Katzenmoyer v. Allstate Ins. Co.

GINGER KATZENMOYER

v.ALLSTATE INSURANCE COMPANY

CIVIL ACTION No. 11-3427

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

August 30, 2012

Norma L. Shapiro, J.

MEMORANDUM

Before the court are cross-motions for summary judgment, an evidentiary motion in limine, and a motion to file a post-argument brief in an insurance dispute between Ginger Katzenmoyer ("Katzenmoyer") and Allstate Insurance Company ("Allstate"). The underlying incident occurred eleven years ago when Katzenmoyer attended a party at the house of a co-worker, Donald Drumheller ("Drumheller"), who invited Katzenmoyer to ride on his ATV through a wooded area near his house. He then drove the ATV into a raised manhole cover. The impact threw Katzenmoyer from the ATV and caused her to suffer serious injuries.

Allstate insured Drumheller's house at the time of the incident. Because the incident occurred in a wooded area away from Drumheller's house, Allstate filed a declaratory judgment action before the Honorable Anita B. Brody to determine whether it had a duty to defend and indemnify Drumheller. After a state court jury verdict against Drumheller, he assigned his rights under the insurance contract to Katzenmoyer.

Katzenmoyer, as Drumheller's assignee, now brings this action against Allstate for breach of contract (common-law bad faith) under Pennsylvania law.¹ Her claim concerns Allstate's refusal to settle with her by paying the face of the policy between June 7 and July 7, 2004. See Katzenmoyer Cross-Mot. Summ. J. at 3. As stated by Katzenmoyer, Allstate "acted negligently, unreasonably and recklessly by ignoring the policy limit settlement demand made by Katzenmoyer's attorney [on June 7, 2004]." See Katzenmoyer Resp. Cross-Mot. Summ. J. at 1. The parties have cross-moved for summary judgment. The Allstate cross-motion for summary judgment will be granted, the Katzenmoyer cross-motion for summary judgment will be denied, the Katzenmoyer motion for leave to file a post-argument brief will be granted, and the Allstate evidentiary motion in limine will be denied as moot.

I. Facts

This action has a complex 11-year-long procedural history. The underlying ATV incident occurred on September 20, 2001. Five months later, Katzenmoyer wrote a letter to Allstate and requested the policy limit of Drumheller's insurance policy—$100,000—in exchange for a full release for Drumheller. Allstate refused. Katzenmoyer then brought a personal injury action against Drumheller in the Montgomery County Court of Common Pleas on June 3, 2002 ("Katzenmoyer v. Drumheller"), and Drumheller sent Allstate a letter asking it to settle the claim.

On September 20, 2002, Allstate, filing a declaratory judgment action in federal court before the Honorable Anita B. Brody ("Allstate v. Drumheller"), alleged the ATV incident occurred away from the insured premises, and denied coverage under its policy.² In August 2003, Judge Brody granted Allstate's motion for summary judgment and ordered that Allstate had neither a duty to defend nor a duty to indemnify Drumheller in Katzenmoyer v. Drumheller. See Allstate Ins. Co. v. Drumheller, 285 F. Supp. 2d 605 (E.D. Pa. 2003). Katzenmoyer and Drumheller appealed the decision.

On May 11, 2004, while the federal appeal was pending, the Pennsylvania Superior Court decided State Farm Fire & Casualty Company v. MacDonald, 850 A.2d 707 (Pa. Super. Ct. 2004). The MacDonald court found State Farm had a duty to defend and indemnify its insured under circumstances similar to those in Allstate v. Drumheller.

On June 7, 2004, Katzenmoyer, citing MacDonald, sent a letter to Allstate and sought the $100,000 policy limit in exchange for a full release for Drumheller. Katzenmoyer notified Allstate that if it failed to tender the $100,000 policy limit within 30 days, she would hold Allstate responsible for any excess verdict in Katzenmoyer v. Drumheller. Two days later, Allstate sent a letter to Katzenmoyer stating: (1) MacDonald was factually different than Allstate v. Drumheller; and (2) State Farm had filed a petition for allocatur in MacDonald, so MacDonald's effecton Allstate v. Drumheller was unclear. Allstate did not tender the $100,000 policy limit to Katzenmoyer within 30 days of the settlement demand.

On September 30, 2004, the Court of Appeals in Allstate v. Drumheller vacated Judge Brody's order that Allstate had neither a duty to defend nor a duty to indemnify Drumheller, and remanded for further consideration in light of MacDonald. See Allstate Ins. Co. v. Drumheller, 115 F.App'x 528 (3d Cir. 2004). The Pennsylvania Supreme Court did not deny allocatur in MacDonald until October 27, 2004.

On November 1, 2004, Judge Brody held a meeting with Allstate, Drumheller, and Katzenmoyer to discuss a briefing schedule on remand. At the meeting, Judge Brody suggested it was unlikely she would find in favor of Allstate in light of MacDonald. See Letter from Allstate counsel to Allstate (Pl.'s Mot. Summ. J. Ex. 36). Judge Brody ordered the parties to file briefs discussing how MacDonald affected Allstate v. Drumheller. See id. at Exs. 38-39. Allstate offered the $100,000 policy limit to Katzenmoyer on November 16, 2004. Katzenmoyer declined.

On March 16, 2005, Judge Brody, citing MacDonald, held Allstate had a duty to defend and indemnify Drumheller in Katzenmoyer v. Drumheller. Allstate appealed the decision.

While the appeal was pending, Katzenmoyer offered to release Drumheller and Allstate for $750,000. Allstate declined.

On June 27, 2006, the Court of Appeals, in a 2-to-1 decision (Garth, J., dissenting), affirmed Judge Brody's decision that Allstate had a duty to defend andindemnify Drumheller. See Allstate Ins. Co. v. Drumheller, 185 F.App'x 152, 153 (3d Cir. 2006). In August 2006, Allstate offered to settle with Katzenmoyer for $100,000. In July 2007, Katzenmoyer again offered to release Drumheller and Allstate for $750,000. The parties failed to settle.

On February 26, 2009, a state court jury in Katzenmoyer v. Drumheller rendered a verdict against Drumheller for $1,500,000. In March 2009, Allstate requested a release of all claims against Drumheller and Allstate in return for $100,000. Katzenmoyer would accept no less than $1,975,000. The parties again failed to settle.

In April 2010, Drumheller assigned to Katzenmoyer all claims, causes of action, demands, titles, or rights he ever had against Allstate in return for his release. Katzenmoyer initiated this action in July 2010 in the Philadelphia County Court of Common Pleas, and Allstate removed the action to this court. Allstate tendered the $100,000 policy limit to Katzenmoyer on September 14, 2010.

II. Legal Standard

Summary judgment is appropriate "where the pleadings, depositions, answers to interrogatories, admissions, and affidavits show there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); Meditz v. City of Newark, 658 F.3d 364, 369 (3d Cir. 2011). The court must view all evidence and draw all inferences in the light most favorable to the non-moving party. Id.

Where, as here, the parties have presented cross-motions for summary judgment, the court considers each party's motion individually. Each side bears theburden of establishing a lack of genuine issue of material fact.

Cross-motions are no more than a claim by each side that it alone is entitled to summary judgment, and the making of such inherently contradictory claims does not constitute an agreement that if one is rejected the other is necessarily justified or that the losing party waives judicial consideration and determination whether genuine issues of material fact exist.

Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir. 1968).

III. The Allstate cross-motion for summary judgment

Allstate moves for summary judgment and argues: (1) the statute of limitations bars both claims; and (2) Allstate had a reasonable basis to deny Katzenmoyer's settlement offer in June 2004.

A. Statute of limitations

Allstate denied Katzenmoyer's settlement offer on July 7, 2004—30 days after Katzenmoyer's counsel sent the settlement offer letter. The Katzenmoyer v. Drumheller jury rendered a verdict against Drumheller for $1,500,000 on February 26, 2009. Katzenmoyer, as Drumheller's assignee, initiated this action against Allstate on July 28, 2010.

Under Pennsylvania law, the limitations period for common-law bad faith claims is 4 years. CRS Auto Parts, Inc. v. Nat'l Grange Mut. Ins. Co., 645 F. Supp. 2d 354, 365 (E.D. Pa. 2009). Katzenmoyer's action is time-barred if the limitations period began on the date when Allstate denied the settlement offer on July 7, 2004, and not time-barred if it began when the jury rendered the verdict against Drumheller on February 26, 2009. The issue is whether the limitations period began when Allstate denied the settlement offer or when the jury rendered theverdict against Drumheller. The Pennsylvania Supreme Court has not expressly addressed the issue.

Allstate argues "the statute of limitations begins to run when a right to institute and maintain a suit arises," and "a claim accrues when a plaintiff is harmed and not when the precise amount or extent of damages is determined." See Allstate Mot. Summ. J. at 18 (quoting Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 224-25 (3d Cir. 2005) and Adamski v. Allstate Ins. Co., 738 A.2d 1033, 1042 (Pa. Super. Ct. 1999)). Katzenmoyer argues Drumheller could not have maintained a bad faith suit against Allstate without showing damages, so the limitations period should begin when the jury rendered the verdict against him.

Allstate cites T.A. v. Allen, 868 A.2d 594 (Pa. Super. Ct. 2005), as a case in which the Pennsylvania Superior Court held that a "cause of action for bad faith refusal to settle based on a claim that there is no coverage accrues at the time the issuer declines a settlement offer within the policy limits." See Allstate Resp. to Katzenmoyer Mot. Summ. J. at 8,...