Cincinnati Ins. Co. v. PPL Corp.

• Decision Date: 28 October 2013
• Docket Number: Civil Action No. 10–4960.
• Parties: The CINCINNATI INSURANCE COMPANY, Plaintiff, v. PPL CORPORATION, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

979 F.Supp.2d 602

The CINCINNATI INSURANCE COMPANY, Plaintiff,

v.PPL CORPORATION, et al., Defendants.

Civil Action No. 10–4960.

United States District Court,

E.D. Pennsylvania.

Oct. 28, 2013.

Thomas Underwood, Jr., Law Offices of Robert A. Stutman, Berlin, NJ, for Plaintiff.

James J. Dodd–O, Bernard T. Kwitowski, Thomas, Thomas and Hafer LLP, Bethlehem, PA, for Defendants.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge.

I. INTRODUCTION

Plaintiff the Cincinnati Insurance Company (“Plaintiff”) brought this subrogation action seeking damages from PPL Corporation,PPL Electric Utilities Corporation, and PPL Energyplus, LLC (collectively “Defendants”). Plaintiff's Complaint pleads three counts: (1) negligence; (2) strict liability; and (3) breach of contract. Compl. ¶ 18–38, ECF No. 1.

Plaintiff's Complaint arises from an electrical incident on September 29, 2008 that caused damage to Wright Veterinary Medical Center, P.C. (“Wright”). Plaintiff insured Wright, the building it occupied, its business property, and business interests against loss pursuant to an insurance policy (the “Policy”). Id. ¶ 10. Wright purchased its electricity from Defendants. ¹ Answer ¶ 11, ECF No. 10; see also Compl. ¶ 11. Defendants, along with their various contractors and subcontractors, installed, maintained, owned, and operated equipment necessary for delivery of electricity to Wright according to the terms of the sale of electricity. Answer ¶ 12; see also Compl. ¶ 12. On September, 29, 2008, a transformer malfunctioned. Compl. ¶ 14. The malfunction caused a severe fluctuation in the power supply to Wright causing a fire and other extensive damage to Wright's building and property. Id. ¶ 13, 15. Additionally, Plaintiff claims that Wright suffered lost profits from the resulting loss of business. Id. Plaintiff claims that for losses stemming directly from the September 29, 2008 incident, and pursuant to the Policy, Plaintiff made payments to Wright in the amount of $805,559.08. Compl. ¶ 16.

Pending before the Court is Plaintiff's Motion for Partial Summary Judgment (“Motion”). ECF No. 37. Plaintiff contends that, under Pennsylvania law, the sale of electricity is subject to strict liability under Section 402A of the Restatement (Second) of Torts. Id. ¶ 26–28; see also Schriner v. Pennsylvania Power & Light Co., 348 Pa.Super. 177, 501 A.2d 1128, 1134 (1985) (holding that utility will be held to strict liability, under certain circumstances, for sale of electricity). For the reasons that follow, the Court will grant Plaintiff's motion as to Count II (strict liability).

II. BACKGROUND²

At all relevant times and specifically on September 29–30, 2008, Wright operated a veterinary medical center at 3247 Wimmer Road, Bethlehem, PA. ³ Defs.'s Resp. Pl.'s Mot. Partial Summ. J. 1, ECF No. 49–2. Plaintiff insured Wright medical center pursuant to the terms of the Policy. See id. “Wright was a customer of Defendant[s] ... and [they] provided electric power service to Wright.” Id. at 2. The electric power which Defendants provided to Wright passed through a single-phase 100KVA transformer owned and operated by Defendants and manufactured by the McGraw–Edison Company.⁴ The transformer contains “three leads that connect two hot leads and a neutral from the transformer's interior to the exterior.” Id. The neutral is designed to “carry unbalanced current” to “keep the voltage stabilized and balanced”. Id. The two “hot leads” ⁵ “have their alternating currents flowing in opposite directions (reversing 120 times per second for 60–cycle power) so that the current goes back and forth at the same instant but in opposite directions.” Pl.'s Mot. Partial Summ. J., Ex. 8, Fire Investigation Report of John F. Goetz, CFI 5–6, July 26, 2012, ECF No. 44–7 (citing NFPA 921, Guide for Fire & Explosion Investigations § 8.3.2.1 (2008 ed.)). The “voltage between either of the [hot leads] and the [neutral] is 120v,” while the “voltage between the two [hot leads] is 240v.” Id. at 6 (citing NFPA 921 § 8.3.2.1.). After passing through the transformer, the electric power passes though Wright's meter and is then used by Wright.

On the night of September 29, 2008, a problem developed with the neutral, which the parties refer to as a “floating neutral” or a “break at the neutral connection.” ⁶See Defs.'s Resp. Pl.'s Mot. Partial Summ. J. 2; see also Report of Mr. Goetz 6. A “floating neutral creates uneven voltage to power supply for a structure” and the “higher voltage can overheat or burn out some equipment and the lower voltage can damage some electronic equipment.” Report of Mr. Goetz 6, (citing NFPA 921 § 8.5.2). Following the break in the neutral, the voltages on the hot leads on either side of the transformer became unbalanced. Defs.'s Resp. Pl.'s Mot. Partial Summ. J. 2. Prior to disconnecting the Transistor, a PPL troubleman (Raymond Bringhurst) measured the voltage as 215 volts on one hot lead and 40 volts on the other and recorded his measurement by writing on the transformer itself. See Pl.'s Mot. Partial Summ. J., Ex. 8, Report of Robert A. Neary, P.E., C.F.E.I. fig. 3, August 15, 2012, ECF No. 44–6 (displaying writing on transformer); see also Defs.'s Resp. Pl.'s Mot. Partial Summ. J. 2 (“the voltage output was measured to be 215 volts on one hot lead and 40 volts on the other lead”).

When the electrical malfunction began, the initial indication of a problem was, according to Plaintiff, that an ultrasound machine at the veterinary facility began smoking and making “terrible electrical noises.” See Pl.'s Mot. Partial Summ. J., Ex. 3, Dr. Patrick Thomas Wright Dep. 90:13–91:9, Apr. 17, 2012, ECF No. 44–4. Wright employees contacted the fire department who responded to the fire at around 11:00 p.m. and then, after determining there was no fire, left around 11:22 p.m. Id. at 91:7–91:24; see also Pl.'s Mot. Partial Summ. J., Pl.'s Statement of Uncontested Material Facts ¶ 8–9, Nov. 16, 2012, ECF No. 44–3.

The problem continued after the fire department left. The owner of Wright's, Dr. Wright, arrived at the veterinary center. He reported hearing a “loud shrieking sound” coming from the computer servers and noticed the lights were “becoming very dim and then very bright.” See Wright Dep. 32:19–33:19. Next, Dr. Wright claims that “all of a sudden the lights started to pop and there [were] popping noises.” Id. 33:15–16. Wright's electrical contractor, Richard Horvath, informedDr. Wright via telephone to turn off every electronic device, unplug everything, shut off the circuit breakers, and tell everyone to leave the building. Id. 33:16–19. Mr. Horvath arrived approximately ten minutes later and discovered smoke in the building. Pl.'s Statement of Uncontested Material Facts ¶ 14; see also Pl.'s Mot. Partial Summ. J., Ex. 5, Richard S. Horvath Dep. 53:15–25, Sep. 28, 2011, ECF No. 44–5. Mr. Horvath then called the fire department again. Horvath Dep. 53:19–56:11. The fire fighters returned to the veterinary clinic and found a fire burning on top of a wooden bookshelf in a second floor office. Pl.'s Statement of Uncontested Material Facts ¶ 15; (citing Pl.'s Mot. Partial Summ. J., Ex. 4, Bernard Roecker, Fire Marshall Dep. 56:1–25, Apr. 17, 2012, ECF No. 44–5). The fire fighters extinguished the fire. Id.

Shortly thereafter, Defendants dispatched a troubleman, Ray Bringhurst, to the site. See Pl.'s Mot. Partial Summ. J., Ex. 6, Ray Bringhurst, Dep. 90:13–91:9, Apr. 17, 2012, ECF No. 44–5. Mr. Bringhurst conducted an investigation and determined that a malfunction with the transformer was causing the electrical problems. Id. 41:13–45:24. To confirm his suspicions, Mr. Bringhurst inspected the transformer and tested the voltage output. Id. 58:3–61:22. His test of the voltage revealed that the voltage was imbalanced with over 200 volts on one phase and 40 volts on the other. Id. 58:18–61:3. He recorded his results on the transformer and marked his readings as “215v on 1 leg 40v on the other.” Report of Mr. Neary, fig. 3.

In a subsequent investigation, Plaintiff's expert, Mr. Goetz and the local fire marshal determined that the power surge from the malfunctioning transformer caused the fire in the Wright facility and the damage to the electrical equipment. See Report of Mr. Goetz 6; see also Roecker Dep. 104:16–105:17. Defendants' experts do not dispute that the imbalance of voltage put out by the transformer caused both the fire and the damage to the electrical equipment. Notably, Defendants' electrical engineering expert, Allan Magee, P.E., states in his conclusion that:

Due to the fact that the clinic reported electrical problems at the facility immediately before the fire, the circumstances of the fire are consistent with an electrical failure, and that electrical items were found to have malfunctioned after the fire, it is my conclusion that fire and equipment damage were caused by the same event and were part of the same loss.

Pl.'s Mot. Partial Summ. J., Ex. 9, Report of Allan Magee 2, P.E., Sep. 6, 2012, ECF No. 44–7. Furthermore, “[t]he transformer failed internally on the date of the loss, and the failure was a direct cause of the loss.” Id. at 5.

Plaintiff subsequently compensated Wright pursuant to the policy. Compl. ¶ 16.

III. STANDARD OF REVIEW

Summary judgment is appropriate if there are no genuine disputes of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). “A motion for summary judgment will not be defeated by ‘the mere existence’ of some disputed facts, but will be denied when there is a genuine issue of material fact.” Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir.2009) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). A fact is “material” if proof of its existence or non-existence might affect the outcome of the litigation, and a dispute is “genuine” if “the evidence is such that a reasonable jury could return a verdict...