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Nationwide Mutual Fire v. Nova Real Estate LLC

March 1, 2011

NATIONWIDE MUTUAL FIRE
INSURANCE COMPANY
v.
NOVA REAL ESTATE LLC,
LAWRENCE EBUROUH,
FELIX EBUROUH, KOFI NKANSA MCHAYA, LLC, TONIA KAY, AND
KATHLEEN RANALLI



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

MEMORANDUM

Nationwide Mutual Fire Insurance Company ("Nationwide") filed this action pursuant to 28 U.S.C. § 2201 seeking a declaratory judgment regarding Nationwide's obligations under an insurance policy issued to Nova Real Estate, LLC ("Nova Realty"), with regard to a lawsuit filed by Tonia Kay and Kathleen Ranalli, Administratrix of the Estate of Iziah Walker (hereinafter referred to as "Kay and Ranalli") against Nova Realty, Lawrence Eburouh, Felix Eburouh, Kofi Nkansa, Mchaya, LLC, Tonia Kay and Kathleen Ranalli (collectively, "the Kay Defendants") in the Court of Common Pleas of Philadelphia County (hereinafter "the Kay Lawsuit"). (Compl. ¶ 14, ECF No. 1.) Presently before the court is Plaintiff and Counterclaim Defendant Nationwide's Motion for Summary Judgment. (ECF Nos. 20, 21.) For the following reasons, the Motion will be granted.

I. BACKGROUND

A. The Kay Lawsuit

On March 1, 2007 Kay and Ranalli filed a lawsuit in the Court of Common Pleas of Philadelphia County seeking damages for injuries sustained as a result of a fire that took place on March 1, 2005, at 6121 Glenmore Avenue in Philadelphia. On March 1, 2005, the Glenmore Avenue property was owned by Defendant Lawrence Eburouh. Kay's son Iziah Walker died in the fire and Kay sustained personal injuries. (Pl.'s Mot. 3.) Kay and Ranalli allege that Kay and her family leased the Glenmore Avenue residence from Nova Realty and the other Kay Defendants. Kay and Ranalli further allege that the fire was caused by a faulty electrical system that Nova Realty negligently failed to repair.

Defendants in the Kay lawsuit deny that Tonia Kay ever signed a lease with them and allege that not only was the property uninhabitable, but that Kay and her family were squatters on the property. The Kay Defendants allege that Kay and her family caused the fire while they were living at the residence illegally. Eburouh asserts that his employee, Robert Rouse, who was related to Kay, allowed the Kay family to live at the Glenmore Avenue residence after he had helped Eburouh evict a tenant from the property. According to Eburouh, Rouse apologized for the fire, and as a result Eburouh never considered that Nova Realty might be liable for the fire. Eburouh considered the claim against Nova Realty to be false or fraudulent.

On October 17, 2008 the attorneys for Kay, Ranalli, and Nova Realty negotiated a settlement of the lawsuit for the total sum of $3,000,000. Tonia Kay's claim for negligent infliction of emotional distress was settled for $1,500,000. The claim of Tonia Kay for personalinjuries suffered in the fire along with the Wrongful Death and Survival Act claims for the death of Iziah Walker were settled for $1,500,000. Separate releases were signed for each $1,500,000 settlement. (Pl.'s Mot. Ex. 1E.) Nova Realty paid $50,000 to Kay and Ranalli. Nova Realty then assigned to Kay and Ranalli all of its rights to proceed against Nova Realty's insurance carriers for the remaining balance of the $3,000,000. (Pl.'s Mot. Ex. 1D.) Kay and Ranalli agreed to forgo their rights to proceed against Nova Realty for the remaining balance of the settlement. (Pl.'s Mot. Ex. 1E.) They also agreed to reimburse Eburouh for the $50,000 out of any recovery from Nova Realty's insurers. (Id.)

B. Notice to Nationwide

On October 29, 2008, more than three and one-half years after the fire, counsel for Kay and Ranalli notified Nationwide by letter of the fire, the lawsuit, the settlement and the assignment of rights. (Pl.'s Mot. Ex. C.) Along with the letter, counsel provided a copy of the complaint from the lawsuit, copies of the two general releases regarding the settlement agreement and a copy of the assignment of rights. (Pl.'s Mot. Exs. 1C, 1D, 1E.) Defendants admit that this letter was the first notice that Nationwide received of the fire, the lawsuit or the settlement. (Defs.' Resp. Ex. 2 at ¶ 39.)

Nova Realty obtained insurance coverage through various insurance companies, including Twin City, Diamond State, and Virginia Surety, in addition to their coverage through Nationwide. (Pl.'s Mot. Ex. 10.) In the summer of 2008 Eburouh contacted the other insurance companies regarding the Kay claims. He did not contact Nationwide until October of 2008. Eburouh stated at his deposition that this was because he thought "their coverage wasn't for what [he] was being sued." (Defs.' Mot. Ex. 9, Eburouh Dep. 49:13-16.)

On January 22, 2009, after receiving notification of the Kay claims, counsel for Nationwide sent a letter to Nova Realty and Eburouh denying coverage. (Def.'s Resp. Ex. G, ECF No. 25.) The letter specifically pointed to an exclusion under the Policy for "professional services." (Id.) Nationwide asserted that "[t]he claims in the Kay lawsuit fall within the exclusion for 'bodily injury' due to rendering or failure to render any professional service." (Id.) The letter also asserted that Nationwide did not consent to the settlement of the Kay lawsuit as required by the Nationwide Policy, and that Nationwide was prejudiced by the late notice of the settlement between Nova Realty and the Kay Plaintiffs. (Id.) Moreover, the letter notified Nova Realty and Eburouh that Nationwide would be filing a declaratory judgment action "seeking a declaration that the Nationwide Policy does not provide coverage for the claims in the Kay lawsuit and that Nationwide is not obligated to provide indemnity or to pay any sums for the claims in the Kay lawsuit." (Id.)

C. Coverage Under the Nationwide Policy

Nova Realty was insured under a business owners policy ("the Nationwide Policy") issued by Nationwide for the policy period of May 21, 2004, to May 21, 2005, with liability limits of $500,000 on any one occurrence. (Pl.'s Mot. Ex. 1B.) The fire took place on March 1, 2005, within the period covered by the Nationwide Policy. (Compl. Ex. A.) The Nationwide Policy included property coverage for the Nova Realty office located at 2700 South 70th Street in Philadelphia, Pennsylvania subject to terms, conditions and exclusions of the Policy. (Pl.'s Mot. Ex. 1B.) The Nationwide Policy also includes liability coverage subject to the terms, conditions and exclusions of the Policy. (Id.) This liability coverage applied to "bodily injury," "property damage," "personal injury" and "advertising injury" as those terms are defined by the Nationwide Policy. (Id.)

The Nationwide Policy excludes various occurrences from coverage. (Id.) In the January 22, 2009 letter, Nationwide points to one such exclusion under section B.1.j. of the Policy, which states that the insurance "does not apply to [p]rofessional [s]ervices" or "[b]odily injury. . . due to rendering or failure to render any professional service." (Id. (internal quotations omitted)). The Policy states that "professional ...


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