Maronda Homes, LLC v. Motorists Mut. Ins. Co., 2:20-CV-01526-CCW
| Decision Date | 20 May 2021 |
| Docket Number | 2:20-CV-01526-CCW |
| Parties | MARONDA HOMES, LLC, Plaintiff, v. MOTORISTS MUTUAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
Before the Court is Defendant Motorists Mutual Insurance Company's Motion for Reconsideration or Certification for Interlocutory Appeal. For the reasons that follow, Motorists' Motion will be denied.
This case arises out of damage to homes constructed by Plaintiff Maronda Homes, LLC. This damage was allegedly caused by improper excavation and site preparation work performed by Maronda's subcontractor, Frey Excavating. See ECF Nos. 5-1 at ¶ 25 and 5-2 at ¶ 28. The homeowners, who "noticed" cracking and other defects shortly after taking possession of the homes, see ECF Nos. 5-1 at ¶ 8 and 5-2 at ¶ 8, sued Maronda in state court. See ECF Nos. 5-1 and 5-2. Maronda in turn sued Motorists in state court, seeking coverage as an additional insured under an insurance policy issued by Motorists to Frey, and stating claims for breach of contract (Count I), breach of the implied covenant of good faith (Count II), and bad faith insurance practices (Count III). Motorists timely removed this case to federal court and moved to dismiss. See ECF Nos. 1 and 5.
On April 16, 2021, the Court denied Motorists' Motion to Dismiss in part. See ECF No. 16. The Court concluded that the facts alleged in the underlying state court complaints (those filed by the homeowners) did not foreclose coverage for Maronda under the applicable completed work/intended use exclusion to the insurance policy. See id. at 8-10. Accordingly, the Court denied Motorists' motion with respect to Maronda's breach of contract claim. See id. The Court granted Motorists' motion with respect to Count II, because "under Pennsylvania law, a 'claim for breach of the implied covenant of good faith and fair dealing is subsumed in a breach of contract claim.'" Id. at 10 (quoting Davis v. Wells Fargo, 824 F.3d 333, 352 (3d Cir. 2016)). Finally, the Court concluded that Maronda had adequately pled a claim for bad faith insurance practices, and so denied Motorists' Motion to Dismiss Count III. See id. at 11.
Motorists now asks the Court to reconsider its prior decision and dismiss Maronda's remaining claims, or, in the alternative, to certify its decision for interlocutory appeal. See ECF Nos. 17 and 18. Motorists argues that it was error for the Court to conclude that, based on the underlying state court complaints, Maronda could potentially be entitled to coverage. See ECF No. 18 at 6-8. In short, Motorists contends that, although the Court correctly invoked Pennsylvania's "four-corners" rule, the Court misapplied Pennsylvania's "first manifestation" rule by finding that the allegations in the underlying state court complaints do not establish that damage to the homes did not manifest before the homeowners took possession of the residences. See id. Motorists also argues that it was error for the Court to consider the allegations in Maronda's Complaint, see ECF No. 16 at 11 (citing ECF No. 1-1 at ¶¶ 75-77, 80-84), when declining to dismiss the bad faith claim because, as with the breach of contract claim, the four-corners rule applies and the allegations in the underlying state court complaints control. See ECF No. 18 at 9-10. Finally, in the alternative, Motorists requests that the Court "certify its Opinion and Order for Appeal by amending it to include the statement required by 28 U.S.C. § 1292(b)." Id. at 10.
On a motion for reconsideration, the party seeking to have a judgment altered or amended must demonstrate either: (1) a change in controlling law; (2) the availability of new evidence not previously before the court; or (3) "the need to correct a clear error of law or fact or to prevent manifest injustice." Allaham v. Naddaf, 635 Fed. Appx. 32, 35-36 (3d Cir. 2015) (quoting U.S. ex rel. Schumann v. Astrazeneca Pharm. L.P., 769 F.3d 837, 848-49 (3d Cir. 2014); see also Max's Seafood Café by Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999). Here, Motorists' Motion implicates only the third basis for an appropriate motion to reconsider—i.e. the asserted need to correct clear error.
A district court may certify an order for interlocutory appeal under 28 U.S.C. § 1292(b) only if the order (1) "involves a controlling question of law"; (2) "as to which there is substantial ground for difference of opinion"; and (3) "an immediate appeal from the order may materially advance the ultimate termination of the litigation[.]" 28 U.S.C. § 1292(b); see also, Katz v. Carte Blanche Corp., 496 F.2d 474, 755 (3d Cir. 1974). In deciding whether to certify an order for interlocutory appeal, the court must remain "mindful of the strong policy against piecemeal appeals and that certification is appropriate only in exceptional circumstances." Clarity Software, LLC v. Allianz Life Ins. Co. of N. Am., No. 04-1441, 2007 U.S. Dist. LEXIS 40861, at *2 (W.D. Pa. June 5, 2007).
As discussed in the Court's prior opinion, the question of whether the completed work/intended use exclusion bars coverage is controlled by the four-corners rule. Under that rule, when an insured is sued, "'an insurer's duty to defend is triggered, if at all, by the factual averments contained in [the underlying] complaint[.]'" Sapa Extrusions, Inc. v. Liberty Mut. Ins. Co., 939 F.3d 243, 249 (3d Cir. 2019) (quoting Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 896 n.7 (Pa. 2006)). This means that "'[i]f the allegations of the underlying complaint potentially could support recovery under the policy, there will be coverage at least to the extent that the insurer has a duty to defend its insured in the case." Id. (quoting Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660, 673 (3d Cir. 2016). Furthermore, although "an insurer's potential duty to defend is 'determined solely by the allegations of the complaint in the [underlying] action,'" Ramara, 814 F.3d at 673 (quoting Kvaener, 908 A.2d at 896), "'[i]f coverage (indemnification) depends upon the existence or nonexistence of undetermined facts outside the complaint, until the claim is narrowed to one patently outside the policy coverage, the insurer has a duty to defend claims against its insured.'" Id. (quoting Stidham v. Millvale Sportsmen's Club, 618 A.2d 945, 953-54 (Pa. Super. Ct. 1992). Thus, "[t]o determine whether based on its factual allegations an underlying complaint triggers an insurer's duty to defend, a court views the allegations as true and 'liberally construe[s them] in favor of the insured.'" Id. (quoting Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir. 1999)).
Here, then, the pivotal question is whether the allegations in the underlying state court complaints foreclose the possibility that Maronda could recover under the applicable occurrence-based policy, in light of the completed work/intended use exclusion.1 See ECF No. 16 at 8-9. That issue, in turn, depends on when the damages alleged in the underlying complaints first "manifested." Under Pennsylvania law, "[a]n occurrence happens when the injurious effects of the negligent act first manifest themselves in a way that would put a reasonable person on notice of injury." D'Auria v. Zurich Ins. Co., 507 A.2d 857, 861 (Pa. Super. Ct. 1986). Furthermore, "[t]he party alleging the negligence need not have actually discovered the injurious effects at the time they first manifested themselves." Id. (citing Silver Eagle Co. v. National Union Fire Ins. Co., 423 P.2d 944 (Or. 1967)).
Thus, the Court's analysis focused on two relevant factual allegations from the underlying complaints: (1) the damage to the homes was caused by improper excavation, placement of fill, and soil compaction, and (2) the homeowners "noticed" problems with the homes shortly after taking possession of them. See ECF No. 16 at 9; see also ECF No. 5-1 at ¶¶ 8, 25 and ECF No, 5-2 at ¶¶ 8, 28. Assuming these facts to be true and construing them liberally in favor of the insured, as we must, the Court found that the underlying complaints do not foreclose coverage because they only allege when the damage was actually discovered, not when it first manifested (i.e. became apparent in a way that would put a reasonable person on notice). That date could be the same as the homeowner's discovery of the damage (putting it outside the scope of the policy), or it could be earlier (making it potentially within the scope of the policy). Thus, the Court concluded that Motorists is not entitled to dismissal of Maronda's breach of contract claim at this stage of the proceeding based on an affirmative defense, i.e. the clear application of a policyexclusion. See id. at 9-10; see also Ramara, 814 F.3d at 673 (); Brayman Constr. Corp. v. Westfieldl Ins. Co., 2:18-CV-00457-MJH, 2019 U.S. Dist. LEXIS 36432, at *13-*17 (W.D. Pa. Mar. 6, 2019) ().
The Court concludes that Motorists has not demonstrated a clear error of law or fact relating to the denial of Motorists' Motion to Dismiss with respect to Maronda's breach of contract claim (Count I). Therefore, Motorists' Motion to Reconsider on this issue will be denied.
Motorists also asserts that the Court erred in concluding that Maronda's...
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