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Alan S. Gold, et al. v. State Farm Fire and Casualty

July 23, 2012


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


This case arises out of water damage occurring at the home of the plaintiffs, Alan and Frances Gold, and a homeowners insurance policy they had with the defendant. The plaintiffs' home suffers mud and water damage following heavy rains. They made claims under their policy in August 2009 and July 2010 for mud damage to their basement, which State Farm denied on the basis of a policy exclusion for water damage. The plaintiffs brought the instant suit in the Court of Common Pleas of Montgomery County, alleging breach of contract and bad faith in connection with those denials. The defendant removed the action to this Court and has moved for summary judgment on both counts. The Court will grant the motion in part and deny it in part.

I. Summary Judgment Record

The plaintiffs own a home at 7916 Rogers Road in Elkins

Park, Pennsylvania. The home is a split-level house with four levels. Below grade level, the house has a basement with cinder-block walls, part of which is finished and part of which contains a storage area. The level above the basement is at street level and contains a garage, family room, and laundry room, each of which has a concrete slab running underneath. Dep. of Frances Gold, Aug. 17, 2011, at 10-14, 23-25. 27, Ex. L.*fn1

The Gold home was covered by State Farm homeowners insurance policy number 78-E1-0781-1. Ex. B. The policy provides that State Farm will "insure for accidental direct physical loss to the property . . . except as provided in SECTION I - LOSSES NOT INSURED." Id. at 7. Among the exclusions in Section I, the policy states:

We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: (a) the cause of the excluded event; (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these: . . . .

c. Water Damage, meaning:

(1) flood, surface water, waves, tidal water, tsunami, seiche, overflow of a body of water, or spray from any of these, all whether driven by wind or not;

(2) water or sewage from outside the residence premises plumbing system that enters through sewers or drains, or water which enters into and overflows from within a sump pump, sump pump well or any other system designed to remove subsurface water which is drained from the foundation area; or

(3) water below the surface of the ground, including water which exerts pressure on, or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure.

Id. at 10.

Because of the relation of the Golds' home to the ground and the way in which their driveway slopes, their home is subject to water incursions during heavy rainstorms. The house has a french drain in the driveway, but if too much water is present, water "will go back up the slope [of the driveway] and it will go . . . under the garage door." At one point, the flooding was so severe that water ran down the steps from the laundry room to the basement. F. Gold Dep. 74-78.

The Golds submitted a claim to State Farm for water damage occurring in August 2004 from rain entering the home and causing damage on the first two levels. State Farm invoked the surface water exclusion to deny the claim. Ex. D.

Between July 20, 2009 and August 1, 2009, severe rainstorms occurred in the area in which the Gold home was located, but the Golds were out of town. On August 4, 2009, after they had returned, Frances Gold discovered water on the second level of her home that had gone through the wall separating the garage and family room. She discovered "a three foot square area of mud a quarter of an inch thick" in the carpeted area of the basement; she later discovered some mud in the corner of the basement area, near the water heater. All of the damage had occurred while they were out of town. F. Gold Dep. 60-61, 69, 73-77.

Gold telephoned her State Farm agent's office in early August and spoke with an individual named Christine Roming regarding the damage that had occurred while they were away. Roming reported to Gold that she was writing down that "[w]ater has been infiltrating through the walls," and advised Gold that any claim would be denied; Gold told her that she had not told Roming that water was coming through the walls. Roming responded, "[y]eah, it's coming through the walls. It's the same thing." When Gold told her that it was coming through the floor, "[Roming] said, 'Oh, it doesn't matter,' just like that." F. Gold Dep. 79-80, 82-85.

State Farm's claims agent, Adam Juliano, contacted Frances Gold on August 12, 2009 to discuss the claim she had submitted. There is a dispute as to the contents of this conversation. The defendant's record of the claim notes that "[w]ater has been infiltrating through the concrete walls," which Juliano said would have come from a statement by the insured. Claims File at SF004, Ex. E; Dep. of Adam Juliano, Oct. 10, 2011, at 33. Frances Gold testified that Juliano told her that water had come through the walls, and that she said, "No, it didn't come through the walls. That's what [Roming] wrote. I did not say that to her. It didn't came through the walls[;] it came through the floor." F. Gold Dep. 93.

During her telephone call with Juliano, Gold also asked: "'What if you give me a date that is convenient for you and I hire a plumber . . . to see if there's any plumbing underneath [the HVAC system] that may be broken, because this way if it is, then it's covered, if it's not, then it's not covered. And I will go to my expense to do that.' And [Juliano] said, 'No, that's not necessary.'" Gold testified that "I wanted [Juliano] or someone from State Farm to come out and look at [the mud in the basement] to see what the cause was, and he said, 'No, it's standing water.'" F. Gold Dep. 93-94.*fn2

Juliano spent a total of at most twelve minutes investigating the claim (including reviewing the 2004 claim), speaking with Frances Gold, and dictating a denial letter. Juliano Dep. 36, 54, Ex. M. The letter, dated August 13, 2009, states that "you had advised me that there was water and mud damage to your basement due to water entering through the concrete walls. . . . I advise you at this time that there is no coverage for surface or subsurface water under your Homeowners Policy. . . . The denial of your claim is based on the specific facts outlined in this letter. Please contact me if the facts are incorrect or if any additional information regarding this claim should arise." Letter from Adam Juliano to Alan and Frances Gold, Aug. 13, 2009, at SF019-20, Ex. F. The Golds did not respond to this letter. Frances Gold stated that she felt a response would be pointless because she had told Juliano over the phone that State Farm's record of her reporting that water was infiltrating through the basement walls was incorrect. F. Gold Dep. 95.

In July 2010, another heavy rainstorm occurred during which "water came in through the garage again and went down into the laundry room," along with "additional mud coming up from the same area [in the basement]," which had "come up through the slab floor" as with earlier storms. F. Gold Dep. 104-09. The plaintiffs submitted an additional claim to State Farm and described damage similar to that occurring in August 2009. In response to a request by the plaintiffs, State Farm sent Charles Warner, a claims representative, to the home for an inspection on July 23, 2010. Frances Gold told Warner that mud had entered the basement "recently in conjunction with some big storms." During Warner's inspection, Gold told Warner that mud was entering the basement but that no water appeared to be coming from the basement walls, although the home's earlier water problems involved water seepage through the basement walls. Warner told Gold that he "wasn't sure of the source, at the beginning of [his] investigation," but that through eliminating other potential ...

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