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State Farm Fire and Casualty Co. v. Jumper

United States District Court, M.D. Pennsylvania

March 3, 2017



          KANE, JUDGE

         Before the Court is Plaintiff State Farm Fire and Casualty Company's motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. (Doc. No. 14.) For the reasons that follow, the Court will grant the motion.

         I. BACKGROUND

         The present action for declaratory judgment arose out of a fire that occurred at the home of Ralph Weidner on September 8, 2013 and a lawsuit filed in federal court on July 2, 2015. (Doc. Nos. 1 ¶¶ 21-23; 4-1 ¶ 13; see Doc. No. 8 ¶ 23.)

         On July 2, 2015, Unitrin Auto and Home Insurance Company, as subrogee of Ralph Weidner, filed an action (“Underlying Action”) against Defendant Jumper, alleging that the September 8, 2013 house fire was caused by Defendant's “negligent, careless and/or reckless acts and/or omissions.”[1] (Doc. No. 4-1 ¶¶ 17, 18; 14-3 ¶¶ 17-18; 15 ¶¶ 10, 11; 18 ¶¶ 10, 11.) According to the underlying complaint, Ralph Weidner allegedly hired Defendant Jumper to investigate and repair circuit breakers that had been tripping at Weidner's home. (Doc. Nos. 14-3 ¶10; 15 ¶ 10; 18 ¶ 10.) The underlying complaint alleges that: (1) Defendant Jumper installed “larger sized circuit breakers” to address the problem; (2) the September 8, 2013 fire “originated in the electrical wiring” of Weidner's home; and (3) the damage to Weidner's home was caused by Defendant Jumper, inter alia, “carelessly and improperly repairing the electronical system” at Weidner's home.[2] (Doc. No. 14-3 ¶¶ 12, 13, 17; 15 ¶¶ 10, 11; 18 ¶¶ 10, 11.)

         Plaintiff State Farm Fire and Casualty Company issued a homeowners policy, No. 38-E5-6609-4 (“the Policy”), to Defendant Jumper for the period between April 5, 2013 and April 5, 2014. (Doc. Nos. 1 ¶ 8; 8 ¶ 8.) Plaintiff has since provided Defendant a defense to the Underlying Action pursuant to three reservation of rights letters.[3] (Doc. Nos. 1 ¶ 12; 8 ¶ 12.) However, on December 11, 2015, Plaintiff filed the above-captioned action seeking a declaratory judgment that it owes no obligation to defend or indemnify Defendant Jumper for claims arising out of the Underlying Action.[4] (Doc. No. 1 ¶¶ 14, 32, 43-44; 48-49.) First, Plaintiffs contend that the claims asserted in the Underlying Action “do not fall within the Insuring Agreement of the Policy” because the Underlying Action's complaint does not allege an “occurrence.” (Id. ¶¶ 28-32.) Second, Plaintiffs argue that the Policy's “business pursuits exclusion” applies to Defendant's claim for coverage. (Id. ¶¶ 34, 36-37, 40-43.)

         On January 20, 2016, Defendant filed an answer to Plaintiff's complaint for declaratory judgment. (Doc. No. 8.) Plaintiff filed a motion for summary judgment on March 29, 2016. (Doc. No. 14.) In its motion for summary judgment, Plaintiff submits only its first argument - that “the allegations of the Underlying Action do not constitute an ‘occurrence' under the Policy.” (Id. ¶ 25.) The motion for summary judgment has been fully briefed and is ripe for disposition.


         Federal Rule of Civil Procedure 56(a) requires the court to render summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “[T]his standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original). A factual dispute is material if it might affect the outcome of the suit under the applicable law, and is genuine only if there is a sufficient evidentiary basis that would allow a reasonable fact finder to return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). Thus, where no material fact is in dispute, the moving party need only establish that it is entitled to judgment as a matter of law. Anderson, 477 U.S. at 248. Conversely, where there is a dispute as to an issue of material fact, the moving party must establish that the factual dispute is not a genuine one. Id.

         The party moving for summary judgment bears an initial burden of identifying evidence that it believes demonstrates the absence of a genuine issue of material fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 145-46 (3d Cir. 2004). Once the moving party has carried this initial burden, “the nonmoving party must come forward with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (internal quotation marks omitted). If the non-moving party “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden at trial, ” summary judgment is warranted. Celotex, 477 U.S. at 322. With respect to the sufficiency of the evidence that the non-moving party must provide, a court should grant summary judgment where the non-movant's evidence is merely colorable, conclusory, or speculative. Anderson, 477 U.S. at 249-50. There must be more than a scintilla of evidence supporting the non-moving party and more than some metaphysical doubt as to the material facts. Id. at 252; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

         In determining whether there is a genuine issue of material fact, the court must view the facts and all reasonable inferences in favor of the nonmoving party. Moore v. Tartler, 986 F.2d 682 (3d Cir. 1993); Clement v. Consolidated Rail Corp., 963 F.2d 599, 600 (3d Cir. 1992); White v. Westinghouse Electric Co., 862 F.2d 56, 59 (3d Cir. 1988). In deciding a motion for summary judgment, the court need not accept allegations that are merely conclusory in nature, whether they are made in the complaint or a sworn statement. Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990). Moreover, the court's function is not to make credibility determinations, weigh evidence, or draw inferences from the facts. Anderson, 477 U.S. at 249. Rather, the court must simply “determine whether there is a genuine issue for trial.” Id.


         In its motion for summary judgment, Plaintiff contends that it has no duty to defend or indemnify Defendant because the allegations in the Underlying Action do not constitute an “occurrence” under the Policy. (Doc. No. 16 at 6.) Defendant responds that the Underlying Action brings a “claim for negligent work, ” Plaintiff has an obligation to defend Defendant for a loss caused by a fire, and that Plaintiff's November 23, 2015 reservation of rights letter “should be deemed untimely.” (Doc. No. 17.) The Court first addresses Defendant's untimeliness argument.

         A. Timeliness of Plaintiff's Reservation of Rights

         Defendant urges this Court to deem Plaintiff' second reservation of rights letter as untimely and, by extension, Plaintiff's “non-occurrence argument” as waived. (See Doc. No. 17 at 13-14.) Defendant argues that he had no notice that the allegations of the Underlying Action might not qualify as an “occurrence” until he received the second reservation of rights letter, dated November 23, 2015. (Id. at 13.) Defendant stresses that more than six months passed between the commencement of the Underlying Action and the second reservation of rights letter. (Id.) Plaintiff responds that Defendant's timeliness argument overlooks that the complaint in the Underlying Action was amended on February 16, 2016 and that Plaintiff cited the “relevant language of the Policy at issue” in its reservation of rights letters. (Doc. No. 19 at 4-7.)

         “Under Pennsylvania law, an insurer is not estopped from denying coverage when … the insured received a timely reservation of rights letter.” St. Leger v. Am. Fire & Cas. Ins. Co., 870 F.Supp. 641, 644 (E.D. Pa. 1994), aff'd, 61 F.3d 896 (3d Cir. 1995). However, the “[f]ailure to provide timely notice of a reservation of rights may preclude the insurer from later denying a duty to defend and/or a duty to indemnify its insured. When a party seeks to estop an insurer from withdrawing from a case, the burden is on the party asserting the estoppel claim to establish that defense by clear, precise, and unequivocal evidence.” Transportation Ins. Co. v. C.F. Bordo, Inc., No. 06-2386, 2009 WL 839366, at *5 (M.D. Pa. Mar. 30, 2009) (Vanaskie, J.) (internal citation omitted).

         For example, in Erie Insurance Exchange v. Lobenthal, the Superior Court of Pennsylvania concluded that an insurer's reservation of rights letter, sent seven months after the filing of the underlying complaint, was untimely. 114 A.3d 832, 840 (Pa. Super. Ct. 2015). In that case, the passenger of a car - who suffered injuries in a car accident - brought the underlying action against the driver and a family whose daughter had hosted a party preceding the accident. Id. at 834-35. The underlying complaint alleged that the daughter - an additional insured under her family's insurance policy - “encouraged the use of controlled substances at the party” and provided the driver in the car accident with controlled substances. Id. at 838-89.

         In Erie, although the insurer was “on notice” that the underlying “allegations fell under the controlled substances policy exclusion, ” the insurer did not send the second reservation of rights letter, which first referenced the policy's controlled substances exclusion, until seven months after the underlying complaint was filed and three months after the disposition of preliminary objections. Id. at 837, 839. The Superior Court of Pennsylvania reasoned that prejudice, under the circumstances, could be “fairly presumed, ” as follows:

[The insurer] waited to send its reservation of rights letter until over three months had passed from disposition of its preliminary objections and the only remaining claim related to [the daughter's] alleged furnishing of controlled substances, which was clearly excluded from coverage. . . . Had [the daughter] been informed of [the insurer's] intention to deny ...

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