Three Rivers Hydroponics, LLC v. Florists' Mut. Ins. Co.

• Decision Date: 08 February 2018
• Docket Number: 2:15-cv-00809
• Parties: THREE RIVERS HYDROPONICS, LLC, Plaintiff, v. FLORISTS' MUTUAL INSURANCE COMPANY, and THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of Pennsylvania

THREE RIVERS HYDROPONICS, LLC, Plaintiff, v. FLORISTS' MUTUAL INSURANCE COMPANY,and THE HARTFORD STEAM BOILER INSPECTIONAND INSURANCE COMPANY, Defendant.

2:15-cv-00809

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

February 8, 2018

ELECTRONICALLY FILED

OPINION

Mark J. Hornak, United States District Judge

Now before the Court are Defendant The Hartford Steam Boiler Inspection and Insurance Company's ("HSB") Motion to Dismiss Plaintiff's Amended Complaint, ECF No. 168 ("HSB's Motion"), and Defendant Florists' Mutual Insurance Company's ("Florists") Motion to Dismiss and Strike Portions of Plaintiff's Amended Complaint, ECF No. 170 ("Florists' Motion"), both seeking to extricate HSB from the case.

This is an insurance coverage dispute arising out of a June 30, 2014, incident at Plaintiff's commercial greenhouse, which produces hydroponic produce and herbs. (First Am. Compl., ECF No. 158, ¶¶ 8, 38.) Plaintiff alleges that a component of its hydroponic ozone system exploded and caught fire, damaging Plaintiff's crops. (Id. ¶¶ 38-42.) Plaintiff's original Complaint asserted claims for breach of contract and bad faith against Florists only, pursuant to the insurance policy for Plaintiff's commercial greenhouse issued by Florists, Business Package Policy Number BP-13221 ("Policy"). (Compl., ECF No. 1; see also Policy, ECF No. 158-2.) On May 30, 2017, Plaintiff amended its Complaint to include claims for breach of contract and bad faith against HSB, Florists' reinsurer, and a new claim for civil conspiracy against both HSB and Florists. (First Am. Compl., ECF No. 158.) All told, the Amended Complaint contains the following counts: Count I, breach of contract against Florists; Count II, breach of contract against HSB; Count III, bad faith against Florists and HSB; and Count IV, civil conspiracy against Florists and HSB. (Id.)

HSB's Motion asks the Court to dismiss Counts II, III, and IV (breach of contract, bad faith, and civil conspiracy, respectively) against HSB. (HSB's Motion, ECF No. 168, ¶ 21.) Florists' Motion similarly seeks to dismiss Count IV (civil conspiracy) against Florists,¹ to strike language in specific paragraphs of Plaintiff's Amended Complaint alleging Florists is vicariously liable for HSB's acts and omissions or alleging that Florists breached the Reinsurance Agreement,² and to strike the "Introduction" section of the First Amended Complaint. (Florists' Motion, ECF No. 170, at 1.)

For the reasons that follow, HSB's Motion is granted in its entirety. Florists' Motion is granted in part and denied in part.

I. Legal Standard

A. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) allows dismissal of a claim for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When reviewing a Rule 12(b)(6) motion, the Court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303, 308 n.3 (3d Cir. 2014) (quoting Phillips v. Cty. of Allegheny, 515 F.3d 224, 233 (3d Cir.2008)). Plaintiff's factual allegations must "raise a right to relief above the speculative level" and state a "plausible claim for relief to survive a motion to dismiss. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A well-pleaded complaint may not be dismissed simply because "it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely." Twombly, 550 U.S. at 556. The Court need not accept as true any unsupported conclusions, unsupported inferences, and "threadbare recitals of elements of a cause of action." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

B. Motion to Strike

A court may strike from a pleading "any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). Motions to strike are generally disfavored by courts, and they are ordinarily granted only "where the language in the pleading at issue has no possible relation to the controversy and is clearly prejudicial to the movant." Zappala v. Hub Foods, Inc., 683 F. Supp. 127, 131 (W.D. Pa. 1988). Motions to strike are decided on the pleadings alone, and should not be granted unless the relevant insufficiency is "clearly apparent." Fulton Fin. Advisors, Nat'l Ass'n v. NatCity Invs., Inc., No. 09-cv-4855, 2013 WL 5635977, at *18 (E.D. Pa. Oct. 15, 2013) (quoting Cipollone v. Liggett Grp., Inc., 789 F.2d 181, 188 (3d Cir. 1986). A motion to strike is not the proper device for placing the actual merits of the party's pleadings in issue, or challenging the legal correctness of an argument. Zappala, 683 F. Supp. at 131.

II. Count II: Breach of Contract Against HSB

To maintain a breach of contract claim under Pennsylvania law, a plaintiff must establish (1) the existence of a contract; (2) a breach of a duty imposed by the contract; and (3) resultant damages. Ware v. Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir. 2003) (quoting CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999)). "Only a party to a contract can beliable for breach of that contract." McLaren v. AIG Domestic Claims, Inc., 853 F. Supp. 2d 499, 513 (E.D. Pa. 2012) (citing Electron Energy Corp. v. Short, 597 A.2d 175, 177 (Pa. Super. Ct. 1991)). There are two relevant contracts in this case: (1) the Policy issued by Florists; and (2) the reinsurance agreement between HSB and Florists, wherein HSB agreed to reinsure Florists for equipment breakdown claims under Florists' insurance policies and maintained the right to investigate those claims ("Reinsurance Agreement"). Plaintiff alleges HSB breached duties it owed to Plaintiff under both contracts.

HSB asserts that it is not in privity with Plaintiff under either contract; therefore, Plaintiff is unable to prove the necessary elements of a breach of contract claim against HSB. HSB argues that (1) it is not a party to the Policy between Plaintiff and Florists; (2) Plaintiff is not a party to the Reinsurance Agreement; and (3) Plaintiff is not a third-party beneficiary of the Reinsurance Agreement. Plaintiff, in contrast, argues that Florists assigned its duties under the Policy to HSB, wherein HSB assumed a contractual duty to Plaintiff to "investigate, negotiate, and fund settlement payments in connection with Florists' policyholders' equipment breakdown claims," giving Plaintiff a direct right to relief for breach of contract against HSB. (Pl.'s Br. in Opp. to HSB's Motion, ECF No. 175, at 7.) Plaintiff further argues that it is an intended third-party beneficiary of the Reinsurance Agreement, and should be permitted to enforce the agreement against HSB. (Id. at 3-4.) The Court first analyzes whether there is a contract between Plaintiff and HSB before addressing whether Plaintiff is a third-party beneficiary of the Reinsurance Agreement.

A. Privity of Contract

This Court's review of the averments in the Amended Complaint, the language in the Policy and the Reinsurance Agreement, and the applicable law supports the conclusion that the Amended Complaint fails to allege a contract between Plaintiff and HSB. As an initial matter, thetitles of Plaintiff's exhibits attached to the Amended Complaint are illustrative: "Florists' Insurance Policy," and "Reinsurance Agreement Between Florists and HSB." (ECF Nos. 158-1, 158-2 (emphases added).) HSB is nowhere to be found in the Policy between Plaintiff and Florists. (Policy, ECF No. 158-1, at 3.) Similarly, Plaintiff is not a party to the Reinsurance Agreement. (Reinsurance Agreement, ECF No. 158-2, at 1.)

Plaintiff argues that HSB assumed a contractual duty to Plaintiff by the nature of the Reinsurance Agreement, which "assigned" Florists' duties with respect to investigating claims under the Policy to HSB; however, Plaintiff has identified nothing in the Reinsurance Agreement that relieved Florists of its obligations to Plaintiff in this regard. Rather, Florists and HSB entered into a contract and assumed obligations to each other—a common practice in the context of reinsurance and third-party claims investigators—but HSB did not directly assume any of Florists' obligations to Plaintiff under the Policy. Indeed, to adopt Plaintiff's interpretation of this arrangement absent evidence of a separate contract between Plaintiff and HSB would cut against established law, for "it is the general rule that an insured may bring claims for breach of contract and bad faith against the insurer who issued the policy but not against related parties, such as reinsurers and third party administrators, who are not in privity with the insured." Brand v. AXA Equitable Life Ins. Co., No. 08-cv-2859, 2008 WL 4279863, at *2 (E.D. Pa. Sept. 16, 2008) (citing Reid v. Ruffin, 469 A.2d 1030, 1033 (Pa. 1983)).

B. Third-Party Beneficiary Status

Pennsylvania law recognizes a limited exception to the general rule that an insured may not assert a direct claim against a reinsurer: if the insured is a third-party beneficiary of the reinsurance agreement, the insured can sue for breach of that agreement. See, e.g., Reid, 469 A.2d at 1032. Plaintiff argues that is the case here, and it seeks to recover from HSB for breach of theReinsurance Agreement using its asserted status as a third-party beneficiary. (Pl.'s Br. in Opp. to HSB's Motion, ECF No. 175, at 10-12.) HSB argues that nothing in the Reinsurance Agreement evidences an intent to give Plaintiff third-party beneficiary status. (Def.'s Br. in Supp. of HSB's Motion, ECF No. 169, at 9-12.)

Under Pennsylvania law, a party becomes a third-party beneficiary

only where both parties to the contract express an intention to benefit the third party in the contract itself, unless, the circumstances are so compelling that recognition of the beneficiary's right is appropriate to effectuate the intention of the parties, and the performance satisfies

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