Hanover Ins. Co. v. Ryan

• Decision Date: 17 December 2007
• Docket Number: Civil Action No. 06-2650.
• Parties: HANOVER INSURANCE COMPANY, Plaintiff v. Kenneth RYAN, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

619 F.Supp.2d 127

HANOVER INSURANCE COMPANY, Plaintiff v. Kenneth RYAN, et al., Defendants.

Civil Action No. 06-2650.

United States District Court, E.D. Pennsylvania.

December 17, 2007.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Geoffrey A. Kahn, John C. Grugan, Renee Jennifer Hurtig, Ballard Spahr Andrews & Ingersoll LLP, Joseph M. Oberlies, Connor Weber & Oberlies, Philadelphia, PA, for Plaintiff.

Howard G. Silverman, Kane & Silverman PC, James C. Haggerty, Swartz Campbell LLC, Philadelphia, PA, H. Charles Markofski, Gilbertsville, PA, for Defendants.

MEMORANDUM

STENGEL, District Judge.

This declaratory judgment action is one of two lawsuits arising from a November 5, 2004 accident, which resulted in the deaths of Cathryn Ryan and Judith Weinsteiger. The first was brought by Judith's husband, Leonard Weinsteiger, in the Court of Common Pleas of Berks County, against the Estate of Cathryn Ryan. In the second action, before this court, Hanover Insurance Company seeks a declaration that it has no obligation to defend or indemnify Kenneth Ryan in the underlying tort case. Hanover named both its insured, Kenneth Ryan, and the injured party, Leonard Weinsteiger, as defendants in this case.¹ Ryan filed counterclaims against Hanover seeking his own declaratory relief, as well as damages for breach of contract, bad faith, and intentional and negligent misrepresentation. Hanover has moved to dismiss the counterclaims, and to strike the counterclaim for declaratory relief as duplicative of Hanover's own such claim. For the reasons discussed below, I grant the motion only as to (1) the claim for punitive damages for breach of contract, and (2) Ryan's counterclaims for intentional and negligent misrepresentation.

I. BACKGROUND

On November 5, 2004, a collision occurred between a Ford pickup truck driven by Cathryn Ryan and a Chevrolet Sport Van owned by Quigley Bus Services driven by Judith Weinsteiger in Douglass Township, Berks County, Pennsylvania.

Mrs. Ryan was operating a home day care facility and was allegedly en route to pick up and transport one of the children enrolled in the facility. At the time of the accident, Mrs. Ryan was legally intoxicated with a blood alcohol level measured at .29%. Her truck, which was seen traveling in an erratic manner, crossed into the other side of the highway and struck the Chevy Sport Van. Mrs. Ryan died as a result of her injuries. Mrs. Weinsteiger sustained serious bodily injuries, and died months later.

Before the accident, Hanover issued a personal umbrella policy to Kenneth and Cathryn Ryan. The policy afforded up to $1 million worth of coverage, in excess of the primary limit, for any bodily injury for which the Ryans were legally liable.² The policy specifically excluded any liability arising from the provision of home day care services. After an investigation, Hanover concluded that the accident and any resulting claims fell entirely within the home day care exclusion. Hanover then issued a disclaimer of coverage.

On March 28, 2006, Mr. Weinsteiger filed wrongful death and survivor claims against Mr. Ryan in Berks County. After receiving the Weinsteiger's complaint, Hanover issued another disclaimer of coverage, and advised Mr. Ryan that Hanover would continue to deny coverage for any claims arising out of the November 5, 2004 car accident.

On June 19, 2006, Hanover filed the present suit, seeking a declaration that it had no obligation to defend or indemnify Mr. Ryan, individually or as administrator of his wife's estate, or any other individual or entity, with regard to any claim in the underlying action, or any other ensuing action. Mr. Ryan filed an answer to Hanover's complaint on May 4, 2007, asserting four counterclaims for: (1) declaratory relief, (2) breach of contract, (3) bad faith, and, (4) intentional and negligent misrepresentation. On May 24, 2007, Hanover moved to dismiss and/or strike Mr. Ryan's counterclaims; Mr. Ryan responded to Hanover's motion on June 21, 2007.

II. LEGAL STANDARDS

A. Motion to Strike

Under Federal Rule of Civil Procedure 12(f), a court may order stricken any portion of a pleading that constitutes "an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." FED. R. CIV. P. 12(f). Motions to strike are decided on the pleadings alone, and should not be granted unless the relevant insufficiency is "clearly apparent." Cipollone v. Liggett Group, Inc., 789 F.2d 181, 188 (3d Cir.1986); see North Penn Transfer, Inc. v. Victaulic Company of America, 859 F.Supp. 154, 158 (E.D.Pa. 1994) (motions to strike decided on the pleadings alone).

While motions to strike serve the useful function of streamlining litigation, they are "not favored and usually will be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties." Id. (citing 5C C. Wright & A. Miller, FEDERAL PRACTICE AND PROCEDURE 1382 (1969)); see also McInerney v. Moyer Lumber & Hardware, Inc., 244 F.Supp.2d 393, 402 (E.D.Pa.2002) ("The purpose of a motion to strike is to clean up the pleadings, streamline litigation, and avoid unnecessary forays into immaterial matters"). In particular, courts have identified prejudice to one or more of the parties as a touchstone for deciding a motion to strike. See, e.g., Miller v. Group Voyagers, Inc., 912 F.Supp. 164, 168 (E.D.Pa.1996).

Finally, although courts exercise considerable discretion in deciding motions to strike, the 12(f) prohibition on "redundant" pleadings "must be read in conjunction with the liberal pleading standards of Rule 8 in general and Rule 8(e)(2) in particular" (under which parties may plead alternative theories of relief). Callaway Golf Company v. Dunlop Slazenger Group Americas, Inc. d/b/a Maxfli, 295 F.Supp.2d 430, 438 (D.Del.2003); see also Miller, 912 F.Supp. at 168 (noting the discretion afforded in deciding motions to strike), North Penn, 859 F.Supp. at 158 (same).

B. Motion to Dismiss

When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court must accept the complaint's allegations as true and draw all reasonable inferences in the plaintiff's favor. Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1164-65 (3d Cir. 1987).

Under Rule 12(b)(6), a defendant may move to dismiss a complaint for "failure to state a claim upon which relief can be granted." The rule is designed to screen out cases where "a complaint states a claim based upon a wrong for which there is clearly no remedy, or a claim which the plaintiff is without right or power to assert and for which no relief could possibly be granted." Port Auth. v. Arcadian Corp., 189 F.3d 305, 311-12 (3d Cir. 1999). A complaint should not be dismissed on a 12(b)(6) motion if the claim is adequately stated and if the factual allegations raise a right to relief "above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007). "A well-pleaded complaint may proceed even if it appears that a recovery is very remote and unlikely." Id. (citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974) (internal quotations omitted)). The issue, therefore, is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to offer further evidence to support its claims. Scheuer, 416 U.S. at 236, 94 S.Ct. 1683; see also Maio v. Aetna, Inc., 221 F.3d 472, 482 (3d Cir.2000).

In a 12(b)(6) motion, courts generally consider the allegations contained in the complaint, exhibits attached to the complaint, and public records of which the court may take judicial notice. Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.1993).

III. DISCUSSION

A. Choice of Law

A federal court sitting in a diversity action "must apply the choice of law rules of the forum state to determine what substantive law will govern." Huber v. Taylor, 469 F.3d 67, 73 (3d Cir.2006) (quoting Klaxon Company v. Stentor Electric Manufacturing Company, 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). Both federal and state courts in Pennsylvania, however, have long labored in a state of uncertainty as to the proper test for determining the applicable law in contracts cases. See, e.g., Hammersmith v. TIG Insurance Company, 480 F.3d 220, 226-27 (3d Cir.2007); Foremost Insurance Company v. Erickson, et al., No. 07-0195, 2007 WL 2301119, at *3, 2007 U.S. Dist. LEXIS 58017, at *7 (E.D.Pa. Aug. 7, 2007). Therefore, before turning to the substantive issues raised on this motion to dismiss and/or strike Ryan's counterclaims, it is necessary to determine the appropriate choice of law rule to apply, and its application to the present case.

In Griffith v. United Air Lines Inc., 416 Pa. 1, 203 A.2d 796 (1964), the Pennsylvania Supreme Court abandoned the "lex loci delicti" rule in tort cases "in favor of a more flexible rule which permits analysis of the policies and interests underlying the particular issues before the court." Id. at 805. Whereas the Griffith rule clearly applies in tort cases, the Pennsylvania Supreme Court has not explicitly extended the approach to choice of law questions in contracts cases, traditionally governed by the "lex loci contractus" rule, which holds that the place of formation, most often the place of delivery, supplies the law of the case. See Hammersmith, 480 F.3d at 227; Foremost, 2007 WL 2301119, at *3 n. 3, 2007 U.S. Dist. LEXIS 58017, at *8 n. 3 ("The lex loci rule requires application of the substantive law of the state in which the contract was delivered") (citing authorities); see also Crawford v. Manhattan Life Insurance Company of New York, 208 Pa.Super. 150, 221 A.2d 877, 880 (1966); Peele v. Atlantic Express Transp. Group, 840 A.2d 1008, 1011 (Pa.Super.2003) ("[U]nder well-settled Pennsylvania insurance contract law, the law of the state where the policy was delivered is...