MALACHY E. MANNION, District Judge.
Pending before the court is the partial motion for summary judgment of defendant. (Doc.
Plaintiff Taitwana Boulware alleges that her exterior deck and sunroom collapsed on March 4, 2012, at her property located at 15 Norman Court, Lot 21, Bushkill, Pike County, Pennsylvania, and that she sustained damages. Plaintiff had purchased a homeowners insurance policy from defendant Liberty Insurance Corporation ("Liberty") on November 9, 2011, which was in effect on the day of plaintiff's loss.
After the pleadings closed and discovery was completed, defendant Liberty filed a motion for partial summary judgment on July 3, 2014, regarding only plaintiff's bad faith claim. (Doc.
Liberty's motion for partial summary judgment is ripe for disposition. This court has jurisdiction over this case based on diversity under
On March 4, 2012, plaintiff's Bushkill property sustained damage to the rear exterior deck and sun room when the deck collapsed. Defendant issued a homeowners insurance policy, H37-288-603361-700, to plaintiff for her Bushkill property with an effective date of November 9, 2011, and this policy was in effect at all relevant times. (Doc.
Based on his inspection and his experience with the H-3 policy, Baron determined that there was no coverage for the plaintiff's loss since he found it was caused by "inadequate, improper, defective construction [of her deck], water dry rot deterioration." Baron personally performed the inspection and did not have any construction or engineer experts with him. Baron measured plaintiff's deck and found that the entire deck was 36 feet by 20 feet, and that the enclosed part of the deck was 18 feet by 20 feet. Subsequently on the same day of his inspection, Baron prepared a formal denial letter to send to the plaintiff regarding her claim. The parts of the letter referencing the policy language were cut and pasted out of a standard H-3 policy, not from plaintiff's specific policy. In his denial letter, Baron referenced sections of plaintiff's policy which he was familiar with based on his prior evaluations and he verified that those sections matched the sections in the policy actually issued to plaintiff. Baron did not have authority to have an expert look at plaintiff's deck and he would have had to get approval from his team manager at the time, Michelle Ciuffo. When he inspected the property, he did not request to hire an expert. (Id., at 31-37, 54-55).
After Baron drafted the denial letter, he sent it to his team manager for review, approval and mailing to plaintiff. On March 27, 2012, Ciuffo reviewed and approved Baron's denial letter which he drafted on March 7. Ciuffo did not hire a contractor or engineer prior to approving the denial of plaintiff's claim, nor did she suggest to Baron that he should send a construction expert or engineer to inspect plaintiff's deck. However, Ciuffo had experience with property damage claims and with the construction of decks. She was employed with Liberty handling claims since 2005, originally as an inside adjuster and then as a personal property specialist, and she received training with Liberty, including training regarding the installation of decks on homes. (Doc.
After Ciuffo personally reviewed all of the information and photos, she then decided that Barons' proposed denial letter was appropriate since she concluded that there was no coverage because "the deck had fallen due to improper construction or faulty workmanship" as well as decay and dry rot. She also found that the deck fell due to improper attachment of the deck to the house by nails. This completed the involvement of Ciuffo with plaintiff's claim. (Id., at 16-20, 25-27).
On March 28, 2012, Baron mailed the denial letter to plaintiff and closed the claim. Defendant did not receive a response to the denial letter until October 19, 2012, when it received a "Letter of Notification" from a public adjuster firm, Metro Public Adjustment, on behalf of plaintiff. However, plaintiff maintains that she tried to contact defendant several times before October 19, to discuss the denial letter, but to no avail. Thus, plaintiff hired Metro Public Adjustment to pursue her claim. (Doc. 24, at 8).
The next entry in the claim log is October 19, 2012, which noted "Send for filed inspection due to PA [public adjuster] involvement." This note referred to Baron and directed him to reopen the plaintiff's claim since she hired a public adjuster to examine her claim. Baron reopened plaintiff's claim on October 19. Baron contacted plaintiff on October 19 and spoke to her about reopening her claim. She indicated that she was not happy with the denial of coverage and confirmed that she hired a public adjuster. Baron said that he would wait to hear from the public adjuster. Three days later on October 22, 2012, he got the first phone call from the public adjuster, Larry Meyerhoffer. Baron received a second call from the adjuster on October 26. Meyerhoffer stated that he felt the plaintiff's loss was caused by a collapse and Baron did not agree based on his earlier analysis as set forth in his March 7 denial letter. Baron told Meyerhoffer he would send him a copy of this letter. Baron also re-evaluated his analysis of plaintiff's claim and reviewed the relevant documents, the log entries and photos. Baron further reviewed the claim with his new team manager T.S. Scott. On October 31, 2012, Baron made entries in the log after reconsidering plaintiff's claim with Scott and determined that his prior denial was going to stand since they agreed that the cause of loss was wear, tear and deterioration, and that the loss did not fit the definition of collapse. On January 8, 2013, Baron then sent plaintiff's adjuster a second denial letter. Defendant did not receive any further correspondence from the public adjuster. Baron did not do anything regarding plaintiff's claim from October 31, 2012, until January 8, 2013, and after the second denial letter was sent out, he did not have anything further to do with her claim except for sending plaintiff's counsel a copy of her policy on February 5, 2013. (Doc.
Baron admitted that the only inspection of plaintiff's deck and her loss regarding her claim was his March 7, 2012 inspection, and that his determination at that time was there was no coverage due to "improper, inadequate, defective workmanship or construction" of the deck. In particular, Baron stated that the method of attachment of the deck to plaintiff's home was "with nails, instead of lag screws" and that there "was no Z flashing present." Additionally, Baron personally concluded that there was defective construction performed since there was rot in the deck boards which reasonably occurred since the Z flashing was not present. This allowed snow and water to rot out the boards over time, especially when it was an open deck before a structure was later built on top of it. Based on his determinations and his investigation defendant Liberty denied coverage for plaintiff's claim. Baron personally told plaintiff at the time of his March 7 inspection that there was an exclusion to coverage in her policy and that there was no named peril for the personal property damages. Baron stated that plaintiff's loss was not caused by a "collapse" since, as defined in an H-3 policy, this meant "a sudden and entire falling down or caving in of a building" which did not occur to plaintiff's deck. Rather, Baron stated that he determined during his inspection that plaintiff's loss was simply caused by "a separation" of her deck from her home.
Baron could have hired a construction contractor with respect to plaintiff's claim without approval of his team manager if he thought it was necessary, but he required approval to hire an engineer. Scott did not hire a construction expert or an engineer to inspect plaintiff's loss although he had the authority to do so and he did not inspect plaintiff's property. However, Scott had previously worked as a contractor for several years and as an engineer officer (a Major) for the United States Army from 1998 until 2002. Scott also was involved with property loss claims on behalf of insurance companies for several years, namely, with Liberty since June of 2012 and prior to that, for 15 years with Farmers Insurance. When Scott first became involved with plaintiff's claim on October 31, 2012, he had all of the documents regarding her claim, including the original denial letter, the notes, the photographs, the log notes, all correspondence and her policy. After the second denial letter was sent out on January 8, 2013, Scott did not have any further involvement with plaintiff's claim. (Doc.
The exclusion for wear and tear, and wet and dry rot in the plaintiff's policy provided, in pertinent part, as follows:
(Doc.
The plaintiff's policy further provided an exclusion for faulty, inadequate or defective construction and stated as follows:
(Doc.
In the March 7, 2012 denial letter, Baron also cited the policy language relating to collapse as contained in both the main policy and the amendatory endorsement.
The main policy issued to plaintiff contained the following provision regarding collapse:
(Doc.
The amendatory endorsement to plaintiff's policy provided the following additional information regarding the above quoted collapse section:
(Doc.
After plaintiff commenced this lawsuit, plaintiff provided an expert report from David A. Hawk, Remodeling Specialist, dated May 21, 2014. Hawk, who had over 20 years of construction expertise, inspected plaintiff's deck and opined, in part, that the plaintiff's deck was constructed properly and that it "collapsed," as this term was defined in plaintiff's policy. Hawk also determined that the cause of the collapse was the fact that the deck had been overloaded with weight, including the subsequent enclosure of half of the deck, furniture as well as the installation of a tile floor. Hawk also determined that the removal and replacement cost of plaintiff's deck was $38,900. (Doc.
Additionally, after plaintiff filed this lawsuit, defendant had her claim reviewed and her property inspected by an engineer, Jody F. DeMarco, P.E., of Forensic Consultants of North America, LLC. DeMarco reviewed several documents regarding plaintiff's claim, including the photographs, the log notes, her deposition, Hawk's report as well as notes and photographs from his own site investigation on April 8, 2014. DeMarco prepared a report dated June 20, 2014, and concluded, to a reasonable degree of engineering certainty, that the cause of plaintiff's loss was improper construction of her deck, including improper installation of flashing and the use of nails as opposed to lag bolts to connect the ledger board to the rim joist, leading to rust and corrosion of the nails as well as rot of the rim joist. (Doc.
Summary judgment is appropriate 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 judgment as a matter of law."
To prevail on summary judgment, the moving party must affirmatively identify those portions of the record which demonstrate the absence of a genuine issue of material fact.
Defendant argues that this court should grant it summary judgment on plaintiff's bad faith claim since plaintiff failed to show by clear and convincing evidence that there was no reasonable basis for denial of her loss claim. In her complaint, (Doc. 1-2), plaintiff alleges that defendant acted in bad faith by denying her coverage and by refusing to pay her loss under the policy. Specifically, plaintiff alleges that defendant did not possess "evidence that the damage to her deck and sunroom [was] a direct result of wet dry rot, wear and tear, deterioration and/or faulty, ineffective or defective workmanship or construction", and that defendant had "no reasonable and sufficient basis to deny [her] claim." (Id., ¶'s 19-20).
Initially, since this federal court has diversity jurisdiction over this case, it applies Pennsylvania state law.
As both parties recognize:
For an insurance company to show that it had a reasonable basis, it need not demonstrate its investigation yielded the correct conclusion, or that its conclusion more likely than not was accurate.
"The `clear and convincing' standard requires that the plaintiff show `that the evidence is so clear, direct, weighty and convincing as to enable a clear conviction, without hesitation, about whether or not the defendants acted in bad faith.'"
Pennsylvania's bad faith statute,
"Pennsylvania law does not limit bad faith claims to unreasonable denials of coverage[]" and, "[a] bad faith can have various other bases, including an insurer's lack of investigation, lack of adequate legal research concerning coverage, or failure to communicate with the insured."
Plaintiff bases, in large part, her bad faith claim on the fact that the only on site inspection of her loss, prior to the instant litigation, was performed by Baron on March 7, 2012, who was only at her property for less than one hour. Additionally on the fact that defendant did not retain any contractor experts or engineers to inspect her damage despite the fact that its adjusters and supervisors had authority to do so. In fact, plaintiff points out that during the entire claims process, defendant failed to utilize a contractor expert or engineer to assist it to properly evaluate her claim and examine the cause of her loss, and that defendant should have retained such experts before it issued the two denial letters. It was certainly within the discretion of Baron, Ciuffo and Scott to retain an expert or engineer. However, based on their backgrounds in handling property loss claims and with construction, as well as Baron's personal investigation of plaintiff's loss, it can hardly be said that their decisions were unreasonable or that they knew an expert or engineer was required to properly evaluate plaintiff's claim yet recklessly disregarded this in denying her claim.
Moreover, based on his March 7, 2012 inspection, Baron determined that there was "improper, inadequate, defective workmanship or construction" of the deck, and he stated that the method of attachment of the deck to plaintiff's home was "with nails, instead of lag screws" and that there "was no Z flashing present." Additionally, Baron concluded that there was defective construction of plaintiff's deck since there was rot in the deck boards caused by the lack of Z flashing which allowed snow and water to rot out the boards over time. Baron personally viewed the areas of rot and took photos of the areas, and his photos substantiated his findings regarding the use of nails and the deteriorating boards. Indeed, Baron's March 7 findings were entirely consistent with the opinions of the engineer expert defendant retained after this case was filed in court, namely, DeMarco. As defendant indicates, (Doc. 29, at 8), the retention of an expert by the insurer after denying a claim is not bad faith and, that even if the insurer erred by not retaining an expert to examine the damage prior to the initial denial of a claim, this amounts to only negligence or poor judgment and not bad faith. See
In any event, it was reasonable in this case for Liberty to issue the March 7 denial letter without first hiring an expert to investigate the damage. Even though the expert hired by plaintiff for litigation, i.e., Hawk, issued a report finding that her deck collapsed as defined in her policy and that her damage was covered, this only creates an issue of fact as to plaintiff's breach of contract claim not her bad faith claim. The defendant performed a reasonably detailed investigation of plaintiff's claim notwithstanding the lack of an expert, and it supplied a reasonable basis to bolster its denial of her claim on two occasions.
Plaintiff also argues that defendant's adjuster and supervisors failed to review her specific policy before issuing the denial letters, and Baron simply cut and pasted the March 7, 2012 denial letter from denials he issued regarding prior claims of other insureds. Baron's testimony, as detailed above, shows that he was well aware of the provisions in a standard H-3 policy as well as the exclusions in the H-3 standard policy when he inspected plaintiff's property and drafted his first denial of coverage letter for plaintiff's claim. In fact, Baron personally told plaintiff at the time of his March 7 inspection that there was an exclusion to coverage in her policy and that there was no named peril for the personal property damages. Baron stated that plaintiff's loss was not caused by a "collapse" since, as defined in an H-3 policy, this meant "a sudden and entire falling down or caving in of a building" which did not occur to plaintiff's deck. Rather, Baron stated that he determined during his inspection that plaintiff's loss was simply caused by "a separation" of her deck from her home and that this was not covered under her policy. Upon reviewing Baron's March 7 denial letter, Ciuffo stated that she checked to see which policy plaintiff had, namely, an H-3 policy, as well as the endorsements applicable to coverage, but she did not review the specific policy issued to plaintiff. However, Ciuffo stated that based on the general H-3 policy, she checked to see whether Baron properly cited to the correct policy language and sections in his draft denial letter. Ciuffo concurred with Baron's conclusion and found that plaintiff's loss did not meet the portion of the policy dealing with collapse since they did not consider her deck as collapsing because the whole building did not fall, just part of the deck fell. Additionally, when Scott, Baron's subsequent team manager, became involved with plaintiff's claim on October 31, 2012, he had all of the documents regarding her claim, including the original denial letter, the notes, the photographs, the log notes, all correspondence and her actual policy. Scott discussed plaintiff's loss with Baron and he reviewed the definition of collapse in her policy and, they both agreed that the cause of her loss was "wear/tear/deterioration" and that her loss "[did] not fit [the policy] definition of collapse."
"Under Pennsylvania law, an insurer may be liable for bad faith if it fails to make a good faith investigation into the facts of a claim, or engages in a frivolous or unfounded refusal to pay proceeds of a policy."
In light of the aforementioned facts of record in this case, the court finds that defendant conducted a prompt and reasonably thorough investigation of plaintiff's loss claim, and that defendant provided plaintiff with a reasonable basis for denying her claim. See
Based on the record, the court finds no material questions of fact exist and, that defendant did not handle plaintiff's claim in bad faith and with an improper motive. As such, the court will grant defendant's partial motion for summary judgment, (Doc. 18), regarding plaintiff's bad faith claim. Plaintiff's bad faith claim, Count II of her complaint, will be dismissed with prejudice. An appropriate order will be entered.
