Heller's Gas v. International Insurance Company of Hannover Ltd. et al

Filing 55

MEMORANDUM (Order to follow as separate docket entry) re: 28 First MOTION for Summary Judgment filed by International Insurance Company of Hannover SE and International Insurance Company of Hannover Ltd. Signed by Honorable Matthew W. Brann on 9/18/2017. (jn)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
HELLER’S GAS, INC.,
Plaintiff,
v.
INTERNATIONAL INSURANCE
COMPANY OF HANNOVER LTD, and
INTERNATIONAL INSURANCE
COMPANY OF HANNOVER SE
Defendants.

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No. 4:15-CV-01350
(Judge Brann)

MEMORANDUM OPINION
SEPTEMBER 18, 2017
Before the Court for disposition is Defendants International Insurance
Company of Hannover Ltd. and International Insurance Company of Hannover
SE’s Motion for Summary Judgment. For the reasons discussed below, this
Motion will be granted.
I.

INTRODUCTION

Plaintiff Heller’s Gas, Inc. (“Plaintiff”) commenced this action on July 9,
2015 against Defendants International Insurance Company of Hannover Ltd. and
International Insurance Company of Hannover SE (“Defendants”). In its
Complaint, Plaintiff alleged claims for: (1) breach of contract, and (2) statutory bad

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faith pursuant to 48 Pa.C.S.A. § 8371.1 Defendants filed an Answer on October
13, 2015,2 and the parties thereafter commenced factual discovery.3 Following the
completion of discovery, Defendants filed a Motion for Summary Judgment
seeking the entry of final judgment in their favor on both claims.4 Parties then
briefed this Motion, and, following an unsuccessful attempt at mediation during
which time this Motion was stayed,5 the matter is again ripe for my determination.6
II.

FACTUAL BACKGROUND

A.

Plaintiff Heller’s Gas, Inc. Constructs a Bulk Propane Storage
Facility in Carlisle, PA.

Plaintiff Heller’s Gas, Inc. owns and operates a property located at 1560
Holly Pike in Carlisle, Pennsylvania.7 In the summer and fall of 2011, Plaintiff
began developing this property as a bulk liquid storage facility.8 The “Project
Narrative” for this endeavor within Brehm-Lebo Engineering, Inc.’s (“BrehmLebo”) Post Construction Management Plan includes the following description:

1

ECF No. 1.

2

ECF No. 9.

3

ECF No. 14.

4

ECF No. 28.

5

ECF No. 52.

6

ECF Nos. 29, 36, and 38.

7

Defs.’ Statement of Material Facts (“Defs.’ SUMF”)(ECF No. 28-2) ¶ 1, at 1; Pl.’s Resp. to
Defs.’ SUMF (“Pl.’s Resp.”)(ECF No. 34) ¶ 1, at 1.

8

Defs.’ SUMF ¶ 2, at 1; Pl.’s Resp ¶ 2, at 1.

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Heller’s Gas is proposing to operate a propane gas distribution center
with retail store at 1560 Holly Pike (S.R. 0034), in South Middleton
Township, Cumberland County. Proposed improvements will include
expanding the existing service garage area with retail space, constructing
a free standing storage garage for service vehicles, and the outdoor
storage of bulk propane.9
Brehm-Lebo submitted these project plans to the LeTort Regional Authority
Project Review Committee for approval.10 In a letter dated September 24, 2011,
the LeTort Regional Authority wrote the following concerning drainage on the
property:
2. The existing conditions drawings show what appears to be a random
stone-lined swale along the southern lot line leading to an enclosed
depression, a sinkhole within the unlined portion of the swale at the
enclosed depression, and a possible sinkhole within the stone lined
portion of the swale. Recommend:
a. That the plans clearly state that the existing sinkhole is to be
repaired and that the suspected sinkhole is to be investigated and
repaired if necessary.
b. Relocating SWM Basin #1 to avoid concentrated infiltration
of stormwater in the existing enclosed depression and sinkhole area to
preclude the probable formation of a new sinkhole or the reopening of
the existing sinkhole. The proposed location of Basin #1 is adequate
for a detention basin provided that it is properly lined to preclude
seepage.11

9

Brehm-Lebo Engineering, Inc.’s Post Construction
Exhibit B, at 5.

10

Defs.’ SUMF ¶ 3, at 2; Pl.’s Resp ¶ 3, at 2.

11

September 24, 2011 Letter from LeTort Regional Authority (ECF No. 28-5), Exhibit D, at 1.

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Management Plan (ECF No. 28-5),

The Carlisle facility was completed and thereafter opened by Plaintiff in May
2013.12 By October 11, 2013, the facility contained six large liquid propane
storage tanks.13 In a Status Report compiled by Adjuster Brad Powers, the location
of these tanks is described as follows:
The location manager mentioned that the parking lot slops (sic) towards
the tanks, so all drainage from the parking lot goes to the tank storage
area.14
B.

Defendants International Insurance Company of Hannover Ltd.
and International Insurance Company of Hannover SE Issues an
Insurance Policy to Plaintiff Covering this Carlisle Location.

This new bulk propane storage facility was insured by Defendants for a
policy period of May 28, 2013 through May 28, 2014.15 This Policy covers “direct
physical loss to covered property at a ‘covered location’ caused by a covered
peril.”16 Concerning the ambit of “covered property,” and pertinent to the instant
action, the Policy contains the following provision:
10. Land, Water, and Growing Crops – “We” do not cover:
a. land, including but not limited to land on which the covered
property is located;
b. underground or surface water; or

12

Defs.’ SUMF ¶ 6, at 2; Pl.’s Resp ¶ 6, at 2.

13

Defs.’ SUMF ¶ 7, at 2; Pl.’s Resp ¶ 7, at 2.

14

August 8, 2014 Status Report of Energi Risk Management (ECF No. 28-5), Exhibit F.

15

Defs.’ SUMF ¶ 10, at 3; Pl.’s Resp ¶ 10, at 3.

16

ECF No. 28-5, Exhibit H (Policy, Form CO 10001002, page 6 of 31).

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c. growing crops.17
The Policy, furthermore, excludes coverage for a loss caused by an excluded
peril. This exclusion is encapsulated by the following language:
“We” do not pay for loss or damage caused directly or indirectly by one
or more of the following excluded causes or events. Such loss or damage
is excluded regardless of other causes or events that contribute to or
aggravate the loss, whether such causes or events act to produce the loss
before, at the same time as, or after the excluded causes or events.18
The list of excluded perils includes both earth movement and flood exclusions.19
The Flood exclusion specifically states the following:
“We” do not pay for loss caused by “flood.” However, “we” do cover the
resulting loss if fire, explosion, or sprinkler leakage results. 20
Within the Definitions portion of the Policy, the term “flood” is defined as
including “surface water.”21
The Policy nevertheless offers coverage for (1) sinkhole collapse, (2)
emergency removal expenses, and (3) income coverage loss as follows. First, the
Policy covers sinkhole collapse to covered property through the following
language:
Collapse –“We” pay for loss caused by direct physical loss involving
collapse as described in a., b., and c. below.
17

Id. at 8–9 of 31.

18

ECF No. 28-5, Exhibit H (Policy, Form CO 10001002, page 17 of 31).

19

Defs.’ SUMF ¶¶ 16–17, at 4; Pl.’s Resp ¶¶ 16–17, at 4.

20

ECF No. 28-5, Exhibit H (Policy, Form CO 10001002, page 19 of 31).

21

Id. at 3 of 31.

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a. Collapse of a building or structure, any part of a building or
structure, or personal property inside a building or structure, if
the collapse is caused by one or more of the following:
...
c. Collapse means a sudden and unexpected falling in or caving
in of a building or structure or any portion of a building or
structure with the result that the building or portion of the
building cannot be occupied for its intended purpose.
d. The following are not considered to be in a state of collapse:
1) a building or structure that is standing or any portion
of a building that is standing even if it displays
evidence of bending, bulging, cracking, expansion,
leaning, sagging, settling, or shrinkage;
2) a building or structure or any portion of a building
structure in danger of falling in or caving; and
3) a portion of a building or structure that is standing
even if it has separated from another portion of the
building or structure.22
Second, the Policy offers under the “Emergency Removal Expenses” provision “up
to $5,000 for “your” expenses to move or store covered property to prevent a loss
caused by a covered peril.”23 Third and finally, the Income Coverage Part of the
Policy provides coverage “when ‘your’ ‘business’ is necessarily wholly or partially

22

Id. at 24 of 31.

23

Id. at 10 of 31.

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interrupted by a direct physical loss of or damage to property at a ‘covered
location.’ ”24 This coverage, however, is subject to the following condition:
“We” pay no more than the Income Coverage “limit” indicated on the
“schedule of coverages” for any one loss. Payments for earnings, extra
expense, and “rents” combined does not exceed the “limit.”25
The “Location Schedule in the instant policy, while including two entries for 1560
Holly Pike in Carlisle, Pennsylvania, contains no limit for either entry under the
column titled “BI/EE.”26
C.

On October 11, 2013, Plaintiff Notices Several Sinkholes
Developing at the Base of the Propane Tanks.

Plaintiff first noticed sinkholes at the base of the propane tanks at the
Carlisle property on October 11, 2013, and filed a corresponding Property Loss
Notice on October 18, 2013.27 Plaintiff thereafter retained an engineering firm—
Navarro and Wright—to perform a site inspection on October 15, 2013.28 A
subsequently prepared report (“Navarro & Wright Report”) relayed that “[t]he
sinkhole was reported to have opened sometime during or after the significant
rainfall event ending on Friday 10-11-13,” and was the result of “[a] combination
of the natural geologic conditions, pour (sic) surface drainage, and ground
24

ECF No. 28-5, Exhibit H (Policy, Form CO 10010402, page 1 of 6).

25

Id. at 6 of 6.

26

ECF No. 28-5, Exhibit H (Policy, Form CO 10520402, page 1 of 1).

27

Property Loss Notice (ECF No. 28-6), Exhibit K.

28

See October 16, 2013 Navarro & Wright Consulting Engineers, Inc. Report (ECF No. 28-5),
Exhibit G.

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disturbances associated with the new construction.”29 The Navarro & Wright
Report further detailed an Action Plan which included the following pertinent
steps:
Temporary measures, such as plastic sheeting and diversion dikes
should be installed to limit, to the greatest extent as reasonably
achievable, the volume of surface water that might enter and
accumulate on and around the tank farm pad and the adjacent concrete
apron.30
Heller’s should consult with B-L regarding potential alterations to the
current site stormwater drainage, especially as it is related to the
tank farm. Ideally, water should flow freely off of the tank farm pad
and should not accumulate in, or around, the pad. Consideration
should be given to regrading of the pad and to the use of impermeable
geosynthetic lining systems or pavements. N&W will remain
available to explain the risks associated with the project as it
evolves.31
The Report finally recommended that Plaintiff remove the liquid propane from the
tanks and relocate said tanks to prevent further damage.32 A copy of this Report
was forwarded to Defendants on October 18, 2013.33

29

Id.

30

Id.

31

Id. at 3 of 4 (emphasis added).

32

Id.

33

Pl.’s Counterstatement of Material Facts (“Pl.’s CSMF”)(ECF No. 35) ¶ 17, at 4.

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D.

Defendants Received Notice of the Reported Loss and, After
Conducting An Investigation, Formally Denied Coverage on
October 28, 2013.

Upon receipt of both the Property Loss Notice and the Navarro and Wright
Report, Defendants began investigating the reported loss with the assistance of its
agent/broker Energi Insurance Services and its authorized claim representative,
York Risk Services Group, Inc.34 On October 21, 2013, Stephen E. Toli, a
Property Claims Examiner for York Risk Services Group, Inc., sent Plaintiff a
Letter which expressed that, because coverage for the claim is “questionable”
under the Policy, Defendants would be investigating “under a full reservation of all
its rights.”35 The letter also stated the following:
International Insurance Company of Hannover Limited’s coverage
position is based on the information currently available to us. If you have
any information that would alter our coverage position concerning this
matter, please forward it to us for further evaluation. This letter is not,
and should not be construed as, a waiver of any terms, conditions,
exclusions or other provisions of the policy, or any other policies of
insurance issued by International Insurance Company of Hannover
Limited or any of its affiliates. International Insurance Company of
Hannover Limited expressly reserves all of its rights under the policy,
including the right to amend the above reservation of rights to include
any additional grounds for disclaimer of coverage, including but not
limited to those set forth above, if subsequent information indicates that
such action is warranted.
...

34

Defs.’ SUMF ¶ 40, at 10; Pl.’s Resp. ¶ 40, at 9.

35

October 21, 2013 Letter from York Risk Services Group, Inc. to Plaintiff (ECF No. 28-6),
Exhibit L.

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Please realize that the International Insurance Company of Hannover
Limited is not denying coverage at this time. If following our
investigation, there continues to exist certain questions of coverage, you
will be advised at that time.36
York Risk Services Group, Inc. thereafter conducted an investigation led by
Brad Powers of Energi Insurance Services, Inc., and drafted a Letter dated October
28, 2013.37 In this missive, Mr. Toli expressed that coverage would be denied
based on the “Cost of Excavation,” “Land, Water, and Growing Crops,” and “Earth
Movement Exclusions.”38 This letter again invited Plaintiff to forward additional
information which would alter this position, and repeated that Defendants reserved
the right to assert additional grounds for disclaimer of coverage.39
Plaintiff continued contesting this coverage determination, and on June 25,
2014, Energi representative Paul Nestor requested that the claim be reopened for
purposes of allowing an “Emergency Removal Expense” under the policy.40
Plaintiff was thereafter provided with a “Sworn Statement in Proof of Loss” form
to sign on July 14, 2014.41 This completed form for Emergency Removal
Expenses was returned as dated September 8, 2014, and with recognition of the
36

Id.

37

October 28, 2013 Letter from York Risk Services Group, Inc. to Plaintiff (ECF No. 28-6),
Exhibit P.

38

Id.

39

Id.

40

June 25, 2014 Email from Paul Nestor to Stephen Toli (ECF No. 28-6), Exhibit Y.

41

July 14, 2014 Email from Derek Zambino to Plaintiff (ECF No. 28-6), Exhibit Z.

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$ 5,000 policy limit under this provision.42
E.

Plaintiff Unsuccessfully Seeks Reconsideration of the Coverage
Denial, And Brings A Legal Action Against Defendants.

On August 5, 2014, Derek Zambino, insurance broker for Plaintiff, sent an
email to Molly Ferrante of Energi Insurance Services, Inc. requesting that she
clarify the applicability of certain provisions of the Policy.43 Mr. Zambino
specifically wrote:
I have been working with Paul Nestor with this and we both are in
agreement with how we are handling this claim but the client is asking
around for other opinions and it is causing confusion for them.
I am looking for a legal interpretation on the policy language that I
can use to help explain our decision.44
Ms. Ferrante thereafter responded addressing the inapplicability of each of the
seven provisions cited within Mr. Zambino’s email.45
Eric Quinlan, Esquire, claims counsel for Energi Insurance Services, Inc.,
sent an email on February 12, 2015 to Mr. Zambino.46 In this email, Mr. Quinlan
expressed that, while Energi had “made a decision to forfeit the $ 5,000.00 we
have put up in an effort to get Heller’s the largest recovery,” Energi would not be
42

Sworn Statement in Proof of Loss (ECF No. 28-6), Exhibit AA.

43

August 5, 2014 Email from Derek Zambino to Molly Ferrante (ECF No. 28-6), Exhibit BB.

44

Id.

45

See August 22, 2014 Email from Molly Ferrante to Derek Zambino (ECF No. 28-6), Exhibit
CC.

46

February 12, 2015 Email from Eric Quinlan, Esq. of Energi Insurance Services, Inc. to Derek
Zambino (ECF No. 28-6), Exhibit DD.

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abandoning their case, but rather would work with Plaintiff’s newly retained
counsel to secure a recovery against the engineering firm responsible for the faulty
design of the tank farm.47 Mr. Quinlan thereafter facilitated contact between
Plaintiff’s counsel and Mr. Zambino.48
On April 15, 2015, Plaintiff’s counsel sent a Letter to Mr. Quinlan
requesting a formal coverage opinion concerning coverage for the extent of loss
previously detailed in the Sworn Statement in Proof of Loss.49 Counsel for
Defendants thereafter responded on May 22, 2015 in an eight page letter
discrediting Plaintiff’s argument for coverage through both the operation of the
anti-concurrent clause and exclusions, and the inapplicability of numerous
coverage extensions.50 Like previous denials, this Letter concluded with the
following pertinent language:
Hannover reserves all rights to assert, and shall not be estopped from
asserting, any and all defenses under the policy and/or law. This
correspondence is therefore not intended as a waiver, modification, or
alteration of any of the terms, conditions, limitations, endorsements or
exclusions of the subject policy.51

47

Id.

48

See ECF No. 28-6, Exhibit EE.

49

April 15, 2015 Letter from Plaintiff’s Counsel to Eric Quinlan (ECF No. 28-6), Exhibit FF.

50

May 22, 2015 Letter from Defendants’ Counsel to Plaintiff’s Counsel (ECF No. 28-7),
Exhibit HH.

51

Id.

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Unhappy with this affirmation of prior coverage determinations, Plaintiff filed suit
against Defendants on July 9, 2015.52
III.

LAW

“One of the principal purposes of the summary judgment rule is to isolate
and dispose of factually unsupported claims or defenses, and we think it should be
interpreted in a way that allows it to accomplish this purpose.”53 Summary
judgment is appropriate where “the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.”54
“Facts that could alter the outcome are ‘material facts,’ and disputes are ‘genuine’
if evidence exists from which a rational person could conclude that the position of
the person with the burden of proof on the disputed issue is correct.”55
“A defendant meets this standard when there is an absence of evidence that
rationally supports the plaintiff’s case.”56 “A plaintiff, on the other hand, must
point to admissible evidence that would be sufficient to show all elements of a
prima facie case under applicable substantive law.”57 The letter further requested

52

ECF No. 1.

53

Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986).

54

Fed. R. Civ. P. 56(a).

55

Clark v. Modern Grp. Ltd., 9 F.3d 321, 326 (3d Cir. 1993) (Hutchinson, J.) (citing Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) and Celotex Corp., 477 U.S. at 322).

56

Clark, 9 F.3d at 326.

57

Id.

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“[T]he inquiry involved in a ruling on a motion for summary judgment or for
a directed verdict necessarily implicates the substantive evidentiary standard of
proof that would apply at the trial on the merits.”58 Thus, “[i]f the defendant in a
run-of-the-mill civil case moves for summary judgment or for a directed verdict
based on the lack of proof of a material fact, the judge must ask himself not
whether he thinks the evidence unmistakably favors one side or the other but
whether a fair-minded jury could return a verdict for the plaintiff on the evidence
presented.”59 “The mere existence of a scintilla of evidence in support of the
plaintiff’s position will be insufficient; there must be evidence on which the jury
could reasonably find for the plaintiff.”60 “The judge’s inquiry, therefore,
unavoidably asks . . . ‘whether there is [evidence] upon which a jury can properly
proceed to find a verdict for the party producing it, upon whom the onus of proof is
imposed.’”61 Summary judgment therefore is “where the rubber meets the road”
for a plaintiff, as the evidentiary record at trial, by rule, will typically never surpass
that which was compiled during the course of discovery.
“[A] party seeking summary judgment always bears the initial responsibility
of informing the district court of the basis for its motion, and identifying those

58

Liberty Lobby, Inc., 477 U.S. at 252.

59

Id.

60

Id.

61

Id. (quoting Schuylkill & Dauphin Imp. Co. v. Munson, 81 U.S. 442, 447 (1871)).

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portions of the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, which it believes demonstrate the
absence of a genuine issue of material fact.”62 “[R]egardless of whether the
moving party accompanies its summary judgment motion with affidavits, the
motion may, and should, be granted so long as whatever is before the district court
demonstrates that the standard for the entry of summary judgment, as set forth in
Rule 56(c), is satisfied.”63
Where the movant properly supports his motion, the nonmoving party, to
avoid summary judgment, must answer by setting forth “genuine factual issues that
properly can be resolved only by a finder of fact because they may reasonably be
resolved in favor of either party.”64 For movants and nonmovants alike, the
assertion “that a fact cannot be or is genuinely disputed” must be supported by:
(i) “citing to particular parts of materials in the record” that go beyond “mere
allegations”; (ii) “showing that the materials cited do not establish the absence or
presence of a genuine dispute”; or (iii) “showing . . . that an adverse party cannot
produce admissible evidence to support the fact.”65

62

Celotex Corp., 477 U.S. at 323 (internal quotations omitted).

63

Id.

64

Liberty Lobby, Inc., 477 U.S. at 250.

65

Fed. R. Civ. P. 56(c)(1).

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“When opposing summary judgment, the non-movant may not rest upon
mere allegations, but rather must ‘identify those facts of record which would
contradict the facts identified by the movant.’”66 Moreover, “[i]f a party fails to
properly support an assertion of fact or fails to properly address another party’s
assertion of fact as required by Rule 56(c), the court may . . . consider the fact
undisputed for purposes of the motion.”67 On motion for summary judgment,
“[t]he court need consider only the cited materials, but it may consider other
materials in the record.”68
“[A]t the summary judgment stage the judge’s function is not himself to
weigh the evidence and determine the truth of the matter but to determine whether
there is a genuine issue for trial.”69 “[T]here is no issue for trial unless there is
sufficient evidence favoring the nonmoving party for a jury to return a verdict for
that party.”70 “If the evidence is merely colorable . . . or is not significantly
probative, summary judgment may be granted.”71

66

Port Auth. of N.Y. and N.J. v. Affiliated FM Ins. Co., 311 F.3d 226, 233 (3d Cir. 2003) (Weis,
J.).

67

Fed. R. Civ. P. 56(e)(2).

68

Fed. R. Civ. P. 56(c)(3).

69

Liberty Lobby, Inc., 477 U.S. at 249.

70

Id.

71

Id. at 249–50 (internal citations omitted).

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IV.

ANALYSIS

In their Motion for Summary Judgment, Defendants seek the entry of
summary judgment on Plaintiff’s breach of contract and statutory bad faith claims.
Having reviewed the factual record of this case in conjunction with applicable
Pennsylvania contract interpretation principles, I find that no genuine dispute of
material fact precludes this result. My reasoning is as follows.
A.

Breach of Contract Claim

To sustain a cause of action for breach of contract, a plaintiff must establish:
(1) the existence of a contract, including its essential terms; (2) a breach of a duty
imposed by that contract; and (3) resultant damages.72 In the context of insurance
contracts, the United States Court of Appeals for the Third Circuit has stated the
following:
[t]he task of interpreting an insurance contract is generally performed
by a court rather than by a jury. The goal of that task is, of course, to
ascertain the intent of the parties as manifested by the language of the
written instrument. Where a provision of a policy is ambiguous, the
policy provision is to be construed in favor of the insured 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.73

72

See CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa.Super. Ct. 1999).

73

Regents of Mercersburg College v. Republic Franklin Ins. Co., 458 F.3d 159, 171 (3d Cir.
2006).

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“A court should read policy provisions to avoid ambiguities, if possible, and not
torture the language to create them.”74 As a practical matter, the initial burden of
establishing coverage under an insurance policy rests with the insured; however,
the insurer then bears the burden of establishing the applicability of an exclusion
under an insurance policy.75
1.

Direct Physical Loss

In their Motion and its accompanying papers, Defendants first argue that
summary judgment is appropriate here because Plaintiff did not suffer “direct
physical loss” to covered property—in this case, the propane storage tanks.76
Defendants specifically advance that, while the damage to the land upon which the
tanks sat is undeniable, such damage is not covered and the costs of
filling/backfilling would be allowable only to the extent necessary to repair
underground covered property.77 Damage to the tanks themselves—property
covered by the Policy—was limited to a single, above ground pipe whose value
was soundly within the policy deductible.78 The mere “leaning, sagging, or

74

St. Paul Fire and Marine Ins. Co. v. U.S. Fire Ins. Co., 655 F.2d 521, 524 (3d Cir. 1981).

75

Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 206 (3d Cir. 2001).

76

Defs.’ Br. in Supp. of Mot. for Summ. J. (“Defs.’ Br.”)(ECF No. 29), at 5.

77

See Defs.’ Br. at 11 (quoting ECF No. 28-5, Exhibit H (Policy, Form CO 10001002, page 8
of 31)).

78

Defs.’ Br. at 6.

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settling” of the tanks, Defendants argue, does not constitute “collapse” within the
“Other Coverages” section, or trigger Policy coverage.79
Plaintiff, of course, resists the issuance of summary judgment on this ground
by arguing that the covered property— here the propane tanks—either suffered a
direct physical loss triggering coverage, or was nevertheless “at risk” for a greater
physical loss due to the state of the tanks after October 11, 2013, but prior to
remediation.80 Specifically, Plaintiff avers that uncontroverted evidence of
“sinking tanks, sinking tank supports, bent pipes, and damaged pylons” constitutes
“direct physical loss” triggering coverage under the following Policy provision:
13. Underground Pipes, Pilings, Bridges, and Roadways – “We” cover
direct physical loss caused by a covered peril to:
a.
b.
c.

pilings, piers, wharves, docks, or retaining walls;
underground pipes, flues, or drains; and
bridges, walkways, roadways, and other paved surfaces.

The most “we” pay under this Supplemental Coverage in any one
occurrence or at any one “covered location” is $250,000.81
Having established direct physical loss to a component of the storage tanks,
Plaintiff next cites the following provision to mandate coverage to the full extent of
damages suffered:

79

Id. at 10 (citing ECF No. 28-5, Exhibit H (Policy, Form CO 10001002, page 24 of 31)).

80

Pl.’s Br. in Opp. (“Pl.’s Br.”) (ECF No. 36), at 6.

81

Id. at 20 (citing Policy, Form CO 10001002, page 14 of 31)).

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“We” do not cover the cost of excavations, grading, filling, of
backfilling. However, if a covered loss occurs to covered property
below the surface of the ground, “we” cover costs that are a necessary
part of the repairing, rebuilding, or replacement of the property.82
Finally, Plaintiff avers that coverage is itself recognized by Defendants who paid
$5,000 under the “Emergency Removal Expenses” coverage extension.83
In the alternative, Plaintiff argues that “direct physical loss” to the covered
property occurred because the sinkhole opening rendered the tanks unusable.84 To
support this “loss of use” argument, Plaintiff cites the Third Circuit cases of Port
Authority of New York and New Jersey v. Affiliated FM Ins. Co., 311 F.3d 226 (3d
Cir. 2005) and its progeny, Motorists Mutual Ins. Co. v. Hardinger, 131 F. App’x.
823 (3d Cir. 2005). In Port Authority, the Third Circuit held that the plaintiff
could recover for losses stemming from asbestos contamination of a building only
if the cause of the harm “ ‘has resulted in contamination of the property such that
its function is nearly eliminated or destroyed or the structure is made useless or
uninhabitable . . . ’ ”85 While the Third Circuit found that such “loss of use” was
not present in Port Authority, the Court later held, in Motorists Mutual Ins. Co.,

82

Pl.’s Br. at 20 (citing Policy, Form CO 10001002, page 8 of 31)).

83

Id. at 14.

84

Id. at 11.

85

311 F.3d at 236.

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that the bacteria contamination of a home’s water supply constituted a “direct
physical loss” under Pennsylvania law when it rendered the home uninhabitable.86
I find Plaintiff’s arguments concerning the presence of “direct physical loss”
to covered property in this instance unavailing. Here, as previously noted, the
Policy covers “direct physical loss to covered property at a ‘covered location’
caused by a covered peril.”87 In order to trigger coverage, Plaintiff has the burden
of establishing that its covered property was damaged.88 This burden has not been
met for two reasons. First, I find coverage under the “Underground Pipes, Pilings,
Bridges, and Roadways” provision for the extent of damage sustained is not
triggered based solely on damage to a single pipe. I specifically agree with
Defendants that, despite the averments of Plaintiff, there is no evidence within the
factual record which demonstrates damage to such property underground. This
provision is therefore inapplicable. Indeed, photos of the storage tanks at issue
clearly and indisputably show both (1) the deflected pipe above ground, and (2) the
undamaged status of the pylons.

86

131 F.App’x. at 825–27.

87

ECF No. 28-5, Exhibit H (Policy, Form CO 10001002, page 6 of 31).

88

Port Authority, 311 F.3d at 232 (citing Koppers Co. v. Aetna Cas. & Surety Co., 98 F.3d
1440, 1446 (3d Cir. 1996)).

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Figure 1: Picture of Deflected Pipe89

89

Defs.’ Br. at 9.

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Figure 2: Picture of Undamaged Pylon90

Furthermore, even assuming the applicability of the “Underground Pipes,
Pilings, Bridges, and Roadways” provision, I am nevertheless in agreement with
Defendants that the plain and unambiguous language of the provision covers
“direct physical loss caused by a covered peril to . . . pilings, piers, wharves, docks,
or retaining walls,” and cannot be construed to extend to the damages sought by
Plaintiff—costs of the removal of the tanks in toto and remediation of the land.
90

Id. at 8.

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Such an interpretation would, in my view, torture the language of this provision to
create an ambiguity in the scope of coverage afforded by the Policy.91
Finally, contrary to the assertion of Plaintiff, Defendants’ payment of
$ 5,000 under the “Emergency Removal Coverage Extension” does not trigger
coverage for the damages sustained. This provision states the following:
4. Emergency Removal Expenses –“We” pay up to $5,000 for “your”
expenses to move or store covered property to prevent a loss caused
by a covered peril. This coverage applies for up to 365 days after the
property is first moved, but does not extend past the date on which
this policy expires.92
Again, the plain language of this provision does not indicate that payment under its
auspices necessarily implicates the presence of a “direct physical loss.” Rather, the
wording of this provision and purpose of this section is to prevent a potential loss
caused by a covered peril. Given that the covered property at issue—the propane
tanks—contained flammable material, their state post October 11, 2013 presented
just that—a potential loss.
Having found no physical damage to the covered property sufficient to
trigger coverage, the success of Plaintiff’s claim is therefore dependent on a novel
argument that the alleged inoperability of the propane tanks post October 11, 2013

91

T.H.E. Ins. Co. v. Charles Boyer Children’s Trust, 455 F.Supp.2d 284, 289 (M.D.Pa.
2006)(Vanaskie, J.)(quoting St. Paul Fire & Marine Ins. Co. v. U.S. Fire Ins. Co., 655 F.2d
521, 524 (3d Cir. 1981)(“A court should read policy provisions to avoid ambiguities, if
possible, and not torture the language to create them.”).

92

ECF No. 28-5, Exhibit H (Policy, Form CO 10001002, page 10 of 31)(emphasis added).

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constitutes “direct physical loss.” I find this argument both unpersuasive and
unsupported by law.
As I noted above, Plaintiff advances this argument pursuant to Port
Authority of New York and New Jersey v. Affiliated FM Ins. Co., 311 F.3d 226 (3d
Cir. 2005) and Motorists Mutual Ins. Co. v. Hardinger, 131 F. App’x. 823 (3d Cir.
2005). Application of these cases to the instant matter, however, is an attempt by
Plaintiff to fit the proverbial square peg in a round hole. Specifically, in both of
these cases, the Third Circuit was confronted with the discrete issue of whether
covered property rendered uninhabitable by dangerous gases or bacteria
constituted “direct physical loss or damage” sufficient to trigger coverage. These
cases did not address whether a non-gaseous or bacterial related condition on
noncovered property—in this case, supporting land— can constitute physical loss
on covered property if it renders such property unusable. Indeed, the line of cases
in this Circuit following these decisions has not extended nor interpreted their
applicability to this broad a reach.93 I will not act to extend it today.
Second, and equally dispositive, is a factual difference between the instant
Policy and that in Motorists Mutual Ins. Co. Specifically, the definition of
93

See, e.g., Gregory Packaging, Inc. v. Travelers Prop. Cas. Co. of America, Civil Action No.
12-CV-04418, 2014 WL 6675934, at *6 (D.N.J. Nov. 25, 2014)(finding that an unsafe
amount of the chemical ammonia rendered a facility unusable and thus constituted a direct
physical loss); Bragg v. Taylor, Civil Action No. 12-CV-7219, 2013 WL 1214971, at *2
(E.D.Pa. Oct. 29, 2013)(recognizing that Port Authority and Motorists Mutual involved
damage from unconventional sources difficult to measure).

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property damage within Motorists Mutual Ins. Co. policy included “physical injury
to, destruction of, or loss of use of tangible property.”94 This expansive view of
property damage is absent in the instant policy. Rather, any damages stemming
from loss of use would be compensable under the Income Coverage Part of the
instant Policy, which states:
“We” cover any extra expense to avoid or reduce the interruption of
“business” and continue operating at a “covered location”,
replacement location, or a temporary location. This includes expenses
to relocate and costs to outfit and operate a replacement or temporary
location.95
Plaintiff, however, declined to purchase this additional coverage for its Carlisle
location.96 Indeed, the “Location Schedule in the instant policy, while including
two entries for 1560 Holly Pike in Carlisle, Pennsylvania, contains no limit for
either entry under the column titled “BI/EE.”97
In sum, based on the undisputed facts and the foregoing analysis which finds
that Plaintiff’s covered property has not sustained “direct physical loss” necessary
to trigger coverage, I find that summary judgment is warranted in favor of
Defendants on this ground alone.

94

131 F. App’x. at 825 n. 2 (emphasis added).

95

ECF No. 28-5, Exhibit H (Policy, Form CO 10010402, page 1 of 6).

96

See ECF No. 28-5, Exhibit H (Policy, Form CO 10520402, page 1 of 1).

97

ECF No. 28-5, Exhibit H (Policy, Form CO 10520402, page 1 of 1).

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2.

Flood Exclusion

Assuming arguendo that the covered property—the six propane tanks at
issue sustained “direct physical loss” necessary to trigger policy coverage for the
sustained damages, I hold that coverage would nevertheless be precluded pursuant
to the Policy’s flood exclusion.
The Flood Exclusion Provision provides the following:
“We” do not pay for loss or damage caused directly or indirectly by
one or more of the following excluded causes or events. Such loss or
damage is excluded regardless of other causes or events that
contribute to or aggravate the loss, whether such causes or events act
to produce the loss before, at the same times as, or after the excluded
causes or events.
...
f. Flood – “We” do not pay for loss caused by “flood”. However,
“we” do cover the resulting loss if fire, explosion, or sprinkler leakage
results.98
Within the Policy in the Definitions section, “Flood” is in turn defined as:
[F]lood, surface water, waves, tidal water, or the overflow of a body
of water, all whether driven by wind or not. This includes spray that
results from any of these whether driven by wind or not.99
In their Motion for Summary Judgment, Defendants argue the applicability of this
exclusion together with the above anti-concurrent causation lead-in language
precludes coverage for the damages sought.100
98

See ECF No. 28-5, Exhibit H (Policy, Form CO 10001002, page 18–19 of 31)(emphasis
added).

99

Id. at 3 of 31 (emphasis added).

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Plaintiff contests this conclusion with three arguments. First, Plaintiff
argues that Defendants failed to raise this argument at the time of denial of
coverage and are therefore precluded from advancing it now.101 Second, Plaintiff
argues that this exclusion is inapplicable because there is no evidence supporting
the presence of “surface water” as defined within the policy.102 Third, and
apparently in the alternative,103 Plaintiff argues that, while weather would normally
be an excluded condition, the effects of the rainfall are covered to the extent they
result in a covered peril, such as sinkhole collapse.104
First, to the extent Plaintiff argues that the application of this flood exclusion
is somehow estopped by Defendants failure to invoke it in their initial denial of
coverage on October 28, 2013, I note that the factual record does not support this
claimed waiver by Defendants. Indeed, in the declination letter cited by Plaintiff,
counsel for Defendants wrote the following:

100

Defs.’ Br. at 14.

101

Pl.’s Br. at 14–15.

102

Id. at 16–17.

103

I note “in the alternative” because, despite Defendants’ production of a NOAA Certified
Quality Controlled Local Climatological Data Sheet indicating that Harrisburg received
nearly ten inches of rain on October 10-11, 2013, Plaintiff contests the relevance of this data
for showing rainfall totals at the Carlisle tank farm. Defs.’ SUMF ¶ 27, at 7; Pl.’s Resp. ¶ 27,
at 6. This argument, however, now asks the Court to accept as undisputed fact significant
rainfall during this period. This fact is established by Plaintiff’s own engineering study—the
Navarro & Wright Report. See October 16, 2013 Navarro & Wright Consulting Engineers,
Inc. Report (ECF No. 28-5), Exhibit G.

104

Id. at 18.

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This letter is not, and should not be construed as, a waiver of any
terms, conditions, exclusions or other provisions of the policy, or any
other policies of insurance issues by International Insurance Company
of Hannover Limited or any of its affiliates. International Insurance
Company of Hannover Limited expressly reserves all of its rights
under the policy, including the right to amend the above
reservation of rights to include any additional grounds for
disclaimer of coverage, including but not limited to those set forth
above, if subsequent information indicates that such action is
warranted.105
This admonition was repeated in Defendants’ formal May 22, 2015 Letter
expressing their coverage position.106 Furthermore, while Plaintiff cites the nonbinding cases of Trunzo v. Allstate Ins. Co.107 and Hollock v. Erie Ins. Co.,108 my
analysis reveals these cases to be inapposite. The dispute within the Trunzo case
concerned both whether the insured constituted an “insured person” and whether
the car she was driving was an “insured auto” within the context of an auto
policy.109 Furthermore, the Hollock case was outside the context of a policy’s
coverage and was instead limited to bad faith analysis.110 These cases are not
persuasive.

105

See October 28, 2013 Letter from York Risk Services Group to Hellers Gas Company, Inc.
(ECF No. 36-6)(emphasis added).

106

May 22, 2015 Letter from Defendants’ Counsel to Plaintiff’s Counsel (ECF No. 28-7),
Exhibit HH.

107

Civil Action No. 04-CV-1789, 2006 WL 2773468 (W.D.Pa. Sept. 25, 2006).

108

842 A.2d 409 (Pa. Super. Ct. 2004).

109

Trunzo, 2006 WL 2773468, at *11.

110

Hollock, 842 A.2d at 412.

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Second, while Plaintiff contests the applicability of the flood exclusion by
arguing that there is no evidence of an accumulation of “surface water” within the
policy, that averment is unsupported, and in fact contradicted, by a full reading of
the factual record. Specifically, the engineering report of Navarro & Wright is
replete with references to rainfall/surface water contributing to the opening of the
sinkhole. These references include the following:
One (1) apparent sinkhole opening at the ground surface was observed
to the north of Tank 2 and extending below the concrete apron
pavement. The sinkhole was reported to have opened sometime
during or after the significant rainfall ending on Friday 10-1113.111
...
A combination of natural geologic conditions, pour (sic) surface
drainage, and ground disturbances associated with the new
construction have provided a catalyst form the formation of the
observed sinkholes and closed depressions.112
Furthermore, in recommending remedial measures, the Report recognized the
necessity of addressing stormwater drainage on the tank farm in the following
passages:
Temporary measures, such as plastic sheeting and diversion dikes
should be installed to limit, to the greatest extent as reasonably
achievable, the volume of surface water that might enter and

111

See ECF No. 28-5, Exhibit G (October 16, 2013 Navarro & Wright Consulting Engineers,
Inc. Report, page 2 of 4)(emphasis added).

112

Id. (emphasis added).

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accumulate on and around the tank farm pad and the adjacent concrete
apron.113
Heller’s should consult with B-L regarding potential alterations to the
current site stormwater drainage, especially as it is related to the
tank farm. Ideally, water should flow freely off of the tank farm pad
and should not accumulate in, or around, the pad. Consideration
should be given to regrading of the pad and to the use of impermeable
geosynthetic lining systems or pavements. N&W will remain
available to explain the risks associated with the project as it
evolves.114
Third and finally, Plaintiff argues that while loss caused by weather
conditions is normally excluded from the ambit of this policy, its contribution to a
covered peril—sinkhole collapse— necessarily mandates coverage per the
language of the Policy.115 This recognition of rain and therefore surface water’s
effect in causing the instant loss implicates the anti-concurrent causation language
of this Policy, and is ultimately damning to Plaintiff’s argument. This language
states the following:
“We” do not pay for loss or damage caused directly or indirectly by
one or more of the following excluded causes or events. Such loss or
damage is excluded regardless of other causes or events that
contribute to or aggravate the loss, whether such causes or events act
to produce the loss before, at the same time as, or after the excluded
causes or events.116

113

Id.

114

Id. at 3 of 4 (emphasis added).

115

Pl.’s Br. at 18 (quoting Policy, Form CO 10001002, page 22 of 31).

116

See ECF No. 28-5, Exhibit H (Policy, Form CO 10001002, page 18 of 31).

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The explicit inclusion of this language negates the default “efficient proximate
cause” doctrine under Pennsylvania law.117
The conjunctive effect of this anti-concurrent causation language and the
flood exclusion118 precludes coverage of the damages sought regardless of other
covered perils. While Plaintiff resists this conclusion by arguing both that the
surface water did not directly cause the damages at issue and that the policy
language itself is ambiguous, I note that these arguments were previously raised
and rejected by the Court in T.H.E. Ins. Co. v. Charles Boyer Children’s Trust.119
In that case, the Honorable Thomas I. Vanaskie, formerly of this Court, wrote
[I]t must be concluded that the damage in question was caused,
directly or indirectly, by surface water. That a covered risk may have
contributed to the loss is irrelevant in light of the clear language of the
lead-in clause.”120
Judge Vanaskie therefore held that “the surface water exclusion and the lead-in
clause unambiguously combine to exclude the loss at issue from coverage under
the Policy.”121 Appealing the entry of summary judgment in favored of insured on

117

Colella v. State Farm Fire & Cas. Co., 407 F. App’x. 616, 622 (3d Cir. 2011).

118

Furthermore, while Plaintiff argues that it purchased Deluxe Coverage Extensions providing
coverage for a loss caused by surface water (Pl.’s Br. at 16 (citing Policy, Energi Deluxe
Coverage Extensions, page 2 of 5), it has not adduced that any of its petroleum product was
rendered unusable as required by this provision. See ECF No. 28-5, Exhibit E, Interrogatory
Number 10.

119

455 F. Supp. 2d at 298.

120

Id.

121

Id.

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this ground, the plaintiff in T.H.E. Ins. Co. argued before the Third Circuit that the
“surface water exclusion is ambiguous rather than specific.”122 Our Court of
Appeals rejected that argument, noting that “the term “surface water” has a clear
definition under Pennsylvania and Third Circuit law” and that “[a]bsent ambiguity
and given an applicable exclusion, [plaintiff] cannot benefit from the all-risk nature
of its policy from T.H.E.”123
Here, as noted above, the undisputed facts demonstrate that the
accumulation of surface water contributed at the very least indirectly to the
damages at issue. Therefore, given the unambiguous definition of “surface water”
within this jurisdiction and the operation of the anti-concurrent causation lead-in
clause, I am satisfied that the language of the Policy is unambiguous, the issue
presented is beyond dispute, and coverage in the instant matter is thus precluded.124
Summary judgment is therefore appropriate in Defendants’ favor based on this
alternative conclusion.
122

269 F. App’x. 220, 223 (3d Cir. 2008).

123

Id.

124

Accord Gillin v. Universal Underwriters Ins. Co., Civil Action No. 09-CV-5855, 2011
780744, at *8 (E.D.Pa. Mar. 4, 2011) (granting summary judgment in favor of the insurer
where coverage for damages “unambiguously precluded” by the lead-in clause and the e
earth movement, cracking and collapse exclusions); Pisano v. Nationwide Mut. Fire Ins. Co.,
Civil Action No. 08-CV-2524, at *5 (E.D.Pa. Oct. 21, 2009)(granting summary judgment in
favor of the insurer where coverage for damages was precluded by the lead in clause of
policy and the presence of an excluded peril); Baker v. Metropolitan Property and Cas. Ins.
Co., Civil Action No. 12-CV-01231, 2013 WL 5308196 at *3 (M.D.Pa. Sept 19,
2013)(Mariani, J.)(finding that the “lead-in” clause of the insurance policy bars coverage for
excluded events regardless of their cause).

- 33 -

B.

Bad Faith Claim

A plaintiff asserting an insurance bad faith claim under 42 Pa. C. S.A. §
8371125 must demonstrate by clear and convincing evidence that: 1) the insurer
lacked a reasonable basis for its handling of a claim; and, 2) the insurer knew of or
recklessly disregarded the lack of a reasonable basis.126 “[T]he essence of a bad
faith claim must be the unreasonable and intentional (or reckless) denial of
benefits.”127 Bad faith conduct “imports a dishonest purpose and means a breach
of a known duty (i.e., good faith and fair dealing), through some motive of selfinterest or ill will; mere negligence or bad judgment is not bad faith.”128
In opposing a summary judgment motion on this claim, courts “must view
the evidence presented in light of the [insured’s] substantive burden at trial.”129
Accordingly, on summary judgment the plaintiff must present evidence such that a
125

The text of the statute reads:
In an action arising under an insurance policy, if the court finds that the insurer has acted
in bad faith toward the insured, the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date the claim was made
by the insured in an amount equal to the prime rate of interests plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.

42 Pa. C.S.A. § 8371.
126

Amica Mut. Ins. Co. v. Fogel, 656 F.3d 167, 179 (3d Cir. 2011).

127

UPMC Health Sys. v. Metro. Life Ins. Co., 391 F.3d 497, 506 (3d Cir. 2004).

128

Terletsky v. Prudential Prop. & Cas. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994) (quoting
Black’s Law Dictionary 139 (6th ed. 1990)) (internal citations omitted).

129

Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 137 (3d Cir. 2005) (internal quotations and
citations omitted).

- 34 -

reasonable jury could find bad faith “by the stringent level of clear and convincing
evidence.”130 “This heightened standard requires the insured to provide evidence
so clear, direct, weighty and convincing as to enable a clear conviction, without
hesitation, about whether or not the defendants acted in bad faith.”131 Where a
plaintiff fails to offer clear and convincing evidence of bad faith for summary
judgment, the plaintiff’s claim is properly withheld from the jury.132
An insurer may defeat a bad faith claim by showing it had a reasonable basis
for its actions.133 The insurer may do so by demonstrating that it conducted a
sufficiently thorough review or investigation used as a foundation for its
subsequent decisions.134 The insurer need not show that its investigation “yielded
the correct conclusion or even that its conclusion more likely than not was
accurate,” only that its actions were reasonable.135
In the instant matter, my analysis of Plaintiff’s bad faith claim is necessarily
short given both the above failure of its breach contract claim, and Plaintiff’s
failure to show bad faith by clear and convincing evidence. At the outset, I note
130

Verdetto v. State Farm Fire and Cas. Co., 837 F. Supp. 2d 480, 484 (M.D. Pa. 2011)
(Caputo, J.) (internal quotations and citations omitted).

131

Amica, 656 F.3d at 179 (internal quotations and citation omitted).

132

See Oehlmann v. Metro. Life Ins. Co., 644 F. Supp. 2d 521, 528–29 (M.D. Pa. 2007) (Kosik,
J.).

133

Amica, 656 F.3d at 179.

134

See Foster v. Westchester Fire Ins. Co., Civil Action No. 09-1459, 2011 WL 4382971, at *13
(W.D. Pa. Sept. 20, 2011).

135

Id.

- 35 -

that summary judgment is appropriate on this claim given the failure of the breach
of the contract claim.136 Furthermore, even if the failure of Plaintiff’s breach of
contract claim were not outcome determinative, the exacting standard which
Plaintiff must meet at trial on his bad faith claim, and its failure to present a
scintilla of evidence to that end, dictates the entry of summary judgement in
Defendants’ favor.137
First, upon review of the factual record, I find that no reasonable jury could
conclude by clear and convincing evidence that a reasonable basis for denial of
coverage was lacking given the complexity of the coverage issue presented.138
Beyond the determination made repeatedly, and in this Court’s view—correctly—
by Defendants, Plaintiff’s own broker, Derek Zambino, in the face of his staff’s
concurrence with this result, vowed to “work my relationships” to “get ‘something’
covered.”139 He later requested from Molly Ferrante of Energi Insurance Services,

136

Gold v. State Farm Fire & Cas. Co., 880 F.Supp.2d 587, 597 (E.D.Pa. 2012)(“Resolution of
a coverage claim on the merits in favor of the insurer requires dismissal of a bad faith claim
premised on the denial of coverage, because under the circumstances the insurer necessarily
has a reasonable basis for denying benefits.”)(citing Frog, Switch & Mfg. Co., Inc. v.
Travelers Ins. Co., 193 F.3d 742, 751 n. 9 (3d Cir.1999); Treadways, LLC v. Travelers
Indem. Co., 467 F.App’x. 143, 146–47 (3d Cir. 2012); Pizzini v. Am. Int'l Specialty Lines Ins.
Co., 249 F.Supp.2d 569, 570 n. 1 (E.D.Pa. 2003)).

137

Babayan, 430 F.3d at 137.

138

Error! Main Document Only.See Amica,

139

See ECF No. 28-6, Exhibit U (April 2, 2014 Email from Derek Zambino)(emphasis added).

656 F.3d at 179.

- 36 -

Inc. “a legal interpretation on the policy language that I can use to help explain our
decision.”140
Furthermore, evidence is lacking in the factual record to show by clear and
convincing evidence that the denial of coverage was made with knowledge or
reckless disregard by Defendants. Plaintiff contends that this burden is met
through a continually evolving narrative of why coverage was being denied.141
This narrative, however, fails to cite any evidence showing the ill motive or
recklessness necessary to succeed on this claim. Specifically, while Plaintiff
attempts to demonstrate a predetermined decision to deny benefits through the
alacrity of the claim review process, I nevertheless note the absence of evidence
supporting this supposition.142 Rather, full review of the factual record
demonstrates the following. First, Defendants’ decision to deny coverage was
consistent throughout the review process, and was always accompanied by an
invitation to Plaintiff to supplement the record with information which could alter
this conclusion.143 Second, while denying their obligation to indemnify the extent

140

Id.

141

Pl.’s Br. at 23–31.

142

Foster v. Westchester Fire Ins. Co., Civil Action No. 09-CV-1459, 2011 WL 4582971, at
*14 (W.D.Pa. Sept. 20, 2011)(“Plaintiff, bearing the burden of proof at trial with respect to
establishing the essential elements of a bad faith claim, cannot rest solely upon his
allegations to defeat defendants' motion for summary judgment as to this claim.”).

143

See, e.g., October 21, 2013 Letter from York Risk Services Group, Inc. to Plaintiff (ECF No.
28-6), Exhibit L; October 28, 2013 Letter from York Risk Services Group, Inc. to Plaintiff

- 37 -

of loss suffered, Defendants nevertheless assisted Plaintiff in a potential third party
claim against the engineer responsible for the tank farm’s faulty design by
recommending an attorney and offering the resources of its own litigation
department.144 Third, following an initial denial of coverage, Defendants
reconsidered their decision and in fact provided some coverage under the
Emergency Removal Expense provision.145
Here, Plaintiff’s statutory bad faith claim necessarily fails given the
dismissal of the underlying breach of contract claim. Furthermore, the undisputed
facts of record demonstrate both that Defendants had a reasonable basis for their
coverage denial and Plaintiff nevertheless failed to offer evidence from which a
reasonable jury could find bad faith by a clear and convincing standard.
Consequently, Plaintiff’s bad faith claim is properly dismissed on summary
judgment.
V.

CONCLUSION

Finding no genuine disputes of material fact precluding such a result, I will
grant Defendants International Insurance Company of Hannover Ltd. and

(ECF No. 28-6), Exhibit P; May 22, 2015 Letter from Defendants’ Counsel to Plaintiff’s
Counsel (ECF No. 28-7), Exhibit HH.
144

February 12, 2015 Email from Eric Quinlan, Esq. of Energi Insurance Services, Inc. to Derek
Zambino (ECF No. 28-6), Exhibit DD.

145

June 25, 2014 Email from Paul Nestor to Stephen Toli (ECF No. 28-6), Exhibit Y.

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International Insurance Company of Hannover SE’s Motion for Summary
Judgment in its entirety. The Clerk of Court is directed to close this case.
An appropriate Order follows.

BY THE COURT

s/ Matthew W. Brann
Matthew W. Brann
United States District Judge

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