Mason et al v. The Travelers Home and Marine Insurance Company

Filing 34

MEMORANDUM and ORDER granting 17 Traveler's Motion for Summary Judgment ; Clerk of Court is directed enter judgment and CLOSE this case.Signed by Honorable James M. Munley on 2/28/13 (sm)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
JAMES MASON and
JOANNE MASON, his wife,

:
No. 3:11cv2155
:
Plaintiffs
:
(Judge Munley)
:
v.
:
:
THE TRAVELERS HOME AND
:
MARINE INSURANCE COMPANY,
:
Defendant
:
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
MEMORANDUM
Before the court for disposition is the motion for summary judgment
filed by Defendant The Travelers Home and Marine Insurance Company.
The motion has been fully briefed and is ripe for disposition.
Background
The general background facts of this case are undisputed. On March
30, 2011, a fire destroyed a building located on plaintiffs’ property in
Hawley, Pennsylvania. The fire also destroyed the contents of the building.
The building and its contents were covered by an insurance policy issued
by the defendant. The plaintiffs reported the loss to its insurance carrier.
After an investigation, on May 6, 2011, the defendant paid plaintiffs
$29,790.89 for the loss of personal property destroyed in the fire. On May
9, 2011, defendant made a second payment of $28,521.93 for fire and
smoke damage. Plaintiffs assert that defendant owes them more money
under the terms of the policy. Accordingly, they filed the instant five-count
complaint. The claims of the complaint include the following: Count I

asserts that the defendant improperly made a deduction for depreciation
when calculating the amount due; Count II asserts that defendant still owes
them nearly $600,000 representing the replacement cost of the building;
Count III is a claim for insurance bad faith and seeks $1,000,000 in
damages; Count IV seeks $1,264 in damages, which represents the
permits plaintiffs had to obtain to remove debris from the premises and
rebuild the garage; Count V seeks damages for the loss of the use of the
premises to house their pets during the daytime hours.
Plaintiff filed suit in the Court of Common Pleas of Wayne County,
Pennsylvania and then defendant removed the case to this court on
August 3, 2012.
Jurisdiction
This Court has jurisdiction pursuant to the diversity jurisdiction
statute, 28 U.S.C. § 1332. The plaintiffs are residents of the
Commonwealth of Pennsylvania and defendant is a Connecticut
corporation with a principal place of business in Hartford, Connecticut.
Because we are sitting in diversity, the substantive law of Pennsylvania
shall apply to the instant case. Chamberlain v. Giampapa, 210 F.3d 154,
158 (3d Cir. 2000) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938)).
Standard of review
Granting summary judgment is proper “‘if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact
and that the moving party is entitled to judgment as a matter of law.’” See
Knabe v. Boury, 114 F.3d 407, 410 n.4 (3d Cir. 1997) (citing FED. R. CIV. P.
56©)). “[T]his standard provides that the mere existence of some alleged

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factual dispute between the parties will not defeat an otherwise properly
supported motion for summary judgment; the requirement is that there be
no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247-48 (1986) (emphasis in original).
In considering a motion for summary judgment, the court must
examine the facts in the light most favorable to the party opposing the
motion. Int’l Raw Materials, Ltd. v. Stauffer Chem. Co., 898 F.2d 946, 949
(3d Cir. 1990). The burden is on the moving party to demonstrate that the
evidence is such that a reasonable 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 under the governing law. Id.
Where the non-moving party will bear the burden of proof at trial, the party
moving for summary judgment may meet its burden by showing that the
evidentiary materials of record, if reduced to admissible evidence, would be
insufficient to carry the non-movant's burden of proof at trial. Celotex v.
Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies its
burden, the burden shifts to the nonmoving party, who must go beyond its
pleadings, and designate specific facts by the use of affidavits,
depositions, admissions, or answers to interrogatories showing that there
is a genuine issue for trial. Id. at 324.
Discussion
This case involves the application of a homeowner’s insurance
policy. With regard to insurance law, Pennsylvania law provides:
Under Pennsylvania law, the interpretation of an
insurance contract is a matter of law for the court.
Madison Constr. Co. v. Harleysville Mut. Ins. Co.,
557 Pa. 595, 735 A.2d 100, 106 (1999). “Where a
provision of a policy is ambiguous, the policy
provision is to be construed in favor of the insured
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and against the insurer, the drafter of the
agreement. Where, however, the language of the
contract is clear and unambiguous, a court is
required to give effect to that language.” Id.
(quoting Gene & Harvey Builders, Inc. v.
Pennsylvania Mfrs.' Ass'n, Ins. Co. 512 Pa. 420,
517 A.2d 910, 913 (1986)). “Contractual language
is ambiguous ‘if it is reasonably susceptible of
different constructions and capable of being
understood in more than one sense.’ ” Id. (quoting
Hutchison v. Sunbeam Coal Corp., 513 Pa. 192,
519 A.2d 385, 390 (1986)).
Lexington Ins. Co. v. W. Pa. Hosp., 423 F.3d 318, 323 (3d Cir. 2005).
Defendant’s motion for summary judgment raises the following three
issues: 1) whether count I fails because plaintiffs never provided
documentation that the personal property destroyed in the fire has been
replaced; 2) whether counts II, IV and V fail due to the policy language;
and 3) whether count III fails because as a matter of law, defendant has
not engaged in bad faith. We will address each issue in turn.
I. Count I
Defendant has paid plaintiff’s personal property loss claim.
Defendant, however, made a deduction for depreciation of the property.
Plaintiffs assert that defendant owes the replacement cost of the personal
property, with no deduction for depreciation. This difference amounts to
$15,667.00 according to the plaintiffs. Defendant moves for judgment on
this claim on the basis that the plaintiffs have not met all the conditions
precedent to being paid the replacement value of the personal property as
opposed to the amount reduced for depreciation. After a careful review,
we agree with defendant.
The policy provides as follows:
A. Eligible Property
1. Covered losses to the following property are settled at
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replacement costs at the time of loss:
a. Property described in Coverage C;
*

*

*

C. Replacement Cost Loss Settlement Condition
The following loss settlement condition applies to all property
described in A. above:
1. We will pay no more than the least of the following amounts:
a. Replacement cost at the time of loss without deduction for
depreciation;
b. The full cost of repair at the time of loss;
c. The limit of liability that applies to Coverage C, if applicable;
d. Any applicable special limits of liability stated in this policy;
or
e. For loss to any time described in A.2.a. - f. above, the limit
of liability that applies to the item.
2. If the cost to repair or replace the property described in A. above
is more than $2,500, we will pay no more than the actual cash value
for the loss until the actual repair or replacement is complete.
The parties do not dispute that the cost to repair or replace the
property at issue is greater than $2,500. Therefore, the insurance
company is liable for the “actual cash value for the loss until the actual
repair or replacement is complete.” Id. Defendant’s position is that the
term “actual cash value” is clear and unambiguous. The unambiguous
term calls for a deduction for depreciation before paying the plaintiff.
Plaintiffs’ position is that the policy does not define the term “actual cash
value.” Because the term is not defined, it is inappropriate to make a
deduction for depreciation when computing the “actual cash value.” After
a careful review, we agree with the defendant.
Contrary to plaintiff’s argument, the policy does, in fact, define “actual
cash value.” The Policy provides: “Actual case value means the amount it
would cost to repair or replace covered property, at the time of the loss or
damage, with material of like kind and quality, subject to a deduction for
deterioration, depreciation and obsolescence.” (Doc. 1-2, Policy at 1).

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The parties agree that the amount of loss exceeds $2,500. (Doc. 17,
Def.’s Mot. for Summ. J. ¶ 14; Doc. 20 Pls.’ Resp. to Def’s Mot. for Summ.
J. ¶ 14). Therefore, under the clear and unambiguous terms of the policy,
defendant need only pay the actual cash value of the loss, including
appropriate deductions for depreciation, until the actual repair or
replacement is complete. Plaintiff admits that defendant has paid
$28,521.93 for the personal property claim. (Doc. 1-2, Compl. ¶ 16, 20).
Plaintiff complains that this amount reflects a deduction for depreciation.
Under the policy such a deduction is appropriate until plaintiffs establish
that actual repair or replacement is complete. Defendant asserts that
plaintiffs have not provided any documentation or other proof that they
have repaired or replaced any personal property destroyed in the fire.
(Def.’s Stat. of Undisputed Facts1, ¶ 12). Plaintiff has presented no
evidence to the contrary.
Based upon our analysis, defendant appropriately made a deduction
for depreciation in paying benefits to the plaintiffs for their loss of personal
property. Accordingly, summary judgment in favor of the defendant on
count one of the complaint is appropriate.

Plaintiffs did not file an appropriate answer to defendant’s statement
of undisputed facts. See L.R. 56.1 (“The papers opposing a motion for
summary judgment shall include a separate, short and concise statement
of the material facts, responding to the numbered paragraphs set forth in
the [moving party’s statement of material facts].”). Plaintiffs did, however,
file a counter statement of material facts. Nothing in this counter statement
raises a material question of fact regarding whether plaintiffs submitted
appropriate proof of repair or replacement of the personal property.
Rather, plaintiffs’ argument is that such proof is not needed under the
policy and the benefits should not have been reduced due to depreciation.
As set forth above, however, this argument lacks merit.
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II. Counts II, IV and V
Counts II, IV and V of plaintiffs’ complaint deal with the losses
suffered due to the destruction of the building. Defendant argues that the
policy did not cover the building at issue. As noted above, the insurance
policy at issue is a homeowners policy. (See Doc. 1-2, Policy). As such it
provided coverage for plaintiff’s dwelling as well as limited coverage for
other structures. At issue in the instant case is not the plaintiff’s dwelling
but an “other structure” in which was stored certain property. Under the
policy, other structures are covered as follows:
COVERAGE B - OTHER STRUCTURES
1. We cover other structures on the “residence
premises” set apart from the dwelling by clear
space. This includes structures connected to the
dwelling by only a fence, utility line, or similar
connection.
2. We do not cover:
a. Land, including on which the other structures are
located;
b. Other structures rented or held for rental to any
person not a tenant of the dwelling . . .
c. Other structures from which any “business” is
conducted; or
d. Other structures used to store “business”
property. However, we do cover a structure that
contains “business” property solely owned by an
“insured” or a tenant of the dwelling provided that
“business” property does not include gaseous or
liquid fuel, other than fuel in a permanently installed
fuel tank of a vehicle or craft parked or stored in the
structure.
(Doc. 1-2, Policy at 3-4).
Defendant alleges that the instant case falls under subsection 2.d.
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The building at issue was a structure other than the dwelling that was used
to store business property. The business property was not solely owned
by an “insured” or a tenant of the dwelling according to the defendant.
Thus, defendant argues that no coverage is available for the building.
Plaintiff agrees that the Policy does not provide coverage for “[o]ther
structures used to store ‘business property.’” (Doc. 17, Def.’s Mot. for
Summ. J. ¶ 22; Doc. 20, Pls.’ Answer to Mot. for Summ. J. ¶ 22). Plaintiffs
also conceded that the named insureds under the Policy were the plaintiffs,
James Mason and Joanne Mason. (Doc. 17, Def.’s Mot. for Summ. J. ¶
22; Doc. 20, Pls.’ Answer to Mot. for Sum J. ¶ 22). Plaintiffs concede that
the property located in the structure was in fact owned by a business, in
fact two different businesses, White Mills Pet Shop, Inc. and United
Plumbing Heating and Air Conditioning, Inc. Plaintiff argues, however, that
these businesses were solely owned by the plaintiffs. Therefore, coverage
under the Policy should be provided. We disagree.
The named insureds under the Policy were Joanne and James
Mason. (Doc. 1-2, Policy). Two business entities, corporations, owned
property in the barn. (See Doc. 20, Pls’ Answer to Mot. for Summ. J. ¶ 19;
Doc. 30, Pls.’ Br. at 12 (indicating that the two businesses are
corporations)). Thus the “other structures used to store business property
exclusion” applies. We are not convinced by plaintiff’s arguments that the
corporations were solely owned by the plaintiffs therefore coverage should
be provided. The law provides that corporations are separate and distinct
legal entities with an existence independent of the individuals who
compose it. United States v. Sain, 141 F.3d 463, 474 (3d Cir. 1998);
see also Commonwealth v. Vienna Health Prods. Inc., 726 A.2d 432, 434

8

(Pa. Commw. Ct. 1999) (holding that a corporation generally must be
treated as an independent entity ever if its stock is owned entirely by one
person).

In fact, under Pennsylvania law, a corporation has the power “to

acquire, own and utilize any real or personal property[.]” 15 PA. CONS.
STAT. ANN. § 1502(4).
Businesses with a separate and distinct legal identity from the
individual plaintiffs stored property in the building. Thus, the “other
structures used to store business property” exclusion applies. Summary
judgment is appropriate for the defendant on Counts II, IV an V of the
Complaint, which all apply to the structure that was destroyed by the fire.2
III. Bad Faith
Count III of the complaint is a claim for bad faith. Plaintiffs assert
that the defendant failed to properly address and pay their claim.
Specifically, plaintiffs aver: “[T]he continuing failure to properly address and
pay the claim of the Plaintiffs and the conduct of the Defendant with
regards to investigating the claim, failing to remove items on the property,
failing to allow Plaintiffs to remove items from the property is
unconscionable and clearly is an indication of bad faith[.]” (Doc. 1-2,
Compl. ¶ 36). As set forth above, however, defendant owed plaintiff
nothing more under the Policy. Therefore, plaintiffs assertion that
defendant demonstrated bad faith by failing to properly address and pay
the claim is without merit. The remainder of the bad faith count involves

In fact, United Plumbing and Heating Service, Inc. had a Commercial
Property Insurance Policy that provided coverage for the building
destroyed by the fire and business personal property contained in the
building. (Doc. 17, Def.’s Mot. for Summ. J. ¶ 20, Doc. 20, Pls.’ Answer to
Mot. for Summ. J. ¶ 20).
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defendant’s investigation/handling of the plaintiffs’ insurance claim. Under
Pennsylvania law, a plaintiff’s bad faith claim may extend to investigation or
handling of the claim, but only where the defendant’s conduct “import[s] a
dishonest purpose.” Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 524
(3d Cir. 2012) (quoting Brown v. Progressive Ins. Co., 860 A.2d 493, 501
(Pa. Super. Ct. 2004)). “Invariably, this requires that the insurer lack a
reasonable basis for denying coverage, as mere negligence or aggressive
protection of an insurer’s interests is not bad faith.” Id. In this case,
plaintiffs have not established any “dishonest purpose” on the part of the
defendant. Accordingly, the bad faith claim fails, and summary judgment
will be granted to the defendant on Count III.
Conclusion
After a careful review of the defendant’s motion for summary
judgment, we find that judgment should be granted in defendant’s favor.
Defendant properly valued the property loss using the “actual cash value”
as defined in the Policy. Therefore, judgment should be granted to the
defendant on Count I. Judgment will be granted on Counts II, IV and V
because they all apply to the structure that was destroyed by fire. The
Policy at issue does not cover that structure. Additionally, the bad faith
claim will be denied as defendant did not fail to properly address and pay
plaintiffs’ insurance claim. An appropriate order follows.

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IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
JAMES MASON and
JOANNE MASON, his wife,

:
No. 3:11cv2155
:
Plaintiffs
:
(Judge Munley)
:
v.
:
:
THE TRAVELERS HOME AND
:
MARINE INSURANCE COMPANY,
:
Defendant
:
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
ORDER
AND NOW, to wit, this 28th day of February 2013, Defendant The
Travelers Home and Marine Insurance Company’s motion for summary
judgment (Doc. 17) is hereby GRANTED. The Clerk of Court is directed to
enter judgment in favor of defendant and against Plaintiffs James Mason
and Joanne Mason. The Clerk of Court is directed to close this case.
BY THE COURT:
s/ James M. Munley
JUDGE JAMES M. MUNLEY
United States District Court

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