2012 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

5-22-2012

3039 B Street Associates Inc v. Lexington Insurance

Company

Precedential or Non-Precedential: Non-Precedential

Docket No. 11-2999

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Recommended Citation

"3039 B Street Associates Inc v. Lexington Insurance Company" (2012). 2012 Decisions. Paper 960.

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1

 NOT PRECEDENTIAL 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

 

_____________ 

No. 11-2999 

_____________ 

3039 B STREET ASSOCIATES, INC., 

 Appellant 

v.

LEXINGTON INSURANCE COMPANY 

_____________ 

 

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

District Court No. 2-10-cv-01740 

District Judge: The Honorable Eduardo C. Robreno 

 

Submitted Pursuant to Third Circuit L.A.R. 34.1(a) 

May 18, 2012 

Before: SMITH and FISHER, Circuit Judges

and STEARNS, District Judge

(Filed: May 22, 2012) 

 

 

The Honorable Richard G. Stearns, United States District Judge for the United 

States District Court of Massachusetts, sitting by designation. 
2

_____________________ 

 OPINION 

_____________________ 

 

STEARNS, District Judge. 

Appellant 3039 B Street Associates, Inc. (B Street) seeks review of a 

decision of the United States District Court for the Eastern District of Pennsylvania 

granting summary judgment to appellee Lexington Insurance Company 

(Lexington) on its denial of coverage to B Street for a stolen property claim. 

Because the District Court correctly determined that the entrustment exclusion of 

the policy applied, we will affirm. 

BACKGROUND1

Lexington issued Commercial Property Policy Number 747856, effective 

June 30, 2007 to June 30, 2008 (Policy), through HWI Global Properties, Inc., an 

insurance purchasing group, to B Street. The Policy provided coverage for the 

contents of a three-story warehouse B Street owned at 3039-51 B Street in north 

Philadelphia. The Policy contained several loss exclusions, among them the 

following: 

This policy does not insure against loss or damage . . . [c]aused by . . 

. misappropriation, secretion, conversion, fraud, infidelity or any 

 

1 We recount the material facts in the light most favorable to B Street, as the nonmoving party. See Harrison Aire, Inc. v. Aerostar Int’l, Inc., 423 F.3d 374, 377 

(3d Cir. 2005). 

 
3

dishonest act or omission on the part of the insured or other party of 

interest, his, her or their trustees, directors, officers, employees, agents 

or others to whom the property may be entrusted; this exclusion does 

not apply to a carrier for hire, nor to acts of destruction by your 

employees; but theft by employees is not covered . . . . 

App. at 76a. 

 Gianni Pignetti, B Street‟s President, gave Brett Gillespie, a former 

employee, permission to scavenge metal from the warehouse, “to clean the place 

up.” Id. at 164a. Pignetti provided Gillespie with the keys to the warehouse to 

expedite the work. In early April of 2008, Gillespie and his crew removed metal 

wiring and fixtures from the warehouse, including the 66 radiators that are the 

focus of this dispute. 

The testimony regarding Gillespie‟s removal of the radiators is conflicting. 

Drew Callahan, the warehouse‟s sole tenant, testified that he met a man on the 

loading dock who informed him “that he worked for Pignetti and was there to 

remove scrap metal from the warehouse.” Id. at 249a. Callahan asked Dan 

Marino, a B Street partner, to notify Pignetti that workers were on the premises 

removing the radiators. According to Callahan, Pignetti called and told him that 

Gillespie “was his friend and that he had his permission to remove all copper 

wiring, radiators and bathroom fixtures from the building so he could make some 

money.” Id. at 250a. Callahan testified that a few days later, when he saw the men 

removing bathroom fixtures, he called Pignetti to complain that the warehouse 
4

required a working bathroom. Pignetti replied that Callahan “did not need a 

bathroom because [he] was just warehousing equipment.” Id. Edgar Branch, a 

building maintenance worker, testified that after he observed four men taking 

radiators out of the warehouse, he called Dan Finnetti at B Street. Id. at 261a. 

Finnetti told him that the men “were there to clean out the building.” Id. Branch 

saw the same men at the warehouse three days later while making a routine, driveby inspection.2

Pignetti testified that he did not give Gillespie permission to remove the 

radiators, which were attached to the walls – only “the loose stuff.” Id. at 164a. 

Pignetti stated that upon being informed by B Street that someone was at the 

warehouse removing radiators, he immediately spoke to Callahan and “told him to 

tell them people to stop, and I ran over there. And when I got there, nobody was 

there. Then I called Gillespie and said: What are you doing? And he said: I‟m 

fucked up and I don‟t know.”3 Id. 

 

2 Branch testified that after the warehouse boiler burst in January of 2008, and there 

was no longer heat in the building, he stopped making daily inspections of the 

property. Around the time that the radiators were taken, Branch was conducting 

drive-by inspections of the warehouse approximately three times per week, mostly 

looking out for broken windows. Id. at 257a. 

3 The record does not explain why Pignetti did not ask Gillespie to return the 

radiators. Pignetti testified at his May of 2009 deposition that a few days before he 

had bailed Gillespie out of jail after he was arrested for “fighting.” Id. at 165a. 
5

On October 7, 2008, B Street filed a stolen property report with the 

Philadelphia police. Id. at 182a. On October 13, 2008, B Street filed a 

$160,864.64 “Notice of Loss” for the radiators with Lexington. Id. at 167a. B 

Street listed the date of the loss as April 4, 2008. 

After conducting an investigation, Lexington denied coverage on September 

29, 2009. As reasons for the denial, Lexington first pointed to the Policy‟s 

entrustment exclusion and Pignetti‟s testimony that he had “entrust[ed] the 

property in question to . . . Gillespie, the alleged thief.” Id. at 339a-340a. 

Lexington noted the conflict between Pignetti‟s statement that he had only given 

Gillespie permission to take “the loose stuff” and Callahan‟s testimony that he had 

informed Pignetti “on more than one occasion that the . . . radiators were being 

removed from the Premises and that [Pignetti] told him that Gillespie was 

authorized to remove the items.” Id. at 340a. Finally, Lexington cited the Policy‟s 

requirement of “immediate written notice of any loss,” a condition of coverage that 

B Street breached by waiting more than six months to file its claim. 

On March 30, 2010, B Street sued Lexington in federal court alleging claims 

of breach of contract and bad faith. Id. at 131a-139a. After discovery concluded, 

Lexington moved for summary judgment on several grounds, including the 

Policy‟s exclusions clause. Judge Robreno granted the motion, noting that 

“[a]lthough the evidentiary record presents a compelling case for both [the fraud 
6

and entrustment] exclusions, . . . it is nevertheless clear that the entrusted property 

exclusion applies.” Id. at 4a. Judge Robreno based his decision on Pignetti‟s 

undisputed testimony that he gave Gillespie the keys to the warehouse and 

provided him “with unsupervised access to the premises.” Id. at 5a. B Street filed 

a timely notice of appeal on July 21, 2011. 

DISCUSSION 

The District Court had jurisdiction over this action pursuant to 28 U.S.C. § 

1332. This Court has jurisdiction under 28 U.S.C. § 1291. We review a district 

court‟s grant of summary judgment de novo, applying “the same standard as the 

District Court in determining whether summary judgment was appropriate.” United 

States ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 94 (3d Cir. 2009). 

Summary judgment is appropriate “if the movant shows that there is no genuine 

dispute as to any material fact and the movant is entitled to judgment as a matter of 

law.” Fed. R. Civ. P. 56(a). “Ordinarily in insurance coverage disputes an insured 

bears the initial burden to make a prima facie showing that a claim falls within the 

policy‟s grant of coverage, but if the insured meets that burden, the insurer then 

bears the burden of demonstrating that a policy exclusion excuses the insurer from 

providing coverage if the insurer contends that it does.” State Farm Fire & Cas. 

Co. v. Estate of Mehlman, 589 F.3d 105, 111 (3d Cir. 2009) (citing Koppers Co. v. 
7

Aetna Cas. & Sur. Co., 98 F.3d 1440, 1446 (3d Cir. 1996) (applying Pennsylvania 

law)). 

 On appeal, B Street contends that the District Court “ignored two key 

undisputed facts in reaching its conclusion . . . that the radiators were part of the 

warehouse structure . . . therefore real property that cannot be the subject of a 

bailment and, therefore, could not have been entrusted to Gillespie.” Appellant‟s 

Br. at 5. B Street also complains that the lower court failed to consider that its 

“maintenance man, Branch, was also present in the building while Gillespie was 

present so the warehouse clearly was not entrusted to Gillespie as there was an 

employee of B Street present in the building also.”4 Id. at 6. 

Like the District Court Judge, we need go no further than the entrustment 

exclusion. B Street argues that “[t]he entrustment exclusion makes no sense unless 

it is applied only to personal property.” Appellant‟s Reply Br. at 1. The argument 

is based on a synonymous reading of “entrustment” and “bailment.” While a 

bailment is a form of entrustment, the Policy exclusion was not limited to personal 

 

4 This argument was not presented to the District Court Judge and we decline 

to consider it now. Tri-M Grp., LLC v. Sharp, 638 F.3d 406, 416 (3d Cir. 2011) 

(“It is axiomatic that „arguments asserted for the first time on appeal are deemed to 

be waived and consequently are not susceptible to review in this Court absent 

exceptional circumstances.‟” (quoting United States v. Petersen, 622 F.3d 196, 202 

n.4 (3d Cir. 2010))). We do note that Branch‟s three times per week drive-by 

inspections of the warehouse for broken windows would unlikely be considered to 

constitute a “supervisory presence.” 
8

property, nor did it make any mention of the term bailment.5 The cases cited by 

the District Court are on target. See Wagner v. Edemnify, LLC, No. 4:08-cv-299, 

2009 WL 5062058, at *3 (E.D. Tex. Dec. 16, 2009) (independent contractor who 

was given keys and unsupervised access when hired to clean up a building was 

“entrusted” with its contents for purposes of an insurance policy theft exclusion); 

Wexler Knitting Mills v. Atl. Mut. Ins. Co., 555 A.2d 903, 905 (Pa. Super. Ct. 

1989) (finding a theft exclusion applicable to anyone entrusted with the property 

by the insured). In both cited cases, the entrustment clause is virtually identical to 

that in B Street‟s Policy. Like the insureds in the Wagner and Wexler cases, B 

Street entrusted the warehouse to a third party – Gillespie – who took advantage of 

the opportunity to steal the building‟s radiators. That the radiators were fixtures 

rather than chattels is a distinction that has no bearing on our interpretation of the 

exclusion clause. Lexington properly denied coverage in reliance on the exclusion 

and the District Court so held. 

Consequently, we will affirm the judgment of the District Court. 

 

5 Lexington aptly notes that “[w]hile a bailment is a form of entrustment . . . the 

converse, that „an entrustment is a bailment‟ is not true. This flawed reasoning is 

akin to asserting that because a fork is a utensil all utensils must be forks.” 

Appellee Br. at 14.