Filed: Sep. 19, 2008
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 2008 Decisions States Court of Appeals for the Third Circuit 9-19-2008 Gardner v. State Farm Fire Precedential or Non-Precedential: Precedential Docket No. 07-3051 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2008 Recommended Citation "Gardner v. State Farm Fire" (2008). 2008 Decisions. Paper 435. http://digitalcommons.law.villanova.edu/thirdcircuit_2008/435 This decision is brought to you for free and open access by the Opinion
Summary: Opinions of the United 2008 Decisions States Court of Appeals for the Third Circuit 9-19-2008 Gardner v. State Farm Fire Precedential or Non-Precedential: Precedential Docket No. 07-3051 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2008 Recommended Citation "Gardner v. State Farm Fire" (2008). 2008 Decisions. Paper 435. http://digitalcommons.law.villanova.edu/thirdcircuit_2008/435 This decision is brought to you for free and open access by the Opinions..
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Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
9-19-2008
Gardner v. State Farm Fire
Precedential or Non-Precedential: Precedential
Docket No. 07-3051
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2008
Recommended Citation
"Gardner v. State Farm Fire" (2008). 2008 Decisions. Paper 435.
http://digitalcommons.law.villanova.edu/thirdcircuit_2008/435
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-3051
NICOLE GARDNER, as Administratrix of the
Estate of Sharon Ann Gardner, deceased as
Assignee of Kevin Harper,
Appellant
v.
STATE FARM FIRE AND CASUALTY
COMPANY
On Appeal from the United States District Court
for the Western District of Pennsylvania
(Case No. 05-cv-1055)
District Judge: The Honorable Gary L. Lancaster
____________
Argued May 13, 2008
Before: McKEE and ROTH, Circuit Judges, and PADOVA,
Senior District Judge*
(Opinion Filed: July 22, 2008)
Jerome W. Kiger (Argued)
Amy B. Kubisiak
1420 Grant Building
Pittsburgh, Pennsylvania 15219
Counsel for Appellant
C. Leon Sherman (Argued)
C. Leon Sherman & Associates, P.C.
20 Stanwix Street, Fifth Floor
Pittsburgh, PA 15222
Counsel for Appellee
___________
OPINION OF THE COURT
___________
PADOVA, Senior District Judge:
Nicole Gardner (“Appellant”) appeals the order of the
United States District Court for the Western District of
*
Hon. John R. Padova, Senior District Judge for the
Eastern District of Pennsylvania, sitting by designation.
2
Pennsylvania granting summary judgment in favor of State Farm
Fire and Casualty Company (“State Farm”), and denying
summary judgment in Appellant’s favor. At issue is the District
Court’s disposition of Appellant’s claims arising out of State
Farm’s refusal to defend or indemnify its insured, Kevin Harper,
in connection with negligence claims Appellant asserted against
Harper in a state court action. We have jurisdiction pursuant to
28 U.S.C. § 1291. We affirm.
I.
Kevin Harper purchased a residence on Sole Street in
McKeesport, Pennsylvania (the “Property”) sometime in the
1980’s. Harper lived at the Property until March 1, 2002, when
he moved in with his girlfriend on Scott Street, around the
corner from the Property. To maintain the mortgage on the
Property, he rented it to Appellant pursuant to a March 1, 2002
written lease agreement. Although the initial term of the lease
3
agreement was six months, Appellant continued to rent the
Property until February 1, 2003, when Harper evicted her on
account of her failure to keep current on the rent. Meanwhile,
on August 29, 2002, Appellant’s mother, Sharon Ann Gardner
(“Appellant’s Mother”), slipped and fell on the sidewalk outside
the Property and was injured.
Harper had a Homeowner’s Insurance Policy with State
Farm (the “Policy”). On March 7, 2003, Appellant advised
State Farm of her Mother’s fall and resulting injuries. As a
result, State Farm conducted an investigation, which included
obtaining the statements of Appellant and Harper. Pursuant to
that investigation, State Farm learned for the first time that
Harper was renting out the Property. On April 4, 2003, State
Farm sent a letter to Harper, denying coverage and explaining
that the Policy “does not offer coverage for bodily injury when
the property is held for rental and is no longer occupied by the
4
insured.” App. at A189.
On March 31, 2004, Appellant’s Mother passed away.
On August 25, 2004, Appellant filed a negligence action against
Harper on behalf of her Mother’s estate in the Court of Common
Pleas of Allegheny County (the “State Court Action”). In a
September 10, 2004 letter to Harper, State Farm reiterated that
because Harper “held the residence premises for rental and did
not occupy any part of it when this accident occurred,” it was
denying coverage and would not provide him with a defense to
Appellant’s claims. App. at A195. Appellant obtained an entry
of default against Harper in the State Court Action on May 18,
2006, and the court entered judgment against Harper in the
amount of $1,664,757.52, plus costs and interest, on June 16,
2006.
On April 8, 2005, Appellant’s counsel filed a Praecipe for
Writ of Summons in the Court of Common Pleas of Allegheny
5
County, and captioned the case Kevin Harper v. State Farm Fire
& Cas. Co., even though Appellant had not received an
assignment of Harper’s rights against State Farm and Harper had
not authorized Appellant’s counsel to act on his behalf.
Subsequently, on June 22, 2005, Harper assigned his rights
against State Farm to Appellant (the “Assignment”), and
Appellant executed the Assignment on June 29, 2005. That
same day, Appellant served the Praecipe for Writ of Summons
on State Farm. Exactly one month later, on July 29, 2005, State
Farm removed the action to federal court. On September 14,
2005, Appellant’s counsel filed a Complaint against State Farm,
again in Harper’s name, and on December 6, 2005, counsel filed
a motion pursuant to Federal Rule of Civil Procedure 17 to
substitute Appellant, as administratrix of her Mother’s estate, as
the real party in interest. The District Court granted that motion
on December 13, 2005.
6
Appellant’s Complaint in this case asserts six claims:
breach of contract, breach of fiduciary duty, negligence,
statutory bad faith pursuant to 42 P. S. § 8371, violation of
Pennsylvania’s Unfair Trade Practices and Consumer Protection
Law (the “UTPCPL”), 73 P. S. § 201-1 et seq., and a claim for
punitive damages. Appellant’s essential complaint is that State
Farm breached its contractual and statutory duties to Harper by
refusing to defend Appellant’s suit against him, failing to
indemnify him for the judgment against him, and failing to
evaluate the case in good faith. At the completion of discovery,
both parties filed motions for summary judgment. The District
Court granted State Farm’s motion, denied Appellant’s cross-
motion, and entered judgment in State Farm’s favor.
II.
Appellant asks us to find that the District Court erred in
7
granting summary judgment in State Farm’s favor and denying
judgment in her favor.1 Our standard of review of a grant of
summary judgment is plenary. See Fed. Home Loan Mortgage
Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 443 (3d Cir. 2003).
In reviewing the decision of the District Court, we assess the
record using the same summary judgment standard that guides
the district courts. See Farrell v. Planters Lifesavers Co.,
206
F.3d 271, 278 (3d Cir. 2000). To prevail on a motion for
summary judgment, the moving party must demonstrate “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).
III.
1
Although an order denying a motion for summary judgment is
not ordinarily final and appealable, it becomes appealable when
accompanied by an order granting a cross-motion for summary
judgment. Nazay v. Miller, 949 F.2d 1323, 1328 (3d Cir. 1991).
8
Appellant first argues that the District Court erred in
finding that the Policy afforded Harper no coverage for her
claims against him and therefore erred in entering judgment in
State Farm’s favor on her breach of contract and breach of
fiduciary duty claims. This argument is meritless.
In denying coverage for Appellant’s claims, the District
Court relied on the following exclusion in the Policy, i.e., the
“Rental Exclusion.”
Section II - Exclusions
1. Coverage L [Liability] and Coverage
M [Medical] do not apply to:
* * *
b. bodily injury or property
damage arising out of the
business pursuits of any
insured or the holding for
rental of any part of the
premises by any insured. This
exclusion does not apply:
9
* * *
(3) to the rental or
holding for rental of
a residence of yours:
(a) on an occasional
basis for the
exclusive use as a
residence; . . .
App. at A140.
Appellant argued to the District Court, and continues to
argue, that the Rental Exclusion is inapplicable because
Harper’s rental of the Property was on “an occasional basis” and
was therefore subject to the exception set forth in subparagraph
(3)(a), the “Occasional Basis Exception.” In the alternative,
Appellant argues that the Occasional Basis Exception is
ambiguous and therefore should be construed in Harper’s favor.
Under Pennsylvania law, which the parties agree is
10
applicable here, the “interpretation of an insurance contract
regarding the existence or non-existence of coverage is
generally performed by the court.” Donegal Mut. Ins. Co. v.
Baumhammers, 938 A.2d 286, 290 (Pa. 2007) (quoting
Minnesota Fire and Cas. Co. v. Greenfield,
855 A.2d 854, 861
(Pa. 2004)). “When the language of the policy is clear and
unambiguous, we must give effect to the language.”
Id.
(quoting Kvaerner Metals Div. of Kvaerner U.S., Inc. v.
Commercial Union Ins. Co.,
908 A.2d 888, 893 (Pa. 2006)). On
the other hand, “where a provision of a policy is ambiguous, the
policy provision is to be construed in favor of the insured and
against the insurer, the drafter of the agreement.” Standard
Venetian Blind Co. v. Am. Empire Ins. Co.,
469 A.2d 563, 566
(Pa. 1983). Contractual language is ambiguous if “it is
reasonably susceptible of different constructions and capable of
being understood in more than one sense.” Hutchison v.
11
Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986).
In rejecting Appellant’s argument that the Occasional
Basis Exception was either ambiguous or plainly applicable
under the circumstances of this case, the District Court
considered the definition of “occasional” in the 2003 edition of
the Merriam-Webster Dictionary, which is, in relevant part: (1)
“of or relating to a particular occasion,” or (2) “encountered,
occurring, appearing, or taken at irregular or infrequent
intervals.” App. at A17 (quoting Merriam-Webster’s Collegiate
Dictionary (Merriam-Webster, 11th Ed. 2003)). The court held
that under either of these definitions, coverage was not available
for Appellant’s claims as Appellant’s rental was neither on a
particular occasion nor taken at irregular or infrequent intervals.
In this regard, the trial court emphasized that Appellant “rented
the property continuously for almost one (1) year which is,
practically speaking, the entire term of the annually renewable
12
policy.” App. at A18. It further stated that requiring coverage
under those circumstances would not be reasonable as it would
distort the meaning of the Policy language and would
“effectively transform a homeowner’s insurance policy into a
landlord’s insurance policy and render the applicable exclusions
meaningless.” App. at A18.
We agree with the District Court that, under the
circumstances of this case, the Rental Exclusion unambiguously
excludes coverage and the Occasional Basis Exception is
unambiguously inapplicable. Appellant attempts to inject
ambiguity into the Occasional Basis Exception by arguing that
the rental was on the single “occasion” of Harper’s attempting
to get caught up on his mortgage, and that it was likewise
“infrequent” and “irregular” because it occurred for just an 11-
month period over more than 15 years of ownership. However,
these arguments rely on unreasonable interpretations of the
13
Occasional Basis Exception. First, a homeowner’s rental of his
property in order to finance his mortgage is nothing more than
a business pursuit, which is exactly what triggers the application
of the Rental Exclusion in the first place and, thus, cannot also
be the “occasion” that triggers the Occasional Basis Exception.
Second, we reject the assertion that the relevant time period for
assessing the infrequency or irregularity of the rental is the
length of Harper’s ownership rather than the term of the
insurance policy, because the Policy addresses only the policy
term and plainly anticipates that the norm during that term will
be the insured residing at the property, not renting it out. See,
e.g., State Farm Fire & Cas. Co. v. Piazza, 131 P.3d 337, 338
(Wash. App. 2006) (an “‘occasional’ rental should be
interpreted consistent with the purposes of a homeowner’s
insurance policy . . . which means that the circumstances of the
rental must not negate the assumption that the homeowner is still
14
the primary resident of the house, despite his or her temporary
absence.”) Thus, where, as here, the term of the policy is one
year, an eleven-month rental is anything but infrequent or
irregular.2 Accordingly, under either definition of “occasional,”
2
Our conclusion in this regard is consistent with other
court decisions that have considered the Occasional Basis
Exception. See State Farm Fire & Cas. Co. v. Wonnell, 533
N.E.2d 1131, 1133 (Ill. App. Ct. 1989) (concluding that
tenancy was not “irregular” or “infrequent” and, thus, was not
on an “occasional basis,” where tenant “lived with her
children at the home in question, full-time, for at least seven
months, without interruption”); Ferguson v. State Farm Fire &
Cas. Co., Civ. A. No. 94-36205,
1995 WL 653971, *4 (9th
Cir. Sept. 5, 1995) (finding that three-month tenancy, without
interruption, was not “irregular” or “infrequent” and, thus,
was not on an “occasional basis,” where owner moved away,
was attempting to sell the house, and did not intended to
resume living there, and tenant “only moved out after being
given a notice to quit”). Appellant argues that these cases,
both of which involved owners who did not intend to return to
their premises at the conclusion of the rental, stand for the
proposition that the Occasional Basis Exclusion is only
inapplicable when the owner has no intention of returning to
residence at the rented property. We do not read the cases to
stand for such a proposition. Although both courts took note
that the owners had no intention of returning to the premises
at issue, and used that fact to bolster their conclusions that the
15
the Occasional Basis Exception does not apply to save
Appellant’s claim from the Rental Exclusion.
We also find that the District Court did not err in finding
no coverage for Appellant’s claims in the State Court Action,
because a second exclusion in the Policy, the “Insured Location
Exclusion,” also precluded coverage. That exclusion provides
as follows:
Section II - Exclusions
1. Coverage L [Liability] and Coverage
M [Medical] do not apply to:
* * *
d. bodily injury or property
Occasional Basis Exception did not apply, they did not
establish the per se rule that Appellant suggests. Rather, we
find that the owner’s intention to return is just one additional
fact that may be considered in assessing whether a rental is on
an occasional basis. Here, in spite of Harper’s professed
intent to return to residence at the Property, other factors
plainly establish that the rental was not on an occasional
basis.
16
damage arising out of any
premises currently owned or
rented to any insured which
is not an insured location..
..
App. at A140. The Policy defines “insured location,” in relevant
part, as “the residence premises,” and “any part of any other
premises . . . used by you as a residence.” App. at A126.
“Residence premises” is defined as the premises “where you
reside and which is shown in the Declarations.” Id.
Harper simply was not residing at the Property at the time
that Appellant’s Mother was injured. Under Pennsylvania law,
an individual’s residence for purposes of an insurance policy is
his “factual place of abode,” which is “a matter of physical
fact.” Amica Mut. Ins. Co. v. Donegal Mut. Ins. Co.,
545 A.2d
343, 346 (Pa. Super. Ct. 1988). As such, when a person actually
lives in one location, and sporadically visits, or keeps certain
personal items at, another location, it is the location where he
17
lives that is his residence. Id. (finding that daughter resided with
mother, and not with father, when she only sporadically visited
father and kept certain personal items at his home.) Here, the
undisputed evidence shows that Harper was living on Scott
Street with his girlfriend during the Appellant’s entire lease
term. Appellant nevertheless argues that the Premises remained
at least one of Harper’s “residences” for purposes of the Policy
because he “maintained a close connection with [the Property]
by keeping clothing, furniture, a safe and other personal items
there, keeping a key and using it to enter the [Property]
frequently and without consent, receiving mail there, keeping
the utility bills in his name and having the intent to return to [the
Property], and actually returning there to live after [Appellant]
left.” (App. Br. at 20-21). However, under Pennsylvania law,
these facts are irrelevant to a determination of Harper’s
residence. As “a matter of physical fact,” he was living not at
18
the Property but, rather, was living on Scott Street. Thus, the
Property no longer qualified as an “Insured Location” under the
definition of that term in the Policy, and there was no coverage
under the Policy for any bodily injury that occurred there.
Appellant argues, in the alternative, that even if State
Farm had no duty to indemnify Harper under the Policy, it
should have at least defended him in the State Court Action as
the duty to defend is determined by the scope of the allegations
in the Complaint and, here, the Complaint specifically alleged
that the Property was Harper’s residence and that he rented it to
Appellant on an occasional basis for the exclusive use as a
residence. See Frog, Switch & Mfg. Co. v. Travelers Ins. Co.,
193 F.3d 742, 746 (3d Cir. 1999) (stating that to determine the
existence of a duty to defend under Pennsylvania law, the
factual allegations of the underlying complaint against the
insured are to be taken as true and liberally construed in favor of
19
the insured). However, the law in Pennsylvania is that an
insurer need only provide a defense “until it [can] confine the
claim to a recovery that the policy [does] not cover.”
Cadwalleder v. New Amsterdam Cas. Co., 152 A.2d 484, 488
(Pa. 1959) (quoting Lee v. Aetna Cas. & Sur. Co.,
178 F.2d 750,
752 (2d Cir. 1949)); Belser v. Rockwood Cas. Ins. Co.,
791
A.2d 1216, 1219-20 (Pa. Super. Ct. 2002) (stating that duty to
defend remains with the insurer “until it is clear the claim has
been narrowed to one beyond the terms of the policy”). The
record demonstrates that State Farm investigated the facts
underlying Appellant’s claims prior to the commencement of the
State Court Action and properly concluded that there was no
coverage for those claims under the Policy on account of
Harper’s rental of the Property to Appellant. In conducting that
investigation, State Farm was able to “confine the claim to a
recovery that the policy did not cover.” Cadwalleder,
152 A.2d
20
at 488. Accordingly, the District Court correctly concluded that
State Farm did not violate the Policy by refusing to defend
irrespective of Appellant’s conclusory allegations in her
Complaint in the State Court Action.
IV.
Appellant next argues that the District Court erred in
entering judgment in State Farm’s favor on her negligence and
statutory bad faith claims on statute of limitations grounds. The
statute of limitations for both negligence claims and statutory
bad faith claims pursuant to 42 Pa. Cons. Stat. Ann. § 8371 is
two years. 42 Pa. Cons. Stat. Ann. § 5524; Ash v. Cont’l Ins.
Co., 932 A.2d 877, 885 (Pa. 2007); Sikirica v. Nationwide Ins.
Co.,
416 F.3d 214, 225 (3d Cir. 2005) (predicting that
Pennsylvania Supreme Court would apply a two-year limitations
period to a statutory bad faith claim). In this case, State Farm
21
sent a letter to Harper on April 4, 2003, denying coverage for
Appellant’s Mother’s bodily injury claim based on the Rental
Exclusion, and the District Court therefore concluded that the
statute of limitations began to run on that date. See Sikirica
(predicting that Pennsylvania Supreme Court would hold the
limitations period for bad faith claims would begin to run when
coverage was denied.) Approximately two years later, on April
8, 2005, Appellant’s counsel commenced the State Court Action
against State Farm with the filing of a Writ of Summons in
Harper’s name. However, as explained above, Harper had not
authorized the filing of the action in his name and had not yet
assigned his rights against State Farm to Appellant. As he did
not assign those rights to Appellant until June of 2005, the
District Court concluded that the action was not properly
commenced until the Assignment was fully executed on June 29,
2005, more than two years after the April 4, 2003 letter. It
22
therefore found the bad faith and negligence claims to be time-
barred.
Appellant takes issue with the District Court’s critical
conclusion that the action was not “commenced” for statute of
limitations purposes until the execution of the Assignment. She
specifically argues that Federal Rule of Civil Procedure 15(c)(1)
provides that an amendment that changes the party or the
naming of the party relates back to the date of the original
pleading, so long as the claim asserted arose out of the same
conduct, transaction or occurrence set forth in the original
pleading, as it did here.
In our view, however, Rule 15(c)(1) is simply not
applicable here, as, by its own terms, it applies only to
amendments to the “party . . . against whom a claim is asserted,”
that is, the defendant. Fed. R. Civ. P. 15(c)(1)(C) (emphasis
added). Indeed, the Advisory Committee Notes to Rule 15
23
explicitly state that the “relation back of amendments changing
plaintiffs is not expressly treated in revised rule 15(c) . . .” and
that “the attitude taken in . . . Rule 15(c) toward change of
defendants extends [only] by analogy to amendments changing
plaintiffs.” Advisory Committee Notes on the 1966
Amendments to the Fed. R. Civ. P. 15. The more applicable
Rule is Federal Rule of Civil Procedure 17, which provides that
“[a]n action must be prosecuted in the name of the real party in
interest” and that a court may dismiss an action for failure to
prosecute in the name of the real party in interest after affording
the real party in interest a reasonable time to ratify, join or be
substituted in the action. Fed. R. Civ. P. 17(a)(1), (3). That
protection against dismissal “is designed to avoid forfeiture and
injustice when an understandable mistake has been made in
selecting the party in whose name the action should be brought.”
6A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane,
24
Federal Practice & Procedure, § 1555 (2d ed. 2008). Thus, it
“should be applied only to cases in which substitution of the real
party in interest is necessary to avoid injustice.” Id.
Here, Appellant named the “real party in interest” in
commencing suit, by filing it in Harper’s name. Fatally,
however, she had no authorization to do so.3 Thus, in actuality,
3
Harper’s testimony at his deposition on June 12, 2006 was
as follows:
Q: Now, did [Appellant’s two attorneys] ever act as
your lawyer?
A: No. First time I met them.
Q: So you never met either one of them before
today?
A: No.
Q: Is that correct?
A: Never.
Q: And they have represented to me that neither
one of them has ever talked to you about either
the coverage case or the underlying case – well,
strike that – about the question of your coverage
with State Farm or any issue about that. Is that
right?
A: What do you mean?
Q: That you never talked to them about State Farm
25
it was she who commenced the suit, not Harper, and she was not
yet a real party in interest, because Harper had not yet assigned
his rights to her. See FDIC v. Deglau, 207 F.3d 153, 159 n.2
(3d Cir. 2000) (“Federal Rule of Civil Procedure 17 requires that
an action involve only the real parties in interest, as determined
by transfers prior to the initiation of suit.”) Under such
circumstance, we agree with the District Court that the April
or your policy. Let me ask it this way. Do you
recall any conversation you ever had with either
one of them?
A: On the phone.
Q: Okay. What do you recall about that
conversation, and who was it with?
A: Well, just who my insurance was.
Q: Okay.
A: My insurance carrier.
Q: They wanted to find out the name of your
insurance carrier?
A: That was it.
Q: And that was the extent of the conversation?
A: That was it. That was the only thing.
App. at A271-A272.
26
2005 filing of the writ of summons did not toll the statute of
limitations and, instead, the statute continued to run until Harper
assigned his right to Appellant in June of 2005. By that time,
however, the statute had expired.
Notably, the United States Court of Appeals for the Ninth
Circuit addressed a situation similar to ours in United States ex
rel. Wulff v. CMA, Inc., 890 F.2d 1070 (9th Cir. 1989). In that
case, plaintiffs asserted a Miller Act claim against CMA, Inc.,
a federal contractor, and its surety. Plaintiffs, however, were
merely judgment creditors of CMA’s subcontractor, which was
the real party in interest on the Miller Act claim. At the time
that plaintiffs commenced the suit, on September 17, 1986, the
subcontractor had not assigned its Miller Act claim against
CMA to plaintiffs. Six days later, on September 23, 1986, the
one-year statute of limitations on the Miller Act claim expired.
On June 2, 1987, plaintiffs obtained the subcontractor’s written
27
assignment of its claims against CMA, and plaintiffs
immediately amended their complaint to allege this assignment.
The Ninth Circuit considered both whether the amended
complaint related back to plaintiffs’ initial complaint under Rule
15, so as to make it timely under the statute of limitations, and
whether the amended complaint could be construed as a specific
ratification by the subcontractor of plaintiff’s right to maintain
the Miller Act claim under Rule 17. In finding that the
amended complaint did not relate back, it stated as follows:
. . . [T]he requirement that a person
suing under the Miller Act must
have furnished labor or material to
the federal construction project is a
condition precedent to the existence
of the cause of action. This
element was lacking when
[plaintiffs] filed their original
complaint. Therefore, they did not
have a Miller Act claim on which
they could sue at that time. When
they later obtained the assignment
from [the subcontractor] the statute
28
of limitations had run. Thus, . . . the
supplemental pleading in which the
[plaintiffs] alleged that they had
obtained the assignment from [the
subcontractor] will not relate back
to create a Miller Act claim which
the [plaintiffs] did not have when
they filed their original complaint.
890 F.2d at 1074. With respect to Rule 17, the Court noted that
the Advisory Notes to Rule 17 indicate that the purpose of Rule
17(a)(3) is to “prevent forfeiture of an action when
determination of the right party to sue is difficult or when an
understandable mistake has been made.”
Id. (citing Advisory
Committee Notes on the 1966 Amendments to Fed. R. Civ. P.
17, and 6 C. Wright and A. Miller, Federal Practice and
Procedure § 1555 (1971)). Stating that there was no difficulty
and no mistake in determining who was the proper party to bring
suit, and that plaintiffs had admitted that they filed suit when
they did in order to toll the statute of limitations, the Court
29
reasoned as follows:
Rule 17(a) does not apply to a
situation where a party with no
cause of action files a lawsuit to toll
the statute of limitations and later
obtains a cause of action through
assignment. Rule 17(a) is the
codification of the salutary
principle that an action should not
be forfeited because of an honest
mistake; it is not a provision to be
distorted by parties to circumvent
the limitations period. [The
subcontractor’s] assignment to the
[plaintiffs] of its claim against
CMA cannot ratify the [plaintiffs’]
commencement of suit on a claim
which theretofore did not exist.
Id. at 1075.
Applying this same rationale to the instant case, we
conclude that Harper’s assignment of his claims against State
Farm to Appellant after the statute of limitations had run was
legally ineffective to save the claims from the statute of
30
limitations bar.4 Thus, we affirm the District Court’s dismissal
of the negligence and statutory bad faith claims on statute of
limitations grounds.5
4
State Farm has argued that Appellant’s action against it
was void ab initio because Appellant commenced the State
Court Action in Harper’s name without the authority to do so.
Given our disposition of this appeal, we need not rule on that
argument. We nevertheless observe that we were very
surprised to learn that Appellant’s counsel filed the State
Court Action in Harper’s name without Harper’s consent and
misrepresented in that filing that they were Harper’s counsel.
We strongly caution attorneys against engaging in similar
conduct in the future.
5
We also reject Appellant’s arguments that (1) the April
2003 letter was not a clear and unambiguous denial of
coverage, and (2) that there was no proof that the denial letter
was actually mailed and received. Specifically, we find that
the plain language of the letter was a clear and unambiguous
denial, App. at A190 (“Since you held the residence premises
for rental and did not occupy any part of it when this accident
occurred, we must deny coverage for this claim.”), and the
record is clear that the letter was sent and Harper does not
deny receiving it. See App. at A41, A71-A72. While we do
not know the exact date on which Harper received the letter,
the few days of uncertainty are inconsequential given that
Harper did not assign his claims to Appellant until more than
two months after the statute of limitations had expired,
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V.
Appellant also argues that the District Court erred in
failing to separately analyze her claims that State Farm breached
the insurance contract and its fiduciary duties by conducting an
inadequate claims investigation, concluding “very early” that the
Rental Exclusion applied, without conducting a “complete and
objective investigation” that would have uncovered relevant
facts and “ignor[ing] the answers that it did receive.” According
to Appellant, these claims are not contingent on the underlying
success of her claims that State Farm breached the insurance
contract by failing to provide coverage as they hinge entirely on
State Farm’s alleged investigatory misconduct.
Even if we were to accept Appellant’s premise that her
claims based on State Farm’s alleged investigatory misconduct
making the precise date on which the statute began to run
immaterial to our analysis.
32
can survive our determination that State Farm had no duty to
defend or indemnify Harper against Appellant’s claims, we
conclude that the undisputed record evidence establishes that
State Farm breached no duties to Appellant in connection with
its investigation. According to Appellant, State Farm should
have asked a whole host of questions to more accurately
determine Harper’s residency, should have obtained Harper’s
statement under oath, and should have obtained an outside legal
opinion regarding the applicability of the Occasional Basis
Exception. However, as explained above, State Farm properly
denied coverage based on its correct conclusion that the
Occasional Basis Exception did not apply, and Appellant cites
to no facts that State Farm would have obtained in a more
thorough investigation that would have established otherwise.
Accordingly, the District Court did not err in granting judgment
in State Farms’s favor, even insofar as Appellant asserted claims
33
based on State Farm’s allegedly inadequate investigation.
VI.
Finally, Appellant argues that the trial court erred in
granting summary judgment in State Farm’s favor on
Appellant’s UTPCPL claim. As the District Court explained,
the UTPCPL is designed to protect the public from fraud and
deceptive business practices. Pirozzi v. Penske
Olds-Cadillac-GMC, Inc., 605 A.2d 373, 375 (Pa. Super. Ct.
1992). The statute provides a private right of action for “[a]ny
person who purchases . . . goods or services primarily for
personal, family or household purposes and thereby suffers any
ascertainable loss of money or property” on account of the
seller’s unfair or deceptive acts or practices. 73 P.S. §
201-9.2(a). We have previously explained that “[i]n
Pennsylvania, only malfeasance, the improper performance of
34
a contractual obligation, raises a cause of action under the
[UTPCPL], and an insurer’s mere refusal to pay a claim which
constitutes nonfeasance, the failure to perform a contractual
duty, is not actionable.” Horowitz v. Fed. Kemper Life Assur.
Co., 57 F.3d 300, 307 (3d Cir. 1995) (citing Gordon v.
Pennsylvania Blue Shield,
548 A.2d 600, 604 (Pa. Super. Ct.
1988)). Here, as the District Court stated, “the undisputed
evidence establishes that [State Farm] committed neither
malfeasance nor did it improperly perform a contractual
obligation.” App. at A24. The District Court was entirely
correct in that regard; there is no basis in the record or the law
for a conclusion that State Farm engaged in malfeasance. We
therefore affirm the District Court’s decision in that regard as
well.
IV.
We have considered all other arguments made by the
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parties on appeal, and conclude that no further discussion is
necessary. For the foregoing reasons, we will affirm the District
Court’s order granting summary judgment in favor of State
Farm and denying summary judgment to Appellant.
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