Indian Harbor Insurance Company v. F&M Equipment Ltd.

MOTION for Partial Summary Judgment

E.D. Pa.December 1, 2016

DB1/ 89965345.1 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA INDIAN HARBOR INSURANCE COMPANY, : : Plaintiff : : Civ. No. 12-1506 (PBT) v. : : F&M EQUIPMENT LTD., f/k/a : FURNIVAL MACHINERY COMPANY, : : Defendant : : F&M EQUIPMENT LTD., f/k/a : FURNIVAL MACHINERY COMPANY, : : Counter-Plaintiff : : v. : : INDIAN HARBOR INSURANCE COMPANY, : : Counter-Defendant : : F&M EQUIPMENT, LTD.’s MOTION FOR PARTIAL SUMMARY JUDGMENT Counter-Plaintiff F&M Equipment, Ltd., f/k/a Furnival Machinery Company (“Furnival”), through undersigned counsel, respectfully requests that this Court enter summary judgment in its favor and against Indian Harbor Insurance Company (“Indian Harbor”) that Indian Harbor must comply with the prior unambiguous ruling of the Third Circuit in this case and issue a renewal of a prior policy that Indian Harbor issued to Furnival (the “Policy”) that includes the Policy’s renewal provisions. This Motion seeks summary judgment on Furnival’s Breach of Contract Claim and an Order requiring that Indian Harbor issue such a renewal, which it has to date refused to do. In support, Furnival states as follows: Case 2:12-cv-01506-PBT Document 64 Filed 12/01/16 Page 1 of 3 DB1/ 89965345.1 2 1. The Third Circuit has held that Indian Harbor is required to offer Furnival a renewal of the Policy, the terms of which “must be the same or nearly the same as the initial contract.” Indian Harbor Ins. Co. v. F&M Equipment, Ltd., 804 F.3d 310, 316 (3d Cir. 2015). The parties have negotiated and reached agreement on the majority of the material terms of the renewal policy. Indian Harbor, however, refuses to include in the renewal policy the renewal provisions of Endorsement 16 to the Policy. Those renewal provisions limit Indian Harbor’s freedom to cancel or non-renew the Policy to certain events, none of which has taken place. 2. The Third Circuit’s holding requiring Indian Harbor to offer a renewal “on the same or nearly the same” terms as the Policy is the law of the case. Accordingly, Indian Harbor must include Endorsement 16’s renewal provisions in its renewal policy. 3. Putting aside the Third Circuit’s holding, the language of Endorsement 16 and the Policy compels the same result. The plain language of the Policy is clear that the parties intended that Endorsement 16’s renewal provisions be part of further renewals of the Policy. 4. Including Endorsement 16’s renewal provisions in the renewal policy does not create a “perpetual contract.” Endorsement 16’s renewal provision has a defined period – ten years – and includes specific conditions that the parties negotiated that provide for non-renewal. The renewal provisions are a recognition by the parties that the risk insured against – environmental damage – can take place over long periods of time but ultimately will end. That the conditions justifying non-renewal have yet to take place does not make the Policy a perpetually renewing one. 5. Regardless, this Court need not reach the issue of whether Endorsement 16 creates a “perpetual contract” to find in favor of Furnival. Furnival merely seeks enforcement of what amounts to an automatic trigger of its right to renew the Policy, absent one of the specific, Case 2:12-cv-01506-PBT Document 64 Filed 12/01/16 Page 2 of 3 DB1/ 89965345.1 3 negotiated conditions justifying non-renewal. Such renewal provisions are enforceable under Pennsylvania law. 6. Furnival is submitting a memorandum of law in support of this Motion, which is incorporated herein. 7. Furnival respectfully requests that this Court grant summary judgment in its favor and against Indian Harbor and award the following relief: (a) Grant partial summary judgment on Furnival’s breach of contract claim; (b) Order specific performance of a renewal of the Policy to include Endorsement 16’s renewal provisions; and (c) Any other relief as this Court deems just and proper. Dated: December 1, 2016 Respectfully submitted ____________________________ Harvey Bartle, IV 1701 Market Street Philadelphia, Pennsylvania 19103-2921 Tel.: (215) 963-5000 Fax: (215) 963-5001 harvey.bartle@morganlewis.com Nicholas Schretzman 101 Park Avenue New York, New York 10178-0060 Tel.: (212) 309-6000 Fax: (212) 309-6001 nicholas.schretzman@morganlewis.com Attorneys for F&M Equipment Ltd., f/k/a Furnival Machinery Company s/Harvey Bartle, IV Case 2:12-cv-01506-PBT Document 64 Filed 12/01/16 Page 3 of 3 DB1/ 89965327.1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA INDIAN HARBOR INSURANCE COMPANY, : : Plaintiff, : : Civ. No. 12-1506 (PBT) v. : : F&M EQUIPMENT LTD., f/k/a : FURNIVAL MACHINERY COMPANY, : : Defendant. : : F&M EQUIPMENT LTD., f/k/a : FURNIVAL MACHINERY COMPANY, : : Counter-Plaintiff, : : v. : : INDIAN HARBOR INSURANCE COMPANY, : : Counter-Defendant. : : COUNTER-PLAINTIFF F&M EQUIPMENT LTD’S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR PARTIAL SUMMARY JUDGMENT MORGAN, LEWIS & BOCKIUS LLP Harvey Bartle, IV 1701 Market Street Philadelphia, Pennsylvania 19103-2921 Tel.: (215) 963-5000 Fax: (215) 963-5001 harvey.bartle@morganlewis.com Nicholas Schretzman 101 Park Avenue New York, New York 10178-0060 Tel.: (212) 309-6000 Fax: (212) 309-6001 nicholas.schretzman@morganlewis.com Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 1 of 17 TABLE OF CONTENTS Page -i- DB1/ 89965327.1 PRELIMINARY STATEMENT ................................................................................................... 1 STATEMENT OF FACTS ............................................................................................................ 2 1. Indian Harbor Agrees To Specific Limitations On Its Right To Cancel Or Not Renew The Policy. .......................................................................................... 3 2. Furnival Tenders Notice of Loss Under the Policy. .............................................. 4 3. Prior To Expiration Of The Policy, Furnival Requests Renewal Pursuant To Endorsement No. 16 And Indian Harbor Offers An “Indication” Of Coverage That Is Substantially Inferior To The Coverage Of The Expiring Policy. .................................................................................................................... 5 4. Furnival’s Tender Of The Premium For A Renewal Extension Policy Pursuant To Endorsement No. 16 Is Rejected By Indian Harbor and Litigation Ensues. .................................................................................................. 6 5. The Third Circuit Rules for Furnival. .................................................................... 7 6. Indian Harbor Ignores the Third Circuit’s Decision .............................................. 7 ARGUMENT................................................................................................................................ 8 I. LEGAL STANDARD........................................................................................................ 8 II. THE THIRD CIRCUIT’S DECISION IS LAW OF THE CASE...................................... 8 III. THE PARTIES INTENDED FOR ENDORSEMENT 16 TO BE INCORPORATED IN A RENEWAL............................................................................... 9 IV. THE COURT NEED NOT FIND THAT THE PARTIES ENTERED INTO A ‘PERPETUAL CONTRACT’ IN ORDER TO HOLD INDIAN HARBOR TO ITS PROMISE ................................................................................................................. 12 Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 2 of 17 DB1/ 89965327.1 ii TABLE OF AUTHORITIES Page(s) Cases Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).................................................................................................................10 Bensalem Township. v. International Surplus Lines Ins. Co., 38 F.3d 1303 (3d Cir. 1994).....................................................................................................11 In re City of Philadelphia Litigation, 158 F.3d 711 (3rd Cir. 1998) ...................................................................................................10 Indian Harbor Ins. Co. v. F & M Equipment, Ltd., 804 F.3d 310 (3rd Cir. 2015) .......................................................................................3, 4, 9, 10 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986).................................................................................................................10 Meyer v. CUNA Mut. Ins. Soc., 648 F.3d 154 (3d Cir. 2011)...............................................................................................11, 12 Regents of Mercersburg College v. Republic Franklin Ins. Co., 458 F.3d 159 (3d Cir. 2006).....................................................................................................10 Other Authorities Fed. R. Civ. P. 56(a) ......................................................................................................................10 Federal Rule of Civil Procedure 56 ...............................................................................................10 The Unanswered Question of Environmental Insurance Allocation in Oregon Law, 39 Willamette Law Review 1131, 1133-1134 (2003).....................................................12 Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 3 of 17 DB1/ 89965327.1 1 PRELIMINARY STATEMENT Summary judgment in favor of Counter-Plaintiff F&M Equipment Ltd., f/k/a Furnival Machinery Company (“Furnival”) should be granted that its insurer, Counter-Defendant Indian Harbor Insurance Co. (“Indian Harbor”) must comply with the prior unambiguous holding of the Third Circuit in this action and issue a renewal of a prior policy that Indian Harbor had issued Furnival (the “Policy”) that includes the Policy’s renewal provision. That provision was contained in Endorsement 16 to the Policy and limited Indian Harbor’s freedom to cancel or non- renew to an enumerated list of events. None of those have events occurred. The “renewal” of the Policy that Indian Harbor initially offered was replete with material changes to the original policy, which led to litigation before this Court and subsequently the Third Circuit. Indian Harbor Ins. Co. v. F & M Equipment, Ltd., 804 F.3d 310 (3rd Cir. 2015). The Third Circuit ruled in favor of Furnival, holding that the renewal language in Endorsement 16 required that Indian Harbor offer a renewal substantially similar to the original. Indian Harbor argued to the Third Circuit that requiring Indian Harbor to include Endorsement 16’s renewal language in the renewal policy would have the effect of forcing Indian Harbor to renew in perpetuity. The Third Circuit was unpersuaded by that argument: Indian Harbor complains that holding it to its promise would require renewing the renewal provision itself, and that would obligate Indian Harbor to recursively renew the contract in perpetuity. To the extent Indian Harbor argues that a contract it drafted was not careful enough, we are unmoved. Id. at 316 (emphasis added). The Third Circuit also dismissed Indian Harbor’s perpetual contract complaints on the ground that the issue before the Court concerned what terms needed to be included in one single renewal policy and not Indian Harbor’s obligations in perpetuity. Id. (“being held to a perpetual renewal is not before us.”). Third Circuit held unambiguously that “the terms of a renewal must be the same or nearly the same as the initial contract.” Id. Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 4 of 17 DB1/ 89965327.1 2 (emphasis added). The Third Circuit concluded that because Indian Harbor did not offer Furnival such a renewal contract, it breached its obligation to do so under Endorsement 16. Id. The Court required Indian Harbor to “offer a contract that can be considered a renewal, and then the parties can negotiate the details.” Id. Negotiate the parties have. However, despite reaching agreement on the majority of the material terms of the renewal contract, Indian Harbor has ignored the Third Circuit’s unambiguous ruling and the clear intent of the parties that the renewal provision of Endorsement 16 be included in the renewal policy, and has refused to incorporate the renewal provision Endorsement 16 into its renewal. This Court should order that Indian Harbor is required to do so. STATEMENT OF FACTS Furnival purchased from Indian Harbor an environmental contamination insurance policy with a term of ten years running from December 31, 2001 to December 31, 2011. (Affirmation of Harvey Bartle dated December 1, 2016) (“Bartle Aff.”), Exh. 1 at 2-3).1 The premium totaled $520,498. (Id., Exh. 1 at 2-3). The Policy initially provided $10,000,000 in coverage for remediation expenses and legal liability in connection with “Pollution Conditions” at twelve locations in Pennsylvania owned, leased or operated by Furnival, and thirteen specifically identified off-site disposal locations used but not owned, leased or operated by Furnival. One of the included sites was in Elizabethtown, Pennsylvania (the “Elizabethtown Site”). In June 2006, 1 The Policy has three main sections. The “Form Policy” refers to the 12-page standard-form policy, identified by form numbers IHIC-PARL4CP (5/01) and KINK 02/21/2002 in the lower left-hand corner of each page. The “Declarations” set forth the general terms, such as the identity of the insured, the premium, the limits of liability, and the policy number. The “Endorsements” modify the Form Policy and the Declarations by adding, amending, or deleting terms or clauses. Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 5 of 17 DB1/ 89965327.1 3 the parties modified the contract to include Endorsement No. 23, which increased the Policy’s limit from $10 million to $14 million for an additional premium of $55,798. 1. Indian Harbor Agrees To Specific Limitations On Its Right To Cancel Or Not Renew The Policy. Indian Harbor’s standard form policy places no relevant limits on either party’s right to cancel coverage. (Id., Exh. 1 at 10). The standard form does not provide for renewal coverage. The parties negotiated to add Endorsement 16 to the Policy specifically to restrict Policy cancellations and to limit the circumstances under which Indian Harbor could “refuse to offer a renewal extension of coverage.” That endorsement provides: Section IX, CONDITIONS, Item B, CANCELLATION is amended by the addition of the following: I. The INSURED and the Company [i.e., issuing insurer XL] agree that the Company may cancel at any time or refuse to offer a renewal extension of coverage for the following reasons: a. the Insured has made a material misrepresentation which affects XL’s assessment of the risk of insuring the location(s) listed in the Pollution Legal Liability Schedule and/or Remediation Legal Liability Schedule. b. the Insured materially breaches any of its obligations under the Policy, fails to pay the premium or fails to pay any Deductible or Retention Amount; or c. material failure on the part of the Insured to comply with Policy terms, conditions, or contractual duties; or d. a material change in the operations or lack of operations performed by the Insured, which changes the Company’s assessment of the risk of insuring the location(s) listed in the Pollution Legal Liability Schedule and/or Remediation Legal Liability Schedule. II. Furthermore, the INSURED and the Company agree that the Company may refuse to offer a renewal extension of coverage to the INSURED for the following reason: a. loss of reinsurance or a substantial decrease in reinsurance has occurred, which loss or decrease, at the time of non- Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 6 of 17 DB1/ 89965327.1 4 renewal, shall be certified to the Insurance Commissioner as directly affecting in-force policies. Notice of non- renewal will be mailed at least sixty (60) days before the effective date of non-renewal. This does not apply to Section V. EXTENDED REPORTING PERIOD, Item A., Automatic Extended Reporting Period or Section V. EXTENDED REPORTING PERIOD, Item B., Optional Extended Reporting Period. The Company agrees that it shall not cancel nor non-renew this Policy except for the reasons stated above. (Id., Exh. 1 at 33) (emphasis added). Renewals are also addressed in Section V of the Policy, in connection with extended reporting periods. (Id., Exh. 1 at 10-11). In the event of termination of the Policy by cancellation or “non-renewal,” Furnival was entitled to extend, past the end of the Policy term, the time within which it could report to Indian Harbor claims falling within the Policy’s coverage.2 (Id.). 2. Furnival Tenders Notice of Loss Under the Policy. On December 28, 2011, Furnival tendered notice to Indian Harbor under the Policy, seeking defense and indemnity related to groundwater and vapor remediation and study activities at the Elizabethtown Site. Bartle Aff., Exh. 2 at 15. That notice was connected with the continued exercise of regulatory authority under the Consent Decree disclosed to Indian Harbor prior to issuance of the Policy as part of the Policy underwriting process. (Bartle Aff., Exh. 1 at 18-19). 2 Claims made during any extended reporting period are limited to Pollution Conditions “existing as of or prior to the applicable termination or expiration date” (for the 60 day Automatic Reporting Period), or “existing as of or prior to the date of cancellation or non-renewal of this Policy” (for the up-to three year Optional Extended Reporting Period). No premium was due for the Automatic Extended Reporting Period, while the Optional Extended Reporting Period required that a premium be paid. (Bartle Aff., Exh. 1 at 10-11). The premium to be charged for any Optional Extended Reporting Period is capped. (Id., Exh. 1 at 11). Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 7 of 17 DB1/ 89965327.1 5 3. Prior To Expiration Of The Policy, Furnival Requests Renewal Pursuant To Endorsement No. 16 And Indian Harbor Offers An “Indication” Of Coverage That Is Substantially Inferior To The Coverage Of The Expiring Policy. On December 30, 2011, Furnival requested from Indian Harbor the “[p]roposed premium payable and all other relevant terms and conditions” for both a renewal policy and an optional extended reporting period, thereby providing “notice under the [P]olicy of the insured’s intention to elect between these two available options.” (Bartle Aff., Exh. 3 at 2). On January 24, 2012, Furnival responded with an “Indication” for renewal offering terms materially different from those in the expiring Policy. These terms proposed substantially less coverage. (Bartle Aff., Exh. 4 at 2). For example:  While the Policy had a term of ten years, the Indication offered a mere twelve months of coverage. (Id., Exh. 4 at 6).  The Policy provided $10,000,000 in limits, which were increased to $14,000,000 by the 2006 amendment. The Indication proposed $5,000,000 along with various sublimits. (Id., Exh. 4 at 15).  The Indication removed the Elizabethtown Site from the covered locations, and added broad exclusions for Pollution Conditions resulting from specific pollutants that had been covered under the Policy. (Id., Exh. 4 at 9, 17, 19). Further, the premium was for a substantially increased amount: the total amount paid for the Policy and its amendment works out to $57,629 per year; the Indication was priced at $69,292 for a single year’s protection—an increase of approximately $12,000 – more than 20% - for significantly reduced coverage. The Indication proposed a coverage expiration date of January 31, 2012. (Id., Exh. 4 at 2). Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 8 of 17 DB1/ 89965327.1 6 Indian Harbor explained its reasons for the materially different coverage proposal in a January 26, 2012 e-mail: As we discussed, we do not feel that we have enough information to provide broader coverage than that offered on January 24, 2012. We do not believe that even with this information coverage will match that of the expiring. We may be able to refine the exclusion(s) further with additional information. As for the Elizabethtown site, the renewal indication does not include that location because we feel that the risk/exposure relative to the non-groundwater issues cannot be quantified sufficiently to provide coverage for the site at this time. In our discussions with the client on January 6, 2012 we did not say that a quote would match the expiring terms. We said that we would prepare a quote subsequent to receiving the information regarding the claim on the Elizabethtown site and all updated information for all sites since our original binding of this policy in 2001. (Bartle Aff., Exh. 5 at 2). 4. Furnival’s Tender Of The Premium For A Renewal Extension Policy Pursuant To Endorsement No. 16 Is Rejected By Indian Harbor and Litigation Ensues. On February 24, 2012, Furnival tendered $520,498—the amount of the premium originally paid for the expiring Policy as part of serving “unequivocal notice of Furnival’s acceptance of XL’s offer of a renewal extension of coverage” and as part of “reject[ing] any alternative offers that XL extended.” (Bartle Aff., Exh. 6.). Indian Harbor rejected Furnival’s tender by its March 14, 2012 letter and filed its complaint for declaratory relief on March 23, 2012. (Bartle Aff., Exh. 7). Furnival filed a counterclaim for breach of contract and moved for summary judgment. In an opinion dated August 15, 2013, the District Court held that Indian Harbor’s offered renewal policy comported with the requirements of Endorsement 16. (Docket No. 28). The District Court later entered judgment in favor of Indian Harbor. (Docket No. 34). Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 9 of 17 DB1/ 89965327.1 7 5. The Third Circuit Rules for Furnival. On October 15, 2015, the Third Circuit reversed that ruling. In finding for Furnival, the Third Circuit ruled that “[b]ecause Indian Harbor did not offer a contract that is either the same or nearly the same as the Policy, it breached its promise to offer a renewal extension of coverage.” Indian Harbor, 804 F.3d at 315-16. The Court ordered that, “[p]er Endorsement No. 16, Indian Harbor must offer a contract that can be considered a renewal, and then the parties can negotiate the details.” Id. at 316. To allay any doubt, the Court explained exactly how the contract could be considered a renewal: “the terms of a renewal must be the same or nearly the same as the initial contract.” Id. (emphasis added). The Court expressly considered and rejected Indian Harbor’s argument for why it should not be required to include the same renewal language in the renewal policy as in the original policy, even pointing out what Indian Harbor could do in different policies than the one sought to be renewed here: Indian Harbor complains that holding it to its promise would require renewing the renewal provision itself, and that would obligate Indian Harbor to recursively renew the contract in perpetuity. To the extent Indian Harbor argues that a contract is drafted was not careful enough, we are unmoved. Moreover, in future policies, Indian Harbor need not incorporate the broad renewal provisions that are included here. The issue of a perpetual contract is, however, a question for another day. Id. (emphasis added). 6. Indian Harbor Ignores the Third Circuit’s Decision. Indian Harbor subsequently tendered a new proposed renewal policy to Furnival, over the terms of which the parties negotiated for several months. While all other material terms have been agreed to, Indian Harbor refuses to incorporate the renewal language of Endorsement 16 in the renewal, despite the Third Circuit’s admonition that it do so. Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 10 of 17 DB1/ 89965327.1 8 ARGUMENT I. LEGAL STANDARD Under Federal Rule of Civil Procedure 56, summary judgment “shall be rendered” if the submissions “show[s] that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). If the evidence in the record “could not lead a . . . trier of fact to find for the non-moving party, there is no genuine issue for trial,” and the motion should be granted. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation omitted). In turn, there are no factual issues for trial unless there is sufficient evidence favoring the non-moving party for a reasonable jury to return a verdict for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). II. THE THIRD CIRCUIT’S DECISION IS LAW OF THE CASE The law of the case doctrine is “designed to protect traditional ideals such as finality, judicial economy and jurisprudential integrity.” In re City of Philadelphia Litigation, 158 F.3d 711, 717 (3rd Cir. 1998). Decisions which are neither dicta, contradicted by new evidence, or clearly erroneous are to be afforded respect. Id. Here, the Third Circuit expressly rejected Indian Harbor’s complaint that requiring inclusion of Endorsement 16’s renewal provision in the renewal policy would obligate Indian Harbor to renew the contract in perpetuity. The Court ruled that question was for “another day,” but that the terms of the renewal policy at issue before it then (and still at issue now) “must be the same or nearly the same as the initial contract.” Indian Harbor, 804 F.3d at 316. Accordingly, Indian Harbor is bound by that determination and summary judgment should be granted on that basis alone. Any other outcome would contradict the Third Circuit’s ruling. Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 11 of 17 DB1/ 89965327.1 9 III. THE PARTIES INTENDED FOR ENDORSEMENT 16 TO BE INCORPORATED IN A RENEWAL Even putting aside the direct ruling of the Third Circuit, the language of Endorsement 16 compels Indian Harbor to include Endorsement 16’s renewal provisions in its renewal policy. “The interpretation of the scope of coverage of an insurance contract is a question of law properly decided by the court . . ..” Regents of Mercersburg College v. Republic Franklin Ins. Co., 458 F.3d 159, 163 (3d Cir. 2006) (citing Med. Protective Co. v. Watkins, 198 F.3d 100, 103 (3d Cir. 1999) (internal quotation marks omitted). “The goal of that task is, of course, ‘to ascertain the intent of the parties as manifested by the language of the written instrument.’” Meyer v. CUNA Mut. Ins. Soc., 648 F.3d 154, 162 (3d Cir. 2011) (citations omitted). The goal of interpreting an insurance policy, like that of interpreting any other contract, is to determine the intent of the parties. It begins with the language of the policy. A policy must be read as a whole and its meaning construed according to its plain language. The burden of drafting with precision rests with the insurance company, the author of the policy.” Id. at 163 (internal citations omitted). When interpreting the plain and unambiguous terms of insurance contracts, Pennsylvania courts supplement the rules of contract interpretation in recognition of the circumstances that insurance contracts are typically drafted by the insurer, and thus the insurer bears “[t]he burden of drafting with precision.” Id.; Bensalem Township. v. International Surplus Lines Ins. Co., 38 F.3d 1303, 1310 (3d Cir. 1994). Further, even unambiguous terms of insurance contracts must be interpreted in the light of the insured’s reasonable expectations. Bensalem Township, 38 F.3d at 1308-09 (dismissal reversed where insured denied opportunity to submit evidence that insurer had created reasonable expectation that claims would be covered despite unambiguous exclusion). Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 12 of 17 DB1/ 89965327.1 10 Indian Harbor agreed by its Policy to protect specific locations, as to specific, disclosed pollution risks, for an extended period, the first term of which was ten years, renewable. The duration of the Policy as well as its renewability is wholly consonant with the reality that the assessment and remediation of environmental issues can be a very lengthy process. See The Unanswered Question of Environmental Insurance Allocation in Oregon Law, 39 Willamette Law Review 1131, 1133-34 (2003) (the “typical scenario” of environmental contamination is discovery of “contamination [that] occurred twenty-five or more years ago, at a time when environmental regulations were inadequate (or nonexistent) and standard operating practices were not sufficiently rigorous to prevent the contamination” followed by a lengthy clean-up). Under Indian Harbor’s standard form policy, no renewal was included. The parties, however, negotiated and agreed that part of the protection furnished by the Policy would be a “renewal extension” available unless one of several specifically identified events took place. In other words, Furnival was promised in the context of this pollution protection insurance, which addresses issues that can take decades to resolve, that it could continue to look to Indian Harbor even after the initial term of the Policy expired. Indian Harbor knew and understood the length of time for remediation when it drafted and added the renewal provision following negotiation. It protected itself by the premium charged in 2001, the commercially reasonable premium that it could charge for a renewal, the specified grounds for non-renewal, and Indian Harbor’s chance to assess, as part of its 2001 underwriting, the locations and risks it was covering. Indian Harbor protected itself in other ways as well. For example, the Policy excludes coverage for known but undisclosed Pollution Conditions, and it allows cancellation or non- renewal if one of several specified acts or omissions by Furnival might affect the liability risks that Indian Harbor had the chance to fully assess before it issued the Policy. (Bartle Aff., Exh. 1 Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 13 of 17 DB1/ 89965327.1 11 at 33). Indian Harbor was thus fully aware of the long-term liability risk that it undertook when it negotiated the Policy terms with Furnival, including Endorsement 16’s renewal provision. Endorsement 16’s renewal provision does not make the Policy a “perpetual contract.” That provision is simply a recognition by the parties that the risk insured against – environmental damage – can take place over long periods of time but ultimately will end. A perpetual contract is a contract that has an indefinite period of time and no agreed-to way to terminate. See Wyeth Pharmaceuticals, Inc. v. Borough of West Chester, 2015126 A.3d 1055, 1064 (Pa. Cmmwlth Ct. 2015) (citations omitted). That is not Endorsement 16’s renewal provision, which has a defined period – ten years – and includes specific conditions negotiated by the parties that provide for non-renewal at the end of that period. Furthermore, Furnival has been an inactive corporation since 2006. It has not engaged in any operations or activities that could result in new Pollution Conditions arising. The sole claim made under the Policy stems from groundwater testing and remediation activities mandated under the continuing regulatory jurisdiction of a Consent Decree at the Elizabethtown Site that was listed on the schedule of Known Conditions that were incorporated into the Policy itself, and were known to Indian Harbor before it issued the Policy and Endorsement No. 16. (Bartle Aff., Exh. 1 at 18). The coverage, as negotiated between the parties, was intended to last only as long as the disclosed risks, not ad infinitum. Even if Endorsement 16 were to be interpreted as creating a perpetual contract (which it does not), such contracts are enforceable in Pennsylvania where the “perpetual term [is] expressed unequivocally.” Id. There is no doubt that in Endorsement 16, Indian Harbor and Furnival “unequivocally expressed” their intent and specifically agreed that the Policy automatically renew unless the conditions listed therein were met. Those conditions admittedly Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 14 of 17 DB1/ 89965327.1 12 were not, and have not, been triggered. As a result, Indian Harbor cannot complain when all it is being asked to do is comply with the terms of the Policy it issued. Meyer, 648 F.3d at 163. Calling Endorsement 16 a “perpetual contract” does not make it so. IV. THE COURT NEED NOT FIND THAT THE PARTIES ENTERED INTO A “PERPETUAL CONTRACT” IN ORDER TO HOLD INDIAN HARBOR TO ITS PROMISE That said, to resolve this matter this Court does not even need to reach the issue of whether Endorsement 16’s renewal provision created a perpetual contract. Furnival merely seeks enforcement of what amounts to an automatic trigger of its right to renew, absent one of the specific, negotiated conditions justifying non-renewal. Pennsylvania courts have routinely enforced automatic renewal provisions. See, e.g., Otis Elevator Co. v. George Washington Hotel Corp., 27 F.3d 903, 906 (3d Cir. 1994); Sungard Services Co. v. Joint Computer Center, Inc., CIV. A. No. 88-8367, 1989 WL 46049, at *4-5 (E.D. Pa. April 25, 1989) (examining Pennsylvania precedent and holding that an automatic renewal provision in a contract “is not, in and of itself, unconscionable.”). The contracts at issue in Otis Elevator and Sungard were written to automatically renew so long as neither party provided written notice of termination within a specified period of time prior to the end of the operative contract term. Otis Elevator, 27 F.3d 903 at 904; Sungard, 1989 WL 46049, at *2. Here, rather than condition renewal on the absence of a timely notice of termination, Furnival and Indian Harbor elected to include a provision which would automatically trigger Indian Harbor’s obligation to offer a renewal absent one of the certain enumerated events taking place. As set forth above, Indian Harbor’s standard form policy does not limit either party’s right to cancel coverage and does not provide for renewal coverage. (Bartle Aff., Exh. 1 at 10). But, by Endorsement 16, Furnival and Indian Harbor agreed to restrict Indian Harbor’s ability to cancel the Policy and limit the circumstances under which Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 15 of 17 DB1/ 89965327.1 13 Indian Harbor could “refuse to offer a renewal extension of coverage.” Such automatic renewal provisions, which are conditioned on the non-occurrence of particular events, are therefore enforceable. Indian Harbor argues that it should not be held to its promise to offer a renewal absent events which did not occur because to do so would be unfair. It essentially asks the Court to read into the Policy a provision which allows it unfettered power to not to renew the Policy. However, when Indian Harbor was negotiating the detailed policy language in Endorsement No. 16 setting forth the justifications and mechanisms for cancellation and non-renewal, it could have but did not include such a provision. This Court should not create one out of whole cloth. Nor should this Court “sanction [Indian Harbor’s] willful disregard of a valid contract provision.” Sungard, 1989 WL 46049, at *6 (E.D. Pa. April 25, 1989) (citing Erie Telecommunications, Inc. v. City of Erie, 853 F.2d 1084, 1091 (3d Cir. 1988) (“the essence of contract law is the objective intent of the parties and when there is no allegation of mistake, fraud, overreaching or the like, it is not the function of the court to redraft a contract to be more favorable to a given party than the agreement he chose to enter.”). The Third Circuit made the same point when it stated in response to Indian Harbor’s complaints about being held to a perpetual contract: “To the extent Indian Harbor argues that a contract it drafted was not careful enough, we are unmoved.” Indian Harbor Ins. Co., 804 F.3d at 316 (emphasis added). Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 16 of 17 DB1/ 89965327.1 14 CONCLUSION For the foregoing reasons, summary judgment should be granted in Furnival’s favor on the question of whether Endorsement 16 must be incorporated into the renewal policy. Dated: December 1, 2016 Respectfully submitted ____________________________ Harvey Bartle, IV 1701 Market Street Philadelphia, Pennsylvania 19103-2921 Tel.: (215) 963-5000 Fax: (215) 963-5001 harvey.bartle@morganlewis.com Nicholas Schretzman 101 Park Avenue New York, New York 10178-0060 Tel.: (212) 309-6000 Fax: (212) 309-6001 nicholas.schretzman@morganlewis.com Attorneys for F&M Equipment Ltd., f/k/a Furnival Machinery Company s/Harvey Bartle, IV Case 2:12-cv-01506-PBT Document 64-1 Filed 12/01/16 Page 17 of 17 DB1/ 89910892.1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA INDIAN HARBOR INSURANCE COMPANY, : : Plaintiff : : Civ. No. 12-1506 (PBT) v. : : F&M EQUIPMENT LTD. f/k/a : FURNIVAL MACHINERY COMPANY, : : Defendant : : F&M EQUIPMENT LTD, f/k/a : FURNIVAL MACHINERY COMPANY, : : Counter-Plaintiff : : v. : : INDIAN HARBOR INSURANCE COMPANY, : : Counter-Defendant : : DECLARATION OF HARVEY BARTLE, IV IN SUPPORT OF COUNTER-PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT I, HARVEY BARTLE, IV, pursuant to 28 U.S.C. § 1746, hereby declares as follows: 1. I am a partner of the law firm of Morgan, Lewis & Bockius LLP, counsel for Counter- Plaintiff F&M equipment Ltd. (“Furnival”). I respectfully submit this declaration in support of Furnival’s motion for summary judgment. I base this declaration upon my personal knowledge and the file kept by my firm. 2. Annexed hereto as Exhibit 1 is a true and correct copy of Policy Number PEC0010805 (the “Policy”), which was issued by Indian Harbor Insurance Company (“Indian Harbor”) to Furnival. Case 2:12-cv-01506-PBT Document 64-2 Filed 12/01/16 Page 1 of 2 DB1/ 89910892.1 2 3. Annexed hereto as Exhibit 2 is a true and correct copy of Furnival’s Answer, Affirmative Defenses, and Counterclaim filed in this action on May 29, 2012. 4. Annexed hereto as Exhibit 3 is a true and correct copy of a letter dated December 30, 2011 from Mr. Steven Karl to Ms. Mary Ann Susavidge. 5. Annexed hereto as Exhibit 4 is a true and correct copy of a letter dated January 24, 2012 from Mr. A.J. Polito to Mr. Chuck Zaher. 6. Annexed hereto as Exhibit 5 is a true and correct copy of an e-mail dated January 26, 2012 from Ms. Mary Ann Susavidge to Mr. Richard Sheldon. 7. Annexed hereto as Exhibit 6 is a true and correct copy of a letter dated February 24, 2012 from Mr. Richard Pearl to Indian Harbor Insurance Company. 8. Annexed hereto as Exhibit 7 is a true and correct copy of a letter dated March 14, 2012 from Mr. Joel Hopkins to Mr. Richard Pearl. Dated: December 1, 2016 ____________________________ Harvey Bartle, IV 1701 Market Street Philadelphia, Pennsylvania 19103-2921 Tel.: (215) 963-5000 Fax: (215) 963-5001 harvey.bartle@morganlewis.com s/Harvey Bartle, IV Case 2:12-cv-01506-PBT Document 64-2 Filed 12/01/16 Page 2 of 2 1 Case 2:12-cv-01506-PBT Document 64-3 Filed 12/01/16 Page 1 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 9 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 1 of 43Case 2:12-cv-01506-PBT Document 64-3 Filed 1 /0 /16 Page 2 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 10 of 51s : -cv- - c t 8-3 Filed 06/22/12 Page 2 f 43Case 2:12-cv-01506-PBT Document 64-3 Filed 1 /0 /16 Page 3 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 11 of 51s : -cv- - c t 8-3 Filed 06/22/12 Page 3 f 43Case 2:12-cv-01506-PBT Document 64-3 Filed 1 /0 /16 Page 4 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 12 of 51s : -cv- - c t 8-3 Filed 06/22/12 Page 4 f 43Case 2:12-cv-01506-PBT Document 64-3 Filed 1 /0 /16 Page 5 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 13 of 51s : -cv- - c t 8-3 Filed 06/22/12 Page 5 f 43Case 2:12-cv-01506-PBT Document 64-3 Filed 1 /0 /16 Page 6 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 14 of 51s : -cv- - c t 8-3 Filed 06/22/12 Page 6 f 43Case 2:12-cv-01506-PBT Document 64-3 Filed 1 /0 /16 Page 7 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 15 of 51s : -cv- - c t 8-3 Filed 06/22/12 Page 7 f 43Case 2:12-cv-01506-PBT Document 64-3 Filed 1 /0 /16 Page 8 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 16 of 51s : -cv- - c t 8-3 Filed 06/22/12 Page 8 f 43Case 2:12-cv-01506-PBT Document 64-3 Filed 1 /0 /16 Page 9 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 17 of 51s : -cv- - c t 8-3 Filed 06/22/12 Page 9 f 43Case 2:12-cv-01506-PBT Document 64 1 0 6 10 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 18 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 10 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 11 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 19 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 11 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 12 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 20 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 12 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 13 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 21 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 3 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 4 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 22 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 14 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 15 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 23 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 15 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 16 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 24 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 16 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 17 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 25 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 17 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 18 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 26 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 18 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 19 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 27 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 19 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 20 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 28 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 20 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 21 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 29 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 21 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 22 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 30 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 22 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 23 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 31 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 23 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 24 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 32 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 4 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 5 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 33 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 25 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 26 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 34 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 26 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 27 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 35 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 27 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 28 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 36 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 28 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 29 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 37 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 29 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 30 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 38 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 30 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 31 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 39 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 31 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 32 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 40 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 32 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 33 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 41 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 33 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 34 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 42 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 34 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 35 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 43 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 5 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 6 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 44 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 36 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 37 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 45 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 37 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 38 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 46 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 38 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 39 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 47 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 39 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 40 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 48 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 40 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 41 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 49 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 41 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 42 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 50 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 42 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 43 of 44 Case 2:12-cv-01506-PBT Document 1 Filed 03/23/12 Page 51 of 51Case 2:12-cv-01506-PBT Document 8-3 Filed 06/22/12 Page 43 of 43Case 2:12-cv-01506-PBT Docu ent 64-3 Filed 1 /0 /16 Page 44 of 44 2 Case 2:12-cv-01506-PBT Document 64-4 Filed 12/01/16 Page 1 of 30 DB1/ 69722136.1 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA INDIAN HARBOR INSURANCE : COMPANY, : : CIVIL ACTION Plaintiff, : : No. 2:12-cv-01506-PBT v. : : F&M EQUIPMENT LTD. f/k/a : FURNIVAL MACHINERY : JURY TRIAL DEMANDED COMPANY, : : Defendant. : __________________________________________ : : F&M EQUIPMENT LTD, f/k/a FURNIVAL : MACHINERY COMPANY, : : Counter-Plaintiff, : : v. : : INDIAN HARBOR INSURANCE COMPANY, : : Counter-Defendant. : F&M EQUIPMENT, LTD.’S ANSWER, AFFIRMATIVE DEFENSES, AND COUNTERCLAIM F&M Equipment Ltd., f/k/a Furnival Machinery Company (“Furnival”), through undersigned counsel, files its Answer, Affirmative Defenses, and Counterclaim to the Complaint in this matter. I. ANSWER PARTIES 1. Plaintiff Indian Harbor Insurance Company (“IHIC”) is a North Dakota corporation that operates as a surplus lines insurer in all 50 states, and provides insurance coverage to commercial insureds. ANSWER: Furnival admits that Plaintiff is a North Dakota corporation and lacks information or belief sufficient to admit or deny the remaining allegations in this paragraph, and denies same. Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 1 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 2 of 30 DB1/ 69722136.1 2 2. Defendant F&M Equipment, Ltd. f/k/a Furnival Machinery Company (“Furnival”), is a Pennsylvania corporation engaged in the distribution and sale of new, used, and rental bulldozers and small unit equipment, and is located at 2240 Bethlehem Pike, Hatfield, Montgomery County, Pennsylvania 19440. ANSWER: Furnival admits that F&M Equipment, Ltd. is a corporation incorporated in Pennsylvania and did operate a business in the past that included the distribution and sale of bulldozers and certain other types of equipment, but Furnival ceased these operations in 2006. Furnival denies the remaining allegations in this paragraph. JURISDICTION AND VENUE 3. This Court has subject matter jurisdiction over this action pursuant to the provisions of 28 U.S.C. §§ 1332 and 2201, as the parties are of diverse citizenship and the amount of controversy exceeds $75,000, exclusive of costs, interest and attorney’s fees. ANSWER: This paragraph contains a legal conclusion to which no answer is required. To the extent required, Furnival denies any factual allegations in this paragraph. 4. Venue is proper within the Eastern District of Pennsylvania under 28 U.S.C. § 1391(a) and (c) because: (i) a substantial part of the events or omissions giving rise to the claim occurred in this District; and (ii) a defendant is subject to personal jurisdiction in this District. ANSWER: This paragraph contains a legal conclusion to which no answer is required. To the extent required, Furnival denies any factual allegations in this paragraph. THE IHIC POLICY 5. From December 31, 2001, through December 31, 2011, Furnival was the first named insured under a Pollution and Remediation Legal Liability Policy issued by IHIC under policy number PEC 0010805 (the “Policy”). A true and correct copy of the Policy is attached hereto as Exhibit A and incorporated herein by reference. Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 2 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 3 of 30 DB1/ 69722136.1 3 ANSWER: Admitted. 6. The Policy included a provision that it would not be cancelled or non-renewed except for the reasons set forth in Endorsement No. 16. (the “Endorsement”). ANSWER: Furnival admits that Endorsement No. 16 was part of the Policy and that it addresses cancellation and non-renewal, but denies Indian Harbor’s characterization of that Endorsement. 7. Specifically, the Endorsement provides: I. The INSURED and the Company agree that the Company may cancel at any time or refuse to offer a renewal extension of coverage for the following reasons: a. the INSURED has made a material misrepresentation which affects the Company’s assessment of the risk of insuring the location(s) listed in the Pollution Legal Liability Schedule and/or Remediation Legal Liability Schedule. b. the INSURED materially breaches any of its obligations under the Policy, fails to pay the premium or fails to pay any Deductible or Retention Amount; or c. material failure on the part of the INSURED to comply with Policy terms, conditions, or contractual duties; or d. a material change in the operations or lack of operations performed by the INSURED, which changes the Company’s assessment of the risk of insuring the location(s) listed in the Pollution Legal Liability Schedule and/or Remediation Legal Liability Schedule. II. Furthermore, the INSURED and the Company agree that the Company may refuse to offer a renewal extension of coverage to the INSURED for the following reason: a. loss of reinsurance or a substantial decrease in reinsurance has occurred, which loss or decrease, at the time of non-renewal, shall be certified to the Insurance Commissioner as directly affecting in- force policies. Notice of non-renewal will be mailed at least sixty (60) days before the effective date of non-renewal. This does not apply to Section V. EXTENDED REPORTING PERIOD, Item A., Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 3 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 4 of 30 DB1/ 69722136.1 4 Automatic Extended Reporting Period or Section V. EXTENDED REPORTING PERIOD, Item B., Optional Extended Reporting Period. The Company agrees that it shall not cancel nor non-renew this Policy except for the reasons stated above. All other terms and conditions remain the same. Exh. A., Endorsement No. 16. ANSWER: Admitted that Endorsement No. 16 reads as above and is part of an insurance policy issued by Indian Harbor. THE COVERAGE DISPUTE 8. On or about September 12, 2011, IHIC sought a renewal application from Furnival’s broker of record, who advised IHIC the following day that no such coverage was needed. ANSWER: Furnival lacks information or belief sufficient to admit or deny the allegations in this paragraph, and denies same. 9. On December 30, 2011, Furnival, through its in-house counsel, requested that IHIC provide Furnival with “[p]roposed premiums payable and all other relevant terms and conditions for a renewal policy that the named insured is entitled to and allowed to elect under the policy.” ANSWER: Furnival admits that on December 30, 2011 Furnival’s in-house counsel sent correspondence to Indian Harbor’s agents and that such correspondence contained the language quoted above. Answering further, Furnival states that the quoted language above does not quote the entire communication, and Furnival denies Indian Harbor’s characterization of that communication. 10. IHIC provided Furnival with a renewal quote on or about January 25, 2012. Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 4 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 5 of 30 DB1/ 69722136.1 5 ANSWER: Denied. Answering further, Furnival states that on January 25, 2012, Indian Harbor provided Furnival with an indication for a potential new insurance policy that would contain materially different and inferior terms and conditions from those in the Policy, and such an offer did not constitute a “renewal quote.” 11. On January 25, 2012, Furnival rejected IHIC’s renewal quote. ANSWER: Furnival admits that on January 25, 2012, Furnival rejected Indian Harbor’s indication for a potential new insurance policy that would contain materially different and inferior terms and conditions from those in the Policy, and states further that such offer did not constitute a “renewal quote.” Furnival denies the remaining allegations in this paragraph. 12. On or about January 27, 2012, Furnival requested that IHIC provide a revised “offer to renew” containing the same material terms and conditions as the expiring Policy. ANSWER: Furnival admits that on January 27, 2012, Furnival requested that Indian Harbor provide an “offer to renew” as required under the Policy and applicable law. Furnival denies the remaining allegations in this paragraph. 13. IHIC informed Furnival on or about January 31, 2012 that a revised offer to renew would not be forthcoming. ANSWER: Furnival admits that Indian Harbor refused to offer anything other than the proposal Indian Harbor provided on January 25, 2012. Furnival denies the remaining allegations in this paragraph. 14. On February 24, 2012, Furnival, through its counsel, provided notice of Furnival’s purported election to renew the Policy by tendering a check in the amount of the Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 5 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 6 of 30 DB1/ 69722136.1 6 expiring Policy’s premium and unilaterally asserting that the renewal must be on the same terms and conditions as the expiring Policy. ANSWER: Furnival admits that on February 24, 2012, Furnival, through its counsel, tendered a check in the amount of the Policy’s premium and elected to accept Indian Harbor’s offer of a “renewal extension of coverage,” as set forth in Endorsement No. 16 of the Policy. Answering further, Furnival states that Furnival rejected Indian Harbor’s January 25, 2012 proposal of a potential new insurance policy that would contain materially different and inferior terms and conditions from those in the Policy. Furnival denies the remaining allegations in this paragraph. 15. IHIC has not accepted Furnival’s offer for IHIC to issue a renewal policy on the same terms and conditions as the expiring Policy. ANSWER: This paragraph states a legal conclusion to which no answer is required. Furnival denies the remaining allegations in this paragraph. DECLARATORY JUDGMENT 16. IHIC’s offer of January 25, 2012, satisfied the insurer’s obligation as set forth in Endorsement No. 16. ANSWER: Denied. 17. Furnival rejected IHIC’s offer of a renewal policy on January 25, 2012. ANSWER: Denied. 18. IHIC has no further obligations with respect to renewal coverage, and has no obligation to accept Furnival’s offer to renew the Policy under the same terms and conditions as were in effect during the original policy period. ANSWER: Denied. Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 6 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 7 of 30 DB1/ 69722136.1 7 19. This claim for declaratory judgment is brought pursuant to 28 U.S.C. § 2201 et seq., and seeks a determination by this Court that IHIC has no obligation to renew the Policy under the same terms and conditions as the expiring Policy, and that Furnival’s February 24, 2012, attempt to renew the Policy has no force and effect. ANSWER: This paragraph contains a legal conclusion to which no answer is required. To the extent required, Furnival denies any factual allegations in this paragraph. 20. An actual and immediate controversy exists between the parties hereto concerning coverage under the Policy, as the parties dispute whether coverage under the Policy currently exists in light of Furnival’s rejection of IHIC’s offer of renewal, and subsequent attempt to renew the Policy under the same terms and conditions. ANSWER: This paragraph contains a legal conclusion to which no answer is required. To the extent required, Furnival denies any factual allegations in this paragraph, except to admit that a controversy exists between the parties, but Furnival denies Indian Harbor’s characterization of that controversy. 21. In light of Furnival’s apparent belief that it had the unilateral right to renew the Policy under the same terms and conditions as the expiring Policy, and IHIC’s belief that the purported renewal has no force and effect, litigation appears imminent and inevitable. As such, the dispute between the parties is an actual, existing and bona fide controversy that is ripe for judicial determination. ANSWER: This paragraph contains a legal conclusion to which no answer is required. To the extent required, Furnival denies any factual allegations in this paragraph, except to admit that a controversy is ripe for judicial determination and denies any remaining factual allegations in this paragraph. 22. Because the declarations sought by IHIC – that the Policy terminated on December 31, 2011; that IHIC’s offer to renew the Policy was rejected by Furnival; and that Furnival’s attempt to renew the Policy under the same terms and conditions is without force and Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 7 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 8 of 30 DB1/ 69722136.1 8 effect – will resolve or assist the parties in resolving this controversy, a declaratory judgment is an appropriate remedy under the circumstances. ANSWER: This paragraph contains legal conclusions to which no answer is required. To the extent required, Furnival denies any factual allegations in this paragraph, except to admit that Indian Harbor seeks a declaratory judgment. 23. IHIC’s interest in this controversy is direct, substantial and present. ANSWER: The allegations in this paragraph contain legal conclusions to which no answer is required or otherwise are vague. To the extent required, Furnival denies any factual allegations in this paragraph, except to admit that there exists a controversy between the parties. WHEREFORE, Defendant, F&M Equipment Ltd., f/ka/ Furnival Machinery Corp. respectfully requests that this Court enter judgment in its favor and against Indian Harbor Insurance Company. II. AFFIRMATIVE DEFENSES First Affirmative Defense Indian Harbor’s claim for relief is barred by the doctrines of equitable estoppel. Second Affirmative Defense Indian Harbor’s claim for relief is barred by the doctrine of waiver. Third Affirmative Defense Indian Harbor’s claim for relief is barred by the doctrine of laches. Fourth Affirmative Defense Indian Harbor’s claim for relief is barred by the doctrine of unclean hands. Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 8 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 9 of 30 DB1/ 69722136.1 9 Fifth Affirmative Defense Furnival reserves its right to assert additional affirmative defenses for which Furnival develops knowledge or support and as permitted by applicable law. III. COUNTERCLAIM F&M Equipment Ltd., f/k/a Furnival Machinery Company, through undersigned counsel, asserts its Counterclaim against Indian Harbor Insurance Company and alleges as follows: Parties 1. Counter-Plaintiff F&M Machinery Company, f/k/a Furnival Machinery Company (“Furnival”), is a Pennsylvania corporation with its principal place of business located currently in Illinois. ANSWER: 2. Counter-Defendant Indian Harbor Insurance Company (“Indian Harbor”) is part of the XL Group of insurance companies. Upon information and belief, Indian Harbor is a North Dakota corporation with its principal place of business in Stamford, Connecticut. ANSWER Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 9 of 29Case 2:12-cv-01506-PBT Document 64-4 Filed 12/01/16 Page 10 of 30 DB1/ 69722136.1 10 Jurisdiction and Venue 3. Jurisdiction is proper under 28 U.S.C. §§ 1332 and 2201, as the parties are of diverse citizenship and the amount of controversy exceeds $75,000, exclusive of costs, interest and attorney’s fees. ANSWER: 4. Venue is proper in the Eastern District of Pennsylvania under 28 U.S.C. § 1391(a) and (c) because: (i) a substantial part of the events or omissions giving rise to the claim occurred in this District; and (ii) a defendant is subject to personal jurisdiction in this District. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 10 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 11 of 30 DB1/ 69722136.1 11 The Insurance Policy 5. Indian Harbor issued Furnival Machinery Company a Pollution and Remediation Legal Liability Policy, Policy Number PEC0010805, with a Policy Period of December 31, 2001 to December 31, 2011 (referring to herein as the “Policy”). (Ex. A to Dkt. No. 1.) ANSWER: 6. The Policy Premium, which was paid in full, was $520,498.00. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 11 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 2 of 30 DB1/ 69722136.1 12 7. The form policy contains a section IX entitled “Conditions,” with a subsection B entitled “Cancellation.” ANSWER: 8. Endorsement No. 16, entitled “Cancellation and Non-Renewal Modification,” forms a part of the Policy and amends Section IX(B). Endorsement No. 16 states as follows: CANCELLATION AND NON-RENEWAL MODIFICATION This endorsement modifies insurance provided under the following: POLLUTION AND REMEDIATION LEGAL LIABILITY Section IX. CONDITIONS, Item B. CANCELLATION is amended by the addition of the following: I. The INSURED and the Company agree that the Company may cancel at any time or refuse to offer a renewal extension of coverage for the following reasons: a. the Insured has made a material misrepresentation which affects XL’s assessment of the risk of insuring the location(s) listed in the Pollution Legal Liability Schedule and/or Remediation Legal Liability Schedule. b. the Insured materially breache[d] any of its obligations under the Policy, fail[ed] to pay the premium or fail[ed] to pay any Deductible or Retention Amount; or c. material failure on the part of the Insured to comply with Policy terms, conditions, or contractual duties; or d. a material change in the operations or lack of operations performed by the Insured, which changes the Company’s assessment of the risk of insuring the Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 12 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 13 of 30 DB1/ 69722136.1 13 location(s) listed in the Pollution Legal Liability Schedule and/or Remediation Legal Liability Schedule. II. Furthermore, the INSURED and the Company agree that the Company may refuse to offer a renewal extension of coverage to the INSURED for the following reason: a. loss of reinsurance or a substantial decrease in reinsurance has occurred, which loss or decrease, at the time of non-renewal, shall be certified to the Insurance Commissioner as directly affecting in-force policies. Notice of non-renewal will be mailed at least sixty (60) days before the effective date of non-renewal. . . . The Company agrees that it shall not cancel nor non-renew this Policy except for the reasons stated above. All other terms and conditions remain the same. ANSWER: The Period of December 31, 2001 to December 31, 2011 9. Furnival is an inactive corporation and has not operated since 2006. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 13 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 14 of 30 DB1/ 69722136.1 14 10. Furnival purchased the Policy from Indian Harbor in order to insure against risks associated with pollution conditions at, emanating from, or in connection with locations that Furnival owned, leased, or otherwise had an interest in. ANSWER: 11. One such location was the Elizabethtown Landfill Superfund Site location in West Donegal Township, Lancaster, Pennsylvania (referred to herein as the “Elizabethtown Site”). In 1999, Furnival and several other third-parties unaffiliated with Furnival agreed to terms of a Consent Decree with the EPA, under which Furnival and the third parties would participate in the cleanup of the former landfill. ANSWER: 12. Before Indian Harbor issued the Policy to Furnival, Furnival provided Indian Harbor with documents concerning the Elizabethtown Site. Those documents disclosed to Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 14 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 15 of 30 DB1/ 69722136.1 15 Indian Harbor various conditions at or near the Elizabethtown Site for which Furnival was seeking insurance protection from Indian Harbor. ANSWER: 13. Before Indian Harbor issued the Policy to Furnival, Furnival also provided Indian Harbor with hundreds of documents identifying conditions at other locations that Furnival owned, leased, or otherwise had an interest in and for which Furnival was seeking insurance protection from Indian Harbor. ANSWER: 14. On December 28, 2011, Furnival tendered to Indian Harbor a notice under the Policy and requested defense and indemnity for certain groundwater, vapor, and other remediation and study efforts in connection with the Elizabethtown Site. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 15 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 16 of 30 DB1/ 69722136.1 16 15. The December 28, 2011 tender from Furnival to Indian Harbor included several hundred pages of documents relating to environmental remediation and study efforts in connection with the Elizabethtown Site. ANSWER: 16. The December 28, 2011 tender to Indian Harbor caused Indian Harbor to be concerned about having to pay potential claims or losses under the Policy or a subsequently issued policy, even though Indian Harbor has not paid any Policy proceeds to or on behalf of Furnival in connection with the Elizabethtown Site. Indian Harbor became aware of the potential for additional claims, losses, or damages that could occur after December 28, 2011 and into the policy period of any renewal policy that it might issue. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 16 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 17 of 30 DB1/ 69722136.1 17 Indian Harbor Refused to Offer a Renewal Extension of Coverage 17. On December 31, 2011, which was three days after Furnival tendered to Indian Harbor information about the Elizabethtown Site, the Policy was set to expire. ANSWER: 18. After Furnival tendered to Indian Harbor notice of claim under the Policy relating to the Elizabethtown Site, and before the Policy’s expiration date of December 31, 2011, Furnival requested that Indian Harbor offer a renewal extension of coverage in accordance with Endorsement No. 16. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 17 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 18 of 30 DB1/ 69722136.1 18 19. Indian Harbor never provided written notice to Furnival that Indian Harbor would refuse to renew the Policy. ANSWER: 20. On January 25, 2012, Indian Harbor presented to Furnival’s broker an “indication,” which Indian Harbor stated “will expire on January 31, 2012.” ANSWER: 21. The indication that Indian Harbor presented on January 25, 2012 contained a Facilities Pollution Application and a “Proposal for F&M Equipment Ltd” of a Pollution and Remediation Legal Liability insurance policy (referred to herein as the “Proposed Policy”). ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 18 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 19 of 30 DB1/ 69722136.1 19 22. The Proposed Policy – which was provided to Furnival nearly a month after Furnival’s tender of potential claims arising out of Elizabethtown – contained an endorsement that identified eleven “Covered Locations” to which the Proposed Policy would apply, but which omitted Elizabethtown Site as a Covered Location. The timing of Furnival’s tender of potential claims related to Elizabethtown and the preparation of Indian Harbor’s indication leads to the inescapable conclusion that Indian Harbor crafted its proposed “renewal” insurance to ensure that no coverage would exist for potential claims, damages, or other losses in connection with the Elizabethtown Site. ANSWER: 23. The Proposed Policy contained an endorsement entitled “Dedicated Sublimits of Liability for Specific Covered Location(s)” that applied a $5,000,000 Dedicated Sublimit of Liability to all of the eleven covered locations. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 19 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 20 of 30 DB1/ 69722136.1 20 24. The Proposed Policy contained two endorsements entitled “Contamination Exclusion.” One such endorsement excluded coverage for, among other things, “All Constituents that were known by the insured at the inception of this policy” for two of the coverage types provided by the Proposed Policy. ANSWER: 25. The Proposed Policy contained a Quote Summary for a 1 Year Term at a premium of $69,292.00. ANSWER: 26. The terms and provisions of Proposed Policy provide different coverage from the coverage provided under the Policy. Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 20 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 21 of 30 DB1/ 69722136.1 21 ANSWER: 27. None of the reasons (a)-(d) identified in Endorsement No. 16 Section I, or (a) identified in Section II has occurred. ANSWER: 28. On January 25, 2012, Furnival rejected Indian Harbor’s January 25, 2012 indication. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 21 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 22 of 30 DB1/ 69722136.1 22 29. On January 27, 2012, Furnival requested that Indian Harbor offer a renewal extension of coverage that contained the same material terms and conditions as in the prior Policy. Indian Harbor refused. ANSWER: 30. In a January 31, 2012 letter, Indian Harbor refused to amend its January 24, 2012 proposal. ANSWER: Furnival Accepted Indian Harbor’s Offer of a Renewal Extension of Coverage as Required by Endorsement No. 16 31. In a February 24, 2012 letter, Furnival elected to renew the Policy in accordance with Endorsement No. 16 and applicable law and tendered to Indian Harbor a check for $520,498.00, which was the amount of the premium under the prior Policy. Furnival also rejected any alternative offers that Indian Harbor extended. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 22 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 3 of 30 DB1/ 69722136.1 23 32. On March 23, 2012, Indian Harbor initiated this action against Furnival. ANSWER COUNT I – BAD-FAITH BREACH OF CONTRACT 33. Paragraphs 1 through 32 are incorporated into this Count as if set forth fully herein. ANSWER: 34. The Policy was a binding and enforceable agreement between Furnival and Indian Harbor. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 23 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 24 of 30 DB1/ 69722136.1 24 35. Indian Harbor has breached the Policy by refusing to offer a renewal extension of coverage as required under Endorsement No. 16. ANSWER: 36. Furnival has complied with its obligations under the Policy, including without limitation paying the Policy premium. ANSWER: 37. Indian Harbor’s breach has caused injury to Furnival. Furnival is without the benefit of the proper renewal extension of coverage that Indian Harbor was obligated to offer under Endorsement No. 16 and that Furnival clearly indicated it did, or would, accept. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 24 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 25 of 30 DB1/ 69722136.1 25 38. Indian Harbor’s breach was in a bad faith and violated its implied duty of good faith and fair dealing under the Policy. The Policy’s terms and conditions, and applicable authority, make clear that Indian Harbor was obligated to offer a renewal extension of coverage that included the same material terms and conditions as those in the prior Policy. Furnival has never indicated any agreement or intent to reach an agreement for a new insurance policy with materially and substantially different terms from those in the prior Policy. ANSWER: 39. Indian Harbor’s breach was motivated in part by its own self interest and desire to disclaim coverage for claims, losses, and damages that Indian Harbor considered after receiving the December 28, 2011 tender by Furnival. ANSWER: WHEREFORE, Furnival respectfully requests that this Court enter judgment in its favor and against Indian Harbor for the following relief: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 25 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 26 of 30 DB1/ 69722136.1 26 a. Specific performance requiring Indian Harbor to issue an insurance policy to Furnival with the same material terms and conditions as the Policy and with a Policy Period of December 31, 2011 to December 31, 2021; b. An award of attorneys’ fees, litigation costs, and all expenses incurred in connection with this action; c. All other relief this Court deems just and proper. COUNT II – VIOLATION OF Pa. C.S. SECTION 8371 40. Furnival brings this Count pursuant to 42 Pa. C.S. § 8371. ANSWER: 41. Paragraph 1 through 32 are fully incorporated into this Count. ANSWER: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 26 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 27 of 30 DB1/ 69722136.1 27 42. Indian Harbor had no reasonable basis to believe that Endorsement No. 16 to the Policy authorized Indian Harbor to propose a purported “renewal” policy with terms and conditions that differed materially from those in the Policy. ANSWER: 43. Indian Harbor’s bad-faith conduct is evidenced by its refusal to renew the Policy despite : a. the overwhelming number of court decisions defining the term “renewal” to mean an agreement with the same material terms and conditions as the prior agreement between the parties; b. the overwhelming number of court decisions holding that an insurer fails or refuses to renew or offer a renewal policy if it offers a policy with materially different terms and conditions; c. the language in Endorsement No. 16, which requires Indian Harbor to offer a renewal “extension,” which even more clearly prohibits Indian Harbor from proposing terms and conditions that differ materially from those in the Policy; d. the language in the Policy that was amended by Endorsement No. 16, which shows that Endorsement No. 16 was meant to restrict Indian Harbor’s ability to modify terms and conditions in a renewal policy; Further evidence of Indian Harbor’s bad faith includes: Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 27 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 28 of 30 DB1/ 69722136.1 28 a. its quick, almost knee-jerk defense of its unreasonable position without citing any supporting authority; b. Indian Harbor’s receipt of the December 28, 2011 tender from Furnival, which led Indian Harbor to act in its own interests and against the interests of its insured in interpreting its obligations under Endorsement No. 16; c. its filing of the instant lawsuit against Furnival; d. Other factors that Furnival discovers and/or asserts in this litigation. ANSWER: WHEREFORE, Furnival respectfully requests that this Court enter judgment in its favor and against Indian Harbor under 42 Pa. C.S. § 8371 for the following relief: a. Punitive damages against Indian Harbor; b. Court courts and attorneys’ fees against Indian Harbor; c. Other relief as this Court deems just and proper. FURNIVAL DEMANDS A TRIAL BY JURY AS TO ALL MATTERS Dated: May 29, 2012 Respectfully Submitted, By: /s/ Hillary B. Weinstein Counsel for F&M Equipment Ltd. Hillary B. Weinstein Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 28 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 29 of 30 DB1/ 69722136.1 29 MORGAN, LEWIS & BOCKIUS LLP 1701 Market St. Philadelphia, PA 19103-2921 Phone: 215.963.5478 Fax: 215.963.5001 Of Counsel Lisa M. Campisi MORGAN, LEWIS & BOCKIUS LLP 101 Park Avenue New York, NY 10178-0060 Phone: 212.309.6178 Fax: 212.309.6273 Richard J. Pearl MORGAN, LEWIS & BOCKIUS LLP 77 West Wacker Dr. Chicago, IL 60601-5094 Phone: 312.324.1715 Fax: 312.324.1001 Case 2:12-cv-01506-PBT Document 4 Filed 05/29/12 Page 29 of 29Case 2:12-cv-01506-PBT Document 6 -4 Filed 1 /0 /16 Page 30 of 30 3 Case 2:12-cv-01506-PBT Document 64-5 Filed 12/01/16 Page 1 of 3 Case 2:12-cv-01506-PBT Document 26-3 Filed 06/03/13 Page 2 of 364 5 12 1 6 Case 2:12-cv-01506-PBT Document 26-3 Filed 06/03/13 Page 3 of 364 5 12 1 6 4 Case 2:12-cv-01506-PBT Document 64-6 Filed 12/01/16 Page 1 of 34 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 2 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 3 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 4 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 5 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 6 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 7 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 8 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 9 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 10 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 11 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 12 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 13 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 14 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 15 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 16 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 17 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 18 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 19 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 20 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 21 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 22 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 23 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 24 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 25 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 26 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 27 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 28 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 29 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 30 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 31 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 32 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 33 of 3464 6 12 1 6 Case 2:12-cv-01506-PBT Document 26-4 Filed 06/03/13 Page 34 of 3464 6 12 1 6 5 Case 2:12-cv-01506-PBT Document 64-7 Filed 12/01/16 Page 1 of 2 Case 2:12-cv-01506-PBT Document 26-5 Filed 06/03/13 Page 2 of 264 7 12 1 6 6 Case 2:12-cv-01506-PBT Document 64-8 Filed 12/01/16 Page 1 of 2 Case 2:12-cv-01506-PBT Document 26-6 Filed 06/03/13 Page 2 of 564 8 12 1 6 2 7 Case 2:12-cv-01506-PBT Document 64-9 Filed 12/01/16 Page 1 of 4 Case 2:12-cv-01506-PBT Document 26-7 Filed 06/03/13 Page 2 of 464 9 12 1 6 Case 2:12-cv-01506-PBT Document 26-7 Filed 06/03/13 Page 3 of 464 9 12 1 6 Case 2:12-cv-01506-PBT Document 26-7 Filed 06/03/13 Page 4 of 464 9 12 1 6 DB1/ 89971889.1 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA INDIAN HARBOR INSURANCE COMPANY, : : Plaintiff : : Civ. No. 12-1506 (PBT) v. : : F&M EQUIPMENT LTD., f/k/a : FURNIVAL MACHINERY COMPANY, : : Defendant : : F&M EQUIPMENT LTD., f/k/a : FURNIVAL MACHINERY COMPANY, : : Counter-Plaintiff : : v. : : INDIAN HARBOR INSURANCE COMPANY, : : Counter-Defendant : : ORDER This matter having come before the Court on the motion of Counter-Plaintiff F&M Equipment, Ltd., f/k/a Furnival Machinery Company (“Furnival”) for partial summary judgment on Furnival’s Breach of Contract Claim and for an Order requiring that Indian Harbor issue a renewal of Policy No. PEC0010805 (the “Policy”) to include Endorsement 16’s renewal provisions; and the Court having reviewed the submissions of the parties, and having heard oral argument, if any; and for good cause shown, IT IS on this ____ day of ____________, 2017, ORDERED that Furnival’s motion for partial summary judgment is GRANTED; and it is further Case 2:12-cv-01506-PBT Document 64-10 Filed 12/01/16 Page 1 of 2 DB1/ 89971889.1 2 ORDERED that Indian Harbor Insurance Company must issue a renewal policy that includes the renewal provisions contained in Endorsement 16 to the Policy. ________________________________ Hon. Petrese B. Tucker Chief United States District Judge Case 2:12-cv-01506-PBT Document 64-10 Filed 12/01/16 Page 2 of 2