PETTIFORD et al v. STATE FARM INSURANCE COMPANIES et al

Filing 14

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE JOHN M. YOUNGE ON 2/6/24. 2/6/24 ENTERED AND COPIES E-MAILED.(mbh)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
CHARLES PETTIFORD, et al.,

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Plaintiffs,
v.
STATE FARM INSURANCE COMPANIES,
et al.,
Defendants.

Civil Action
No. 23-4360

MEMORANDUM
J. Younge
I.

February 6, 2024

INTRODUCTION
Currently before this Court is Defendant State Farm Insurance Companies’ Motion to

Dismiss. (ECF No. 5.)1 The Court finds this Motion appropriate for resolution without oral
argument. Fed. R. Civ. P. 78; L.R. 7.1(f). For the reasons set forth in this Memorandum, this
Motion is Granted with leave to amend.
II.

FACTUAL BACKGROUND
At a point prior to June 3, 2022, Plaintiffs Charles and Marie Pettiford’s garage roof

collapsed. (Complaint ¶¶ 6 & 11, ECF No. 1-5.) Their insurance company, Defendant State
Farm Insurance Companies (hereinafter “State Farm”), approved a claim to repair the damage
and allegedly referred Plaintiffs to Defendant John Doe, a person or entity that then allegedly
recommended that the Plaintiffs use contractor Quantum Restoration Services (hereinafter
“QRS”) to do the repairs. (Complaint ¶¶ 7-9.) Based upon this recommendation, Plaintiffs

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When applicable, the Court adopts the pagination supplied by the CM/ECF docketing system,
which does not always match the document’s internal pagination.
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allege they entered a residential construction contract with QRS to repair the garage on June 3,
2022. (Complaint ¶¶ 10-11; Residential Construction Contract, ECF No. 1-5, pp. 24-34.) This
contract stated that work would begin on July 18, 2022, and end by August 26, 2022, but
Plaintiffs allege that QRS did not finish the project in a timely manner, having still been on site
in January 2023, and performed defective work that it did not correct. (Residential Construction
Contract, ECF No. 1-5, p. 26; Complaint ¶¶ 15-22, ECF No. 1-5.) On March 6, 2023, Ken
Group LLC, working on behalf of Plaintiffs, calculated the proposed cost of completing the
garage at $73,525.00, including re-leveling the garage floor and reconstructing its walls.
(Complaint ¶¶ 23-25.) State Farm has not extended coverage for this additional proposed work,
and Plaintiffs have refused to make final payment to QRS for completion of the project which
led QRS to file a mechanic lien action against the premises on March 9, 2023. (Complaint ¶¶
26-27; Mechanics Lien, ECF No. 1-5, pp. 39-41.) State Farm additionally has declined to defend
or indemnify Plaintiffs in the defense of this action. (Complaint ¶¶ 27-28, ECF No. 1-5.)
Plaintiffs filed their Complaint against Defendants for breach of contract and bad faith in
state court on August 18, 2023. See Complaint, ECF No. 1-5. There, Plaintiffs argue that the
Defendants knew or should have known that QRS did not have the ability to complete the project
they were recommended for in a timely and workmanlike manner, had an obligation to ensure
that its recommended contractor was suitable for the project, and had an obligation to indemnify
Plaintiffs for “losses attributable to their damaged garage” and QRS’ “deficient and incomplete
work.” (Complaint ¶¶ 31-36.) This case was removed to federal court on November 8, 2023
pursuant to 28 U.S.C. § 1332. See Notice of Removal, ECF No. 1. On November 15, 2023,
Defendants filed their Motion to Dismiss for Failure to State a Claim pursuant to Federal Rule of
Civil Procedure 12(b)(6). See Motion to Dismiss, ECF No. 5.

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III.

LEGAL STANDARD
The standard for a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6)

is examined in detail in Ashcroft v. Iqbal, 556 U.S. 662 (2009). After Iqbal, it is clear that
“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice” to defeat a Rule 12(b)(6) motion to dismiss. Id. at 678; see also Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “To survive dismissal, ‘a complaint must
contain sufficient factual matter, accepted as true, to state a claim [for] relief that is plausible on
its face.’” Tatis v. Allied Interstate, LLC, 882 F.3d 422, 426 (3d Cir. 2018) (quoting Iqbal, 556
U.S. at 678). Facial plausibility is “more than a sheer possibility that a defendant has acted
unlawfully.” Id. (quoting Iqbal, 556 U.S. at 678). Instead, “[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. (quoting Iqbal, 556 U.S. at 678).
Thus, this Court must examine Plaintiff’s claims to determine whether it can infer that Defendant
is liable for the alleged misconduct.
IV.

DISCUSSION
Plaintiffs have failed to plead sufficient facts in support of their breach of contract and

bad faith allegations against Defendants. Plaintiffs are suing not based on the original damage
sustained to their garage but for the defective performance of, and failure to indemnify against, a
contractor that Plaintiffs allege was recommended by Defendant. Defendants, in their Motion to
Dismiss, argue that the alleged damages and indemnification request are not covered by the
parties’ insurance policy and that, consequently, they cannot make out claims for breach of
contract or bad faith. See ECF No. 5. While Defendants also argue that their claims are timebarred by the insurance policy, which provides that “[a]ny action by any party must be started

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within one year after the date of loss or damage” (Insurance Policy, ECF No. 5-3, p. 37),
Plaintiffs have sufficiently pled that the damage at issue in this suit is the untimely and defective
work provided by Defendants’ recommended contractor between July 2022 and January 2023,
which is within the allowable time period. However, Plaintiffs have not set forth a plausible
claim of either breach of contract or bad faith, notably because they have failed to plead facts: (1)
establishing the relationship between State Farm and John Doe; (2) showing how or why
Plaintiffs were required or obligated to accept the contractor recommended by John Doe; and (3)
why State Farm’s recommendation of John Doe and the corresponding recommendation of QRS
required State Farm to, in effect, warrant the performance of QRS such that State Farm was
obligated to defend Plaintiffs against QRS.
The root of Plaintiffs’ claims is not the faulty workmanship itself but Defendants’ alleged
obligation and failure to ensure that QRS was able to competently complete the project it was
recommended for. Under Pennsylvania law, a breach of contract cause of action requires “(1)
the existence of a contract, including its essential terms, (2) a breach of a duty imposed by the
contract[c] and (3) resultant damages.” CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058
(Pa. Super. Ct. 1999). Losses aggravated by inadequate workmanship and repair are
unambiguously excluded in the relevant contract. See Insurance Policy, ECF No. 5-3, p. 33;
Jones v. Allstate Property and Casualty Ins. Co., 552 F. Supp. 3d 498, 503 (E.D. Pa. 2021))
(finding a faulty workmanship exclusion, related to “the faulty or defective execution of making
or doing something,” unambiguous). Plaintiffs attempt to sidestep this exclusion by alleging that
Defendants’ improper recommendation of QRS directly and proximately aggravated those losses
because they should have known QRS could not properly complete the repairs. There is no
contractual provision that Plaintiffs point to that requires either that Defendants recommend a

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suitable contractor or, if such a contractor is recommended, that it meets certain standards. The
argument that Defendants’ actions deprived Plaintiffs of their full rights under the policy by
subjecting them to a more costly and lengthy repair process in breach of their contract is based
on too attenuated a fact pattern – that State Farm referred Plaintiffs to John Doe and John Doe
then recommended QRS does not, absent more, create a contractual obligation that State Farm
investigate QRS’ suitability for the project. As such, the Court finds that Plaintiffs have not pled
facts sufficient to bring a cause of action for breach of contract.
The allegation that Defendants’ refusal to indemnify Plaintiffs against QRS’ mechanics
lien action was made in bad faith is similarly deficient. Bad faith conduct under Pennsylvania
law can be shown where the defendant “did not have a reasonable basis for denying benefits
under the policy and that the defendant knew or recklessly disregarded its lack of reasonable
basis for denying the claim.” Terletsky v. Prudential Property and Casualty Ins. Co., 649 A.2d
680, 688 (Pa. Super. 1994). Conduct “import[ing] a dishonest purpose and mean[ing] a breach
of a known duty . . . through some motive of self-interest or ill will” may be considered bad
faith, though “mere negligence or bad judgment is not.” Id. Where an insurer acts in bad faith
towards an insured, the court may award interest on the amount of the claim, award punitive
damages, and assess attorneys’ fees against the insurer. 42 Pa. C.S. § 8371.
Here, the allegation that Defendants breached a known duty and acted in bad faith by
refusing to indemnify Plaintiffs in QRS’ mechanics lien action is not plausibly established. The
insurance policy provides that State Farm will indemnify Plaintiffs for suits brought “for
damages because of bodily injury or property damage to which this coverage applies, caused by
an occurrence,” which is defined as an “accident.” See Insurance Policy, ECF No. 5-3, pp. 19 &
38-39. Defendants argue that they have no duty to indemnify Plaintiffs for their own refusal to

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pay QRS because refusal to pay for faulty workmanship is not an accident and is not otherwise a
part of its indemnification obligations. See Motion to Dismiss, ECF No. 5; Specialty Surfaces
Intern., Inc. v. Continental Cas. Co., 609 F.3d 223, 238-39 (3d Cir. 2010) (finding that
“occurrences” must be unanticipated, and a foreseeable result of faulty workmanship is not
unanticipated).
Absent a showing that Defendants ultimately bear some fault for QRS’ alleged poor
performance, Plaintiffs are left with an allegation of faulty workmanship, which is not included
in Defendants’ indemnification obligations. As with Plaintiffs’ breach of contract claim, the
mere fact that State Farm referred Plaintiffs to John Doe who then recommended QRS is not
enough to show that Defendants were unreasonable in refusing Plaintiffs’ claim for
indemnification based on John Doe having made that ultimate recommendation, however poorly
QRS performed. As such, the Court finds that the facts as presented by Plaintiffs do not meet
Plaintiffs’ burden in making out a plausible bad faith cause of action. Plaintiffs shall be granted
leave to file an Amended Complaint pursuant to Federal Rule of Civil Procedure 15(a)(2) to
potentially cure these deficiencies.
V.

CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss is Granted with leave to

amend.
An appropriate Order follows.
IT IS SO ORDERED.
BY THE COURT:
/s/ John Milton Younge
Judge John Milton Younge

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