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Intercon Construction, Inc. v. Williamsport Municipal Water Authority

January 28, 2008

INTERCON CONSTRUCTION, INC., PLAINTIFF,
v.
THE WILLIAMSPORT MUNICIPAL WATER AUTHORITY, DEFENDANT.
THE WILLIAMSPORT MUNICIPAL WATER AUTHORITY, THIRD-PARTY PLAINTIFF,
v.
SAFECO INSURANCE COMPANY OF AMERICA, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Judge McClure

ORDER

BACKGROUND

On July 26, 2007, plaintiff Intercon Construction, Inc. ("Intercon") filed its complaint for damages against the Williamsport Municipal Water Authority (the "Authority"). The complaint arises out of a contract in which Intercon would construct a water line under the Susquehanna River in Williamsport, Pennsylvania for the Authority. Safeco Insurance Company of America ("Safeco") provided the performance bond on the contract. In its complaint, Intercon alleges that the Authority breached the contract.

On November 5, 2007, the Authority filed an answer to the complaint with a counterclaim against Intercon for breach of contract. (Rec. Doc. No. 6.) On November 20, 2007, the Authority filed a third-party complaint against Safeco. (Rec. Doc. No. 9.) Count I of the third-party complaint alleges breach of contract under the performance bond while Count II alleges a claim of bad faith under Pennsylvania's bad faith insurance statute, 42 Pa. C.S.A. § 8371.

On December 19, 2007, Safeco filed a partial motion to dismiss. (Rec. Doc. No. 20.) Opposing and reply briefs have been filed and the motion is ripe for disposition. Now, for the following reasons, the court will grant the motion.

DISCUSSION

I. Motion to Dismiss Standard

When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court must view all allegations stated in the complaint as true and construe all inferences in the light most favorable to plaintiff. Hishon v. King & Spaulding, 467 U.S. 69, 73 (1984); Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). In ruling on a motion to dismiss the court primarily considers the allegations of the pleading, but is not required to consider legal conclusions alleged in the complaint. Kost, 1 F.3d at 183. At the motion to dismiss stage, the court considers whether plaintiff is entitled to offer evidence to support the allegations in the complaint. Maio v. Aetna, Inc., 221 F.3d 472, 482 (3d Cir. 2000). A complaint should be dismissed only if the court, from evaluating the allegations in the complaint, is certain that under any set of facts relief cannot be granted. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir. 1997); Markowitz v. Northeast Land, Co., 906 F.2d 100, 103 (3d Cir. 1994).

The failure-to-state-a-claim standard of Rule 12(b)(6) "streamlines litigation by dispensing with needless discovery and factfinding." Neitzke v. Williams, 490 U.S. 319, 326-27 (1989). A court may dismiss a claim under Rule 12(b)(6) where there is a "dispositive issue of law." Id. at 326. If it is beyond a doubt that the non-moving party can prove no set of facts in support of its allegations, then a claim must be dismissed "without regard to whether it is based on an outlandish legal theory or on a close but ultimately unavailing one." Id. at 327.

III. Analysis

In Count II of its third-party complaint, the Authority alleges that Safeco violated Pennsylvania's bad faith insurance statute in the manner in which it investigated and denied the Authority's coverage under the performance bond. (Rec. Doc. No. 9, ¶ 46.) The Authority also alleges that Safeco acted in bad faith by withholding certain information from the Authority while encouraging it to reach an assignment agreement with Carson & Roberts, a drilling contractor who placed a bid for completion of the contract. (Id. ¶ 47.)

In its partial motion to dismiss, Safeco argues that Pennsylvania's bad faith insurance statute does not apply to a surety bond because a surety bond is simply not an insurance policy. (Rec. Doc. No. 21, at 5.) Pennsylvania's bad faith insurance statute states that:

In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:

(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the ...


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