State Farm Fire & Cas. Co. v. McDermott

STATE FARM FIRE AND CASUALTY CO. v. PATRICK McDERMOTT, d/b/a PATRICK McDERMOTT PLASTERING

CIVIL ACTION NO. 11-5508

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

October 14, 2014

MEMORANDUM

TUCKER, C.J.

Presently before the Court is Plaintiff State Farm Fire and Casualty Company's Motion for Summary Judgment (Doc. 16), Defendant Patrick McDermott d/b/a Patrick McDermott Plastering's Answer in Response to Plaintiff's Summary Judgment Motion (Doc. 17), Defendant McDermott's Cross-Motion for Summary Judgment (Doc. 18), Defendant McDermott's Memorandum of Law in Support of his Cross-Motion for Summary Judgment (Doc. 19), Plaintiff State Farm's Response in Opposition to Defendant's Cross-Motion for Summary Judgment (Doc. 20), and Defendant McDermott's Reply to Plaintiff's Response in Opposition to Defendant's Cross-Motion for Summary Judgment (Doc. 21). Upon consideration of the parties' motions with briefs and exhibits, and for the reasons set forth below, Plaintiff's Motion for Summary Judgment is GRANTED and Defendant's Cross-Motion for Summary Judgment is DENIED.

I. FACTS AND PROCEDURAL BACKGROUND¹

Because the Court writes primarily for the parties, the Court sets forth only those facts that are relevant to its conclusion. Plaintiff State Farm Fire and Casualty Company ("StateFarm") issued five insurance policies providing comprehensive business liability coverage to Defendant Patrick McDermott, here doing business as Patrick McDermott Plastering ("McDermott").² (Second Am. Compl. ¶ 7; Answer ¶ 7.) In March of 2012, McDermott, along with another party, was named in an action for negligence and breach of contract/warranty brought by the PulteGroup (hereafter referred to as the "underlying PulteGroup action"). (Second Am. Compl. ¶ 11; Answer ¶ 11.) The underlying PulteGroup action claimed that on or about February 12, 2002, McDermott entered into a building contract with the PulteGroup to "plaster/stucco and install window and door flashing and felt paper for approximately 299 homes in the residential community of the Traditions at Washington Crossing, located in Washington Crossing, Bucks County, PA." (PulteGroup, Inc. a/k/a Pulte Homes, Inc. a/k/a Pulte Home Corporation of Delaware County v. Patrick McDermott Plastering, LLC and Nassau Construction Company, LLC, No. 2010-08958, Fourth Am. Compl. ¶¶ 4-5 (Pennsylvania Court of Common Pleas for Bucks County filed Mar 26, 2012)). From approximately May 1, 2002 through September 1, 2005, McDermott plastered and/or stuccoed and installed window and door flashing and felt paper for the approximately 299 homes located in the Traditions at Washington Crossing community. (Id. at ¶ 6.) The PulteGroup further alleged that on or about October 23, 2008, the PulteGroup, with the help of a water intrusion specialist, became aware that McDermott had "failed to install a drip cap under the patio doors, improperly fastened the ledger board of the deck to the homes, failed to properly install felt paper under the soffit or between the back walls and the fascia, failed to properly flash under the window flanges, failedto use felt paper behind the cladding on the header, etc." (Id. at ¶ 10.) Because of these defects, the PulteGroup claims, water intrusion became an ongoing and reoccurring issue for the approximately 299 homes in the residential community, causing losses to PulteGroup through lawsuits filed against them by homeowners. (Id. at ¶¶ 11-14.)

McDermott sought out defense and indemnity from State Farm for the underlying PulteGroup action. (Second Am. Compl. ¶ 14; Answer ¶ 14.) State Farm claims they reserved their right to disclaim coverage under certain exclusions and provisions found within the business liability insurance policies. (Second Am. Compl. ¶ 15, Ex. C.) State Farm is currently providing McDermott with a defense in the PulteGroup action. (Second Am. Compl. ¶ 15; Answer ¶ 15.) State Farm has since filed the instant suit challenging their obligation to cover McDermott.

On September 1, 2011, State Farm filed the instant action with the Eastern District of Pennsylvania and later filed two amendments, the final amendment being filed on March 28, 2013. State Farm seeks a determination that it has no obligation to defend or indemnify McDermott from the PulteGroup action based on certain exclusions and provisions noted in the insurance policies issued to McDermott. On May 14, 2013, State Farm filed the instant Motion for Summary Judgment, which was followed by a Cross-Motion for Summary Judgment by McDermott on June 13, 2013 and various supporting briefs and documents from both parties. The Court's analysis follows.

II. STANDARD OF REVIEW

Summary judgment is awarded only when "there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(a); Liberty Mut. Ins. Co. v. Sweeney, 689 F.3d 288, 292 (3d Cir. 2012). A factual dispute between theparties will not defeat a motion for summary judgment unless it is both genuine and material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-49 (1986); Dee v. Borough of Dunmore, 549 F.3d 225, 229 (3d Cir. 2008). A factual dispute is genuine if a reasonable jury could return a verdict for the non-movant, and it is material if, under the substantive law, it would affect the outcome of the suit. See Anderson, 477 U.S. at 248; Fakete v. Aetna, Inc., 308 F.3d 335, 337 (3d Cir. 2002).

The moving party must show that if the evidentiary material of record were reduced to admissible evidence in court, it would be insufficient to permit the non-moving party to carry its burden of proof. See Celotex v. Catrett, 477 U.S. 317, 327 (1986). Once the moving party has carried its burden under Rule 56, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Scott v. Harris, 550 U.S. 372, 380 (2007). Under Federal Rule of Civil Procedure 56(e), the opposing party must set forth specific facts showing a genuine issue for trial and may not rest upon the mere allegations or denials of its pleadings. See Marten v. Godwin, 499 F.3d 290, 295 (3d Cir. 2007).

At the summary judgment stage the court's function is not to weigh the evidence and determine the truth of the matter, but rather to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249 (citations omitted); Jiminez v. All American Rathskeller, Inc., 503 F.3d 247, 253 (3d Cir. 2007). In doing so, the court must construe the facts and inferences in the light most favorable to the non-moving party. See Horsehead Indus., Inc. v. Paramount Communications, Inc., 258 F.3d 132, 140 (3d Cir. 2001). The court must award summary judgment on all claims unless the non-moving party shows through affidavits or admissible evidence that an issue of material fact remains. See, e.g., Love v. Rancocas Hosp.,270 F. Supp. 2d 576, 579 (D.N.J. 2003); Koch Materials Co. v. Shore Slurry Seal, Inc., 205 F. Supp. 2d 324, 330 (D.N.J. 2002).

The filing of Cross-Motions for Summary Judgment does not change this analysis. See Transportes Ferreos de Venezuela II CA v. NKK Corp., 239 F.3d 555, 560 (3d Cir. 2001); Appelmans v. City of Philadelphia, 826 F.2d 214, 216 (3d Cir. 1987). The filing of such claim by the parties "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." Transportes Ferreos de Venezuela II CA, 239 F.3d at 560 (citation omitted). If review of Cross-Motions for Summary Judgment reveals no genuine issue of material fact, then judgment will be entered in favor of the party deserving of judgment in light of the law and undisputed facts. See Id.; Iberia Foods Corp. v. Romeo, 150 F.3d 298, 302 (3d Cir. 1998) (citation omitted); FED. R. CIV. P. 56(c).

III. DISCUSSION

This Court sits in diversity and therefore must apply state substantive law and federal procedural law. See Liggon-Redding v. Estate of Sugarman, 659 F.3d 258, 262 (3d Cir. 2011); Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). McDermott is a Pennsylvania limited liability corporation with its principal place of business in Glenside, PA. (Counter-cl. ¶ 1; Answer to Counter-cl ¶ 1.) State Farm is a wholly-owned subsidiary of State Farm Mutual Automobile Insurance Company, an Illinois mutual insurance company with its principal place of business in Bloomington, Illinois. (Counter-cl. ¶ 2; Answer to Counter-cl ¶ 2.) Both parties claim jurisdiction through 28 U.S.C. 1332(a). (Second Am. Compl. ¶ 2; Counter-cl ¶ 4.) Both parties seek declaratory judgment under 28 U.S.C. § 2201 and Rule 57 of the Federal Rules of Civil Procedure. (Second Am. Compl. ¶ 1; Counter-cl. ¶ 3.) This case does not involve mattersgoverned by the Federal Constitution or acts of Congress, the alleged action here occurred in Philadelphia, and both parties make claims of diversity jurisdiction and use Pennsylvania state law to support their arguments. (Second Am Compl. ¶¶ 2-15, Ex. B; Answer ¶¶ 2-15; Counter-cl. ¶ 4; Answer to Counter-cl ¶ 4; Pl.'s Mot. for Summ. J. ¶¶ 33-105; Mem. of Law in Support Cross-Mot. for Summ. J. 2-8.) Additionally, Under Pennsylvania choice of law rules, an insurance contract is governed by the law of the state in which the contract was made. See Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir. 1999) (citing Travelers Indent. Co. v. Fantozzi ex rel. Fantozzi, 825 F. Supp. 80, 84 (E.D.Pa. 1993)). Pennsylvania state law will therefore govern.

A. The Underlying PulteGroup Action Complaint Does Not Allege an "Occurrence" as Required by the State Farm Policies

The Supreme Court of Pennsylvania has established that "[a] carrier's duty to defend and indemnify an insured in a suit brought by a third party depends upon a determination of whether the third party's complaint triggers coverage." Kvaerner Metals Div. of...