Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. Civil Action No. 00-cv-00558) District Judge: Honorable James F. McClure, Jr.
The opinion of the court was delivered by: Ambro, Circuit Judge
Before: BARRYand AMBRO, Circuit Judges and DEBEVOISE,*fn1 District Judge.
This is an insurance coverage dispute arising out of a lightning strike and fire that damaged Keil Hall on the campus of Mercersburg Academy. We affirm in part and reverse in part the judgment of the District Court.
I. Factual and Procedural Background
Mercersburg, the insured, is a private secondary and college preparatory boarding school located in Mercersburg, Pennsylvania. Keil Hall is a building located on the Mercersburg campus that was constructed over a century ago. It has four levels above ground and a basement containing mechanical equipment. The first floor of the building contains public spaces, including an auditorium and classrooms, while the second and third floors contain dormitory housing and common meeting areas. The fourth floor was designed and constructed for dormitory use as well, and had been used for that purpose in the past. At the time of the fire, however, that floor was used as attic and storage space, and was cordoned off from students.*fn2
The chimney of Keil Hall was struck by lightning on June 13, 1998, igniting a fire that caused extensive damage to the roof and fourth floor of the building, as well as smoke and water damage to the first, second, and third floors. Following the fire, Mercersburg submitted a timely claim to its property insurance carrier, Republic Franklin Insurance Company, for (1) the costs to repair the actual fire damage, (2) additional costs to repair the building that were made necessary to bring the building in compliance with applicable laws and various building codes, and (3) lost business income.
Republic Franklin's primary policy only provides coverage for those repairs necessary to return the property to its pre-fire condition. Accordingly, Mercersburg purchased a separate "Ordinance and Law Endorsement" to its policy. That Endorsement provides in relevant part:
1. Coverage A -- Coverage For Loss to the Undamaged Portion of the Building. If a Covered Cause of Loss occurs to covered Building property[,] . . . we will pay for loss to the undamaged portion of the building caused by enforcement of any ordinance or law that: (a) requires demolition of parts of the same property not damaged by a Covered Cause of Loss; (b) regulates the construction or repair of buildings, or establishes zoning or land use requirements at the described premises; and (c) is in force at the time of loss.
3. Coverage C -- Increased Cost of Construction Coverage. If a Covered Cause of Loss occurs to covered Building property[,] . . . we will pay for the increased cost to repair, rebuild or construct the property caused by enforcement of building, zoning or land use ordinance or law. If the property is repaired or rebuilt, it must be intended for similar occupancy as the current property, unless otherwise required by zoning or land use ordinance or law.
The insurer's failure to reimburse the Academy for all of its costs incurred as a result of the fire prompted it to file a complaint in United States District Court for the Middle District of Pennsylvania alleging breach of contract and bad faith. Specifically, Mercersburg contended that the Ordinance and Law Endorsement required Republic Franklin to pay for repair and renovation costs required by the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12101-12213, the Pennsylvania Handicapped Act and Universal Accessibility Standards promulgated thereunder, 71 Pa. Cons. Stat. § 1455 et seq. (2000) & 34 Pa. Code § 60.1 et seq., as well as other Pennsylvania statutes and national building codes (including the International Mechanical Code, the Building Officials and Code Administrators International, Inc. Code, the National Electric Code, the International Plumbing Code and the standards of the American Society of Heating, Refrigerating and Air-Conditioning Engineers).
After extensive factual and expert discovery, the parties settled, resolving all disputes except those related to the Ordinance and Law Endorsement claim.*fn3 Republic Franklin's motion for summary judgment on those claims was granted by the District Court. It held that (1) the ADA did not apply because the dormitory space in Keil Hall was not a "public accommodation" within the meaning of that statute, (2) the PHA also did not apply because the costs of the fire damage did not reach the threshold cost to trigger coverage under the Act, and (3) nationally recognized standards of design and construction and Pennsylvania laws that require private ...