Wenk v. State Farm Fire & Cas. Co.

228 A.3d 540

Jeffrey R. WENK and Lee Ann Wenk a/k/a Lee Ann Madden

v.STATE FARM FIRE AND CASUALTY COMPANY and H.J.M. Enterprises, Inc. tdba FireDEX of Pittsburgh

Appeal of: State Farm Fire and Casualty

Jeffrey R. Wenk and Lee Ann Wenk a/k/a Lee Ann Madden Appellants

v.State Farm Fire and Casualty Company and H.J.M. Enterprises, Inc. tdba FireDEX of Pittsburgh

Jeffrey R. Wenk and Lee Ann Wenk a/k/a Lee Ann Madden

v.State Farm Fire and Casualty Company and H.J.M. Enterprises, Inc. tdba FireDEX of Pittsburgh

Appeal of: H.J.M. Enterprises, Inc. tdba FireDEX of Pittsburgh

No. 1284 WDA 2018

No. 1287 WDA 2018

No. 1288 WDA 2018

Superior Court of Pennsylvania.

Argued October 22, 2019

Filed February 7, 2020

Reargument Denied April 1, 2020

Mark A. Martini, Pittsburgh, for State Farm.

Louis C. Long, Pittsburgh, for H.J.M. Enterprises.

Steven E. H. Gibbs, Sewickley, for Wenk, J. and L.

BEFORE: SHOGAN, J., LAZARUS, J., and OLSON, J.

OPINION BY SHOGAN, J.:

Jeffrey and Lee Ann Wenk ("the Wenks" or "Appellants"),¹ who are Allegheny County homeowners in Upper St. Clair Township in Allegheny County, appeal from the judgment entered in this case on July 25, 2018, following a bench trial. State Farm Fire and Casualty Company ("State Farm" or "Appellee") and H.J.M. Enterprises, Inc. tdba FireDEX of Pittsburgh ("FireDEX" or "Appellee") filed cross appeals. We affirm in part and vacate and remand in part.

The Wenks filed a complaint against State Farm and FireDEX asserting claims of bad faith against State Farm and the following claims against both State Farm and FireDEX: breach of contract; breach of warranty; violations of Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. §§ 201-1, et seq. ; and intentional infliction of emotional distress.

In a Memorandum Opinion accompanying the verdict, the trial court summarized the facts of the case as follows:

The Plaintiffs, (hereinafter "the Wenks") are homeowners in Allegheny County. The Wenks hired a contractor^{[2 ]} to perform remodeling on their home. In the process, the contractor, in an attempt to destroy a bee's nest, poured gasoline within the framework of the Wenks' home,³ thereby contaminating the wood structure in a corner of the house. The Wenks contacted their homeowner's insurer, State Farm, to submit a claim and request assistance in repairing the damage. Following consultation with State Farm, the Wenks agreed to permit a State Farm approved contractor, FireDEX, to perform the remedial work on their home. FireDEX prepared an estimate including a scope of work that involved removing all of the contaminated lumber plus four additional feet of contaminated material, replacing the material, and returning the home to its original condition.

During the course of FireDEX's work, the Wenks, and in particular Mr. Wenk[,] took issue with an ever-increasing number of perceived deficiencies in the work performed by FireDEX. Additionally, the Wenks began to believe that the work performed by FireDEX was causing additional structural damage to other aspects of their home. The Wenks requested that State Farm engage an engineer to address their concerns regarding FireDEX's work and their concerns regarding damage to their home. State Farm declined to do so. The Wenks independently engaged their own engineer to conduct a review of the work being performed. The Wenks' engineer identified what he considered to be deficient aspects of the work performed and offered an alternative remedial scope of work necessary to return the home to its original condition. State Farm declined to accept these recommendations. Nonetheless, as complaints and concerns continued to escalate, State Farm ultimately did review the work being performed by FireDEX, engaged an engineer of its choosing to review the work of FireDEX, and did ultimately confirm that some of the work was deficient.

In the process of allowing for and permitting the re-inspection of their home by each of the engineers, the Wenks made the unilateral decision to remove large portions of walls, flooring, and ceiling to allow the inspectors and engineers to see what the Wenks believed was evidence of deficient work by FireDEX. The Wenks' engineer agreed that these deconstruction exposures were helpful in permitting him to understand the problems and formulate solutions to the problems. State Farm's engineer did not believe that these deconstruction exposures of the home were at all necessary, but rather constituted unnecessary destruction of areas of the home. Principally because of the removal of the floors and walls, the Wenks' home became, in the Wenks' view, uninhabitable. Accordingly, they moved to alternative housing. Because they moved, they requested alternative living[-]expense payments under their State Farm insurance policy. Payment for these expenses were [sic] originally declined by State Farm, however, they were later approved, essentially, (in the view of State Farm,) as a good will gesture. In addition, the deconstruction of the home by the Wenks created a need for additional work to return the home to its original condition.

The Wenks' engineer and State Farm's engineer did not agree as to what remedial structural changes were necessary in order to ensure a structurally sound reconstruction of the Wenks' home so as to return it to its original condition. The Wenks generally became dissatisfied and suspicious of the work performed by FireDEX. In particular, the Wenks believed that FireDEX's work was unworkmanlike, unprofessional and often performed contrary to the applicable building codes and regulations. As a result, the Wenks ordered FireDEX from the site and refused to permit FireDEX to continue any work on the home.

The Wenks ultimately engaged CCTV [Technology ("CCTV") ] to perform the reconstruction work consistent with the plans and design drawings of the Wenks' independently engaged engineer. CCTV is an entity owned by Mr. Wenk's parents. Mr. Wenk acknowledged that his father plays no active role in the company and that his mother serves purely as a treasurer. Mr. Wenk, while not an "owner" of CCTV, serves as the company's project manager and is personally in charge of all material operations of the company.^[4] Accordingly, Mr. Wenk agreed with the proposition advanced by defense counsel that he, Mr. Wenk, negotiated an oral contract on behalf of the Wenks (himself and his wife) with himself, as project manager of and on behalf of CCTV, wherein CCTV would perform reconstruction work on the Wenks' home. Mr. Wenk offered extensive testimony regarding the manner in which he attempted to ensure that CCTV's costs and expenses charged to the Wenks were fair and reasonable. Nonetheless, because of the close relationship between CCTV and the Wenks, [State Farm and FireDEX] questioned the fairness and reasonableness of the CCTV estimate, charges, and expenses.

Memorandum Opinion and Verdict, 6/7/17, at 1–3.

All parties filed motions for summary judgment, which were denied on September 21, 2016. A bench trial occurred between April 17, and April 28, 2017.⁵ The trial court issued a Memorandum Opinion and Verdict on June 7, 2017, and judgment was entered by praecipe on July 25, 2018. The trial court found as follows:

• In favor of State Farm and against the Wenks on claims sounding in breach of warranty, intentional infliction of emotional distress, UTPCPL and bad faith (whether statutory or institutional), including the demand for exemplary treble and punitive damages;

• In favor of the Wenks and against State Farm on the Wenks' claim for breach of contract and granted judgment for the Wenks in the amount of $27,500;

• In favor of the Wenks and against FireDEX on the Wenks' claim for breach of contract, breach of warranty, and UTPCPL, awarding the Wenks $70,000 but declining to award exemplary treble damages, punitive damages, or attorney fees on the Wenks' UTPCPL claims and ruling the $70,000 was recoverable against either FireDEX or State Farm because FireDEX had acted under the direction and supervision of State Farm.

Memorandum Opinion and Verdict, 6/7/17, at 5–7. All parties filed post-trial motions. At a status conference on August 30, 2017, all parties agreed that the trial court would defer ruling on post-trial motions pending its ruling on State Farm and FireDEX's argument that the Wenks' award should be offset by the settlement, filed under seal, in the related case, Wenk v. D&R Equipment . The Wenks argued that the settlement should not be offset because State Farm and FireDEX were not joint tortfeasors in the related case.⁶

On March 6, 2018, the trial court denied setoff. Order, 3/6/18. State Farm filed a praecipe on July 25, 2018, for entry of judgment upon a nonjury verdict pursuant to Pa.R.C.P. 227.4. The Wenks assert that as a result, the trial court did not rule on the parties' motions for post-trial relief other than the setoff issue raised by State Farm and FireDEX.⁷ Appellant's Brief at 7. The Wenks appealed on August 23, 2018, and both State Farm and FireDEX filed cross-appeals on September 5, 2018. All parties and the trial court complied with Pa.R.A.P. 1925.

Issues in the Wenks' Appeal, 1287 WDA 2018

The Wenks raise the following issues:

1. Whether institutional evidence, such as an insurer's corporate policies and practices related to the handling of claims by its insureds, is as a matter of law irrelevant to a claim for insurance bad faith under 42 Pa. C.S. § 8371 ?

2. Irrespective of the answer to the Question No. 1, supra, whether the trial court abused its discretion when it determined that "it cannot be reasonably said, given the facts and evidence adduced at trial, that State Farm lacked a reasonable basis for denying benefits and/or that State Farm knew or recklessly disregarded its lack of a reasonable basis to deny benefits to the [the Wenks?]"

3. Whether an insurance company's handling of claims is a consumer transaction of the nature intended to be protected under Pennsylvania's Unfair Trade

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