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Harrisburg Dairies, Inc. v. Selective Insurance Co. of America

April 23, 2008


The opinion of the court was delivered by: Judge Sylvia H. Rambo


This case arises out of the collapse of a milk silo on Plaintiff's property. After the collapse, Plaintiff brought suit against Selective Insurance Company of America t/d/b/a Selective Insurance and Selective Way Insurance Company ("Selective") and the manufacturer of the silo, Walker Stainless Equipment Company, LLC t/d/b/a Walker Equipment Company n/k/a Walker Engineered Products ("Walker"). Before the court is Selective's motion to dismiss the bad faith claim in Count II, pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim. For the reasons that follow, the motion will be granted in part and denied in part.

I. Background

A. Facts

On July 30, 2002, Plaintiff purchased a milk silo from Walker, which Walker delivered and installed at Plaintiff's business. (Compl. ¶ 7.) On July 8, 2005, Selective issued an insurance policy for the silo effective from July 1, 2005 until July 1, 2006. (Id. ¶ 8.) Before the policy was issued, Plaintiff advised Selective that it had suffered a milk silo collapse on a prior occasion. (Id. ¶ 9.) Additionally, Selective conducted a loss-risk assessment, during which time Selective uncovered a defect in the sprinkler system, but not in the design of the milk silo. (Id. ¶ 10.)

On February 20, 2006, one of the milk silos purchased on July 30, 2005 collapsed,*fn1 resulting in the loss of the silo and the milk it contained, and a disruption of Plaintiff's business. (Id. ¶ 11.) Plaintiff filed a claim with Selective pursuant to its insurance policy for the loss caused by the silo collapse. Selective hired an engineer to investigate the collapse, who determined that the collapse was caused by a design defect in the silo. (Id. ¶ 15.) Selective denied the claim on the ground that a collapse caused by a design defect is specifically excluded from coverage by the terms of the policy. (Id. ¶ 14.) Plaintiff claims that it did not receive a copy of the additional policy form setting forth this exclusion until February 28, 2006, after the collapse had already occurred. (Id.)

B. Procedural History

On May 10, 2007, Plaintiff filed suit in the Court of Common Pleas of Dauphin County, Pennsylvania against Selective and Walker. Plaintiff's complaint states two counts against Selective. In Count I, Plaintiff alleges that it is "entitled to coverage from the type of loss and damage" it sustained (Doc. 1 ¶¶ 18, 19), or in the alternative, that "Selective breached its contract with Plaintiff by failing to provide Plaintiff coverage for the type of loss sustained." (Doc. 1 ¶ 21.) In Count II, Plaintiff alleges that Selective acted in bad faith in denying Plaintiff's claim because Selective "knew, or should have known, whether or not any 'design defects' or other possible exclusions from coverage existed prior to or at the time issuing of the July 1, 2005 policy and had an obligation to advise or otherwise inform Plaintiff of the same prior to issuing the policy and/or accepting the $400,000.00 insurance premium from Plaintiff." (Id. ¶ 27.) Additionally, Plaintiff asserts Selective acted in bad faith because "Selective lacked a reasonable basis for denying and/or refusing to make payments to Plaintiff for the loss and damages suffered from the February 20, 2006 milk silo collapse and knew or recklessly disregarded the lack of such a reasonable basis when Selective denied the claim." (Id. ¶ 28.)

On June 18, 2007, Defendant Walker filed a motion for removal of the action to federal court. (Doc. 1.) On July 5, 2007, Defendant Selective filed a motion to dismiss the bad faith claim stated in Count II of the complaint (Doc. 5.) A brief in support thereof was filed on July 25, 2007 (Doc. 13.) On August 14, 2007, Plaintiff filed a brief in opposition. (Doc. 14.) A reply brief was filed by Selective on August 22, 2007. (Doc. 20.) Accordingly, the matter has been fully briefed and is ripe for disposition.

II. Legal Standard

Among other requirements, a sound complaint must set forth "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This statement must "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, - U.S. -, 127 S.Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). "Fair notice" in Rule 8(a)(2) "depends on the type of case - some complaints will require at least some factual allegations to make out a showing that the pleader is entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (quotation omitted). "A situation may arise where, at some point, the factual detail in a complaint is so undeveloped that it does not provide a defendant the type of notice of claim which is contemplated by Rule 8." Id. A plaintiff must provide "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action" to show entitlement to relief. Twombly, 127 1965; accord, e.g., Phillips, 515 F.3d at 238-39; Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007) (The court is not "compelled to accept unsupported conclusions and unwarranted inferences or a legal conclusion couched as a factual allegation." (quotations and citations omitted)); Evancho v. Fisher, 423 F.3d 347, 350(3d Cir. 2005).

A defendant may attack a complaint by a motion under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. In deciding a motion to dismiss under Rule 12(b)(6), the court is required to accept as true all of the factual allegations in the complaint, Erickson v. Pardus, - U.S. -, 127 S.Ct. 2197, 2200 (2007), and all reasonable inferences permitted by the factual allegations, Watson v. Abington Twp., 478 F.3d 144, 150 (3d Cir. 2007), viewing them in the light most favorable to the plaintiff, Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007). Accord Phillips, 515 F.3d at 233. If the facts alleged are sufficient to "raise a right to relief above the speculative level" such that the plaintiff's claim is "plausible on its face," a complaint will survive a motion to dismiss. Twombly, 127 S.Ct. at 1965, 1974; Phillips, 515 F.3d at 234; Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007); Stevenson v. Caroll, 495 F.3d 62, 66 (3d Cir. 2007). This requirement "calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of" necessary elements of the plaintiff's cause of action. Twombly, 127 S.Ct. at 1965.

"To decide a motion to dismiss, courts generally consider only the allegations contained in the complaint, exhibits attached to the complaint and matters of public record."*fn2 Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993) (citations omitted); see also Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2007). The court may consider "undisputedly authentic document[s] that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] document[s]." Id. Additionally, "documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading may be considered." Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002); see also U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002) ("Although a district court may not consider matters extraneous to the pleadings, a document integral to or explicitly relied upon in the complaint may be considered ...

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