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Cher-D, Inc. v. Great American Alliance Insurance Co.

April 7, 2009


The opinion of the court was delivered by: Surrick, J


Presently before the Court is Defendant's Motion for Summary Judgment (Doc. No. 12). For the following reasons, the Motion will be granted in part and denied in part.


This is an insurance coverage dispute that arose between an insured, Pine Knob Inn, and its insurer, Great American Alliance Insurance Company, following two fires. Pine Knob Inn ("Plaintiff") was a 28-room country inn located on nearly seven acres of land in Canadensis, a town in the Poconos region of northeastern Pennsylvania. (Doc. No. 12 ¶ 1; Doc. No. 17 ¶ 1.) Plaintiff served guests with food and lodging in the Poconos for over 100 years. (Compl. ¶¶ 1-2; Def.'s Ans. ¶¶ 1-2.) Plaintiff's property included two cottages, a bungalow, a conference center, a pool house, and a main building that contained 19 rooms. (J. Garman Dep. at 22.) On January 22, 2004, Plaintiff purchased an Innkeeper's Insurance Policy ("the Policy") from Great American Alliance Insurance Company ("Defendant"), which provided coverage for Plaintiff's main building. (See Doc. No. 14, Ex. A.) The Policy had a policy period of March 12, 2004 to March 12, 2005. (See id.; see also Doc. No. 12 ¶ 9; Doc. No. 17 ¶ 9.) The Policy contained two provisions that are relevant to this dispute. The first provision, entitled "Commercial Property Conditions," provided the following:


Under this Coverage Part:

1. We cover loss or damage commencing:

a. During the policy period shown in the Declarations....

(Doc. No. 14 at 6 (emphasis added)). The second provision, entitled "Innkeepers Property Coverage Form," provided the following:


We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss. (Id. at 8 (emphasis added)). A "Covered Cause of Loss" is defined as a "risk of direct physical loss." (Id. at 10.)

On October 1, 2004, while the Policy was in place, there was an electrical fire in Plaintiff's main building due to faulty wiring. (Doc. No. 12 ¶ 5; Doc. No. 17 ¶ 5.) The fire was extinguished on the same day. (Id.) Plaintiff ceased operations because of the fire and intended to repair the damage. (Doc. No. 12 ¶ 6; Doc. No. 17 ¶ 6; C. Garman Dep. at 24-25.) Plaintiff submitted a claim under the Policy immediately after the fire. (Doc. No. 12 ¶ 8; Doc. No. 17 ¶ 8; Doc. No. 17 at 4.) Defendant agreed that the Policy covered Plaintiff's claim. (Doc. No. 17 at 4.) Plaintiff hired a public adjuster, Clark Jones ("Jones"), to serve as its representative in connection with the claim. (C. Garman Dep. at 8.) Within two weeks of the fire, Defendant sent its contractor, Belfor Construction Company ("Belfor"), to "shore up the lobby floor" so that Defendant's investigators could enter the main building. (Id. at 14.) During that visit, Belfor told Plaintiff that it "would not be a problem to rebuild this building." (Id. at 13.)

The next month, in November 2004, Plaintiff told Defendant's representative Don Jordan ("Jordan") that Plaintiff "intended to rebuild and recommence the business." (Id. at 25; J. Garman Dep. at 56.) Jordan told Plaintiff that it would "be no problem to rebuild the property" and that it would "be very doable." (J. Garman Dep. at 56.) Plaintiff understood that Defendant was handling the rebuilding process and so Plaintiff did not take steps to initiate the rebuilding. (Id.) Plaintiff "got the impression" that Defendant was handling the rebuilding based on Defendant's statements:

Q: Is that why you didn't do anything, because you thought it was being handled by Belfor?

A: I thought that it was being handled, yes.

Q: And you got that impression from where?

A: Well, from Don Jordan. And the Belfor people were there. But I don't know how much -- I mean, from day one, they said, We can do this. We can take care of this problem. You know, we will solve this problem for you. (Id. at 64.) Plaintiff did not ask Defendant "when they were going to start" with the rebuilding, because Plaintiff had never been involved in this type of an insurance claim and "just figured it was the protocol of the insurance company":

Being the novices that we were, and thank God, we had never been involved in anything like this before, I just figured it was the protocol of the insurance company. I didn't think as owners we had the ability to ask or demand anything other than what was being done.

(C. Garman Dep. at 16.) Plaintiff was also "under the assumption that [it] couldn't do anything on [its] own," since Plaintiff "was under the assumption that it was [Defendant and] Belfor doing the construction." (Id. at 28.) Even if Plaintiff wanted to begin rebuilding on its own, Plaintiff could not have done so since Defendant had given them "no money." (J. Garman Dep. at 58.)

On December 7, 2004, Plaintiff provided Defendant with an inventory of the building contents. (See Doc. No. 17, Ex. G.) A month later, on January 3, 2005, Plaintiff presented Defendant with a formal estimate to repair the building in the amount of $1,258,745.11. (Doc. No. 17, Ex. F.) Starting sometime that month, with the rebuilding process not yet begun, trespassers entered Plaintiff's building and began to engage in acts of vandalism. (C. Garman Dep. at 28-29.) The vandals were "breaking in daily" and, since there was no electricity, "[t]hey were lighting candles" and "sleeping on old mattresses." (Id.; see also Doc. No. 17 at 6.) Plaintiff took steps to prevent the vandals from entering the building. The windows and entrances were "boarded up with plywood" and "with two by fours." (J. Garman Dep. at 74.) Plaintiff "tried to close [the main building] up as much as possible" by securing the access points. (Id.) However, the building was "very large" and had "a lot of access points." (Id.) The vandals "kept moving" and when one entry point was secured, "they'd just go to another part." (Id.) Plaintiff notified the police about the incidents of vandalism, and the police began to patrol the area "on a regular basis." (Id. at 74, 80.) Plaintiff, meanwhile, continued to secure the access points. Plaintiff believed that Jones had told Defendant about the vandalism at some point prior to May 2005 so that Defendant was made "aware of the situation." (C. Garman Dep. at 29.) There is no evidence in the record of vandalism occurring at any time before the first fire except for "an incident where somebody got into the basement and stole some drinks or liquor." (Scalice Dep. at 70.)

In late January 2005, Defendant notified Plaintiff that it would not renew Plaintiff's insurance policy. (Doc. No. 17 at 6.) Plaintiff therefore attempted to purchase insurance from a broker, James Wolf Insurance. (J. Garman Dep. at 84.) The broker was unable to obtain a policy to insure the main building. (Id.) In late January or early February 2005, Plaintiff attempted to purchase insurance through another broker, Richard Scalice. (Scalice Dep. at 26.)

Scalice told Plaintiff that it was going to be "difficult if not impossible" to get insurance on the main building "because it's a burnt out structure." (Id. at 28-29.) Scalice attempted ...

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