The opinion of the court was delivered by: Baylson, J.
This action arises out of a contractual dispute respecting an insurance policy Defendant Great American Insurance Company of New York ("Defendant") issued to Plaintiffs James F. Campenella Construction Co., Inc. ("Campenella") and W.U. Locust Partners, L.P. ("W.U. Locust," collectively with Campenella, "Plaintiffs"). Following a bench trial on the issue of coverage, the Court will deny Defendant's request for declaratory judgment on the "hard-cost" claims, grant Defendant's request for declaratory judgment on the "soft-cost" claims,*fn1 and order that the parties submit their dispute regarding the hard-cost claims, excluding any costs related to project delay, to appraisal pursuant to the terms of the insurance policy.
I. Background and Procedural History
Defendant issued Plaintiffs a Builder's Risk Plus Renovation Project insurance policy, number IMP 640926600, for a commercial property at 1103-13 Locust Street in Philadelphia, Pennsylvania. (Def. Ex. 1.) W.U. Locust owns the property, and Campenella is the general contractor hired to perform construction and renovations. The scope of the project included renovations to the existing four-story structure and construction of seven additional floors, with the intention of building approximately one hundred condominium units and a Walgreens at street-level. Construction began in April 2006 and was substantially completed in October 2010.
The policy provides coverage for a direct "loss" to the "Covered Property" from any "Covered Causes of Loss." (Def. Ex. 1 at CF5074.) The policy defines "loss" as "accidental loss or damage," and it defines "covered causes of loss" as "risks of direct physical 'loss' to Covered Property except those causes of 'loss' listed in the Exclusions." (Def. Ex. 1 at CF5074, 5080.) Excluded from coverage is any loss "caused by or resulting from . . . [d]elay, loss of use, loss of market or any other consequential loss." (Def. Ex. 1 at CF5077.)
On October 23, 2007, a water-supply line on the building's third floor failed causing water damage to the building's first three floors. Plaintiffs performed repairs between October 23, 2007 and December 25, 2007. Plaintiffs applied for coverage under the insurance policy. Defendant hired a consultant, J.S. Held, Inc., to estimate the damages. In July 2008, J.S. Held estimated damages totaling $505,886.07 (Def. Ex. 3), which Defendant paid to Plaintiffs, less the policy's $10,000 deductible. Defendant later paid an additional $1,000 for Plaintiffs' time spent preparing their claim.
In August 2008, Plaintiffs filed a sworn statement in proof of loss claiming damages in excess of $900,000, which they revised down to $888,117.47. (Def. Ex. 4; Pls. Exs. 5-7.) Thus, Plaintiffs claim an additional $381,231.40 in unpaid hard-cost claims. Then, in October 2008, Plaintiffs submitted soft-cost claims under the policy's Time Element Coverage Supplemental Declarations totaling $912,820.83. (Def. Ex. 11.) Pursuant to the policy, Defendant is obligated to pay certain soft costs during the "period of delay in completion" of the project, including interest on money borrowed to finance construction; advertising and promotional expenses; realty taxes and other assessments; and architectural or engineering supervisory or consulting fees. (Def. Ex. 1 at CF5069-70.)
Defendant denied coverage for the remainder of the hard-cost claims and all of the soft-cost claims. Because Defendant refused to pay any additional amounts, Plaintiffs sought to compel appraisal under the terms of the policy, which provides in relevant part, "If we and you disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss." (Def. Ex. 1 at CF5065.)
On January 29, 2010, Plaintiffs filed a complaint against Defendant in the Philadelphia Court of Common Pleas. (ECF No. 1.) Defendant removed the action to this Court on February 18, 2010.*fn2 (ECF No. 1.) On May 21, 2010, the Court dismissed Plaintiffs' bad faith claims. (ECF Nos. 9, 10.) Thereafter, Plaintiffs amended their complaint to (1) compel appraisal pursuant to the terms of the insurance policy, and (2) for breach of contract arising from Defendant's failure to pay Plaintiffs' claims. (ECF No. 11, Ex. A.)
Defendant answered and asserted two counter-claims for declaratory relief. (ECF No. 21.) Defendant asked the Court to declare that (1) it has paid all covered hard costs and is not liable to Plaintiffs for any additional hard-cost claims, and (2) it is not liable to Plaintiffs for any claimed soft costs.*fn3 (ECF No. 21 at 13, 16-17.) The Court then denied a flurry of motions and cross-motions to dismiss and for summary judgment, concluding factual disputes existed regarding coverage under the policy.*fn4 (ECF No. 44.)
On November 10, 2010, the Court held a bench trial on Defendant's counter-claims. Defendant presented testimony from one of its representatives, Gail Salafia, regarding the scope of coverage under the policy and the progression of Plaintiffs' claim process. Defendant then presented testimony from Douglas MacKinney, the individual who prepared J.S. Held's estimate for Defendant. Notably, Mr. MacKinney had previously agreed to purchase one of the units in the insured building in September 2006, completed the sale in February 2008, and began occupying the unit in June 2008. Finally, Defendant offered testimony from Plaintiffs' public adjuster, Leonard Orloff, who testified regarding his efforts to estimate the damages and obtain additional payments from Defendant. Plaintiffs called no witnesses, but introduced several exhibits including the invoices submitted with their sworn statement in proof of loss and summaries of their claimed losses.
After trial, the parties filed supplemental letter briefs. Defendant argues that Plaintiffs failed to meet their burden of establishing coverage for hard-cost claims above and beyond the amounts it has already paid. (ECF No. 55.) Defendant also contends that Plaintiffs failed to show that their claimed soft costs are covered because they failed to show a delay and, even if covered, are excluded. (ECF No. 55.) Plaintiffs, on the other hand, argue ...