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Burgunder v. United Specialty Insurance Co.

United States District Court, W.D. Pennsylvania

May 10, 2018

JIM BURGUNDER, Plaintiff,
v.
UNITED SPECIALTY INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION

          Arthur J. Schwab United States District Judge

         I. Introduction

         Jim Burgunder (“Plaintiff') initiated this action on September 1, 2017, against United Specialty Insurance Company (“Defendant') for breach of contract and for bad faith in violation of Pennsylvania's bad faith statute, 42 Pa. Con. Stat. Ann. § 8371. Plaintiff had sought payment under his insurance policy after two buildings on his property sustained damage but was denied. Currently pending before the Court is Defendant's Motion for Summary Judgment, its brief in support thereof, and its concise statement of material facts. (Docs. 37, 38, 39.) Plaintiff filed a response thereto along with a counterstatement of material facts. (Doc. 44, 45, 46.) Summary judgment was denied by order on May 1, 2018. This is the memorandum opinion relating to that decision.

         II. Facts

         Plaintiff is the owner of 116 New York Avenue in Rochester, Pennsylvania. (Docs. 39 ¶ 5; 46 ¶ 5 8.) Plaintiff purchased a Commercial Lines Policy from Defendant that provided coverage for two buildings on his property from June 3, 2016, until June 3, 2017. (Docs. 39 ¶ 9; 46 ¶ 9.) The amount of Property Damage Coverage available for Building 1 and Building 2 is $300, 000 and $50, 000, respectively. (Docs. 39 ¶ 20; 46 ¶ 20.) On April 1, 2017, retaining walls on a neighboring property failed. (Docs. 39 ¶ 7; 46 ¶ 7.) Both buildings were damaged and were subsequently condemned and demolished. (Docs. 39 ¶ 8; 46 ¶ 8.)

         Plaintiff reported his loss to Defendant, and Daniel Green was assigned as the claims representative. (Docs. 39 ¶ 21; 40-4 at 33.) On April 6, 2017, per Defendant's request, Erik Swanson of VeriClaim, an independent adjusting firm, inspected the property and was unable to discover who owned the retaining walls that failed. (Docs. 39 ¶¶ 24, 25, 27; 46 ¶¶ 24, 25, 27.) His report, however, did mention that the walls at issue were likely not part of Plaintiff's property based on an “Indenture to Deed”. (Doc. 40-8, 3.) With Green's permission, Swanson, retained an engineer to further evaluate the loss. (Docs. 39 ¶ 29; 46 ¶ 29.)

         Green then sent a Partial Denial of Coverage and Reservation of Rights letter to Plaintiff. (Docs. 39 ¶ 30; 44 ¶ 30.) Robert L. Smith, P.E., Defendant's expert, authored a report outlining his investigation and conclusions. (Docs. 39 ¶ 33; 44 ¶ 33.) Smith found that the retaining walls were not designed properly, were not constructed in accordance with acceptable standards, and were not properly maintained. (Docs. 39 ¶ 34; 46 ¶ 34.) On May 8, 2017, after receiving the engineering expert's conclusion, Mr. Green denied coverage based upon Mr. Smith's conclusion that the loss was caused by the lateral forces of the earth coupled with the walls' inadequate design, construction, and maintenance. (Docs. 39 ¶ 35; 46 ¶ 35.) Mr. Green's opinion was based solely on his expert's conclusion and he did not consult counsel and was unaware of Pennsylvania law. (Docs. 40-4 at 49, 56, 57; 46 ¶¶ 40-41.)

         On April 2, 2018, Plaintiff's expert Richard A. Bragg, Ph.D., P.E., authored a report. (Docs. 39 ¶ 36; 46 ¶ 36.) In his report, Bragg concurred with Defendant's engineer that the retaining walls that failed were not properly designed, constructed, or maintained and that design and construction flaws were the cause of its failure. (Docs. 39 ¶ 37; 46 ¶ 37.) Bragg concluded that the walls' failures were not the result of a landslide and did not induce a landslide. (Doc. No. 46 ¶ 42; 47 at 7.) Dr. Bragg also concluded that:

[a)] Failure of the retaining walls was the direct cause of damage to the 1-story structure located on the Burgunder property. The southwest corner of this building was founded on fill that was located within the zone of plastic equilibrium in the fill retained by the walls. Collapse of the walls resulted in simultaneous collapse of support for the southwest corner of the building foundation provided by the fill retained by the wall.
[b)] The failure of the walls was initiated by the structural collapse of the brick retaining wall located below the timber retaining wall. The lower brick wall was inadequately designed/constructed to retain soil fill to near its top (a height of about 12 feet). Nonetheless, the timber wall placed additional lateral loading on the brick wall and contributed to its ultimate collapse.
[c) T]he two buildings located on the Burgunder property were condemned at the same time and that the failure of the retaining walls was the primary consideration for the condemnations.

(Doc. No. 46 ¶ 43.)

         III. Standard of Review

         Summary judgment may be granted if, drawing all inferences in favor of the non-moving party, “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); see also Melrose, Inc. v. City of Pittsburgh, 613 F.3d 380, 387 (3d Cir. 2010). A fact is “material” if proof of its existence or non-existence might affect the outcome of the suit under applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir. 2011). Disputes must be both: (1) material, meaning concerning facts that will affect the outcome of the issue under substantive law; and (2) genuine, meaning there is sufficient evidence supporting the claimed factual dispute “to require a jury or judge to resolve the parties' differing versions of the truth at trial.” In re Lemington Home for the Aged, 659 F.3d 282, 290 (3d Cir. 2011) (internal citations omitted).

         A party moving for summary judgment has the initial burden of supporting its assertion that fact(s) cannot be genuinely disputed by citing to particular parts of materials in the record- i.e., depositions, documents, affidavits, stipulations, or other materials-or by showing that: (1) the materials cited by the non-moving party do not establish the presence of a genuine dispute, or (2) the non-moving party cannot produce admissible evidence to support its fact(s). Fed.R.Civ.P. 56(c)(1). The moving party may discharge its burden by “pointing out to the district court” the “absence of evidence to support the nonmoving party's case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). “[T]he nonmoving party bears the ultimate burden of proof” for the claim in question. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 140 (3d Cir. 2004) (quoting Singletary v. Pa. Dept. of Corr., 266 F.3d 186, 192 n.2 (3d Cir. 2001)).

         Conversely, in order to defeat a motion for summary judgment, the non-moving party must support its assertion that fact(s) are genuinely disputed by citing to particular parts of materials in the record, or by showing that: (1) the materials cited by the moving party do not establish the absence of a genuine dispute, or (2) the moving party cannot produce admissible evidence to support its fact(s). Fed.R.Civ.P. 56(c)(1). When determining whether there are any genuine issues of material fact, all inferences should be drawn in favor of the non-moving party. Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir. 2006). In reviewing a motion for summary judgment, the court does not make credibility determinations, and summary judgment is “inappropriate when a case will turn on credibility determinations.” El v. Se. Pa. Transp. Auth., 479 F.3d 232, 237-38 (3d Cir. 2007) (citing Anderson, 477 U.S. at 255).

         IV. Discussion

         Both parties agree in this diversity action that Pennsylvania law applies.

         A. Count I-Breach of Contract

         Defendant asserts three reasons why Plaintiff's loss is not covered under the USIC Policy: the earth movement exclusion, the maintenance exclusion, and the fact that collapses are only covered in limited situations under the policy. Defendant's arguments are without merit and, as such, Defendant's Motion for Summary Judgment as to Count I, breach of contract, has been denied.

         “To prevail on a contract claim under Pennsylvania law, a plaintiff must show ‘(1) the existence of a contract, including its essential terms, (2) a breach of the contract; and, (3) resultant damages.'” Reeves v. Travelers Cos., --F.Supp.3d --, 2017 WL 4930900, at *2 (E.D. Pa. Oct. 31, 2017) (quoting Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman, P.C., 137 A.3d 1247, 1258 (Pa. 2016)). Under Pennsylvania law, the “‘interpretation of an insurance contract regarding the existence or non-existence of coverage is generally performed by the Court.'” Gardner v. State Farm Fire & Cas. Co., 544 F.3d 553, 558 (3d Cir. 2008) (citing Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286, 290 (2007)).

         “Since [an insurance] policy is a contract, the court's duty is to ascertain the intent of the parties as manifested in the language of the agreement.” E. Associated Coal Corp. v. Aetna Cas. & Sur. Co., 632 F.2d 1068, 1075 (3d Cir. 1980). “A policy must be read as a whole and its meaning construed according to its plain language.” Meyer v. CUNA Mut. Ins. Soc., 648 F.3d 154, 163 (3d Cir. 2011). A policy should be interpreted to “give effect to all of its provisions.” Am. Auto. Ins. Co. v. Murray, 658 F.3d 311, 321 (3d Cir. 2011) (internal citation and quotation omitted). “[I]f the court is ‘forced to choose between two competing interpretations of an insurance policy, we are bound, as a matter of law, to choose the interpretation which allows us to give effect to all of the policy's language.'” Gen. Refactories Co. v. First State Ins. Co., 94 F.Supp.3d 649, 661 (E.D. Pa. 2015) (quoting Clarke v. MMG Ins. Co., 100 A.3d 271, 276 (Pa. Super. 2014)).

         “Whether an ambiguity exists is a question of law.” Viera v. Life Ins. Co. of N. Am., 642 F.3d 407, 419 (3d Cir. 2011) (internal citation and quotation omitted). “The court should read policy provisions so as to avoid ambiguities, if the plain language of the contract permits[, ]” and should not torture the language of the policy to create an ambiguity. E. Associated Coal Corp., 632 F.2d at 1075. An insurance contract is ambiguous where it: “(1) is reasonably susceptible to different constructions, (2) is obscure ...


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