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Keystone Asset Management, Inc. v. West American Insurance Co.

October 21, 2010

KEYSTONE ASSET MANAGEMENT, INC., PLAINTIFF,
v.
WEST AMERICAN INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Joyner, J.

MEMORANDUM OF LAW

Presently before the Court is Plaintiff's Motion for Partial Summary Judgment Pursuant to FRCP 56 to Compel an Appraisal to Determine the Amount of Loss (ECF No. 7) and Defendant's Cross-Motion for Partial Summary Judgment as to Count I of Plaintiff's Complaint (ECF No. 10). For the following reasons, Plaintiff's Motion shall be denied and Defendant's Cross-Motion shall be granted.

I. FACTUAL BACKGROUND

West American Insurance Company ("Defendant") issued a commercial property insurance policy to Keystone Asset Management, Inc. ("Plaintiff"), to insure Plaintiff's business premises located at 100 West Main Street, Suite 310, Lansdale, Pennsylvania. (ECF No. 7, Ex. A at 1.) Plaintiff occupied the third, fourth, and fifth floors of the insured building as a tenant.

The insurance policy issued to Plaintiff contains an appraisal provision that states:

If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:

a. Pay its chosen appraiser; and

b. Bear the other expenses of the appraisal and umpire equally. If there is an appraisal, we will still retain our right to deny the claim.

(ECF No. 10, Ex. A ¶ E(2).)

On Sunday, July 20, 2008, a water pipe leading into a water softener unit burst and flooded the basement of the insured premises. As a result, the entire building lost electrical power and phone service. Plaintiff moved its servers to a temporary location in Wayne, Pennsylvania, and had the servers and website running by 3:00 a.m. on Monday, July 21, 2008. However, Plaintiff did not open for business that day.

Plaintiff remained at the Wayne location for two weeks. However, the location was not large enough to accommodate all of Plaintiff's employees and it did not have adequate bandwidth for Plaintiff's business purposes. Plaintiff then moved to a building in Fort Washington, Pennsylvania, where it stayed until it was able to return to the insured premises on October 5, 2008. Defendant paid Plaintiff $214,739.26 in moving and relocation expenses.

On April 6, 2009, Plaintiff submitted a claim to Defendant for loss of business income, estimated by Plaintiff at $2,069,633.00. Defendant investigated the claim and conducted Examinations Under Oath of several of Plaintiff's employees. On January 13, 2010, Defendant denied Plaintiff's claim in a letter issued to Plaintiff. The letter clearly stated that "[a]fter careful review, West American is respectfully denying your request for coverage." (ECF No. 10, Ex. C at 1.) The letter also explained that "[t]he information and documentation provided by Keystone indicates that the claim is not covered or otherwise excluded pursuant to the relevant policy of insurance as more fully described below." (Id.) Defendant concluded that Plaintiff's business income loss claim was not covered under the policy because Plaintiff "did not suffer a necessary suspension of its operations or an actual loss of business income as a result of the July 20, 2008 water loss." (Id. at 10.) The letter invited Plaintiff to submit "other information or documentation that might impact our determination . . . ." (Id. at 11.)

On April 27, 2010, Plaintiff filed a complaint in the Court of Common Pleas of Philadelphia County seeking to recover its business income losses pursuant to the contract and alleging bad faith actions by Defendant. Defendant removed the case to this Court on the basis of diversity jurisdiction.

At issue in the instant motions is Count I of Plaintiff's Complaint, in which Plaintiff demands that the Court order Defendant to appoint an appraiser in accordance with the appraisal clause of the insurance ...


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