United States District Court, W.D. Pennsylvania
GIBSON UNITED STATES DISTRICT JUDGE
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.
Jurisdiction and Venue
Court has subject-matter jurisdiction over this dispute under
28 U.S.C. § 1332. American is a citizen of both Delaware
and Georgia. Custom is a citizen of
Pennsylvania. Thus, there is complete diversity among
the parties. Additionally, the amount in controversy exceeds
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
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.)
Custom's Workers' Compensation Coverage
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.)
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.)
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.)
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.)
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,
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.
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.)
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.)
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 ¶ ...