REGINELLA CONSTRUCTION CO., INC. v. STATE FARM FIRE AND CASUALTY COMPANY et al
ORDER granting 4 Motion to Dismiss for the reasons set forth more fully in the Memorandum Opinion filed in conjunction with this Order. IT IS FURTHER ORDERED that, should Plaintiff choose to file an Amended Complaint in order to cure the deficiencies in the Complaint, it shall do so on or before 2/26/2016. Signed by Magistrate Judge Maureen P. Kelly on 2/5/16. (bb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
REGINELLA CONSTRUCTION CO.,
STATE FARM FIRE AND CASUALTY
COMPANY and STATE FARM
GENERAL INSURANCE COMPANY,
Civil Action No. 15-989
Chief Magistrate Judge Maureen P. Kelly
Re: ECF No. 4
MEMORANDUM OPINION AND ORDER
KELLY, Chief Magistrate Judge
Presently before the Court is a Motion to Dismiss (ECF No. 4) filed by State Farm Fire
and Casualty Company and State Farm General Insurance Company (“State Farm” or
“Defendants”), pursuant to Federal Rule of Civil Procedure 12(b)(6), with respect to all claims
pled in the Complaint (ECF No. 1-2) filed on July 8, 2015, by Reginella Construction Co., Inc.
(“Plaintiff” or “Reginella”), in the Court of Common Pleas of Allegheny County, Pennsylvania.
Reginella’s claims are asserted under the laws of the Commonwealth of Pennsylvania.
Defendants removed the case to the United States District Court for the Western District of
Pennsylvania on July 27, 2015. (ECF No. 1). This Court exercises subject-matter jurisdiction
over Reginella’s claims pursuant to 28 U.S.C. §§ 1332(a) (diversity). For the reasons that
follow, Defendants’ Motion to Dismiss will be GRANTED.
PROCEDURAL AND FACTUAL BACKGROUND
On or about May 4, 2005, Mark A. Eck (“Eck”) purchased a home located in Verona,
Pennsylvania, from Pelone Land, LLC. (ECF No. 1-3 at 25). The home was constructed by
Reginella. (ECF No. 1-3 at 25). In June, 2012, Eck observed “bulging” of the floors on the
second floor of the home. (ECF No. 1-3 at 28). Eck thereafter filed a Complaint against
Reginella in the Court of Common Pleas of Allegheny County in July, 2013. (ECF No. 1-3 at 7
– 12). In an Amended Complaint filed in November, 2013, Eck attributed the bulging floors –
among other structural issues – to Reginella’s use of substandard or faulty materials, and
improper construction methods. (ECF No. 1-3 at 24 – 29).
Reginella alerted State Farm of the aforementioned complaints. (ECF No. 1-2 at 6).
Reginella had obtained a comprehensive business liability policy from State Farm beginning in
July, 2004, and extending until July, 2005. (ECF No. 1-2 at 4). Reginella subsequently renewed
the policy, but cancelled its coverage after May, 2006. (ECF No. 1-2 at 4). Given that the above
policies were in effect at the time of Reginella’s construction of the Eck house, it was
Reginella’s belief that State Farm was required to defend and indemnify against the Eck claims.
(ECF No. 1-2 at 6).
In a letter dated February 21, 2014, State Farm rejected Reginella’s request for indemnity
and assistance in defense of the Eck claims. (ECF No. 1-2 at 6). As justification, State Farm
cited the following language from Reginella’s former policies: “[t]his insurance applies only: 1.
to bodily injury or property damage caused by an occurrence which takes place in the
coverage territory during the policy period.”1 (ECF No. 1-4 at 2 – 3) (emphasis in original).
State Farm goes on to note additional grounds for denial of Reginella’s claim, including that “this insurance does
not apply: 13. to property damage to your work arising out of it or any part of it and included in the productscompleted operations hazard[;]” and that policy exclusions include “bodily injury, property damage, personal
State Farm then cited the Amended Complaint filed by Eck, noting that because the allegedly
improper construction was not discoverable until the floors began to bulge in June, 2012, there
was not an “occurrence,” within the meaning of the policy, during the policy period. (ECF No.
1-4 at 5).
In November, 2014, Reginella filed a Complaint to Join Additional Defendants in the
action initiated by Eck. (ECF No. 1-2 at 6). Reginella asserted that two subcontractors, Stark
Truss Company, Inc., and Empire Today, LLC, were liable for the improper construction leading
to the Eck claims. (ECF No. 1-2 at 6). Arbitration of the suit ensued and, while Eck was to
receive $23,390.00 in damages from Reginella, Stark Truss Company, Inc. was required to
indemnify Reginella and reimburse Reginella for $3,800.00 in attorney fees. (ECF No. 1-2 at 6).
On July 8, 2015, Reginella filed the instant Complaint against State Farm in the Court of
Common Pleas of Allegheny County. (ECF No. 1-2 at 1 – 10). At Counts I and II, Reginella
asserts claims for breach of contract and bad faith denial of insurance coverage, in violation of
Pennsylvania state law, and seeks compensatory damages in the amount of $8,413.00 for unpaid
attorney fees related to defending the Eck claims, as well as interest, punitive damages, and
attorney fees and costs. (ECF No. 1-2 at 10). State Farm removed the case to this Court on July
27, 2015 (ECF No. 1), and filed the present Motion to Dismiss on August 3, 2015. (ECF No. 4).
The matter is fully briefed (ECF Nos. 5, 9, 10), and is ripe for disposition.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain a short and
plain statement of a claim showing that the pleader is entitled to relief. Dismissal of a complaint
or portion of a complaint is warranted under Federal Rule of Civil Procedure 12(b)(6) when a
injury or advertising injury arising out of the actual, alleged or threatened inhalation of, ingestion of, contact with,
exposure to, existence of, or presence of any fungus[.]” (ECF No. 1-4 at 3 – 4) (emphasis in original).
claimant fails to sufficiently state a claim upon which relief can be granted. Avoiding dismissal
under Rule 12(b)(6) requires a pleading party’s complaint to provide “enough factual matter” to
allow the case to move beyond the pleading stage of litigation; the pleader must “‘nudge his or
her claims across the line from conceivable to plausible.’” Phillips v. Cnty. of Allegheny, 515
F.3d 224, 234 – 35 (3d Cir. 2008) (quoting Bell Atlantic Co. v. Twombly, 550 U.S. 544, 556, 570
In assessing the merits of a claim subject to a motion to dismiss, a court must engage in a
two-part analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 – 11 (3d Cir. 2009). First,
factual and legal elements of a claim must be distinguished. Id. Second, it must be determined
whether the facts as alleged support a “plausible claim for relief.” Id. In making the latter
determination, the court must be mindful that the matter pleaded need not include “detailed
factual allegations,” Phillips, 515 F.3d at 231 (quoting Twombly, 550 U.S. at 555), and the court
must construe all alleged facts, and draw all inferences gleaned therefrom, in the light most
favorable to the non-moving party. Id. at 228 (citing Worldcom, Inc. v. Graphnet, Inc., 343 F.3d
651, 653 (3d Cir. 2003)). Moreover, a pleading party need only “put forth allegations that ‘raise
a reasonable expectation that discovery will reveal evidence of the necessary element[s].’”
Fowler, 578 F.3d at 213 (quoting Graff v. Subbiah Cardiology Assocs., Ltd., 2008 WL 2312671
(W.D. Pa. June 4, 2008)). A well-pleaded complaint, even when “it strikes a savvy judge that
actual proof of . . . facts is improbable,” will not be dismissed as long as the pleader
demonstrates that his or her claim is plausible. Phillips, 515 F.3d at 234 (quoting Twombly, 550
U.S. at 555 – 56).
Nevertheless, the facts provided do need to raise the expectation of relief above a purely
speculative level, and must include more than “labels and conclusions, and a formulaic recitation
of the elements of a cause of action.” Phillips, 515 F.3d at 231 – 32 (quoting Twombly, 550 U.S.
at 554 – 56). Rule 8(a)(2) “requires a ‘showing’ rather than a blanket assertion of an entitlement
to relief.” Id. at 232. “[T]hreadbare recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.” Fowler, 578 F.3d at 211 (quoting Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009)).
A. Count I – Breach of Contract
At Count I of Reginella’s Complaint, it is asserted that State Farm breached its
contractual duty to Reginella by declining to defend against the Eck claims. (ECF No. 1-2 at 7 –
8). Reginella contends that State Farm’s decision was made without any reasonable basis, in
that: (1) the duty to defend is triggered whenever the facts pled in the complaint against the
insured create the potential that any claim therein may be covered by the underlying insurance
policy; and (2) the allegedly improper construction work was completed during the policy
period, and the facts pled by Eck were not so specific as to eliminate the possibility that damages
were reasonably apparent during the policy period. (ECF Nos. 1-2 at 7 – 8; 9 at 6 – 9). State
Farm counters by stating that the Eck claims clearly articulated that the damage caused by faulty
construction was not reasonably apparent until six years after the insurance policy expired. (ECF
Nos. 5 at 5 – 7; 10 at 2 – 4). Therefore, because the underlying policy was occurrence-based,
coverage was not triggered because the damage was not reasonably apparent during the policy
As an initial matter, the Court notes that in Pennsylvania the duty to defend is an
obligation separate and distinct from the duty to indemnify. Sikirica v. Nationwide Ins. Co., 416
F.3d 214, 225 (3d Cir. 2005) (citing Erie Ins. Exch. v. Muff, 851 A.2d 919, 925 (Pa. 2004)). The
duty to defend is the broader of the two obligations. Id. at 225 – 26 (citing Mut. Benefit Ins. Co.
v. Haver, 725 A.2d 743, 746 n.1 (Pa. 1999); Erie Ins. Exchange v. Claypoole, 673 A.2d 348, 356
n.3 (Pa. Super. Ct. 1996)). However, both duties “‘flow from a determination that the complaint
triggers coverage.’” Id. at 226 (quoting Gen. Accident Ins. Co. of Am. v. Allen, 692 A.2d 1089,
1095 (Pa. 1997)). “‘[T]he obligation of a casualty insurance company to defend an action
brought against the insured is to be determined solely by the allegations of the complaint in the
action.’” Holy Ghost Carpatho-Russian Greek Catholic (Orthodox) Church of the Eastern Rite
of Phoenixville, Pa. v. Church Mut. Ins. Co., 492 F. App’x 247, 249 (3d Cir. 2012) (quoting
Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 896
Yet, allegations contained in the complaint need only create a possibility of coverage
under the insured’s policy to trigger the duty to defend. Sunoco, Inc. v. Ill. Nat’l Ins. Co., 226 F.
App’x 104, 108 (3d Cir. 2007) (citing Air Prods. & Chemicals, Inc. v. Hartford Accident &
Indem. Co., 25 F.3d 177, 179 (3d Cir. 1994)). Additionally, the allegations of the complaint
must be viewed as true, and be liberally construed in the insured’s favor. Am. and Foreign Ins.
Co. v. Jerry’s Sport Center, Inc., 2 A.3d 526, 541 (Pa. 2010) (citing Frog, Switch & Mfg. Co.,
Inc. v. Travelers Ins. Co., 193 F.3d 742 (3d Cir. 1999)). Nonetheless, not all claims will be
capable of triggering the duty to defend; the Court must “compare the terms of the . . . policy
with the nature of the allegations of the underlying complaints.” Aetna Cas. And Sur. Co. v. Roe,
650 A.2d 94, 98, 100 (Pa. Super. Ct. 1994) (citing D’Auria v. Zurich Ins. Co., 507 A.2d 857, 859
(Pa. Super. Ct. 1986)).
The Court will begin by looking at the terms of the underlying insurance policy. The
policy provides, in relevant part, that: “[t]his insurance applies only: (1) to bodily injury or
property damage caused by an occurrence which takes place in the coverage territory during
the policy period.” (ECF No. 1-2 at 38) (emphasis in original). Further, “occurrence means: a.
an accident, including continuous or repeated exposure to substantially the same general harmful
conditions which result in bodily injury or property damage; or b. the commission of an
offense, or series of similar or related offenses, which results in personal injury or advertising
injury.” (ECF No. 1-3 at 1) (emphasis in original). It is clear, based upon the above language,
that the underlying policy issued to Reginella by State Farm was an “occurrence” policy. In
Pennsylvania, an occurrence policy will “‘indemnify for any loss from an event that occurs
within the policy period, regardless of when the claim is made.’” Pa. Nat’l Mut. Cas. Ins. Co. v.
St. John, 106 A.3d 1, 5 n. 3 (Pa. 2014) (quoting Black’s Law Dictionary 810 (7th ed. 2009)).
Plaintiff’s policy period was from July 2, 2004, through May 11, 2006. (ECF No. 1-2 at 4).
Next, the Court turns to the Eck claims. The Amended Complaint states that “bulging
has commenced to occur beneath the floors on the second floor of the home causing the floors to
become uneven and potentially unsound,” condensation has accumulated “in the ceiling of the
garage of the home, causing property damages to the ceiling,” “laminated flooring in the rooms
on the second floor of the [Eck] home [have] become damaged by way of bulging,” and
“additional property damages, which are currently obscured by the garage ceiling and floors of
the [Eck] second floor rooms has occurred.” (ECF No. 1-3 at 26 – 27). This was believed to be
the result of “failure to utilize appropriate and non-defective or a sufficient amount of materials
in the construction of the home,” “failure to utilize appropriate construction methods and
means,” and “improperly insulated or installed duct work.”
(Id.). Additionally, “structural
components and other components may be sustaining water damages or damages from mildew or
from mold which has or may be accumulating on the components causing additional damage to
as yet unknown additional structures and components in the [Eck] home.” (Id.). The amended
complaint goes on to state that “[t]he bulging to the [Eck’s] floors on the second floor of the
[Eck] home and the additional property damages were not observed before approximately June
of 2012 and could not have been observed by [Eck] before then.” (ECF No. 1-3 at 28). “None
of the damage to the [Eck’s] floor, as described, or the other property damages and losses could
have been discovered as the condition at issue was a latent defect in the construction performed.”
(ECF No. 1-3 at 29).
Based upon the above, the Court is compelled to find that the totality of the Eck claims
unequivocally point to an “occurrence” taking place only after Reginella’s insurance policy had
expired. Even viewed in the light most favorable to Reginella, the Amended Complaint made
clear that the damages to the Eck home were not reasonably apparent until June, 2012, due to the
hidden nature of the alleged construction defects. Although the cause of the damages to the Eck
home was arguably within the coverage period, “the cause of injury…has no special relevance to
determining the date an insurance policy is triggered, unless specifically required by the
language of the applicable policy of insurance.” St. John, 106 A.3d at 15. Where, as here, there
is no policy language requiring the cause of injury to be identified, Pennsylvania courts apply the
“first manifestation rule” to occurrence policies; that is, the court looks to when injury is
“reasonably apparent,” i.e., when it is first manifested. St. John, 106 A.3d at 15 – 16; Cincinnati
Ins. Co. v. Devon Int’l, Inc., 924 F. Supp. 2d 587, 592 (E.D. Pa. 2013). See also Appalachian Ins.
Co. v. Liberty Mut. Ins. Co.., 676 F.2d 56, 62 (3d Cir. 1982) (“There can be no question but that
the aspect of the occurrence which must take place within the policy period is the ‘result,’ that is,
the time when the accident or injurious exposure produces personal injury.”). The date on which
an injury was first manifested solely depends upon the facts pled in the complaint. D’Auria, 507
A.2d at 860. Once again, the cause of the injury is not pertinent to determining when an
occurrence took place. D’Auria, 507 A.2d at 861.
There is nothing pled in the Eck claims that would support Reginella’s assertion that
damages could have been reasonably apparent before the State Farm insurance policy expired,
and no reasonable reading of the Eck claims would allow for a conclusion to the contrary. As
such, State Farm’s duty to defend was not triggered. No breach of contract occurred, and the
Court will dismiss Count I of Reginella’s Complaint.
B. Count II – Bad Faith
At Count II of Reginella’s Complaint, it is asserted that State Farm’s denial of
Reginella’s request to defend and indemnify against the Eck claims was made in bad faith. (ECF
No. 1-2 at 8 – 10). Reginella contends that State Farm’s decision was the result of: (1) a failure
to conduct a diligent investigation into the Eck claims; and (2) improper interpretation of the
terms of its insurance contract. (ECF Nos. 1-2 at 8 – 10; 9 at 9 – 10). State Farm responds that
Reginella’s claim is based solely upon its disagreement with State Farm’s interpretation of the
insurance contract, and that even an incorrect interpretation of the insurance contract – if
reasonable – defeats a bad faith claim. (ECF Nos. 5 at 8 – 10). State Farm asserts that Reginella
failed to plead facts sufficient to demonstrate that State Farm’s conduct was unreasonable, or that
State Farm was aware of or recklessly disregarded its alleged unreasonableness. (Id.).
In Pennsylvania, ‘bad faith’ is considered to be “‘any frivolous or unfounded refusal’” by
an insurer to perform in accordance with the obligations outlined in an insurance policy J.C.
Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 367 (3d Cir. 2004) (quoting Terletsky v. Prudential
Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994)). Pursuant to 42 Pa. Cons. Stat.
§ 8371, a plaintiff may recover for the bad faith of an insurer only when clear and convincing
evidence shows that the insurer: “(1) did not have a reasonable basis for denying benefits under
the policy; and (2) knew or recklessly disregarded its lack of a reasonable basis in denying the
claim.” Id. (citing W.V. Realty, Inc. v. N. Ins. Co., 334 F.3d 306, 311 (3d Cir. 2003)). “The
‘clear and convincing’ standard requires that the plaintiff show ‘that the evidence is so clear,
direct, weighty and convincing as to enable a clear conviction, without hesitation, about whether
or not the defendants acted in bad faith.’” Id. (quoting Bostick v. ITT Hartford Group, Inc., 56 F.
Supp. 2d 580, 587 (E.D. Pa. 1999)).
As discussed at length above, State Farm’s denial of assistance in the defense of the Eck
claims was based upon a plain reading of the insurance contract, and was in accordance with the
law regarding coverage under occurrence-based policies. State Farm therefore had a reasonable
basis to deny Reginella’s request for assistance and thus, even viewed in the light most favorable
to Reginella, the facts pled do not establish a plausible claim for bad faith.
Count II of
Reginella’s Complaint must, therefore, be dismissed.
Based upon the foregoing, Reginella has failed to state claims upon which relief can be
granted. The Eck claims against Plaintiff did not trigger Defendants’ duty to defend, because
damages were not reasonably apparent within the underlying insurance policy coverage period.
The facts pled also cannot support a plausible claim for bad faith. The Court notes that the
inadequacies in Reginella’s Complaint are not likely to be remedied by supplemental pleadings;
the Eck claims – having been previously resolved – will not change, and neither will the terms of
the State Farm policy. However, to the extent Reginella determines that it can remedy the
deficiencies identified herein, the Court will give it the opportunity to file an Amended
Accordingly, the following Order is entered:
AND NOW, this 5th day of February, 2016, upon careful consideration of the
Motion to Dismiss submitted on behalf of State Farm, the Brief in Opposition to State Farm’s
Motion to Dismiss filed by Reginella, and State Farm’s Reply Brief, IT IS HEREBY ORDERED
that State Farm’s Motion to Dismiss, ECF No. 4, is GRANTED. IT IS FURTHER ORDERED
that, should Reginella choose to file an Amended Complaint in order to cure the deficiencies
cited in this Memorandum Opinion, it shall do so on or before February 26, 2016.
BY THE COURT:
s/ Maureen P. Kelly
Maureen P. Kelly
Chief United States Magistrate Judge
cc/ecf: All counsel of record.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?