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American Builders Insurance Co. v. Custom Installations Contracting Services, Inc.

United States District Court, W.D. Pennsylvania

July 29, 2019

AMERICAN BUILDERS INSURANCE COMPANY, Plaintiff,
v.
CUSTOM INSTALLATIONS CONTRACTING SERVICES, INC. Defendant, and COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF LABOR & INDUSTRY and UNINSURED EMPLOYERS GUARANTY FUND, Intervenor Defendants.

          MEMORANDUM OPINION

          KIM R. GIBSON UNITED STATES DISTRICT JUDGE

         I. Introduction

         Before the Court is Plaintiff American Builders Insurance Company's ("American") Partial Motion for Summary Judgment as to Count II of its Amended Complaint. (ECF No. 105.) Count II of Plaintiff's Amended Complaint alleges a violation of the Pennsylvania Insurance Fraud statute, 18 Pa. CONS. STAT. § 4117(b)(4). Intervenor Defendants-the Commonwealth of Pennsylvania Department of Labor & Industry and the Uninsured Employers Guaranty Fund (collectively, "the Commonwealth") -filed a response to American's motion. (ECF No. 109.) Defendant Custom Installations Contracting Services, Inc. ("Custom") has not filed a response to this motion. For the reasons that follow, the Court will DENY Plaintiff's Motion.

         II. Jurisdiction and Venue

         The Court has subject-matter jurisdiction over this dispute under 28 U.S.C. § 1332. American is a citizen of both Delaware and Georgia.[1] Custom is a citizen of Pennsylvania.[2] Thus, there is complete diversity among the parties. Additionally, the amount in controversy exceeds $75, 000.[3]

         Venue is proper under 28 U.S.C. § 1391(b)(1) and (2) because a defendant, Custom, resides in the Western District of Pennsylvania, and a substantial part of the acts giving rise to this suit occurred in the Western District of Pennsylvania.

         III. Background

         A. Factual History

         The following facts are undisputed unless noted. This case arises from Custom's 2015 application for workers' compensation coverage with American. American sells workers' compensation insurance policies to Pennsylvania companies. (ECF No. 110 ¶ 2.) Custom describes the work it does as "commercial remodeling," although the specific work that Custom does is in dispute. (ECF No. 22 ¶ 15; ECF No. 108 at 13.)

         1. Custom's Workers' Compensation Coverage

         Since 2012, Custom authorized Ebensburg Insurance Agency ("EIA"), an insurance broker, to secure workers' compensation policies on its behalf. (ECF No. 110 ¶ 4.) From 2012 until 2014, EIA obtained workers' compensation insurance for Custom on an annual basis through the State Workers Insurance Fund ("SWIF"). (Id. ¶ 5.)

         Beginning in the 2015 policy year, Custom asked EIA to move its workers' compensation insurance from SWIF to a commercial insurer to obtain a different premium and enjoy better customer service. (Id. ¶ 9.) On June 15, 2015, Custom completed a Contractors' questionnaire for Lackawanna Insurance Group ("Lackawanna") and returned this questionnaire to EIA for submission. (Id. ¶ 12.) On this form, Custom disclosed that its work was evenly split between commercial and remodeling projects and that ten percent of its work involved roofing. (Id. ¶ 13; ECF No. 105-1 at 161.) Custom indicated that it does not perform work at heights above two stories and that it utilizes aerial lifts in its work. (ECF No. 110 ¶ 13.) The Commonwealth contends that there is no evidence showing that ten percent of Custom's work involves roofing. (Id.)

         Additionally, on June 22, 2015, Custom completed a Contractors Supplemental Application for Eastern Alliance Insurance Group ("Eastern") and returned this application to EIA for submission. (Id. ¶ 10; ECF No. 105-1 at 160.) In this application, Custom disclosed that fifty percent of its work involved "working on rooftops." (ECF No. 110 ¶ 11.) The Commonwealth again contends that there is no evidence that this disclosure accurately describes the amount of work that Custom does on rooftops. (Id.) Eastern contacted EIA on the same day EIA submitted the application, and declined to provide a quote for Custom "due to commercial work of 50%, and higher than normal roofing work." (Id. ¶ 14; ECF No. 105-1 at 160.)

         On May 28, 2015, prior to either Custom or EIA submitting applications for coverage with Eastern or Lackawanna, EIA employee Kurtis DeYulis completed and submitted an initial application to American for workers' compensation coverage on Custom's behalf. (ECF No. 105-1 at 167.) EIA edited the application and re-submitted it on July 17, 2015 after American requested additional information. (ECF No. 109 at 5.) American approved Custom's revised application on the same day. (Id.; ECF No. 105-1 at 167.)

         In the application, EIA indicated that Custom's work included commercial carpentry, office work, and residential carpentry. (ECF No. 110 ¶ 17.) Custom's application indicated that it did not do any roofing work. (ECF No. 22 ¶ 22.) The application also states three separate times that Custom does not do any work at heights above fifteen feet. (Id. ¶¶ 16, 18, 19; ECF No. 105-1 at 154, 157.)

         American's application for workers' compensation coverage included a clause stipulating the following:

Any person who knowingly and with intent to defraud any insurance company or another person files an application for insurance or statement of claim containing any material false information or conceals for the purpose of misleading information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime and subjects the person to criminal and civil penalties.

(ECF No. 22 ¶ 24.) A Custom agent, Michael Bichko, signed this application. (Id. ¶ 25.) Bichko testified that he assumed EIA prepared the application with information it already had on file. (ECF No. 109 at 6-7.) He also testified that he would not have signed the application if he knew that the information it contained was false. (Id.)

         Mr. DeYulis, who filled out the application for workers' compensation coverage with American, did not fill out the applications for coverage with Lackawanna or Eastern. (ECF No. 109 at 6.) American contends that the disparate figures Custom gave to other potential insurers show that it intentionally provided false information to American. (ECF No. 106 at 6.) However, the Commonwealth alleges that these differences were the result of negligence and a lack of communication between EIA employees. (ECF No. 109 at 15.)

         On July 20, 2015, American issued Custom a workers' compensation insurance policy to last one year from the day of issuance. (ECF No. 110 ¶ 21.) American contends that it does not provide workers' compensation insurance for any Pennsylvania company that engages in roofing of any kind. (ECF No. 22 ¶ 11.) American states that it would not have issued Custom a workers' compensation insurance policy if it knew Custom engaged in roofing work. (ECF No. 107 ¶ 26.) The Commonwealth notes that American's statement about insuring roofers contradicts evidence showing "roofers" as an eligible class for which American insures risks. (ECF No. 109-1 at 10.)

         American contends that Custom, through either "mutual mistakes of fact" or intentional misrepresentations, provided false information on its application. (ECF No. 22 ¶ 3, 59; ECF No. 106 at 4-5; ECF No. 107 ¶ 19.) American states that "Custom's answers, which generally misrepresented the nature of its work and specifically misrepresented that it did not perform roofing work or work above the defined height of fifteen feet, contained essential facts that formed the inducement for American to issue the Policy to Custom." (ECF No. 22 ¶ 26.) Custom admits that the answers it provided on the application were inaccurate. (Id.) The Commonwealth, however, alleges that Custom never intentionally provided false information to American. (ECF No. 109 at 14-15; ECF No. 110 ¶ 19.) Instead, it argues that the inaccuracies were only the result of negligence or miscommunications between Custom and EIA. (Id.) EIA employees testified that they did not obtain any new information from Custom on the scope of their work. (ECF No. 110 ΒΆ ...


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