THREE RIVERS HYDROPONICS, LLC v. FLORISTS' MUTUAL INSURANCE COMPANY, 2:15-cv-00809

Background

Three Rivers Hydroponics (TRH) grew basil hydroponically using an ozone system (ORP controller + sensor + ozone generator). On June 30, 2014 the ozone generator caught fire; TRH’s crop later failed and it claimed loss of business.
TRH asserted the crop loss was caused not by the fire but by an earlier mechanical breakdown of the ORP controller and/or sensor that over‑ozonated the water.
TRH submitted claims under a Business Personal Property provision (seasonal crop limit $26,000) and an Equipment Breakdown endorsement (covers mechanical breakdowns; $300,000 limit; perishable goods $26,000 for June). Florists Mutual paid $7,341.85 for the generator and continued investigating TRH’s crop‑loss claim.
Multiple investigations followed (Donan/Graf electrical investigator; Simpson manufacturer reps; Lanini; greenhouse engineer Gregg Short). Short’s later closed‑system test (with a replaced sensor and new generator) showed the ORP controller powered, passed diagnostics, and shut off at the setpoint; investigators concluded only the generator sustained fire damage.
Florists denied TRH’s crop‑loss claim on December 18, 2015. TRH sued for breach of contract, bad faith under 42 Pa. Cons. Stat. § 8371, and consequential damages (including loss of business). The Court denied TRH’s summary‑judgment motion and granted Florists’ motion in full.

Issues

Issue	TRH's Argument	Florists' Argument	Held
Breach of contract: did TRH prove a covered "accident" (mechanical breakdown) caused crop loss?	TRH: evidence (error codes, consultant statements) shows ORP controller/sensor failed mechanically and caused over‑ozonation and crop loss.	Florists: TRH produced no admissible expert proof that a mechanical breakdown occurred or caused loss; investigators concluded only the generator was damaged.	Court: Held for Florists — TRH failed to meet its prima facie burden; no admissible expert proof of a covered mechanical breakdown.
Need for expert proof on technical causation	TRH: Simpson’s Gringauz and others supply competent opinion; expert testimony requirement can be met by hybrid/non‑retained witness.	Florists: Issue is highly technical; expert testimony is required and TRH supplied no admissible expert proving mechanical breakdown and causation.	Court: Held for Florists — subject is technical; expert proof required and TRH failed to present admissible expert causation evidence.
Bad faith under § 8371 (reasonable basis + subjective recklessness)	TRH: Florists hired unqualified experts, concealed favorable findings, pressured settlement and failed to split claims — conduct shows bad faith.	Florists: Conducted timely, thorough investigations, relied on engineering reports, paid for generator, and had a reasonable basis to deny coverage; no clear and convincing evidence of subjective bad faith.	Court: Held for Florists — TRH failed to show by clear and convincing evidence that Florists lacked a reasonable basis or acted recklessly.
Consequential damages (loss of business) — causation and foreseeability	TRH: denial (and underpayment) caused failure to replace system and loss of clients/business; $26,000 crop limit would have saved the business.	Florists: TRH admitted an ozone system was not necessary to grow hydroponic crops; TRH cannot prove causation or that business loss was foreseeable/quantifiable.	Court: Held for Florists — TRH admitted ozone was not necessary; cannot prove causal link or reasonable certainty of consequential damages.

Key Cases Cited

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (summary judgment: movant must show no genuine dispute of material fact).
Anderson v. Liberty Lobby, 477 U.S. 242 (1986) (court must view evidence in the light most favorable to nonmoving party).
Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment when party with burden fails to present sufficient evidence).
Oddi v. Ford Motor Co., 234 F.3d 136 (3d Cir. 2000) (expert testimony generally required for technical causation unless issues are within common understanding).
Jacobs Constructors, Inc. v. NPS Energy Servs., Inc., 264 F.3d 365 (3d Cir. 2001) (insured bears initial burden to show claim falls within policy coverage).
Madison Const. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100 (Pa. 1999) (insurer bears burden to prove policy exclusion applies).
Miller v. Boston Ins. Co., 218 A.2d 275 (Pa. 1966) (insured must make prima facie showing of coverage).
Northwest Mut. Life Ins. Co. v. Babayan, 430 F.3d 121 (3d Cir. 2005) (elements of bad‑faith claim under Pennsylvania law).
Rancosky v. Washington Nat’l Ins. Co., 170 A.3d 364 (Pa. 2017) (Pennsylvania clarifies subjective recklessness element for bad faith).
Saldana v. K‑Mart Corp., 260 F.3d 228 (3d Cir. 2001) (nonmoving party must produce evidence beyond pleadings to survive summary judgment).