ABC CAPITAL INVESTMENTS, LLC v. CNA FINANCIAL CORPORATION et al

Filing 48

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE J. CURTIS JOYNER ON 6/20/2017. 6/21/2017 ENTERED AND COPIES E-MAILED.(kp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ABC CAPITAL INVESTMENTS, LLC, AND
ALPHA CAPITAL INVESTMENTS, LLC,

:
:
:
Plaintiffs,
:
:
v.
:
:
CNA FINANCIAL CORPORATION, et al., :
:
Defendants.
:

CIVIL ACTION
NO. 16-CV-4943

MEMORANDUM
Joyner, J.

June 20, 2017

Before the court are four motions to dismiss filed by each
of the four remaining defendants in this case (Doc. Nos. 20, 25,
30, and 32), Plaintiffs’ Consolidated Reply to those Motions
(Doc. No. 33), and various replies, sur-replies, and supplemental
briefing (Doc. Nos. 35, 36, 38, 45, 46, and 47).

For the reasons

below, the City of Philadelphia’s Motion to Dismiss is DENIED,
and the other three Motions are GRANTED.

An appropriate Order

follows.
I.

Factual and Procedural Background1
On December 1, 2015, Alpha Capital Investments, LLC

(“Alpha”) purchased a property located at 714 North 36th Street
in Philadelphia (“the Property”).

1

(Amended Complaint (“AC”),

Unless otherwise noted, all factual background is taken from
the allegations in Plaintiffs’ original and/or amended complaints. We
presume the truth of the Plaintiffs’ allegations for purposes of
Defendants’ Motions to Dismiss.

Doc. No. 17, at ¶¶ 9-10).

At some point in time not specified in

the Amended Complaint, Alpha entered into a contract with ABC
Capital Investments, LLC (“ABC”) to manage the Property, with an
aim toward renovating it and turning it into a rental property.
Id. at ¶ 10.

Although ABC is itself a plaintiff in this action

(as is Alpha), the Amended Complaint alleges that “ABC was
negligent with regard to its duties to Alpha, by not insuring
that the proper construction permits, and other insurance had
been obtained by the hired contractors.”

Id. at ¶ 11.2

In any event, Plaintiffs allege that they hired Beneficial
Insurance Services, LLC (“BIS”) to serve as their insurance
agent.

Id. at ¶ 16.

In this capacity, BIS was responsible for

ensuring that the Property was “fully insured from all perils and
risks of all kinds.”

Id.

BIS in turn directed Plaintiffs to

contract with Transportation Insurance Company (“TIS”) and
Continental Casualty Company (“CCC”) to procure insurance for the
Property covering “all risks.”

Id. at ¶ 17.

Plaintiffs allege

that an insurance policy between ABC, TIS, and CCC was enacted on

2

According to the Amended Complaint, ABC and Alpha are both
limited liability corporations duly organized in accordance with the
laws of the Commonwealth of Pennsylvania, and they are both located at
1218 North Marshall Street in Philadelphia. (AC at ¶¶ 1-2). The
precise nature of their relationship is not clear from the facts
plead. Plaintiffs also allege that Alpha “has asserted, or is in the
process of asserting, negligence claims against ABC for their
negligence and breach of their duties.” Id. at ¶ 25. And, indeed,
Plaintiff Alpha has since filed a separate lawsuit in the Philadelphia
County Court of Common Pleas against Plaintiff ABC, at docket number
161100937. (Doc. No. 17-5; Doc. No. 33-1).

2

July 10, 2015.

Id. at ¶ 18; id. at Exhibit (“Ex.”) A (Doc. No.

17-2).
At some point after the December 1, 2015 purchase date, the
City of Philadelphia (“the City”) inspected the Property and
determined that a retaining wall was in danger of collapsing.
Id. at ¶ 12.

ABC responded by hiring a contractor to reinforce

the wall, apparently bracing it as directed by the City’s
inspector.

Id. at ¶¶ 12-13.

ABC and Alpha also procured a sworn

affidavit from William Scott Cooper, a professional engineer,
dated February 4, 2016, in which Mr. Cooper stated that he
personally inspected the Property and found that it “IS NOT in
danger of collapse.”

Id. at ¶ 14; id. at Ex. B (Doc. No. 17-3).

The City was evidently not satisfied.

Plaintiffs allege that the

City conducted an emergency hearing at which it refused to allow
the professional engineer or any other person to speak.
14.

Id. at ¶

It then authorized the demolition of Alpha’s property.

Id.

Once the property was destroyed, the City sent Alpha a bill for
$53,000, the cost of demolition.

Id.

In the wake of that demolition, Plaintiffs ABC and Alpha
submitted an insurance claim “against Plaintiff ABC” to their
insurers, TIC and CCC.

Id. at ¶ 20.

Plaintiffs allege that both

TIC and CCC have “refused to cover and compensate properly for
the damages of Plaintiffs, have ignored the provable facts and
policy language and issued a Reservation of Rights letter . . .

3

.”

Id. at ¶ 21; id. at Ex. D (Doc. No. 17-4).
On August 19, 2016, Alpha and ABC filed a lawsuit in the

Philadelphia County Court of Common Pleas naming the City, BIS,
CCC, and CNA Financial Corporation (“CNA”) as defendants.
Doc. No. 1).

(See

Plaintiffs asserted various state-law claims

against BIS, CCC, and CNA, including breach of contract, unjust
enrichment, and negligence.

It asserted its sole federal claim

against the City, which Plaintiffs say violated Plaintiffs’
constitutional right to due process.

The City promptly removed

this case to federal court on the basis of federal-question
jurisdiction.

After CNA and CCC filed motions to dismiss,

Plaintiffs filed an amended complaint substituting TIS as a
defendant in place of CNA.

The City, BIS, CCC, and TIS then

separately moved to dismiss Plaintiffs’ amended complaint for
failure to state a claim on which relief can be granted.
Nos. 20, 25, 30, and 32).

(Doc.

Those motions are now fully briefed

and the matter is ripe for disposition.
II.

Standard of Review
A party may move to dismiss a complaint for failure to state

a claim upon which relief can be granted.
12(b)(6).

Fed. R. Civ. P.

In considering such a motion, a district court must

“accept as true the factual allegations in the complaint and all
reasonable inferences that can be drawn therefrom.”

Krantz v.

Prudential Invs. Fund Mgmt. LLC, 305 F.3d 140, 142 (3d Cir. 2002)

4

(quoting Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996)).

While a

court generally cannot consider matters outside the pleadings, “a
document integral to or explicitly relied upon in the complaint
may be considered without converting the motion to dismiss into
one for summary judgment.”

In re Burlington Coat Factory Sec.

Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (emphasis in original)
(internal quotation marks and alteration omitted).
“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’”

Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007)).

“A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.”

Id. (citation omitted).

“Threadbare”

recitations of the elements of a claim supported only by
“conclusory statements” will not suffice.
omitted).

Id. (citation

Rather, a plaintiff must allege some facts to raise

the allegation above the level of mere speculation.

Great W.

Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 176 (3d
Cir. 2010) (citing Twombly, 550 U.S. at 555).

Although a

plaintiff is entitled to all reasonable inferences from the facts
alleged, a plaintiff’s legal conclusions are not entitled to
deference, and the Court is “not bound to accept as true a legal

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conclusion couched as a factual allegation.”

Papasan v. Allain,

478 U.S. 265, 286 (1986).
III.

Due Process Claim Against City of Philadelphia
Plaintiffs allege that the City violated Plaintiffs’ right

to due process and other constitutional rights by demolishing
Plaintiffs’ property without first adhering to proper procedural
steps.

Plaintiffs rely on 42 U.S.C. § 1983, which authorizes

private parties to enforce their federal constitutional rights
against defendants who acted under color of state law.

A

municipality, like Philadelphia here, can be liable under § 1983,
but not on the basis of respondeat superior.

Rather, a

municipality can be liable only when it acts on “‘a policy
statement, ordinance, regulation, or decision officially adopted
and promulgated by’ the officers of that municipality.”

Langford

v. City of Atl. City, 235 F.3d 845, 847 (3d Cir. 2000) (quoting
Monell v. Dep’t of Soc. Servs. of City of New York, 436 U.S. 658,
690 (1978)).
The City argues that we should dismiss Plaintiffs’ claim
because the Amended Complaint fails to allege facts regarding a
municipal policy or custom, and because it fails to allege prior
instances of misconduct.

But Plaintiff need not allege a

consistent pattern of behavior when the Amended Complaint clearly
alleges that the City acted in its official capacity, and not
through the behavior of a possibly rogue officer.

6

As the Supreme

Court has made clear, “it is plain that municipal liability may
be imposed for a single decision by municipal policymakers under
appropriate circumstances.”
U.S. 469, 480 (1986).

Pembaur v. City of Cincinnati, 475

The act Plaintiffs complain of was

allegedly the product of an emergency hearing conducted by the
City.

It is possible that the procedures employed at, before,

and after that hearing satisfied Plaintiffs’ due process rights,
but that question is for another day.

A fair reading of

Plaintiffs’ complaint demonstrates that the decision to demolish
the property was made by the City’s authorized decision makers.
That is enough.

See id. at 481 (“[W]here action is directed by

those who establish governmental policy, the municipality is
equally responsible whether that action is to be taken only once
or to be taken repeatedly.

To deny compensation to the victim

would therefore be contrary to the fundamental purpose of §
1983.”).

We hold that Plaintiffs have stated a cognizable due

process claim against the City, and so the City’s motion will be
denied.
IV.

State-Law Claims Against CCC
Plaintiffs assert three claims against Defendant CCC: (1)

breach of contract, (2) unjust enrichment, and (3) bad faith.
CCC advances distinct arguments as to why neither Plaintiff Alpha
nor Plaintiff ABC has stated any cognizable claim.

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(1) Alpha’s Claims
CCC argues that Alpha’s claims all fail because Alpha is not
insured by CCC, and Pennsylvania law does not permit “direct
actions” against insurers.

(Doc. No. 20).

Plaintiffs do not

dispute CCC’s characterization of the law; they respond only that
Alpha was issued a Certificate of Insurance, which purportedly
brings Alpha within the scope of CCC’s insurance policy.
No. 33-1, at p. 14; Doc. No. 33-3).

(Doc.

But Plaintiffs’ averment

that Alpha is insured by CCC is belied by the allegations in the
Amended Complaint and the Certificate of Insurance included with
Plaintiffs’ opposition papers.

As CCC points out in its reply,

Alpha’s “Certificate of Insurance” references insurance policies
purportedly issued by “Great American E&S Insurance Company” and
nowhere makes any reference to CCC.
3).

(Doc. No. 35; Doc. No. 33-

Plaintiffs’ argument is also undermined by their own

representations to the Court.

See, e.g., Pl. Opp. (Doc. No. 33-

1), at p. 9 (“TIC and CCC acted in bad faith toward its insured
and Plaintiff Alpha”) (emphasis added).

Accordingly, the Court

holds that Plaintiffs’ amended complaint fails to allege facts
that support any of Alpha’s claims against CCC.
(2) ABC’s Claims
CCC next argues that ABC’s claims fail because any legal
action is premature under the “No Action” provision of ABC’s
insurance policy.

In relevant part, that insurance policy

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states:
Legal Action Against Us
No legal action shall be brought against us unless you
have fully complied with all the terms of this policy
and the amount of your obligation to pay has been
finally determined either by:
a.

Judgment against you after actual trial; or

b.

Written agreement between us, you and the claimant.

(Doc. No. 20-5).3

Plaintiffs respond that CCC has a duty to

defend ABC, and that this duty supersedes the “No Action” clause
in ABC’s insurance policy.

And, indeed, insurers are required

under Pennsylvania law to defend their insureds against claims
for which the insurer has agreed to provide coverage.

See Birth

Ctr. v. St. Paul Companies, Inc., 567 Pa. 386, 411 (2001) (“It is
hornbook law that a breach of either the duty to indemnify or the
duty to defend constitutes a breach of a promise set forth in the
liability insurance contract and gives rise to a cause of action
ex contractu[.]”).

Because the amended complaint clearly alleges

that CCC has not complied with their duty to defend, Plaintiffs
maintain that their claims against CCC are viable.

We disagree.

At the time the Amended Complaint was filed, ABC’s claims
against CCC were not ripe, because CCC had not yet determined
whether to cover ABC’s claims or otherwise defend ABC against any

3

Because ABC’s insurance policy is integral to and explicitly
relied upon in the Plaintiffs’ Amended Complaint, it is appropriately
before the Court even on a motion to dismiss. See Burlington Coat
Factory, 114 F.3d at 1426.

9

litigation, as is made clear by the “Reservation of Rights”
letter from CCC to ABC which Plaintiffs attached to the Amended
Complaint.4

In relevant part, CCC stated:

As stated above, we will investigate this claim under a
reservation of rights. However, at this early stage of
the claim certain factual information may not yet be
determined which could potentially affect the coverage
available. Additionally, please send us a copy of any
Complaint that you may receive in the future. We
therefore reserve our right to modify our position. We
reserve the right to seek reimbursement for any and all
sums paid for indemnity or defense costs to the extent
it is determined we had no obligation to provide
coverage for this claim.
AC, Ex. D (Doc. No. 17-4), at p. 5.

And, in fact, CCC has since

assigned defense counsel to represent Plaintiff ABC’s interests
in the state court litigation filed against it by Plaintiff
Alpha.

(Doc. No. 45, Ex. 1).

We thus hold that ABC’s claims

against CCC are not ripe, and all of Plaintiffs’ claims against
CCC are properly dismissed at this time.5
V.

State-Law Claims Against TIC
Plaintiffs assert the same claims against Defendant TIC as

4

“A copy of a written instrument that is an exhibit to a
pleading is a part of the pleading for all purposes.” Fed. R. Civ. P.
10(c).
5

CCC asks that we go further and declare that CCC has no
obligation to defend ABC in the state court action, on account of
certain acts taken by ABC’s counsel in state court that CCC alleges
amount to a breach of contract. (Doc. Nos. 45, 47). CCC is in effect
asking us for a declaratory judgment of its rights under the insurance
policy. Such a declaratory judgment claim is not properly before the
Court, however, and we thus decline to make any judgments regarding
either CCC’s obligation to defend ABC in the state court action, or
the conduct of ABC or its attorney in prosecuting that action.

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those asserted against CCC:

(1) breach of contract, (2) unjust

enrichment, and (3) bad faith.

Like CCC, TIC advances distinct

arguments as to why neither Plaintiff Alpha nor Plaintiff ABC has
stated any cognizable claim.
(1) Alpha’s Claims
Alpha’s claims against TIC fail for the same reasons
discussed above with regard to its claims against CCC.

In

particular, Plaintiffs’ argument that Alpha is insured by TIC are
unsupported by the allegations in the Amended Complaint and the
“Certificate of Insurance,” (Doc. No. 33-3), which Plaintiffs
erroneously rely upon to support their argument that Alpha is
insured by TIC.
(2) ABC’s Claims
TIC argues that ABC’s claims for coverage are excluded under
the ABC’s insurance policy because, on Plaintiffs’ own account,
ABC was acting as Alpha’s property manager when the property
damage occurred.

In relevant part, an endorsement to that

insurance policy states:
THIS ENDORSEMENT CHANGES THE POLICY.
CAREFULLY.

PLEASE READ IT

LIMITATION OF COVERAGE - REAL ESTATE SERVICES WITH
PROPERTY MANAGEMENT
This endorsement modifies insurance provided under the
following:
BUSINESSOWNERS LIABILITY COVERAGE FORM

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A. This insurance does not apply to “property damage”
to property you operate or manage or as to which you
act as agent for the collection of rents or in any
other supervisory capacity.
(Doc. No. 30-5) (emphasis in original).6

Plaintiffs advance

several arguments in an attempt to avoid this contractual bar.
They respond first that TIC’s argument for dismissal relies on an
“‘exclusion’ deep within the contract.”

(Doc. No. 33-1, at 15).

Next, they contend that TIC’s argument turns on a factual issue
regarding whether ABC was acting as Alpha’s property manager.
Id.

Finally, they argue that the insurance arrangement between

Plaintiffs and TIC “were known, accepted, and the fundamental
basis for all insurance policies issued,” including the
Certificate of Insurance discussed above.

Id.

These arguments

are not persuasive.
Plaintiffs’ assertion that the exclusion is “deep within the
contract” is irrelevant where Plaintiffs have not argued that the
insurance policy is a contract of adhesion or that the policy
exclusion is unconscionable.

Indeed, an “insurance policy’s

language that is clear and unambiguous should be given its plain
and ordinary meaning, unless the parties indicate that another
meaning was intended,” Auto. Ins. Co. of Hartford, Conn. v.
Curran, 994 F. Supp. 324, 329 (E.D. Pa. 1998), and Plaintiffs do

6

As with CCC, ABC’s insurance policy with TIC is likewise
integral to and explicitly relied upon in the Plaintiffs’ Amended
Complaint. It too is appropriately before the Court even on a motion
to dismiss. See Burlington Coat Factory, 114 F.3d at 1426.

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not argue that the policy exclusion is ambiguous or that the
parties intended another meaning for that exclusion.

Plaintiffs

instead try to manufacture a factual issue, but that is
foreclosed by the allegations in their own complaint, which
clearly state that ABC was Alpha’s property manager.

See AC at ¶

10 (“Plaintiff ABC had a legal duty to Alpha, as ABC’s customer
and client, to act as property manager”).

Plaintiffs’ averment

that an alternative insurance arrangement between the parties was
known and accepted is unsupported by the allegations in the
Amended Complaint and those documents properly before the Court
that are integral to and relied on in the Amended Complaint;
Plaintiffs’ conclusory argument to the contrary cannot save ABC’s
claims from dismissal.

We will accordingly dismiss all claims

against TIC.
VI.

State-Law Claims Against BIS
Plaintiffs assert three claims against Defendant BIS: (1)

breach of contract, (2) breach of fiduciary duty, and (3)
negligence.

BIS argues that Plaintiffs’ claims fail as a matter

of law because Plaintiffs have not yet suffered any damages.

BIS

separately argues that Alpha’s claims should be dismissed for the
independent reason that BIS owed no duty to Alpha.
(1) Alpha’s Claims
We begin again by analyzing whether Plaintiffs have stated
any cognizable claims against BIS on behalf of Alpha.

13

BIS argues

that Plaintiffs have not, because (a) Alpha is not a named
insured under either the CCC or TIC policy, (b) Alpha and BIS are
not parties to any contract, and (c) ABC, and not Alpha, was the
customer to whom BIS owed tort duties as the broker to procure
requested coverage.

We have already held that Alpha is not a

named insured under either the CCC or TIC policy, and dismissed
Alpha’s claims against those defendants on that basis.
Plaintiffs respond that the Amended Complaint alleges that
BIS was hired by both ABC and Alpha to serve as their insurance
agent.

See AC at ¶ 16 (“Defendant Beneficial was hired by

Plaintiff ABC, and Alpha, to serve as their skilled insurance
agent, and was responsible for ensuring . . . that ABC and Alpha
were both properly insured for any issues with the property”).
Neither Plaintiffs nor BIS has presented the Court with a copy of
any contract between Beneficial and the Plaintiffs, and so
Plaintiffs’ allegations about the contractual relationship
between the parties are entitled to the ordinary presumption of
truth afforded on a motion to dismiss.

At this stage of the

litigation, this Court finds no basis for dismissing Alpha’s
claims against BIS on the ground that BIS owed no duties in
contract or tort to Alpha.
(2) Alpha and ABC’s Claims: Damages
BIS also argues that Alpha’s claims—and ABC’s, too—should be
dismissed for the independent reason that all of their claims

14

require a showing of damages, which are premature because CCC may
yet provide complete relief to ABC on its insurance claim.
Plaintiffs do not dispute that damages are an essential element
of each of its claims against BIS.

They instead appear to rest

on the same arguments they made in support of their claims
against CCC.

(Doc. No. 33).

For the same reasons that

Plaintiffs’ claims against CCC are not yet ripe, their claims
against Beneficial are likewise premature.

Accordingly,

Plaintiffs’ claims against BIS are appropriately dismissed at
this time.
VII.

Conclusion
For the foregoing reasons, the City of Philadelphia’s Motion

is DENIED, and CCC’s Motion, TIC’s Motion, and BIS’s Motion are
GRANTED.

Plaintiffs’ claims against CCC, TIC, and BIS will be

dismissed without prejudice.

An appropriate Order follows.

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