FEBRUARY 2011 BAD FAITH CASES BAD FAITH ALLEGATION DISMISSED WITH LEAVE TO RE-FILE IN ANOTHER STATE UNDER FORUM NON CONVENIENS DOCTRINE (Philadelphia Commerce Court)

In 821,393 LLC v. Liberty Mutual Insurance Company, the three joint insureds purchased a new aircraft in 2009.  They then contracted with the insurer for an “All-Clear Aircraft Policy,” under which the insurer would cover all three insureds against losses involving the plane.  The policy covered against “risk of physical loss of or accidental damage” to the aircraft while it was in fight and not in flight.

Less than two months after the insureds purchased the aircraft, a winter storm struck the airport where the aircraft was located, and the hangar where the insureds’ plane was stored collapsed.  Their aircraft suffered significant damage as a result of the incident.  The insureds submitted a claim to the insurer for $50 million under the “physical loss” and “accidental damage” provisions of the policy.  They claimed that because local authorities restricted access to the hanger housing the plane, the aircraft was considered “lost” under the policy and they were therefore entitled to the plane’s full cost.

The insurer denied the claim for the full purchase price, claiming that the insureds did not allow it to inspect the aircraft and perform a thorough assessment of damages.  It also justified its denial by asserting that there was no dispute as to the location of the aircraft and the restriction of access to the plane was only temporary.  The insureds responded by filing a Complaint against the insurer for breach of contract and bad faith, alleging that the insurer breached the policy for failing to pay the full amount for the “physical loss” of the aircraft and denying their claims for “accidental damage.”

The insurer moved for dismissal of the action and leave to re-file in Virginia under the forum non conveniens doctrine because the vast majority of the events leading to the suit occurred in Virginia (the airport with the hangar was in Virginia).  The insureds responded by claiming that the insurer did not meet the high burden required to disturb their choice of forum.

The doctrine of forum non conveniens, 42 Pa. Cons. Stat. § 5322(e), states that “when a tribunal finds that in the interest of substantial justice the matter should be heard in another forum, the tribunal may stay or dismiss the matter in whole or in part on any conditions that may be just.”  The court noted that (1) it should not disturb a plaintiff’s choice of forum except for “weighty reasons,” and (2) it cannot dismiss an action under this doctrine unless “an appropriate alternative forum is available.”

According to the court, this case satisfied the standards mentioned above.  It determined that an overwhelming amount of the events occurred in Virginia, and the events that did not occur in Virginia occurred in states other than Pennsylvania.  Also, the choice of law analysis led to a conclusion that Virginia law should apply.  The insureds were Virginia residents who kept a plane in Virginia and suffered damage in Virginia.  The court therefore dismissed the case with leave to re-file in Virginia.

Date of Decision:  January 5, 2011

821,393 LLC v. Liberty Mut. Ins. Co., May Term 2010, No. 3573, Commerce Case Management Program, Common of Pleas Court of Philadelphia County, Pennsylvania, Civil Trial Division, 2011 Phila. Ct. Com. Pl. LEXIS 7 (Jan. 5, 2011) (New, J.)