Court Opinion

ID: 2671614
Source: CourtListenerOpinion
Date Created: 2014-04-30 00:00:31.706784+00
Date Added: 2024-06-11T13:08:41.302249
License: Public Domain

NOT PRECEDENTIAL

                   UNITED STATES COURT OF APPEALS
                        FOR THE THIRD CIRCUIT
                           ________________

                                 No. 13-2129
                              ________________

                           ERCOLE MIRARCHI
                             doing business as
                        ORIGINAL GEORGE’S PIZZA
                                PARLOR

                                            Ercole Mirarchi,
                                                   Appellant

                                       v.

                SENECA SPECIALTY INSURANCE COMPANY
                           ________________

                  Appeal from the United States District Court
                    for the Eastern District of Pennsylvania
                    (D.C. Civil Action No. 2-10-cv-03617)
                  District Judge: Honorable Gene E.K. Pratter
                              ________________

                   Submitted Under Third Circuit LAR 34.1(a)
                                April 8, 2014

             Before: AMBRO, JORDAN, and ROTH, Circuit Judges

                         (Opinion filed: April 29, 2014)

                              ________________

                                  OPINION
                              ________________

AMBRO, Circuit Judge
       Ercole Mirarchi brought an action against Seneca Specialty Insurance Company

alleging bad faith and breach of contract in the handling of his claim following a fire that

destroyed his property. The District Court granted summary judgment in favor of

Seneca. Mirarchi now appeals that ruling as well as various discovery rulings. We

affirm. 1

I.     Background

       In 2007 Mirarchi purchased property located in Philadelphia, Pennsylvania. The

location included space for his restaurant, Original George’s Pizza Parlor. Mirarchi

purchased an insurance policy for the property through Seneca. The policy’s coverage

limit was $600,000 and it directed that valuation on any claim be done according to the

actual cash value (“ACV”) of the property. The policy defined ACV as “the amount it

would cost to repair or replace [the property], at the time of loss or damage, with material

of like kind and quality, subject to a deduction for deterioration, depreciation and

obsolescence.” App. at 98. Under the policy, Seneca would not pay on any claim until it

received a formal proof of loss from Mirarchi. If a disagreement arose as to the value of

the property or amount of loss, either party could seek an appraisal.

        In May 2008, a fire damaged the property, including the restaurant. Mirarchi

promptly notified Seneca and a claim was opened. Seneca (which never contested that

the fire was a covered event under the policy) and Mirarchi each retained experts to

inspect the damage and estimate the cost of repairs. Seneca’s expert estimated the ACV

1
 The District Court had subject matter under 28 U.S.C. § 1332. We have jurisdiction
over this appeal pursuant to 28 U.S.C. § 1291.
                                             2
to be $331,777.42, whereas Mirarchi’s expert believed the ACV to be $692,160. Despite

the differing estimates, Seneca paid the first $100,000 on the claim after Mirarchi

submitted a partial proof of loss on August 4, 2008. In October 2008, Mirarchi submitted

a proof of loss based on his expert’s full assessment of the ACV. Within a month,

Seneca paid the full undisputed portion of the claim (that is, the amount of its own

estimate of ACV).

       As to the disputed amount, the experts for the parties continued amicable

discussions to resolve the discrepancy. Those discussions ended, however, when

Mirarchi told his expert that he would not accept less than $500,000 for the loss.

Mirarchi later pointed out that Seneca never offered more than its original ACV estimate

of $331,777.42. At any rate, the parties mutually agreed to enter the appraisal process,

and each side hired an independent appraiser. Seneca’s appraiser estimated the ACV at

$449,550, more than $100,000 higher than the insurer’s original estimate. The dispute

was submitted to an umpire, and on October 20, 2009, the umpire concluded that the

ACV was $618,338.07. Seneca therefore paid the balance remaining on the $600,000

policy limit.

       Mirarchi sued, alleging that Seneca delayed payment on his claim in bad faith.

After the parties cross-moved for summary judgment, the District Court partially granted

Mirarchi’s request for additional discovery, and the parties supplemented their summary

judgment briefs accordingly. Shortly before oral argument on the dispositive motions,

Mirarchi’s counsel moved to withdraw. After new counsel entered an appearance, the

District Court again allowed Mirarchi to supplement his summary judgment briefing.

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Following this extensive briefing and oral argument on the motions, the Court granted

Seneca’s motion for summary judgment.

II.    Standard of Review

       “We exercise plenary review over a District Court's grant of summary

judgment . . . .” Zavala v. Wal Mart Stores Inc., 691 F.3d 527, 545 (3d Cir. 2012)

(internal quotation marks and citation omitted). “We will affirm if our review shows

‘that there is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.’” Liberty Mut. Ins. Co. v. Sweeney, 689 F.3d 288, 292 (3d

Cir. 2012) (quoting Fed. R. Civ. P. 56(a)). When determining whether there is any

genuine issue of material fact, the record must be viewed in the light most favorable to

the non-moving party. HIP Heightened Independence & Progress, Inc. v. Port Auth. of

N.Y. & N.J., 693 F.3d 345, 351 (3d Cir. 2012).

       We review a district court’s rulings regarding the scope and conduct of discovery

for abuse of discretion. Petrucelli v. Bohringer & Ratzinger, GMBH, 46 F.3d 1298, 1310

(3d Cir. 1995).

III.   Discussion

       On appeal, Mirarchi challenges the District Court’s award of summary judgment

to Seneca as well as its rulings as to the discoverability and admissibility of certain

evidence. Because the discovery rulings affected the evidence considered at summary

judgment, we address them first.

                                              4
A.     Discovery Rulings

       Mirarchi first challenges the District Court’s ruling that information as to Seneca’s

loss reserve estimates was irrelevant to the claims and thus not discoverable. The

evidence is important to Mirarchi because Seneca set its loss reserves for Mirarchi’s

claim at the $600,000 policy limit. According to Mirarchi, this shows that Seneca knew

his claim was worth more than what it offered to pay and demonstrates bad faith.

       The District Court denied Mirarchi discovery of evidence related to the loss

reserves and did not consider the loss reserve estimates (to the extent they were revealed

in discovery) at summary judgment. The Court explained that a loss reserve is “the

insurer’s own estimate of the amount which the insurer could be required to pay on a

given claim.” App. at 12 (quoting 17A Couch on Ins. § 251:29) (emphasis added).

Although the Court recognized that such information is sometimes relevant in bad faith

cases, it concluded that in this case the loss reserve figures did not represent “an

evaluation of coverage based upon a thorough factual and legal consideration” and hence

were irrelevant and not discoverable. App. at 14 (quoting Ind. Petrochemical Corp. v.

Aetna Cas. & Sur. Co., 117 F.R.D. 283, 288 (D.D.C. 1986)) (internal quotation marks

omitted).

       Mirarchi repeatedly references the evidence in his brief, but fails to show that the

loss reserve figures were related to Seneca’s considered estimate of the ACV such that

they would be relevant to his bad faith claim. We see no error in the District Court’s

legal analysis of the relevance of loss reserve estimates generally in bad faith cases, and

                                              5
the Court did not abuse its discretion in excluding the evidence in this case based on its

lack of relevance to Mirarchi’s bad faith claim. 2

       Mirarchi’s argument that the District Court erred in refusing to extend discovery,

compel additional discovery responses, and reconsider earlier discovery rulings after he

retained new counsel is also rejected. “District Court[s] ha[ve] considerable discretion in

matters regarding . . . case management, and a party challenging the [D]istrict [C]ourt’s

conduct of discovery procedures bears a ‘heavy burden.’” ZF Meritor, LLC v. Eaton

Corp., 696 F.3d 254, 297 (3d Cir. 2012) (citation omitted). Mirarchi does not explain

why he filed the motion to compel and extend discovery more than three months after the

discovery deadline, and the District Court noted that, even if timely, the motion sought

documents that were already produced, may not exist, and/or were in the possession of

third parties. App. at 7 n.1. Moreover, the Court allowed Mirarchi to supplement his

summary judgment briefing at least twice. Id. at 22. In this context, it did not abuse its

discretion when it denied Mirarchi’s belated motion for additional discovery.

B.     Summary Judgment

       Mirarchi also challenges the grant of summary judgment in Seneca’s favor on his

bad faith and breach of contract claims. In Pennsylvania, “bad faith” in insurance cases

is defined as “any frivolous or unfounded refusal to pay proceeds of a policy.” Terletsky

v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. 1994); see also 42 Pa. C.S.

2
 Mirarchi also contends that the District Court improperly denied him discovery of
communications between Seneca and its reinsurer about the value of Mirarchi’s claim.
We affirm for the same reasons we affirm the Court’s rulings as to the loss reserve
evidence—Seneca’s communications with the reinsurer are not evidence of its considered
evaluation of the value of Mirarchi’s claim.
                                              6
§ 8371 (providing a remedy for bad faith on the part of insurers). Bad faith must be

demonstrated by clear and convincing evidence, a burden that applies even on summary

judgment. Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 523 (3d Cir. 2012). Because

Seneca ultimately paid the full policy limit, Mirarchi’s bad faith claim was based on the

insurer’s delay in paying the claim. For such a claim, Mirarchi had to show that (1) the

delay was attributable to Seneca, (2) it had no reasonable basis for causing the delay, and

(3) it knew or recklessly disregarded the lack of a reasonable basis for the delay. See

Thomer v. Allstate Ins. Co., 790 F. Supp. 2d 360, 369-70 (E.D. Pa. 2011).

       On appeal, Mirarchi relies principally on Seneca’s own independent appraiser’s

estimate that exceeded Seneca’s initial estimate and offer. He argues that Seneca acted in

bad faith by standing by its adjuster’s initial estimate of ACV pending resolution by the

umpire, failing to make an additional partial payment, and failing to make a higher

settlement offer.

       As the District Court noted and as Mirarchi concedes, Seneca had no duty to

advance partial payments to Mirarchi, particularly because the claim was disputed. See

Zappile v. Amex Assurance Co., 928 A.2d 251, 256 (Pa. Super. Ct. 2007). We decline

Mirarchi’s invitation to create new law in this area. The undisputed evidence showed

that Seneca relied on a genuine and considered estimate of ACV by its first expert. 3 That

3
  The District Court also rejected Mirarchi’s related argument that a purported
mathematical relationship between Seneca’s initial claim estimate, the purchase price of
the property, and the balance on Mirarchi’s mortgage showed a conspiracy between the
insurer and its hired experts. On appeal, Mirarchi devotes 15 pages of his brief to
calculations that similarly purport to show Seneca’s first offer was not based on a true
estimate of repair costs. These calculations lack sufficient explanation to make them
                                             7
subsequent estimates assigned a higher value to the claim is not “clear and convincing”

evidence that Seneca acted in bad faith either in arriving at its initial estimate or by

standing by that estimate until the appraisal process concluded. See, e.g., Albert v.

Nationwide Mut. Fire Ins. Co., No. 3CV991953, 2001 WL 34035315, at *11-12 (M.D.

Pa. May 22, 2001). That is, after all, what the appraisal process is for—settling disputes

about the value of a claim. We agree with the District Court that Mirarchi failed to show

by clear and convincing evidence that Seneca acted unreasonably in the manner it paid

the claim; no reasonable juror could conclude otherwise. Mirarchi’s breach-of-contract

claim, based on a breach of the duty of good faith, fails for the same reasons as his bad

faith claim. Summary judgment was thus appropriately awarded to Seneca.

       For the foregoing reasons, we affirm.

persuasive. We thus reject Mirarchi’s argument that they constitute evidence that this
offer by Seneca was made in bad faith.
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