Star Spa Services, Inc. et al v. Robert G. Turano Insurance Agency, Inc. et al

Filing 34

MEMORANDUM and ORDER granting in part and denying in part 23 dfts' Motion for Summary Judgment ; GRANTED re pltf's remaining breach of contract claims under the PA Unfair Trade Practices & Consumer Protection Law; and DENIED re pltfs' negligence claims raised in Counts II and III of the complaint.Signed by Honorable James M. Munley on 1/27/09 (sm, )

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA STAR SPA SERVICES, INC., STAR SPA INC., and STARK SPENCER REAL ESTATE PARTNERSHIP, Plaintiffs : No. 3:07cv302 : : (Judge Munley) : : : v. : : ROBERT G. TURANO INSURANCE : AGENCY, INC, : ROBERT G. TURANO, : SHERRI ROBBINS, : NATIONWIDE MUTUAL FIRE : INSURANCE CO., : NATIONWIDE FLOOD INSURANCE : PROGRAM, : NATIONWIDE PROPERTY & : CASUALTY CO., and : NATIONWIDE MUTUAL INSURANCE : CO., : Defendants : ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
M E M O R AN D U M B e fo re the court is defendants' motion for summary judgment. (Doc. 23). Having been fully briefed, the matter is ripe for disposition. B a c k g ro u n d T h is case concerns the duties of insurers related to flood coverage. On or a b o u t June 23, 2006, a flood occurred at a property on 1250 Roosevelt Highway, Rt. 6 , in W a ym a rt Pennsylvania. (Defendants' Statement of Undisputed Facts (Doc. 24)

(h e re in a fte r "Defendants' Statement) at ¶ 5). Plaintiff Star Spa Services ("Star Spa") is a former tenant of Plaintiff Stark Spencer Real Estate Partnership ("Stark S p e n c e r" ) at this address. (Id. at ¶ 3). Both companies are Pennsylvania c o rp o ra tio n s . (Id. at ¶¶ 1-2). On that date, Stark Spencer maintained a standard

flo o d insurance policy on that property in question through Defendant Nationwide M u tua l Flood Insurance Company ("Nationwide"). (Id. at ¶ 6). Star Spa did not have flo o d insurance coverage for its property, which was stored in the structure owned by S ta rk Spencer. (Id. at ¶ 7). Defendants contend that Star Spa never made a request for flood insurance c o ve ra g e from them. (Id. at ¶ 8). No flood insurance policy was ever issued to Star S p a . (Id. at ¶ 9). W h e n informed by the bank that plaintiff required flood insurance c o ve ra g e for its renovated building, the plaintiff understood that this type of in s u ra n c e coverage was separate from other insurance on the property. (Id. at ¶ 1 0 ). Defendant Turano Insurance Agency ("Turano") and its representatives never in fo rm e d Star Spa that it was covered for its contents under a flood insurance policy. (Id. at ¶ 11). Turano also never informed Star Spa that it enjoyed flood insurance c o ve ra g e under Stark Spencer's flood insurance policy. (Id. at ¶ 12). The property d a m a g e d in the flood on June 23, 2006 belonged to Star Spa. (Id. at ¶ 13). The p ro p e rty where the flooding took place is located in a flood zone rated "AE." (Id. at ¶ 1 4 ). Substantial improvement and construction occurred at that property after S e p te m b e r 30, 1987. (Id. at ¶ 15).

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O n January 24, 2007, plaintiffs filed a complaint in the Court of Common Pleas o f W a yn e County, Pennsylvania. The complaint consists of four counts. Count I a lle g e s that the Nationwide Insurance Defendants improperly denied coverage for p la in tiffs ' losses from the flood. Plaintiffs allege that Nationwide's improper refusal to p r o v id e coverage under the policy resulted in "direct and consequential damages" th a t included "additional damage to personal property and profits, substantial fin a n c ia l hardship and inconvenience with loss of rents and/or rental income." (Id. at ¶ 11). Count II alleges that all defendants negligently misrepresented to the plaintiffs th a t they would obtain flood contents coverage for Star Spa. (Id. at ¶¶ 13-16). Count III contends that defendants were careless and negligent in failing to provide in s u ra n c e for the property's contents and failing to notify plaintiffs about the limits of th e insurance. (Id. at ¶¶ 18-19). Count IV alleges that the Turano Defendants, in failin g to provide plaintiffs with contents coverage, engaged in unfair and deceptive a c ts or practices in violation of the Pennsylvania Unfair Trade Practices and C o n s u m e r Protection Law, 73 PA. CONS. STAT. § 201.2(4). On February 16, 2007, defendants filed a notice of removal with this court (D o c . 1). On February 22, 2007, the defendants filed their motion to dismiss p u rs u a n t to Federal Rule of Civil Procedure 12(b)(6) (Doc. 3). Both parties then filed b rie fs . The court issued a decision denying in part and granting in part the motion to d is m is s on September 25, 2007. The parties then engaged in discovery. At the c lo s e of discovery, the defendants filed the instant motion for summary judgment,

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b rin g in g the case to its present posture. J u r i s d ic t i o n B e c a u s e this case arises from a dispute over flood insurance claims under the N a tio n a l Flood Insurance Program, this court has jurisdiction pursuant to 42 U.S.C. § 4 0 7 2 . The court has supplemental jurisdiction over the plaintiff's state-law claims p u rsu a n t to 28 U.S.C. § 1367(a) ("In any civil action of which the district courts have o rig in a l jurisdiction, the district courts shall have supplemental jurisdiction over all o th e r claims that are so related to claims in the action within such original jurisdiction th a t they form part of the same case or controversy under Article II of the United S ta te s Constitution."). Legal Standard T h e case is before the court on the defendants' motion for summary judgment. Granting summary judgment is proper if the pleadings, depositions, answers to in te rro g a to rie s , and admissions on file, together with the affidavits, if any, show that th e re is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Knabe v. Boury, 114 F.3d 407, 410 n.4 (3d Cir. 1 9 9 7 ) (citing FED. R. CIV. P. 56(c)). "[T]his standard provides that the mere existence o f some alleged factual dispute between the parties will not defeat an otherwise p ro p e rly supported motion for summary judgment; the requirement is that there be n o genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 2 4 7 -4 8 (1986) (emphasis in original). 4

In considering a motion for summary judgment, the court must examine the fa c ts in the light most favorable to the party opposing the motion. International Raw M a te ria ls , Ltd. v. Stauffer Chemical Co., 898 F.2d 946, 949 (3d Cir. 1990). The b u rd e n is on the moving party to demonstrate that the evidence is such that a re a s o n a b le jury could not return a verdict for the non-moving party. Anderson, 477 U .S . at 248 (1986). A fact is material when it might affect the outcome of the suit u n d e r the governing law. Id. Where the non-moving party will bear the burden of p ro o f at trial, the party moving for summary judgment may meet its burden by s h o w in g that the evidentiary materials of record, if reduced to admissible evidence, w o u ld be insufficient to carry the non-movant's burden of proof at trial. Celotex v. C a tre tt, 477 U.S. 317, 322 (1986). Discussion D e fe n d a n ts move for summary judgment on several grounds. The court will a d d re s s each in turn. A. Pre-Emption of Plaintiffs' Extra-Contractual Claims T h e defendants argue that all of plaintiffs' extra-contractual and tort claims, c o n ta in e d in Counts II-IV of the complaint, are preempted and/or barred as a matter o f law. The only allegation of damages in the complaint, defendants contend, are c o n ta in e d in Count I. In that Count, plaintiffs contend that they suffered loss solely b e c a u s e of defendants' failure to make payment under the policy. All of the statela w claims are therefore "preempted" as a matter of law. Moreover, defendants 5

in s is t that the National Flood Insurance Act preempts any claims for m isr e p re s e n ta tio n s about coverage brought pursuant to Pennsylvania law. "Congress created the [National Flood Insurance] Program to provide s tan d a rd iz e d insurance coverage for flood damage at or below actuarial rates." C.E.R. 1988, Inc. v. Aetna Cas. and Sur. Co., 386 F.3d 263, 266 (3d Cir. 2004). Under this program, "Congress authorized [the] F[ederal] E[mergency] M [a n a g e m e n t] A[gency] to `prescribe regulations establishing the general method or m e th o d s by which proved and approved claims for losses may be adjusted and paid fo r any damage to or loss of property which is covered by flood insurance." Id. at 2 6 7 . Congress allows private insurance companies to write flood-insurance policies, b u t those companies "must strictly enforce the provisions set out by FEMA and may va ry the terms of a Policy only with the express written consent of the Federal Ins u ra n c e Administrator." Id. Policies written under the Act are called Standard F lo o d Insurance Policies." (SFIPs). Neill v. State Farm Fire and Cas. Co., 159 F. S u p p . 2d 770, 772 (E.D. Pa. 2000). The Act "provides subject matter jurisdiction for an insured's suits against a[n] [in s u re r] arising out of a disputed flood insurance claim." Van Holt v. Liberty Mut. F ire . Ins. Co., 163 F.3d 161, 166 (3d Cir. 1998). Because of the federal g o ve rn m e n t's interest in uniform national policies and standards in relation to flood in s u ra n c e , "federal courts are the appropriate and exclusive arbiters of Policy-related d is p u te s ." C.E.R. 1988, Inc., 386 F.3d at 267. These courts must apply federal, not

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s ta te , law to interpreting policies issued under the Act. Id. Moreover, a plaintiff may n o t plead a state-law tort claim to avoid federal law in interpreting such insurance c o n tra c ts , since "a claim may sound in tort but nonetheless be one in contract." Id. a t 268. Courts have therefore found that "federal common and statutory law s p e c ific a lly preempt state principles of contract law for purposes of the in te rp re ta tio n s of policies issued pursuant to the N[ational F[lood] I[nsurance] A[ct]." M e s s a v. Omaha Property & Cas. Ins. Co., 122 F.Supp. 2d 513, 520 (D.N.J. 2000); s e e also, Padalino v. Standard Fire Ins. Co., No. 08cv1553, 2008 W L 4630585 at * 3 (E .D . Pa. Oct. 15, 2008) (finding that "NFIA [preempts] state law claims that are b a s e d on the handling and adjustment of a claim made under an insured's SFIP b e c a u s e the `application of state law would impede Congress's objectives' in re d u c in g `fiscal pressure on federal flood relief efforts.'") (quoting C.E.R. 1988, 386 F .3 d at 270). Accordingly, if the court were to find that plaintiffs' tort claims were merely an a tte m p t to use state law to interpret a contract issued pursuant to the NFIA, the court w o u ld find those tort claims preempted. The tort claims in question here, however, a re not designed to determine whether the defendants properly interpreted the p o lic y. Instead, they are aimed at the negotiations the parties undertook when they p ro c u re d the coverage. Indeed, Plaintiff Star Spa acknowledges that the company d id not purchase any flood insurance coverage before the incident in question. Courts in various jurisdictions have concluded that federal preemption does not

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a p p ly to the procurement of flood insurance policies under the Act. See, e.g., S p e n c e v. Omaha Indem. Ins. Co., 996 F.2d 793, 796 (5th Cir. 1993) (finding that "to rt actions based on misrepresentations concerning the SFIP, as opposed to c o n tra c t claims under the SFIP itself" are not preempted under the Act); Reeder v. N a tio n w id e Mut. Fire Ins. Co., 419 F. Supp. 2d 750, 759 (D. Md. 2006) (finding that "s ta te law tort claims arising out of alleged misrepresentations made during the p ro c u re m e n t of an SFIP are not preempted in the flood insurance context"); Padlino, 2 0 0 8 WL 4630585 at *4 (finding that "state law claims against W [rite ]Y [o u r]O [w n ] c o m p a n ie s in the context of SFIP procurement should not interfere with Congress's o b je c tive of providing affordable flood insurance to the public."). Here, the complaint is not about the interpretation of a flood insurance policy, b u t the procurement of one. The denial of coverage for Star Spa came not because th e claim did not qualify under the policy, but because there was no policy under w h ich plaintiffs could make a claim. In that case, the reasons for preempting state la w ­ to give effect to the supremacy of federal law enshrined in the Constitution and a llo w the efficient operation of a federally designed nationwide regulatory s c h e m e ­ a re not applicable. No flood control policy was in place here, and there th u s exists no reason to use federal law to interpret the policy. See, e.g., Padlino, 2 0 0 8 WL 4630585 at * 6 (holding that "W ith o u t a SFIP, the NFIP does not apply and th e NFIA cannot extend to the relationship between the insurance company and their in s u re d s ."). If plaintiffs did not actually have a flood insurance policy, defendants

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s h o u ld not be able to use rules applied to those who took out such a policy to shortc irc u it the plaintiffs' claims. Accordingly, the court will not grant summary judgment o n these grounds. The court will, however, consider defendants' motion in relation to the claims themselves. B . Negligence Claims Against Turano Agency i. Duty D e fe n d a n ts contend that plaintiffs' negligence claims against Defendant T u ra n o Agency must fail because that defendant neither had a duty to provide flood in s u ra n c e nor a duty imposed by law to secure such coverage for plaintiffs. Evidence indicates that plaintiffs were aware that Turano would not provide such c o ve ra g e , and thus the defendant had no duty to do so. Those facts establish that P la in tiff Stark Spencer suffered no loss and Plaintiff Star Spa had no expectation th a t it would receive coverage. Further, defendants argue that Turano met its legal d u ty to explain the coverage available and the consequences of not accepting that c o ve ra g e . Donna M. Spencer, President of Plaintiffs Star Spa and Stark Spencer testified at her deposition about the process of insuring the property on Roosevelt R o a d . She first contacted Defendant Turano Insurance Agency in September or O c to b e r of 2002. (Deposition of Donna M. Spencer, Exh. J to Plaintiffs' brief in o p p o s itio n to defendants' motion for summary judgment (Doc. 28-3) (hereinafter "S p e n c e r Dep.") at 32). The business had expanded and planned to move to a new 9

lo c a tio n , and Spencer sought an insurance agency based closer to that business. (Id.). Her husband, the other principal in the business, knew the head of the agency, a n d Spencer asked for a quoted rate. (Id. at 33). She sought coverage for all of the b u s in e s s , except for vehicles, which were covered by State Farm. (Id.). Spencer s o u g h t coverage for her businesses' operations. (Id. at 33-34). She knew that her b u s in e s s e s needed coverage for "fire and flood and liability," but "relied on" the D e fe n d a n t Agency to provide her with "adequate coverage." (Id. at 34). She had n e ve r before purchased flood insurance. (Id.). The companies' new property, h o w e ve r, was located on a flood plain, and the bank that made the mortgage for that p ro p e rty had informed Spencer that she needed flood insurance. (Id.). In her te s tim o n y, Spencer insisted that she never told anyone at the Agency that she w a n te d only the "bare minimum" flood insurance. (Id. at 34-35). Eventually, Defendant Turano wrote the plaintiffs' insurance policies. (Id. at 3 5 ). Spencer testified that in September or October of 2002 she requested "[b ]u ild in g and contents coverage" for both Star Spa and Stark Spencer. (Id. at 39). She called up a Turano representative and told her that she wanted "building c o ve ra g e for Stark Spencer and contents for Star Spa." (Id.). Spencer testified that s h e also requested flood insurance from the Defendant Agency. (Id. at 39-40). She d id not make that request in writing, however. (Id. at 40-41). Instead, she made a ve rb a l request for the coverage, as "[t]hat's the way we always did business with th e m ." (Id. at 41). Stark Spencer procured a flood insurance policy through

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D e fe n d a n t Turano in 2002. (Id. at 44). Star Spa sought flood insurance coverage fo r the contents of the building the companies shared, but "were told they couldn't g e t it." (Id. at 45). W h e n the companies renewed their policies in 2003, Spencer a g a in requested flood insurance for Star Spa to cover the building's contents. (Id. at 4 7 ). The companies were expanding the building and wanted to ensure coverage. (Id.). Again, however, the Defendant Agency informed Spencer that flood insurance c o ve ra g e was not available for the building's contents. (Id.). Spencer requested s u c h coverage for contents once more in the spring of 2004. (Id. at 48). Defendant a g a in informed here that such coverage was not available. (Id.). In August or September 2004, however, Spencer again requested a flood p o lic y for Star Spa. (Id. at 49). The new building had been constructed, and Star S p a had moved a great many items to the store. (Id.). Spencer claimed that the ite m s were not stored in a basement, and that Star Spa should thus be eligible for c o v e ra g e . (Id.). Concluding that the area where the goods were stored was a b a s e m e n t, Defendant informed Star Spa that it could not obtain flood insurance for th e goods. (Id. at 50). According to Spencer, Defendant Turano then suggested th a t she obtain "a blanket protector," which she took to mean would "cover contents u n d e r any circumstances." (Id.). The company never gave her specific information o n that type of policy, but Spencer purchased a blanket protector nonetheless. (Id.). Spencer believed that such a policy would cover the contends "if a flood should o c c u r." (Id. at 51). Spencer insisted that no one explained to her that the blanket

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p ro te c tio n she bought would not cover the contents in the case of a flood. (Id. at 52). Indeed, she contended that Turano Agency representatives had implied that the b la n k e t coverage would protect the contents against flood. (Id. at 53). She had s o u g h t such coverage, been told that the flood-insurance policy could not cover c o n te n ts and then the defendant had suggested she buy a blanket protector. (Id. at 5 4 ). Stark Spencer purchased the blanket protector policy to be effective from S e p te m b e r 11, 2004 until September 11, 2005. (Id. at 55-56). In April 2005, Stark Spencer increased the flood coverage on the building from $ 4 5 ,0 0 0 to $160,000. (Id. at 59). The company increased coverage because im p ro ve m e n ts to the building had been completed and the insurance was changed to reflect the value of those improvements. (Id.). When Spencer sought the in s u ra n c e , she knew that the coverage was for the building and not its contents. (Id.). The Turano Agency had repeatedly informed her that flood insurance c o ve ra g e was not available to Star Spa for the building's contents. (Id. at 67). Spencer testified that she did not believe that she had an agreement with the Turano A g e n c y to obtain flood insurance coverage for the contents of the building. (Id. at 7 2 ). No one at the Agency ever told Spencer that the contents of the building were c o v e re d by Stark Spencer's flood insurance policy. (Id. at 75-76). Ron Stark, S p e n c e r's husband and co-owner of the businesses, also testified that Star Spa had n o flood insurance coverage prior to their loss. (Stark Dep. at 37-38). The only p o lic y in place covered Stark Spencer. (Id. at 380).

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S p e n c e r testified that sometime after July 2006 she and her husband had a c o n ve rs a tio n with an insurance adjuster. (Id. at 76). After evaluating the coverage o n the property, the adjuster asked Spencer whether the companies had coverage fo r the building's contents. (Id.). After informing the adjuster that she understood s u c h coverage to be unavailable, Spencer and her husband spoke with agents at the T u ra n o agency. (Id.). Soon thereafter, plaintiffs received a quote for contents c o ve ra g e from the Defendant Agency. (Id.). Eventually, plaintiffs severed their b u s in e s s relationship with the Defendant Agency. (Id. at 77). At the time of S p e n c e r's deposition, the company had coverage for flood contents through State F a rm . (Id.). D e fe n d a n t Turano testified that plaintiffs never asked him for a quote on c o n te n ts insurance before the flood, but that he would have provided such in fo rm a tio n had he been asked. (Turano Dep. at 56). He could not recall c o n ve rs a tio n s with either Spencer or Stark regarding contents coverage prior to the p la in tiffs ' loss due to flooding. (Id. at 71-72). Turano insisted that only Stark S p e n c e r had sought flood insurance coverage, and that plaintiffs had never informed h im that they kept property for which they wanted insurance in the flooded areas of th e building. (Id. at 92). After the flood, his office on September 20, 2006 provided a flo o d insurance quote that included contents. (Id. at 74, 93). His agency provided th is quote for Star Spa, not Stark Spencer. (Id. at 75, 93). That request was the o n ly request Star Spa had ever made to him for a quote on contents coverage. (Id.

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a t 93). The Turano agency provided Star Spa with coverage for contents in s itu a tio n s other than floods, but had never been requested to write flood insurance c o n te n ts coverage. (Id. at 101). Turano's agency kept separate records for its d e a lin g s with Stark Spencer and Star Spa, though the agency always dealt with e ith e r of the plaintiffs, and never with a particular company. (Id. at 94-95). Still, T u ra n o insisted that the company always clarified with the plaintiffs which company th e y were speaking about. (Id. at 95-96). Even after the flood, Turano retained his p o s itio n that he could not write flood insurance coverage for the contents. (Id. at 89). T o make out a negligence claim, a plaintiff must allege "`the defendant had a duty to conform to a certain standard of conduct; that the defendant breached that d u ty ; that such breach caused the injury in question; and actual loss or damage.'" W is n is k i v. Brown & Brown Ins. Co. of Pennsylvania, 906 A.2d 571, 575-76 (Pa. S u p e r . Ct. 2006) (quoting Phillips v. Cricket Lighters, 841 A.2d 1000, 1008 (Pa. 2 0 0 3 )). The Pennsylvania Supreme Court has held that "the legal concept of duty of c a re is necessarily rooted in often amorphous public policy considerations." Althaus v. Cohen, 756 A.2d 1166, 1169 (Pa. 2000). Courts are to balance several factors in d e te rm in in g whether a duty exists: (1) the relationship between the parties; (2) the s o c ia l utility of the actor's conduct; (3) the nature of the risk imposed and fo re s e e a b ility of the harm incurred; (4) the consequences of imposing a duty upon th e actor; and (5) the overall public interest in the proposed solution." Id. The Pennsylvania Superior Court has addressed these factors in determining

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th e extent of an insurance agent's duty to inspect a property before advising a p e rs o n seeking flood insurance coverage. See W is n is k i, 906 A.2d at 581 (finding th a t an insurance broker does not have a "duty to inspect business premises and a d vis e clients based on that inspection."). The court found that "for ordinary n e g lig e n c e purposes, the relationship between the insurance broker and client is an a rm 's -le n g th business relationship." Id. at 579. W h ile the court found "social utility" in having an agent inspect a property and identify risks, the court also concluded "th a t insureds can also inspect their own property and come to their own reasonable c o n c lu s io n s about the type and scope of insurance coverage they need." Id. Next, th e court concluded that the nature of the risk imposed and foreseeability of the h a rm incurred did not justify imposing a duty to inspect since, "[r]isk is the very n a tu re of insurance . . . individuals take an intellectual gamble when purchasing in s u ra n c e as they weigh the expense of purchasing insurance versus the amount of c o ve ra g e they purchase. Insurance against loss does not mean the industry is 1 0 0 % guarantor of protection against loss." Id. at 580. Finally, the court found the d u ty to inspect a property would impose an onerous risk on insurance brokers, who m ig h t well be expected to inspect every item eligible for insurance or face lawsuits a fte r a loss occurred.1

The court quoted approvingly from an opinion by the Missouri Court of Appeals that found that creating such a duty would turn the principle of insurance on its head: "[b]y creating such a duty insureds would have the opportunity to seek coverage for a loss after it occurred merely by asserting that they would have bought additional coverage if it had been offered. This turns the entire theory of insurance on its ear as individuals, in theory, 15

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T h e court thus finds that the duty owed by an insurance broker in this context is the same as the duty generally owed by an agent in any other insurance tra n s a c tio n .2 In addressing the general nature of the duty of an insurance agent to a c o n s u m e r, courts in Pennsylvania have found an insurer's duty to consist of "fair d e a lin g and good faith . . . not hand holding and substituted judgment." Kilmore v. E rie Ins. Co., 595 A.2d 623, 627 (Pa. Super. Ct. 1991). W h ile an insurer may have a heightened duty to a person relying on his knowledge of a specialized industry, "th e relationship [between insurer and insured] is not so unique as to compel this C o u rt to require an insurer to explain every permutation possible from an insured's c h o ic e of coverage." Id. Still, this duty of good faith and fair dealing "includes the d u ty of full and complete disclosure as to all of the benefits and every coverage that is provided by the applicable policy or policies." Dercoli v. Pennsylvania Nat'l Mut. In s . Co., 554 A.2d 906, 909 (Pa. 1989). This duty "arises from the nature of in s u ra n c e contracts and the fiduciary relationship between an insurance company a n d its insureds." Burton v. Republic Ins. Co., 845 A. 2d 889, 899 (Pa. Super. Ct. 2 0 0 4 ); W e isb la tt v. Minnesota Mut. Life Ins. Co., 4 F. Supp. 2d 371 (E.D. Pa. 1998).

take an `intellectual gamble' when purchasing insurance as they weigh the expense of insurance versus the amount of coverage that they purchase. Allowing insureds to seek coverage, post-occurrence, allows them to completely circumvent this risk." Wisniski, 906 A.2d at 581 (quoting Farmers Ins. Co. v. McCarthy, 871 S.W.2d 82, 86 (Mo. App. E.D. 1994)). The court also notes that the complaint in this case is not about promises made about the flood insurance­all agree that no one ever represented that such flood insurance coverage applied to Star Spa's property­but about the failure to offer other coverage that could have protected the property stored in the real estate. 16
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P e n n s ylv a n ia courts have emphasized, however, that, despite the duty of the insurer to make the insured aware of the contents of a policy, "[e]ach insured has the right a n d obligation to question his insurer at the time the insurance contract is entered in to as to the type of coverage desired and the ramifications desired therefrom." Kilmore, 595 A.2d at 627; see also, Treski v. Kemper Nat. Ins. Companies, 674 A.2d 1 1 0 6 , 1115-16 (Pa. Super. Ct. 1996). Evidence here exists by which a jury could conclude that the Defendant A g e n c y and agents breached their duty of fair dealing in selling Plaintiff Spencer in s u ra n c e policies. The evidence indicates that Spencer sought coverage for the c o n ten ts of the building. Star Spa owned the contents of the building, and Stark S p e n c e r owned the building. Defendant made Spencer aware of the limits of the p o lic ie s available to insure the contents under the flood insurance program, and thus th a t Stark Spencer and Star Spa could not obtain coverage that would insure the c o n te n ts . Still, a jury could find that Spencer, aware that she could not obtain c o ve ra g e under the flood insurance program, persisted in attempting to obtain c o ve ra g e for the contents. A jury could also find that defendants breached their duty to disclose fully to Spencer the coverage provided by the blanket protector policy a n d suggest other policies which could provide the coverage she clearly and re p e a te d ly sought. The situation here is complicated by the fact that two separate b u s in e s s e s sought insurance policies, but the same persons owned and managed th o s e separate companies. The parties involved may not always have been clear

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a b o u t which entity sought what kind of coverage. The court concludes that this c o m p lic a te d factual situation would be best resolved by a jury and will deny summary ju d g m e n t on this point. ii. Failure to Establish Prima Facie Causation D e fe n d a n ts next argue that even if plaintiffs could establish that a duty to p ro vid e coverage existed in this case, they could not establish that the failure to p ro vid e such coverage was the cause of plaintiffs' loss. Because the coverage p la in tiffs here sought would not have covered the items damaged anyway, the d e fe n d a n ts assert that their failure to provide coverage did not cause the plaintiffs' in ju r ie s . S p e n c e r testified that Star Spa kept many items in the bottom level of the b u ild in g on Roosevelt Road, including parts, surplus water treatment products and s p a s . (Spencer Dep. at 38). Items stored in that part of the building at the time of th e flood included "new spas . . . parts, pumps, motors, water treatment products, o ffic e furniture . . . computers, the office setup, the whole thing." (Id. at 78). The a re a also contained "a lot of used spas that we refurb[ish]." (Id. at 79). The flood d a m a g e d spas, pumps, heaters, water treatment product, files, office furniture, a re frig e r a to r , stove, wicker furniture, spa covers, artificial plants, storage chests, s to re d building materials like sheetrock, literature, and dressers. (Id. at 79-81); See a ls o Stark Dep. at 42). More than $200,000 worth of this property was damaged in th e flood. (Id. at 82; Stark Dep. at 46).

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T h e court finds that the dispute here is not over whether defendants provided a flood insurance policy to cover this property, which belonged to Star Spa and was n o t covered by the existing flood-insurance policy, but instead whether the d e fe n d a n ts failed to provide coverage for this property which had been requested. There is no dispute that the plaintiffs were informed that they could not obtain c o v e ra g e for Star Spa's property by obtaining flood insurance coverage. Insurance c o ve rin g the contents later proved available to the plaintiffs, and they obtained it s u b s e q u e n t to the flood. If the plaintiff had obtained such coverage before the in c id e n t, they would not have suffered the uncompensated damage to their property th a t is the subject of this lawsuit. As such, a jury could conclude that the failure of d e fe n d a n ts to inform plaintiffs of coverage available for Star Spa's property and was th e cause of Star Spa's injuries, and the court will deny the defendant's motion on th is point. C . Damages on the Breach of Contract Claim D e fe n d a n ts also argue that plaintiff Stark Spencer cannot recover on its b re a c h of contract claim because Stark Spencer did not suffer any damages a s s o c ia te d with the breach.3 Stark Spencer had coverage only for damage to the b u ild in g here in question, not for any of the contents of the property. Plaintiffs have e vid e n c e only of damage to property belonging to Star Spa, and therefore Plaintiff

The court previously dismissed Plaintiff Star Spa's breach of contract claim, concluding that no contract existed between Star Spa and the defendants. 19

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S ta rk Spencer has not suffered any damages for which they would be entitled to re c o ve r. "A claim for breach of contract exists where it can be shown that there was a contract, a breach of duty imposed by that contract and damages that resulted from th e breach." Koken v. Steinberg, 825 A.2d 723, 729 (Pa. Commw. Ct. 2003). "The b a s ic elements of a contract" include "an offer, acceptance and consideration." Hatbob v. Brown, 575 A.2d 607, 613 (Pa. Super. Ct. 1990). Here, the deposition te s tim o n y indicates that the only damage suffered by the plaintiffs was to the c o n te n ts of the building. As outlined above, all of the items damaged in the flood th a t precipitated the instant litigation belonged to Star Spa. (Spencer Dep. at 81). The flood insurance policy the plaintiffs held was issued to Stark Spencer, and S p e n c e r was "never under any impression that [she] had a flood insurance policy for S ta r Spa Services." (Id. at 64). Spencer's husband and business partner, Ron S ta rk , agreed with this assessment that Star Spa never had any flood insurance. (Ron Stark Deposition, Exh. L to Doc. 28, (hereinafter "Stark Dep.") at 26). Because n o evidence indicates that the defendants breached their agreement to provide c o ve ra g e for the building, the court finds that no reasonable juror could conclude that d e fe n d a n ts breached their insurance contract with Stark Spencer. The court will th e re fo re grant summary judgment to the defendants on Stark Spencer's breach of c o n tra c t claim. D. Unfair Trade Practices and Consumer Protection Law/Reasonable

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E x p e c ta tio n s Doctrine D e fe n d a n ts next argue that they should be granted summary judgment on p la in tiffs ' claims brought pursuant to the Pennsylvania Unfair Trade Practices and C o n s u m e r Protection Law ("UTPCPL") because plaintiffs have no evidence of m a lfe a s a n c e but only nonfeasance, and the law requires that a plaintiff establish m a lfe a s a n c e to prove liability. Defendants also argue that plaintiffs cannot claim that th e y had a reasonable expectation of insurance coverage because they knew that th e policy that had purchased did not provide such coverage. Under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 PENN. CONS. STAT. §§ 201-1, et seq, "[i]t is well established that an in s u re r's refusal to pay benefits to an insured is nonfeasance, and not actionable u n d e r the CPL." Klinger v. State Farm Mutual Auto Ins. Co., 895 F. Supp. 709, 717 (M .D . Pa. 1995); see also Horowitz v. Federal Kemper Life Assurance Co., 57 F.3d 3 0 0 , 307 (3d Cir. 1995) (holding that "[i]n Pennsylvania, only malfeasance, the im p ro p e r performance of a contractual obligation, raises a cause of action under the U n fa ir Trade Practices and Consumer Protection Law [citation omitted], and an in s u re r's mere refusal to pay a claim which constitutes nonfeasance, the failure to p e rfo rm a contractual duty, is not actionable."). T h u s , the plaintiffs would not have a claim under the UTPCPL if they had p u rc h a s e d a valid policy and the defendants had refused coverage on a claim. The e vid e n c e here, however, indicates that plaintiffs never had a policy that would cover

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th e contents in question. Instead, they contend that the evidence demonstrates that th e y sought such a policy but were negligently prevented from obtaining one. The q u e s tio n in this case, then, is whether the failure to procure such a policy constitutes th e sort of malfeasance a jury could use to find defendants liable. The Third Circuit Court of Appeals has concluded that "Pennsylvania law does n o t allow an insurer to use the explicit language of its insurance policy to defeat the re a s o n a b le expectations of an insured, at least when the insured's expectations are b a s e d on the insurer's or its agent's representations, and that it is not unreasonable fo r insureds to rely on the representations of the insurer's agent rather than on the c o n te n ts of the insurance policy to understand the scope or cost of her coverage." D ilw o rth v. Metro. Life Ins. Co., 418 F.3d 345, 353 (3d Cir. 2005); see also Bensalem T w p . v. Int'l Surplus Lines Ins. Co., 38 F.3d 1303, 1311 (3d Cir. 1994) (noting that in P e n n s ylv a n ia "we are confident that where the insurer or its agent creates in the in s u re d a reasonable expectation of coverage that is not supported by the terms of th e policy that expectation will prevail over the language of the policy."). In Dilworth, the Third Circuit Court of Appeals reversed the district court's grant of summary ju d g m e n t to the defendant on plaintiff's claim under the UTPCPL. The plaintiff had p u rc h a s e d a life insurance policy and claimed her insurance agent had informed her th a t she would not have to pay premiums after nine or ten years because the policy w a s "self funding." Dilworth, 418 F.3d at 347. Because plaintiff had presented e vid e n c e that demonstrated that she reasonably expected her policy to include

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p ro vis io n s which it did not, the court concluded that her claim under the UTPCPL c o u ld survive summary judgment. Id. at 353-54. The situation here is different from Dilworth. The evidence indicates that p la in tiffs did not believe that they had received coverage for contents in their flood in s u ra n c e policy. Instead, the evidence demonstrates that they believed­because of th e ir agents' representations­that they could not obtain such coverage because of w h e re the contents were stored on the property. No evidence indicates that the p la in tiffs ever expected the policy they had in place to cover the property that the flo o d damaged. As such, no reasonable expectation of coverage based on the d e fe n d a n ts ' representations occurred, and plaintiffs cannot prevail on their claim u n d e r the UPTCPL. Summary judgment will be granted the defendants on this c la im . C o n c l u s io n F o r the reasons stated above, we will grant the defendants' motion for s u m m a ry judgment in part and deny it in part. The court will grant the motion for s u m m a ry judgment on plaintiffs' breach of contract claim and plaintiffs' claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law. The court w ill deny the motion on plaintiff's negligence claims contained in counts two and th re e . A trial date will be set to address these claims for negligence in the p ro c u re m e n t of insurance coverage for Star Spa's contents. An appropriate order fo llo w s .

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IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA STAR SPA SERVICES, INC., STAR SPA INC., and STARK SPENCER REAL ESTATE PARTNERSHIP, Plaintiffs : No. 3:07cv302 : : (Judge Munley) : : : v. : : ROBERT G. TURANO INSURANCE : AGENCY, INC, : ROBERT G. TURANO, : SHERRI ROBBINS, : NATIONWIDE MUTUAL FIRE : INSURANCE CO., : NATIONWIDE FLOOD INSURANCE : PROGRAM, : NATIONWIDE PROPERTY & : CASUALTY CO., and : NATIONWIDE MUTUAL INSURANCE : CO., : Defendants : ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
ORDER AN D NOW, to wit, this 27th day of January 2009, the Defendants' motion for s u m m a ry judgment (Doc. 23) is hereby GRANTED IN PART and DENIED IN PART, a s follows: 1 ) The motion is GRANTED with respect to plaintiffs' remaining breach of c o n tra c t claims and claims under the Pennsylvania Unfair Trade Practices and

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C o n s u m e r Protection Law; and 2 ) The motion is DENIED with respect to the plaintiffs' negligence claims ra ise d in Counts II and III of the complaint.

BY THE COURT:

s/ James M. Munley JUDGE JAMES M. MUNLEY United States District Court

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