Utica Mut. Ins. Co. v. Cincinnati Ins. Co.

361 F.Supp.3d 451

UTICA MUTUAL INSURANCE COMPANY, Plaintiff,

v.CINCINNATI INSURANCE COMPANY, Defendant.

No. 18-cv-1646

United States District Court, E.D. Pennsylvania.

Signed January 15, 2019

Geoffrey B. Fehling, Syed S. Ahmad, Hunton Andrews Kurth LLP, Washington, DC, for Plaintiff.

William H. Catto, Freeman Mathis & Gary, LLP, Philadelphia, PA, Daniel Litchfield, Patrick S. Kenney, Litchfield Cavo LLP, Chicago, IL, for Defendant.

OPINION

Plaintiff's Partial Motion for Summary Judgment, ECF No. 45—Granted in part

Defendant's Motion for Summary Judgment, ECF No. 29—Denied

JOSEPH F. LEESON, JR., United States District Judge

I. INTRODUCTION

In this fire insurance claim dispute, two commercial buildings with separate street addresses were connected by a covered walkway. A fire destroyed one of the buildings, but not the other. The business operating out of the two addresses had a commercial insurance policy issued by Defendant Cincinnati Insurance Company and sought coverage for the damage to the building. The parties, the business's assignee and the insurer, do not dispute that the commercial policy covered damage to the building that did not burn down. The defendant insurer argues that the two buildings were separate and the policy did not cover damage to the destroyed building. The plaintiff assignee argues that, because the buildings were connected, they formed a single building and the coverage for the surviving building extends to the destroyed building as well.

The defendant refused to cover the damage to the destroyed building and the plaintiff sued for breach of the insurance policy. Both parties have moved for summary judgment. This Court concludes that both parties present reasonable interpretations of the policy documents, and thus that the policy is ambiguous. This Court considers extrinsic evidence of the parties' intentions and concludes that it does not resolve the ambiguity one way or another. Therefore, this Court applies the Pennsylvania principle of contra proferentem , construes the policy in favor of coverage, and grants summary judgment in favor of the plaintiff as to liability on its breach of contract claim. However, because a dispute of fact remains concerning the value of the destroyed building to which the plaintiff is entitled under the policy, this Court denies summary judgment with respect to damages.

II. FACTUAL BACKGROUND

The following facts are undisputed:

For many years, Prizer-Painter Stove Works, Inc. conducted business operations at property in Reading, Pennsylvania, comprised of two separate street addresses: 200 Orrton Avenue and 600 Arlington Street. Stat. Facts ¶¶ 1-3.¹ Buildings, each with walls and a roof, stood at 200 Orrton and 600 Arlington and were connected by a covered walkway with walls and a roof. Stat. Facts. ¶¶ 4, 22.

Defendant Cincinnati Insurance Company issued a commercial property insurance policy with various kinds of coverages to Prizer; the policy was effective from July 1, 2015, to July 1, 2018. Stat. Facts. ¶¶ 5, 7.

On April 22, 2016, a fire destroyed 200 Orrton and its contents, but not 600 Arlington. Stat. Facts. ¶ 16. Prizer sought coverage under the policy for the fire damage to 200 Orrton and Cincinnati made a payment under the policy for Prizer's destroyed business personal property located at 200 Orrton, Prizer's lost business income and extra expenses. Stat. Facts. ¶ 17; Philpot Decl. ¶¶ 9-10, Ex. A to Cincinnati's Motion, ECF No. 29-2. Prizer also sought building coverage equal to the cost to replace 200 Orrton, but Cincinnati determined that although the policy provided building coverage for 600 Arlington, it did not provide building coverage to 200 Orrton. Stat. Facts. ¶¶ 18, 23, 30. Cincinnati knew about the enclosed walkway connecting 200 Orrton and 600 Arlington at the time it denied building coverage. Stat. Facts. ¶ 24. Prizer and Prizer's insurance agency, Gallen Insurance, took the position that 600 Arlington and 200 Orrton were considered one building under the policy. Stat. Facts. ¶ 33.

In December 2016, Prizer filed a lawsuit against Gallen Insurance in the Court of Common Pleas for Berks County, Pennsylvania, alleging that Gallen Insurance, as an authorized insurance agent for Cincinnati and Prizer's insurance broker, negligently failed to obtain building coverage for 200 Orrton. Cincinnati's Counterstat. Facts ¶ 57; Utica's Response to Cincinnati's Counterstat. Facts ¶ 57, ECF No. 52; Cincinnati Ex. M, ECF No. 49-14.

On March 19, 2018, Prizer, Gallen Insurance, and Plaintiff Utica Mutual Insurance Company (the errors and omissions liability carrier for the insurance agent, Gallen Insurance) entered an agreement to settle the lawsuit by Prizer. Cincinnati's Counterstat. Facts ¶ 63; Utica Response to Cincinnati's Counterstat. Facts, ¶ 63. As part of this agreement and in exchange for $ 2.8 million, Prizer assigned all claims against Cincinnati resulting from the fire to Utica. Cincinnati's Counterstat. Facts ¶ 64; Utica Response to Cincinnati's Counterstat. Facts, ¶ 64.

Utica filed suit against Cincinnati in this Court on April 19, 2018. Complaint, ECF No. 1. Utica brings claims for breach of contract, reformation of the insurance policy, and bad faith, alleging that Cincinnati wrongly denied Prizer's building coverage claim for 200 Orrton. Cincinnati moved for summary judgment on all of Utica's claims well in advance of the close of discovery, arguing that the policy is unambiguous and provides no building coverage for 200 Orrton. ECF No. 29. Utica later filed a cross-motion for partial summary judgment on its breach of contract claim, arguing that the policy is unambiguous and provides building coverage for 200 Orrton or, if the policy is ambiguous, that extrinsic evidence shows the parties' intentions to provide building coverage for 200 Orrton. ECF No. 45. These motions are ripe for decision.²

III. LEGAL STANDARD

Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c) ; Turner v. Schering-Plough Corp. , 901 F.2d 335, 340 (3d Cir. 1990). A disputed fact is "material" if proof of its existence or nonexistence would affect the outcome of the case under applicable substantive law, and a dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The party moving for summary judgment bears the burden of showing the absence of a genuine issue as to any material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Once such a showing has been made, the non-moving party must go beyond the pleadings with affidavits, depositions, answers to interrogatories or the like in order to demonstrate specific material facts which give rise to a genuine issue. Fed. R. Civ. P. 56 ; Celotex , 477 U.S. at 324, 106 S.Ct. 2548 ; Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (stating that the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts"). The party opposing the motion must produce evidence to show the existence of every element essential to its case, which it bears the burden of proving at trial, because "a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex , 477 U.S. at 323, 106 S.Ct. 2548 ; see also Harter v. G.A.F. Corp. , 967 F.2d 846, 851 (3d Cir. 1992). "Inferences should be drawn in the light most favorable to the non-moving party, and where the non-moving party's evidence contradicts the movant's, then the non-movant's must be taken as true." Big Apple BMW, Inc. v. BMW of N. Am. Inc. , 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied , 507 U.S. 912, 113 S.Ct. 1262, 122 L.Ed.2d 659 (1993).

IV. ANALYSIS

The parties do not dispute that the insurance policy is a valid contract between Prizer and Cincinnati, or that Cincinnati has provided coverage already for Prizer's destroyed business personal property located at 200 Orrton, lost business income, and extra expenses. The issue is whether the policy also required Cincinnati to provide building coverage, or cover the cost of the damage to 200 Orrton.

Utica argues that the policy unambiguously provides building coverage to 200 Orrton because it covers "the building or structure" described as 600 Arlington. Utica urges this Court to adopt the plain meaning of "building" as a structure with a roof and walls and argues that because an enclosed walkway with walls and a roof connects 200 Orrton and 600 Arlington, the structures are one "building" under the building coverage for 600 Arlington. Utica also argues that, to the extent the policy is ambiguous, it must be resolved in favor of coverage. In support of resolving any ambiguity in its favor, Utica points to extrinsic evidence and argues that the standard trade usage of the term "building" and the course of Pritzer and Cincinnati's dealings show their intent that the coverage for 600 Arlington would include 200 Orrton.

Cincinnati argues that the policy unambiguously provides no building coverage for 200 Orrton. Cincinnati points to the policy's Schedule of Locations, which lists 600 Arlington and 200 Orrton as separate locations, numbers 1 and 2, respectively. The policy's Declarations page lists building coverage only for what Cincinnati interprets as Location 1, but lists no building coverage for Location 2. Thus, argues Cincinnati, the policy unambiguously excludes building coverage for 200 Orrton. Cincinnati argues that, even if the policy is ambiguous, the extrinsic evidence Utica cites does not support Utica's single-building theory because it does...