' furnace was also in the attic. Weaver advised Plaintiff that if such a problem occurred at his premises it would be covered by the Policy. T at 26-27.
15. On April 3, 2001, shortly after the construction and furnishing of the building was completed, Plaintiff suffered a loss when a seal on his oil furnace failed.*fn4 As a result of the malfunctioning seal, the pump that supplied oil to the furnace activated and pumped approximately five gallons of heating oil into the attic of the building. Joint Stipulation at ¶ 7.
16. When the seal failed, the oil was pumped through the furnace. The oil then came out of the furnace, soaked the insulation, melted the plastic and the Dow board, contacted the metal ceiling, ran out the seam of the ceiling and dripped into the retail area of the building. T at 32. 17. At the time of the leak the carpet was four or five days old. The carpet was damaged by the leak. Additionally, the roof and ceiling, including the trusses, were impacted by oil. T at 33-34.
18. Plaintiff made a claim to Motorists' through Weaver. Motorists' received notice of the loss on or about April 6, 2001, and assigned the claim to Gary Weber ("Weber"), a claims specialist in Defendant's Monroeville, Pennsylvania office. Joint Stipulation at ¶ 8. Weber visited the site on April 11, 2001. Id. at ¶ 9.
19. Weber then reviewed the circumstances of the loss with Jim Evans ("Evans"), Ed
Besides Weaver, no one affiliated with Defendant made any representations to Plaintiff regarding what was or was not covered by the policy. T. at 77-78. Weaver's testimony was generally consistent with Plaintiff's testimony.
Wetzel ("Wetzel") and Judy Palamara ("Palamara") of the Monroeville office.*fn5 Id. at ¶ 10.
20. On April 12, 2001, Evans discussed the claim with Courtney Taylor ("Taylor"),*fn6 a claims consultant in Defendant's home office in Columbus, Ohio. Joint Stipulation at ¶ 11. During this conversation, Evans and Taylor both agreed that the "pollution exclusion" applied to the loss. T at 137. Evans then instructed Weber to deny the claim based on the "pollution exclusion." T at 138.
21. The Policy contains the following exclusion of coverage for property damage caused by or resulting from pollutants:
We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
Discharge, dispersal, seepage, migration, release or escape of "pollutants" unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the "specified causes of loss." But if the discharge, dispersal, seepage, migration, release or escape of "pollutants" results in a "specified causes of loss," we will pay for the loss or damage caused by that "specified cause of loss."
Joint Stipulation at ¶ 24.*fn7
22. The Policy defines the term "pollutants" as follows: "Pollutants" means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
23. The Policy also includes an Additional Coverage Extension, which provides as follows:
Water Damage, Other Liquids, Powder or Molten Material Damage. If loss or damage caused by or resulting from covered water or other liquid, powder or molten material damage loss occurs, we will also pay the cost to tear out and replace any part of the building or structure to repair damage ...