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HomeMy WebLinkAbout2003-3887 Civil QUALITY INN-ENOLA AND KUMAR, INC. T/A UNIVERSITY LODGE, JAYVEER, INC. T/A UNIVERSITY LODGE AND JAYDIP, INC. T/A UNIVERSITY LODGE, PLAINTIFFS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA V. NOVA CASUALTY COMPANY AND RBLA OF PA, INC., DEFENDANTS 03-3887 CIVIL TERM IN RE: MOTION OF DEFENDANT, NOVA CASUALTY COMPANY, FOR SUMMARY JUDGMENT BEFORE BAYLEY, J. AND OLER. J. OPINION AND ORDER OF COURT Bayley, J., June 2, 2005:-- There is evidence presented by plaintiff to support the following. In 1998, Umesh and Prite Patel formed Kumar, Inc. The corporation owns and operates the Quality Inn in East Pennsboro Township, Cumberland County. Patel obtained insurance for the Inn through the NNDA Agency. In 1999, Patel changed brokers, purchasing insurance for the Inn through defendant, RBLA of PA, Inc. RBLA's agent is George Schiaffino. In October 2000, Umesh Patel's nephews, Jaymin Patel and Dipak Patel, who were working at the Quality Inn, formed Jaydip, Inc. At that time, the University Lodge at 20 Walnut Bottom Road, Shippensburg, Cumberland County, was owned by Jayveer, Inc. Its principals were Niketan Meheta and Rashmi Meheta. In October, 2000, Jayveer, Inc., and Jaydip, Inc., entered into an oral agreement for 03-3887 CIVIL TERM Jaydip, Inc., to lease and purchase the University Lodge. Pursuant to this agreement, Jaydip, Inc., made a $40,000 down payment to Jayveer, Inc.1 Jaydip, Inc., paid for insurance through RBLA for the University Lodge even though the property was still owned and the insured was Jayveer, Inc.2 In order to secure better insurance rates for his nephews, Umesh Patel contacted RBLA agent George Schiaffino to help Jaydip, Inc., purchase insurance. Patel has testified that he told Schiaffino that his nephews were operating and purchasing the University Lodge in Shippensburg, and that they had to have insurance. He testified that he explained everything regarding the agreement between Jayveer, Inc., and Jaydip, Inc., to Schiaffino.3 Schiaffino told him that Jaydip, Inc., could not be named on an insurance policy because it was not the owner of the property. Patel further testified that he understood from Schiaffino that although Jayveer, Inc., was named as the owner of the policy, Jaydip, Inc., was named as an additional insured or operator.4 1 Check #0092 in the amount of $40,000 and dated October 10, 2000, was paid to Jayveer, Inc., from Jaydip, Inc., and deposited on October 10, 2000. 2 Check #0091 in the amount of $600 and dated September 27,2000, was paid to RBLA from Jaydip, Inc., and deposited on October 6, 2000; check #1002 in the amount of $1 ,782 and dated November 13,2000, was paid to RBLA from Jaydip, Inc., and deposited on November 22, 2000; and check #1001 in the amount of $2,564.50 and dated June 24, 2001, was paid to RBLA from Jaydip, Inc., and deposited on June 29, 2001. 3Throughout the history of these events, Kumar, Inc., Umesh Patel's company, had an insurance policy with RBLA for the Quality Inn in East Pennsboro Township. 4 The record is unclear as to how, exactly, the alleged first insurance policy for the -2- 03-3887 CIVIL TERM On November 15, 2001, Jaymin and Dipak Patel took over the operation of the University Lodge. Umesh Patel helped his nephews finance extensive renovations to the Lodge. In June, 2002, the insurance policies were due for renewal. On June 28, 2002, Umesh Patel submitted an application to renew the insurance policies on the Quality Inn as well as the University Lodge. As brokered by RBLA through George Schiaffino, defendant, Nova Casualty Company, insured Kumar, Inc., t1a Quality Inn, and Jayveer, Inc., t1a University Lodge for a period retroactive to June 25, 2002 and expiring on June 25, 2003. The premium was $26,312. On August 2,2002, the University Lodge was purchased by Jaydip, Inc., by deed from Jayveer, Inc., for $600,000. A sum of $530,000 of the purchase price was privately financed. A fire occurred at the Lodge on August 12, 2002, destroying the property. Nova Casualty Company has denied coverage for the loss resulting from the fire, claiming that the named insured, Jayveer, Inc., had no insured interest in the Lodge at the time of the fire, and suffered no damages. Plaintiffs herein instituted this suit. Their amended complaint alleges in Count 1: breach of contract by Quality Inn-Enola and Kumar, Inc. t1a University Lodge v. Nova Casualty Company; in Count 2: negligence by all plaintiffs v. RBLA of PA, Inc.; and in Count 3: reformation of the insurance contract by Jaydip, Inc. t1a University Lodge and Jayveer, Inc. t1a University Lodge v. Nova Casualty Company. On January 14, 2005, the claims of Kumar, Inc., and Jayveer, Inc., in negligence against RBLA of PA, Inc., in Shippensburg property was written. -3- 03-3887 CIVIL TERM Count 2, were dismissed by stipulation.5 Nova Casualty Company filed a motion for summary judgment which was briefed and argued on May 4, 2005. In Washington v. Baxter, 719 A.2d 733 (Pa. 1998), the Supreme Court of Pennsylvania set forth the standard for examining a motion for summary judgment. A court: [m]ust view the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party, Pennsylvania State University v. County of Centre, 532 Pa. 142, 143-145, 615 A.2d 303, 304 (1992). . .. In order to withstand a motion for summary judgment, a non- moving party "must adduce sufficient evidence on an issue essential to his case and on which he bears the burden of proof such that a jury could return a verdict in his favor. Failure to adduce this evidence establishes that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Ertrel v. Patriot-News Co., 544 Pa. 93,101-102,674 A.2d 1038,1042 (1996). Defendant maintains that all of the claims against it in Counts 1 and 3 should be dismissed. With respect to Count 1 for breach of contract, defendant maintains that the claim of "Quality Inn-Enola and Kumar, Inc., t1a University Lodge" must be dismissed because the claimant did not have an insurable interest in the University Lodge at the time when its insurance policy was issued or at the time of the loss on August 12, 2002. 5 The dismissal came after RBLA had filed a motion for summary judgment against Quality Inn-Enola and Kumar, Inc., t1a University Lodge and Jayveer, Inc., t1a University Lodge. What remains of Count 2 is the negligence claim by Jaydip, Inc., t1a University Lodge v. RBLA of PA, Inc., which is not before us. The issues are whether RBLA of PA, Inc., through Schiaffino, was negligent in not insuring Jaydip, Inc., and in misrepresenting to Patel that Jaydip, Inc., was an additional insured, or in not otherwise telling Patel that Jaydip, Inc.'s interest in the property was not insured. -4- 03-3887 CIVIL TERM A person may not recover on an insurance policy in the event of a loss if the person has no insurable interest in the property. Commonwealth of Pennsylvania v. Rodebaugh, 102 Pa. Commw. 592 (1986). In lehle v. Coleman, 401 Pa. Super. 78 (1991), the Superior Court of Pennsylvania stated that, "In determining whether [a person] has an insurable interest in the property sought to be insured, one must focus on the facts as they existed at the time when the policy was issued and at the time the loss by fire occurred. It is not appropriate to look to facts transpiring after the loss occurred to determine such an issue." (Emphasis added.) In Alberici v. Safeguard Mutual Insurance Company, 664 A.2d 110 (Pa. Super. 1995), the Superior Court stated: A policy that insures against loss by fire is a contract for indemnity which protects the insured's interest in the property, not the property itself. Mutual Benefit Ins. Co. v. Goschenhoppen Mutual Ins. Co., 392 Pa.Super. 363, 368, 572 A.2d 1275, 1277 (1990). One who "derives pecuniary benefit or advantage from the preservation or continued existence of [] property or who will suffer pecuniary loss from its destruction" has an insurable interest in the property. Luchansky v. Farmers Fire Ins. Co., 357 Pa.Super. 136, 138, 515 A.2d 598, 599 (1986). Upon execution of an agreement of sale, a purchaser of real estate has an equitable title to property and may insure his or her interest therein. Mutual Benefit Ins. Co. v. Goschenhoppen Mutuallns. Co., supra at 369, 572 A.2d at 1277. A purchaser's insurable interest is in the entire property, not merely the extent to which he or she has made payments towards the purchase price. lehle v. Coleman, supra at 83, 584 A.2d at 990; Mutual Benefit Ins. Co. v. Goschenhoppen Mutual Ins. Co., supra at 369,572 A.2d at 1277. Accord: Dubin Paper Co. v. Insurance Co. of North America, 361 Pa. 68, 86, 63 A.2d 85, 94 (1949). (Emphasis added. ) Umesh Patel has admitted that Kumar, Inc., was not trading as the University -5- 03-3887 CIVIL TERM Lodge when defendant issued the insurance policy on the Lodge, and that Kumar, Inc., has not suffered a loss as a result of the fire at the Lodge. Patel himself maintains that he was acting as the agent of Jaydip, Inc., when the policy was issued to Jayveer, Inc. Clearly, "Quality Inn-Enola - Kumar, Inc., t1a University Lodge," as plaintiff is designated, did not have an insurable interest in the University Lodge at the time the insurance was issued or at the time of the loss. Defendants' motion for summary judgment will be granted on Count 1. In Count 3, "Jayveer, Inc. t1a University Lodge, and Jaydip, Inc. t1a University Lodge" seek reformation of the insurance policy issued by defendant. Jayveer, Inc. is the named insured, therefore, there is nothing to reform. Accordingly, summary judgment will be granted on the claim of Jayveer, Inc., to reform the insurance policy.6 In Navarro v. Ohio Casualty Insurance Company, 325 Pa. Super. 167 (1984), the Superior Court stated: A contract may be reformed where mutual mistaken belief, shared by the parties with respect to a material aspect of the agreement, prevents it from conforming to the true intention of the parties. While Umesh Patel has admitted that George Schiaffino told him that Jayveer, Inc., would be the named insured on the policy, he also testified that Schiaffino told him 6 Despite arguing in its brief that Jayveer Inc.'s "insurable interest was extended by operation of law until the end date of the policy," Jayveer, Inc., has not pleaded a claim for breach of contract for the loss caused in the fire at the University Lodge. That is understandable as the insurance policy protected Jayveer, Inc., not the property. Jayveer, Inc., sold the property to Jaydip, Inc., on August 2, 2002. It no longer had any insurable interest in the Lodge, nor did it suffer any loss when the fire occurred on -6- 03-3887 CIVIL TERM that Jaydip, Inc., was named as an additional insured or operator. If those are the facts, they would support the claim of a mutual mistaken belief with respect to a material aspect of the agreement that the interest of Jaydip, Inc., was being insured by the Nova Casualty Company.7 Accordingly, the motion of Nova Casualty Company for summary judgment on the claim of Jaydip, Inc., to reform the insurance policy will be denied. In Count 3 for reformation of the insurance policy plaintiffs seek treble damages and attorney fees. Plaintiffs have not pleaded a count of bad faith against defendant. They have not pleaded any facts in support of their claim for attorney fees pursuant to the Judicial Code at 42 Pa.C.S. Section 2503. They have not cited any express statutory authorization, or some other established exception to the general rule that attorney fees are not recoverable. See Merlino v. Delaware County, 728 A.2d 949 (Pa. 1999). Nor have they produced any evidence of a clear agreement by the parties providing for an award of attorney fees. Id. Accordingly, plaintiffs' claim in Count 3 for treble damages and for attorney fees will be dismissed. Nova Casualty Company makes several other arguments in support of its motion for summary judgment, all of which are fact driven. The facts are in dispute. Therefore, August 12, 2002. 7 Depending on a resolution of the facts, it appears that Jaydip, Inc., may have had an insurable interest in the University Lodge at the time the insurance policy was issued. See Commonwealth of Pennsylvania v. Rodebaugh, supra; Luchansky v. Farmers Fire Insurance Company, 357 Pa. Super. 136 (1986); Erie Indemnity Company v. Conyers, (94-6602 Civil, Cumberland County, November 16, 1995), aff'd 698 A.2d 112 -7- 03-3887 CIVIL TERM (Pa. Super. 1997). -8- 03-3887 CIVIL TERM these arguments will not be analyzed. For the foregoing reasons, the following order is entered. AND NOW, this ORDER OF COURT day of June, 2005, IT IS ORDERED: (1) The motion of Nova Casualty Company for summary judgment on the claim in Count 1 of the amended complaint by "Quality Inn-Enola and Kumar, Inc., t1a University Lodge," IS GRANTED. Count 1, IS DISMISSED. (2) The motion of Nova Casualty Company on the claim in Count 3 of the amended complaint by "Jayveer, Inc., t1a University Lodge" seeking reformation of the insurance policy, IS GRANTED. The claim of Jayveer, Inc., in Count 3, IS DISMISSED. (3) The motion of Nova Casualty Company for summary judgment on the claim in Count 3 of the amended complaint by "Jaydip, Inc., t1a University Lodge," seeking reformation of the insurance policy, IS DENIED. (4) The motion of Nova Casualty Company for summary judgment on the claim in Count 3 of the amended complaint for treble damages and attorney fees, IS GRANTED. That claim, IS DISMISSED. By the Court, Edgar B. Bayley, J. -9- 03-3887 CIVIL TERM Michael Dube, Esquire For Plaintiffs John F. Yaninek, Esquire For Nova Casualty Company John C. McNamara, Esquire For RBLA of PA, Inc. :sal -10-