The opinion of the court was delivered by: Eduardo C. Robreno, J.
Before the Court is Defendant's motion for summary judgment as to Plaintiffs' bad faith insurance claims (doc. no. 33), Plaintiffs' responses (doc. nos. 40, 48, 50), Defendant's Omnibus Reply (doc. no. 61); and Plaintiffs' Omnibus Sur-Reply (doc. no. 62). For the reasons set forth below, Defendant's motion for summary judgment will be granted.
On February 17, 2009, Plaintiffs 3039 B Street Associates, Inc. and Gianni Bignetti ("Plaintiffs") initiated this action against Defendant Lexington Insurance Company ("Defendant"),*fn1 alleging breach of contract and bad faith claims based on Defendant's refusal to pay for damages sustained when a frozen sprinkler pipe burst at Plaintiffs' place of business, causing a flood. Defendant has since paid the undisputed flooding damages. Only Plaintiffs' bad faith claims and request for punitive relief remain.*fn2
On May 21, 2009, the Court, after applying Pennsylvania choice of law rules, denied Defendant's motion to compel appraisal and to dismiss/stay litigation. There, the Court determined that, under both Pennsylvania and New York law, where an insurance policy breach has been alleged, appraisal is premature "prior to the admission of liability."*fn3
On August 14, 2009, Defendant filed a motion for summary judgment, now pending before the Court. Therein, Defendant requests that Plaintiffs' bad faith claims and the additional cause for relief in the form of punitive damages be dismissed.*fn4 Defendant avers that its investigation of Plaintiffs' claim was proper and reasonable, Plaintiffs were paid the undisputed amount, and pursuant to the appraisal provision, the parties agreed to resolve continuing damages disputes through appraisal, which have since been paid. Further, Defendant contends that Plaintiffs cannot prove their remaining bad faith claims under either New York or Pennsylvania law.
On August 27, 2009, Plaintiffs filed a first amended complaint alleging three counts under Pennsylvania law: (1) the Appraisal, wherein parties will make additional submissions to this Court should differences in valuation exist regarding the balance of damages; (2) the 3039 Bad Faith Action; and (3) the Pignetti Bad Faith Action.
On September 19, 2009, Plaintiffs filed a supplemental response in opposition to Defendant's cross-motion for summary judgment and an amended motion to modify the scheduling order. Therein, Plaintiffs, assuming Pennsylvania law controls, provided statutory and case law in support of their bad faith claims.
Following a hearing before the Court, on November 23, 2009, Defendant filed its omnibus reply and, on December 8, 2009, Plaintiffs filed their omnibus sur-reply. Defendant's motion for summary judgment is now ripe for adjudication.*fn5
Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The "mere existence" of disputed facts will not result in denial of a motion for summary judgment; rather there must be "a genuine issue of material fact." Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir. 2009) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248 (1986)). A fact is "material" if proof of its existence or non-existence might affect the outcome of the litigation and a dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Liberty Lobby, 477 U.S. at 248.
"After making all reasonable inferences in the nonmoving party's favor, there is a genuine issue of material fact if a reasonable jury could find for the nonmoving party." Pignataro v. Port Authority of N.Y. and N.J., 593 F.3d 265, 268 (3d Cir. 2010) (citing Reliance Ins. Co. v. Moessner, 121 F.3d 895, 900 (3d Cir. 1997)). While the moving party bears the initial burden of showing the absence of a genuine issue of material fact, the non-moving party "may not rely merely on allegations or denials in its own pleading; rather its response must-by affidavits or as otherwise provided in [Rule 56]-set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e)(2).
III. CHOICE OF LAW ANALYSIS
In the case at bar, Defendant argues that the Court should determine that New York law applies to a claim of bad faith concerning an insurance policy issued in New York (the "Policy"). Plaintiff, however, argues Pennsylvania law controls because the Policy was signed by the insureds and the location of the insured real property is in Pennsylvania. The Court must first determine whether Pennsylvania or New York law applies to this case.
The conflict of laws rules of the forum state apply when a federal court exercises diversity jurisdiction. Kaneff v. Del. Title Loans, Inc., 587 F.3d 616, 621 (3d Cir. 2009) (internal citations omitted). Therefore, as this Court sits in Pennsylvania, it will apply Pennsylvania's choice of law rules.
Pennsylvania employs a two-step hybrid framework to choice of law questions. See Atl. Pier Assocs., LLC v. Boardakan Rest. Partners, 647 F. Supp. 2d 474, 486-87 (E.D. Pa. 2009) (Robreno, J.) (discussing Pennsylvania's approach to conflict of laws issue) (internal citation omitted). Under the first step of this analysis, the Court must determine whether a real conflict exists between the respective laws. Hammersmith v. TIG Ins. Co., 480 F.3d 220, 230 (3d Cir. 2007). Where a conflict exists, a court must proceed to the second step of the conflict inquiry to determine whether the conflict is "true," "false," or "unprovided for." Id. at 230.
A. Existence of a Real Conflict
A real conflict exists only where the application of each state's substantive law produces a contrary result. Id. If the same result would ensue under the laws of the forum state and those of the foreign jurisdiction, then no conflict exists and the court may avoid the choice of law question altogether. Id.; see Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006) (finding that where applying the laws of both jurisdictions would produce an identical result, a court should not engage in a choice of law analysis) (citing Williams v. Stone, 109 F.3d 890, 893 (3d Cir. 1997)).
Defendant (the insurer) contends the Court should apply New York law to a claim of bad faith concerning an insurance policy issued in New York, even though the Policy covers property in Pennsylvania.*fn6 In opposition, Plaintiffs (the insureds) dispute the location of insurance issuance and argue that, although the Policy was signed and dated in New York, a certified copy of the Policy was mailed to them in Philadelphia, therefore the Policy was issued in Philadelphia. Furthermore, based on the place the contract was received and situs of the insureds and property, Plaintiffs aver Pennsylvania law controls.*fn7
New York law does not recognize the tort of bad faith denial of insurance coverage. See Core-Mark Int'l Corp. v. Commonwealth Ins. Co., 2005 U.S. Dist. LEXIS 14312, at *9 (S.D.N.Y. July 19, 2005) (citing Polidoro v. Chubb Corp., 354 F. Supp. 2d 349, 352 (S.D.N.Y. 2005) ("Plaintiff's claim for bad-faith conduct in handling insurance claims is not legally-cognizable under New York law.")); US Alliance Fed. Credit Union v. CUMIS Ins. Soc'y, Inc., 346 F. Supp. 2d 468, 470 (S.D.N.Y. 2004) ("Plaintiff's claim for bad faith denial of coverage is crafted as an independent cause of action in its complaint but, as the Defendant correctly points out, an independent tort action for bad faith denial of insurance coverage is not recognized in New York."); Cont'l Info. Sys. Corp. v. Fed. Ins. Co., 2003 U.S. Dist. LEXIS 682, at *3 (S.D.N.Y. Jan. 17, 2003)).
Pennsylvania law, however, provides a private cause of action for bad faith insurance disputes under 42 Pa. C.S. § 8371. Section 8371 provides a private plaintiff with remedies "if the court finds that the insurer has acted in bad faith toward the insured." 42 Pa. C.S. § 8371.
Therefore, where New York does not recognize a bad faith insurance claim and Pennsylvania law does, a real conflict exists. The Court must next determine whether the conflict is classified as true, false or unprovided for.
B. Classification of the Conflict
A "true" conflict exists where both states have a cognizable interest in applying their own law. Hammersmith, 480 F.3d at 230. A "false" conflict exists when only one state has an actual interest in applying its law. Id. The situation is "unprovided for" when neither state has an interest in applying its own law. Id. at n.9. Where a false conflict or "unprovided for" situation exists, the Court's inquiry is at an end and the law of the forum applies. It is only necessary to proceed to a "deeper" choice of law analysis where a true conflict exists, i.e., the interests of both of the respective states would be impaired by application of the other's law. Id. at 230 (citing Cipolla v. Shaposka, 267 A.2d 854, 856 (Pa. 1970) (emphasis in original)).
Here, Pennsylvania has asserted an interest in having its law applied by providing for a private statutory cause of action under § 8371. Pennsylvania affords its citizens a legal remedy following bad faith insurance disputes. New York, in failing to recognize bad faith insurance contract disputes and the resulting damages, is at least neutral with regards to application of its own law.*fn8 Therefore, where Pennsylvania has an interest in application of its law and New York does not, a "false" conflict arises. Under these circumstances, the ...