THE NETHERLANDS INSURANCE COMPANY v. WEST PENN POWER COMPANY
Filing
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MEMORANDUM OPINION AND ORDER OF COURT denying 31 Motion for Summary Judgment. Signed by Judge Terrence F. McVerry on 11/08/12. (mcp)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
THE NETHERLANDS INSURANCE
COMPANY as subrogee of JEANNETTE
SPECIALTY GLASS,
Plaintiff,
v.
WEST PENN POWER COMPANY
Defendant.
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2:11-cv-00338
(Consolidated-Lead Action)
MEMORANDUM OPINION AND ORDER OF COURT
Presently pending before the Court is the MOTION FOR SUMMARY JUDGMENT
(Doc. No. 31) filed by Defendant, West Penn Power Company (“West Penn” or “Defendant”),
on its counterclaim (Doc. No. 9) filed against Plaintiff, The Netherlands Insurance Company
(“Netherlands” or “Plaintiff”), as subrogee of Jeanette Specialty Glass (“JSG). The issues have
been fully briefed (Doc. Nos. 32, 35, 41, 42), and the factual record has been thoroughly
developed through the submission of Defendant’s CONCISE STATEMENT OF MATERIAL
FACT (Doc. No. 33) and Plaintiff’s responses and opposition thereto (Doc. No. 34).
Accordingly, the motion is ripe for disposition.
Background
This litigation concerns a now-consolidated subrogation action in which Plaintiff seeks to
recover monies paid to its insured, Jeanette Specialty Glass, for property damage to a glass
furnace allegedly caused by West Penn and/or Palco Sales Corporation (“Palco”). The following
background information is taken from the evidentiary record and is not in dispute for the purpose
of this Memorandum Opinion unless otherwise noted. 1
At all relevant times, JSG operated a glass manufacturing facility in Jeannette,
Pennsylvania that produced light fixtures, tiles, sinks, and dinnerware.
The manufacturing
process employed at JSG included the use of a glass furnace, which was constructed of refractory
brick and operated at approximately 2,900 degrees Fahrenheit, a temperature controlled with
electric blower motors. The proper operation of the glass furnace and its cooling fans was
seemingly critical to the company’s industrial production.
Pursuant to a contract executed on July 25, 2006, West Penn sold and supplied single
phase and three phase electricity to JSG throughout the relevant time period. The record
indicates that three phase electricity typically powers industrial equipment (i.e., the electric
blower motors that controlled the temperature of the glass furnace) and that West Penn provided
that power to the JSG facility via a utility pole and three transformers that it owned, operated and
maintained within the vicinity.
Much like West Penn, it appears that Palco also entered into a contract with JSG whereby
it sold, supplied and installed a back-up generator with a transfer switch for use at the facility.
According to Plaintiff, the transfer switch did not have loss of phase detection and/or loss of
phase protection to safeguard JSG against property damage and other losses associated with
power failures, voltage fluctuations, and loss of phase.
On February 9, 2010, JSG experienced voltage fluctuations and unbalanced phase with
1. The Court notes that in the Netherland’s Response (Doc. No. 34) to the Concise Statement of Material Fact filed
by West Penn (Doc. No. 33), Plaintiff makes admissions on behalf of Palco. See, e.g., Doc. No. 34 at ¶ 27 (“It is
admitted that the transfer switch that Palco sold JSG was not suitable for use in a three phase power distribution
system because the transfer switch lacked the ability to detect and protect unbalanced phase.”). The Court does not
accept these admissions. Although Palco is a party in this now-consolidated subrogation action, it is not presently
before the Court on the instant motion with the opportunity to admit or deny allegations. Indeed, Palco has denied
similar factual averments in its Answer to Plaintiff’s Complaint at Civil Action 2:12-00157. Thus, the Court notes
these allegations, along with Plaintiff’s other seemingly uncontroverted admissions, only for informational purposes
to provide some background with regard to the purported power failure and ultimate collapse of the glass furnace.
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regard to the three phase supply that West Penn provided. The loss of phase led JSG to shut
down the glass furnace and cooling fans for approximately two hours. Although JSG had an
emergency generator, that equipment failed to automatically engage and required manual startup. West Penn personnel later restored power and all of the equipment at JSG returned to normal
operations the next day.
Following that incident, a glass engineer at JSG inspected the furnace and determined
that its crown remained intact. Inspections continued every day thereafter. The glass engineer
and his staff were also provided information on the temperature and condition of the furnace on a
daily basis.
Approximately one month after the incident, on March 23, 2010, maintenance workers at
JSG discovered a hole in the crown of the glass furnace after they noticed a bright light
emanating from the equipment. Maintenance workers at JSG then began the necessary process
to shut down the glass furnace based on their finding, and the crown collapsed during the
procedure. Personnel at JSG would dismantled the glass furnace.
At the time of the incident, Plaintiff was an insurance carrier for JSG and allegedly paid,
in whole or in part, $1,079,577.00 for the damages caused by the furnace collapse. Since that
time, Plaintiff, as subrogee of JSG, has filed two lawsuits to recover an unidentified portion of
that sum.
First, Plaintiff commenced this action against West Penn on March 15, 2011 by the filing
of a three-count Complaint at Civil Action 2:11-cv-00338, alleging claims of negligence, breach
of warranty, and strict products liability. The gravamen of the Complaint is that a West Penn
transformer failed and caused the voltage fluctuations that entered the electrical distribution
system and burned out the blower motors of the glass furnace. To the Plaintiff, the inactivity of
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the cooling fans led to the equipment overheating, compromised the structural integrity of the
glass furnace, and caused the ultimate collapse on March 23, 2010.
Second, on February 9, 2012, Plaintiff initiated a nearly identical action against Palco at
Civil Action 2:12-00157, proceeding under the same three theories of liability. According to the
Complaint, Palco sold, supplied, and installed the back-up generator and transfer switch “without
phase detection and/or phase protection despite [its] knowledge that loss of phase detection
and/or loss of phase protection was required for the safe operation of the motors and equipment
used by Jeannette Specialty Glass at its facility.” (Doc. No. 1 at 2). Plaintiff likewise concludes
that if the transfer switch had loss of phase detection and/or loss of phase protection, “the
February 9, 2009 damage to the blower motors would not have occurred, the furnace would not
have overheated and the March 23, 2010 collapse would not have occurred.” (Doc. No. 1 at 3).
By Order of Court dated July 18, 2012, the Court granted the motion to consolidate the two cases
for the purposes of discovery and trial.
In addition to the two actions commenced by Plaintiff, other parties in this case have also
brought companion actions against fellow litigants. More specifically, Palco filed a third-party
complaint against West Penn, and West Penn filed a counterclaim against Netherlands along
with its Answer to the March 15, 2011 Complaint in which it seeks declaratory relief, alleging
that certain contractual clauses in agreements between itself and JSG bar Plaintiff, as subrogee,
from pursuing this action.
West Penn now moves for summary judgment on that counterclaim. For the reasons
discussed below, the Court finds that summary judgment is not appropriate at this time and
therefore, the motion will be denied.
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Standard of Review
Summary judgment must be granted when “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.” FED.
R. CIV. P. 56(a). The movant must identify those portions of the record which demonstrate the
absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986). To withstand summary judgment, the non-movant must show a genuine dispute of
material fact by “citing to particular parts of materials in the record, including depositions,
documents, electronically stored information, affidavits or declarations, stipulations (including
those made for purposes of the motion only), admissions, interrogatory answers, or other
materials.” FED. R. CIV. P. 56(c)(1)(A); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 586–87 (1986). A dispute is “genuine” only if “there is sufficient evidence favoring
the nonmoving party for a jury to return a verdict for that party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 249 (1986).
Discussion
According to West Penn, three documents control and provide sufficient grounds for this
Court to grant summary judgment on its request for declaratory judgment. Those agreements
include (1) the Retail Tariff: Rates and Schedules and Rules and Regulations accepted by the
Pennsylvania Public Utility Commission (“Tariff”); (2) an Electric Service Agreement (“ESA”)
dated July 25, 2006; and (3) West Penn Power’s Customer Requirements for Electric Service
(“CRES”). The Tariff outlines certain Rules and Regulations, which include the following two
paragraphs:
3. Safety
It is necessary for the protection of the Customers that all wiring and equipment
be installed and maintained by a capable electrician in a safe manner.
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Compliance with the requirements of the National Electric Code shall be
considered sufficient evidence of safe electrical installation. All wiring and
equipment shall be inspected and approved by a duly qualified inspector before
service is supplied.
4. Liability
The Customer, by accepting service from the Company, assumes full
responsibility for the safety and adequacy of the wiring and equipment installed
by the Customer. The Customer agrees to indemnify and save the Company
harmless from any liability which may arise as the result of the use of service
supplied to the Customer by the Company if such liability is caused, in whole or
in part, by negligence of the Customer and not by the negligence of the company.
The Company does not guarantee but will endeavor to furnish a continuous
supply of electric energy and to maintain voltage and frequency within reasonable
limits. The Company shall not be liable for damages or losses which the
Customer may sustain caused by or resulting from interruptions in service,
variations in service characteristics (including but not limited to high or low
voltage, operation of protection or control devices, the single phasing of threephase service, and phase reversals) or neutral to ground voltage, except such
damages and losses which are solely caused by or due to the negligence or willful
and wanton misconduct of the Company. Any of the aforementioned conditions
occurring as a result of electric system design common to the electric utility
industry shall be conclusively deemed not to result from the negligence or willful
and wanton misconduct of the Company.
(Doc. No. 9-2 at 2-3, ¶¶ 3-4). Similarly, paragraph 5 of the ESA, which incorporates the Tariff
by reference, states that West Penn “will make a reasonable effort to supply Electric Service as
required by this Agreement, but shall not be liable for any loss, damage expense, injury or death,
or any claim thereof, resulting from a delay or failure to furnish said Electric Service unless
caused by the sole negligence of the Company” and entirely disclaims consequential damages.
(Doc. No. 9-1 at 1, ¶ 5). The CRES, although not legally binding, is generally consistent with
the above-referenced clauses. See, e.g., Doc. 9-3 at 3, § 7.03 (“The Company will not be
responsible in any way for damage to the Customer’s equipment that is due to failure of the
Customer to provide adequate protection.”).
Based on the clauses cited in those three documents, West Penn seeks to have this Court
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declare that it is not liable for any damages, including consequential damages, arising from the
alleged voltage fluctuations that occurred on February 9, 2010, and therefore, bar Netherlands
from asserting its claim as subrogee of JSP. West Penn first submits that the ESA and the Tariff
contain permissible, binding, and dispositive provisions that limit its liability for damage caused
by electrical interruptions and voltage variations—occurrences that arguably form the basis for
Plaintiff’s Complaint. West Penn next argues that the inclusion of language exempting West
Penn from all liability unless the damages and losses are caused by its “sole negligence or willful
and wanton misconduct” illustrates that that the Court should apply the contractual maxim
expressio unius es exclusio alterius to recognize that the parties agreed to exclude all other
theories of liability, including breach of warranty and strict products liability. According to West
Penn, those provisions not only limit its liability, but also exempt the Company completely.
Distilled to its essence, West Penn presents the position that Plaintiff cannot recover
absent record evidence showing that JSG was free of contributory negligence and that no other
person or entity was negligent. West Penn supports this assertion with language from the Tariff
and ESA that requires the occurrence of a necessary precondition: a finding that any damages
and losses resulted from its “sole negligence.” To demonstrate that liability does not rest solely,
if at all, on the Company, West Penn (1) attempts to reason that despite the fact that JSG’s
operation depended on the glass furnace, nothing in the record indicates that Plaintiff provided
adequate protection for its equipment and safeguard against damage caused by voltage
fluctuations or the single phasing of three-phase service, and therefore, the absence of any
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evidence to the contrary indicates that it cannot be solely negligent as a matter of law;2 and (2)
highlights the companion case, Civil Action 12-00157, in its effort to support the conclusion that
the “unequivocal averments in the Palco complaint confirm that the damage to the glass furnace
was not caused by [the] sole negligence of West Penn.” (Doc. No. 32 at 17). West Penn further
attempts to underpin this line of reasoning with its position that the Complaint and record are
devoid of any allegations that establish it knew of, should have known of, was warned about, or
could have discovered and corrected any patent and/or latent defect in the glass furnace cooling
system or the transformer. Therefore, as the Company concludes, the damage to the glass
furnace and cooling motors cannot be the result of its sole negligence.
In response, Plaintiff first attempts to characterize the contractual provisions on which
West Penn heavily relies as exculpatory clauses void against public policy under Pennsylvania
law that prohibits public utilities from insulating themselves from liability, as opposed to only
permissibly limiting their liability. Plaintiff also argues that even assuming arguendo that West
Penn’s clauses are valid, the Court should still deny the motion for summary judgment, on
among other grounds, the existence of genuine issues of fact “as to whether West Penn’s
negligence was the sole proximate cause of the unbalanced voltage fluctuations and resulting
damages.” (Doc. No. 35 at 2).
As an initial matter, the Court notes that it need not determine at this stage whether the
various clauses of the Tariff and/or the ESA are limitations of liability provisions or exculpatory
clauses void as against public policy, as the resolution of this issue is not necessarily dispositive
of the present motion. See generally State Farm Fire & Cas. Co. v. PECO, -- A.3d -, 2012 PA
2. Contrary to West Penn’s assertion that “nothing in the record indicates that JSG had installed any device to
protect the glass furnace cooling motors form electrical interruptions or abnormal current,” two sentences later West
Penn notes “[t]he only protective device referenced in the record is an emergency generator.” (Doc. No. 32 at 17).
West Penn also offers its observation that “[e]ven assuming that JSG had installed protective devices on its cooling
motors, those devices and motors were not dependable or sufficient to protect JSG’s glass furnace to harm.” Id.
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Super 212 (Pa. Super. Ct. Oct. 3, 2012) (discussing the “legal framework within which to assess
the validity of clauses purporting to limit a utility company's liability”). To be sure, while either
interpretation inevitably precludes summary judgment on West Penn’s request for declaratory
relief, the principal basis for the denial rests on the movant having not shown that there are no
genuine issues of material fact as Rule 56 requires. Indeed, the theory offered by West Penn is
replete with genuine disputes with regard to the facts that implicate the parties’ potential liability,
if any, and certainly requires the Court to prematurely resolve those issues, effectively usurping
the role of the finder of fact.
West Penn offers the position, as previously noted, that the subrogee cannot recover
unless JSG was free of contributory negligence and that no other person or entity was negligent
based on the “sole negligence” language of the agreements.
To the extent that the Court
interprets the Tariff and ESA as permissible limitations of liability and accepts West Penn’s
concept that a contractual maxim bars all liability but for damages caused by its “sole
negligence,” its motion for summary judgment cannot be granted.3 The natural application of the
agreements first requires the Court, months before the close of discovery,4 to somehow discern
that JSG and/or Palco contributed to damaging the glass furnace and/or that West Penn was not
the sole cause of its ultimate collapse. West Penn asks this Court to make these factual findings
based on an incomplete record and otherwise uncontroverted averments.
The use of the
agreements at this stage then necessitates that the Court allocate the percentage of liability
among the parties, apportioning at least one percent (1%) of liability to any party in addition to
any amount assigned to West Penn in order to exonerate the Company completely and excuse it
3. While the Court assumes the validity of the Tariff and ESA and construes its provisions as limitations of liability
infra, nothing in this Memorandum Opinion should be construed as a determination on the merits of whether the
agreements contain exculpatory clauses that are void against public policy.
4. The parties submitted a Joint Motion for Enlargement of Discovery (Doc. No. 43) on November 1, 2012, and the
Court granted that request and extended the deadline for fact discovery to February 10, 2013. (Doc. No. 44 at 1).
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from repaying the subrogee in whole or in part.
The responsibility to assign liability is generally reserved for the finder of fact and the
Court will not commandeer that role. See, e.g., Tortu v. A-1 Quality Limousine Serv., CIV.063952(RBK), 2008 WL 3887612, at *3 (D. N.J. Aug. 18, 2008) (“Where, as here, issues of
material fact prevent the Court from determining liability as a matter of law, this allocation of
percentages of responsibility is an issue reserved for the finder of fact.”). This determination is
not to say that the Court will never entertain or decide issues with regard to liability at this stage.
See, e.g., Perasso v. Caesars Cove Haven, Inc., 3:10-CV-1476, 2012 WL 2121244, at *5 (M.D.
Pa. June 12, 2012) (“[The] apportionment of fault is generally within the jury’s province, and
should not be analyzed by the court except in certain circumstances where ‘the facts so clearly
reveal the plaintiff's negligence that reasonable minds could not disagree as to its existence.’”)
(citations omitted).
However, when an undeveloped record presents substantial issues of
material fact, the ultimate determination of which would impact liability, summary judgment is
not appropriate. C.f. Perasso, 2012 WL 2121244, at *5 (citing Peair v. Home Ass’n of Enola
Legion No. 751, 430 A.2d 665, 669 (Pa. Super. Ct.1981) (citation omitted) (“[S]ummary
judgment is a poor device for deciding questions of comparative negligence.”)).
Here, there is no record evidence or undisputed facts to allow the Court to make the
finding that either West Penn was without any negligence whatsoever or that another party was
also negligent, thereby releasing West Penn from all liability because any damage(s) and loss(es)
did not result from its “sole negligence.” From the perspective of the Court, the disputes in this
consolidated action include, among others, the origination and effect of the voltage fluctuations
and loss of phase, the suitability (or lack thereof) of the Palco transfer switch, and the precise
cause(s) that led to the burnout of the blower motors, the failure of the emergency generator(s) to
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automatically engage, and the ultimate collapse of the furnace. Thus, summary judgment based
on West Penn’s theory is premature at this time and therefore, will be denied.
To the extent that the Court interprets the agreements as containing exculpatory clauses
that are void against public policy, the outcome does not change. However, as noted above, the
Court declines to address the merits of the position offered by Plaintiff in its brief in opposition
regarding the validity of the Tariff and ESA, which it submits primarily as a defense to defeat
summary judgment. The application of those agreements not only presents factual issues when
addressed from the perspective of West Penn, but also leads to a premature examination of the
potential applicability of the clauses when observed from the viewpoint of Plaintiff. With the
benefit of further discovery and an ultimate determination by the finder of fact, the “sole
negligence” provision may not even apply should a jury or this Court find that no liability rests
with West Penn. Thus, to invoke the invalidity of the “exculpatory clauses” as a defense only
and at this early juncture does not require a decision on what is otherwise a contract
interpretation issue when the movant cannot even meet the basic requirements of Rule 56 that are
necessary in order to merit summary judgment.
Conclusion
For the reasons hereinabove set forth, the MOTION FOR SUMMARY JUDGMENT
(Doc. No. 31) filed by Defendant, West Penn Power Company on its counterclaim (Doc. No. 9)
will be DENIED in its entirety.
An appropriate order follows.
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
THE NETHERLANDS INSURANCE
COMPANY as subrogee of JEANNETTE
SPECIALTY GLASS,
Plaintiff,
v.
WEST PENN POWER COMPANY
Defendant.
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2:11-cv-00338
(Consolidated-Lead Action)
ORDER OF COURT
AND NOW, this 8th day of November, 2012, in accordance with the foregoing
Memorandum Opinion, it is hereby ORDERED, ADJUDGED, and DECREED that the
MOTION FOR SUMMARY JUDGMENT (Doc. No. 31) filed by Defendant, West Penn Power
Company on its counterclaim (Doc. No. 9) is DENIED in its entirety. The parties are further
instructed to docket all future filings at the Lead Action, 2:11-cv-00338.
BY THE COURT:
s/Terrence F. McVerry
United States District Judge
cc:
John A. Robb , Jr., Esquire
Email: jrobb@rlmlawfirm.com
William N. Clark , Jr., Esquire
Email: wclark@cozen.com
Lee R. Demosky, Esquire
Email: ldemosky@mdbbe.com
Peter B. Skeel, Esquire
Email: pskeel@summersmcdonnell.com
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