In Pine Grove Manufactured Homes v. Ind. Lumbermens Mut. Ins. Co., insured’s facility was flooded causing damage to its building, materials and inventory. At the time of the flood, the insured had two insurance policies covering the facility, one from Harleysville Mutual Insurance Company and a commercial policy through Indiana Lumbermens Mutual Insurance Company (“ILM”). Insured’s loss was estimated to be $3,293,993.38. Insured received a payment in the amount of $1,165,751.70 under the Harleysville policy after its deductible was subtracted. Insured then submitted the unpaid portion of the claim to ILM, who deducted its $500,000.00 deductible and then paid $1,625,514.68. Insured alleged that it was permitted to apply the proceeds from its Harleysville policy to the deductible under the ILM policy, and that ILM breached its policy by refusing to allow it to do so. Insured sued ILM for bad faith and breach of contract.
ILM joined the insured’s broker, Chamberlin & Reinheimer Insurers, Inc. (“CRI”), as a third party defendant. ILM contended that CRI was partly responsible for the harm to the insured for which ILM could be found liable. The court stated that as an insurance broker, CRI was the insured’s agent, and therefore, owed CRI a duty of care to act as a reasonably prudent insurance broker. The court stated that if CRI breached this duty, which caused the indivisible (alleged) harm that resulted when ILM did not apply the Harleysville policy proceeds to the ILM policy deductible, it could bear culpability. Accordingly, the court held that, on the complaint as pleaded for purposes of a motion to dismiss, CRI could be a joint tortfeasor whose negligence, along with ILM’s bad faith, caused the harm to the insured. Thus, as joint tortfeasors, ILM could be entitled to contribution from CRI.
Date of Decision: October 23, 2009
Pine Grove Manufactured Homes v. Ind. Lumbermens Mut. Ins. Co., U.S. District Court, Middle District of Pennsylvania, Civil Action No. 3:08-CV-1233, 2009 U.S. Dist. LEXIS 98926 (M.D. Pa. October 23, 2009) (Caputo, J.)
A subsequent motion for reconsideration was granted in part on the contribution issue. A summary of that opinion can be found on this blog.