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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF PENNSYLVANIA
KVAERNER NORTH AMERICAN
CONSTRUCTION INC., as successor to
Aker Kvaerner Songer, Inc. and Aker
Construction, Inc.,
Plaintiff,
v.
ALLIANZ GLOBAL RISKS US
INSURANCE COMPANY,
Defendant.
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Civil Action No. 2:15-CV-01460
RESPONSIVE MEMORANDUM IN OPPOSITION TO DEFENDANT’S MOTION FOR
PARTIAL SUMMARY JUDGEMENT ON CHOICE OF LAW
Pursuant to Federal Rules of Civil Procedure 56 and this Court’s Order dated November
2, 2016, Plaintiff Kvaerner North American Construction Inc. (“Kvaerner”) submits this
memorandum in opposition to Defendant Allianz Global Risks US Insurance Company’s
(“Allianz”) motion for partial summary judgment on the choice of law applicable to Kvaerner’s
bad-faith claims against Allianz, through which Allianz contends Pennsylvania law should apply
to such claims. Allianz contends that West Virginia law—which was alleged by Kvaerner in its
complaint—should not apply to Kvaerner’s bad faith claims, arguing instead that Pennsylvania
has the “most meaningful connection” and “greatest interest” in having its law applied to the
bad-faith claims. Because West Virginia, based on the location of the insured risk, as well as the
focus of (1) the coverage determination, (2) the adjustment process, and (3) the parties’ central
relationship, has a more meaningful connection to and greater interest in the specific claims at
issue, this Court should deny Allianz’s motion, grant Kvaerner’s motion, and declare that West
Virginia law applies to Kvaerner’s claims of bad faith.
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ARGUMENT
PENNSYLVANIA’S CHOICE OF LAW FRAMEWORK REQUIRES APPLICATION OF
WEST VIRGINIA LAW TO KVAERNER’S BAD-FAITH CLAIMS.
Allianz notes in its memorandum, and Kvaerner agrees, that an actual conflict exists
between Pennsylvania and West Virginia’s bad-faith laws. Under Pennsylvania’s choice of law
framework, therefore, this Court must determine which state has the “greatest interest in the
application of its law” by weighing state contacts “on a qualitative scale” in relation to the state’s
“policies and interests” underlying the bad-faith claims. Hammersmith v. TIG Ins. Co., 480 F.3d
220, 231 (3d Cir. 2007).
I. West Virginia Has The Most Significant Relationship to The Actions Underlying
The Bad-Faith Issues Before This Court.
While Pennsylvania follows a flexible contacts and interests approach to choice-of-law
questions, the choice of law analysis is issue-specific and a court applying Pennsylvania law
must characterize the issue “in order to settle on a given section of the Restatement for
guidance.” Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006). In addition
to the general choice of law principles listed in Restatement (Second) of Conflict of Laws § 6,
which relate to the interests of the potential forums (discussed below), the Restatement
provisions addressing contract and tort actions inform the analysis here. See Kvaerner’s Mem. in
Supp. of Mot. for Summ. J. (Dkt. No. 43) at 8-9.
Allianz investigated Kvaerner’s claims for coverage in West Virginia, the location of the
insured risk (i.e., the plant). Moreover, the plant is the sole location of the Policy’s subject
matter. In other words, this is not a policy that applies generally to various projects—it is project
specific. See, e.g., Ex. A at §§ I.2 and IV.4 to Declaration of James J. Tedjeske (“Tedjeske
Decl.”) (Dkt. No. 45). The Restatement (Second) of Conflicts of Law § 193, comment c,
covering analogous contracts of fire, surety, or casualty insurance, provides a general rule that
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“calls for the application of the local law of the state which the parties understood was to be the
principal location of the insured risk during the term of the policy.” This is the case, unless “with
respect to the particular issue, some other state has a more significant relationship to the contract
and the parties.” Id. (emphasis added).
In addition, for purposes of the investigation, West Virginia served as the center of
Kvaerner’s and Allianz’s relationship as this is where the parties’ representatives met in person
to discuss and investigate the claims. Meanwhile, Pennsylvania’s only connection to the bad-
faith issues at the center of the choice of law analysis is as Kvaerner’s principal place of
business. Based on the importance of its connections to the relevant issues—specifically, the
“acts and/or omissions of Allianz in handling Kvaerner’s request for coverage,” and “failing to
conduct and diligently pursue an investigation of Kvaerner’s claim for coverage in a thorough,
fair and objective manner,” Compl. ¶¶ 65, 70—West Virginia has the most meaningful
relationship to the bad-faith claims.
Allianz argues, though, that Pennsylvania has the most meaningful connection to the bad-
faith claims because it sent notices to and received correspondence from Kvaerner in
Pennsylvania,1 any loss payments would have been made in Pennsylvania, and Allianz conducts
business in Pennsylvania. 2 As Allianz notes, however, courts does not consider the sheer
quantity of peripheral connections in determining the “most meaningful connection.” Instead,
they look to the qualitative nature of those contacts. See Hammersmith, 480 F.3d at 231. As
1 Allianz notes that it received all correspondence through its broker, Aon Risk Services
Central, Inc., in Pennsylvania. See Allianz’ Mem. of Law in Supp. of Its Mot. for Partial
Summ. J. at 5. Aon was not added as a broker for the Policy until 2008. Instead, the original
brokers for the Policy were domiciled in Oklahoma and Massachusetts. See Ex. A at § V.9 to
Tedjeske Decl.; see also Tedjeske Decl. at ¶ 5.
2 Allianz conducts business from “over 20 regional offices coast to coast across the US.”
Allianz Global Corporate & Specialty United States, available at
http://www.agcs.allianz.com/global-offices/united-states (last visited Dec. 15, 2016).
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they relate to the bad-faith claims, the pertinent contacts are those regarding the location of the
insured risk (from which the claims arose) and the bad-faith investigation itself, both of which
point to West Virginia.
Allianz also suggests that Kvaerner concedes Pennsylvania has the most meaningful
contacts to the bad-faith issues by alleging venue is proper in the Western District of
Pennsylvania under 28 U.S.C. § 1391. Allianz simply assumes that the reference in Kvaerner’s
Complaint to venue being proper under 28 U.S.C. § 1391(b) refers to (b)(2) (“a judicial district
in which a substantial part of the events or omissions giving rise to the claim occurred”), without
any consideration of (b)(1) (“a judicial district in which any defendant resides”). This is simply
not the case.
28 U.S.C. § 1391(d) directs that for purpose of determining venue under Section 1391(b),
a corporation is deemed to reside “in any judicial district in which such defendant is subject to
the court’s personal jurisdiction with respect to the civil action in question.” Allianz admits that
this Court has personal jurisdiction over it, in that Allianz conducts business (and is licensed to
conduct business) in Pennsylvania, as alleged by Kvaerner in its Complaint. See Ans. ¶ 4 (Dkt.
No. 10). As a result, venue is proper under Section 1391(b)(1), without any reference to Section
1391(b)(2). See, e.g., Abercrombie v. Cont’l Cas. Co., 295 F. Supp.2d 604, 607-08 (D.S.C.
2003) (holding that because an insurance company was subject to personal jurisdiction in a state,
the company resided in that state for venue purposes).
In addition, however, Kvaerner asserts two causes of action for breach of contract under
the Policy. A “substantial part” of the omissions giving rise to the breach of contact occurred in
Pennsylvania. This does not entail that a substantial part of the claim investigation, which is the
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subject of the choice of law dispute with respect to Kvaerner’s bad-faith claims, occurred in
Pennsylvania.
In sum, Because West Virginia has the most significant connection to the specific issue
before this Court, West Virginia law should apply.
II. West Virginia Has The Greatest Interest In The Application Of Its Laws to the Bad-
Faith Claims.
In addition to determining the state with the most meaningful connection to the claims at
issue, this Court must also weigh these connections in relation to the policies and interests of the
state. Hammersmith, 480 F.3d at 231.
West Virginia, as the location of both the Project insured under the Policy and the bad-
faith investigation of the claims, has a strong interest in regulating large-scale construction
within the state. It has an interest in ensuring that companies who engage in construction in the
state will have their insurance claims investigated in a thorough and cooperative manner. West
Virginia further has an interest in promoting construction projects within the state and companies
will be more likely to contract for such projects if they can recover costs under West Virginia
law should they substantially prevail in an insurance dispute. Insofar as West Virginia seeks
development from other states, these concerns implicate the need for interstate cooperation and
reciprocity—a central principle underlying choice of law decisions. See Restatement (Second)
of Conflicts of Law § 6 cmt. d (“Probably the most important function of choice-of-law rules is
to make the interstate and international systems work well.”).
Pennsylvania, on the other hand, has the sole interest of protecting its insured. While it is
true that courts have sometimes given this interest “considerable weight,” Hanover Ins. Co. v.
Ryan, 619 F. Supp 2d 127, 137 (E.D. Pa. 2007), this factor alone is not dispositive. By focusing
the entire analysis on Kvaerner’s place of business, Allianz is essentially arguing that a state’s
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interest in providing for a citizen-insured outweighs the concerns noted above to such a degree
that West Virginia’s significant relationship to the claims is meaningless. This is not the case.
Nor does the case law cited by Allianz support this proposition.
The cases cited by Allianz are distinguishable from the facts before this Court. In Kilmer
v. Connecticut Indemnity Co., the court relied on the fact that “all of the other relevant contacts,”
other than the location of the insured risk, “suggested that the local state of the insured had the
greatest interest in the matter.” 189 F. Supp. 237, 246 (M.D. Pa. 2002) (emphasis added). For
example, the contract in Kilmer was also negotiated in the insured’s home state. Id. There is no
evidence that that was the case here, see Tedjeske Decl. ¶ 5; rather, Pennsylvania’s only
meaningful connection is the location of the insured.
Westfield Insurance Company v. Icon Legacy Custom Modular Homes similarly is not
dispositive. Although the court supports the Kilmer decision, it is not clear that the insured’s
home state was the only factor that led the court to apply the law of the insured’s home state.
Westfield, 2016 U.S. District LEXIS 115214, at *17-18 (M.D. Pa. August 29, 2016). Rather,
unlike here, the insured’s home state in Westfield was also designated in the insurance policy’s
governing law provision as the law applicable to the underlying breach of contract claim. See id.
at *18 (“[B]ased upon these considerations, Pennsylvania law should apply to the breach of
contract and any related claims advanced in this litigation.”). Similarly, the Westfield court’s
focus on “business certainty,” “predictability,” and “greas[ing] the wheels of commerce,” leant
support to the court’s decision to apply Pennsylvania law. Id. at *14-15.
Here, neither predictability, commercial concerns, nor the preference to enforce settled
expectations favors applying Pennsylvania law over West Virginia law, as it was foreseeable that
West Virginia law would apply to acts or omissions occurring in West Virginia, particularly
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where the sole insured risk is in West Virginia.3 Moreover, basing the applicable bad-faith law
on the domicile of the insured leads to greater uncertainty given the number of insureds under the
Policy. See, e.g., Ex. A at § I.1 to Tedjeske Decl. (listing the named insureds). Given that a
state’s interest in providing for its insureds is but one consideration in the insurance bad-faith
context, it is not sufficient to overpower West Virginia’s strong relationship to Kvaerner’s bad-
faith claims.
CONCLUSION
For the reasons stated above, this Court should declare that West Virginia law applies to
Kvaerner’s bad-faith claims. In the alternative, New Jersey law should apply under the
“Governing Law” provision of the Policy.
If this Court disagrees and finds that Pennsylvania has the greater interest in the
application of its laws to the bad-faith claims, however, Kvaerner respectfully requests that the
Court grant Kvaerner leave to amend its Complaint to assert claims of bad faith under
Pennsylvania law. Such a request is not the product of undue delay, bad faith, or dilatory
motive, and granting such leave would not result in undue prejudice to Allianz. See generally
Fed. R. Civ. P. 15(a) (providing that “leave [to amend] shall be freely given when justice so
requires”); Forman v. Davis, 371 U.S. 178, 182 (1962); In re Burlington Coat Factory Sec.
Litig., 114 F.3d 1410, 1435 (3d Cir. 1997).
3 Instead, at most these concerns support the conclusion that the bad-faith claims are covered
by the Policy’s New Jersey governing law provision. Even though the provision is narrowly
drafted to cover only contract-related claims, bad-faith actions under Pennsylvania law are
considered breaches of the contractual duty of good faith and fair dealing, and therefore
arguably fall under the provision. See McMahon v. Med. Protective Co., 92 F. Supp. 3d 367,
380 (W.D. Pa. 2015) (discussing contractual bad-faith claims under Pennsylvania common
law).
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Dated: December 16, 2016 KVAERNER NORTH AMERICAN
CONSTRUCTION INC.
/s/ Eric Lopez Schnabel________________
Eric Lopez Schnabel (PA 84921)
Dorsey & Whitney (Delaware) LLP
Schnabel.eric@dorsey.com
300 Delaware Avenue, Suite 1010
Wilmington, Delaware 19801
Telephone: (302) 425-7171
Jocelyn Knoll (MN 022988X)
Katie Pfeifer (MN 0309709) Bryan Keane (MN
0328716) Knoll.jocelyn@dorsey.com
Pfeifer.katie@dorsey.com
Keane.bryan@dorsey.com
50 South Sixth Street, Suite 1500
Minneapolis, Minnesota 55402
Telephone: (612) 340-2600
Attorneys for Plaintiff Kvaerner North
American Construction Inc.
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CERTIFICATE OF SERVICE
I hereby certify that on December 16, 2016, a copy of the foregoing document was filed
electronically with the United States District Court for the Western District of Pennsylvania via
the Court’s ECF system and served on all parties who have entered a notice of appearance
through the notice of filing generated by the ECF system.
Matthew S. Ponzi
Thomas S. Gozdziak
Foran Glennon Palandech Ponzi & Rudloff PC
222 N. LaSalle Street, Ste. 1400
Chicago, IL 60601
312-863-5000
Fax: 312-863-5099
Email: mponzi@fgppr.com
tgozdziak@fgppr.com
Paul K. Geer
Tara L. Maczuzak
DiBella, Geer, McAllister & Best
20 Stanwix Street 11th Floor
Pittsburgh, PA 15222
(412) 261-2900
Email: pgeer@dgmblaw.com
tmaczuzak@dgmblaw.com
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Dated: December 16, 2016 DORSEY & WHITNEY LLP
/s/ Eric Lopez Schnabel_______
Eric Lopez Schnabel (PA 84921)
Dorsey & Whitney (Delaware) LLP
Schnabel.eric@dorsey.com
300 Delaware Avenue, Suite 1010
Wilmington, Delaware 19801
Telephone: (302) 425-7171
Jocelyn Knoll (MN 022988X)
Katie Pfeifer (MN 0309709)
Bryan Keane (MN 0328716)
Knoll.jocelyn@dorsey.com
Pfeifer.katie@dorsey.com
Keane.bryan@dorsey.com
50 South Sixth Street, Suite 1500
Minneapolis, Minnesota 55402
Telephone: (612) 340-2600
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