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21st Century North American Insurance Company F/K/A American v. John Wolfington

August 22, 2012

21ST CENTURY NORTH AMERICAN INSURANCE COMPANY F/K/A AMERICAN INTERNATIONAL CIVIL ACTION INSURANCE, PLAINTIFF,
v.
JOHN WOLFINGTON, DAVID GRAHAM, AND JILL GRAHAM, DEFENDANTS.



The opinion of the court was delivered by: Anita B. Brody, J.

MEMORANDUM

Plaintiff 21st Century North American Insurance Company f/k/a American International Insurance Company ("21st Century") brings this declaratory judgment action against Defendants John Wolfington ("Wolfington"), David Graham, and Jill Graham (collectively "the Grahams"), requesting that the court find that 21st Century has no duty to defend or indemnify Wolfington in a pending state court action brought against him by the Grahams. 21st Century has filed a motion for judgment on the pleadings. For the reasons set forth below, I will grant 21st Century's motion. I find the opinion of my colleague, Judge Baylson, in USAA Cas. Ins. Co. V. Bateman, No. 07-cv-3700, 2008 WL 4761718 (E.D. Pa. Oct. 30, 2008), persuasive, and my opinion largely tracks his.

I.BACKGROUND

On March 2, 2009, the Grahams purchased a house, owned by Wolfington and located at 801 Harriton Road, Bryn Mawr, Pennsylvania (the "Property"). On March 31, 2011, the Grahams sued Wolfington and other parties in the Court of Common Pleas, Montgomery County. In the state court complaint, the Grahams assert the following claims against Wolfington arising out of the events surrounding the purchase of the Property: fraudulent misrepresentation, negligent misrepresentation, negligence, breach of fiduciary duty, breach of warranty, breach of contract, and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1 et seq. See ECF No. 8-10 ("Grahams' State Ct. Am. Compl.") ¶¶ 13-15. Wolfington subsequently gave notice of the state court action to his insurer, 21st Century. 21st Century is currently providing a defense in that matter under a reservation of rights.

In the action before me, 21st Century seeks a declaration that it has no duty to defend or indemnify Wolfington in connection with the claims asserted by the Grahams in state court. On September 1, 2011, 21st Century filed a motion for judgment on the pleadings, contending that select provisions and/or exclusions in Wolfington's homeowners' policies and excess liability policy release it from any duty to defend or indemnify. On September 29, 2011, Wolfington responded to 21st Century's motion. ECF No. 11.*fn1 On October 7, 2011, 21st Century filed a reply in support of its motion. ECF No. 12. A summary of the Grahams' state court complaint and the relevant sections of Wolfington's insurance policies issued by 21st Century is set forth below.

A. Facts Alleged in the Grahams' State Court Complaint

In December 2008, the Grahams contacted Jody Kotler, a real estate agent with Fox and Roach L.P. d/b/a Prudential Fox & Roach ("Prudential"), to request her assistance in selecting and locating a home for the Grahams in Bryn Mawr, Pennsylvania. Grahams' State Ct. Am. Compl. ¶¶ 13-15. Eventually the Grahams settled on the house owned by Wolfington, located at 801 Harriton Road, Bryn Mawr, Pennsylvania (the "Property"). Id. ¶¶ 17-18. During January 2009, the Grahams and Wolfington negotiated the purchase price for the Property through their respective brokers, and, near the end of the month, Wolfington accepted an offer from the Grahams to purchase the Property. Id.¶¶ 23-24.

In February 2009, Mrs. Graham traveled from London, England-where the Grahams then resided-to Bryn Mawr to visit the Property so that an inspection could be performed. Id.¶ 25. While surveying the Property, Mrs. Graham asked Wolfington why the driveway of the Property abutting Morris Avenue had not been paved and contained grass on it. Wolfington indicated that the driveway had not been finished, but that a company had gravel ready to be delivered, and that the gravel could be laid at any time. Id.¶ 26.

However, as early as 2004, Wolfington had been told by officials of the Township of Lower Merion ("the township") that the Property exceeded the maximum ratio of impervious coverage allowed by impervious surface zoning ordinances included in Chapter 155 of the Code of the Township of Lower Merion ("the Zoning Ordinances"). Id.¶¶ 27-28. The Grahams maintain that, in order to comply with the Zoning Ordinances and be approved for occupancy, Wolfington caused portions of the pool deck, the driveway abutting Harriton Road, and gravel from the driveway abutting Morris Avenue to be removed. Id.¶ 28. After the township's approval, Wolfington caused portions of the driveway abutting Harriton Road to be repaved in secret, in violation of the Zoning Ordinances. Id.

The Grahams further claim that at the time of inspection and prior to the sale of the Property, Wolfington knew or should have known that the Property had numerous physical and mechanical defects including the following: leaking roof, leaking foundation, malfunctioning electrical and telephone systems, malfunctioning toilets, a non-functioning bathroom, missing tiles in the pool, a shortened pool deck that requires persons using the diving board to be under 200 pounds, malfunctioning pool heater, pipes in the garage that are not adequately insulated, roofing material that fails to conform to manufacturing specification and required replacement, and a cornice and dentil molding system made with medium density fiberboard and fasteners inappropriate for exterior elements (collectively, the "Defects"). Id.¶ 29.

In late February 2009, the parties entered into a purchase and sale agreement for the Property, and on March 2, 2009, the Grahams took title to the Property. Id.¶¶ 31-32. Prior to taking title to the Property, the Grahams received a 68 Pa. C.S.A. § 7303 real estate disclosure statement from Wolfington and his broker. The disclosure did not mention any existing or potential zoning violations or any physical defects in the property. Id.¶ 33. However, after moving onto the property, the Grahams became aware, through speaking with neighborhood residents and local contractors, that the Property's past and current zoning violations were common knowledge in the community.

Upon discovery of the zoning violations and other physical defects, the Grahams filed suit in the Court of Common Pleas of Montgomery County against Mr. Wolfington, Prudential, and the real estate brokers, alleging that the partiers were aware or should have been aware of the zoning violations and defects in the Property. The Underlying Plaintiffs therefore brought claims of fraudulent misrepresentation, negligent misrepresentation, negligence, breach of fiduciary duty (against only Prduential and the brokers), breach of warranty (against Mr. Wolfington), breach of contract, and violatios of Pennsyvania Unfair Trade Practices and Consumer Protection Law. The underlying litigation is currently ongoing.

In response to the suit, Wolfington requested a defense and indemnification for defense fees from 21st Century North American Insurance, pursuant to his homeowners insurance policy. The insurer advised Wolfington that it would defend him in the lawsuit under a full reservation of rights until there could be a judicial determination of its duties. 21st Century subsequently brought this ...


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