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Ginger Katzenmoyer v. Allstate Insurance Company

August 30, 2012

GINGER KATZENMOYER
v.
ALLSTATE INSURANCE COMPANY



The opinion of the court was delivered by: Norma L. Shapiro, J.

MEMORANDUM

Before the court are cross-motions for summary judgment, an evidentiary motion in limine, and a motion to file a post-argument brief in an insurance dispute between Ginger Katzenmoyer ("Katzenmoyer") and Allstate Insurance Company ("Allstate"). The underlying incident occurred eleven years ago when Katzenmoyer attended a party at the house of a co-worker, Donald Drumheller ("Drumheller"), who invited Katzenmoyer to ride on his ATV through a wooded area near his house. He then drove the ATV into a raised manhole cover. The impact threw Katzenmoyer from the ATV and caused her to suffer serious injuries.

Allstate insured Drumheller's house at the time of the incident. Because the incident occurred in a wooded area away from Drumheller's house, Allstate filed a declaratory judgment action before the Honorable Anita B. Brody to determine whether it had a duty to defend and indemnify Drumheller. After a state court jury verdict against Drumheller, he assigned his rights under the insurance contract to Katzenmoyer.

Katzenmoyer, as Drumheller's assignee, now brings this action against Allstate for breach of contract (common-law bad faith) under Pennsylvania law.*fn1 Her claim concerns Allstate's refusal to settle with her by paying the face of the policy between June 7 and July 7, 2004. See Katzenmoyer Cross-Mot. Summ. J. at 3. As stated by Katzenmoyer, Allstate "acted negligently, unreasonably and recklessly by ignoring the policy limit settlement demand made by Katzenmoyer's attorney [on June 7, 2004]." See Katzenmoyer Resp. Cross-Mot. Summ. J. at 1. The parties have cross-moved for summary judgment. The Allstate cross-motion for summary judgment will be granted, the Katzenmoyer cross-motion for summary judgment will be denied, the Katzenmoyer motion for leave to file a post-argument brief will be granted, and the Allstate evidentiary motion in limine will be denied as moot.

I. Facts

This action has a complex 11-year-long procedural history. The underlying ATV incident occurred on September 20, 2001. Five months later, Katzenmoyer wrote a letter to Allstate and requested the policy limit of Drumheller's insurance policy-$100,000-in exchange for a full release for Drumheller. Allstate refused. Katzenmoyer then brought a personal injury action against Drumheller in the Montgomery County Court of Common Pleas on June 3, 2002 ("Katzenmoyer v. Drumheller"), and Drumheller sent Allstate a letter asking it to settle the claim.

On September 20, 2002, Allstate, filing a declaratory judgment action in federal court before the Honorable Anita B. Brody ("Allstate v. Drumheller"), alleged the ATV incident occurred away from the insured premises, and denied coverage under its policy.*fn2 In August 2003, Judge Brody granted Allstate's motion for summary judgment and ordered that Allstate had neither a duty to defend nor a duty to indemnify Drumheller in Katzenmoyer v. Drumheller. See Allstate Ins. Co. v. Drumheller, 285 F. Supp. 2d 605 (E.D. Pa. 2003). Katzenmoyer and Drumheller appealed the decision.

On May 11, 2004, while the federal appeal was pending, the Pennsylvania Superior Court decided State Farm Fire & Casualty Company v. MacDonald, 850 A.2d 707 (Pa. Super. Ct. 2004). The MacDonald court found State Farm had a duty to defend and indemnify its insured under circumstances similar to those in Allstate v. Drumheller.

On June 7, 2004, Katzenmoyer, citing MacDonald, sent a letter to Allstate and sought the $100,000 policy limit in exchange for a full release for Drumheller. Katzenmoyer notified Allstate that if it failed to tender the $100,000 policy limit within 30 days, she would hold Allstate responsible for any excess verdict in Katzenmoyer v. Drumheller. Two days later, Allstate sent a letter to Katzenmoyer stating: (1) MacDonald was factually different than Allstate v. Drumheller; and (2) State Farm had filed a petition for allocatur in MacDonald, so MacDonald's effect on Allstate v. Drumheller was unclear. Allstate did not tender the $100,000 policy limit to Katzenmoyer within 30 days of the settlement demand.

On September 30, 2004, the Court of Appeals in Allstate v. Drumheller vacated Judge Brody's order that Allstate had neither a duty to defend nor a duty to indemnify Drumheller, and remanded for further consideration in light of MacDonald. See Allstate Ins. Co. v. Drumheller, 115 F.App'x 528 (3d Cir. 2004). The Pennsylvania Supreme Court did not deny allocatur in MacDonald until October 27, 2004.

On November 1, 2004, Judge Brody held a meeting with Allstate, Drumheller, and Katzenmoyer to discuss a briefing schedule on remand. At the meeting, Judge Brody suggested it was unlikely she would find in favor of Allstate in light of MacDonald. See Letter from Allstate counsel to Allstate (Pl.'s Mot. Summ. J. Ex. 36). Judge Brody ordered the parties to file briefs discussing how MacDonald affected Allstate v. Drumheller. See id. at Exs. 38--39. Allstate offered the $100,000 policy limit to Katzenmoyer on November 16, 2004. Katzenmoyer declined.

On March 16, 2005, Judge Brody, citing MacDonald, heldAllstate had a duty to defend and indemnify Drumheller in Katzenmoyer v. Drumheller. Allstate appealed the decision.

While the appeal was pending, Katzenmoyer offered to release Drumheller and Allstate for $750,000. Allstate declined.

On June 27, 2006, the Court of Appeals, in a 2-to-1 decision (Garth, J., dissenting), affirmed Judge Brody's decision that Allstate had a duty to defend and indemnify Drumheller. See Allstate Ins. Co. v. Drumheller, 185 F.App'x 152, 153 (3d Cir. 2006). In August 2006, Allstate offered to settle with Katzenmoyer for $100,000. In July 2007, Katzenmoyer again offered to release Drumheller and Allstate for $750,000. The parties failed to settle.

On February 26, 2009, a state court jury in Katzenmoyer v. Drumheller rendered a verdict against Drumheller for $1,500,000. In March 2009, Allstate requested a release of all claims against Drumheller and Allstate in return for $100,000. Katzenmoyer would ...


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