United States District Court, E.D. Pennsylvania
For EASY CORNER, INC., trading as EASY CORNER BAR, Plaintiff: JONATHAN WHEELER, LEAD ATTORNEY, LAW OFFICES OF JONATHAN WHEELER PC, PHILADELPHIA, PA.
For STATE NATIONAL INSURANCE CO., INC., Defendant: NANCY ELIZABETH ZANGRILLI, LEAD ATTORNEY, MCDONNELL & ASSOCIATES PC, KING OF PRUSSIA, PA; STANLEY W. KALLMANN, LEAD ATTORNEY, PRO HAC VICE, GENNET, KALLMANN, ANTIN & ROBINSON, PARSIPPANY, NJ.
EDUARDO C. ROBRENO, J.
On January 28, 2014, Easy Corner, Inc. (" Plaintiff" ) filed a Complaint in the Court of Common Pleas for Philadelphia County against State National Insurance Company (" Defendant" ). The Complaint contains two counts: breach of contract and bad faith in violation of 42 Pa. Cons. Stat. Ann. § 8371. Defendant removed the case to this Court. Plaintiff, the owner of a bar,
alleges that Defendant, which insured Plaintiff's bar, has failed to pay Plaintiff for damage covered by the insurance policy, thus breaching contract, and has engaged in bad faith conduct with respect to its adjustment of Plaintiff's loss. Defendant has moved for summary judgment and, for the reasons that follow, the Court will grant the motion in part and deny it in part.
For more than ten years, Plaintiff - a corporation owned by Ezra Reuven, who also owns an apartment building and an auto repair shop - operated Easy Corner Bar at 537 North 35th Street in Philadelphia. Ezra Reuven Dep. 9:6-20, 12:13-13:11, July 1, 2014, ECF No. 14 Ex. A. In 2012, Plaintiff attempted to sell the building (which includes both the bar and the apartments that Plaintiff owns), but was unsuccessful. Id. at 19:9-20:16. In the meantime, Reuven decided to get a new manager for the bar (his wife managed it previously) and met Darius Mason, who offered to run the bar for Reuven. Id. at 20:2-21:12. On May 10, 2012, Reuven and Mason executed an " Agreement regarding Management of 'Eazy Corner Inc.'" ECF No. 14 Ex. B. Key terms of the agreement included:
o Mason would manage the bar from June 1, 2012 to May 31, 2013.
o Mason would pay Reuven $3000 per month and keep any additional profit.
o Mason would assume all legal responsibility for the operation of the bar and be responsible for the payment of all bills and necessary purchases (including the liquor, which he would purchase in Pennsylvania).
o Reuven, in conjunction with his accountants, would continue to handle tax and bookkeeping matters, but Mason would be responsible for maintaining the checkbook.
o Mason would be responsible for the maintenance of all equipment, as well as all damage and repairs.
At some unknown point before the contractual end of the management agreement, Mason informed Reuven that he wished to renew the agreement. Reuven took some time to think about it, then told Mason that he did not wish to renew the agreement and that he " hope[d]" Mason would leave after the agreement ended. Reuven Dep. 28:2-29:25. According to Reuven, Mason " d[id]n't sound so happy" about that. Id. at 30:23-25.
After the end of the agreement, Mason just " k[ept] running the place" against Reuven's wishes. Id. at 31:4-6. The day after the agreement ended, Reuven changed the lock on the front of the building, but Mason cut the padlock the same day and continued to manage the bar. Id. at 31:21-23. (Reuven did not attempt to padlock the building again, and never made any efforts to prevent Mason from using his key to enter the bar through the back of the building. Id. at 44:16-19.) When Reuven realized what Mason had done, he called the police to report it, but the police told him that Reuven would need to take Mason to court in order to evict him. Id. at 35:9-24, 38:2-7. Reuven retained a lawyer for this effort, but waited
to do so until for several months, id. at 38:8-41:22, as he is " a little bit scared" of Mason, id. at 42:2-8. Between the end of the agreement and the time Mason finally left, he did not pay Reuven the agreed-upon $3000 per month. Id. at 46:23-47:5.
At some point during the beginning of August 2013, Reuven approached Mason again about leaving the bar, and Mason asked to " have the last weekend" before leaving - the " weekend" being Saturday, according to Reuven. Reuven agreed. Id. at 42:22-43:25. Mason then threw a party for his final Saturday night at the bar, which was August 17. Id. at 44:20-46:21. The following day - Sunday, August 18 - Reuven and his wife passed by the bar and saw Mason and four other people " destroy the place" and " [b]reak everything." Id. at 47:6-21. Reuven called the police, and Mason and his companions were arrested. Id. at 48:6-9.
The bar sustained extensive damage as a result of Mason's actions - Young Adjustment Company estimated that the total loss was $42,950.14. ECF No. 15 Ex. D at 10. That amount included damage to the apartment above the bar, where Mason was a tenant and which he also wrecked. Id. at 6-8; Reuven Dep. 98:2-17. However, after Risk Control Associates - Third Party Administrator on behalf of Defendant - conducted its investigation into Plaintiff's claim, it concluded that Mason was a manager of the bar. Plaintiff's insurance policy reads in relevant part:
2. We will not pay for loss or damage caused by or resulting from any of the following:
. . . .
h. Dishonest or criminal act (including theft) by you, any of your partners, members, officers, managers, employees (including temporary employees and leased workers), directors, trustees or authorized representatives, whether acting alone or in collusion with each other or with any other party; or theft by any person to whom you entrust the property for any purpose, whether acting alone or in collusion with any other party.
(1) Applies whether or not an act occurs during your normal hours of operation;
(2) Does not apply to acts of destruction by your employees (including temporary employees and leased workers) or authorized representatives; but theft by your employees (including temporary employees and leased workers) or authorized representatives is not covered.
Commercial Property Policy, ECF No. 14 Ex. C at 28. Therefore, Defendant concluded, Mason's destruction of Easy Corner Bar fell into this clause, and Plaintiff was excluded from insurance coverage. Letter from Chrystie M. Lalor, Prop. Claims Exam'r, Risk Control ...