TITHONUS PARTNERS II, LP v. CHICAGO TITLE INSURANCE COMPANY

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

TITHONUS PARTNERS II, LP,

Plaintiff, Civil Action No. 2:20-cv-952

V. Hon. William S. Stickman IV

CHICAGO TITLE INSURANCE

COMPANY, .

Defendant.

MEMORANDUM OPINION

WILLIAM S. STICKMAN IV, United States District Judge

Plaintiff, Tithonus Partners I, LP (“Tithonus Partners”), sued Defendant, Chicago Title

Insurance Company (“Chicago Title’’), alleging that it breached a title insurance policy by failing

to indemnify Tithonus Partners in a related action concerning a land dispute, and that Chicago

Title’s refusal to do so was in violation of Pennsylvania’s insurance bad faith statute, 42 Pa. C.S.

§ 8371. (ECF No. 21). The parties filed cross-motions for summary judgment. (ECF Nos. 27

and 28). For the following reasons, the Court holds that summary judgment is warranted in

Chicago Title’s favor because, as a matter of law, no coverage was owed under the insurance

agreement.

I. FACTUAL BACKGROUND

In 2012, Tithonus Partners, a limited partnership, was formed with Tithonus GP II, LLC

(“Tithonus GP”) as the general partner and Hawthorne Assisted Living Partners II, LP, Richard

Irwin and Loriann Putzier as the limited partners. Tithonus Partners then created three separate

limited partnerships so that each limited partnership could acquire an assisted living facility.

One of these partnerships was Tithonus Tyrone, LP (“Tithonus Tyrone”), which took title to an

assisted living facility in Tyrone, Pennsylvania known as Colonial Courtyard at Tyrone. 0.1% of

Tithonus Tyrone was owned by one general partner, Tithonus GP, and 99.9% was owned by one

limited partner, Tithonus Partners. (ECF No. 33, {ff 2-3, 5-7, 9; ECF No. 39, □□ 2-3, 5-7, 9; ECF

No. 30, 1-4, 18-19; ECF No. 35, 1-4, 18-19).

In June 2012, Tithonus Tyrone purchased three adjoining parcels of property totaling

approximately 60 acres in the Tyrone Borough of Blair County, Pennsylvania. The assisted

living facility was located on a portion of the insured land, and the rest of the insured land was

vacant. (ECF No. 33, Jf 11, 14; ECF No. 39, §¥ 11, 14). Tithonus Tyrone also obtained a policy

of title insurance (Policy Number 120181PIT-B) from Chicago Title, dated July 2, 2012, in the

amount of $3,077,000.00 (the “Policy”). (ECF No. 21-1). “Schedule A” to the Policy defined

the “Insured” as “Tithonus Tyrone, LP, a Pennsylvania limited partnership.” (ECF No. 21-1, p.

3). The “Definition of Terms” further identified the “Insured” as:

(i) The term “Insured” also includes

(A)successors to the Title of the Insured by operation of law as

distinguished from purchase, including heirs, devisees, survivors,

personal representatives, or next of kin;

(B)successors to an Insured by dissolution, merger, consolidation,

distribution, or reorganization;

(C) successors to an Insured by conversion to another kind of Entity;

(D)a grantee of an Insured under a deed delivered without payment of

actual valuable consideration conveying the Title

(1) if the stock, shares, memberships, or other equity interests of

the grantee are wholly-owned by the named insured,

(2) if the grantee wholly owns the named Insured;

(3) if the grantee is wholly-owned by an affiliated Entity of the

named Insured; provided the affiliated Entity and the named

Insured are both wholly-owned by the same person or Entity,

or

(4) if the grantee is a trustee or beneficiary of a trust created by a

written instrument established by the Insured named in

Schedule A for estate planning purposes.

(ii) | With regard to (A), (B), (C), and (D) reserving, however, all rights and

defenses as to any successor that the Company would have had against

any predecessor Insured.

(ECF No. 21-1, p. 13, § 1(d)).! The Policy insured “against loss or damage” for “Covered Risks”

subject to certain “Exclusions from Coverage,” “Exceptions from Coverage Contained in

Schedule B” and the “Conditions” set forth in the policy. (ECF No. 21-1, p. 2) (capitalization

removed). It further stated that the “law of the jurisdiction where the Land is located” shall be

applied to “interpret and enforce the terms of this policy.” (ECF No. 21-1, p. 17).

In 2013, Tithonus Tyrone separated the 1-2 acre lot on which the assisted living facility

sat (Lot 4) for refinancing with the U.S. Department of Housing and Urban Development

(“HUD”). The purpose of the subdivision was to facilitate refinancing through HUD of Tithonus

Tyrone’s mortgage loan and to finance some capital improvements on the assisted living facility.

To complete the financing, it was necessary for Tithonus Tyrone to convey the vacant land.

Accordingly, Tithonus Tyrone retained title to Lot 4 and the assisted living facility, and it

conveyed the 58 acres of vacant property to Tithonus Partners through a deed (“First Deed”)

dated April 24, 2014.2 (ECF No. 21-2; ECF No. 30, 95, 17; ECF No. 35 §9 5, 17; ECF No. 33,

qj 19-22; ECF No. 39, 44 19-22). The First Deed states, in relevant part:

THIS INDENTURE is made as of the 23rd day of April, 2014, between

TITHONUS TYRONE, LP, a Pennsylvania limited partnership (“Grantor”) and

TITHONUS PARTNERS II, LP, a Pennsylvania limited partnership (“Grantee’’).

WITNESSETH, that Grantor, as a distribution to Grantee with a value of

Twenty-Two Thousand Five Hundred Dollars ($22,500), the receipt and legal

sufficiency of which are hereby acknowledged, does hereby grant, bargain, sell,

' The Policy fails to include a further definition of the phrase “successors to an Insured by

dissolution, merger, consolidation, distribution, or reorganization,” set forth in § 1(d)(i)(B), or to

further define the term “wholly-owns” set forth in § 1(d)(@)(D)(2). (ECF No. 30, Jf 15, 16; ECF

No. 35, §§ 15, 16).

* Tithonus Tyrone is now owned by a third-party. (ECF No. 33, §§ 37, 38, 41; ECF No. 39, §

37, 38, 41).

release, convey and confirm, unto Grantee, and Grantee’s successors and assigns,

all of Grantor’s interest in and property described in Exhibit A, attached hereto.

UNDER AND SUBJECT TO any and all easements, rights of way, leases,

licenses, restrictions, reservations and grants (including, but not limited to

reservations and grants of mining, coal, gas and oil rights, if any) as described in

Title Insurance Policy No. 120181PIT-B, dated July 2, 2012, issued to Grantor by

Chicago Title Insurance Company.

TOGETHER with all singular ways, waters, water courses, rights,

liberties, privileges, hereditaments and appurtenances whatsoever thereunto

belonging, or in anywise appertaining, and the reversions and remainders, rents,

issues and profits thereof and also all the estate, right, title, interest, use, trust,

property, possession, claim and demand whatsoever of Grantor, in law, equity, or

otherwise, howsoever, of, in, to or out of the same.

TO HAVE AND TO HOLD the same to and for the use of the said

Grantee, and the Grantee’s successors and assigns, FOREVER.

AND THE GRANTOR hereby covenants and agrees that Grantor will

warrant SPECIALLY the property hereby conveyed.

(ECF No. 21-2, p. 2). Tithonus Partners did not obtain a new owner’s policy of title insurance

on the vacant land. (ECF No. 33, 9 25; ECF No. 39, { 25). It did not speak to anyone at Chicago

Title about obtaining a new owner’s policy of title insurance on the vacant land identifying it as

the name insured. Chicago Title did not represent to Tithonus Partners that it would be covered

by the Policy issued to Tithonus Tyrone. (ECF No. 33, J 25-28; ECF No. 39, {f[ 25-28).

In 2017, Tithonus Partners subdivided the 58 acres of vacant land to facilitate the sale of

a small portion, Lot 5. Then, by deed dated January 30, 2018 (“Second Deed”), Lot 5 was sold

by Tithonus Partners to Port Pizza, LLC (“Port Pizza’). (ECF No. 21-4; ECF No. 30, 23-24;

ECF No. 35, {ff 23-24; ECF No. 33, 9] 34-35; ECF No. 39, {| 34-35).

On or about January 21, 2020, Port Pizza commenced an action against Tithonus Partners

and four other defendants at Docket No. 2020-CN-239 in the Court of Common Pleas of Blair

County, Pennsylvania, alleging that a portion of the conveyed property had not been owned by

Tithonus Partners. Tithonus Partners then submitted a claim to Chicago Title on February 21,

2020, requesting that it fully indemnify, defend and/or resolve issues pertaining to the allegations

in the Port Pizza litigation. It claimed it was an “‘Insured’ under the 2012 Policy through a Deed

of distribution dated April 23, 2014 delivered by Tithonus Tyrone, LP.”? (ECF No. 34, p. 270;

ECF No. 33, {§ 43-44; ECF No. 39, {§ 43-44).

Chicago Title determined that Tithonus Partners did not qualify for coverage as an

“insured” under the Policy, and it denied the claim by March 13, 2020 letter (“First Denial

Letter”). Its explanation for the denial of coverage was:

The Claimant is. not an “insured” as the term is defined by the Policy. The

Claimant is not the named insured identified in Schedule A of the Policy. The

Claimant is not a successor to the Named Insured because the Claimant acquired

the Property by grant. Finally, the Claimant is not a grantee of an insured under a

deed delivered without payment because Claimant paid $22,500 to the Named

Insured in exchange for the Property. As such, the Claimant does not qualify as

an insured as defined under the Policy.

(ECF No. 21-5, p. 3).

By March 25, 2020 letter, Tithonus Partners requested reconsideration arguing

that it: (1) qualified as an insured under § 1(d)G@)(B) of the Policy because it was a

successor to Tithonus Tyrone’s interests in the property by distribution; and/or it (2)

qualified as an insured under § 1(d)(i)(D)(2) of the Policy because it never paid any

consideration to Tithonus Tyrone for the distribution of the property and because

Tithonus Partners wholly owned Tithonus Tyrone at the time of the grant.4 (ECF No. 34,

pp. 272-73). By April 10, 2020 letter, Chicago Title once again denied Tithonus

Partners’s claim, because it not an “Insured” under the Policy. (ECF No. 21-6). As to

3 At time of its claim, Tithonus Partners and Tithonus Tyrone had no common ownership. (ECF

No. 33, § 45; ECF No. 39, 7 45). Furthermore, Tithonus Tyrone is not a party to the Port Pizza

litigation, and Tithonus Partners has not demanded that Tithonus Tyrone defend and indemnify

Tithonus Partners in the litigation. (ECF No. 33, § 47; ECF No. 39, §{ 47, 48).

4 Tithonus Partners was actually a 99.9% owner of Tithonus Tyrone at the time of the grant.

Tithonus Partners’s first argument regarding coverage under § 1(d)(i)(B) of the Policy,

Chicago Title responded:

A distribution of the nature mentioned in the Policy occurs as part of a non-

voluntary transfer by operation of law resulting from some acts such as a

dissolution or merger. In this instance, there was no dissolution of the Named

Insured, and the Named Insured did not merge with the Claimant. In this

circumstance, the transfer of the deed evidences an agreement between the Named

Insured and the Claimant to voluntarily convey the Property rather than being

merely a confirmatory act memorializing a transfer that had already occurred by

operation of law.

(ECF No. 21-6, p. 3) (internal citations omitted). As to Tithonus Partners’s second argument

regarding coverage under § 1(d)(i)(D)(2) of the Policy, Chicago Title responded:

[T]he Agreement of Limited Partnership for the Named Insured states that the

Named Insured is a limited partnership with [Tithonus] GP I], LLC (“[Tithonus]

GP”) as the general partner, and the Claimant as the limited partner. The

Claimant’s Agreement of Limited Partnership states that the Claimant is a limited

partnership with [Tithonus] GP as the general partner, and Hawthorne Assisted

Living Partners II, LP, Richard Irwin, and Loriann Putzier as limited partners. As

such, it does not appear that the Named Insured is wholly owned by the Claimant,

and, as a result, the Claimant does not quality as an insured as defined under the

Policy.

(ECF No. 21-6, p. 3) (citations omitted).

On May 28, 2020, Tithonus Partners commenced this action in the Civil Division of the

Court of Common Pleas of Allegheny County, Pennsylvania. (ECF No. 1). Chicago Title

removed the case to this Court on June 26, 2020, on the basis of diversity jurisdiction, see

28 U.S.C. §§ 1332, 1441. (ECF No. 1). Both parties have sought summary judgment in their

_ favor as to both counts. Chicago Title argues that, as a matter of law, it correctly (Count I) and

reasonably (Count IT) denied coverage under the Policy and refused to defend Tithonus Partners

in the Port Pizza litigation. (ECF No. 32). In contrast, Tithonus Partners argues that summary

judgment should be granted in its favor because, as a matter of law, it qualified as an “Insured”

under the Policy (Count I), and that Chicago Title failed to conduct a reasonable investigation

prior to denying its claim (Count II). (ECF Nos. 28, 29).

I. STANDARD OF REVIEW

Summary judgment is warranted if the Court is satisfied that there is no genuine issue as

to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R.

Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material if it

must be decided to resolve the substantive claim or defense to which the motion is directed. See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). There is a genuine dispute of

material fact “if the evidence is such that a reasonable jury could return a verdict for the

nonmoving party.” Jd. The Court must view the evidence presented in the light most favorable

to the nonmoving party. Jd at 255. It refrains from making credibility determinations or

weighing the evidence. Jd. “[R]eal questions about credibility, gaps in the evidence, and doubts

as to the sufficiency of the movant’s proof” will defeat a motion for summary judgment. EI v.

Se. Pa. Transp. Auth., 479 F.3d 232, 238 (3d Cir. 2007).

“When both parties move for summary judgment, ‘[t]he court must rule on each party’s

motion on an individual and separate basis, determining for each side whether a sudgment may

be entered in accordance with the Rule 56 standard.’” Auto-Owners Ins. Co. v. Stevens & Ricci

Inc., 835 F.3d 388, 402 (3d Cir. 2016) (quoting 10A CHARLES ALAN WRIGHT ET AL., FEDERAL

PRACTICE AND PROCEDURE § 2720 (3d ed. 2016)). Under the same rule, if upon review of a

party’s motion for summary judgment, the court, viewing the evidence in the light most

favorable to the nonmoving party, enters summary judgment for the moving party, the court may

properly declare the opposing party’s cross-motion for summary judgment as moot. Beenick v.

LeFebvre, 684 F. App’x 200, 205-06 (3d Cir. 2017).

TIE. ANALYSIS

The threshold issue is whether Tithonus Partners is an “Insured” party under the Policy

issued by Chicago Title to Tithonus Tyrone in 2012. After a probing examination of the relevant

contractual language, the Court holds that Tithonus Partners is not an “Insured.” As such, no

coverage is owed. Because it is not an “Insured” and is not entitled to coverage, Tithonus

Partners’s bad faith claim also fails.

A. Count I— BREACH OF CONTRACT

The parties agree that Pennsylvania law governs the Court’s analysis of the Policy

language. Tithonus Partners bears the burden of proving facts that bring its claim at Count I

within the Policy’s grant of coverage. If it meets that burden, then Chicago Title bears the

burden of demonstrating that a policy exclusion excuses it from providing coverage. State Farm

Fire & Cas. Co. v. Est. of Mehlman, 589 F.3d 105, 111 (3d Cir. 2009) (citing Koppers Co., Inc.

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

Courts generally enforce the plain language of an insurance policy. Reliance Ins. Co. y.

Moessner, 121 F.3d 895, 901 (3d Cir. 1997) (“If . . . the terms of the policy are clear and

unambiguous, the general rule in Pennsylvania is to give effect to the plain language of the

agreement.” (citations omitted)). “Straightforward language in an insurance policy should be

given its natural meaning.” Lawson vy. Fortis Ins. Co., 301 F.3d 159, 162 (3d Cir. 2002). “Under

Pennsylvania law, an insurance contract is ambiguous where it: ‘(1) is reasonably susceptible to

different constructions, (2) is obscure in meaning through indefiniteness of expression, or (3) has

a double meaning.’” Viera v. Life Ins. Co. of N. Am., 642 F.3d 407, 419 (3d Cir. 2011) (quoting

Lawson, 301 F.3d at 163). Courts should not, however, “distort the meaning of the language or

resort to a strained contrivance in order to find an ambiguity.” Madison Constr. Co. v.

Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999); see also Selko v. Home Ins. Co., 139

F.3d 146, 152 n.3 (3d Cir. 1998) (applying Pennsylvania law). Any ambiguity in policy

language should be interpreted against the insurer. McMillan v. State Mut. Life Assurance Co.,

922 F.2d 1073, 1075 (3d Cir. 1990). Failing to define a coverage term does not mean that it is

ambiguous. Cap. Flip, LLC v. Am. Modern Select Ins. Co., 416 F. Supp. 3d 435, 439 (W.D. Pa.

2019) (citing Heebner v. Nationwide Ins. Enterprise, 818 F. Supp. 2d 853, 857 (E.D. Pa. 2011)).

Parties’ disagreement on the proper construction of a provision does not render it ambiguous.

Trombetta v. Raymond James Fin. Servs., Inc., 907 A.2d 550, 562 (Pa. Super. 2006). Whether a

contract is ambiguous is a question of law for the court to decide. Jd. at 561-62; Thomas Rigging

& Constr. Co., Inc. v. Contraves, Inc., 798 A.2d 753, 756 (Pa. Super. 2002); see also Allstate

Prop. & Cas. Ins. Co. v. Squires, 667 F.3d 388, 391 (3d Cir. 2012) (under Pennsylvania law, the

interpretation of an insurance contract is a matter of law).

1. Tithonus Partners is not a “successor” to Tithonus Tyrone pursuant to

§ 1(d)(i)(B) of the Policy and, therefore, it is not an “Insured” under that

clause of the Policy.

Section 1(d)(i)(B) of the Policy provides:

The term “Insured” also includes (B) successors to an Insured by dissolution,

merger, consolidation, distribution, or reorganization|[. |

(ECF No. 21-1, p. 13) (emphasis added). Tithonus Partners contends that it is a successor to

Tithonus Tyrone by distribution. Tithonus Partners concedes that there was not a dissolution,

merger, consolidation, or reorganization of Tithonus Tyrone. According to Tithonus Partners,

the First Deed conveying the Property to it from Tithonus Tyrone expressly labels the

conveyance as “a distribution to Grantee.” (ECF No. 21-2, p. 2). It takes the position that “by

the plain and express language of the First Deed, Tithonus Partners is a successor to the

Property by distribution to Tithonus Tyrone.” (ECF No. 29, p. 15). Thus, because it qualifies

as a “successor” to Tithonus Tyrone, Tithonus Partners argues that it is clearly an “Insured”

under the plain language of the Policy. (ECF No. 42, pp. 5-6; ECF No. 47, pp. 2-3).

In contrast, Chicago Title argues that Tithonus Partners has not shown that it is actually

Tithonus Tyrone’s successor. It contrasts the language of § 1(d)G)(A), which references

“successors to the Title of the Insured by operation of law,” with that of § 1(d)@)(B), which

references “successors to an Insured.” (ECF No. 36, p. 10). Chicago Title argues that this

difference is significant and provides coverage in distinct situations. Citing to Black’s Law

Dictionary, it argues that being a “successor” to an entity—rather than merely to the title—

“implies that the predecessor entity has ceased to exist and has been replaced for all purposes

by the successor entity.” (ECF No. 36, p. 10). Chicago Title contends that it is undisputed that

Tithonus Tyrone still exists and that it operates an assisted living facility on the portion of the

land it kept (Lot 4) from which it generates income. And, Tithonus Tyrone’s portion of the

land remains insured under the Policy. (ECF No. 32, pp. 10-11). Chicago Title also argues that

“le]very owner of real estate who takes title by grant has succeeded to its predecessor’s title in

that limited sense, but this does not make the current owner the ‘successor’ to the prior owner.

There is a difference under the Policy between a ‘successor to the title’ and a ‘successor to the

Insured.’” (ECF No. 48, pp. 3-4).

The Court holds that Tithonus Partners is not a successor to Tithonus Tyrone pursuant to

§ 1(d)(i)(B) of the Policy. In reaching its holding, the Court first examined the specific language

of the clause at issue-—-which provides coverage to “successors to an Insured by dissolution,

merger, consolidation, distribution, or reorganization.” It is significant, as Chicago Title argued,

that § 1(d)(i)(B) specifically references successors “to an Insured” rather than “to the Title of the

Insured” referenced at § 1(d)(i)(A). The Court may not ignore the difference in language—it

10

must give it full effect that recognizes and actualizes the difference in terminology used in each

clause. The fact that the phrase “successors to an Insured” is modified by a list of specific

events highlights that § 1(d)(i)(B) contemplates an existential alteration, if not extinction, of the

original “Insured.”

The Court’s reading of § 1(d)(i)(B) is bolstered by the interpretive canon? noscitur a

sociis, which is “literally translated as ‘it is known by its associates.’”” Graham Cnty. Soil &

Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 288 (2010) (citation

omitted). The canon “counsels lawyers reading statutes that ‘a word may be known by the

company it keeps.” Id. (citation omitted). Thus, “words grouped in a list should be given

related meaning.” S.D. Warren Co. v. Me. Bd. of Env’t Prot., 547 U.S. 370, 378 (2006)

(citations omitted). Further, “[t]hat several items in a list share an attribute counsels in favor of

interpreting the other items as possessing that attribute as well.” Beecham v. United States, 511

U.S. 368, 371 (1994). Section 1(d)()(B) includes “distribution” in a series of words that each

refer to an event whereby a business entity is structurally changed (1e., “merger,”

“consolidation,” “reorganization’”) or eliminated (i.e., “dissolution”). “Distribution,” as used in

§1(d)(i)(B), must be read consistently with its companions. Thus, it must refer to the liquidation

of an entity’s assets, rather than partnership distributions made in the ordinary course of

business. This reading is internally consistent with the provisions of § 1(d)(i)(B), and it also

recognizes the distinction between “successors to the Title of the Insured” and “successors to an

Insured.” Tithonus Partners is not an “Insured” under § 1(d)(@)(B).

> See, e.g., Viera, 642 F.3d at 418-19 (applying a canon of statutory interpretation to interpret

language in an insurance contract); J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 365-66 (3d

Cir. 2004) (same).

il

2. Tithonus Partners is not an “Insured” under § 1(d)(i)(D)(2) of the Policy.

Tithonus Partners also claims coverage as an “Insured” under § 1(d)()(D)(2) of the

Policy. That subclause defines an “Insured” as:

(D) a grantee of an Insured under a deed delivered without payment of actual

valuable consideration conveying the Title

+k Oe

(2) if the grantee wholly owns the named Insured[.]

(ECF No. 21-1, p. 13). Tithonus Partners argues that the record is clear that it did not pay

consideration for the property. (ECF No. 38, pp. 8-9). It contends that the original named

“Insured,” Tithonus Tyrone, should be deemed “wholly owned” by Tithonus Partners because it

owned 99.9% of Tithonus Tyrone at the time of the transfer of property, and the remaining 0.1%

was owned by Tithonus Partners’s general partner, Tithonus GP I, LLC, which was also a

general partner of Tithonus Tyrone. Tithonus Partners argues that it is impossible for a limited

partnership to be 100% owned by one single entity in Pennsylvania, as it must have a general

partner and a limited partner. (ECF No. 38, pp. 10-12; ECF No. 47, pp. 3-5). Tithonus Partners

submits that “[t]his is as close as a Pennsylvania limited partnership can be to ‘wholly owned,’”

such that it effectively “wholly owned” Tithonus Tyrone at the time of the conveyance and,

therefore, it was insured under § 1(d)(i)(D)(2) of the Policy. (ECF No. 47, p. 5).

Chicago Title argues that Tithonus Partners cannot be classified as an “Insured” as the

grantee of Tithonus Tyrone because, even assuming no consideration was paid, it failed to meet

the test set forth in § 1(d)(i)(D)(2) of the Policy—‘if the grantee wholly owns the named

Insured.” (ECF No. 32, pp. 15-17). According to Chicago Title, when the claim for coverage

was made, Tithonus Partners owned 0% of Tithonus Tyrone, and Tithonus Partners has admitted

as much. (ECF No. 48, p. 6). Tithonus Partners is a limited partnership with four partners, none

of whom were ever Tithonus Tyrone. When the original Policy was sought in 2012, Tithonus

12

Tyrone was a limited partnership with Tithonus GP II, LLC as the general partner and Tithonus

Partners as the limited partner. (ECF No. 32, pp. 15-16). It submits that “[a] conveyance from a

parent corporation to a wholly owned subsidiary would qualify; but a conveyance by a

partnership to only one of its two partners, as occurred here, would not.” (ECF No. 32, p. 16).

The Court will first address whether to read the provisions of this subclause as referring

to ownership at the time of the conveyance or at the time the insurance claim is made. Chicago

Title takes the position that because § 1(d)(i)(D)(2) uses the present tense, the critical point is the

ownership of the named Insured at the time the claim is made, rather than the time of

conveyance. If, as Chicago Title argues, the critical date is the time the claim was made, then

there is no question that Tithonus Partners is not an “Insured” because it is undisputed that, at the

time, it did not own any part of Tithonus Tyrone.

The Court holds, however, that the proper point of reference is the time of the grant. The

focal point of § 1(d)(i)(D) is the grant of the insured Title pursuant to “a deed delivered without

payment of actual valuable consideration.” This clause looks to the time of the grant. And the

relevant subclause—“if the grantee wholly owns the named Insured,” § 1(d)(i)(D)(2)—clearly

refers to the specific event of the conveyance effectuated by “a deed delivered without payment,”

§ 1(d)(~)(D) (emphasis added). Moreover, the reading espoused by Chicago Title, focusing on

the time the claim was made, would allow related companies (as Tithonus Partners and Tithonus

Tyrone are here) to recalibrate ownership structures prior to making a claim when, at the time of

the conveyance, the “wholly owned” provision of §1(d)(@)(D) was clearly inapplicable. This

would not be a sound result and is not supported by the terms of the contract. As such, the Court

will, as urged by Tithonus Partners, look to the time of the conveyance.

13

The Court holds that there is no genuine issue of material fact that Tithonus Partners

made no “payment of actual valuable consideration” in return for the conveyance. The critical

issue, therefore, is whether Tithonus Tyrone was “wholly owned” by Tithonus Partners.

Notwithstanding the fact that, as Tithonus Partners argues, it owned almost all of Tithonus

Tyrone, 99.9%, the Court cannot hold that it wholly owned Tithonus Tyrone. The contract

clearly and unambiguously calls for whole ownership, not nearly whole or “effectively whole” as

Tithonus Partners advocates.

“Wholly owned” is not defined by the Policy, so the Court must interpret what the term

means in the context of the Policy. Pennsylvania law on interpreting insurance contracts

provides:

In interpreting an insurance policy, a court must ascertain the intent of the parties

as manifested by the language of the written agreement. When the policy

language is clear and unambiguous, the court must give effect to the langue of the

contract. However, if the policy provision is ambiguous, the policy provision

must be construed in favor of the insured and against the insurer as the drafter of

the instrument. Also, the words of the insurance policy must be construed in

their natural, plain and ordinary sense.

Riccio v. Am. Republic Ins. Co., 705 A.2d 422, 426 (Pa. 1997) (internal citations omitted)

(emphasis added). Moreover, “[i]f the terms of a policy are clear, [the] Court cannot rewrite it or

give it a construction in conflict with the accepted and plain meaning of the language used.”

Treesdale, Inc. v. TIG Ins. Co., 681 F. Supp. 2d 611, 616-17 (W.D. Pa. 2009) (quoting Wall Rose

Mut. Ins. Co. v. Manross, 939 A.2d 958, 962 (Pa. Super. 2007)).

“(A] contract will be found ambiguous only if it is: (1) reasonably or fairly susceptible of

different constructions; (2) capable of being understood in more than one sense; (3) obscure in

meaning through indefiniteness of expression; or (4) its words have a double meaning.” Jd. at

14

617 (citing Bohler-Uddeholm Am., Inc. vy. Ellwood Grp., Inc., 247 F.3d 79, 93 (3d Cir. 2001)).

Further:

A contract is not ambiguous if the court can determine its meaning absent a guide

other than “knowledge of the simple facts on which, from the nature of the

language in general, its meaning depends; and a contract is not rendered

ambiguous by the mere fact that the parties do not agree on the proper

construction.” “[A]mbiguity in a contract must emanate from the language used

in the contract rather than from one party’s subjective perception of its terms.” In

determining whether or not there is an ambiguity, “the whole contract must be

considered and not an isolated part.”

Id. (internal citations omitted).

The Court holds that the term “wholly owned” as used in § 1(d)()(D)(2) is clear and

unambiguous. It is not readily susceptible to different constructions. Nor is it capable of being

understood in more than one sense. It is not obscure in meaning through indefiniteness of

expression and, finally, its words do not have a double meaning. Although Tithonus Partners

argues that it is impossible for a limited partnership to be wholly owned, this was not specifically

couched, nor does the Court construe it, as an argument that the term “wholly owned” is

ambiguous. Ambiguity must emanate from the contractual language itself, not from any party’s

perception or interpretation of those terms. The Court cannot read into “wholly owned” an

ambiguity that is not present. The term is not ambiguous.

The Court must afford the terms of § 1(d)(i)(D)(2) their natural, plain and ordinary

meaning at the time of the execution of the contract. Black’s Law Dictionary® defined “wholly”

as “[n]ot partially; fully; completely.” Wholly, BLACK’s LAW DICTIONARY 1735 (9th ed. 2009).

The Random House Dictionary similarly defined “wholly” as “entirely; totally; altogether” and

6 The Court reviewed dictionaries that were contemporaneous with the execution of the contract

in 2012. See Madison Constr. Co., 735 A.2d at 108 (“Words of common usage in an insurance

policy are to be construed in their natural, plain, and ordinary sense, and we may inform our

understanding of these terms by considering their dictionary definitions.”).

15

“to the whole amount, extent.” Wholly, THE RANDOM HOUSE DICTIONARY OF THE ENGLISH

LANGUAGE 2171 (2d ed. 1987). Finally, Webster’s Third defined the term as “to the full or

entire extent” and “to the exclusion of other things.” Wholly, WEBSTER’S THIRD NEW

INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE 2612 (3d ed. 1993). Here, the record

shows that, at the time of the conveyance, Tithonus Partners owned 99.9% of Tithonus Tyrone.

The Court therefore cannot find that it “wholly owned” Tithonus Tyrone. To do so would be to

expand the plain meaning of “wholly owned” to—as advocated by Tithonus Partners—

“effectively wholly owned.” But that is not what the Policy says, and the Court does not have the

authority to amend and broaden the terms of the parties’ agreement.

Tithonus Partners cites to Siegel Transfer, Inc. v. Carrier Express, Inc., 54 F.3d 1125,

1133 (3d Cir. 1995), as a purported example of a case where the Third Circuit has held that a rule

governing “wholly owned” subsidiaries may apply where the ownership is substantial, but less

than 100%. Siegel arose in the antitrust context and addressed whether the rule that a parent

company cannot conspire with its wholly-owned subsidiary—enunciated by the Supreme Court

in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984)—also applied when the

parent does not quite own 100% of the subsidiary. Siege/ cannot be read for the broad

proposition that somewhat less than 100% may be construed as “wholly owned” in all cases and

for all purposes. Rather, it must be construed and constrained by the context in which it arose -

antitrust law. The Copperweld decision addressed the “fundamental question . . . [of] whether an

agreement between a parent and its wholly owned subsidiary represents the conduct of one

economic actor or two.” Siegel, 54 F.3d at 1132. The rule that a parent and “wholly owned”

subsidiary cannot conspire with one another for antitrust purposes recognizes that “given the

control a parent wields over its wholly owned subsidiary, these parties always share ‘a unity of

16

purpose or a common design,’ and thus, cannot engage in Section | [of the Sherman Antitrust

Act] concerted activity.” Jd. (citing Copperweld, 467 U.S. at 771-72). Because the focus of the

Copperweld decision was market impact, it was not a far stretch to extend this rule to situations

where a parent did not own a complete majority of the subsidiary. The effect on markets of

concerted action is essentially the same. This market-based rule reflects the purpose of antitrust

law, the effect of companies’ collaboration on markets. It cannot be read as a blanket

redefinition of the term “wholly owned” to be something less. The Third Circuit simply did not

hold that, as a general matter, “wholly owned” as used in contracts and other contexts really

means “effectively wholly owned” or some other looser measure.

The Court holds that it must afford the term “wholly owned” used in § 1(d)(i)(D) its

ordinary and natural construction. “Wholly” means completely and entirely in an absolute and

objective sense.’ Tithonus Partners did not wholly own Tithonus Tyrone. It is not, therefore, an

’ Tithonus Partners offers a final counterpoint, asserting that “Chicago Title cannot reasonably

seek to enforce a 100% ‘wholly owned’ exclusion” because it is “legal[ly] and factual[ly]

impossib[le]” for any entity to own 100% of Tithonus Tyrone, a Pennsylvania limited

partnership. (ECF No. 29, p. 18). Tithonus Partners cites Daburlos v. Commercial Insurance

Co. of Newark, New Jersey, 381 F. Supp. 393, 400 (E.D. Pa. 1974), for the proposition that

“conditions which are impossible of performance are ineffectual and void.” That case concerned

a policy condition that made it “impossible for the insureds, within the literal terms of [the

contract], to modify their insurance [coverage],” thereby depriving them of an express

“contractual right purchased by the payment of the premium.” Jd at 402. The court thus

“disregarded” the impossible condition and held that the insureds’ beneficiary, having satisfied

the other conditions of coverage, had a right to collect under the policy. /d at 397, 401. The

purportedly impossible condition in this case, however, is of a different sort. The “wholly

owned” subclause—part of a generic definition section—does not have any effect whatsoever on

the coverage rights of the named Insured (Tithonus Tyrone). Nor does it operate as the sole

method for third parties (like Tithonus Partners) to seek coverage rights as successors to the

named Insured. Thus, while affording “wholly owned” its plain meaning may render it

inapplicable in most, if not all cases, it would not cause an outright deprivation of rights at the

heart of the contract, as occurred in Daburlos. Accordingly, the Court will not “disregard| ]” the

“wholly owned” requirement. Jd at 401. And the Court cannot “rewrit[e]”’ the contract or

interpret it to require something less than whole ownership, which would not be a “reasonable

interpretation” of unambiguous policy language. Jd.

17

“Insured” under Section 1 of the Policy. Because it is not an “Insured,” coverage is not owed.

As such, the Court must enter judgment in favor of Chicago Title and against Tithonus Partners

on the breach of contract claim.*

B. Count II — INSURANCE BAD FAITH PURSUANT TO 42 PA. C.S. § 8371

A claim for statutory bad faith under 42 Pa. C.S. § 8371 requires that “the insurer has

acted in bad faith toward the insured.” As explained above, Tithonus Partners was not an

“Insured” under the Policy. Because Tithonus Partners was not an “Insured” it cannot maintain a

bad faith claim against Chicago Title. See Seasor v. Liberty Mut. Ins. Co., 941 F. Supp. 488, 491

(E.D. Pa. 1996) (“[I]n order to bring an action for bad faith against an insurer, one must qualify

as an “Insured” as that term is defined in the policy.”). Accordingly, summary judgment will be

entered in favor of Chicago Title as to Count II.

IV. CONCLUSION

For the foregoing reasons of law and fact, the Court will grant Chicago Title’s summary

judgment motion (ECF No. 27) and enter judgment in its favor as to Counts I and H. Orders of

Court will follow.

BY THE COURT:

DIM & Hew.

WILLIAM S. STICKMAN IV

UNITED STATES DISTRICT JUDGE

{a- Ze2i

Date

8 Because, as a threshold matter, Tithonus Partners is not entitled to coverage as an “Insured”

under Section | of the Policy, the Court need not address the parties’ arguments under Section 2.

18