Kurach, K. v. Truck Insurance Exchange ( 2018 )

J-A31006-17
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
KONRAD KURACH : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
TRUCK INSURANCE EXCHANGE :
:
Appellant : No. 1726 EDA 2017
Appeal from the Order Entered April 21, 2017
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): July Term, 2015 No. 00339
MARK WINTERSTEEN, INDIVIDUALLY : IN THE SUPERIOR COURT OF
AND ON BEHALF OF ALL OTHERS : PENNSYLVANIA
SIMILARLY SITUATED :
:
:
v. :
:
:
TRUCK INSURANCE EXCHANGE : No. 1730 EDA 2017
:
Appellant :
Appeal from the Order Entered April 21, 2017
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): July Term, 2015 No. 03543
BEFORE: PANELLA, J., OLSON, J., and STEVENS, P.J.E.
MEMORANDUM BY PANELLA, J.: FILED AUGUST 24, 2018
Truck Insurance Exchange (“Truck”) appeals from the orders granting
partial summary judgment to its insureds, Konrad Kurach and Mark
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 Former Justice specially assigned to the Superior Court.
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Wintersteen on the issue of whether general contractor overhead and profit
(“GCOP”) is to be included in an actual cash value settlement under their
insurance policies with Truck. We conclude the insurance policies explicitly
excludes GCOP from actual cash value settlements. Furthermore, we conclude
Pennsylvania law does not evince a policy requiring the inclusion of GCOP in
such settlements. We therefore reverse and remand for further proceedings.
As an initial matter, we must address our jurisdiction to entertain this
appeal. An appeal lies only from a final order unless otherwise permitted by
rule or statute. See McCutcheon v. Philadelphia Electric Company, 788
A.2d 345, 349 (Pa. 2002). In relevant part, a final order is defined as an order
that “disposes of all claims and of all parties[.]” Pa.R.A.P. 341(b)(1).
Here, it is undisputed that the order appealed from did not dispose of
all claims and of all parties. Rather, the parties and the trial court believe
jurisdiction is proper under Rule 341(c). Under this rule, a court may
transform an order that disposes of less than all claims and all parties into a
final order upon an express determination that an immediate appeal would
facilitate resolution of the entire case. See id.
We may review the merits of a trial court’s decision to certify an order
under Rule 341(c) sua sponte. See F.D.P. v. Ferrara, 804 A.2d 1221, 1228
n.6 (Pa. Super. 2002). A certification of finality pursuant to Rule 341 should
only be made in the most extraordinary of circumstances. See Liberty State
Bank v. Northeastern Bank of Pa., 683 A.2d 889, 890 (Pa. Super. 1996).
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In order to properly certify an order as final, a trial court must consider, at a
minimum, the following factors:
(1) whether there is a significant relationship between
adjudicated and unadjudicated claims;
(2) whether there is a possibility that an appeal would be
mooted by further developments;
(3) whether there is a possibility that the court or
administrative agency will consider issues a second time;
[and]
(4) whether an immediate appeal will enhance the prospects
of settlement.
Pullman Power Prod. Of Can., Ltd. v. Basic Engineers, Inc., 713 A.2d
1169, 1172 (Pa. Super. 1998) (citation omitted). And, even after examining
these factors, a trial court should “only certify a non-final order for immediate
appeal … where the failure to do so would result in an injustice which a later
appeal can not correct.” Id., at 1173 (quotation and citation omitted).
Here, the trial court provided the following rationale for its certification:
All four factors weigh heavily in favor of permitting immediate
appeal. As to the first factor, there is a significant relationship
between the adjudicated breach of contract claim and the
remaining issues in the case, which are: (1) whether class
certification is appropriate, (2) plaintiff’s claim for bad faith, and
(3) plaintiff’s damages. Our analysis of Truck’s insurance policy
language and our determination that Truck may not withhold
general contractor overhead and profit from Step-1 actual cash
value payments are central to determining whether this case may
proceed as a class action. This is because putative class members
are likely subject to identical contractual language. As to plaintiff’s
bad faith claim, our analysis of Truck’s pertinent policy language
is also related to whether the insurer had a reasonable basis for
denying benefits and whether Truck knew, or recklessly
disregarded, its own lack of reasonable bass to deny plaintiff’s
Step 1 actual value claim. Our statutory bad faith analysis is quite
clearly related to whether plaintiff is entitled to damages on its
breach of contract claim. As to the second and third factors, it is
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unlikely that a certified appeal will be mooted by further
developments or that we will consider the breach of contract issue
a second time. Regarding the fourth factor, while the parties
dispute whether immediate appellate review will enhance
settlement prospects, it is hard to imagine that an affirmance will
not, at the very least, encourage Truck to reckon with the
consequences. Nor is it untrue that reversal will likely result in
dismissal of the individual cases and make class certification
unlikely. The four factors therefore weigh very strongly in favor of
certifying our April 20, 2017 [o]rder as a final order.
We also find that an immediate appeal of the April 20, 2017
[o]rder is necessary to prevent injustice to Truck Insurance under
extraordinary circumstances presented by this putative class
action litigation. Without appellate court clarification and analysis
of the issues, Truck faces uncertainty in a class action
environment on the litigation’s central issue: whether Truck is
permitted to withhold estimated general contractor overhead and
profit when calculating Step 1 actual value. This legal analysis is,
of course, closely related to plaintiff’s remaining claims.
Clarification from the appellate court prevents injustice because it
is wrong to compel Truck to engage in broad discovery and bear
foreseeably substantial costs on class certification before knowing
for sure whether its contract language is unlawful. Certification of
our April 20, 2017 [o]rder and its underlying legal question will
prevent injustice if the [o]rder is reversed. This injustice consists
of unnecessarily expending money and employee labor time to
comply with potentially voluminous discovery associated with
class certification litigation. This is money and time that cannot be
recovered.
Finally, immediate appellate review promotes judicial economy
because appellate analysis will provide instruction, one way or the
other, on open trial level issues relating to both class certification
and bad faith. Pre-trial review in the event of affirmance is
expected to be extensive and should be provided only after the
threshold legal question is settled.
We conclude the court’s explicit rationale for certification is sound. We thus
have jurisdiction over this appeal, and turn to the merits.
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The crux of this case is the interpretation and application of an insurance
agreement. The essential facts are undisputed for purposes of this appeal.
Wintersteen and Kurach purchased homeowner’s insurance from Truck, and
each suffered a water damage loss covered by their policies. They submitted
claims for these losses to Truck under their policies.
Truck reviewed the claims, and determined that the services of a general
contractor would likely be necessary to repair the damaged property. Neither
Wintersteen nor Kurach pursued the option to repair their damaged property.
Rather, they pursued an alternative remedy provided by their policies: actual
cash value settlement. Truck calculated the amount of the actual cash value
settlement excluding GCOP. Kurach and Wintersteen believe this exclusion is
improper under Pennsylvania law.
Wintersteen is a putative class action plaintiff, while Kurach seeks only
to vindicate his own rights. Both agreed to litigate the dispositive legal issue
through cross-motions for summary judgment. Kurach and Wintersteen
argued Pennsylvania law required that GCOP be included in the calculation of
actual cash value. Truck argued the policy explicitly excluded GCOP from the
calculation and that there is no positive Pennsylvania law overriding the
definition in the policy. The court granted Kurach and Wintersteen’s motions,
and denied Truck’s. This timely appeal followed.
We review a challenge to the entry of summary judgment as follows.
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[We] may disturb the order of the trial court only where it is
established that the court committed an error of law or abused its
discretion. As with all questions of law, our review is plenary.
In evaluating the trial court’s decision to enter summary
judgment, we focus on the legal standard articulated in the
summary judgment rule. The rule states that where there is no
genuine issue of material fact and the moving party is entitled to
relief as a matter of law, summary judgment may be entered.
Where the nonmoving party bears the burden of proof on an issue,
he may not merely rely on his pleadings or answers in order to
survive summary judgment. Failure of a non-moving party to
adduce sufficient evidence on an issue essential to his case and
on which he bears the burden of proof establishes the entitlement
of the moving party to judgment as a matter of law. Lastly, we
will review the record in the light most favorable to the nonmoving
party, and all doubts as to the existence of a genuine issue of
material fact must be resolved against the moving party.
E.R. Linde Constr. Corp. v. Goodwin, 68 A.3d 346, 349 (Pa. Super. 2013)
(citations omitted).
Here, the facts are undisputed. The only questions before us concern
the application of the policy’s exclusions to the facts of the case. “The
interpretation of an insurance policy is a question of law for the court.”
Continental Cas. Co. v. Pro Machine, 916 A.2d 1111, 1118 (Pa. Super.
2007). Our goal in interpreting the language of an insurance policy is to
“ascertain the intent of the parties as manifested by the language of the
written instrument.” Kane v. State Farm Fire and Casualty Co., 841 A.2d
1038, 1042 (Pa. Super. 2003). (citation omitted). “The polestar of our inquiry
is the language of the insurance policy.” Continental Cas. Co., 916 A.2d at
1118 (citation omitted). This Court’s function in analyzing an insurance policy
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is to construe words of common usage in their natural, plain, and ordinary
sense. See id.
Here, the parties are in conflict over the issue of whether GCOP should
have been included in the calculation of the actual cash value settlement. The
homeowner’s policy provides that “actual cash value settlements will not
include [GCOP] … unless and until you actually incur and pay such fees and
charges, unless the law of your state requires that such fees and charges be
paid with the actual cash value settlement.” R.R. 152a (emphasis altered).
The parties’ arguments focus on two opinions from this Court. In the
first, Gilderman v. State Farm Insurance Company, 649 A.2d 941 (Pa.
Super. 1994), the parties fought over the definition of actual cash value in a
homeowner’s policy. “Actual cash value [was] not defined in the policy.” Id.,
at 943 (quotation marks omitted). The panel observed that the term had been
“consistently … interpreted as meaning the actual cost of repair or
replacement less depreciation.” Id. (citation and quotation marks omitted).1
Importantly, the panel did not address the issue of public policy. See
id., at 944. Rather, the panel addressed the issue of what the insurer “agreed
to pay to its insureds[.]” Id., at 945. And concluded that the insurer “agreed
to pay actual cash value, … which include[s] any cost that an insured is
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1 As noted in Kane, the deduction of depreciation in calculating actual cash
value is inconsistent with controlling precedent. See 841 A.2d at 1048. The
depreciation deduction is not directly relevant to the issue on appeal in this
case.
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reasonably likely to incur in repairing or replacing a covered loss,” minus
depreciation. Id. Under this definition, actual cash value would sometimes
include GCOP, given that it would sometimes be reasonably likely. See id.
However, Gilderman does not set forth binding Pennsylvania law
defining how actual cash value is calculated. It defined the term in the absence
of any definition in the policy itself, and thus analyzed the intent of the parties.
In contrast, the Truck policy at issue here explicitly defines actual cash
value in a manner congruent with Gilderman: “Actual cash value – means
the reasonable replacement cost at time of loss less deduction for depreciation
and both economic and functional obsolescence.” R.R. 388a. Also congruent
with Gilderman, the policy promises to pay GCOP “only … if it is reasonably
likely that the services of general contractor will be required to manage,
supervise and coordinate the repairs.” R.R. 152a. As highlighted above, the
policy then precludes GCOP from actual cash value settlements “unless and
until [the insured] actually incur[s] and pay[s]” GCOP. R.R. 152a.
In the second case, Kane, this Court held that explicit policy language
could overcome definitions established by case law. See 841 A.2d at 1050
(refusing to use definition of actual cash value from case law, as it “would
make the remaining policy language nonsensical.”)
The language in Truck’s homeowner’s policy explicitly makes payment
of GCOP contingent upon the insured actually incurring and paying GCOP,
unless Pennsylvania state law requires its inclusion. Kurach and Wintersteen
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have not identified any case that sets forth a public policy that actual cash
settlement value must include GCOP.
As recognized in Kane, the definitions supplied by case law in
Pennsylvania demonstrate the parties’ intent only where the policy does not
explicitly provide for a different outcome. Here, Truck’s policy clearly and
obviously provides that GCOP will not be paid to an insured until the insured
actually incurs that cost. Thus, we conclude the trial court erred as a matter
of law in granting summary judgment to Kurach and Wintersteen. Kurach and
Wintersteen (and any similarly situated putative plaintiffs) are not entitled to
receive a payment for GCOP from Truck until they incur that cost.
Orders reversed. Case remanded for further proceedings consistent with
this memorandum. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/24/2018
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