Brayman Constr. Corp. v. Westfield Ins. Co.

• Decision Date: 06 March 2019
• Docket Number: 2:18-CV-00457-MJH
• Parties: BRAYMAN CONSTRUCTION CORPORATION, assignee of GAVCO MATERIALS, INC., Plaintiff, v. WESTFIELD INSURANCE COMPANY, INC, Defendant
• Court: U.S. District Court — Western District of Pennsylvania

BRAYMAN CONSTRUCTION CORPORATION, assignee of GAVCO MATERIALS, INC., Plaintiff, v. WESTFIELD INSURANCE COMPANY, INC, Defendant

2:18-CV-00457-MJH

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA PITTSBURGH

March 6, 2019

OPINION AND ORDER

Plaintiff, Brayman Construction Corporation ("Brayman"), assignee of Gavco Materials, Inc. ("Gavco"), brings claims for breach of contract and statutory bad faith (42 Pa.C.S. § 8731) arising out of Defendant, Westfield Insurance Company, Inc.'s ("Westfield"), denial of defense and indemnification coverage under the insurance policy between Gacvo and Westfield. Westfield has filed a Motion to Dismiss Plaintiff's First Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6). (ECF No. 31). After careful consideration of Brayman's First Amended Complaint (ECF No. 30), Westfield's Motion to Dismiss for Failure to State a Claim and Brief in Support (ECF Nos. 31 and 32), Brayman's Response in Opposition and Reply Brief (ECF No. 36), Westfield's Reply Brief (ECF No. 37), and Brayman's Sur-Reply Brief (ECF No. 42), the arguments of counsel, supplemental letters filed by Brayman and Westfield (ECF Nos. 46 and 47), and for the following reasons, the Motion to Dismiss is Denied.

I. Background

Brayman was a prime contractor for a bridge construction project ("the project"). (ECF No. 30-1 at ¶ 2). Gavco was subcontracted by Brayman to deliver concrete for use in the project. Id. at ¶ 4. Pursuant to the subcontract, Gavco was required to furnish and deliver materials that conformed to certain plans and specifications. Id, at ¶¶ 5-6. After the concrete was delivered, tested, and used in the bridge components, it failed, and bridge columns for the pier had to be replaced at Brayman's expense. Id. at ¶ 10.

Brayman pursued recovery from Gavco in Arbitration. (ECF No. 30 at ¶ 12). Gavco requested Westfield to provide defense and liability indemnity pursuant to the insurance contract between Gavco and Westfield. Id. at ¶ 38. Westfield denied coverage for both defense costs and liability. Id. at ¶ 43. After lengthy proceedings, Gavco settled the matter with Brayman for $2,400,000 plus an assignment of rights to pursue an action against Westfield. Id. at ¶ 61-64 Gacvo incurred $529,041.26 to defend the arbitration case and assigned its right to pursue said expenses to Brayman. Id. at ¶ 52. Presently, Brayman has sued Westfield for breach of contract to recover Gavco's claims for defense costs and liability to Brayman, and for Westfield's bad faith under 42 Pa.C.S. § 8371 in denying defense and indemnity coverage.

In its initial demand for arbitration ("original demand"), Brayman alleged that Gavco breached its subcontract when it manufactured and sold defective and nonconforming concrete. (ECF No. 30-1 at ¶ 9). Further, Brayman alleged that Gavco's defective concrete caused a failure of the placement of concrete for the drilled shafts of the bridge pier. Id. at ¶ 13. After discovery in the arbitration matter, Brayman filed an amended demand to conform to the evidence. (ECF No. 30-7). The amended demand alleged that Gavco negligently designed and manufactured the concrete and delivered the same to the project. Id. at ¶ 9. Further, the amended demand alleged the defects were caused soley by a lack of appropriate quality control measures and that the failure and malfunction was unexpected by all parties involved. Id. at ¶¶ 12-13. Brayman alleges in its Amended Complaint that its original and amended arbitration demand included claims for breach of contract, breach of warranty, negligence and strict products liability for damages caused by the active malfunction of Gavco's concrete. (ECF No. 30 at ¶ 22).

Turning to the insurance contract in dispute in this case, the Westfield Policy issued to Gavco provides it "will pay those sums that the insured becomes legally obligated to pay as damages because of ... 'property damage' to which this insurance applies." Id. at p. 10. Under the terms of the Policy, Westfield has the "duty to defend the insured against any 'suit'" seeking "property damage." Id. The Policy, in relevant part, defines "property damage" as

a. "Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the 'occurrence' that caused it."

Id. at p. 24. The Policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Id.

In its Motion to Dismiss, Westfield argues that the Breach of Contract claim (Count I) fails, because the damages raised in both the original and amended demands do not constitute an "occurrence" under its insurance contract with Gavco, or in the alternative, the insurance contract exclusions defeat coverage. Further, Westfield argues that the Bad Faith claim (Count II) fails because it had a reasonable basis to deny coverage under the insurance contract.

II. Standard of Review

When reviewing a motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Eid v. Thompson, 740 F.3d 118, 122 (3d Cir. 2014) (quoting Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008)). "To survive a motion to dismiss a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556); see also Thompson v. Real Estate Mortg. Network, 748 F.3d 142, 147 (3d Cir. 2014). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. "Factual allegations of a complaint must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. A pleading party need not establish the elements of a prima facie case at this stage; the party must only "put forth allegations that 'raise a reasonable expectation that discovery will reveal evidence of the necessary element[s].'" Fowler v. UPMC Shadyside, 578 F.3d 203, 213 (3d Cir.2009) (quoting Graff v. Subbiah Cardiology Associates, Ltd., 2008 WL 2312671 (W.D. Pa. June 4, 2008)); see also Connelly v. Lane Const. Corp., 809 F.3d 780, 790 (3d Cir.2016) ("Although a reviewing court now affirmatively disregards a pleading's legal conclusions, it must still . . . assume all remaining factual allegations to be true, construe those truths in the light most favorable to the plaintiff, and then draw all reasonable inferences from them.") (citing Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 154 n. 1 (3d Cir.2014)).

Nonetheless, a court need not credit bald assertions, unwarranted inferences, or legal conclusions cast in the form of factual averments. Morse v. Lower Merion School District, 132 F.3d 902, 906, n. 8 (3d Cir. 1997). The primary question in deciding a motion to dismiss is not whether the Plaintiff will ultimately prevail, but rather whether he or she is entitled to offer evidence to establish the facts alleged in the complaint. Maio v. Aetna, 221 F.3d 472, 482 (3d Cir.2000). The purpose of a motion to dismiss is to "streamline [ ] litigation by dispensing with needless discovery and factfinding." Neitzke v. Williams, 490 U.S. 319, 326-327, (1989).

III. Discussion

A. Breach of Contract Claim

1. Insurance Contracts Generally

"Insurance policies are contracts, and the rules of contract interpretation provide that the mutual intention of the parties at the time they formed the contract govern its interpretation." Am. & Foreign Ins. Co. v. Jerry's Sports Ctr., Inc., 606 Pa. 584, 2 A.3d 526, 540 (2010) (citations omitted). "It is well-established that three elements are necessary to plead a cause of action for breach of contract: (1) the existence of a contract, including its essential terms, (2) a breach of the contract, and (3) resultant damages." Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman, P. C., 635 Pa. 427, 137 A.3d 1247, 1258 (2016) (citations omitted). "The interpretation of an insurance contract regarding the existence or non-existence of coverage is generally performed by the court." Minnesota Fire & Cas. Co. v. Greenfield, 579 Pa. 333, 344, 855 A.2d 854 (2004) (internal citations and quotation marks omitted).

2. Duty to Defend and Indemnify

In Pennsylvania, an insurer's duty to defend is determined by comparing the allegations in the complaint with the relevant policy of insurance. Kvaerner Metals Div. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888, 896 (2006). "[A]n insurance company is obligated to defend an insured whenever the complaint filed by the injured party may potentially come within the policy's coverage." Pac. Indem. Co. v. Linn, 766 F.2d 754, 760 (3d Cir. 1985) (emphasis in original). The duty to defend is distinct from the duty to indemnify, but is broader; thus, if there is no duty to defend, there is no duty to indemnify. Kvaerner, 908 A.2d at 896 n.7. In Pennsylvania, courts follow the "four corners rule," considering only the allegations in the complaint in the underlying action¹. Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660, 679 (3d Cir. 2016). In determining whether an underlying complaint triggers a duty to defend, courts focus on the complaint's factual...