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Jerry J. Palmisano and Kathy Evans-Palmisano v. State Farm Fire and Casualty Company

August 20, 2012


The opinion of the court was delivered by: Judge Nora Barry Fischer



In this action, Plaintiffs Jerry J. Palmisano and Kathy Evans-Palmisano ("Plaintiffs") have sued Defendant State Farm Fire and Casualty Company ("State Farm" or "Defendant") for breach of contract and bad faith insurance practices in violation of 42 Pa.C.S. § 8371. (Docket No. 1-3). They argue that State Farm breached their homeowners insurance policy by denying their claim for coverage and indemnity for losses or damages sustained to the foundation of their home and contend that State Farm engaged in bad faith insurance practices through its investigation and denial of their insurance claim. (Docket No. 1-3). Presently before the Court is a motion to dismiss brought by State Farm, wherein it argues that Plaintiffs' breach of contract claim is barred by a one-year contractual limitations period set forth in the policy and that Plaintiffs have failed to sufficiently plead their bad faith claim in light of the pleading standards under Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). (Docket Nos. 4, 5). Plaintiffs oppose State Farm's motion and counter that the contractual limitations clause should not be enforced and that they have sufficiently pled their bad faith claim. (Docket No. 8). For the following reasons, State Farm's Motion is GRANTED.


A. Damage to Plaintiffs' Home

Plaintiffs own a two-story home on King Charles Drive in Pittsburgh, Pennsylvania. (Docket No. 1-3 at 2). Relevant here, the home has a kitchen on the first level and a finished basement. (Id. at 38-41). The finished basement consists of a game room, bathroom and storage area. (Id.). The game room is directly below the kitchen. (Id.). A small crawl space is located beneath the basement and can be accessed through the garage, which is on the street level. (Id.).

In October of 2010,*fn2 Plaintiffs discovered damage to their home, including buckling and cracking of the floor in the kitchen and numerous cracks in the walls. (Id. at ¶¶ 8-9). Plaintiffs hired contractor Greg Cannella of Cannella Construction to inspect the home and determine the cause of the problems. (Id. at ¶ 10). During his initial inspection, Cannella identified problems with the foundation of the home and a main structural beam in the basement. (Id. at ¶ 12). Plaintiffs immediately directed Cannella to remedy these issues. (Id. at ¶ 13).

In the course of conducting the repairs, Cannella cut a hole in the basement floor of the home, and found "that a main sewer pipe had separated, spilling water which pooled in large quantities in the back of the house." (Id. at ¶ 15). The failed sewer pipe caused the interior wall of the rear portion of the foundation to be covered with approximately five feet of water. (Id. at ¶ 16). Cannella removed the water with a submersible pump and fixed the damaged sewer pipe. (Id. at ¶ 17). Cannella later determined "that the foundation had dropped across the rear of the Home by from four to six inches, with the center of the rear foundation having dropped by the largest amount" and that "the sub-base under the rear footer [was] at 36%, well above accepted levels for this type of structure." (Id. at ¶¶ 18, 19). Plaintiffs allege that both they and Cannella "believe that the broken pipe and water spillage was the primary cause of the foundation's failure." (Id. at ¶ 20).

B. Plaintiffs' Homeowners Insurance

Plaintiffs insured their home by purchasing Homeowners Policy No. 38-LD-4477-5 from State Farm. (Id. at ¶ 6). This policy was initially in effect from October 23, 2009 through October 23, 2010, and was subsequently renewed for two additional one-year terms, the last of which ends on October 23, 2012.*fn3 (Id.).

The declaration sheet indicates that the Plaintiffs purchased a standard policy with limits of $354,600 for losses to the dwelling and an additional $35,460 for a dwelling extension. (Docket No. 4-1 at 6). The policy also provided standard coverage for personal property, personal liability and damage to property of others, although those types of coverage are not at issue in this case. (Id.). All losses to the dwelling were subject to a $500 deductible and the annual premium for coverage was $1,268.00. (Id.). Plaintiffs allege that they made all necessary premium payments. (Docket No. 1-3 at ¶ 49).

The policy sets forth the terms for coverage for the dwelling in Coverage-A. (Docket No. 4-1 at 11). The "Losses Insured" for the Coverage A-Dwelling section is broadly drafted, indicating that "[w]e insure for accidental direct physical loss to the property described in Coverage A, except as provided in SECTION I -- LOSSES NOT INSURED." (Id. at 15-16). The exclusions found in that section include the following:

2. 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; or (b) others 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 damages, arises from natural or external forces, or occurs as a result of any combination of these:

b. Earth Movement, meaning the sinking, rising, shifting, expanding or contracting of earth, all whether combined with water or not. Earth movement includes but is not limited to earthquake, landslide, mudflow, mudslide, sinkhole, subsidence, erosion or movement resulting from improper compaction, site selection or any other external forces.

c. Water Damage, meaning:

(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.

3. We do not insure under any coverage for any loss consisting of one or more of the items below. Further, we do not insure for loss described in paragraphs 1 and 2 immediately above regardless of whether one or more of the following: (a) directly or indirectly cause, contribute to or aggravate the loss; or (b) occur before, at the same time, or after the loss or any other cause of the loss:

b. defect, weakness, inadequacy, fault or unsoundness in:

(1) planning, zoning, development, surveying, siting;

(2) design, specifications, workmanship, construction, grading, compaction;

(3) materials used in construction or repair; or

(4) maintenance.

(Id. at 17-18). Among the many "Conditions" set forth in the policy, it contains a one-year limitations clause which provides that:


6. Suits Against Us. No action shall be brought unless there has been compliance with the policy provisions. The action must be started within one year after the date of loss or damage. (Id. at 22 (emphasis added)).

D. Plaintiffs' Insurance Claim and Initial Inspection by Defendant

Plaintiffs timely submitted a claim to State Farm for coverage under their homeowners policy. (Id. at ¶ 21). State Farm responded by sending a representative*fn4 to conduct an initial inspection. (Id. at ¶ 22). The precise date of this visit is unclear from the Complaint, which provides only that it occurred approximately one month before December 2, 2010. (Id. at ¶ 25). At that time, the representative took photographs of the damage to the home, which had not yet been remedied. (Id. at ¶ 22). He also spoke to Cannella about the damage. (Id.). State Farm's representative advised the Plaintiffs that a structural engineer would be sent to complete a more thorough inspection of the home. (Id. at ¶ 23). This representative also counseled Plaintiffs to immediately complete the repairs to the home so as to avoid any further damage. (Id.). Given this instruction, Plaintiffs directed Cannella to complete the repairs to the foundation and Cannella promptly finished the job, mitigating the damage to the home. (Id. at ¶ 24).

E. Inspection by NAE

State Farm retained Paul White of Nelson Architectural Engineers ("NAE") to evaluate the damage to Plaintiffs' home. (Id. at ¶ 25). NAE is based in Dallas, Texas. (Id. at ¶ 25).

Plaintiffs allege that State Farm sought out and chose this company because the "core services" advertised on NAE's website include "Expert Witness, Litigation and Subrogation Resource Support." (Id.) Plaintiffs maintain that because State Farm retained a company based in Dallas which provides litigation services to investigate their claim at their Pittsburgh home, State Farm effectively hired an "adversarial litigation expert" to evaluate their insurance claim. (Id. at ¶¶ 35-37). However, Plaintiffs conveniently omit other relevant passages from the webpage, including that another of NAE's "core services" is "Consulting Services" and that NAE conducts business "worldwide."*fn5 (Docket No. 1-3 at 51).

White arrived at Plaintiffs' home on December 2, 2010 in order to conduct his inspection. (Id. at ¶ 25). All of the remedial repairs were completed before White arrived. (Id. at 26). White met with and conducted informal interviews of Jerry Palmisano and Cannella. (Id.). Cannella was present at that time in order to provide all of his measurements to the inspector and to show him all of the repairs that he had completed. Plaintiffs aver that Cannella advised White that the house "had fallen at least six inches and had been jacked back up to that level." (Id. at ¶¶ 40-42). Palmisano and Cannella offered White the opportunity to go under the house and inspect the foundation and completed repairs, but he declined the opportunity. (Id. at 27). Instead, White allegedly took photographs and sketched the inside and outside of the house. (Id.).

F. NAE Report

White produced a report detailing his findings from the inspection. (Id. at ¶ 34; 36-50). Plaintiffs maintain that the report "largely ignores or glosses over" much of the information provided by Cannella to White during his inspection. (Id. at ¶¶ 39, 43). They further contend that the report "presents a biased view of the situation based upon selective information favoring the insurer and ignoring or failing to give proper weight to undisputed evidence and facts favoring a ...

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