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Tube City Ims Corporation v. Allianz Global Risks U.S. Insurance Co.

United States District Court, W.D. Pennsylvania

November 3, 2014

TUBE CITY IMS CORPORATION, Plaintiff,
v.
ALLIANZ GLOBAL RISKS U.S. INSURANCE COMPANY, Defendant.

REPORT AND RECOMMENDATION

ROBERT C. MITCHELL, Senior Magistrate Judge.

I. Recommendation

It is respectfully recommended that the motion to remand filed on behalf of the plaintiff (ECF No. 3) be denied.

II. Report

Plaintiff, Tube City IMS Corporation ("TCIMS"), brought an action in the Court of Common Pleas of Allegheny County, Pennsylvania against Defendant, Allianz Global Risks U.S. Insurance Company ("Allianz"), seeking a declaration that Allianz owed coverage to TCIMS under its insurance policy based on losses that occurred when a bell rod that was part of a two-bell top charging system that was located at the entrance to the blast furnace at AK Steel (with which TCIMS had a contract to perform services) fractured and fell into the blast furnace, thereby shutting down the facility. TCIMS also alleged that Allianz's denial of coverage constituted a breach of contract and bad faith, or in the alternative, that if the policy did not apply under these circumstances, that Allianz had negligently and/or fraudulently and intentionally misrepresented the scope of the policy's coverage to TCIMS.

On September 12, 2014, Allianz removed the action to this Court based upon diversity of citizenship jurisdiction. The parties then stipulated that Allianz's answer to the Complaint would be due on or before October 20, 2014. (ECF No. 2.)

However, on October 7, 2014, TCIMS filed the pending motion to remand, in which it argues that Allianz failed to follow proper removal procedures and also that this Court should abstain from exercising jurisdiction over this case on the ground that it represents an "all too common case of an insurance company coming to federal court, under diversity jurisdiction, to receive declarations on purely state law matters." Reifer v. Westport Ins. Corp., 751 F.3d 129, 141 (3d Cir. 2014). TCIMS argues that, under the "heart of the action" test, the outcome of the coercive claims (the breach of contract, bad faith and misrepresentation claims in this instance) hinges upon the outcome of the declaratory judgment claim, and therefore the Court can and should utilize its discretion to decline jurisdiction over these state law matters and remand them to the Court of Common Pleas. Allianz responds that it has cured the minor procedural defect and that the Court should not abstain from exercising jurisdiction based upon the Colorado River doctrine and that, even applying the "heart of the action" test, the case also raises claims of bad faith, negligent misrepresentation and fraudulent/intentional misrepresentation, and is therefore seeking legal and not merely declaratory relief.

Facts

TCIMS purchased a policy from Allianz providing boiler and machinery coverage for "accidents" occurring at an "insured location" during the period October 30, 2012 to October 30, 2013. (Compl. ¶¶ 5, 10.)[1] The "time element" section of the policy extended coverage for up to 180 days to commissions, profits and royalties lost by TCIMS as a result of an accident which it was unable to make up within a reasonable period of time. (Compl. ¶¶ 13-19.)

TCIMS had contracts to perform various services for AK Steel at its facility in Middleton, Ohio, which is within the territory of the policy. (Compl. ¶¶ 20-23.) On June 22, 2013, a bell rod which was part of a two-bell top charging system at the blast furnace at AK Steel's facility suddenly fractured and the bell rod and one of the bells fell into the blast furnace. (Compl. ¶¶ 26-32.) As a result of this accident, the blast furnace was shut down for a period of time to repair and/or replace the bell rod and the bell, and the flow of goods to TCIMS was interrupted, TCIMS was prevented from producing goods and/or services to AK Steel and AK Steel was prevented from supplying goods and/or services to TCIMS. TCIMS lost sales and was unable to make up lost production within a reasonable period of time. (Compl. ¶¶ 33-41.) Therefore, it sought coverage from Allianz under the policy.

Allianz denied the claim for four different reasons, one of which was that the bell rod was part of the furnace and thus excluded by the furnace exclusion. (Compl. ¶¶ 47-48.) Even after TCIMS provided Allianz with a report from a world-renowned expert on blast furnaces stating that the two-bell top charging system was not part of the furnace, Allianz continued to deny the claim. (Compl. ¶¶ 50-53.) However, TCIMS states that, before it purchased the policy, its brokers questioned Arturo Alvarez, Executive Underwriter for Allianz, about the scope of the exclusion and Alvarez wrote that "precipitators" were covered, but that "the oven box itself, refractory and foundation" were not. TCIMS submits that it relied on this representation to purchase the policy and that the bell rod and charging system are not part of the oven box, refractory or foundation. (Compl. ¶¶ 55-57.)

Procedural History

Plaintiff filed this action in the Court of Common Pleas of Allegheny County, Pennsylvania on July 22, 2014 and it was docketed at No. GD XX-XXXXXX. Count I seeks a declaratory judgment that Defendant owes coverage to Plaintiff for the losses it sustained as a result of the accident. Count II alleges that Defendant's refusal to provide coverage under the policy constituted a breach of contract. Count III alleges that Defendant acted in bad faith in violation of 42 Pa. C.S. § 8371. Count IV alleges that Defendant negligently misrepresented the scope of the policy's coverage, and Count V alleges that it did so intentionally or fraudulently.

On September 12, 2014, Defendant filed a Notice of Removal with this Court based upon diversity of citizenship in that: TCIMS is a Delaware corporation with its principal place of business in Pennsylvania; Allianz is an Illinois corporation with its principal place of business in Illinois; and the amount in controversy exceeds the sum of $75, 000.00, exclusive of interest and costs. (Notice of Removal ¶¶ 6-8.) On October 7, 2014, Plaintiff ...


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