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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
JOSEPH JADCZAK and CATHERINE JADCZAK, Plaintiffs,
v. HOMESITE INSURANCE COMPANY, Defendant.
) ) ) ) ) ) ) ) ) ) )
C.A. No. 07-0431 (GMS)
DEFENDANT HOMESITE INSURANCE COMPANY'S ANSWERING BRIEF IN OPPOSITION TO PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND OPENING BRIEF IN SUPPORT OF HOMESITE INSURANCE COMPANY'S CROSS MOTION FOR SUMMARY JUDGMENT
Dated: April 11, 2008
Sean J. Bellew (#4072) Cozen O'Connor 1201 North Market Street, Suite 1400 Wilmington, DE 19801 Telephone: (302) 295-2026 Attorneys for Defendant Homesite Insurance Company
Of counsel: Melissa Brill Cozen O'Connor 45 Broadway Atrium, 16th Floor New York, NY 10006 Telephone: (212) 509-9400
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TABLE OF CONTENTS Page 1. 2. STATEMENT OF THE NATURE AND STAGE OF THE PROCEEDINGS.................. 1 THE AIRPLANE HANGAR IS NOT A DWELLING UNDER COVERAGE A................................................................................................................... 2 A. B. SUMMARY OF ARGUMENT .............................................................................. 2 STATEMENT OF FACTS ..................................................................................... 3 1. 2. 3. C. Key Policy Provisions................................................................................. 3 Mr. Jadczak's Sworn Testimony About the Hangar................................... 4 Other Pertinent Facts................................................................................... 4
ARGUMENT.......................................................................................................... 5 1. 2. 3. Summary Judgment Standard ..................................................................... 5 Because the Policy is Clear, Plaintiffs are Bound by its Language. ........... 5 The Homesite Policy Provides Coverage for the Hangar Under Coverage B, Not Coverage A. .................................................................... 6 a) The Policy is Clear the Hangar is an Other Structure Covered Under Coverage B and Must be Enforced as Written. ........................................................................................... 6 Mr. Jadczak's EUO Testimony Further Supports the Conclusion that the Hangar is Covered by Coverage BOther Structures. ............................................................................. 7 Mr. Jadczak's post-loss communications only further support the legal conclusion that the hangar is and always was covered by Coverage B-Other Structures. ............................. 11 The Limited Case Law Supports Homesite's Position. ................ 12 Storing an RV Does Not Make an Airplane Hangar a Dwelling........................................................................................ 14
b)
c)
d) e) D. 3.
CONCLUSION..................................................................................................... 15
THE RV IS NOT COVERED UNDER THE POLICY.................................................... 15
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A. B.
SUMMARY OF ARGUMENT ............................................................................ 15 STATEMENT OF FACTS ................................................................................... 15 1. 2. KEY POLICY PROVISIONS .................................................................. 15 MR. JADCZAK'S SWORN TESTIMONY ABOUT THE RV............... 16
C.
ARGUMENT........................................................................................................ 17 1. 2. 3. The RV is a Motor Vehicle or Other Motorized Land Conveyance......... 17 The RV was Subject to Motor Vehicle Registration. ............................... 17 The RV was Not Used to Service Plaintiffs' Residence........................... 18
D. 4.
CONCLUSION..................................................................................................... 19
PLAINTIFFS' COST TO STORE THEIR AIRPLANE IS NOT COVERED UNDER THE POLICY..................................................................................................... 19 A. B. SUMMARY OF ARGUMENT ............................................................................ 19 STATEMENT OF FACTS ................................................................................... 20 1. 2. C. D. KEY POLICY PROVISIONS .................................................................. 20 OTHER PERTINENT FACTS ................................................................. 20
ARGUMENT........................................................................................................ 21 CONCLUSION..................................................................................................... 21
5.
HOMESITE DID NOT ACT IN BAD FAITH OR VIOLATE THE CONSUMER FRAUD ACT .................................................................................................................... 21 A. B. C. SUMMARY OF ARGUMENT ............................................................................ 21 STATEMENT OF FACTS ................................................................................... 22 ARGUMENT........................................................................................................ 23 1. 2. D. Homesite Did Not Act in Bad Faith.......................................................... 23 Homesite Did Not Violate the Delaware Consumer Fraud Act................ 24
CONCLUSION..................................................................................................... 25
6.
PRAYER FOR RELIEF ................................................................................................... 25
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TABLE OF AUTHORITIES Page CASES Casson v. Nationwide Ins. Co., 455 A.2d 361 (Del. Super. 1982).............................................................................................23 DiSimplico v. Equitable Variable Life Ins. Co., 1988 WL 15394 (Del.Super. 1988)..........................................................................................25 Eames v. Nationwide Mut. Ins. Co., 412 F. Supp. 2d 431 (D. Del. 2006).........................................................................................25 Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451 (1992)...................................................................................................................5 Farmers Mutual Insurance Association v. Martin, et al., 84 So. 2d 688 (Miss. 1956)................................................................................................ 13-14 Goodman v. Continental Cas. Co., 347 A.2d 662 (Del. Super. 1975)...............................................................................................5 Grissom v. Nationwide Mutual Ins. Co., 599 A.2d 1086 (Del. Ch. 1991)..................................................................................................6 Hallowell v. State Farm Mutual Automobile Ins. Co., 443 A.2d 925 (Del. Super. 1982)........................................................................................... 5-6 Howard v. H. Robert Anderson & Assoc., Inc., 2004 WL 3371968 (Minn. Dist. Ct.) ................................................................................. 12-13 Hudson v. State, 569 A.2d 1168 (Del. Super. 1990).............................................................................................5 IMX, Inc. v. LendingTree, LLC, 405 F. Supp. 2d 479 (D. Del. 2005)...........................................................................................5 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986)...................................................................................................................5 Pennsylvania Coal Ass'n v. Babbitt, 63 F.3d 231 (3d Cir. 1995).........................................................................................................5 Tackett v. State Farm Fire & Cas. Ins. Co., 653 A.2d 254 (Del. 1995) .................................................................................................. 23-24
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Tenos v. State Farm Ins. Co., 716 A.2d 626 (Pa. Super. 1998)...............................................................................................18 STATUTES, RULES & REGULATIONS 6 Del. C. § 2513 .............................................................................................................................24 21 Del. C. § 101(35) ......................................................................................................................17 21 Del. C. § 101(53) ......................................................................................................................17 21 Del. C. § 101(80) ......................................................................................................................17 21 Del. C. § 2101(a).......................................................................................................................18 Fed.R.Civ.P. 9(b) .....................................................................................................................21, 25 Fed.R.Civ.P. 56................................................................................................................................5 Rule 56(c).........................................................................................................................................5 OTHER AUTHORITIES Couch on Insurance Third Edition, § 20:23 (2007) ......................................................................14 Restatement (Second) of Torts § 908 (1979)................................................................................24 Websters Ninth New Collegiate Dictionary ..................................................................................19
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Defendant Homesite Insurance Company ("Homesite"), through its undersigned attorneys, hereby files this Answering Brief in opposition to plaintiffs Joseph and Catherine Jadczak's Motion for Partial Summary Judgment and Opening Brief in support of Homesite's Cross Motion for Summary Judgment. Homesite's Cross Motion for Summary Judgment should be granted because (1) plaintiffs' airplane hangar is not covered under the Policy's Coverage A-Dwelling, (2) coverage for plaintiffs' RV is precluded by the Policy's Motor Vehicle exclusion, (3) plaintiffs' claim for rent to store their airplane is not covered under the Policy's Coverage D-Loss of Use and (4) plaintiffs cannot demonstrate that Homesite acted in bad faith. 1. STATEMENT OF THE NATURE AND STAGE OF THE PROCEEDINGS Plaintiffs live at a residential airpark, at which they had both a home and an airplane hangar on their land. On May 29, 2006, plaintiffs' airplane hangar was completely destroyed by fire. Plaintiffs' Recreational Vehicle, stored inside the airplane hangar, was destroyed in the fire. Finally, plaintiffs' home was slightly damaged, and plaintiffs lost certain items of personal property in the fire. On that date, plaintiffs' property, located at 29555 Eagles Crest Drive, Milton, Delaware, was insured under a Homesite homeowners policy (the "Policy"). Homesite paid plaintiffs' claim for the airplane hangar, up to Policy limits, under Coverage B-Other Structures. Plaintiffs now claim that they are entitled to additional coverage for the airplane hangar under Coverage A-Dwelling. Homesite denied plaintiffs' claim for the RV, because of the Policy's Motor Vehicle exclusion. Plaintiffs seek coverage for the RV despite that exclusion. Plaintiffs also seek coverage, under Coverage D-Loss of Use, for the rental of an alternative hangar for their airplane.
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On May 25, 2007, the Jadczaks filed suit against Homesite in Delaware state court. Homesite removed the action to the United States District Court for the District of Delaware and answered the Complaint on August 10, 2007. 2. THE AIRPLANE HANGAR IS NOT A DWELLING UNDER COVERAGE A A. SUMMARY OF ARGUMENT1
Plaintiffs' airplane hangar is not, and never was, a dwelling. This is true under the Policy at issue, and by any other stretch of the imagination. Plaintiffs live at a residential airpark, at which owners may have both a home and an airplane hangar on their land. On May 29, 2006, plaintiffs' airplane hangar2 was completely destroyed by fire. On that date, plaintiffs' property, located at 29555 Eagles Crest Drive, Milton, Delaware, was insured under a Homesite Policy. The Policy's Coverage A provides coverage for the dwelling on the residence premises. The Policy's Coverage B provides coverage for other structures on the residence premises set apart from the dwelling by clear space. The airplane hangar is an other structure, set apart from the dwelling by clear space. As a matter of law, the Policy, therefore, clearly and unambiguously covers the airplane hangar under Coverage BOther Structures. investigation, Homesite paid plaintiffs the full limits under Coverage B. Because plaintiffs want more than the Coverage B limits, they would now have the Court find that the airplane hangar is one of two dwellings on the residence premises, and so entitles plaintiffs to higher limits under Coverage A of the Policy, which covers only the dwelling on the residence premises insured by the Policy. Upon completion of its
In an attempt at simplifying this multi-issue brief, the sections required by D. Del. LR 7.1.3 will be replicated for each argument. 2 For the first time here, plaintiffs refer to their airplane hangar as a "residential hangar." Previously, plaintiffs more accurately described the hangar as an "aircraft hangar." See Plaintiffs' Complaint, p.5. 2
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Pursuant to the plain and unambiguous language of the Policy, plaintiffs' argument must fail. Mr. Jadczak's EUO testimony, as well as his post-loss communications, only further support the conclusion that the airplane hangar is covered only by Coverage B-Other Structures. B. STATEMENT OF FACTS 1. Key Policy Provisions
The Homesite Policy clearly and unambiguously covers the hangar under Coverage B Other Structures. The Policy provides in relevant part as follows: New Business Declarations Insured Location 29555 Eagles Crest Rd Milton DE 19968-3621 Description of Dwelling 2000 Clapboard structure, Single family home, Primary residence, Partially Protected, . . . * * *
SECTION I PROPERTY COVERAGES COVERAGE A - DWELLING We cover: The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling; and * * *
COVERAGE B Other Structures We cover other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection. * * *
See Homesite Policy Number 30318013, attached hereto as Exhibit "A."
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2.
Mr. Jadczak's Sworn Testimony About the Hangar
As a matter of fact and law, the airplane hangar is covered under Coverage B-Other Structures. Although Mr. Jadczak's EUO testimony is not necessary to reach this conclusion, his testimony only further supports it. Mr. Jadczak's Examination Under Oath was taken on October 3, 2006. His sworn EUO testimony clearly demonstrates that the airplane hangar can, by no stretch of the imagination, be characterized as plaintiffs' primary residence or dwelling. Pertinent portions of the October 3, 2006 transcript of Joseph Jadczak's EUO, attached hereto as Exhibit "B," are cited below. 3. Other Pertinent Facts
Again, this coverage issue is easily resolved as a matter of law; the airplane hangar is covered under Coverage B-Other Structures. Although Mr. Jadczak's post-loss communications are not necessary to reach this conclusion, those actions only further support it. On July 7, 2006, Mr. Jadczak signed a Replacement Cost Questionnaire for his renewal policy and returned it to Homesite. See Replacement Cost Questionnaire, attached hereto as Exhibit "C." By September 1, 2006 letter from Homesite to Mr. Jadczak, Homesite confirmed that the following changes were made to the Policy: "ADDED HO 04 48 OTHER STRUCTURE INCR LM." See September 1, 2006 letter from Homesite to Mr. Jadczak, attached hereto as Exhibit "D." Following the loss, Homesite Policy Number 30318013 was issued to the Jadczaks for the policy period from August 16, 2006 through August 16, 2007. That Policy contained Endorsement HO 04 48. See Endorsement HO 04 48 to the August 16, 2006 through August 16, 2007 Policy, attached hereto as "Exhibit E."
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C.
ARGUMENT 1. Summary Judgment Standard3
In deciding a motion for summary judgment, a court will view the underlying facts and all reasonable inferences in the light most favorable to the opposing party. Pennsylvania Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir. 1995); IMX, Inc. v. LendingTree, LLC, 405 F. Supp. 2d 479, 484 (D. Del. 2005). Under Rule 56(c), summary judgment is warranted when, viewing the evidence in the light most favorable to the non-movant, the Court determines that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. See, Fed.R.Civ.P. 56; Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 457 (1992). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is `no genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Here, there is no issue of fact, material or immaterial. Plaintiffs' airplane hangar is an Other Structure as defined by the Policy's Coverage B. 2. Because the Policy is Clear, Plaintiffs are Bound by its Language.
The interpretation of insurance contracts is a question of law. Hudson v. State, 569 A.2d 1168, 1170 (Del. Super. 1990). Unless otherwise provided by statute, the rights and
responsibilities of the parties to a contract of insurance are those which are set forth in the contract. Goodman v. Continental Cas. Co., 347 A.2d 662 (Del. Super. 1975). Thus, the focus of the Court's analysis should be on the clear and unambiguous language of the Policy. Although insurance contracts are to be construed in favor of the insured, this rule only applies where the policy language is ambiguous, for "where the language of an insurance contract is clear and unequivocal, a party will be bound by its plain meaning...." Hallowell v.
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The Summary Judgment standard is intended to apply to all sections of this Brief. 5
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State Farm Mutual Automobile Ins. Co., 443 A.2d 925, 926 (Del. Super. 1982). In order to find that the policy provisions are ambiguous, the Court must determine that two or more equally reasonable interpretations of the policy provisions exist. Id. at 926; Grissom v. Nationwide Mutual Ins. Co., 599 A.2d 1086, 1088 (Del. Ch. 1991). The Homesite Policy's Coverage B unambiguously covers: other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection. Plaintiffs' airplane hangar is a structure, other than the house (dwelling), that is set apart from the house by clear space. The Homesite Policy language is unambiguous it provides coverage for the airplane hangar under Coverage B-Other Structures. interpretation of the Policy language. Despite a desire to collect more money for their airplane hangar, and despite several creative arguments, an airplane hangar is simply not a dwelling under the Policy. Because the Policy language is clear, and is not subject to any other reasonable interpretation, plaintiffs are bound by it. 3. The Homesite Policy Provides Coverage for the Hangar Under Coverage B, Not Coverage A. a) The Policy is Clear the Hangar is an Other Structure Covered Under Coverage B and Must be Enforced as Written. There is no other reasonable
The "dwelling issue" in this case is ripe for decision on summary judgment. There is no issue - the hangar is covered by the Policy's Coverage B. Upon completion of its investigation, Homesite paid the Coverage B limits to the Jadczaks. It is beyond dispute that the airplane hangar is not a dwelling covered under the Policy's Coverage A. The only real issue here is whether the Jadczaks can collect more money by trying to turn their airplane hangar into a dwelling, or primary residence. They cannot.
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The policy provides coverage for Other Structures under Coverage B. The covered structures are described as "other structures on the "residence premises" set apart from the dwelling by clear space. See Exhibit A. This includes structures connected to the dwelling by only a fence, utility line, or similar connection." The airplane hangar, set apart from the house by a driveway, clearly and unambiguously falls under Coverage B. The Policy provides coverage for the insured's Dwelling under Coverage A. The
Dwelling is described as "the dwelling on the "residence premises" shown in the Declarations." The Declarations describe the dwelling as a "2000 Clapboard structure, Single family home, Primary residence . . ." See Exhibit A. The airplane hangar, neither a single family home nor a primary residence, clearly and unambiguously falls outside of Coverage A. It defies the imagination that plaintiffs are trying to characterize their airplane hangar, set apart by a driveway from their $660,000 home4, as their dwelling. There is no ambiguity, patent or latent, in the Policy's language. As a matter of law, the airplane hangar falls under Coverage B, the limits of which have already been paid. b) Mr. Jadczak's EUO Testimony Further Supports the Conclusion that the Hangar is Covered by Coverage B-Other Structures.
The Homesite policy is clear it covers Other Structures under Coverage B. As a matter of law, an airplane hangar, separated from the house by a driveway, is never going to be anything else. Nonetheless, plaintiffs have tried valiantly to find facts to support the conclusion that the Jadczaks used an airplane hangar as their primary residence and dwelling, when their $660,000 home was feet away. The facts do not support their attempt. Mr. Jadczak's sworn EUO testimony clearly demonstrates that the airplane hangar cannot, by any stretch of the imagination, be characterized as plaintiffs' primary residence or The amount for which the home was insured under the Coverage A limits of the Policy. See Exhibit A. This amount was later increased to $822,000. 7
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dwelling. See pertinent portions of the October 3, 2006 transcript of Joseph Jadczak's EUO, attached hereto as Exhibit B. At his EUO, Mr. Jadczak, himself, referred to his house (as opposed to his airplane hangar) as the dwelling: Q. As I understand it, you were living in the RV at the time, and you built the hangar first. Is that right, sir? A. Q. A. * * * Q. A. Q. A. You did live in [the RV]? We did. While you were building the dwelling. Right? Yes. (Exhibit B, p. 56, lines 15-18) That's right. Then you built the dwelling? Yes. (Exhibit B, p. 51, lines 3-8)
Mr. Jadczak's testimony also proves that the hangar was an Other Structure, set apart from the dwelling by clear space (as set forth in the Policy, Coverage B): A. The driveway is splitting the house and the hangar. (Exhibit B, p. 52, lines 8-9) Additionally, Mr. Jadczak's testimony proves that the Jadczaks did not use the airplane hangar as a "dwelling" (which the Policy describes as a "single family home" and "primary residence"). Q. Now, before the loss on Memorial Day, what did you use your hangar for? A. The parking of the airplane and the parking of the RV. I also had tools. I would do just personal odds and ends work on cars or the plane or the RV. Also had personal items in there. (Exhibit B, p. 55, lines 2-7)
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*
*
*
Q. Let me ask you this. When the RV is stored, let's say, you know, in the days leading up to the fire, is the electricity on in the RV? A. Q. A. No. Is the plumbing hooked up on the RV? No.
Q. Is anything connected to the RV in terms of making it operational in any respect? A. Not unless we intend to use it or have someone sleep there if we have a bunch of people come down. (Exhibit B, p. 67, lines 23-24 to p. 68, lines 1-8) * * *
A. . . . I told [the adjuster] I hadn't used the RV for three years. (Exhibit B, p. 69, lines 4-5) * * *
Q. So it's your testimony today that the electric cable [the only source of power to the RV] was not plugged into the outlet on the wall from the RV for a period of three continuous years? A. * * Absolutely not. (Exhibit B, p.69, lines 10-13) *
In an attempt to take the airplane hangar out of Coverage B, plaintiffs state that the airplane hangar was hooked up to utilities. ((D.I. 22, Plaintiffs' Memorandum of Law in support of their Motion for Summary Judgment ("Plaintiffs' Memo"), p.7). However, the Policy's Coverage B specifically includes Other Structures connected to the dwelling by a utility line. See Exhibit A. In an attempt to make the airplane hangar seem like a dwelling, plaintiffs state that a Recreational Vehicle was parked in the hangar. (Plaintiffs' Memo, p.7). However, parking an RV in your garage does not make your garage a dwelling.
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Plaintiffs also incorrectly state that the Jadczaks watched television and videos in the airplane hangar on a daily basis. (D.I. 22 at p.7). In fact, Mr. Jadczak did no more than check the weather each morning (Exhibit B, p. 57, lines 4-5), presumably for conditions before flying to work. Mr. Jadczak did testify that he "occasionally" watched television in the hangar, but he hardly described it as a place that he and his wife would go to watch television on a daily basis. Q. It looks like you had a television and a VCR at the time of the fire inside of the hangar. Is that right? A. Q. A. Yes. Did you watch television and use the VCR in the hangar? Occasionally.
Q. Did you have, like, seats and couches and things of that nature to sit and recline and watch movies and television? A. I had two desks and two chairs in there. (Exhibit B, p. 94, line 17 to p. 95, line 3) * * *
In another attempt to make the airplane hangar seem like a dwelling, plaintiffs state that they kept a microwave in the airplane hangar. However, Mr. Jadczak's testimony makes it clear that the Jadczaks were not eating meals in the hangar. (Plaintiffs' Memo, p.7) Q. So you would have meals out there?
A. Occasionally heat something up if I'm working out there. (Exhibit B, p. 153, lines 21-23) * * *
Plaintiffs also misleadingly state that the Jadczaks bathed in the hangar. (D.I. 22 at Memo, p.11) In fact, the only possible place to bathe was the RV, to which the plumbing was not even connected. (Exhibit B, p. 67)
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It is beyond question that the Jadczaks' airplane hangar was just what its name implies an airplane hangar. No creative arguments are going to change that. Under the clear and unambiguous terms of the Policy, the airplane hangar is an Other Structure, and is covered under Coverage B. Mr. Jadczak's testimony only strengthens that conclusion. c) Mr. Jadczak's post-loss communications only further support the legal conclusion that the hangar is and always was covered by Coverage B-Other Structures.
Mr. Jadczak's communications with Homesite after the May 29, 2006 loss indicate that plaintiffs knew that the airplane hangar was not a dwelling, and was covered only under the Policy's coverage B Other Structures. On July 7, 2006, Mr. Jadczak signed a Replacement Cost Questionnaire for his renewal policy and returned it to Homesite. See Exhibit C. All of the information provided by Mr. Jadczak proves that his house (as opposed to his airplane hangar) is his dwelling. In response to questions about his "dwelling" and "home," Mr. Jadczak indicated that it was a Ranch style, single family home with a "Composition Shingle" roof. He further described its exterior as "Hardy Plank" and "Stucco on Frame."5 He listed the total living area as 3685 square feet.6 Additionally, he requested that the Policy limits on his "dwelling" be changed to $850,000. See Exhibit C. It is obvious that none of these statements apply to the Jadzcak's airplane hangar. In response to a question about his garage, Mr. Jadczak indicated that he had an attached and a detached garage. The attached garage, according to the Replacement Cost Questionnaire, contained three cars. With regard to the "detached garage" (the airplane hangar), Mr. Jadczak The fact that the Policy's Declarations page referred to the house as a "Clapboard structure, Single family home" is a non-issue. It is perfectly clear that this referred to the Jadczak's home, and not the airplane hangar located nearby. 6 Additionally, in his EUO testimony, Mr. Jadczak confirms that his home is 4400 square feet, including the attached garage, and that his hangar was 1936 square feet. (Exhibit B, p. 51, lines 13-17). 11
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requested that the Policy limits be changed from $82,200 to $200,000. Not coincidentally, $82,200 was the Coverage B-Other Structures limits on the renewal Policy and $200,000 was the approximate amount plaintiffs claim it will cost to rebuild their hangar. Further confirming that all agreed that the airplane hangar was an "Other Structure" covered under Coverage B is the September 1, 2006 letter from Homesite to Mr. Jadczak confirming that the following changes were made to the Policy: "ADDED HO 04 48 OTHER STRUCTURE INCR LM." See Exhibit D. In other words, the policy had been endorsed to increase the Coverage B-Other Structures limit. Finally, the renewal policy was issued with the HO 04 48 Endorsement, which demonstrates without question that the hangar is an "Other Structure." See Exhibit E. The Endorsement states: OTHER STRUCTURES INCREASED LIMITS Description of Structure 1. HANGAR Additional Limit of Liability 1. $82,000
It is beyond dispute that the Jadczak's airplane hangar is, and always was, covered by Homesite only under Coverage B-Other Structures. Mr. Jadczak's post-loss communications only strengthen this conclusion. d) The limited case law supports Homesite's position.
Plaintiffs' argument, that an airplane hangar is a dwelling, is unique at best. Therefore, it is not surprising that the case law is scarce. The one Minnesota case cited by plaintiffs on this issue is completely off-point. (D.I. 22 at pp. 11-12). In Howard v. H. Robert Anderson & Assoc., Inc., 2004 WL 3371968 (Minn. Dist. Ct.), the structure at issue was a cabin located in a different town from the insured property. The policy at issue precluded coverage for structures located away from the insured premises and
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used as a dwelling. It was undisputed that, when in that other town, the insured lived in the cabin. The facts in Howard are completely inapplicable here. First, here, the structure at issue is not a cabin, but an airplane hangar. Second, the airplane hangar is located right next to the house, not in another town. Third, to fall under Coverage A-Dwelling, the Homesite Policy requires not only that the structure be a dwelling, but also that it be a single family home and primary residence. See Exhibit A. Plaintiffs are unable to cite a single case that found that an airplane hangar, or any other similar structure, located next to a house, was a dwelling, single family home and/or primary residence. Much more on point is Farmers Mutual Insurance Association v. Martin, et al., 84 So. 2d 688 (Miss. 1956). In Martin, a windstorm policy covered a "one-story frame dwelling with approved roof, occupied by tenant, including permanent building equipment and fixtures therefor while anywhere on the above described premises." Martin, 84 So. 2d at 689. While the policy was in force, a detached garage was destroyed by wind. The garage was built to accommodate two cars, was detached and located ten feet from the dwelling. The garage was rented to a tenant, who stored a car and other `stuff' there. The tenant also kept some chairs and a bed, and on hot summer nights he sometimes slept in the garage. Id. The Mississippi Supreme Court stated that "the decision of this case does not depend upon the definition of the word `dwelling' because that word alone is not used in the policy contract." Id. The property insured is not only said to be a dwelling, but it is further described and identified as `the one-story frame dwelling with approved roof, occupied by tenant, including permanent building equipment and fixtures therefor while anywhere on the above
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described premises.'" The Court went on to hold that to call this garage a covered dwelling would be "to do violence to the plain and unambiguous terms of the policy contract." Id. at 690; Couch on Insurance Third Edition, § 20:23 (2007). In Martin, the Mississippi Supreme Court recognized that, in order to qualify for coverage, the policy required that the structure be more than just a dwelling, but had to be the dwelling described therein. Martin, 84 So. 2d at 689-90. That holding is directly on point here. In order to qualify under Coverage A-Dwelling, the Policy requires not only that a structure be a dwelling, but also that it be a single family home and primary residence. That is obviously not the case with the airplane hangar. What little law there is on this topic clearly supports the position that the airplane hangar falls under the Policy's Coverage B-Other Structures, as a matter of law. e) Storing an RV Does Not Make an Airplane Hangar a Dwelling.
Plaintiffs argue that their airplane hangar is a dwelling covered under the Policy's Coverage A because there is a mobile home stored in it. (Plaintiffs' Memo, p.13). This is incorrect for several reasons. First, the vehicle stored in the hangar was an RV, not a mobile home. (Exhibit B, p. 67). Second, plaintiffs did not live in the RV, or the hangar. In fact, they used the hangar to store the RV. (Exhibit B, p. 55). Nor was the RV, or the hangar, a single family home or a primary residence. Finally, plaintiffs' own insurance claim and Complaint belies their position. Plaintiffs have claimed coverage for the RV not under Coverage ADwelling, but under Coverage C-Personal Property.7 They continue to pursue the Coverage C RV claim in this litigation. Storing an unused RV (or even a used RV) in your airplane hangar does not qualify your airplane hangar as a dwelling, a primary residence or a single family home.
7
This claim is also problematic, for reasons explained below. 14
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D.
CONCLUSION
For the foregoing reasons, plaintiffs' airplane hangar is not a dwelling covered under the Policy's Coverage A, and Homesite's Motion for Summary Judgment on the dwelling issue must be granted. 3. THE RV IS NOT COVERED UNDER THE POLICY. A. SUMMARY OF ARGUMENT
On May 29, 2006, when plaintiffs' airplane hangar was destroyed by fire, the Recreational Vehicle stored in the airplane hangar was destroyed, as well. Plaintiffs made a claim for the loss of their RV under the Coverage C-Personal Property section of the Policy. Because the Policy clearly and unambiguously precludes coverage for Motor Vehicles, there is no coverage for plaintiffs' RV under the Policy. Plaintiffs will likely argue that the exception (for vehicles not subject to registration and used to service the insured residence) to the Motor Vehicle exclusion applies, adding coverage back. The exception does not apply because (1) the RV was subject to registration and (2) the RV was not used to service the residence. Therefore, as a matter of law, there is no coverage under the Policy for the RV, and Homesite's Motion for Summary Judgment on this issue should be granted. B. STATEMENT OF FACTS 1. KEY POLICY PROVISIONS
The Homesite Policy clearly and unambiguously precludes coverage for the RV. The Policy provides in relevant part as follows: SECTION I PROPERTY COVERAGES COVERAGE C Personal Property We cover personal property owned or used by an "insured" while it is anywhere in the world. . . .
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Property Not Covered. We do not cover: * * *
3. Motor Vehicles . . . [deleted and replaced by DE Special Provisions] * * * SPECIAL PROVISIONS - DELAWARE SECTION I PROPERTY COVERAGES COVERAGE C PERSONAL PROPERTY * * *
PROPERTY NOT COVERED 3. Motor Vehicles or all other motorized land conveyances. . . * * *
We do cover vehicles or conveyances not subject to motor vehicle registration which are: a. Used to service an "insured's" residence; . . . See Exhibit A. 2. MR. JADCZAK'S SWORN TESTIMONY ABOUT THE RV
As a matter of law, there is no coverage for the RV under the Policy. Although Mr. Jadczak's EUO testimony is not necessary to reach this conclusion, his testimony only further supports it. Regardless of whether the RV was actually registered, it was certainly subject to registration. Additionally, Mr. Jadczak's testimony proves that, shortly before the fire, he was planning to drive the RV (and therefore, register it). See Exhibit B, pp. 35-36, 41 (repaired RV muffler and put tires on RV in 2005); pp. 65, 67 (intended to travel in RV in July 2005 with grandchildren).
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C.
ARGUMENT 1. The RV is a Motor Vehicle or Other Motorized Land Conveyance.
The Policy precludes coverage for Motor Vehicles and all other motorized land conveyances. Pursuant to the clear and unambiguous terms of the Policy, the RV falls under that exclusion. Additionally, under Delaware law, there is no question that an RV is a Motor Vehicle. Section 101 of the Delaware Code provides: "Motor vehicle" includes every vehicle, as defined in this section, which is self-propelled . . . 21 Del. C. § 101(35). Section 101 goes on to define Vehicle: "Vehicle" means every device in, upon or by which any person or property is or may be transported or drawn upon a public highway, ... 21 Del. C. § 101(80). Section 101 defines Recreational Vehicle, as follows: "Recreational vehicle" includes every motor vehicle used for temporary human living quarters, not the residence of the owner or occupant, and used for recreational or vacation activities, including motor homes, self-propelled campers and other motor vehicles with permanently attached camper components. . . . 21 Del. C. § 101(53). Finally, plaintiffs do not contest that the RV is a Motor Vehicle pursuant to the Policy exclusion. Rather, they contend that the RV falls under the exception to the exclusion for vehicles not subject to registration that are used to service an insured's residence. Because the RV was subject to registration and was not used to service the Jadczak's residence, it does not fall under the exception to the exclusion. 2. The RV was Subject to Motor Vehicle Registration.
The RV does not fall under the exception to the Motor Vehicle exclusion because it was subject to registration and was not used to service the Jadczak's residence. Delaware law is clear RV's are subject to motor vehicle registration.
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§ 2101. Operation of unregistered vehicle; exceptions. (a) No person shall drive or move, nor shall any person, being the owner of a vehicle, knowingly permit to be driven or moved upon any highway any vehicle, except trackless trolley coaches, of a type required to be registered hereunder, which is not registered and for which current registration plates have not been issued as provided in this chapter or for which the appropriate fees have not been paid when and as required by this chapter 21 Del. C. § 2101(a).8 Delaware law prohibits any person from operating a vehicle without registration. As is set forth above, Delaware law defines "vehicle" to include RV's. Therefore, the Jadczaks' RV was subject to registration. The Policy provides an exception to the Motor Vehicle exclusion where, inter alia, a vehicle is not subject to registration. The Jadczaks' RV was subject to registration, regardless of whether it was actually registered. Therefore, the RV cannot fall under the exception to the Motor Vehicle exclusion, and it is excluded from coverage under the Policy. 3. The RV was Not Used to Service Plaintiffs' Residence.
As a matter of law, the RV falls under the Policy's Motor Vehicle exclusion, and does not fall under that exclusion's exception for vehicles (not subject to motor vehicle registration and) used to service an insured's residence. There is no evidence that the Jadczaks' RV was used to service, i.e., maintain or repair, their residence. In Tenos v. State Farm Ins. Co., 716 A.2d 626 (Pa. Super. 1998), the court was asked to decide whether an ATV fell under a similar exception to a motor vehicle exclusion for vehicles used to service the insured location. The court held that the word "service" in this context contemplates some sort of maintenance or repair to the premises.
8
See also, www.dmv.org/de-delaware/rv-motor-homes.php (Delaware's unofficial Department of Motor Vehicles website), which confirms that RV's must be registered in Delaware and www.dmv.de.gov (Delaware's official DMV website), which provides the fees for registering an RV. 18
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Also, according to the National Underwriter Company's October 23, 2007 Fire Casualty and Surety Bulletin, a homeowner may have certain "vehicles" that are used to "service" the home (such as a tractor). Mere use of a vehicle for recreation or enjoyment cannot be interpreted as "serving the residence." National Underwriter cites Websters Ninth New Collegiate
Dictionary's definition of service, which is "to repair or provide maintenance." See National Underwriter Company's October 23, 2007 Fire Casualty and Surety Bulletin, attached hereto as Exhibit F. Plaintiffs' RV was not, as a matter of law, used to service, i.e., repair or provide maintenance to, plaintiffs' residence. Because the RV was a motor vehicle, was subject to registration and was not used to service the insured's premises, is it excluded from coverage by the Policy's Motor Vehicle exclusion. D. CONCLUSION
For the foregoing reasons, coverage for plaintiffs' RV is precluded by the Policy's Motor Vehicle exclusion, and Homesite's Motion for Summary Judgment on the RV issue must be granted. 4. PLAINTIFFS' COST TO STORE THEIR AIRPLANE IS NOT COVERED UNDER THE POLICY A. SUMMARY OF ARGUMENT
After their airplane hangar was destroyed, plaintiffs paid a neighbor for the use of her airplane hangar to store plaintiffs' airplane. Plaintiffs now seek coverage for the airplane hangar rental under the Policy's Coverage D-Loss of Use. Plaintiffs' rental of a hangar to store their airplane is not covered under the Policy's Coverage D-Loss of Use. Coverage D-Loss of Use provides coverage for certain expenses incurred when a covered loss makes that part of the "residence premises" where the insured resides not fit to live in. Here, it is beyond dispute that plaintiffs' house was not rendered unfit to live in. Therefore, loss
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of use coverage was never implicated by plaintiffs' loss, and rental of a hangar for plaintiffs' airplane is simply not covered by the Policy. B. STATEMENT OF FACTS 1. KEY POLICY PROVISIONS
The Homesite Policy does not provide coverage for the rent incurred by plaintiffs to store their airplane. Thus, the Policy clearly and unambiguously precludes coverage for plaintiffs' loss of use claim. The Policy provides in relevant part as follows: SECTION I PROPERTY COVERAGES COVERAGE D Loss of Use * * *
1. If a loss covered under this Section makes that part of the "residence premises" where you reside not fit to live in, we cover, at your choice, either of the following. . . a. Additional Living Expense, meaning any necessary increase in living expenses incurred by you so that our household can maintain its normal standard of living; or b. Fair Rental Value, meaning the fair rental value of that part of the "residence premises" where you reside less any expenses that do not continue while the premises is not fit to live in. 2. OTHER PERTINENT FACTS
In order to trigger the Policy's Coverage D-Loss of Use coverage, that part of the residence premises where the Jadczaks live had to be rendered unfit to live in. The Jadczaks have never claimed that their home was rendered unfit to live in, nor is there any evidence to that effect. In fact, at his EUO, Mr. Jadczak testified that the only damage to the residence caused by the fire was heat damage to the soffit above the attached garage, separation of the seal around the windows of the garage doors and damage to the landscaping. (Exhibit B, p.78, line 11 p. 79, line 13). Certainly, none of this damage rendered the Jadczaks' home unfit to live in.
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C.
ARGUMENT
The Policy's Coverage D-Loss of Use provides coverage for certain expenses incurred when a covered loss makes that part of the "residence premises" where the insured resides not fit to live in. Here, it is beyond dispute that plaintiffs' house was not rendered unfit to live in. Therefore, loss of use coverage was never implicated by plaintiffs' loss and plaintiffs are not entitled to coverage under the Policy's Coverage D-Loss of Use. D. CONCLUSION
For the foregoing reasons, plaintiffs are not entitled to Loss of Use coverage for the cost to rent a hangar to store their airplane, and Homesite's Motion for Summary Judgment on the Loss of Use issue must be granted. 5. HOMESITE DID NOT ACT IN BAD FAITH OR VIOLATE THE CONSUMER FRAUD ACT A. SUMMARY OF ARGUMENT
Plaintiffs cannot prove that Homesite has acted in bad faith or has violated Delaware's Consumer Fraud Act. As is set forth above, as a matter of law, Homesite at all times acted in good faith with regard to plaintiffs. Each of Homesite's coverage determinations was correct, and Homesite provided coverage to plaintiffs where it was due under the Policy. Even if this Court should find that one or more of Homesite's coverage determinations was incorrect, there existed a set of facts or circumstances known to Homesite that created a bona fide dispute and, therefore, a meritorious defense to Homesite's liability under the Policy. Additionally, plaintiffs have failed to allege any facts sufficient to sustain a claim of violation of Delaware's Consumer Fraud Act. Such a claim requires allegations of the use of fraud in connection with the sale of merchandise, which are non-existent here. Additionally, Federal Rule of Civil Procedure 9(b) requires that plaintiffs must state the alleged circumstances constituting fraud with particularity. Plaintiffs have been and will be unable to do so.
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Therefore, Homesite's Motion for Summary Judgment with regard to plaintiffs' claims for bad faith and violation of Delaware's Consumer Fraud Act must be granted. B. STATEMENT OF FACTS
Despite plaintiffs' unsupported statements to the contrary, Homesite at all times acted in good faith and handled plaintiffs' claim promptly and appropriately. Plaintiffs' fire occurred on May 29, 2006. All within two weeks of the fire, plaintiffs submitted their claim to Homesite, Homesite assigned an adjuster and an investigator, and the adjuster contacted plaintiffs to set up a meeting. In addition to Homesite's adjuster and investigator, a separate cause and origin investigator inspected the scene. See July 20, 2006 Cause and Origin Report, attached hereto as Exhibit "G." Once the investigation was underway, Homesite became aware of coverage issues, and issued a detailed Reservation of Rights letter to plaintiffs on June 27, 2006. See June 27, 2006 Reservation of Rights letter, attached hereto as Exhibit "H." Homesite continued to investigate the claim and to communicate with plaintiffs. Mr. Jadczak's Examination Under Oath was taken on October 3, 2006. See Exhibit B. Homesite sent a denial letter with regard to the RV claim to the Jadczaks on November 16, 2006. See November 16, 2006 denial letter, attached hereto as Exhibit "I." On March 5, 2007, Homesite issued three payments to plaintiffs: $21,7729 under
Coverage A, $68,89410 under Coverage B and $31,45011 under Coverage C. In response to an inquiry regarding those amounts, Homesite's counsel sent a July 30, 2007 letter to plaintiffs' counsel setting forth the basis for Homesite's calculations. See July 30, 2007 letter to Michael Sensor, Esq., attached hereto as Exhibit "J."
9
For damage to the dwelling, including landscaping. Policy limits for the hangar, plus 5% for debris removal. 11 For the replacement cost of plaintiffs' contents, minus depreciation.
10
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Plaintiffs' allegations regarding a failure to preserve evidence to support a subrogation claim are a red herring because there is no subrogation potential in this matter. Additionally, plaintiffs' allegation that Homesite failed to retain a cause and origin investigator is incorrect and irrelevant. Homesite did retain a cause and origin investigator, who concluded that the fire was of an accidental nature and was likely caused by the RV's battery charger. See Exhibit G. The cause of the fire is not at issue in this matter. Homesite paid plaintiffs' entire claim for damage to their dwelling and landscaping, paid the policy limits for the loss of the airplane hangar, and paid plaintiffs' covered contents claim. Homesite did not provide coverage for plaintiffs' RV, nor did Homesite provide additional coverage for the airplane hangar under Coverage A-Dwelling. Homesite's coverage positions were correct, and fully supported by the Policy and facts of the claim. C. ARGUMENT 1. Homesite Did Not Act in Bad Faith
Under Delaware law, a lack of good faith, or the presence of bad faith, is actionable where the insured can show that the insurer's denial of benefits was "clearly without any reasonable justification." Tackett v. State Farm Fire & Cas. Ins. Co., 653 A.2d 254 (Del. 1995) (citing Casson v. Nationwide Ins. Co., 455 A.2d 361 (Del. Super. 1982). "The ultimate question is whether at the time the insurer denied liability, there existed a set of facts or circumstances known to the insurer which created a bona fide dispute and therefore a meritorious defense to the insurer's liability." Casson, supra. A first-party claim against an insurer for bad faith denial or delay in claim payments sounds in contract and arises from the implied covenant of good faith and fair dealing. Tackett, supra. Recovery is limited to those damages that arise naturally from the breach or that were reasonably foreseeable at the time the contract was made. Id.
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Courts have generally precluded a party from obtaining damages for the emotional distress caused by breach of contract. This restriction has been applied in insurance bad faith cases to preclude recovery for emotional distress. Id. There is generally no basis for the recovery of damages for emotional distress in the absence of intentional conduct and physical injury, and an insured is not entitled to the recovery of punitive damages in a bad faith action unless the insurer's breach is particularly egregious, reckless or malicious. Id. The penal aspect and public policy considerations which justify the imposition of punitive damages require that they be imposed only after a close examination of whether the defendant's conduct is "outrageous," because of "evil motive" or "reckless indifference to the rights of others." ... Mere inadvertence, mistake or errors of judgment which constitute mere negligence will not suffice. It is not enough that a decision be wrong. It must result from a conscious indifference to the decision's foreseeable effect. Id. (quoting Restatement (Second) of Torts § 908 (1979)). Here, not only were Homesite's coverage decisions justified, they were correct. Even if the decisions were incorrect, they were completely justifiable based on the Policy and case law cited herein. As a matter of law, plaintiffs cannot establish that Homesite acted without any reasonable justification. Here, Homesite paid the entire covered claim, and was correct in its denial of the noncovered portions of the claim, as described above. Even if it is found that Homesite was incorrect in its partial denial of coverage, the coverage issues created a bona fide dispute and, therefore, a meritorious defense to plaintiffs' claims. There is no question that there was a reasonable justification for coming to the conclusions that Homesite did. Therefore, as a matter of law, Homesite acted in good faith with regard to the Jadczaks' claim. 2. Homesite Did Not Violate the Delaware Consumer Fraud Act
Without alleging a single fact to support their claim, plaintiffs allege that Homesite violated the Delaware Consumer Fraud Act, 6 Del. C. § 2513. The Delaware Consumer Fraud
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Act prohibits the use of fraud in connection with the sale of merchandise. Specifically, the Act prohibits: The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, or the concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale, lease or advertisement of any merchandise, whether or not any person has in fact been misled, deceived or damaged thereby, is an unlawful practice. Federal Rule of Civil Procedure 9(b) mandates that: In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally. Here, plaintiffs fail to allege any facts with regard to fraud on the part of Homesite with regard to the sale of merchandise (presumably the policy). Therefore, plaintiffs' claim for a violation of the Delaware Consumer Fraud Act must be dismissed. FRCP 9(b); Eames v. Nationwide Mut. Ins. Co., 412 F. Supp. 2d 431 (D. Del. 2006).12 D. CONCLUSION
For the foregoing reasons, plaintiffs cannot prove that Homesite acted in bad faith or violated Delaware's Consumer Fraud Act. Judgment on these issues must be granted. 6. PRAYER FOR RELIEF For the foregoing reasons, Homesite submits that summary judgment should be entered in its favor and against plaintiffs, declaring that (1) plaintiffs' airplane hangar is not covered under the Policy's Coverage A-Dwelling, (2) coverage for plaintiffs' RV is precluded by the Policy's Motor Vehicle exclusion, (3) plaintiffs' claim for rent to store their airplane is not It follows, obviously, that plaintiffs cannot establish that Homesite committed "gross, oppressive or aggravated" fraud, and so cannot be entitled to punitive damages under the Act. DiSimplico v. Equitable Variable Life Ins. Co., 1988 WL 15394 (Del. Super. 1988). 25
12
Therefore, Homesite's Motion for Summary
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covered under the Policy's Coverage D-Loss of Use and (4) plaintiffs cannot demonstrate that Homesite has acted in bad faith or violated the Delaware Consumer Fraud Act.
Respectfully submitted,
Dated: April 11, 2008
/s/ Sean J. Bellew Sean J. Bellew (#4072) Cozen O'Connor 1201 North Market Street, Suite 1400 Wilmington, DE 19801 Telephone: (302) 295-2026 Attorneys for Defendant Homesite Insurance Company
Of counsel: Melissa Brill Cozen O'Connor 45 Broadway Atrium, 16th Floor New York, NY 10006 Telephone: (212) 509-9400
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Case 1:07-cv-004
Free Brief (Combined Opening and Answering) - District Court of Delaware - Delaware
| File Size: | 9,011.1 kB |
| Pages: | 322 |
| Date: | September 7, 2008 |
| File Format: | |
| State: | Delaware |
| Category: | District Court of Delaware |
| Author: | unknown |
| Word Count: | 10,006 Words, 65,574 Characters |
| Page Size: | Letter (8 1/2" x 11") |
| URL |
https://www.findforms.com/pdf_files/ded/38598/34.pdf |
| Download Brief (Combined Opening and Answering) - District Court of Delaware ( 9,011.1 kB) |
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