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Amitie One Condominium Association v. Nationwide Property & Casualty Insurance Co.

August 4, 2008


The opinion of the court was delivered by: Christopher C. Conner United States District Judge

(Judge Conner)


Plaintiff Amitie One Condominium Association ("Amitie One") brings this action against Nationwide Property & Casualty Insurance Company ("Nationwide") for breach of contract and bad faith arising from Nationwide's denial of insurance coverage. Presently before the court is defendant's motion to dismiss (Doc. 3.) pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the basis that the insurance policy does not cover the damage for which Amitie One claims coverage. For the reasons that follow, the motion will be denied.

I. Statement of Facts*fn1

Amitie One is a homeowners' association whose members own condominium units located in State College, Pennsylvania. (Doc. 1-6 ¶ 1.) Nationwide insures the real estate of Amitie One's members under a Business Provider Insurance Policy. (Id. ¶ 4.) In 1994, Amitie One first observed cracks developing in the northeast corner of the building that houses the condominium units. Two of the units sustained structural damage caused by movement of the foundation and floor slabs. (Id. ¶ 11.) Amitie One hired an engineering company to arrest the movement, and the firm employed a combination of techniques to halt the shifting, which it attributed to compressible soils beneath the building's foundation. (Id. ¶ 12.) For the next twelve years, Amitie One encountered no further problems. (Id. ¶ 13.)

In 2006, however, Amitie One observed the onset of additional structural issues, and it hired a second engineering company to investigate the problems. (Id. ¶ 14.) The firm conducted a number of tests and concluded that the problem was not caused by compressible soils, as the earlier engineering consultants had indicated. (Id. ¶ 16.) Rather, the firm concluded that "[t]he continued distress to the building structure, considering past stabilization attempts and the recent subsurface investigation, is due to a karst or carbonate bedrock related instability."*fn2

(Id. ¶¶ 15-16.) The firm further opined that the 1994 engineers had incorrectly identified compressible soils as the cause of the problem and stated that the distress was consistent with surface collapse due to sinkholes. (Id.) Additional testing confirmed that the bedrock in the area was weathered and susceptible to voids as tall as four feet at depths of approximately twenty feet below surface grade, making sinkholes likely. (Id. ¶ 18.)

In May 2006, Amitie One submitted claims for losses and building damage to Nationwide. (Id. ¶ 21.) Nationwide employed Mark S. Suchecki ("Suchecki") to investigate the policy claims made by Amitie One. (Id. ¶ 19.) Suchecki concurred that the structural problems were due to sinkhole activity progressing over a period of several years. (Id. ¶ 20.) Accordingly, Nationwide denied coverage, asserting that the policy covered sinkhole damage only if it resulted from sudden collapse. (Id. ¶ 24.)

The policy provides coverage for all risks of loss or property damage that are not limited or excluded by the policy. (Id. ¶ 7 (citing (Doc. 1-5 at 2)). The policy states that Nationwide "will pay for loss or damage caused by or resulting from risks of direct physical loss involving collapse of a building or any part of a building" if the damage results from one of several enumerated "specified causes of loss." (Id. (quoting Doc. 1-4 at 23) (emphasis added)). Sinkhole collapse qualifies as a specified cause of loss covered by the policy, which defines it as "the sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or dolomite." (Id. ¶ 9 (quoting Doc. 1-5 at 17) (emphasis added)).

Amitie One commenced this action in state court, and Nationwide removed it to federal court on September 26, 2007. Amitie One seeks enforcement its rights under the contract and to recover for Nationwide's alleged bad faith denial of benefits. Nationwide has filed a motion to dismiss, arguing that the lack of any sudden surface collapse places Amitie One's harm outside the policy's coverage. The parties have fully briefed these issues, which are now ripe for disposition.

II. Standard of Review

Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for the dismissal of complaints that fail to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). When ruling on a motion to dismiss under Rule 12(b)(6), the court must "accept as true all factual allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the plaintiff." Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007) (quoting Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005)). Although the court is generally limited in its review to the facts in the complaint, it "may also consider matters of public record, orders, exhibits attached to the complaint and items appearing in the record of the case." Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n. 2 (3d Cir. 1994); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).

Federal notice pleading rules require the complaint to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Sershen v. Cholish, No. 3:07-CV-1011, 2007 WL 3146357, at *4 (M.D. Pa. Oct. 26, 2007) (quoting Erickson v. Pardus, --- U.S. ---, 127 S.Ct. 2197, 2200 (2007)). The plaintiff must present facts that, if true, demonstrate a plausible right to relief. See FED. R. CIV. P. 8(a) (stating that the complaint should include "a short and plain statement of the claim showing that the pleader is entitled to relief"); Bell Atl. Corp. v. Twombly, ---U.S. ---, 127 S.Ct. 1955, 1965 (2007) (requiring plaintiffs to allege facts sufficient to "raise a right to relief above the speculative level"); Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007). Thus, courts should not dismiss a complaint for failure to state a claim if it "contain[s] either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Montville Twp. v. Woodmont Builders LLC, No. 05-4888, 2007 WL 2261567, at *2 (3d Cir. 2007) (quoting Twombly, --- U.S. at ---, 127 S.Ct. at ...

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