Employers Mut. Cas. Co. v. Loos
| Decision Date | 28 February 2007 |
| Docket Number | No. CV-05-0355.,CV-05-0355. |
| Citation | 476 F.Supp.2d 478 |
| Parties | EMPLOYERS MUTUAL CASUALTY COMPANY, Plaintiff, v. James LOOS and Catherine Loos, Individually and as Administrators of the Estate of Alexandra Loos, Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
William A. Rubert, Campbell, Campbell, Edwards & Conroy, Wayne, PA, for Plaintiff.
Damon J. Faldowski, Kathleen Smith-Delach, Phillips & Faldowski, Washington, PA, for Defendant.
The instant action arises out of an automobile accident in which Alexzandra1 Loos ("Alexzandra") was killed. Pending before the court are the parties' cross-motions for summary judgment concerning whether plaintiff Employers Mutual Casualty Company ("plaintiff') breached a contractual duty allegedly owed to Alexzandra's parents by denying their claim for underinsured motorist ("UIM") benefits. Plaintiff commenced this action seeking a declaratory judgment pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a). Defendants James Loos and Catherine Loos individually and as administrators of the estate of Alexzandra Loos (collectively, "defendants") filed a counterclaim seeking a judgment against plaintiff for bad faith denial of insurance benefits pursuant to 42 PA. CONS.STAT. § 8371. Defendants move for summary judgment only with respect to plaintiffs declaratory judgment action seeking a declaration that Alexzandra was an insured at the time of her death and that her claim for UIM is proper. Plaintiff moves for summary judgment in its favor with respect to its declaratory judgment claim seeking a declaration that it has no obligation to pay UIM benefits to defendants and with respect to defendants' counterclaim seeking a dismissal of defendants' bad faith claim.
On August 11, 2004, a car driven by Armand Pistilli ("Pistilli") hit Alexzandra, the daughter of James and Catherine Loos, as she was crossing a roadway. (Joint Statement of Material Facts) . Alexzandra died as a result of the injuries caused by the accident. Id. ¶ 2. Alexzandra was the only person who sustained bodily injury as a result of the accident. Doc. No. 28 ¶ 17. Since she was a pedestrian at the time of the accident, she was not occupying a motor vehicle. Id. ¶ 16. Pistilli's vehicle was insured through Leader Insurance. Id. ¶ 3. Although Leader Insurance offered to pay the full liability limit of $15,000.00 available under its policy, defendants have not accepted this offer. Id. ¶¶ 4-5. At the time of the accident, defendants were the named insureds under an insurance policy issued by Erie Insurance Company ("Erie") that covered their family automobiles. Id. ¶ 6. Among other things, the Erie policy provided $10,000.00 in medical benefits and $2,500.00 in funeral benefits. Id. ¶ 7.
After Alexzandra's death, defendants presented Erie with a claim for both first-party medical ("FPM") benefits and UIM benefits. Id. ¶ 8. Erie responded by paying the $10,000.00 limit of its FPM coverage, the funeral benefit, and the full UIM benefit payment of $400,000.00. Id. An arrangement was made to provide for the payment of the UIM benefits to defendants and their dependents in structured settlements. Id. Defendants also presented a claim for both FPM and UIM benefits to plaintiff under Policy No. 2E57581 (the "Policy").2 Id. ¶ 9. The Policy provided benefit limits of $10,000.00 for FPM benefits and $2,500.00 for funeral benefits. Id. ¶ 10. The Policy, in pertinent part, provided:
A. Coverage
1. We will pay all sums the "insured" is legally entitled to recover as compensatory damages from the owner or driver of an "underinsured motor vehicle". The damages must result from "bodily injury" sustained by the "insured" caused by an "accident". The owner's or driver's liability for these damages must result from the ownership, maintenance or use of an "underinsured motor vehicle".
* * *
B. Who Is An Insured
If the Named Insured is designated in the Declarations as:
1. An individual, then the following are "insureds":
a. The Named Insured and any "family members".
b. Anyone else "occupying" a covered "motor vehicle" or a temporary substitute for a covered "motor vehicle". The covered "motor vehicle" must be out of service because of its breakdown, repair, servicing, "loss" or destruction.
c. Anyone for damages he or she is entitled to recover because of "bodily injury" sustained by another "insured".
2. A partnership, limited liability company, corporation or any other form of organization, then the following are "insureds":
a. Anyone "occupying" a covered "motor vehicle" or a temporary substitute for a covered "motor vehicle". The covered "motor vehicle" must be out of service because of its breakdown, repair, servicing, "loss" or destruction.
b. Anyone for damages he or she is entitled to recover because of "bodily injury" sustained by another "insured."
Doc. No. 24, App. 1. On the declaration pages of the Policy, under the words "NAMED INSURED," the language of the Policy read as follows:
JAKS MUFFLER & BRAKE D/B/A
JAKS HOUSE OF BENDS
JAMES & KIRK LOOS
894 HENDERSON AVE
WASHINGTON, PA 15301-1341
Doc. No. 24, App. 1. Immediately below this listing, the Policy declarations stated as follows: "INSURED IS: PARTNESHIP[.]" When James Loos applied for the Policy, his purpose was to purchase insurance for the business conducted by the partnership known as Jaks Muffler & Brake d/b/a Jaks House of Bends (the "partnership" or "Jaks"). J.S. ¶ 11.
The Policy, which was initially issued in 2001, was continuously renewed through the time of the accident. Id. ¶ 13. The partners who comprised Jaks at the time of the accident were George Loos and his two sons, James and Kirk Loos. Id. ¶ 15. James Loos was responsible for handling the purchase and maintenance of insurance for the partnership, while Kirk Loos was responsible for handling other administrative tasks. Id. ¶ 16. At the time of the accident, defendants had both personal homeowners' coverage and personal automobile coverage with Erie. Id. ¶ 17. David Leng ("Leng") was the insurance agent for the partnership. Id. ¶ 18. James Loos never asked Leng or his company, Duncan Insurance Group ("Duncan"), for insurance that would cover only his house or family members. Id. ¶ 19. James and Kirk Loos did not ask Leng to add them to the Policy as individual insureds. Id. ¶ 20. At the time of the accident, Kirk Loos had both personal homeowners' coverage and personal motor vehicle coverage. Id. ¶ 26.
James Loos did not expect that the Erie homeowner's policy or motor vehicle policy would provide coverage to the business of the partnership. Id. ¶ 23. Instead, he expected coverage for claims relating to the business of the partnership to be provided by the Policy. Id. In his deposition, James Loos acknowledged that he had never questioned the accuracy of plaintiffs designation of the insured as a partnership. Doc. No. 28, Ex. D at 120. When his daughter Jaminique reached the age of sixteen, James Loos asked Erie, his personal motor vehicle carrier, to add her to the Erie insurance policy. J.S. ¶ 24. Nevertheless, he did not notify plaintiff or Duncan of this fact. Id. Alexzandra Loos never worked for the partnership. Id. ¶ 25.
Alexzandra lived in a single-family residence located twelve miles from the commercial building where the partnership conducted its business. Id. ¶¶ 27-29. In a letter to James Loos dated October 8, 2004, plaintiff denied defendants' UIM and FPM claims on the ground that Alexzandra was not an "insured" as defined under the UIM endorsement or the first-party benefit form to the Policy. Id. ¶ 30. In that letter plaintiff took the position that only the partnership, and not James Loos, was a named insured. Doc. No. 28, Ex. J. James Loos responded by sending a letter to plaintiff requesting reconsideration of the denial, contending that he personally owned one of the vehicles insured under the Policy. J.S. ¶ 31. In a letter dated October 18, 2004 to Patty Leto ("Leto") plaintiff's coverage counsel, James Loos stated that his 1979 Ford truck had never been a business vehicle, and that it had been owned and used by him only for personal travel. Doc. No. 28, Ex. K. Nevertheless, on July 20, 2005, James Loos testified that he had used the truck for business purposes. J.S. ¶ 31, Ex. D at 76-78. At his deposition, James Loos admitted that this vehicle was used to plow the business lot at Jaks when it snowed, and that it was also used to pick up parts. Id. ¶ 32.
Approximately six months after the accident, on February 3, 2005, Carol Daley ("Daley"), an underwriter, sent Leng an email stating that she would be "taking James and Kirk Loos off [the Policy] as named insureds, leaving just Jaks Muffler & Brake D/B/A Jaks House of Bends as the named insured." Doc. No. 24, App. 3. Daley further indicated that the 1979 Ford truck would be deleted within thirty days, and that it should be placed on a personal auto policy. Id. Daley made it clear that if these changes did not meet the approval of the insured, a non-renewal notice would be sent. Id. In a response dated March 14, 2005, Leng expressed his reservations to Daley about her proposed changes:
I suggest you add the PU back on. We do not have a response from the insured to do this yet. Also, by deleting the vehicle, or cancelling the policy at renewal, you are sending a message to the insured that you do not want this exposure. The thought would be that if you do not want this exposure, there must be coverage for this exposure under the UM/UIM for the accident with the daughter as a pedestrian. This will make it very difficult for EMC to continue to deny that there is coverage.
Id. Later that day, Daley responded to Leng and rejected his advice, indicating that her earlier decision would stand. Id.
James Zeigler ("Zeigler"), one of plaintiff's claims managers, testified that plain...
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