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Zenith Insurance Company v. Wells Fargo Insurance Services of Pennsylvania

December 13, 2011

ZENITH INSURANCE COMPANY
v.
WELLS FARGO INSURANCE SERVICES OF PENNSYLVANIA, INC., ET AL.



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

MEMORANDUM

Plaintiff Zenith Insurance Company ("Zenith") initially instituted this diversity action against defendant Wells Fargo Insurance Services of Pennsylvania, Inc. ("Wells Fargo"), an insurance broker, for negligence, breach of the covenant of good faith and fair dealing, and indemnification for benefits paid under a workers' compensation policy issued by Zenith to Glasbern, Inc. ("Glasbern"). In its amended complaint Zenith has also named as defendants Glasbern and Albert Granger ("Granger"), the sole owner of Glasbern. Before the court is the motion of Zenith to dismiss the counterclaim of defendants Glasbern and Granger under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted.

I.

When deciding a Rule 12(b)(6) motion to dismiss, the court must accept as true all factual allegations in the complaint and draw all inferences in the light most favorable to the plaintiff. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008); Umland v. Planco Fin. Servs., Inc., 542 F.3d 59, 64 (3d Cir. 2008). We must then determine whether the pleading at issue "contain[s] sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim must do more than raise a "'mere possibility of misconduct.'" Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Iqbal, 129 S. Ct. at 1950). Under this standard, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S. Ct. at 1949.

II.

The following facts are taken in the light most favorable to Glasbern and Granger as plaintiffs on the counterclaim. In November, 2008, Wells Fargo presented Zenith with an application for workers' compensation insurance for Glasbern, a company owned by Granger. The application described Glasbern as a "Bed & Breakfast, Hotel & Restaurant." Zenith accepted the application and issued a policy, which it renewed in 2009.

It is undisputed that in addition to its bed and breakfast business, Glasbern operated on its premises a farm which grew crops and raised sheep, cows, chicken, and pigs. On June 11, 2010, an employee of Glasbern named Jason Angstadt ("Angstadt") was severely injured by one of Glasbern's cows while working as a herdsman. As a result, he is now a paraplegic. Angstadt submitted a claim for workers' compensation. Zenith processed the claim and continues to pay the periodic benefits to Angstadt on behalf of Glasbern.

In its original complaint, Zenith maintained that it had no knowledge of Glasbern's farming operations until the submission of the Angstadt claim. Zenith asserted that Wells Fargo failed to conduct a reasonable investigation of Glasbern's business. Furthermore, Zenith stated that Wells Fargo did not provide complete and accurate information to Zenith when it submitted Glasbern's initial insurance application and the subsequent application for renewal.

Wells Fargo then filed a third party complaint against Glasbern. In its complaint, Wells Fargo asserts that Glasbern actively concealed its farming operations and failed to provide accurate information. Wells Fargo seeks indemnification and contribution from Glasbern in the event that it is found liable on any of Zenith's claims.

Zenith later filed an amended complaint after seeking approval from this court. The amended complaint named Glasbern and Granger as additional defendants and brought claims against them for negligent misrepresentation, common law fraud, recision, unjust enrichment, and violation of the Pennsylvania Insurance Fraud Act, 18 Pa. Cons. Stat. Ann. § 4117 et seq. Zenith seeks damages and a declaratory judgment that it is not liable for the Angstadt workers' compensation claim.

Glasbern and Granger answered Zenith's amended complaint and brought a counterclaim against Zenith and a cross-claim against Wells Fargo. In the counterclaim and cross-claim, Glasbern and Granger allege that Zenith and Wells Fargo knew of its farming operations. Glasbern and Granger plead that Zenith and Wells Fargo breached their duty of good faith and fair dealing under the Pennsylvania Bad Faith Insurance Act, 42 Pa. Cons. Stat. Ann. § 8371.

III.

In support of its motion to dismiss the counterclaim, Zenith asserts that Granger and Glasbern have failed to state a claim for bad faith because Zenith has continued without interruption to make the payments due for the Angstadt claim. The Pennsylvania Bad Faith Insurance statute provides that:

In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court ...


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