Rite Aid Corp. v. Liberty Mut. Fire Ins. Co.

• Decision Date: 07 June 2005
• Docket Number: No. 1:CV-03-1801.,1:CV-03-1801.
• Parties: RITE AID CORPORATION, Plaintiff v. LIBERTY MUTUAL FIRE INSURANCE CO., et al., Defendants
• Court: U.S. District Court — Middle District of Pennsylvania

414 F.Supp.2d 508

RITE AID CORPORATION, Plaintiff v. LIBERTY MUTUAL FIRE INSURANCE CO., et al., Defendants

No. 1:CV-03-1801.

United States District Court, M.D. Pennsylvania.

June 7, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

William A. Slaughter, Ballard, Spahr, Andrews & Ingersoll, Philadelphia, PA, for Plaintiff.

Gary A. Bresee, Jennifer N. Lee, Supriya Sundarrajan, Barger & Wolen LLP, San Francisco, CA, Joseph G. Manta, Darren L. Harrison, Nelson Levine de Luca & Horst, Blue Bell, PA, Joseph B. Silverstein, Katie L. Miscioscia, Klett, Rooney,

Lieber & Schorling, PC, Philadelphia, PA, Jill M. Lashay, Klett Rooney Lieber & Schorling, Harrisburg, PA, for Defendants.

MEMORANDUM AND ORDER

KANE, District Judge.

Before the Court are cross motions for summary judgment. (Doc. Nos. 70 and 73.) The motions have been fully briefed and are ripe for disposition. For the reasons that follow, Plaintiffs motion for summary judgment will be granted in part and denied in part, and Defendant's motion for summary judgment will be granted in part and denied in part.

I. Background¹

This insurance dispute originated from a February 9, 2001 Demand for Arbitration filed by Beth Kaplan ("Kaplan"), a former executive officer of Plaintiff Rite Aid Corporation, asserting numerous claims against Plaintiff. In August 1996, Ms. Kaplan left her Vice President position with Proctor & Gamble to become a senior executive in charge of Plaintiffs Cosmetics and Fragrance Division. According to Kaplan, her decision to sign an employment contract with Plaintiff was based in part on information found within Plaintiffs public disclosures, annual reports, and SEC filings. After two and a half years, Plaintiff became embroiled in stockholder lawsuits and regulatory investigations regarding certain financial practices conducted by Plaintiffs management. These financial irregularities resulted in a $1.6 billion correction to prior years' earnings, dramatic reduction in Plaintiffs stock price, and criminal prosecution of members of Plaintiffs management. On November 12, 1999, Kaplan terminated her employment agreement with Plaintiff and resigned from the company.

In her Demand for Arbitration, Kaplan alleged, inter alia, that Plaintiff had negligently or intentionally misrepresented its financial strength in documents given to her prior to her employment, thereby fraudulently or negligently inducing her to take employment with a company financially weaker than advertised. Kaplan also alleged that the taint of association with Plaintiff handicapped her ability to secure employment commensurate with her experience.

Defendant Liberty Mutual issued a Commercial General Liability policy to Plaintiff for years 1997, 1998, and 1999 ("Policy"). During all times relevant hereto, Plaintiff was also covered by an Employment Practices Liability Insurance policy issued by Zurich American Insurance ("Zurich"). By letter dated July 6, 2001, Plaintiff notified Zurich of the arbitration. By letter dated August 27, 2001, Plaintiff notified Defendant of the arbitration with Kaplan.

On November 14, 2002, an arbitration panel issued a ruling awarding Kaplan nearly $5,000,000, plus interest, in damages, but finding for Plaintiff on Kaplan's claims for pre-employment misrepresentations and injury to reputation. On January 22, 2003, Plaintiff and Kaplan entered a confidential settlement agreement.

II. Procedural History

On September 26, 2003, Defendant commenced an action in the United States District Court for the Northern District of California, seeking declaratory judgment with respect to potential liability under the Policy. On October 8, 2003, Plaintiff initiated the instant action against Defendant, Zurich, and Federal Insurance Company ("Federal Insurance"), asserting breach of contract and bad faith under the Pennsylvania Bad Faith statute, 42 Pa. Cons.Stat. Ann. § 8371. In addition, Plaintiff moved to transfer the California action to this Court, or in the alternative, dismiss the action. On December 18, 2003, the California court transferred Defendant's declaratory judgment action to this Court, whereupon this Court dismissed the case as unnecessarily duplicative to the instant litigation.

On February 11, 2004, Plaintiff filed an amended complaint. (Doc. No. 29.) On February 15, 2005, Plaintiff filed its instant motion for summary judgment. (Doc. No. 70.) On February 18, 2005, Defendant filed its motion for summary judgment. (Doc. No. 73.) On February 18, 2005 and March 18, 2005, Plaintiff voluntarily dismissed Zurich and Federal Insurance respectively from this case.

III. Summary Judgment Standard

Summary judgment is proper where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56; White v. Westinghouse Elec. Co., 862 F.2d 56, 59 (3d Cir.1988). A factual dispute is material if it might affect the outcome of the suit under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute is genuine only if there is a sufficient evidentiary basis that would allow a reasonable fact-finder to return a verdict for the nonmoving party. Id. at 249, 106 S.Ct. 2505. The evidence presented must be viewed in the-light most favorable to the non-moving party. Id. "The inquiry is whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one sided that one party must, as a matter of law, prevail over the other." Id. This standard does not change by virtue of cross-motions being presented. United States v. Hall, 730 F.Supp. 646, 648 (M.D.Pa.1990).

The moving party has the initial burden of identifying evidence that it believes shows an absence of a genuine issue of material fact. Childers v. Joseph, 842 F.2d 689, 694 (3d Cir.1988). Once the moving party has shown that there is an absence of evidence to support the nonmoving party's claims, the non-moving party may not simply sit back and rest on the allegations in the complaint. Instead, the non-moving party must "go beyond the pleadings and by [its] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The evidence must be viewed in the light most favorable to the nonmovant. See Groman v. Township of Manalapan, 47 F.3d 628, 633 (3d Cir. 1995). Summary judgment should be granted where a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548.

With respect to the sufficiency of the evidence that the nonmoving party must provide, a court should grant summary judgment where the nonmovant's evidence is merely colorable, conclusory or speculative. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). There must be more than a scintilla of evidence supporting the nonmoving part and more than some metaphysical doubt as to the material facts. Id. at 252, 106 S.Ct. 2505; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

IV. Discussion

A. INTERPRETATION OF THE INSURANCE POLICY

Both parties agree that Pennsylvania law governs this contractual dispute. (Doc. No. 72 at 10, n. 8; Doc. No. 74 at 6.) It is well-settled that the task of interpreting an insurance contract falls to the Court. Standard Venetian Blind Co. v. Am. Empire Ins. Co., 503 Pa. 300, 469 A.2d 563, 566 (1983). An insurer owes a duty to defend under a policy when "the allegations in the complaint against [the insured] could potentially fall within the coverage of the policy." Air Prods. & Chems. v. Hartford Accident & Indem. Co., 25 F.3d 177, 179 (3d Cir.1994) (citing Gedeon v. State Farm Mut. Auto. Ins. Co., 410 Pa. 55, 188 A.2d 320 (1963)). This obligation to defend arises whenever the underlying complaint potentially may come within the coverage of the policy. Humphreys v. Niagara Fire Ins. Co., 404 Pa.Super. 347, 590 A.2d 1267, 1271 (1991). Under Pennsylvania law, "it is not the actual details of the injury, but the nature of the claim which determines whether the insurer is required to defend." Springfield Twp. v. Indemnity Ins. Co. of N. Am., 361 Pa. 461, 64 A.2d 761, 763 (1949). In determining whether an insurer has a duty to defend its insured "the factual allegations of the complaint are taken to be true and the complaint is to be liberally construed with all doubts as to whether the claims may fall within the coverage of the policy to be resolved in favor of the insured." Unionamerica Ins. Co., Ltd. v. J.B. Johnson, 806 A.2d 431, 433-34 (Pa.Super.2002) (internal citations omitted). See also Mark I Restoration SVC v. Assurance Co. of Am., 248 F.Supp.2d 397, 400 (E.D.Pa.2003).

In interpreting the insurance policy, the Court should seek to ascertain the intent of the parties as manifested by the language of the written instrument. Standard Venetian Blind Co., 469 A.2d at 566-67. When the language is clear and unambiguous, the Court is required to give effect to that language. Id., "In construing an insurance policy, unambiguous terms are to be given their `plain and ordinary meaning." St. Paul Fire & Marine Ins. Co. v. Lewis, 935 F.2d 1428, 1431 (3d Cir.1991) (quoting Pennsylvania Mfrs. Ass'n Ins. Co. v. Aetna Casualty & Sur. Ins. Co., 426 Pa. 453, 233 A.2d 548, 551 (1967)). However, "if the policy provision is reasonably susceptible to more than one interpretation, it is ambiguous." McMillan v. State Mut. Life Assurance Co., 922 F.2d 1073, 1075 (3d Cir.1990)....