NORA BARRY FISCHER, District Judge.
This is a breach of contract action in which Plaintiff Corner Pocket alleges that Defendant Travelers Insurance failed to properly honor Plaintiff's insurance policy ("the Policy"). (Docket No. 37 at 1-2). Pending before the Court is a Summary Judgment Motion filed by Defendant Travelers Insurance ("Travelers"). (Docket No. 33). Plaintiff responded with a brief in opposition to this Motion. (Docket No. 37). Defendant has filed a reply. (Docket No. 39). Following briefing and the Court's review of the submitted Policy, oral argument on the Motion was heard on July 19, 2013. (Docket No. 40). Subsequently, Defendant submitted proof of loss documents. (Docket No. 42). Plaintiff answered with its own supplemental documents related to proof of loss, (Docket No. 44), to which Defendant has filed a response. (Docket No. 46). Defendant's Motion for Summary Judgment is now ripe for disposition. For the following reasons, said Motion [33] is DENIED.
The Policy at issue between the parties provides property damage coverage, among other coverages, to Plaintiff's building located at 2000 Eden Park Boulevard, McKeesport, Pennsylvania ("the Building"). (Docket No. 35-2, at 17; Docket No. 35-3, at 9). The present dispute revolves around the total amount of money Travelers allegedly owes to Plaintiff under the Policy following damage the Building sustained in a snowstorm that occurred in February 2010. (Docket No. 35, at ¶¶ 4-7; Docket No 37, at 1-2).
Defendant Travelers is one of the largest property casualty companies in the United States. It has more than 30,000 employees, 13,000 independent agents, and multiple market segments across the personal, business, financial and international insurance groups. Travelers maintains offices in the United States, United Kingdom, Canada, Lloyd's of London, and the Republic of Ireland.
On March 6, 2009, Travelers issued to Plaintiff an insurance policy with a property damage coverage amount of $687,628 for a term of one year commencing on April 15, 2009. (Docket No. 35-3, at 2). According to the Policy, coverage applies to "Premises Location No. 0001" and "Building No. 0001." (Docket No. 35-3, at 11). "Premises Location No. 1" and "Building No. 1" are elsewhere defined as Plaintiff's Building located at 2000 Eden Park Boulevard, McKeesport, Pennsylvania 15132. (Id. at 9). The Policy covers "direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from a Covered Cause of Loss." (Id. at 22) (emphasis added). The Policy contains an Exclusions Clause, which stipulates that Travelers "will not pay for loss or damages caused by or resulting from . . . (1) Wear and tear; (2) Rust, other corrosion, fungus, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself." (Docket No. 35-4, at 8).
The Policy also requires that any legal action be "brought within 2 years after the date on which the direct physical loss or damage occurred." (Docket No. 35-3, at 20). It continues that, in the event of loss or damage, Plaintiff must "[g]ive [Travelers] prompt notice of the loss or damage [and] [i]nclude a description of the property involved." (Id. at 32). The Policy included additional directions and details in the event of loss or damage:
(Id.). Further, "[i]f [Corner Pocket] decide[s] to repair or rebuild buildings which have sustained loss or damage, [Travelers'] payment will include any necessary and reasonable architectural, engineering, consulting or supervisory fees incurred in the repair or rebuilding. This will not increase the applicable Limits of Insurance." (Docket No. 35-3, at 37). The Policy also contains a Loss Payment clause that provides in pertinent part:
(Id. at 32).
A snowstorm occurred in February 2010 in the area where the Building is located.
On July 22, 2010, Travelers refused to issue payment for repairs to the roof decking on the basis that the damage to the decking was caused by long-term decay, rust, and deterioration, not the snowstorm. (Docket No. 35-2, at 17-18). As Travelers explained, under the explicit terms of the Policy, damage caused by rust and long-term decay is excluded from coverage. (Id. at 18; Docket No. 35-4, at 8). This denial of Plaintiff's claim ultimately stalled repair efforts, as repairing the roof was impossible without first repairing the damaged roof decking. (Docket No. 35, at ¶ 7; Docket No. 39, at 10-11). Because no roofer would repair the roof without the decking first being replaced, the building continued to sustain further damage to its inside and outside fixtures from the elements. (Docket No. 39, at 10-11). Plaintiff contends that, as a direct result of Travelers' refusal to pay for the necessary repairs to the roof decking, the building is now no longer usable and has been rendered valueless. (Docket No. 35, at ¶ 5). Based on these facts, it asserts that Travelers breached the Policy and seeks damages in the amount of $461,000, which is the Building's replacement value.
Summary judgment may be granted only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). Pursuant to Rule 56, the Court must enter summary judgment against the party "who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A motion for summary judgment will not be defeated by the mere existence of some disputed facts, but will be denied when there is a genuine issue of material fact. Anderson v. Liberty Lobby, 477 U.S. 242 (1986).
In evaluating the evidence, this Court must interpret facts in the light most favorable to the non-movant, and draw all reasonable inferences in its favor. Watson v. Abington Twp., 478 F.3d 144, 147 (3d Cir. 2007). At the outset, the burden is on the moving party to demonstrate that the evidence of record creates no genuine issue of material fact. Conoshenti v. Public Serv. Elec. & Gas Co., 364 F.3d 135, 140 (3d Cir. 2004). A dispute is genuine if the evidence is such that a reasonable jury could return a favorable verdict for the non-movant. McGreevy v. Stroup, 413 F.3d 359, 363 (3d Cir. 2005). To determine whether a dispute is genuine, the court is not to weigh the evidence or determine the truth of the matter, but must only determine whether the evidence of record is such that a reasonable jury could return a verdict for the non-moving party. Id. at 249. The court may consider any material or evidence that would be admissible or usable at trial in deciding the merits of a motion for summary judgment. Horta v. Sullivan, 4 F.2d 2 (1st Cir. 1993) (citing Wright And Miller, Federal Practice § 2721); Pollack v. City of Newark, 147 F.Supp. 35, 39 (D.N.J. 1956), aff'd, 248 F.2d 543 (3d Cir. 1957), cert. denied, 355 U.S. 964 (1958) ("in considering a motion for summary judgment, the court is entitled to consider exhibits and other papers that have been identified by affidavit or otherwise made admissible in evidence").
The party moving for summary judgment may meet its burden by showing that the admissible evidence in the record would be insufficient to carry the non-movant's burden of proof at trial. Celotex, 477 U.S. at 322-23. Once the moving party's burden is satisfied the burden shifts to the nonmoving party who must go beyond its pleadings and designate specific facts through affidavits, depositions, admissions, or answers to interrogatories, in order to demonstrate that there is a genuine issue for trial. Id. at 324. The nonmoving party "cannot simply reassert factually unsupported allegations contained in its pleadings." Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989).
Travelers contends that Plaintiff's claims for breach fail because: (1) the damage to the roof decking, which has rendered the building valueless, was caused by long-term rust and decay, not damage from the snowstorm; and (2) Plaintiff cannot recover the Building's replacement cost because the Policy limits its recovery to only those damages that were suffered as a direct result of the storm, which includes only the roof decking. As to the latter argument, Travelers insists that replacing the Building would enable Plaintiff to recover consequential damages, which "are not recoverable in the absence of a claim for bad faith against an insurer." (Docket No 34, at 5). It is undisputed that Plaintiff has not advanced a bad faith claim.
It is Plaintiff's position that all damages for which it is seeking recovery resulted from the February 2010 snowstorm. (Docket No. 37, at 1, 3). To that end, Plaintiff has produced the report and deposition transcript of an expert, architect Ryan M. Pierce,
In this Court's estimation, the cause of the damage to the roof decking goes to the core of Plaintiff's breach of contract claim and request for damages in the amount of the replacement cost of the building. Because the parties have provided opposing evidence from expert witnesses regarding the key factual issue in dispute, the Court declines to grant Defendant's motion for summary judgment on the breach of contract claim. FED. R. CIV. P. 56(a); see Torno v. 2SI, LLC., Civ. No. 03-74091, 2006 WL 1284924 at *2 (E.D. Mich. May 10, 2006) (holding there were genuine issues of fact based on the parties' competing expert testimony).
It is hornbook law that the remedy for a breach of contract is the compensatory damages that put the non-breaching party in the position he would have been in had the breaching party performed on the contract. See Joseph M. Perillo, Calamari and Perillo on Contracts § 14.5 (6th ed. 2009); UCC § 1-106; revision § 1-305; Corbin § 55.3. Pennsylvania law recognizes two types of contract damages: (1) general damages, which are those that flow directly from the breach (also referred to as ordinary or compensatory damages); and (2) special (or consequential) contract damages, which occur as a result collateral losses such as expenses incurred or gains prevented because of the breach. Baynes v. George E. Mason Funeral Home, Inc., Civ. No. 3-153, 2011 WL 2181469 (W.D. Pa. June 2, 2011) (citing LBL Skysystems (USA), Inc. v. APG-America, Inc., 319 F.Supp.2d 515, 523 (E.D. Pa. 2004) (citations omitted)); McDermott v. Party City Corp., 11 F.Supp.2d 612, 624 (E.D. Pa. 1998). General damages are those that flow from the usual and ordinary circumstances following the breach. Fort Washington Res., Inc. v. Tannen, 901 F.Supp. 932, 943 (E.D. Pa. 1995); Parsons Trading Co. v. Dohan, 167 A. 310 (1933). In contrast, special or consequential damages are those that are not usual and ordinary consequences of the breach. McDermott, 11 F. Supp. 2d at 624. Rather, they depend on special circumstances. Tannen, 901 F. Supp. at 943.
Normally, a breaching party is liable only for the general damages that would naturally result from the breach. See RESTATEMENT (SECOND) OF CONTRACTS § 351(2)(a) ("Loss may be foreseeable as a probable result of a breach because it follows from the breach in the ordinary course of events."); McDermott, 11 F. Supp. 2d at 624. However, the breaching party may also be liable for consequential damages if "it is shown specifically that the defendant had reason to know of the circumstances responsible for the special damage and [the ability] to foresee the injury." Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854); McDermott, 11 F. Supp. 2d at 624 (foreseeability of consequential or "special" damages is determined based on the parties' understanding at the time of contract). Thus, to recover consequential damages, a plaintiff must show that at the time the contract was entered, "the damages subsequently claimed were in the reasonable contemplation of the parties." Keystone Diesel Engine Co. v. Irwin, 191 A.2d 376, 378 (Pa. 1963).
The seminal English case of Hadley v. Baxendale provides the classic example of consequential damages in the context of a commercial contract dispute. 9 Ex. 341, 156 Eng.Rep. 145. There, the court held that lost profits and the closure of a mill caused by the carrier's failure to deliver a necessary piece of equipment to the mill on time could not be recovered as special or consequential damages because such contingencies were not reasonably foreseeable to the parties at the time of contract. Id.; see also RESTATEMENT (SECOND) OF CONTRACTS § 351(1) ("Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made."). A mill shutting down due to a missing piece of equipment is certainly not a result which
On the other hand, direct damages are those that arise within the natural scope of the breach. See McDermott, 11 F. Supp. 2d at 624. As the Court has already mentioned, the Policy covers "direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from a Covered Cause of Loss." (Docket No. 35-3, at 22) (emphasis added).
As with other insurance coverage claims, if the damages claimed by Plaintiff for the roof decking were caused by a Covered Loss, recovery of that loss would be compensatory and not consequential in nature. See Polito v. Continental Cas. Co., 689 F.2d 457, 461 (3d Cir. 1982) (in a suit for money due under an insurance contract, recovery typically comprises the debt plus interest); see also Ambrose v. State Farm Fire & Cas. Co., Civ. No. 90-5642, 1991 WL 238132, at *1 (E.D. Pa. Nov. 7, 1991) ("it is well settled that disputes over payment of insurance claims are claims for breach of a contract to pay money"); Erwin v. World Mut. Health & Accident Ins. Co., 186 A. 260, 261 (Pa. 1936) ("if the insurance company refused, in violation of its contract, to accept the premiums, the insured may elect either to sue on the contract to recover damages for the breach or rescind the contract and sue in assumpsit to recover back money paid under the contract, for which she received no substantial benefit"). Because the record supports Plaintiff's theory that Travelers breached the Policy by failing to pay for repairs to the roof decking, the money damages claimed by Plaintiff are arguably related to said breach.
To some extent, Travelers seems to argue that because the claim for the roof decking repair was not made initially in February 2010, that such damages must be consequential or outside the contemplation of the Policy. (Docket No. 34, at 5-10). This dispute is purely semantic—the fact that damage to the Building was a "consequence" of the lack of repair does not mean that the damages Plaintiff seeks are "consequential damages" as a matter of law. Plaintiff's request for additional funds after making an initial claim is not fatal to its cause of action. The Policy requires only that the physical loss or damage be caused by or resulting from a Covered Cause of Loss. (Docket No. 35-3, at 22). Claims for damage or loss are valid as long as they are brought within two years under the policy.
Travelers also maintains that Plaintiff is asserting excessive Building damage. (Docket No. 34, at 5-10). As Plaintiff has repeatedly stated, however, all the damages that it seeks were directly caused by the snowstorm and should be covered by the terms of the Policy. (Docket No. 37, at 1; Docket No. 44). In this Court's estimation, Travelers' failure to pay the costs to repair the roof decking at a time that may have prevented future damage does not change the fact that the initial damage may have been caused by the snowstorm.
As there is a genuine issue of material fact between the parties as to the cause of the damage to the roof decking, Travelers' motion for summary judgment on Plaintiff's breach of contract claim is denied. Given the cause of the damage to the roof decking implicates Travelers' argument that Plaintiff is improperly seeking consequential rather than compensatory damages, the Court also denies Travelers' motion for summary judgment on Plaintiff's claim to recover the total value of the building. In sum, Travelers' Motion [33] is denied and this case shall be set down for trial.
