The opinion of the court was delivered by: Sitarski, M. J.
Plaintiffs Ribhi Hasan ("Hasan") and Maryam Sood ("Sood"), husband and wife (together, "Plaintiffs"), brought this action for breach of contract and bad faith concerning a dispute over insurance coverage for losses resulting from a fire that occurred on November 29, 2010. (Compl.¶ 4.) A homeowners policy issued by Defendant Allstate Insurance Company ("Allstate") was in effect at the time of the fire, but Allstate denied coverage based on purported misrepresentations made by Plaintiffs when reporting the claim. Allstate also filed a Counterclaim alleging insurance fraud. Currently pending before the Court is a Motion for Summary Judgment filed by Allstate (Dkt. No. 14). For the reasons that follow, the motion will be granted in part and denied in part.
On July 5, 2011, Plaintiffs initiated this lawsuit by filing a
Complaint against Defendant
in the Court of Common Pleas of Philadelphia County.*fn1
The Complaint alleged breach of contract and bad faith. On
August 10, 2011, Defendant filed a Notice of Removal and removed this
case to this court, invoking diversity jurisdiction under 28 U.S.C.§
1332. (See Dkt. No. 1.) On August 15, 2011, Defendant filed an Answer
to the Complaint, as well as a Counterclaim against Plaintiffs
alleging civil insurance fraud. (Dkt. No. 4.) This matter initially
was assigned to District Court Judge Juan R. Sanchez.
On January 18, 2010, Allstate filed the instant Motion for Summary Judgment. ("Def. Mot.") On January 19, 2012, the parties consented to the exercise of jurisdiction by a United States Magistrate Judge under 28 U.S.C. § 636(c) andFed. R. Civ. P.73, and the matter was referred to me. (Dkt. No. 15.) Allstate moves for summary judgment on the grounds that Plaintiffs' claims for breach of contract and bad faith are not supported by the evidence. It also moves for summary judgment on its insurance fraud counterclaim, alleging that it is entitled to a judgment as a matter of law that Plaintiffs intentionally and fraudulently misrepresented material facts when reporting their claim. Plaintiffs filed a Response (Dkt. No. 18), and Defendant filed a Reply (Dkt. No. 19).
A. The Parties and the Policy
Hasan was born in Palestine, and is a naturalized United States citizen who has lived in the United States since September 23, 1996. (Pl. Resp. ¶ 6 at 2.) In 2002, Hasan purchased a property located at 1643 Cadwallader Street in Philadelphia ("the Property"), of which he is the sole owner. (Id.; Def. Mot. ¶ 23 at 7.) The Property has three floors, with each floor constituting a separate apartment unit. (Def. Mot.¶ 22 at 7; Pl. Resp. ¶ 22 at 9.) At the time of purchase, Hasan was married to Sood, with whom he has three children born between 1996 and 1999. (Pl. Resp. at 2-3.)
Around August 29, 2002, Hasan purchased an Allstate Homeowner's Policy ("Policy"), which provided insurance coverage for the Property. (Def. Mot. ¶ 6 at 3; Pl. Resp. ¶ 6 at 2.) The Policy defines several key terms, including:
1. "You" or "Your" -- the person named on the Policy Declarations as the insured and that person's resident spouse.
3. "Insured person(s)" -- you and, if a resident of your household:
(b) any dependent person in your care.
12. "Dwelling" -- a one, two, three, or four family building structure, identified as the insured property on the Policy Declarations, where you reside and which is principally used as a private residence. (Def. Mot. Ex. E at 11-13.)
The Policy contains several components, including coverage for the insured's dwelling and personal property. (Id.) In "Coverage A -- Dwelling Protection," the Policy states that it covers "your dwelling including attached structures." (Id. at 14.) The Dwelling Protection covers "sudden and accidental direct physical loss caused by damage to property described in Coverage A -- Dwelling Protection." (Id. at 15.) However, the policy disclaims coverage for "[a]ny substantial change or increase in hazard, if changed or increased by any means within the control or knowledge of an insured person." (Id. at 16.) The Policy also disclaims coverage in circumstances of concealment or fraud. (Id. at 14.) The Policy specifically states "[w]e do not cover any loss or occurrence in which any insured person has concealed or misrepresented any material fact or circumstance." (Id.)
The Policy also provides "Coverage C -- Personal Property Protection," which includes: "1. Personal property owned or used by an insured person anywhere in the world" and "2. At your option, personal property owned by a guest . . . while the property is in a residence you are occupying." (Id. at 17-18.) The Policy specifically provides that "[w]e will cover sudden and accidental direct physical loss to the property described in Coverage C -- Personal Property Protection, except as limited or excluded in this policy, caused by: 1. Fire or Lightening." (Id. at 19.) However, the Policy does not "cover loss to the property described in Coverage C -- Personal Property Protection caused by or consisting of . . . any substantial change or increase in hazard, if changed or increased by any means within the control or knowledge of an insured person." (Id. at 21.)
1. Family Living Arrangement
Prior to April 2007, Hasan, Sood, and all of their children lived on the first floor of the Property, and rented out the apartments on the upper two floors. (Pl. Resp. at 43-44; Pl. Resp. Ex. I at 23.) In April 2007, Sood and the children temporarily moved to Jerusalem, while Hasan remained and continued to occupy the Property's first floor unit. (Pl. Resp. at 44; Pl. Resp. Ex. I at 13-14.) Hasan and Sood remained married and have had several more children since April 2007. (Pl. Resp. ¶ 6 at 2.)
After moving to Jerusalem, Sood periodically returned to the United States to visit her family. (Id. ¶¶ 67-75 at 21-22.) When Sood visited Philadelphia she would stay overnight at her brother-in-law's house, which was a few blocks away from the Property. (Pl. Resp. at 44.) She did this because she was afraid to stay at the Property due to problems with the upstairs tenants. (Id.) However, Sood kept clothing and personal items at the Property, and would often visit there during the day. (Id.) Hasan and Sood both claim it was their intention for Sood and the children to return to Philadelphia and make the Property the "family house." (Pl. Resp. at 44; Pl. Resp. Ex. N at 27.)
In mid-November 2010, Sood and two of her children returned to the Philadelphia area from Jerusalem.*fn2 (Pl. Resp. Ex. F at 23.) Plaintiffs claim that Sood did not intend to return to Jerusalem, but rather that Plaintiffs intended the family to reside at the Property in Philadelphia. (Pl. Resp. Ex. M at 31.)
2. Relationship with Former Tenants and Neighbors
During the time Hasan owned the Property, he rented the upper two floors to non-relative tenants. (Pl. Resp. Ex. L at 22.) The two primary tenants were Ramon Vargas (second floor unit) and RosaleeOlmedo (third floor unit).*fn3 (Def. Mot. Ex. O-5; Def. Mot. Ex. O-6.) According to Vargas, he rented the second floor of the Property for about five years until he moved out in July 2010. (Def. Mot. ¶ 39 at 12.) Mr. Vargas also claimed he stopped renting the second floor apartment because Hasan left the Property in "bad disrepair," and that when Vargas tried to hold back rent in order to get things fixed, Hasan told Vargas that he had to move out. (Def. Mot. Ex. O-5.) Vargas stated that when he moved out he attempted to give the keys to Hasan, but Hasan was not available so "he just left them hanging in the door." (Id.)Hasan filed a "Landlord and Tenant Complaint" against Vargas on June 18, 2010, in Philadelphia Municipal Court, for failure to pay rent for the months of March through June of 2010. (Pl. Resp. Ex. N at 9.) On July 21, 2010, the Municipal Court found in Hasan's favor and ordered Vargas to pay $978.00 in back rent and costs. (Id. at 13.)
Olmedo stated that she lived in the third floor unit of the Property from November 2009 until March 31, 2010. (Def. Mot. Ex. O-6.) Olmedo claimed that she was upset with Hasan because of problems with the roof. (Id.)Olmedo held back February and March rent because nothing was done about the roof, and subsequently moved out at the end of March. (Id.) Olmedo stated that she contacted the City of Philadelphia Department of Licenses and Inspections ("L&I") to report her concerns, and that when L&I inspected the Property, they told Olmedo that the Property was "uninhabitable." (Id.) After Ms. Olmedo moved out, Hasan filed a complaint against her in Philadelphia Municipal Court for failing to pay rent, failing to pay a gas bill, and for damages to the Property.*fn4 (Pl. Resp. Ex. N at 2.) The parties consented to a "Judgment By Agreement" whereby Olmedo agreed to pay Hasan $2,306.73 to settle the claim. (Id. at 3.)
Plaintiffs also made several other statements concerning their displeasure with former tenants and neighbors. Sood stated that "nobody liked us from that area, from that whole neighborhood." (Def. Mot. Ex. I at 3.) Further, she represented that "people on the third floor, they would boil water . . . and they would throw it on my kids . . . ." (Id.) Sood also stated that cigarettes and condoms were thrown at her children from the second and third floor windows of the Property. (Id. at 4.) Finally, Hasan stated that after he obtained judgments against his former tenants "they sent me some people to fight with me . . . ." (Pl. Resp. Ex. F at 18.)
3. Condition of the Property
Olmedo stated that she reported to L&I the poor condition of the roof, as well as a mice and cockroach infestation. (Def. Mot. Ex. O-6.) L&I investigated the Property on April 5, 2010, and found several violations of the Philadelphia housing code. (Def. Mot. Ext. P.) The cited violations included: leaks in the plumbing fixtures on the third floor; lack of an annual test record for the fire alarm systems; lack of an "IN CASE OF FIRE . . ." sign; lack of lighting in the second floor stairwell; lack of fire extinguishers; lack of a housing inspection license; an unsanitary ceiling; a leaking roof; and a lack of self-closing doors to the units. (Id.) Three additional citations were issued in 2010, for similar violations.*fn5 (Id.) Notations on the last two citations indicate the violations were remedied as of October 21, 2011.*fn6 (Id.)
C. Fire at the Cadwallader Property
On November 29, 2010, the Property was damaged by a fire. (Compl. ¶ 4;
Answer ¶ 4.) On the morning of the fire, Hasan left the Property
around 10:00 a.m., and drove to his brother's house.*fn7
(Pl. Resp. Ex. F at 20.) Hasan picked up his two children and
his brother's children and drove to Center City to pay his bills and
to distract the children, while the rest of the family prepared dinner
at Hasan's ...