PHILADELPHIA – A Philadelphia convenience store has had its breach of contract suit against a New York-based insurance provider dismissed by a federal judge.
Judge Gene E.K. Pratter of the U.S. District Court for the Eastern District of Pennsylvania moved to dismiss the action initiated by Citi Gas Convenience, Inc. against Utica Mutual Insurance Company, on claims of breach of contract and bad faith.
On Dec. 23, 2013, Citi Gas’ business premises were damaged by a water main break, and the store submitted a claim to Utica Mutual under its commercial property policy. Utica Mutual denied coverage, stating that the damage was due to “surface water” and cited a policy exclusion preventing any claims associated with surface water from being collected on.
The policy is all-inclusive as to cause, stating, whether “caused by an act of nature or is otherwise caused.”
Citi Gas filed suit against Utica Mutual in the Philadelphia County Court of Common Pleas in November, alleging Utica Mutual breached its insurance policy with Citi Gas by not paying for the property damage and business interruption it incurred, and for bad faith. Utica Mutual removed the action to federal court the following month on the basis of diversity of jurisdiction and filed a motion to dismiss.
Pratter said it was first necessary to evaluate whether Utica Mutual’s policy definition of “surface water” was ambiguous or not.
“Utica argues that even though ‘surface water’ is not defined in the policy, the term is not ambiguous because the water exclusion provision makes clear that ‘surface water’ includes water from both natural and manmade causes,” Pratter said. “Utica also cites to decisions of other courts applying water exclusions to water main breaks.”
However, Citi Gas alleged the “plain and ordinary” definition of surface water applies, which means it has to originate from a natural source – and pointed to four separate dictionary definitions which all included the words “natural” or “naturally”.
“All in all, Citi Gas’s arguments are unavailing. While dictionary definitions of ‘surface water’ may suggest naturally occurring water, Citi Gas ignores the language of the policy that modifies the term ‘surface water,” Pratter said. “Surface water is a term in Paragraph 1 of the policy’s water exclusion. The water exclusion states that it “applies regardless of whether any of the above in Paragraphs 1 through 5, is caused by an act of nature or is otherwise caused.”
Pratter said the clear language of Utica Mutual’s policy encompassed both types of “surface water”, from natural sources and man-made sources, rendering any damage from either type as excluded.
“Because the plain language of the policy excludes the type of damage alleged by Citi Gas and because Citi Gas has not identified, in its Complaint or in its opposition, any other contractual provision that would provide coverage or somehow stem the tide of arguments favoring Utica’s invocation of the exclusion, the Court will dismiss Citi Gas’s breach of contract claims,” Pratter said.
Pratter also dismissed Citi Gas’s suit on the merits of its bad faith claim.
“Most of the allegations in Citi Gas’s complaint relating to its bad faith claim are tied to the denial of coverage. To the extent that Citi Gas is asserting a bad faith claim based on the denial, the Court will dismiss the bad faith claim with prejudice,” Pratter said.
Yet, Citi Gas also alleged Utica acted in bad faith in the investigation of the claim, which may have left the plaintiff with plausible cause of action for a bad faith claim – but Pratter indicated this also proved fruitless.
“Citi Gas provides no factual allegations that would support such a claim beyond conclusory statements,” Pratter said. “To the extent that Citi Gas is asserting a bad faith claim based on something other than the denial of coverage, the Court will dismiss the bad faith claim without prejudice.”
The plaintiff is represented by Leonidas N. Koletas in Conshohocken.
The defendant is represented by Eric R. Brown of Marshall Dennehey Warner Coleman & Goggin, in Cherry Hill, N.J.
U.S. District Court for the Eastern District of Pennsylvania case 2:15-cv-06691
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com