J-A31020-17


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

JOHN REYNOLDS                            :   IN THE SUPERIOR COURT OF
                                         :        PENNSYLVANIA
                   Appellant             :
                                         :
                                         :
             v.                          :
                                         :
                                         :
PENNSYLVANIA NATIONAL MUTUAL             :   No. 1286 EDA 2017
CASUALTY INSURANCE COMPANY               :
A/K/A PENN NATIONAL INSURANCE            :
COMPANY                                  :

               Appeal from the Order Entered March 16, 2017
    In the Court of Common Pleas of Philadelphia County Civil Division at
                            No(s): 150602031


BEFORE:    PANELLA, J., OLSON, J., and STEVENS*, P.J.E.

MEMORANDUM BY OLSON, J.:                            FILED MARCH 13, 2018

      Appellant, John Reynolds, appeals from the order entered on March

16, 2017. The subject order granted the motion for summary judgment that

was filed on behalf of Pennsylvania National Mutual Casualty Insurance

Company a/k/a Penn National Insurance Company (hereinafter “Penn

National”) and dismissed the action. We affirm.

      The trial court has ably summarized the underlying facts and

procedural posture of this case. As the trial court explained:

        [Penn National] issued [Appellant] an all-risk business
        insurance policy (the “Policy”) . . . , with a limit of
        [$2,403,226.00], on December 7, 2013. This policy was in
        effect at the time of the water damage occurrence in this
        case. The Policy contains exclusions for damage to the
        interior of the structure caused by rain, except where the
        rain entered as a result of damage caused by a covered

____________________________________
* Former Justice specially assigned to the Superior Court.
J-A31020-17


         cause of loss; and for loss or damage caused by water,
         interior or exterior. However, there is an endorsement
         allowing coverage of up to [$100,000.00] for water damage
         caused by a backed up sewer, drain, or sump pump.[1]

         On July 15, 2014, there was a significant rainstorm in
         Philadelphia. The next day, [Appellant] filed for first-party
         benefits for flooding damage to the interior of the building.
         [Appellant] made a claim for water damage to all four floors
         and the basement of the property, along with computers in
         the building. On July 24, 2014, Michael Danilla, an adjuster
         working for [Penn National] inspected the premises.

         On July 27, 2014, [Penn National] sent a reservation of
         rights letter to [Appellant], stating that [Penn National]
         would investigate the cause of loss and assign an expert to
         examine the roof. On August 4, 2014, Keith Bergman, P.E.,
         inspected the roof. His report, dated August 7, 2014,
         stated that the roof appeared to be in good condition with
         no evidence of water penetration into the building.
         Accordingly, on August 26, 2014, [Penn National] sent
         [Appellant] a denial letter.

         An employee of [Appellant] by the name of Ray Griffiths
         subsequently reported that he had gone to the building
         during the storm and saw flooding inside. Griffiths said that
         he went upstairs on the roof and saw a blocked drain that
         had accumulated approximately 18 inches of water around
         it. Griffiths removed the debris that had clogged the roof
         and the water drained away.

         In [October 2014, Appellant] requested reconsideration of
         the claim denial. [Appellant] advised [Penn National] that
         [he] would be hiring [his] own engineer to examine the
         property.     In correspondence, [Griffiths’] report was
         disclosed.    On October 28, 2014, [Appellant’s] expert,
         Charles Penza, examined the roof and issued a report
         stating that the plugged drain caused a backup of rainwater
         on the roof, resulting in water penetration through a
____________________________________________


1We quote the relevant portions of the Policy in the Appendix to this
memorandum.



                                           -2-
J-A31020-17


          shingled party wall.   There was no finding of physical
          damage to the roof or party wall.

          Based on this new information, on January 29, 2015, [Penn
          National] reconsidered its denial of coverage and granted
          limited coverage in the amount of [$100,000.00] under the
          Policy’s Businessowners Pennpac Deluxe Endorsement. This
          coverage was for damage caused by backed up sewers and
          drains.

          [Appellant] was not satisfied and filed an initial complaint on
          July 16, 2015. He filed a Second Amended Complaint on
          November 21, 2015.

Trial   Court   Opinion,   3/16/17,   at   1-3   (some   internal   citations   and

capitalization omitted).

        Appellant’s complaint contained two claims:      breach of contract and

bad faith.   In essence, Appellant claimed that Penn National breached the

Policy by failing to pay for all of the losses he sustained and that Penn

National’s refusal to pay under the Policy constituted bad faith.               See

Appellant’s Second Amended Complaint, 11/21/15, at 3-5.

        At the conclusion of discovery, Penn National filed a summary

judgment motion and requested that the trial court grant it summary

judgment on both of Appellant’s claims and dismiss Appellant’s complaint.

According to Penn National, there was no genuine issue of material fact in

this case, as it was undisputed that Appellant’s loss was caused by rainwater

“backing up from the [roof] drain and seeping through the shingled party

wall.” See Penn National’s Motion for Summary Judgment, 9/6/16, at ¶ 36.

Therefore, Penn National claimed, it fulfilled its contractual obligations when

it paid Appellant the $100,000.00, in accordance with the “Businessowners


                                       -3-
J-A31020-17



Pennpac Deluxe Endorsement.” Penn National claimed it was not liable for

the remainder of Appellant’s losses, as the Policy’s “rainwater limitation” and

“water    exclusion”   provisions   limited   Penn   National’s   liability   to    the

$100,000.00 it had already paid. See id. at 1-9.

      On October 6, 2016, Appellant filed a cross-motion for summary

judgment, where he requested judgment in his favor on both of his claims.

See Appellant’s Answer and Cross-Motion for Summary Judgment, 10/6/16,

at 1-7.

      On March 16, 2017, the trial court entered an order, which denied

Appellant’s cross-motion for summary judgment, granted Penn National’s

summary judgment motion, and dismissed Appellant’s complaint.                      Trial

Court Opinion and Order, 3/16/17, at 1-6.

      Appellant filed a timely notice of appeal. Appellant raises two claims:

          [1.] Whether the trial court erred in granting summary
          judgment in favor of [Penn National] when the undisputed
          evidence showed the damage to the insured premises for
          which [Appellant] made claim under [Penn National’s]
          insurance policy was caused by water damage caused by a
          clogged roof drain that was not excluded under [Penn
          National’s] insurance policy it issued to [Appellant?]

          [2.] Whether the trial court erred in not granting summary
          judgment in favor of [Appellant] when the undisputed
          evidence showed the damage to the insured premises for
          which [Appellant] made claim under [Penn National’s]
          insurance policy was caused by water damage caused by a
          clogged roof drain that was not excluded under [Penn
          National’s] insurance policy it issued to [Appellant?]

Appellant’s Brief at 2-3.



                                       -4-
J-A31020-17



      We have reviewed the briefs of the parties, the relevant law, the

certified record, and the opinion of the able trial court judge, the Honorable

Ramy I. Djerassi. We conclude that there has been no error in this case and

that Judge Djerassi’s opinion, entered on March 16, 2017, meticulously and

accurately disposes of Appellant’s issues on appeal. Therefore, we affirm on

the basis of Judge Djerassi’s thorough opinion and adopt it as our own. In

any future filing with this or any other court addressing this ruling, the filing

party shall attach a copy of Judge Djerassi’s opinion.

      Order affirmed. Jurisdiction relinquished.

      Panella, J., concurs in the result.

      Stevens, P.J.E., concurs in the result.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 3/13/18




                                      -5-
J-A31020-17




                                  Appendix

     In relevant part, the Policy declares:

                    BUSINESSOWNERS COVERAGE FORM

                                     ...

SECTION 1 – PROPERTY

   A. Coverage
   We will pay for direct physical loss of or damage to Covered Property at
   the premises . . . caused by or resulting from any Covered Cause of Loss

                                     ...

      3. Covered Causes of Loss
      Risks of direct physical loss unless the loss is:
          a. Excluded in Paragraph B. Exclusions in Section 1; or

          b. Limited in Paragraph 4. Limitations in Section 1.

      4. Limitations
          a. We will not pay for loss of or damage to:

                                     ...

              (5) The interior of any building or structure caused by or
              resulting from rain, snow, sleet, ice, sand or dust, whether
              driven by wind or not, unless:
                  (a) The building or structure first sustains damage by a
                  Covered Cause of Loss to its roof or walls through which
                  the rain, snow, sleet, ice, sand or dust enters; or

                   (b) The loss or damage is caused by or results from
                   thawing of snow, sleet or ice on the building or structure.

                                     ...

   B. Exclusions



                                     -6-
J-A31020-17


        1. We will not pay for loss or damage caused directly or indirectly by
        any of the following. Such loss or damage is excluded regardless of
        any other cause or event that contributes concurrently or in any
        sequence to the loss. Those exclusions apply whether or not the loss
        event results in widespread damage or affects a substantial area.

                                           ...

            g. Water[2]

                                           ...

                (3) Water that backs up or overflows or is otherwise
                discharged from a sewer, drain, sump, sump pump or related
                equipment. . .

                                           ...

            This exclusion applies regardless of whether any of the above, in
            Paragraphs 1. through 5., is caused by an act of nature or is
            otherwise caused.     An example of a situation to which this
            exclusion applies is the situation where a dam, levee, seawall or
            other boundary or containment system fails in whole or in part,
            for any reason, to contain the water.

            But if any of the above, in Paragraphs 1. through 5., results in
            fire, explosion or sprinkler leakage, we will pay for the loss or
            damage caused by that fire, explosion or sprinkler leakage.

                                           ...

                                BUSINESSOWNERS
                          PENNPAC DELUXE ENDORSEMENT

This endorsement modifies insurance provided under the following:

BUSINESSOWNERS COVERAGE FORM

____________________________________________


2 A Water Exclusion Endorsement modified the Policy’s original water
exclusion. In quoting the Policy, we have included the language contained in
the Water Exclusion Endorsement.



                                           -7-
J-A31020-17


Section 1 – PROPERTY is amended as follows:

                                     ...

II. COVERAGE SUBJECT TO BLANKET LIMIT
    A. Blanket Limit of Insurance - $100,000

   The most we will pay for loss or damage under the following Additional
   Coverages and Coverage Extensions is $100,000 in total in any one
   occurrence:

       1. Back Up of Sewers and Drains

                                     ...

   B. Additional Coverages

   The following are added to Paragraph A.5. Additional Coverages:

   Back Up of Sewers and Drains

   We will pay for loss or damage to Covered Property caused by a back up
   from a sewer or drain or an overflow from a sump within a building at
   the described premises provided:
       (a) The back up or overflow is not expected or intended from your
       standpoint; and

       (b) The expenses must be reported to us in writing no later than 90
       days after the occurrence.

The Policy at 18, 33, 34, 35, 50, and 90.




                                    -8-
                                                                                  Circulated 02/15/2018 03:22 PM




          THE COURT OF COMMON PLEAS OF PHILADELPHIA COUNTY
                FIRST JUDICIAL DISTRICT OF PENNSYLVANIA
                           CIVIL TRIAL DIVISION
JOHN REYNOLDS,                                         JUNE TERM,
                                                       2015
                               Plaintiff,


                                                       No. 203)
PENNSYLVANIA NATIONAL MUTUAL .                         Commerce Program
CASUALTY INSURANCE COMPANY,

                               Defendant.              Control No. 16090583


                                             OPINION

       Defendant's motion for summary judgment arises from a water damage incident at a

building located at 1 15 Chestnut Street, Philadelphia (the Property) owned by Plaintiff John

Reynolds. Plaintiff has brought claims for breach of contract and insurance bad faith against its

defendant insurer, Pennsylvania National Mutual Casualty Insurance Company ("Pa. National

Mutual"). For reasons explained here, defendant's summary judgment motion is granted on both

counts, and plaintiff's cross-motion are denied.

       The facts are as IUHows. Defendant issued Plaintiff an all-risk business insurance policy

(the "Policy"), numbered BP9 0669079, with a limit of ;2�403,226, on December 7. 2013. This

policy was in cftèct at. the time o/Ïthe water damage occurrence in this case. The Policy contains

exclusions    damage to the interior of the structure caused by rain, except where the rain

entered as a result ol' damage caused by a covered cause of' loss (Policy, page :!: 0000:34,.JS)� and.




                                                   1
IOr loss or damage caused by water, interior or exterior. (Policy ).000050). However, there is an

endorsement allowing coverage of" up to $1             tor water damage caused by a backed up

sewer,          or sump pump (Policy, Businessowners' PennPAC Deluxe Endorsement.
                                                                      . .      . , page
                                                                                   ,•




000050),



         On July 15, 2014, there was a significant rainstorm in Philadelphia. The next day,

Plaintiff filed for first-party benefits for flooding damage to the interior of the building. Plaintiff

made a claim for water damage to all four fl(jors and the basement of the propefty, along with

computers in the building. On July 24, 2014, Michael Danilla, an Adjuster working for defendant

Pa. National Mutual inspected the premises.

         On July 27. 2014, MC. Danilla sent a reservation of rights letter to MLA Claims,

PlaintilTs representative, stating that Pa. National Mutual would investigate the cause of loss and

assign an expert to examine the roof. On AuguŠt 4, 2014, Keith Bergman, P.E.. inspected the roof.

His report, dated August 7, 2014, stated that the roof appeared to be in good condition with no

evidence of water penetration into the building. Accordingly, on August 26, 2014, Defendant sent

MLA Claims a denial letter.

         An employee of Plaintiff by the name of Ray Griffiths subsequently reported that he had

gone to the building during the storm and saw flooding inside. Griffiths said that he went upstairs

on the roof and saw a blocked drain that had accumulated approximately 1 8 inches of water around

it. Griffiths removed the debris that had clogged the roof and the water drained away.

         In October, 20 4, on behalf of Plaintiff, MLA Claims requested reconsideration ol' the

claim denial. MLA Claims advised Pa. National Mutual that it would be hiring its own engineer

to examine the property- In correspondence, Griffith's report was disclosed. On October 28,

                                                   2
2014, Plaintiffs expert, Charles Penza, examined the roof and issued a report slating thal lhc

plugged drain caused a backup of rainwater on the roof, resulting in water penetration through a

shingled party wall. There was no finding of physical damage to the roof or party wall. Based on

this new information, on January 29, 2015, defendant Pa. National Mutual reconsidered its

denial of coverage and granted limited Coverage in the amount of $100.000 under the Policy's

Businessowners Pennpac Deluxe Endorsement. This Coverage was for damage caused by

backed up sewers and drains.

           Plaintiff was not satisfied and filed an initial complaint on July 16. 2015. He filed a

Second Amended Complaint on November 21, 2015. Defendant's Summary Judgment Motion

was filed on September 6, 2016. In his responses Plaintiff included his own Cross-Motion for

Summary Judgment. For the reasons which follow, Defendant's Motion is granted and

Plaintiffs Cross-Motion is denied.

           1.      Discussion.

           "When a party seeks summary judgment, a court shall enter judgment whenever there is

no genuine issue of any material fact as to a necessary element of the cause of action or defense

that could bc established by additional discovery." 'In considering whether there exists a genuine

issue of material fact, the court does not weigh the evidence, but determines whether a reasonable

jury, faced with the evidence presented, could return a verdict the non-moving party.' 2

           a. Breach of Contract.

            Plaintiff argues that by Failing to provide full coverage for the damage to the interior of

the Property, Defendant breached its confract. Wc disagree.


 i
     Varner-Mon v. Kap(hammer, 2015 PA Super 14, 109 A,3d 244, 246 (2015).



                                                        3
1
    401 Fourth st.. Inc. v. Investors Ins. Grp., 583 Pa. 445, 461, 879 A.2d 166.      (2005),

              "[T]hree elements are necessary to plead a cause of action for breach of contract: (I ) the

    existence of a contract, including its essential terms, (2) a breach of the contract; and, (3) resultant

    damages. " 1 Plaintiff fails to provide evidence of a contract breach.

              The Policy excludes damage to the interior of the structure caused by rain, except where

    the rain entered as the result of damage caused by a covered cause of Joss. Further, the Policy

    excludes all loss or damage caused by water, interior or exterior, The exception is water damage

    caused by a backed up sewer, drain, or sump pump, for which there is a specific endorsement

    allowing coverage of up to.$J.d0,00

              The expert reports produced by Penza (Plaintiffs expert) and Bergman (Defendant's

    expert) agree that there was no visible damage to the roof. Bergman's analysis, written before

    the parties were made aware of Griffith's report of a clogged roof drain, is clear there was no

    evidence Of water penetration through the roof: Bergman had also observed that the roof itself

    was in good condition after the rainstorm. Bergman's opinion was that the damage was not

    caused by a single event, but was the result of a longstanding problem. Penza's report cites the

    clogged roof drain, and states an opinion that backed up water on the roof caused water to

    penetrate the party wall. Penza believed this was a one-time flooding event,

              Although the parties' experts disagree on the exact way the water damage took place,

    they both agree that the water did not enter through the roof. Nor did either find actual physical

    damage to the roof or party wall that warranted repair. The only cause of the water damage

    according to both experts was the clogged roof drain.




    1   Meyer, I.)arragil. Buckler, Bebenek & Eck P.L.L.C. v. Malone Middleman P.C., t37 A.3d 1247, 1258 (Pa. 2016).


                                                               4
                                                        ;aw Firm:of Malone Middleman. P.C.
         Plaintiff therefore has not has produced evidence that the flooding was the result of any

damage covered by the Policy beyond $100,000. As defendant Pa. National Mutual has paid

$100,000 as required, there is no breach ot• contract.

         b. Bad Faith.
         Defendant is also granted summary judgment on Plaintiff's claim for bad faith.
         In order •to prevail on a claim for insurance bad an insured must show that "the insurer

did not have a reasonable basis for denying benefits under (he policy and that the insurer knew

of, or recklessly disregarded, that it lacked reasonable basis in denying the claim "4 The refusal

to pay need not be fraudulent, but rnust be more than merely negligent or demonstrating bad

judgment? Moreover, "[blad faith must be established by clear and convincing evidence. "Ó

         Plaintiff has simply provided no evidence of bad faith in Defendant's refusal to pay more

than Sl 00,000, Pa. National Mutual's employee, Mr. Danilla, inspected the premises and then

hired Mr. Bergman to re-inspect. Later, when given evidence that the damage had been caused by

a clogged drain, Defendant paid the Policy limits for that loss. Pa. National Mutual' s interpretation

of the Policy is reasonable and does not constitute bad faith because the Policy clearly states an

exclusion for interior water damage caused by rain, except when the flooding is caused by a

backed up drain on the roof. As this is what happened during the December 7, 2013 rainstorm,

Defendant's Motion (Or Summary Judgment is granted and Plaintiffs Cross-Motion for Summary

Judgment is denied.




 " Berg v. Nationwide Milt. Ins. Co. 2012 PA Super 88, 44 A-3d 164, 1 171 (20 2)tintema1 citations omitted).

 b Idr




                                                         5
6
    Johnson v. Progressive Ins. co., 2009 PA super 255, 1 1, 987 A.2d 78 1 ,384 (2009).




                                                           6
     Il.     Conclusion.
      For the reasons©xplained above, Defendant's Motion for Summary Judgment is

 GRANTED and Plaintiffs Cross- Motion for Summary Judgment is DENIED. The casc is

DISMISSED.



                                        BY THE COURT;
    THE COURT OF COMMON PLEAS OF PHILADELPHIA COUNTY
             FIRST JUDICIAL DISTRICT OF
                       PENNSYLVANIA CIVIL TRIAL DIVISION




JOHN REYNOLDS,                                    JUNE TERM, 2015
                               Plaintiff,
                                                                                DOCKETED
                   ..... No. 2031

                                                                         PENNSYLV
CASUALTY INSURANCE COMPANY,
                                                                                NATIONAL
                      Defendant.                  Control No. 17033576
MUTUAL Commerce Program



                                            ORDER

AND NOW, this day of April, 2017, in response to the PlaintifÈg Motion for
Reconsideration, Defendant's response thereto, and the memoranda in support and in opposition,
it is hereby ORDERED as follows;
       The Motion for Reconsideration is DENIED. J




                                            BY THE COURT:




Reynolds Vs Pennsylvani-ORDLLžR             RAMY
                                            RAIVIY I.
 HlllfllUllllllllllll 11111111
      1 S:060203100066 .

 1
·  Plaintiffhas
   Plaintiffhaspointed
                pointed out some m lrsome minor errors in the Court's Opinion. however they are not material to the
ruling.
 which remains. Reconsideration is appropriatejfaparty can point to •new and material evidence or täcts, a change in
 the controlling law ov a clear error inapplying the l idC1s or law 10 the case;dl hand ..Mere disagreement with Ihc
 court'* conclusion is not a basis for reconsideration." Scat-telli Gen. ContraçÇprs Inc. v. Selective Way Ins. Co. i
 No. 2006 CV 4193, 2008 WL 5575968 (Pa. Com. Pl. sept. 9, 2008).

 Ptaintiff can point to no alew facts or material errors: rather, he rehashes arguments alreadyxejectecl by The court.
 Accordingly, recony;ideration is denied.
