Am. Builders Ins. Co. v. Custom Installations Contracting Servs., Inc.
| Decision Date | 29 July 2019 |
| Docket Number | CIVIL ACTION NO. 3:15-cv-00295 |
| Parties | AMERICAN BUILDERS INSURANCE COMPANY, Plaintiff, v. CUSTOM INSTALLATIONS CONTRACTING SERVICES, INC. Defendant, and COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF LABOR & INDUSTRY and UNINSURED EMPLOYERS GUARANTY FUND, Intervenor Defendants. |
| Court | U.S. District Court — Western District of Pennsylvania |
MEMORANDUM OPINION
Before the Court is Plaintiff American Builders Insurance Company's ("American") Partial Motion for Summary Judgment as to Count II of its Amended Complaint. (ECF No. 105.) Count II of Plaintiff's Amended Complaint alleges a violation of the Pennsylvania Insurance Fraud statute, 18 PA. CONS. STAT. § 4117(b)(4). Intervenor Defendants—the Commonwealth of Pennsylvania Department of Labor & Industry and the Uninsured Employers Guaranty Fund (collectively, "the Commonwealth")—filed a response to American's motion. (ECF No. 109.) Defendant Custom Installations Contracting Services, Inc. ("Custom") has not filed a response to this motion. For the reasons that follow, the Court will DENY Plaintiff's Motion.
The Court has subject-matter jurisdiction over this dispute under 28 U.S.C. § 1332. American is a citizen of both Delaware and Georgia.1 Custom is a citizen of Pennsylvania.2 Thus, there is complete diversity among the parties. Additionally, the amount in controversy exceeds $75,000.3
Venue is proper under 28 U.S.C. § 1391(b)(1) and (2) because a defendant, Custom, resides in the Western District of Pennsylvania, and a substantial part of the acts giving rise to this suit occurred in the Western District of Pennsylvania.
The following facts are undisputed unless noted. This case arises from Custom's 2015 application for workers' compensation coverage with American. American sells workers' compensation insurance policies to Pennsylvania companies. (ECF No. 110 ¶ 2.) Custom describes the work it does as "commercial remodeling," although the specific work that Custom does is in dispute. (ECF No. 22 ¶ 15; ECF No. 108 at 13.)
Since 2012, Custom authorized Ebensburg Insurance Agency ("EIA"), an insurance broker, to secure workers' compensation policies on its behalf. (ECF No. 110 ¶ 4.) From 2012 until 2014, EIA obtained workers' compensation insurance for Custom on an annual basis through the State Workers Insurance Fund ("SWIF"). (Id. ¶ 5.)
Beginning in the 2015 policy year, Custom asked EIA to move its workers' compensation insurance from SWIF to a commercial insurer to obtain a different premium and enjoy better customer service. (Id. ¶ 9.) On June 15, 2015, Custom completed a Contractors' questionnaire for Lackawanna Insurance Group ("Lackawanna") and returned this questionnaire to EIA for submission. (Id. ¶ 12.) On this form, Custom disclosed that its work was evenly split between commercial and remodeling projects and that ten percent of its work involved roofing. (Id. ¶ 13; ECF No. 105-1 at 161.) Custom indicated that it does not perform work at heights above two stories and that it utilizes aerial lifts in its work. (ECF No. 110 ¶ 13.) The Commonwealth contends that there is no evidence showing that ten percent of Custom's work involves roofing. (Id.)
Additionally, on June 22, 2015, Custom completed a Contractors Supplemental Application for Eastern Alliance Insurance Group ("Eastern") and returned this application to EIA for submission. (Id. ¶ 10; ECF No. 105-1 at 160.) In this application, Custom disclosed that fifty percent of its work involved "working on rooftops." (ECF No. 110 ¶ 11.) The Commonwealth again contends that there is no evidence that this disclosure accurately describes the amount of work that Custom does on rooftops. (Id.) Eastern contacted EIA on the same dayEIA submitted the application, and declined to provide a quote for Custom "due to commercial work of 50%, and higher than normal roofing work." (Id. ¶ 14; ECF No. 105-1 at 160.)
On May 28, 2015, prior to either Custom or EIA submitting applications for coverage with Eastern or Lackawanna, EIA employee Kurtis DeYulis completed and submitted an initial application to American for workers' compensation coverage on Custom's behalf. (ECF No. 105-1 at 167.) EIA edited the application and re-submitted it on July 17, 2015 after American requested additional information. (ECF No. 109 at 5.) American approved Custom's revised application on the same day. (Id.; ECF No. 105-1 at 167.)
In the application, EIA indicated that Custom's work included commercial carpentry, office work, and residential carpentry. (ECF No. 110 ¶ 17.) Custom's application indicated that it did not do any roofing work. (ECF No. 22 ¶ 22.) The application also states three separate times that Custom does not do any work at heights above fifteen feet. (Id. ¶¶ 16, 18, 19; ECF No. 105-1 at 154, 157.)
American's application for workers' compensation coverage included a clause stipulating the following:
Any person who knowingly and with intent to defraud any insurance company or another person files an application for insurance or statement of claim containing any material false information or conceals for the purpose of misleading information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime and subjects the person to criminal and civil penalties.
(ECF No. 22 ¶ 24.) A Custom agent, Michael Bichko, signed this application. (Id. ¶ 25.) Bichko testified that he assumed EIA prepared the application with information it already had on file. (ECF No. 109 at 6-7.) He also testified that he would not have signed the application if he knew that the information it contained was false. (Id.)
Mr. DeYulis, who filled out the application for workers' compensation coverage with American, did not fill out the applications for coverage with Lackawanna or Eastern. (ECF No. 109 at 6.) American contends that the disparate figures Custom gave to other potential insurers show that it intentionally provided false information to American. (ECF No. 106 at 6.) However, the Commonwealth alleges that these differences were the result of negligence and a lack of communication between EIA employees. (ECF No. 109 at 15.)
On July 20, 2015, American issued Custom a workers' compensation insurance policy to last one year from the day of issuance. (ECF No. 110 ¶ 21.) American contends that it does not provide workers' compensation insurance for any Pennsylvania company that engages in roofing of any kind. (ECF No. 22 ¶ 11.) American states that it would not have issued Custom a workers' compensation insurance policy if it knew Custom engaged in roofing work. (ECF No. 107 ¶ 26.) The Commonwealth notes that American's statement about insuring roofers contradicts evidence showing "roofers" as an eligible class for which American insures risks. (ECF No. 109-1 at 10.)
American contends that Custom, through either "mutual mistakes of fact" or intentional misrepresentations, provided false information on its application. (ECF No. 22 ¶ 3, 59; ECF No. 106 at 4-5; ECF No. 107 ¶ 19.) American states that "Custom's answers, which generally misrepresented the nature of its work and specifically misrepresented that it did not perform roofing work or work above the defined height of fifteen feet, contained essential facts that formed the inducement for American to issue the Policy to Custom." (ECF No. 22 ¶ 26.) Custom admits that the answers it provided on the application were inaccurate. (Id.) The Commonwealth, however, alleges that Custom never intentionally provided false information to American. (ECF No. 109 at 14-15; ECF No. 110 ¶ 19.) Instead, it argues that the inaccuracies wereonly the result of negligence or miscommunications between Custom and EIA. (Id.) EIA employees testified that they did not obtain any new information from Custom on the scope of their work. (ECF No. 110 ¶ 16.) The Commonwealth instead alleges that EIA relied on information in prior SWIF applications and policies to fill out the application on Custom's behalf, and never confirmed with Custom that the information was still correct. (Id.; ECF No. 109 at 5.)
On the morning of September 8, 2015, eighteen-year-old Custom employee James Scott, Jr. sustained serious and life-threatening injuries when he fell approximately twenty-five feet through a skylight while "on a roof doing repairs." (ECF No. 22 ¶ 48; ECF No. 105-1 at 169.) Scott was not wearing OSHA-required safety equipment when he fell, as Custom employees were still in the process of setting up "tie-offs" when the accident occurred. (ECF No. 105-1 at 169, 178.) Scott promptly filed for workers' compensation benefits following the accident. (ECF No. 22 ¶ 49.)
American promptly began to investigate Scott's injury. (ECF No. 109 at 7.) On September 15, 2015, American filed a Notice of Temporary Compensation Payable with the Pennsylvania Department of Labor & Industry, which allowed American to initiate compensation payments to Scott for ninety days without prejudice or admitting liability. (Id.) Two weeks later, an adjuster from American began to prepare a Loss Control Report regarding Scott's accident. (ECF No. 105-1 at 178.) In this report, the adjuster noted that Scott did not have personal fall protection in place at the time of the accident. (Id.) Later, American visited the job site where the accident took place and sent Custom a memo with recommendations for safety improvements. (ECF No. 109 at 8.)On October 8, 2015, American filed a Notice of Compensation Payable ("NCP") with the Pennsylvania Department of Labor & Industry. (Id.)
On November 16, 2015, approximately five weeks after filing the NCP, American filed suit seeking to rescind Custom's workers' compensation insurance policy due to alleged "false and material misrepresentations it made during the policy application process." (...
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