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Habecker v. Peerless Insurance Co.

November 14, 2008


The opinion of the court was delivered by: Judge Conner


The matter sub judice is a diversity action in which plaintiffs allege that defendant insurance carriers wrongfully denied benefits under a commercial property insurance policy covering plaintiffs' business premises. Plaintiffs submitted a claim against the policy after a fire that occurred in early 2005. Following an initial investigation, defendants refused coverage, asserting that plaintiffs had breached material policy terms by failing to cooperate with the investigation. Plaintiffs subsequently brought this action to enforce their rights to coverage, and defendants filed a motion for summary judgment (Doc. 13) on lack of cooperation grounds. For the reasons that follow, the motion will be granted.

I. Statement of Facts*fn1

In approximately 2000, plaintiffs Gerald and Dolores Habecker (collectively "the Habeckers"), opened a barbecue business under the corporate name Doe & Jerry's Barbecue Company ("the Barbecue Company"). (Doc. 14-3 at 62; Doc. 18, Ex. E at 12; Doc. 18, Ex. G at 11.)*fn2 They leased property in Wormleysburg, Pennsylvania, where the Barbecue Company operated a restaurant and catering facility. The business obtained a commercial property insurance policy from defendant Peerless Insurance Company ("Peerless"). (See Doc. 14-2 at 6-100; Doc. 14-3 at 1-59.) The policy contains the following provisions pertinent to the instant matter:

3. Duties In The Event Of Loss Or Damages

a. You must see that the following are done in the event of loss or damage to Covered Property:

(5) At our request, give us complete inventories of the damaged and undamaged property. Include quantities, costs, values and amount of loss claimed.

(6) As often as may be reasonably required, permit us to inspect the property proving the loss or damages and examine your books and records. Also permit us to take samples of damaged and undamaged property for inspection, testing and analysis, and permit us to make copies from your books and records.

(8) Cooperate with us in the investigation or settlement of the claim.

(Doc. 14-2 § E.3.a, at 55.)*fn3

The Habeckers operated the Barbecue Company until January 17, 2005, when an overnight fire damaged the business premises. (Doc. 14 ¶ 1; Doc. 18 ¶ 1.) The fire did relatively minor harm to the restaurant building but caused extensive smoke damage to the Barbecue Company's fixtures, equipment, and inventory. (Doc. 14 ¶ 2; Doc. 18 ¶ 2; Doc. 14-6 at 17-19.) The Habeckers filed a claim against the Peerless policy the next day, (Doc. 18, Ex. B.), and they cooperated with the initial investigation of their claim. Peerless separately deposed them on March 25, 2005, (Doc. 18, Exs. F, G), and Gerald Habecker ("Habecker") voluntarily submitted to a polygraph test administered by law enforcement officials, (Doc. 14-7 at 11-12). He furnished the business's security records and arranged for the Barbecue Company's accountant to transmit its financial information to Peerless. (Doc. 18-2 ¶ 5.) He also submitted to an interview with James Caruso ("Caruso"), a special investigator for Peerless, a few weeks after the fire. (Doc. 18, Ex. C.)

Peerless retained Bradley Schriver ("Schriver"), an independent causeand-origin investigator, to identify the source of the fire. (Doc. 14 ¶ 7; Doc. 18 ¶ 7.) Schriver visited the restaurant the day after the fire and concluded that it had been intentionally started by dousing several cardboard boxes in a storage room with an accelerant and setting them alight. (Doc. 14-3 at 61, 68.) Investigations conducted by local police and fire officials reached a similar conclusion. (Id. at 66.)

The restaurant premises featured a security alarm system that continuously monitored all exterior doors and windows. Each employee authorized to open or close the restaurant received a unique security code to access the system. (Doc. 14-7 at 8.) Habecker maintained a list of all employees' codes in his office. (Id.; Doc. 18, Ex. G at 69.) Whenever an employee armed or disarmed the system, it recorded the date, time, and identity of the employee. (Doc. 14-7 at 9.) Security records from the evening of the fire document no forced entry attempt and indicate that the security code assigned to employee Leann Witman was used to enter the building at 11:40 p.m. (Id. at 21-22; Doc. 18, Ex. D.)

During the initial investigation, Peerless also retained Tom Baker ("Baker"), an independent claims adjuster, to assess the Habeckers' damages. (Doc. 14 ¶ 6; Doc. 18 ¶ 6.) On January 27, 2005, Habecker and Baker conducted a walk-through inspection of the premises during which they documented the extent of the fire damage. (Doc. 14 ¶¶ 8-9; Doc. 18 ¶¶ 8-9.) Baker instructed Habecker to prepare an inventory of equipment, supplies, foodstuffs, and other business property for which he and his wife sought insurance coverage. (Doc. 14 ¶ 10; Doc. 18 ¶ 10.) As part of the inventory, Baker specifically requested the manufacturer, age, and model number for all durable goods. (Doc. 14 ¶ 10; Doc. 18 ¶ 10.) Baker also cautioned Habecker against discarding any nonperishable articles pending Peerless's coverage decision. (Doc. 14-6 at 32-33, 139-40.)

Habecker prepared the business inventory during the weeks immediately following his conversation with Baker and electronically saved it on his home computer. (Id. at 21-22, 42, 141-45.) He mailed it to Baker upon completion, (Id. at 46), but Baker never received it, (Doc. 14-5 at 6). On February 24, 2005, Baker sent Habecker a letter stating that he had not received the inventory. (Id. at 6, 14; Doc. 14-6 at 203.) He received no reply from Habecker. (Doc. 14-5 at 11.) Had Baker received the inventory, he would have handled it according to his usual practice, which included documenting receipt of it, contacting Peerless for further instruction, and forwarding a copy of it to Peerless. (Id. at 10-11.) Peerless did not obtain a copy of it prior to the instant lawsuit. (Doc. 14-2 ΒΆ 5, at 2.) By early May 2005, the Habeckers had not ...

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