VAIKAI HOSPITALITY, INC. v. UTICA MUTUAL INSURANCE COMPANY

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UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
VAIKAI HOSPITALITY, INC.,
Plaintiff,
v.
UTICA MUTUAL INSURANCE
COMPANY,
Defendant.
: 	NO. 1:23-CV-02132
:
:
: 	(CAMONI, M.J.)
:
:
:
:
MEMORANDUM OPINION
I. 	INTRODUCTION
Before the Court is a motion for summary judgment brought by
Defendant, 	Utica 	Mutual 	Insurance 	Company. 	Plaintiff, 	Vaikai
Hospitality brought claims arising from Defendant’s determination of
coverage 	for 	fire 	damage 	to 	Plaintiff’s 	property. 	After 	careful
consideration 	of 	the 	parties’ 	submissions, 	the 	Court 	will 	grant
Defendant’s motion for summary judgment on all claims because Plaintiff
has not provided evidence sufficient to establish essential elements of its
claims that Defendant breached a contractual duty or that Defendant
denied Plaintiff’s insurance claim on an unreasonable basis.
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II. 	LEGAL STANDARD
A. 	Jurisdiction
This Court has jurisdiction over this matter under 28 U.S.C. § 1332
because the amount in controversy exceeds $75,000 and the parties are
citizens of different states. Further, Defendant properly removed the
proceeding to this Court from a Pennsylvania court pursuant to 28 U.S.C.
§ 1441.
B. 	Summary Judgment Standard of Review
Summary judgment is appropriate where “there is no genuine
dispute as to any material fact and the movant is entitled to judgment as
a matter of law.” Fed. R. Civ. P. 56(a). A dispute is “genuine” when “a
reasonable 	jury 	could 	return 	a 	verdict 	for 	the 	nonmoving 	party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is
“material” only if it can “affect the outcome of the suit under governing
law.” Kaucher v. County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006), citing
Anderson, 477 U.S. at 248. Disputes over irrelevant or unnecessary facts
will not preclude a grant of summary judgment. Anderson, 477 U.S. at
248.
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The moving party bears the burden of showing that no genuine
dispute exists such that summary judgment is warranted. See Celotex
Corp. 	v. 	Catrett, 	477 	U.S. 	317, 	322–23 	(1986). 	Once 	the 	movant
adequately supports its motion, the burden shifts to the nonmoving party
to 	“go 	beyond 	the 	pleadings 	and 	by 	her 	own 	affidavits, 	or 	by 	the
depositions, answers to interrogatories, and admissions on file, designate
specific facts showing that there is a genuine issue for trial.” Id. at 324
(citation modified).
In considering a motion for summary judgment, a district court may
not make credibility determinations or weigh the evidence. Marino v.
Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004), citing Anderson, 477
U.S. at 255. Rather, “[a]ll facts and inferences are construed in the light
most favorable to the non-moving party.” Boyle v. County of Allegheny,
139 F.3d 386, 393 (3d Cir. 1998). Credibility determinations are “the
province of the factfinder.” Big Apple BMW, Inc. v. BMW of N. Am., Inc.,
974 F.2d 1358, 1363 (3d Cir. 1992). The court's role, at the summary
judgment stage, is “to determine whether there is a genuine issue for
trial.” Anderson, 477 U.S. at 249. There can be “no genuine issue as to
any material fact,” however, if a party “fails to make a showing sufficient
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to establish the existence of an element essential to that party’s case, and
on which that party will bear the burden of proof at trial.” Celotex, 477
U.S. at 322.
C. 	Local Rule 56.1
The Middle District of Pennsylvania Local Rule of Court requires
that a motion for summary judgment:
be accompanied by a separate, short and concise statement of the
material facts, in numbered paragraphs, as to which the moving
party contends there is no genuine issue to be tried. 	The papers
opposing a motion for summary judgment shall include a separate,
short and concise statement of the material facts, responding to the
numbered paragraphs set forth in the statement required in the
foregoing paragraph, as to which it is contended that there exists a
genuine issue to be tried. 	Statements of material facts in support
of, or in opposition to, a motion [for summary judgment] shall
include references to the parts of the record that support the
statements.
L.R. 56.1. Defendant filed a properly supported statement of material
facts. See Defendant’s Statement of Undisputed Material Facts, Doc. 34-
2. Plaintiff likewise filed a properly supported and responsive statement,
admitting most of the facts Defendant alleged. Doc. 36. Therefore, the
Court deems Defendant’s material facts admitted, except where properly
countered by Plaintiff or contradicted by the record. See L.R. 56.1.
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III. 	BACKGROUND
A. 	Procedural History
On November 27, 2023, Plaintiff, Vaikai Hospitality, Inc., doing
business as “Econolodge Harrisburg, PA,” commenced this action against
Defendant, Utica Mutual Insurance Company, in the Court of Common
Pleas of Dauphin County, Pennsylvania. Complaint, Doc. 1-2. Plaintiff
alleged claims of breach of contract and statutory bad faith. Id. at 5-7. On
December 22, 2023, Defendant removed the case to the Middle District of
Pennsylvania’s District Court. Notice of Removal, Doc. 1 at 1. After the
close of fact discovery, Defendant moved for summary judgment on both
claims. Doc. 34.
The parties have consented to the jurisdiction of a United States
Magistrate Judge to conduct all proceedings in this case, pursuant to 28
U.S.C. § 636(c) and Federal Rule of Civil Procedure 73, including entry of
final judgment. Consent Form, Doc. 7. This case is fully briefed (Docs. 36,
40, 44) and ripe for resolution.
B. 	Undisputed Material Facts
The facts essential to this determination are not in dispute. In July
2019, a hotel owned and operated by Plaintiff suffered damage due to a
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fire. Docs. 34-2 ¶ 1; 39 ¶ 1. At the time of the loss, the property was
covered 	under 	an 	insurance 	policy 	issued 	by 	the 	Defendant: 	Utica
Commercial Package Policy No. 5001270 (the “Policy”). Docs. 34-2 ¶ 3; 39
¶ 3. 	Following 	the 	fire, 	Plaintiff 	submitted 	an 	insurance 	claim 	to
Defendant, requesting payment for the loss in the amount of $770,971.91.
Docs. 34-2 ¶ 4; 39 ¶ 4. Defendant paid Plaintiff $575,543.88, withholding
an additional $213,751.35 as a depreciation holdback. Docs. 34-2 ¶ 5; 39
¶ 5. 	Plaintiff 	claims 	that 	Defendant 	improperly 	refused 	to 	fully
compensate it for its loss under the Policy and allegedly dealt with it in
bad faith. Docs. 34-2 ¶¶ 6-7; 39 ¶¶ 6-7.
As 	proof 	of 	loss, 	Plaintiff 	submitted 	an 	invoice 	from 	C&Z
Construction, totaling $770,971.91. See Docs. 34-2 ¶¶ 11-12; 39 ¶¶ 11-12.
This invoice did not provide line-item entries or reference receipts,
cancelled 	checks, 	bills, 	or 	other 	expenses 	incurred 	for 	the 	asserted
depreciation holdback amount. Docs. 34-2 ¶ 13; 39 ¶ 13. It is undisputed
that Plaintiff has not made any payments to C&Z Construction for
covered repairs beyond the $575,543.88 that Defendant had paid to
Plaintiff. Docs. 34-2 ¶ 28; 39 ¶ 28. The parties agree that Plaintiff’s hotel
has returned to full operation since the fire. Docs. 34-2 ¶ 42; 39 ¶ 42. The
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sum of the receipts and cancelled checks that Plaintiff has submitted for
the work it completed does not exceed the $575,543.88 in actual cash
value (ACV) that Defendant has paid Plaintiff. 	Docs. 34-2 ¶¶ 28, 51; 39
¶¶ 28, 51. Additionally, Defendant has not issued Plaintiff any payment
for the depreciation holdback amount. Docs. 34-2 ¶ 52; 39 ¶ 52.
Thus, the parties agree that, while Plaintiff sought payment of over
$770,000 for losses caused by fire, Defendant paid out only $575,543.88,
which equals the total Plaintiff has actually paid to its contractor for
repairs performed. See Docs. 34-2 ¶¶ 4, 28; 39 ¶¶ 4, 28. There is no
dispute that Plaintiff has not made payment to C&Z Construction for the
remainder of its claimed losses. Docs. 34-2 ¶ 52; 39 ¶ 52.
IV. 	DISCUSSION
To succeed on a breach of contract claim in Pennsylvania, the
Plaintiff must demonstrate (1) the existence of a contract, (2) a breach of
a duty imposed by the contract, and (3) resultant damages. Harley v.
HealthSpark Found., 265 A.3d 674, 685 (Pa. Super. Ct. 2021). To succeed
on a bad faith claim, the Plaintiff must demonstrate that (1) the insurer
did not have a reasonable basis for denying the claim for benefits under
the policy, and (2) the insurer knew of or recklessly disregarded its lack
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of reasonable basis in denying the claim. Watchword Worldwide v. Erie
Ins. Exch., 308 A.3d 294, 303 (Pa. Super. Ct. 2024). Here, Plaintiff has
not provided sufficient evidence to demonstrate that Defendant either
breached 	a 	contractual 	duty 	or 	denied 	its 	insurance 	claim 	on 	an
unreasonable basis. Therefore, the Court will grant Defendant summary
judgment on both claims.
A. 	Plaintiff 	did 	not 	satisfy 	a 	necessary 	condition 	to
receive the replacement cost value.
Defendant is entitled to summary judgment because Plaintiff did
not produce sufficient evidence to show that it satisfied the contractual
conditions to obtain the replacement cost value of its loss. The Policy
provides that:
[Utica] will determine the value of the Covered Property in the
event of loss or damage . . . [a]t actual cash value as of the time of
loss or damage, except as provided in b., c., d. and e. below. . .
[Vaikai] may make a claim for loss or damage covered by this
insurance on an actual cash value basis instead of on a replacement
cost basis. In the event you elect to have loss or damage settled on
an actual cash value basis, you may still make a claim for the
additional coverage this Optional Coverage provides if you notify us
of your intent to do so within 180 days after the loss or damage. . .
We will not pay on a replacement cost basis for any loss or damage:
(1) Until the lost or damaged property is actually repaired or
replaced; and (2) Unless the repairs or replacement are made as
soon as reasonably possible after the loss or damage.
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Insurance 	Policy, 	Doc. 	34-15 	at 	13, 	15-16. 	Additionally, 	the 	Policy
explains that “Actual cash value is calculated as the amount it would cost
to repair or replace Covered Property. . . subject to a deduction for
deterioration, depreciation and obsolescence. . . . The actual cash value of
the 	lost 	or 	damaged 	property 	may 	be 	significantly 	less 	than 	its
replacement cost.” Doc. 34-15 at 17.
In other words, under the Policy, Utica agrees to determine the
actual 	cash 	value 	of 	the 	property, 	which 	excludes, 	by 	definition, 	a
depreciation holdback sum. Defendant will either pay Plaintiff the actual
cash value, or, in the event Plaintiff elects to provide evidence of timely
repair 	or 	replacement 	of 	damaged 	property, 	Defendant 	will 	make
additional payment to cover the replacement cost. 1 Therefore, to qualify
for payment on a replacement cost basis, Plaintiff needed to have (1)
actually repaired or replaced the damaged property and (2) have done so
as soon as reasonably possible after the loss.
The parties agree that Defendant did, in fact, pay the “actual cash
value” of Plaintiff’s loss, amounting to $575,543.88. 	See Docs. 34-2 ¶ 28;
1 In the Policy, the full replacement cost doesn’t include a reduction for
depreciation. Doc. 34-15. at 15.
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39 ¶ 28. Plaintiff claims that the Policy requires Utica to pay over the
remainder of the full replacement cost, an additional sum in excess of
$213,000. Doc. 39 ¶ 5.
Defendant counters that Plaintiff has not provided any evidence to
demonstrate that it actually repaired or replaced the lost or damaged
property to justify a replacement cost payment under the Policy. Doc. 34-
3 at 6. Plaintiff responds that the Policy does not expressly mandate such
proof, but merely requires that Plaintiff make the repairs in a timely
manner. Doc. 40 at 7-8. Thus, according to Plaintiff, because it purports
to have made all repairs, it is entitled to the replacement cost payment
despite 	providing 	no 	evidence 	it 	has 	done 	so. 	Id. 	Under 	Plaintiff’s
interpretation 	of 	the 	Policy, 	Defendant 	is 	required 	to 	simply 	take
Plaintiff’s 	word, 	which 	reflects 	an 	absurd 	notion 	of 	contract 	law.
Fortunately, the Court need not untangle that particular knot.
Even if the Policy did not require Vaikai to submit evidence of the
completed work to qualify for the replacement value, this Court does. To
withstand summary judgment, Plaintiff must produce evidence sufficient
to convince a reasonable jury that it completed the work and satisfied its
duties under the contractual provision it seeks to enforce. Fed. R. Civ. P.
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56(e); Anderson, 477 U.S. at 256 (“Rule 56(e) itself provides that a party
opposing a properly supported motion for summary judgment may not
rest upon mere allegation or denials of his pleading, but must set forth
specific facts showing that there is a genuine issue for trial.”); Williams
v. Borough of W. Chester, Pa., 891 F.2d 458, 460–61 (3d Cir. 1989)
(citation modified), citing Anderson, 477 U.S. at 256–57 (“[T]he plaintiff
must present affirmative evidence in order to defeat a properly supported
motion for summary judgment. Such affirmative evidence must amount
to more than a scintilla, but may amount to less than a preponderance.”).
In Plaintiff’s Brief in Opposition, it merely alleges, without evidence, 2
that it completed the work that it now demands Defendant pay for. Doc.
2 Contrary to Plaintiff’s averment that Defendant’s building consultant
“issued a written report stating that it could verify the amount of loss at
$715,076.16” (Doc. 40 at 8), Defendant’s expert, J.S. Held, in fact reached
a meaningfully different conclusion. In 2019, J.S. Held estimated that it
would cost $715,076.16 to repair the loss to Plaintiff’s property. Doc. 34-
14 at 4. However, after Plaintiff alleged to have fully repaired its
property, Held could not verify that the full scope of the work was indeed
completed, based on the documents that Plaintiff submitted. Id. at 5.
Held’s 	report 	states 	that, 	“Given 	the 	absence 	of 	further/full
documentation 	and 	the 	adjustments 	referenced 	in 	email
communications, completion of the recommended scope of work valued at
$715,076.16 qualifying for release of withheld depreciation cannot be
verified at this time.” Id. Therefore, J.S. Held’s report does not support
Plaintiff’s allegation that it completed repairs, but does support the
Court’s conclusion that Plaintiff has failed to meet its evidentiary burden.
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40 at 1, 8. “Mere allegation” falls short of the mark. Anderson, 477 U.S.
at 256. Therefore, summary judgment is warranted.
B. 	Even if Plaintiff did qualify to receive replacement
cost, it is not entitled to payment beyond what
Defendant has already tendered.
Even if Plaintiff had satisfied the pre-requisites to receive the
replacement cost, the Policy limits replacement cost payment to no more
than the amount Plaintiff actually spent. Within the “Replacement Cost”
section of the Policy, the contract specifies that “[Utica] will not pay more
for loss or damage on a replacement cost basis than. . . “[t]he amount
actually spent that is necessary to repair or replace the lost or damaged
property.” Doc. 34-15 at 16.
Here, the phrase “actually spent” unambiguously requires that
Plaintiff in fact paid out the sum it seeks to recover on a replacement cost
basis. In Pennsylvania, interpreting insurance contracts is a matter of
law, and “[w]ords of common usage in an insurance policy are to be
construed in their natural, plain, and ordinary sense.” Madison Const.
Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100, 108 (Pa. 1999); Kane v.
State Farm Fire & Cas. Co., 841 A.2d 1038, 1042 (Pa. Super. Ct. 2003). A
court may “inform [its] understanding of these terms by considering their
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dictionary 	definitions.” 	Madison 	Const. 	Co., 	735 	A.2d 	at 	108.
“[C]ontractual terms are ambiguous if they are subject to more than one
reasonable interpretation when applied to a particular set of facts.” Id.
at 106. The words “actually spent” are mundane, frequently used, and
not subject to more than one reasonable interpretation in this context,
thus, they are clear and not ambiguous. 	Id.
The Court, therefore, interprets the words “actually spent” in their
colloquial senses. “Actually” means in act or in fact; really. Actually,
MERRIAM -W EBSTER DICTIONARY (Mar. 13, 2026), https://www.merriam-
webster.com/dictionary/actually. To “spend,” means to use up or pay out.
Spend, 	MERRIAM -W EBSTER 	DICTIONARY 	(Mar. 	13, 	2026),
https://www.merriam-webster.com/dictionary/spend. 	Thus, 	the 	phrase
“actually spent,” as used in the Policy, limits the payout on a replacement
cost basis to funds that the insured party has, in fact, paid out. Plaintiff
asks the Court to find the term “actually spent” ambiguous, See Doc. 40
at 7, but that would stretch the words beyond their plain meaning to
create an ambiguity where none exists. 	Meyer v. CUNA Mut. Ins. Soc.,
648 F.3d 154, 164 (3d Cir. 2011) (“Courts should not distort the meaning
of the language or strain to find an ambiguity.”).
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Here, the Policy requires Defendant to pay Plaintiff the $575,543.88
that Plaintiff in fact paid to C&Z Construction. Both parties agree that
Plaintiff has only paid C&Z Construction $575,543.88. Docs. 34-2 ¶ 28;
39 ¶ 28. They likewise agree that Defendant paid Plaintiff $575,543.88
as an ACV payment. See Docs. 34-2 ¶ 28; 39 ¶ 51. Therefore, even if the
loss Defendant were to pay out was calculated on a replacement cost
instead of actual cash value basis, as the Policy defines it, Defendant
would not owe Plaintiff anything more.
Because 	Plaintiff 	has 	not 	fulfilled 	its 	burden 	of 	showing 	that
Defendant breached the insurance Policy by improperly withholding
payment for a covered expense under the contract, the Court will grant
Defendant summary judgment.
C. 	Plaintiff has failed to provide sufficient evidence to
support a claim of bad faith.
The Court will also grant summary judgment on Plaintiff’s bad
faith claim because Plaintiff did not identify sufficient evidence for a
reasonable jury to find that Defendant acted in bad faith when it declined
to issue Plaintiff further payment. A bad faith claim requires Plaintiff to
prove two elements: 1) that the insurer did not have a reasonable basis
for denying the claim for benefits under the policy and (2) that the insurer
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knew or recklessly disregarded its lack of reasonable basis in denying the
claim. Watchword Worldwide, 308 A.3d at 303. Here, as explained above,
Defendant’s 	interpretation 	of 	the 	Policy 	and 	its 	decision 	to 	deny
Plaintiff’s 	claim 	for 	payment 	on 	a 	replacement 	cost 	basis 	were
reasonable. Because Plaintiff has failed to demonstrate that Defendant
denied its insurance claim on an unreasonable basis, the Court will also
grant summary judgment on Plaintiff’s bad faith claim. 3
Accordingly, Defendant’s motion for summary judgment will be
granted, and judgment will be entered in favor of the Defendant.
An appropriate order follows.
Date: March 18, 2026 	s/Sean A. Camoni
Sean A. Camoni
United States Magistrate Judge
3 	Plaintiff’s 	bad 	faith 	claim 	also 	warrants 	dismissal 	because 	it 	is
dependent on, and thus inextricably tied to, its unavailing breach of
contract claim. Amitie One Condo. Ass'n v. Nationwide Prop. & Cas. Ins.
Co., No. 7-1756, 2010 WL 1052911, at *1 n.2 (M.D. Pa. Mar. 22, 2010)
(“Although the two claims are independent, plaintiff has raised a bad
faith claim which is inextricably tied to its contract claim . . . If defendant
were to prevail on the contract claim—in other words, if its denial of
coverage was proper—then plaintiff's bad faith claim would be doomed.”).
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