515 ASSOCIATES v. TRAVELERS INDEM. CO., 160 Fed.Appx. 147 (3rd Cir. 2005)

515 ASSOCIATES LLC, Appellant, v. TRAVELERS INDEMNITY CO. OF ILLINOIS t/a Travelers Property Casualty Group.

No. 03-4332.United States Court of Appeals, Third Circuit.Submitted Under Third Circuit LAR 34.1(a) December 12, 2005.
Filed December 16, 2005.

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[EDITOR’S NOTE: This case is unpublished as indicated by the issuing court.]

Appeal from the United States District Court for the District of New Jersey. (D.C. No. 01-cv-02295). District Judge: Honorable William H. Walls.

Harry P. Begier, Jr., Philadelphia, PA, for Appellant.

Thomas S. Brown, Andrew S. Granzow, Hecker, Brown, Sherry
Johnson, Philadelphia, PA, for Appellee.

Before SLOVITER, SMITH, and STAPLETON, Circuit Judges.

SLOVITER, Circuit Judge.

515 Associates, LLC (“515 Associates”) appeals from the order of the District Court granting summary judgment in favor of defendant Travelers Indemnity Company (“Travelers”).[1]

Appellant 515 Associates, LLC, owns and operates an apartment complex in Newark, New Jersey, that is equipped with three Westinghouse elevators. The elevators were installed in 1962, and are covered by a boiler and machinery insurance policy issued by Travelers. The policy provides coverage for damage caused by an “accident” to an “object.” App. at 105a. Under the policy, “accident” is defined as follows:

“Accident” means a sudden and accidental breakdown of the “object” or part of the “object.” At the time the breakdown occurs, it must become apparent by physical damage that requires repair or replacement of the “object” or part of the “object.”

None of the following is an “accident”:

a. Depletion, deterioration, corrosion, erosion, or wear and tear, unless a sudden and accidental breakdown ensues;
b. The breakdown of any structure or foundation; or
c. The functioning of any safety or protective device.

App. at 117a.

The policy also contained a provision to resolve a dispute over damages by appraisal, which states, in pertinent part:

If we and you disagree on the value of the property, the amount of “business income” or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction.

App. at 111a.

On January 27, 1999, 515 Associates reported a loss due to a “major elevator failure” having occurred on January 20, 1999. Less than a week before, on January 22, 1999, 515 Associates had issued a letter to residents of the building stating that “[d]uring the past week we have experienced a series of different failures with the building’s elevators that have caused the entire system to shut down,” and that an elevator consultant” advised 515 Associates that they “could continue to operate under our present maintenance contract and repair the system each time a mal-function

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occurs . . . or . . replace the system with a new state of the art system.” Supp.App. at 1.

515 Associates retained William Newby (“Newby”) of Newmont Elevator Analysts, Inc., to inspect the elevator system. Newby, the consultant for 515 Associates, shared with Travelers his opinion that the cause of the damage “appears to be electrical . . . but it is virtually impossible to determine the direct cause.” App. at 25a. He further stated:

Heat, shorts and grounds within the system damaged approximately 30% of the controller and selector components. This condition, while most severe on controller # 1, caused all three cars to fail initially. Only through an extraordinary effort by the elevator maintenance company, were they able to return Car # 2 to automatic and Car’ # 3 to manual operation.

Id. He referred to “fire damage to [the] elevators,” App. at 25a, but 515 Associates conceded thereafter that no fire had occurred. Instead, 515 Associates claimed that the entire control system sustained electrical damage on January 14, 1999.

Travelers retained David LaPointe of Crawford Technical Services to investigate the claim. LaPointe noted the opinion of his assistant that “the damage occurring on January 14th, 1999 are [sic] repairable at minimal costs.” App. at 28a. LaPointe’s inspection revealed that only a few wires were damaged and troubleshooting could repair them as other wires had been repaired in the past. Id. He observed that the equipment was “very old and is in need of replacement,” and that it had “served out its useful life and is breaking down due to its age.” Id.

LaPointe further stated:

We are not suggesting that the incident of January 14th, 1999 is excluded by the coverage afforded by the Travelers Property Casualty Corporation. We do suggest that the cost to repair the resultant damages are well below the applicable policy deductible and may, in fact, be repaired at no cost to the insured. We, therefore, are making no offer for “settlement” of that loss.
Any action taken by the Travelers Property Casualty Corporation or [its] representatives in investigating the cause of loss, or investigating and ascertaining the amount of sound value, or the amount of loss and damage which occurred on or about January 20th — 25th, 1999, shall not waive or invalidate any of the terms or conditions of any policy or policies and shall not waive or invalidate any rights whatever of either of the parties to the policy. No act of the company done by way of investigation, defense or participation shall be construed as any admission of coverage under said policy.


Travelers retained yet another consultant, Richard Ladroga (“Ladroga”), who agreed with LaPointe’s assessment. Ladroga reported that the “damage to the elevator control system equipment is primarily age related,” and that there was “no evidence of severe damage caused by any one specific accident or failure that would render the system inoperable and beyond repair.” Supp.App. at 41. His report further stated that the elevators were approximately 40 years old, and that the life expectancy for this type of elevator is approximately 25 years.

On December 27, 2000, 515 Associates filed suit against Travelers seeking damages for the costs of repairing and replacing the elevator equipment. An appraisal performed pursuant to the appraisal provision of the policy awarded $80,000. Travelers moved for summary judgment and

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favor of Travelers and denial of summary judgment to 515 Associates.

[1] The District Court had jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332.

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