Park Restoration, LLV v. Erie Insurance Exchange (In re The Trustees of Conneaut Lake Park, Inc.)

Case Type:
Case Status:
Reversed and Remanded
16-2516 (3rd Circuit, May 02,2017) Published
The United States District Court for the Western District of Pennsylvania erred when it held that a "named insured," as used in 40 Pa. State. § 638, only includes that who own a structure and are responsible for delinquent taxes.
Procedural context:
The United States Court of Appeals reversed and remanded to the United States District Court for the Western District of Pennsylvania, which had reversed a decision of the United States Bankruptcy Court for the Western District of Pennsylvania,
The debtor, the Trustees of Conneaut Lake Park, Inc. (the "Trustees"), owned a beach club in Conneaut Lake Park in Crawford, Pennsylvania. Appellant Park Restoration, LLC operated the beach club under a management agreement with the Trustees. Park Restoration insured the beach club against fire loss for $611,000 through Erie Insurance Exchange ("Erie"), In 2013, the beach club was destroyed by fire. Park Restoration filed a claim with Erie, which did not dispute the claim. However, under 40 Pa. State. § 638, Erie required Park Restoration to obtain a certificate from the local municipal treasurer stating whether any back taxes were owed on the beach club property. Park Restoration received a certificate showing that $478,260.75 in delinquent property taxes were owed to various taxing authorities. The taxes were owed on the entire 55.3 acre property, not only on the one acre property where the beach club was situated. Erie notified Park Restoration that it would transfer $478,260.75 to the taxing authorities. Park Restoration objected, and the proceeds were interpleaded in the Court of Common Pleas of Crawford County. The Trustees then filed for bankruptcy, and the interpleader action was transferred to bankruptcy court. The bankruptcy court held that under 40 Pa. State. § 638, the taxing authorities were entitled to full payment of the delinquent taxes, with the balance going to Park Restoration as the named insured. The parties cross-appealed. Park Restorations argued for the first time on appeal that because the insured property, the beach club, accounted for only 9% of the value of the tax parcel, the insurance proceeds should be applied pro rata. The Trustees claimed entitlement to the balance of the insurance proceeds because they owned the beach club. The district court affirmed the bankruptcy court's judgment for Park Restoration as against the Trustees, but reversed the judgment for the taxing authorities against Park Restorations, finding that 40 Pa. State. § 638 is ambiguous in its interchangeable use of the terms "named insured" and "insured property owner." The district court then concluded that 40 Pa. State. § 638 applies only to property owners. Based on that, because Park Restorations did not own the beach club, it was not responsible for the Trustee's delinquent taxes.
Fisher, Hardiman, and Greenaway, Jr.

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