Ashraf v. State Auto Prop. & Cas. Ins. Co., 18-0382

• Decision Date: 20 May 2019
• Docket Number: No. 18-0382,18-0382
• Parties: Mohammed Ashraf, M.D., Plaintiff Below, Petitioner v. State Auto Property and Casualty Insurance Company, Defendant Below, Respondent
• Court: West Virginia Supreme Court

Mohammed Ashraf, M.D., Plaintiff Below, Petitioner v. State Auto Property and Casualty Insurance Company, Defendant Below, Respondent

No. 18-0382

STATE OF WEST VIRGINIA SUPREME COURT OF APPEALS

May 20, 2019

(Marion County 14-C-253)

MEMORANDUM DECISION

Petitioner Mohammed Ashraf, M.D., by counsel David A. Jividen, Chad C. Groome, and John R. Angotti, appeals the April 24, 2018, amended order of the Circuit Court of Marion County granting the motion for summary judgment filed by Respondent State Auto Property and Casualty Company ("State Auto") and denying petitioner's motion for partial summary judgment on petitioner's claim that State Auto waived the application of the vacancy provision set forth in an insurance policy that petitioner purchased to cover certain real property. State Auto, by counsel Trevor K. Taylor, filed a response in support of the circuit court's order.

This Court has considered the parties' briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the circuit court's order is appropriate under Rule 21 of the Rules of Appellate Procedure.

Petitioner is a medical doctor who also invests in real estate. He and his wife purchased a certain building in Fairmont, West Virginia, in 1997 at a tax sale. The building had previously been converted from a private home to an assisted living facility and petitioner and his wife continued to operate it as such until 2006, when they closed the business. Thereafter, petitioner's efforts to rent out the building did not materialize and the building became vacant.

In 2009, the building was broken into and vandalized. At the time, the building was covered by an insurance policy by State Auto.¹ The State Auto policy provided, in part, as follows:

A. CoverageWe will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Loss.

. . . .

E. Loss Conditions

The following conditions apply in addition to the Common Policy Conditions and the Commercial Property Conditions.

. . . .

1. Vacancy

. . . .

b. Vacancy Provisions

If the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs

(1) We will not pay for any loss or damage caused by any of the following even if they are Covered Causes of Loss:

(a) Vandalism;

(b) Sprinkler leakage, unless you have protected the system against freezing;

(c) Building glass breakage;

(d) Water damage;

(e) Theft; or

(f) Attempted theft.

(2) With Respect to Covered Causes of Loss other than those listed in b.(1)(a) through b.(1)(f) above, we will reduce the amount we should otherwise pay for the loss or damage by 15%.

Petitioner reported the incident to State Auto, which investigated and learned that the building was vacant and had been vacant since 2006. State Auto denied coverage, advising petitioner in a June 26, 2009, letter that the claim was for a clear uncovered loss under subpart (1)(a) of the vacancy provision in the policy: vandalism. Following the 2009 loss, State Auto continued to reissue, and petitioner continued to repurchase, the policy for the vacant property. Over the years, the insurance premium and the amount of coverage on the vacant structure both increased.

By 2012, the insurance policy on the still-vacant building consisted of a property value of $410,555.00, with a $500.00 deductible and a 4% inflation guard provision. Thus, the policy provided a total policy coverage limit of $420,228.35.²

On October 29, 2012, the building was damaged by fire and was a total loss. Petitioner timely reported the fire loss and, upon investigation, State Auto determined that the fire was caused by an incendiary act. By letter dated November 15, 2012, State Auto advised petitioner that it was proceeding under a reservation of rights regarding the fire loss claim because, inter alia, the subject property was alleged to be vacant and, therefore, subject to cancellation or a 15% reduction of thepolicy limit. State Auto canceled the subject policy on November 21, 2012. On December 18, 2012, the subject property sustained a second fire.

Ultimately, on January 28, 2014, State Auto determined that a fire loss qualified as a covered cause of loss and paid petitioner for a total loss of the building. However, because the building was "vacant" at the time of the fire, pursuant to the policy's vacancy provision, State Auto reduced the amount it would "otherwise pay" by 15%. State Auto further explained that the 4% inflation guard was triggered and was added to the amount of the policy payment due to petitioner. Petitioner received a check in the amount of $322,194.10 for the covered loss, which included a $25,000.00 reduction for money State Auto advanced to petitioner in "good faith" while it investigated the claim; petitioner received a second check for $22,141.69 for personal property loss, which amount also reflected the 15% vacancy provision reduction and 4% inflation guard; and a third check was issued for $10,000.00 for debris removal coverage. Though petitioner asserted that he incurred $4,925.00 in costs for the removal and testing of asbestos, no coverage was extended for pollutant removal under the policy.

On August 28, 2014, petitioner filed a declaratory judgment action as to the stated value policy, arguing that the policy's 15% coverage reduction provision violates West Virginia Code § 37-17-9 (Count I), and, as to coverage for pollutant removal, arguing that he is entitled to coverage for asbestos removal (Count II). Petitioner also filed claims for violations of the Unfair Trade Practices Act, West Virginia Code § 33-11-4(9), and first-party bad faith (Count III), the tort of outrage (Count IV), and negligence on the part of Wells Fargo Insurance Services of West Virginia ("Wells Fargo") (Count V).

Defendant Wells Fargo filed an answer. State Auto also filed an answer and a motion to bifurcate and stay petitioner's bad faith and other claims pending a ruling on the declaratory judgment issues (Counts I and II). Petitioner filed a response to the motion, objecting to the same. Following a December 2, 2014, hearing, the circuit court granted the motion to bifurcate and stay discovery related to the bad faith claims for ninety days and ordered that discovery could proceed on the coverage issues.

Petitioner and State Auto thereafter filed cross-motions for summary judgment on Counts I and II. Following a hearing on December 22, 2015, questions were certified to this Court. Relevant to this appeal, we held that a vacancy provision that provides that the insurer may

reduce by 15% the stated amount of coverage payable for a total loss of the building destroyed by fire is enforceable, where the building has been vacant for more than 60 consecutive days prior to the loss. The provision does not conflict with this State's valued policy statute, W.Va. Code, 33-17-9 [2005], or this State's Standard Fire Policy adopted pursuant to W.Va. Code, 33-17-2[1957].

Syl. Pt. 1, in part, Ashraf v. State Auto Prop. & Cas. Ins. Co., 239 W. Va. 119, 799 S.E.2d 550(2017).³

Following remand to the circuit court, State Auto filed a motion for entry of an order granting its previously filed motion for summary judgment. Petitioner filed a response in opposition on the ground that State Auto had waived the application of the vacancy provision following the 2009 vandalism claim. State Auto submitted a reply.

By amended order entered on April 24, 2018, the circuit court granted State Auto's motion for summary judgment and denied petitioner's partial motion for summary judgment on Count I (relating to the vacancy provision) and Count II (relating to pollutant removal) of petitioner's complaint. Petitioner now appeals the court's summary judgment ruling as to Count I only.

This Court reviews the circuit court's summary judgment order de novo. See Syl. Pt. 1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994). Further, in syllabus point two of Painter, this Court held that

"'[a] motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law.' Syllabus Point 3, Aetna Casualty & Surety Co. v. Federal Insurance Co. of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963)." Syllabus Point 1, Andrick v. Town of Buckhannon, 187 W.Va. 706, 421 S.E.2d 247 (1992).

Finally,

[s]ummary judgment is appropriate where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, such as where the nonmoving party has failed to make a sufficient showing on an essential element of the case that it has the burden to prove.

Painter, 192 W. Va. at 190, 451 S.E.2d at 756, syl. pt. 4. This Court will consider petitioner's appeal under this standard.

At issue here is whether State Auto waived the application of the policy's provision that reduced coverage on the building by fifteen percent because the building was vacant at the time of the fire. "'To effect a waiver, there must be evidence which demonstrates that a party has intentionally relinquished a known right.'" Syl. Pt. 1, in part, Potesta v. U.S. Fid. & Guar. Co., 202 W. Va. 308, 504 S.E.2d 135 (1998) (quoting Syl. Pt. 2, in part, Ara v. Erie Ins. Co., 182 W. Va. 266, 387 S.E.2d 320 (1989)). Furthermore,

[t]here is no requirement that an insured have detrimentally relied upon an insurer's previously stated reason(s) for denying coverage in order to assert waiver to prevent the insurer, in subsequent litigation, from asserting other, previously unarticulated reasons for denying coverage. Rather, the insured

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