Signature Building Systems of Pennsylvania LLC and Signature Building Systems, Inc. v. Motorists Mutual Insurance Company
MEMORANDUM OPINION (Order to follow as separate docket entry) re 4 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by Motorists Mutual Insurance Company. Signed by Honorable Robert D. Mariani on 6/3/21. (jam)
THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
SIGNATURE BUILDING SYSTEMS OF
PENNSYLVANIA, LLC AND
SIGNATURE BUILDING SYSTEMS, INC.
MOTORIST MUTUAL INSURANCE CO.
On November 24, 2020, Plaintiffs Signature Building Systems of Pennsylvania, LLC
and Signature Building Systems, Inc. ("Plaintiffs" or "Signature Building Systems") filed a
complaint (the "Complaint") in the Court of Common Pleas of Lackawanna County. (Doc. 11). On December 15, 2020, Defendant Motorist Mutual Insurance Co. ("Defendant" or
"Motorist Mutual") filed a Notice of Removal to remove the action from state court to this
Court on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332 and 28 U.S.C. §
1441(b). (Doc. 1).
Presently before the Court is Defendant's Motion to Dismiss Plaintiffs' Complaint for
failure to state a claim upon which relief may be granted (Doc. 4). For the reasons set forth
below, the Court will deny Defendant's Motion to Dismiss.
II. PROCEDURAL HISTORY AND FACTUAL ALLEGATIONS
Defendant Motorist Mutual is an insurance company incorporated and with its
principal place of business in the state of Ohio. (Doc. 1 at~ 9). Plaintiffs Signature Building
Systems are construction companies with their main offices and principal places of business
in Pennsylvania. (Doc. 1-1 at~ 9). From February 28, 2018 to February 28, 2019, Plaintiffs
maintained an insurance policy with Motorist Mutual (the "Motorist Policy") through which
Motorist Mutual insured certain commercial property controlled by Plaintiffs with general
liability and commercial umbrella coverage. (Id. at 4). The Motorist Policy, entered between
the parties, also included various subsections, including: (1) the "Commercial General
Liability Coverage Form" (the "Property Coverage Form"), which sets forth the applications
and limitations of the Motorist Policy, (Doc. 4-2 at 24-47); (2) the "Damage by
Subcontractors Endorsement" (the "Subcontractor Endorsement"), which provides added
coverage for damages to Plaintiffs' insured property caused by Plaintiffs' subcontractors,
(Id. at 40); and (3) the "Products/Completed Operations Hazard Redefined" endorsement
(the "Redefinition Endorsement"), which modifies the definition of the term "[p]roductscompleted operations hazard" under Section V of the Property Coverage Form, (Id. at 38,
parties argue over the general coverage of the Motorist Policy, but neither provide the full
agreement, which likely will be necessary for the Court if it is to interpret the coverage provided within the
agreement in the future . See (Doc. 5 at 5) ("Signature references and bases its claims on Motorists policy
number 33.293912-90E ... but Signature does not attach the policy (which is 232 pages)" or the "key parts,"
including the Property Coverage Form, Subcontractor Endorsement, and the Redefinition Endorsement.).
On November 17, 2017, Plaintiffs entered into an agreement with a New Jersey
apartment company through which Plaintiffs were to "design, construct deliver and erect
a four-story prefabricated modular apartment building" (the "Carrino Project"). (Doc. 1-1 at~
5). On June 25, 2018, Plaintiffs engaged a third-party contractor, Modsets, to have Modsets
install and set modular units for the Carrino Project. (Id. at~ 6). In August 2018, however,
after Modsets started work on the project, there appeared "various instances of water
damage" to the property resulting from Modsets's work. (Id. at~ 7).
As a result, Plaintiffs filed a claim with Defendant under the Motorist Policy for the
costs incurred to address this damage. 2 (Doc. 1-1 at~ 8). Defendant denied this claim by
letter on October 1, 2018. (Id.). In response, Plaintiffs sent a follow-up letter, dated
December 21, 2018, asserting coverage under the plan and demanding from Defendant
reimbursement of losses exceeding $800,000.00. (Id. at~ 9); (Doc. 8 at 5). Plaintiffs
maintain that this demand too was denied by letter, dated May 9, 2019. (Doc. 1-1 at~ 10).
On May 10, 2019, Plaintiffs sent their final letter in which they claimed to have "expended
approximately $2,000,000.00 in order to mitigate the damages in this matter," while the
Defendant had allegedly failed to request any further information to evaluate the claim. (Id.
at~ 11 ). Nevertheless, Plaintiffs' insurance claim remained unpaid. (Id.).
Plaintiffs allege that they renewed their insurance plan with Defendant "insuring [their] commercial
property, Inland Marine, general liability coverage and commercial umbrella coverage by policy number
33.293912-90E," but they do not clearly state in the Complaint that the property involved in the Carrino
Project was covered by the Motorist Policy. (Doc. 1-1 ). Defendant has not pointed to this omission in its
briefing, but the Court will note that this is a fact that remains at issue and subject to proof for Plaintiffs to
sustain their causes of action.
On May 16, 2019, Plaintiffs filed a Writ of Summons in the Court of Common Pleas
in Lackawanna County, Pennsylvania, (Doc. 1-1 at~ 12), and filed the Complaint on
November 24, 2020 asserting claims against Defendant for breach of contract (Count I) and
bad faith (Count II) as a result of Defendant's purported failure to properly assess and pay
Plaintiffs' insurance claim . See (Id.). Plaintiffs demanded judgment against the Defendant
and monetary recovery in an amount of $50,000.00 for Count I and in an amount in excess
of $50,000.00 for Count II, together with interest, costs, fees and other damages. (Id. at 7,
19). Defendant removed the matter to this Court on December 15, 2020, (Doc. 1), and filed
its Motion to Dismiss for failure to state a claim upon which relief may be granted two days
later. (Doc. 4).3
Ill. STANDARD OF REVIEW
A complaint must be dismissed under Federal Rule of Civil Procedure 12(b)(6) if it
does not allege "enough facts to state a claim to relief that is plausible on its face." Be// At/.
Corp. v. Twombly, 505 U.S. 544, 570 (2007). The plaintiff must assert "factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
"While a complaint attached by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement
Plaintiffs filed a Motion to Remand, (Doc. 7), in addition to their briefing in opposition to
Defendant's Motion. (Docs. 9, 10). Plaintiffs' Motion to Remand, however, was denied by this Court on
May 14, 2021 as the Complaint establishes diversity jurisdiction between the parties and the matter was
timely removed by Defendant to this Court. 28 U.S.C § 1332; 12 U.S.C. § 1446(b)(1); see (Docs. 14, 15).
to relief requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do." Twombly, 550 U.S. at 555 (internal citations,
alterations, and quotation marks omitted). In other words, "[~actual allegations must be
enough to raise a right to relief above the speculative level." Covington v. Int'/ Ass'n of
Approved Basketball Offs., 710 F.3d 114, 118 (3d Cir. 2013) (internal citations and question
A court "take[s] as true all the factual allegations in the Complaint and the
reasonable inferences that can be drawn from those facts, but ... disregard[s] legal
conclusions and threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements." Ethypharm S.A. France v. Abbott Labs., 707 F.3d 223, 231 n. 14
(3d Cir. 2013) (internal citation and quotation marks omitted). Thus "the presumption of
truth attaches only to those allegations for which there is sufficient 'factual matter' to render
them 'plausible on [their] face."' Schuchardt v. President of the United States, 839 F.3d
336, 347 (3d Cir. 2016) (alterations in original) (quoting Iqbal, 556 U.S. at 679) . "Conclusory
assertations of fact and legal conclusions are not entitled to the same presumption." Id.
Twombly and Iqbal require [a district court] to take the following three steps to
determine the sufficiency of a complaint: First, the court must take note of the
elements a plaintiff must plead to state a claim. Second, the court should
identify allegations that, because they are no more than conclusions, are not
entitled to the assumption of truth. Finally, where there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether
they plausibly give rise to an entitlement for relief.
Connelly v. Steel Valley Sch. Dist., 706 F.3d 209, 212 (3d Cir. 2013). "Although the
plausibility standard 'does not impose a probability requirement,' it does require a pleading
to show 'more than a sheer probability that a defendant has acted unlawfully."' Connelly v.
Lane Constr. Corp., 809 F.3d 780, 786 (3d Cir. 2016) (internal citation omitted) (first quoting
Twombly, 550 U.S. at 556; then quoting Iqbal, 556 U.S. at 678).
"The plausibility determination is 'a context-specific task that requires the reviewing
court to draw on its judicial experience and common sense."' Id. at 786-87 (quoting Iqbal,
556 U.S. at 679). The Court, however, does not "require heightened fact pleading of
specifics, but only enough facts to state a claim to relief that is plausible on its face" and
"nudge [a plaintiff's] claims across the line from conceivable to plausible." Twombly, 550
U.S. at 547; see also Iqbal, 556 U.S. at 680 (citing Twombly) (finding that respondent had
failed to plead sufficient facts to state a claim for purposeful and unlawful discrimination as
"respondent's complaint ha[d] not 'nudged [his] claims' of invidious discrimination 'across
the line from conceivable to plausible"').
Plaintiffs' claims for breach of contract and bad faith stem from the contractual
relationship between the parties set forth in the Motorist Policy, which incorporates the
Property Coverage Form, the Subcontractor Endorsement, and the Redefinition
Endorsement. Accordingly, these three portions of the complete and integrated Motorist
Policy held by Plaintiffs are asserted by Defendant as a bar to Plaintiffs' recovery. See
generally (Doc. 5).4
The definitions of terms under the Motorist Policy were described in Section V of the
Property Coverage Form entitled "Definitions." (Doc. 4-2 at 36). Of these definitions, the
parties heavily rely on several in their filings, such as: "occurrence," which "means an
accident, including continuous or repeated exposure to substantially the same general
harmful conditions"; "property damage," which is defined as including "[p]hysical injury to
tangible property, including all resulting loss of use of that property ... [or] [l]oss of use of
tangible property that is not physically injured"; and "your work," which includes "[w]ork or
operations performed by you [Plaintiffs] or on your behalf .... " (Id. at 38-39). In accordance
with these defined terms, Defendant agreed to provide liability coverage to Plaintiffs for
certain "occurrence[s]" under Section I of the Property Coverage Form entitled "Coverages
- Coverage A Bodily Injury and Property Damage Liability," which states in part:
1. Insuring Agreement
a. We [Defendant] will pay those sums that the insured [Plaintiffs]
becomes legally obligated to pay as damages because of "bodily
injury" or "property damage" to which this insurance applies ....
Generally, "a district court ruling on a motion to dismiss may not consider matters extraneous to
the pleadings." In re Burlington Coat Factory, 114 F.3d 1410, 1426 (3d Cir. 1997) (citing Angelastro v.
Prudential-Bache Sec. Inc., 764 F.2d 939, 944 (3d Cir. 1983)). Courts, however, may consider any
"document integral to or explicitly relied upon in complaint ... without converting motion to dismiss into one
for summary judgment." Id. (citation omitted); In re Donald Trump Casino Sec. Litig., 7 F.3d 357, 368 n. 9
(3d Cir. 1993) ("a court may consider an undisputedly authentic document that a defendant attaches as an
exhibit to a motion to dismiss if the plaintiffs claims are based on the document."). The Court may thus
look to the Property Coverage Form, the Subcontractor Endorsement, and the Redefinition Endorsement
as these portions of the Motorist Policy are integral to the Plaintiffs' claims.
b. This insurance applies to "bodily injury" and "property damage" only
(1) The "bodily injury" or "property damage" is caused by an
"occurrence" that takes place in the "coverage territory";
(2) The "bodily injury" or "property damage" occurs during the
policy period ; and
(3) Prior to the policy period, no insured listed under
Paragraph 1. of Section II - Who Is An Insured and no
"employee" authorized by you [Plaintiffs] to give or
receive notice of an "occurrence" or claim, knew that the
"bodily injury" or "property damage" had occurred ... .
(Doc. 4-2 at 24) (emphasis added). According to Defendant, this is interpreted to mean that
"insurance only applies to a covered 'occurrence. "' (Doc. 5 at 6).
Plaintiffs allege that through the Subcontractor Endorsement, the definition of
"occurrence" was expanded to include instances where damages were caused by Plaintiffs'
subcontractors. (Doc. 10 at 3); (Doc. 5 at 7). The Subcontractor Endorsement states in
part: (1) that it "modifies insurance provided under" the Property Coverage Form; and (2)
that it adds to Section V - Definitions that:
"[o]ccurence" includes acts or omissions that cause "property damage" within
the "products-completed operations hazard" to or caused by "your work," but
only if the damaged work or the work out of which the damage arises was
performed on your behalf by your subcontractor(s).
(Doc. 4-2 at 40). Nevertheless, Defendant argue that under this expanded definition
of what constitutes an "occurrence," coverage for damages caused by the work of a
subcontractor working on Plaintiffs' behalf is restricted to acts or omissions within the
definition of "products-completed operations hazard .'' thus adding greater emphasis
to the definition of the term. (Doc. 5 at 7). Under the original Section V of the
Property Coverage Form, "products-complete operations hazard":
a. Includes all "bodily injury" and "property damage" occurring away
from premises you own or rent and arising out of "your product" or
"your work" except:
(1) Products that are still in your physical possession ; or
(2) Prior Work that has not yet been completed or
abandoned . However, "your work" will be deemed
completed at the earliest of the following times:
(a) When all of the work called for in your contract has
been completed .
(b) When all of the work to be done at the job site has
been completed if your contract calls for work at
more than one job site.
(c) When that part of the work done at a job site has
been put to its intended use by any person or
organization other than another contractor or
subcontractor working on the same project.
Work that may need service, maintenance, correction ,
repair or replacement, but which is otherwise complete,
will be treated as complete.
(Doc. 4-2 at 38) . As of August 23, 2018, however, the Redefinition Endorsement appears to
have replaced "[p]aragraph a. of the definition of 'products-completed operations hazard' in
the DEFINITIONS Section" of the Property Coverage Form. (Doc. 4-2 at 41 ). In its place,
as of that date, "products-completed operations hazard" was to include "all 'bodily injury'
and 'property damage' that arises out of 'your products' if the 'bodily injury' or 'property
damage' occurs after you [Plaintiffs] have relinquished possession of those products." (Doc.
4-2 at 41) (emphasis added).
Under the aforementioned definitions of terms and the allegedly restrictive natures of
the Property Coverage Form and Subcontractor Endorsement, Defendant argues that
Plaintiffs have failed to show that they were entitled to recovery under the Property
Coverage Plan as the property that sustained water damage due to Plaintiffs'
subcontractor's "acts or omissions" had not been "relinquished ," but was still in Plaintiffs'
possession. 5 (Doc. 5 at 12). In contrast, Plaintiffs argue that the Subcontractor
Endorsement "expands rather than restricts coverage for property damage" and , regardless,
there are "no facts or documents of record showing the status of completion [or possession]
with respect to [S]ignatures['s] work" that would subvert Plaintiffs' insurance claim. (Doc. 10
1. Motion to Dismiss Plaintiffs' Breach of Contract Claim
To sustain a claim for breach of contract, a plaintiff must generally establish : (1) "the
existence of a contract, including its essential terms"; (2) "a breach of a duty imposed by the
contract"; and (3) "resultant damages." Fortunato v. CGA L. Firm , 2018 WL 4635963, at *3
(M.D. Pa. Sept. 27, 2018) (citing Gorski v. Smith, 812 A.2d 683, 692 (Pa. Super. Ct. 2002)).
In Pennsylvania, certain courts have also required that a plaintiff show it "complied with the
In the alternative, Defendant contends that even if the new definition of "products-completed
operations hazard" is not applied, Plaintiffs still fail to support their claims under the original definition of the
term within Section V of the Property Coverage Plan as the circumstances surrounding the damages
caused by Plaintiffs' subcontractor, Modsets, were still not "within the 'products-completed operations
hazard."' (Doc. 5 at 8-10).
contract's terms." Levin v. Strayer Univ. , LLC, 2018 WL 3585124, at *3 (E.D. Pa. July 26,
2018) (citing Nowosad v. Villanova Univ. , 1999 WL 322486, at *6 (E.D. Pa. May 19, 1999)).
It is uncontested that the Motorist Policy, held by Plaintiffs with Defendant and
incorporating the Property Coverage Form, Subcontractor Endorsement, and Redefinition
Endorsement, is a contract and that the Plaintiffs made the requisite premium payments
towards the policy to keep it active. See (Doc 1-1 at 4); (Doc. 5 at 5-13). Nor is it denied
that the Defendant refused to pay Plaintiffs' insurance claim. (Doc. 1-1 at~~ 8-11 ).
Instead, the disagreement between the parties arises out of the meaning and effect of the
Subcontractor Endorsement and Redefinition Endorsement on the coverage obligation of
the Defendant under the Property Coverage Form.
From the original terms of the Property Coverage Form, the Motorist Policy applied
to a covered "occurrence." (Doc. 5 at 6). Following the execution of the Subcontractor
Endorsement, the definition of an "occurrence" was extended to include "acts or omissions
that cause 'property damage' within the 'products-completed operations hazard' to or
caused by 'your work"' where the acts or omissions were performed on Plaintiffs' behalf by
their subcontractor. (Doc. 4-2 at 40) (emphasis added); (Doc. 5 at 7). For Defendant, the
term "products-completed operations hazard." whether following the original definition in
Section V of the Property Coverage Form or the adjusted definition in the Redefinition
Endorsement, bars recovery as it contends that the Plaintiffs' work was not yet complete
and the insured property was still in Plaintiffs' possession. (Doc. 5 at 13-14). In contrast,
Plaintiffs, regardless of the competing definitions, point to the apparent exception allowing
for work to be considered "completed," and recovery granted here, where the only
remaining work to be done at the time the damages were incurred was "service,
maintenance, correction repair or replacement." (Doc. 10 at 13); (Doc. 4-2 at 38). Thus, the
question as to whether Plaintiffs are entitled to recovery under the Motorist Policy will
require interpretation and application of these terms to the facts established by the parties
through discovery and, if necessary, at trial.
Disputes over the meaning of the Subcontractor Endorsement and the terms within
Section V of the Property Coverage Form and the Redefinition Endorsement are not issues
that can be adjudicated at the motion-to-dismiss stage of litigation. Instead, the Court must
determine whether Plaintiffs have asserted "factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft, 556
U.S. at 678. On the facts alleged, the Court finds that a plausible claim for breach of
contract has been stated under the Subcontractor Endorsement, which provides that a
covered '"occurrence' includes acts or omissions that cause 'property damage' within the
'products-completed operations hazard' to or caused by 'your work"' where the damages
arose from work "performed on [Plaintiffs'] behalf by [their] subcontractor(s)." (Doc. 4-2 at
40) (emphasis added).
Defendant, in turn, has not clearly shown how Plaintiffs failed to state a factual claim
for breach of contract but instead focuses on how its interpretation would bar the Plaintiffs'
claim. See Rosenberg v. Amica Mut. Ins. Co., 2018 WL 4944396 (W.D. Pa. July 12, 2018)
(denying motion to dismiss where, accepting alleged facts as true, the plaintiff properly
established the existence of an insurance policy, failure of the defendant to pay policy
benefits, and resulting damages). As it is improper for the Court to resolve disputed issues
of fact on a motion to dismiss, the Defendant's Motion to Dismiss Plaintiffs' breach of
contract claim will be denied.
2. Motion to Dismiss Plaintiffs' Bad Faith Claim
In order to recover on an insurance-based bad faith claim, the insured must prove:
(1) that the insurer did not have a reasonable basis for denying benefits under the policy;
and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis in
denying the claim. Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121 , 137 (3d Cir. 2005)
(citing Keefe v. Prudential Prop. and Gas. Ins. Co. , 203 F.3d 218, 225 (3d Cir. 2000)); see
a/so 42 Pa. Stat. and Cons. Stat. Ann. § 8371. Pennsylvania courts have interpreted the
term "bad faith" to mean:
any frivolous or unfounded refusal to pay proceeds of a policy; it is not
necessary that such refusal be fraudulent. For purposes of an action against
an insurer for failure to pay a claim, such conduct imports a dishonest purpose
and means a breach of a known duty (i.e., good faith and fair dealing), through
some motive of self-interest or ill will; mere negligence or bad judgment is not
bad faith .
Perkins v. State Farm Ins. Co., 589 F. Supp. 2d 559, 562 (M.D. Pa. 2008) (citing Terletsky
v. Prudential Prop. and Gas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994) (quoting
BLACK'S LAW DICTIONARY 139 (6th ed . 1990)) (citations omitted); see a/so Nw. Mut. Life
Ins. Co., 430 F.3d at 137 (predicting that the Pennsylvania Supreme Court would define
"bad faith" according to the definition set forth in Terletsky).
Plaintiffs allege that the Defendant twice improperly denied their claim, on October 1,
2018 and May 9, 2019 respectively, and failed to conduct a proper analysis to support its
denial.6 (Doc. 1-1 at~~ 8, 10). Plaintiffs further assert that Defendant's inadequate process
in reviewing their claim, including over fifty alleged points of bad-faith conduct, evinced a
clear effort to "unreasonably and unfairly den[y] and/or delay payment of benefits" to
Plaintiffs that the Defendant "knew, or should have known, ... should have been paid ." (Id.
at~~ 35, 48); see also (id. at~ 49) (Plaintiffs' generic list of alleged conduct provided to
support their claim). Defendant, in response, argues that as a bad faith claim requires a
predicate breach of contract, Plaintiffs' claim should be dismissed as, in Defendant's view,
the Plaintiffs' breach of contract claim is unsupported. (Doc. 5 at 15-16); see Moses Taylor
Foundation v. Coverys, 2021 WL 1017371, at *4 (M.D. Pa. Mar. 17, 2021) (bad faith claim
properly dismissed where plaintiff fails to adequately plead a breach of contract claim). As it
has been established above, however, that Plaintiffs adequately pleaded a claim for breach
Plaintiffs alleged in the Complaint that Defendant, in its May 9, 2019 letter, had "maintain[ed] its
denial of coverage" with a "specific refence to the 'Damage by Subcontractor's Endorsement."' (Doc. 1-1 at
I 10). This claim, however, appears to be undermined by Plaintiffs' own assertion in its answer to
Defendant's Motion to Dismiss arguing that the May , 2019 letter "makes no reference, citation or even
inference to the 'Damage by Subcontractor's Endorsement."' (Doc. 9 at I 10). Plaintiffs further undermine
their allegation that there was bad faith when it agreed that Defendant sought to "clarify some facts,
timelines and damages" concerning Plaintiffs' claim in that same letter. (Id.); (Doc. 9-2). Nevertheless,
such factual disputes are not ripe for adjudication at this point of the litigation.
of contract, and Plaintiffs subsequently alleged facts sufficient to state a bad faith claim,
Defendant's Motion to Dismiss Plaintiffs' bad faith claim with be denied.
For the aforementioned reasons, Defendant's Motion to Dismiss Plaintiffs' Complaint
for failure to state a claim upon which relief may be granted (Doc. 4) will be denied. A
separate Order will follow.
United States District Judge
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