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Golon, Inc. v. Selective Insurance Co. of Southeast

United States District Court, W.D. Pennsylvania

July 20, 2017



          Arthur J. Schwab United States District Judge.

         On May 1, 2012, an employee of Plaintiff Golon, Inc., f/k/a Golon Masonry Restoration, Inc. (“Golon” or “Plaintiff”), was involved in a motor vehicle accident while driving a vehicle owned by Golon that resulted in injuries to Thomas Straw, his wife, Jennifer, and their son, Rowan, and in the death of the Straw's six-year-old son, Elijah. Doc. No. 1-1. Thereafter, the Straw family filed suit seeking compensation for personal injuries against Golon and its employee in the Court of Common Pleas of Allegheny County, Docket No. GD-3-3294 (the “Underlying Action”). Id.

         Golon gave notice of the Underlying Action to its insurer, Defendant Selective Insurance Company of the Southeast (“Selective Southeast”). Doc. No. 1-1. Selective Southeast then assumed the defense of the Underlying Action on behalf of Golon. Id. Selective Southeast informed Plaintiff that the potential award in the Underlying Action could exceed the $11 Million policy limits of coverage. Id.

         The Underlying Action resulted in a $32 Million verdict in favor of the Straw family against Golon. Id. Prior to trial, Golon alleges that Selective Southeast and Defendant Selective Insurance Company of America (“Selective America”) employed a “bad-faith, high-risk, brinksmanship negotiation strategy, ” over the objections of Golon, that resulted in a failure to settle the Underlying Action, within the policy limits during a mediation, or for $8.5 Million on the eve of trial, despite the recommendation of the trial judge.

         Golon alleges three claims against Defendants Selective Southeast and Selective America: first, that the Defendants breached the terms of the policy and the “duty to act reasonably and in good faith when considering whether to pay a third party in settlement of the third party's claim[, ]” (“Count I”); second, that Defendants breached their duty as fiduciaries of “undivided loyalty and fidelity, not to engage in self-dealing, not to prefer [their] interest[s] over Golan's, and to act reasonably, in good faith, and with due care when making settlement decisions[, ] (“Count II”); and third, that Defendants acted in bad faith by failing to settle the Underlying Action within the policy limits, rejecting the Straw family's final settlement demand (which was within the policy limits), and otherwise lacking a reasonable basis for refusing to settle the Underlying Action within the policy limits, (“Count III”). Doc. No. 1-1.

         Defendants have moved to partially dismiss Golan's Complaint. Doc. No. 9. Defendants moved to dismiss Count II, the breach of fiduciary duty claim, as barred by the “gist of the action” doctrine. Id. Additionally, Selective America moved to dismiss all claims against it because it is not the entity that issued the insurance policy to Golan and is therefore not a party to the contract. Id.

         I. Legal Standards

         Federal Rule of Civil Procedure 12(b)(6), provides for dismissal for “failure to state a claim upon which relief can be granted.” Detailed factual pleading is not required - Rule 8(a)(2) calls for a “short and plain statement of the claim showing that the pleader is entitled to relief” - but a Complaint must set forth sufficient factual allegations that, taken as true, set forth a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         The plausibility standard does not require a showing of probability that a claim has merit, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007), but it does require that a pleading show “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678. Determining the plausibility of an alleged claim is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. The Court must consider the specific nature of the claims presented and determine whether the facts pled to substantiate the claims are sufficient to show a “plausible claim for relief.” Covington v. Int'l Ass'n of Approved Basketball Officials, 710 F.3d 114, 118 (3d Cir. 2013); see also Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010).

         In addition to the averments in a complaint, the Court may consider “an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document.” Pension Benefit Guar. Corp. v. White Consolidated Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Further, the Court may also consider a document “integral to or explicitly relied upon in the complaint” without converting the motion to dismiss into one for summary judgment. U.S. Express Lines v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002). Accordingly, the Court has considered the insurance policy between Golon and Selective Southeast appended to Defendants' brief.

         A federal court exercising diversity jurisdiction is bound by the Erie doctrine to follow state law as announced by the highest state court. Wayne Moving & Storage of New Jersey, Inc. v. School Dist. of Philadelphia, 625 F.3d 148, 154 (3d Cir. 2010). If the state's highest court has not addressed the precise question presented, the federal court must predict how the state's highest court would resolve the issue. Id.

         II. Discussion

         Golon urges this Court to find that, “under Pennsylvania law, a policyholder may sue an insurance company for breach of its fiduciary duty to settle within policy limits, and at the same time sue for breach of contract, without violating the gist of the action doctrine.” Doc. No. 20, p. 4. Golon follows this argument further in a footnote, stating “[i]t is questionable whether the gist of the action doctrine can ever bar tort claims against insurance companies if the words “mutual consensus” in Bohler-Uddeholm were read according to their ordinary meaning, because the terms of insurance policies are rarely the result of bargaining. Doc. No. 20, FN 1 (emphasis in original).

         In Bohler-Uddeholm, the United States Court of Appeals for the Third Circuit considered whether it was proper for a district court to allow the plaintiff to proceed to trial on breach of contract and breach of fiduciary duty claims in a “complicated commercial case” that “emerge[d] from the disintegration of a joint venture” and also included misappropriation of trade secrets ...

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