G&S Metal Consultants, Inc. v. Cont'l Cas. Co.

• Decision Date: 02 August 2016
• Docket Number: Case No. 3:09-CV-493 JD
• Citation: 200 F.Supp.3d 760
• Parties: G&S METAL CONSULTANTS, INC., Plaintiff, v. CONTINENTAL CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Indiana

200 F.Supp.3d 760

G&S METAL CONSULTANTS, INC., Plaintiff,

v.CONTINENTAL CASUALTY COMPANY, Defendant.

Case No. 3:09-CV-493 JD

United States District Court, N.D. Indiana, South Bend Division.

Signed August 2, 2016

Christopher J. Braun, Frederick D. Emhardt, George M. Plews, Plews Shadley Racher & Braun, Indianapolis, IN, Emily C. Guenin-Hodson, Mark C. Guenin, Guenin Law Office PC, Wabash, IN, Jeffrey D. Claflin, Thao Trong Nguyen, Plews Shadley Racher & Braun, South Bend, IN, for Plaintiff.

Bryan S. Chapman PHV, John T. Williams PHV, Phillip K. Beth, Joseph A. Hinkhouse PHV, Sara Doran PHV, Hinkhouse Williams Walsh LLP, Chicago, IL, Rebecca Hoyt Fischer, Laderer & Fischer PC, South Bend, IN, for Defendant.

OPINION AND ORDER

JON E. DEGUILIO, Judge

This case arises from an insurance dispute. On November 29, 2007, an explosion occurred at the Manchester, Georgia plant of G&S Metal Consultants, Inc. (GSMC), an aluminum processing and recycling business. At that time, GSMC had a commercial insurance policy issued by Continental Casualty Company (Continental). GSMC believes that Continental has not fulfilled its obligations under that policy. So, it filed this lawsuit, alleging breach of contract, promissory estoppel and tortious breach of the insurer's duty of good faith. [DE 5-2]. On September 18, 2015, the Court granted partial summary judgment for Continental as to GSMC's promissory estoppel claim and breach of contract claim under the building and personal property section of the policy. It further struck the parties' other filings as unduly lengthy and confusing, and permitted each party to refile a single motion for summary judgment. [DE 286]. Continental has now filed a renewed, consolidated motion, arguing it is entitled to summary judgment on GSMC's remaining claims: breach of the insurer's duty of good faith and breach of contract under the business income and extra expense section of the policy. [DE 287]. The parties have briefed Continental's motion and it is ripe for review. [DE 288, 292, 295].

STANDARD OF REVIEW

Summary judgment is appropriate when 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 genuine dispute as to any material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Once a party has made a properly-supported motion for summary judgment, the nonmoving party may not simply rest upon the pleadings but must instead submit evidentiary materials that set forth specific facts showing that there is a genuine issue for trial." Siegel v. Shell Oil Co. , 612 F.3d 932, 937 (7th Cir.2010) (internal quotation marks omitted). Since the Court is evaluating a motion for summary judgment filed by the Defendant, it will construe all disputed facts in the light most favorable to the Plaintiff. See Anderson , 477 U.S. at 255, 106 S.Ct. 2505 (at the summary judgment stage "the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor").

FACTS

GSMC is an aluminum processing and recycling business. It was founded in 1995 in Wabash, Indiana and opened a second plant in Manchester, Georgia in 2007. The Manchester plant used four furnaces to melt aluminum: two gas and two electric. On November 29, 2007 water entered one of those furnaces, resulting in an explosion that caused several injuries, a fatality and extensive property damage.

At the time of the explosion, GSMC had commercial insurance coverage through the Defendant, Continental. GSMC's policy (# C 2074910019) (the Policy) contained two separate coverage forms. One coverage form provided building and personal property coverage (the BPP Form), the other provided business income and extra expense coverage (the BIEE Form).

Four days after the explosion, representatives from Continental toured the Manchester facility to evaluate the damage. GSMC then began repair efforts, removing debris from the facility and retaining contractor Rufus Jackson Construction to perform triage repairs to the building's roof and walls. After eight days, GSMC had resumed limited operations. While the gas furnaces and one of the electric furnaces were restored to operation following the explosion, the other electric furnace remained offline. Limited operations ended in April 2008, when GSMC's Scott Galley ordered the facility to close. The parties do not agree as to why. GSMC contends Galley observed a leaking roof and closed the facility for safety reasons. Continental says that the closure was motivated by financial problems that predated the explosion.

Since the repairs performed by Rufus Jackson turned out to be inadequate, GSMC made efforts to locate another contractor to complete repairs to the facility. Galley contacted some potential candidates (the exact number is not clear) and also reached out to Continental and the City of Manchester for recommendations. He was not successful. Ultimately, GSMC did not retain a contractor to complete repairs until nearly a year after the explosion, when its claims representative (Ellen Chanoch of MJ Insurance) located Langford Construction (Langford) in October 2008. Langford then made repairs to the building, beginning with a scope of work meeting on October 29, 2008 and ending on March 16, 2009. Over GSMC's objections, Continental determined that this reflected GSMC's "period of restoration" under the BIEE Form and accordingly compensated GSMC for five months of lost business income.

Even after the October 2008—March 2009 repairs, the facility's roof leaked precipitously due to the inadequacy of the initial repairs performed by Rufus Jackson. Langford accordingly recommended additional repairs to the roof, though Continental did not promptly fund them. GSMC then declared bankruptcy in June 2009 and its assets were liquidated in a bankruptcy sale in September 2009. In October 2009, GSMC learned that Continental had internally authorized the funding of additional repairs (it is not clear when that authorization occurred), but had not provided those funds to Langford or GSMC. Ultimately, Continental not did pay GSMC for the additional roof repairs recommended by Langford until December 2009, after the bankruptcy sale and GSMC had filed suit.

While this litigation began in July 2009 in bankruptcy court, it has since come to this court via a withdrawal of reference. It has now lasted for more than seven years, proceeding through extensive discovery and one partial motion for summary judgment, in which the Court granted judgment for Continental on GSMC's claims for promissory estoppel and breach of contract under the BPP Form. That leaves GSMC's claims for breach of the insurer's duty of good faith and breach of contract under the BIEE Form remaining. Continental now asserts that it is entitled to summary judgment on those claims for several reasons. First, it contends that GSMC's claim for breach of the BIEE Form is barred by GSMC's failure to comply with appraisal and fraud provisions in the Policy. Second, it argues that GSMC has no claim for breach of the BIEE Form since: (1) Continental appropriately paid GSMC for lost business income based on a five-month period of restoration and (2) GSMC's claims that Continental owes it additional lost business income due to "melt loss"—i.e. productivity lost due to reliance on inefficient gas furnaces during GSMC's temporary operation period from December 2007 to April 2008—and a projected increase in business are unfounded. Finally, it says there is no evidence it acted in bad faith. The Court addresses each argument in turn.

ANALYSIS

The Appraisal Provision

Continental first says GSMC's breach of contract claim is foreclosed by the BIEE Form's appraisal provision. That permits either party to demand an appraisal and requires payment only after an appraisal award or the parties agree on a loss amount. [DE 289-9 at 31, 33]. Since neither of those things have happened, Continental reasons that it cannot yet have breached the BIEE Form. GSMC responds that the appraisal provision is only intended to govern the timing of payment, not to limit Continental's duty to pay. Further, it says that even if the appraisal provision is a condition precedent to payment, Continental has now waived any right to appraisal it may have had.¹

The appraisal provision in the BIEE Form is more than a mere "timing provision." Rather, it invokes the conditional "if" to indicate that payment will not occur until an appraisal happens or the parties agree as to loss amount:

We will pay for covered loss within 30 days after we receive the sworn proof of loss, if you have complied with all of the terms of this Coverage Part and: a. We have reached an agreement with you on the amount of loss; or b. An appraisal award has been made

[DE 289-9 at 33] (emphasis added). GSMC argues to the contrary, relying on Montalvo v. American Family Mutual Insurance Company. No. CV–12–02297, 2014 WL 2986678, at *1, *8 (D.Ariz. July 2, 2014). But that case involved a policy that provided payment would be due thirty days after agreement, arbitration or entry of a final judgment, not if those events occurred. More importantly, courts in this circuit have found language more permissive than that in the BIEE Form to constitute a condition precedent to payment. Ocwen Loan Servicing, LLC v. Nationwide Mut. Fire Ins. Co. , No. 1:07–CV–01449, 2012 WL 1067854, at *13 (S.D.Ind. Mar. 29, 2012) (condition precedent to payment where the policy stated "Payment will be made within 60 days after we receive your proof of loss and: (1) reach agreement with you; or (2) there is an entry of a final judgment; or (3) there is a filing of an appraisal award with us."); see also Philadelphia Indem. Ins. Co. v. WE Pebble Point , 44 F.Supp.3d 813, 821 (S.D.Ind.2014) (condition precedent to suit where policy...