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Gardner v. State Farm Fire and Casualty Co.

June 11, 2007


The opinion of the court was delivered by: Gary L. Lancaster, District Judge


This is an insurance coverage dispute. Plaintiff, Nicole Gardner, is the Administratrix of the estate of her mother, Sharon Ann Gardner. Plaintiff alleges that her mother was injured on the sidewalk outside property plaintiff rented from Kevin Harper, an insured of defendant State Farm Fire and Casualty Company. Plaintiff initially filed suit against Mr. Harper in the Court of Common Pleas of Allegheny County, Pennsylvania. After defendant denied Mr. Harper insurance coverage, plaintiff obtained a default judgment against Mr. Harper. Thereafter, plaintiff filed this action against defendant in state court, and defendant removed this action to this court pursuant to 28 U.S.C. §§ 1441 and 1446.

Plaintiff alleges that defendant wrongfully denied Mr. Harper insurance coverage. Plaintiff alleges that defendant's conduct constituted Breach of Contract (Count I), Breach of Fiduciary Duty/Duty to Act in Good Faith (Count II), Negligence (Count III), Bad Faith in violation of the Pennsylvania Bad Faith statue, 42 Pa.C.S.A. § 8371 (Count IV), and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 Pa.C.S.A. § 201 et seq ("PUTPCPL")("Count V")*fn1 . Defendant has filed a motion for summary judgment [Doc. No. 67] contending that plaintiff has failed to state a claim against it. Plaintiff has filed a cross motion for summary judgment [Doc. No. 71] arguing that she is entitled to judgment as a matter of law.

For the reasons set forth below, defendant's motion will be granted and plaintiff's motion will be denied.


Unless otherwise specifically indicated, the following material facts are undisputed. Kevin Harper and Deborah Watts purchased a residence located at 1803 Soles Street, McKeesport, Pennsylvania (the "Soles Street property") in the 1980s. In 1988, Mr. Harper and Ms. Watts purchased a homeowners insurance policy, No. 38-06-2027-2, ("the policy") from defendant. The policy identified the Soles Street property as the insured residence, and identified Mr. Harper and Ms. Watts as insureds. The policy was in effect until 2003. The policy contained, inter alia, the following provisions:

Section II - Exclusions

1. Coverage L (Liability) and Coverage M (Medical)do not apply to...

(b) bodily injury and property damage arising out of the business pursuits of any insured or the holding for rental of any part of the premises by any insured. This exclusion does not apply:

(1) to activities which are ordinarily incident to non-business pursuits;

(2) with respect to Coverage L to the occasional or part-time business pursuits of an insured who is under 19 years of age;

(3) to the rental or holding for rental of a residence of yours;

(a) on an occasional basis for the exclusive use as a residence...

(d) bodily injury or property damage arising out of any premises currently owned or rented to any insured which is not an insured location. This exclusion does not apply to bodily injury to a residence employee arising out of and in the course of the residence employee's employment by the insured.

Mr. Harper lived at the Soles Street Property until early 2002. Thereafter, in March of 2002, Mr. Harper rented the home to plaintiff for an initial term of six (6) months*fn2 . Mr. Harper moved to the home of his girlfriend, Wendy Thomas, located at 1701 Scott Street, McKeesport, Pennsylvania. Plaintiff paid Mr. Harper rent of $380.00 per month. After the initial six months, plaintiff continued renting the home. In total, plaintiff resided in the home with her family from March 1, 2002 until February 1, 2003. Mr. Harper did not advise defendant that he had rented the property.

On August 29, 2002, Sharon Ann Gardner slipped and fell on the sidewalk outside the Soles Street property. Sharon Ann Gardner claimed she suffered significant injuries in the fall*fn3 .

On March 7, 2003, Sharon Ann Gardner advised defendant of her injuries. Defendant assigned a claims adjuster, Dominic Mangiamelle, to conduct an investigation of the claim. Neither Mr. Mangiamelle nor his supervisor, David Konefal-Shaer, recalled handling any prior claims which involved the "occasional basis" exception to the rental exclusion in defendant's homeowners policies. Mr. Mangiamelle spoke to Mr. Harper, Ms. Watts and plaintiff's counsel in the course of his investigation. Defendant first learned that Mr. Harper had rented the property to plaintiff during this investigation.

Defendant's investigation included obtaining the statements of plaintiff, Mr. Harper and Ms. Watts. Plaintiff advised defendant that she was renting the Soles Street property from Mr. Harper beginning on March 1, 2002 and ending on February 1, 2003. During plaintiff's tenancy, Mr. Harper entered the Soles Street property at least one time per month to collect rent or retrieve personal belongings. Mr. Harper advised defendant that he rented the property to plaintiff in order to pay the mortgage on the Soles Street property. Mr. Harper returned to live there after plaintiff moved out in February of 2003.

Mr. Harper further stated that he had not informed defendant of the rental and was unaware of any need to do so. On March 23, 2003, after completing his investigation, Mr. Mangiamelle submitted a status report to his supervisors and requested authority to provide a statement of coverage to Mr. Harper. Mr. Mangiamelle did not, during his investigation, obtain the definition of "occasional basis" from a dictionary or other reference book. Mr. Mangiamelle did not obtain a legal opinion regarding this issue. By letter ...

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