Busch Props., Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh

• Court: U.S. District Court — Eastern District of Missouri
• Writing for the Court: STEPHEN N. LIMBAUGH, JR. UNITED STATES DISTRICT JUDGE
• Decision Date: 31 October 2014
• Docket Number: Case No. 4:12CV2318 SNLJ
• Citation: Busch Props., Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Case No. 4:12CV2318 SNLJ (E.D. Mo. Oct 31, 2014)
• Parties: BUSCH PROPERTIES, INC., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Defendant.

BUSCH PROPERTIES, INC., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Defendant.

Case No. 4:12CV2318 SNLJ

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

October 31, 2014

MEMORANDUM AND ORDER

This matter is before the Court on plaintiff's motion for partial summary judgment and defendant's motion for summary judgment. The motions have been fully briefed and are ripe for disposition. For the following reasons, the Court will grant defendant's motion and deny plaintiff's motion as moot.

I. Background

This case involves a dispute over coverage for Busch Properties, Inc. (BPI) under commercial general liability policies that National Union Fire Insurance Company of Pittsburgh, Pa. (National Union) issued. BPI was the property manager for condominiums at the Kingsmill Resort (Kingsmill) in Williamsburg, Virginia, a gated residential golf community. National Union was the general liability insurance carrier for BPI from September 1, 1994 to July 1, 2004. In 2003, BPI personnel became aware of a serious mold problem inside the condominium development at Kingsmill.

According to BPI, the primary cause of the mold was determined to be the use of impermeable vinyl wallpaper which prevented moisture in the walls from escaping, thereby providing a fertile climate for mold to develop and spread inside the walls of the units. BPI, as the property manager, had selected and installed the vinyl wallpaper in the units at Kingsmill. As a result, BPI believed that it faced significant exposure from potential claims by unit owners and resort guests alleging property damage or bodily injury.

On December 1, 2003, BPI notified its insurers, including National Union, of the problem. BPI informed its insurers, including National Union, that its proposed strategy was to proactively remediate the problem. BPI alleges it paid remediation costs of approximately $11.3 million to address the damage caused by the mold problem. BPI claims the policies cover costs it was obligated to pay to remediate mold in the condominiums at Kingsmill. National Union has not reimbursed BPI for any portion of the remediation costs.

BPI filed this lawsuit on December 17, 2012 alleging claims of breach of contract and vexatious refusal to pay. National Union admits that BPI provided notice regarding the alleged mold problem and its efforts to remediate the affected units. National Union contends, however, that it did not consent or otherwise agree to BPI's remediation plan. National Union filed a counterclaim for declaratory relief alleging that coverage for the remediation costs that BPI seeks to recover is limited or unavailable under the terms of the 1994 and 2003 policies. BPI and National Union have each filed summary judgment motions seeking declarations as to coverage under the policies at issue.

II. Summary Judgment Standard

Pursuant to Federal Rule of Civil Procedure 56(a), a district court may grant a motion for summary judgment if all of the information before the court demonstrates that "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The burden is on the moving party. City of Mt. Pleasant, Iowa v. Associated Elec. Co-op. Inc., 838 F.2d 268, 273 (8th Cir. 1988). After the moving party discharges this burden, the nonmoving party must do more than show that there is some doubt as to the facts. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, the nonmoving party bears the burden of setting forth affirmative evidence and specific facts by affidavit and other evidence showing that there is a genuine dispute of a material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Celotex, 477 U.S. at 324. "A dispute about a material fact is 'genuine' only 'if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Herring v. Canada Life Assur. Co., 207 F.3d 1026, 1030 (8th Cir. 2000) (quoting Anderson, 477 U.S. at 248). "[T]he mere existence of some alleged factual dispute between the parties will not defeat a motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48. A party resisting summary judgment has the burden to designate the specific facts that create a triable controversy. See Crossley v. Georgia-Pacific Corp., 355 F.3d 1112, 1114 (8th Cir. 2004). "Because 'the interpretation and construction of insurance policies is a matter of law, . . . such cases are particularly amenable to summary judgment.'" Bituminous Cas.Corp. v. Scottsdale Ins. Co., 1:12CV84 SNLJ, 2013 WL 5739034, at *2 (E.D. Mo. Oct. 22, 2013) (quoting John Deere Ins. Co. v. Shamrock Indus., Inc., 929 F.2d 413, 417 (8^th Cir. 1991).

III. Interpretation of Insurance Contracts

As the parties agree, Missouri law governs the interpretation of the insurance policies in this diversity case. Id. (quoting St. Paul Fire & Marine Ins. Co. v. Missouri United Sch. Ins. Council, 98 F.3d 343, 345 (8th Cir. 1996)). Under Missouri law, "the interpretation of an insurance contract is generally a question of law, particularly in reference to the question of coverage." D.R. Sherry Const., Ltd. v. American Family Mut. Ins. Co., 316 S.W.3d 899, 902 (2010). Unless an ambiguity exists, the policy must be enforced as written. Am. States Ins. Co. v. Mathis, 974 S.W.2d 647, 649 (Mo.App. E.D. 1998). "Under Missouri law the plaintiff has the burden of showing that the loss and damages are covered by the policy; the defendant insurer has the burden of demonstrating the applicability of any exclusions on which it relies." Mathis, 974 S.W.2d at 649.

IV. Defendant's Motion for Summary Judgment

A. Facts

The Court has reviewed the statements, the responses, and the supporting documentation, and, where appropriate, will accept facts as supported by appropriate admissible evidence. In accordance with Local Rule 4.01 (E), all matters set forth in the movants' statement of facts are deemed admitted unless specifically controverted by the opposing party. The following facts are undisputed.

The Kingsmill condominiums were built near Williamsburg, Virginia between 1982 and 1992. In 2003, Kingsmill included 192 units.¹ BPI administered a rental program and acted as property manager for non-resident owners of some of the Kingsmill units. Non-resident owners participating in the rental program retained BPI as their rental agent under a rental agreement.

As rental agent, BPI required owners participating in the rental program to have vinyl wallpaper in their units. At the time BPI recommended the use of vinyl wallpaper, it was very common in the resort industry. The hotel and hospitality industry did not appreciate any risks of using impermeable finishes, such as vinyl wallpaper, until the early 2000s.

During the summer of 2003, BPI employees discovered mold in certain units at Kingsmill.² In October of 2003, BPI discovered crumbling drywall and a wall full of mold after a mirror fell off of a wall. BPI's expert believes that the mold at issue began causing property damage in December of 2002 and continued causing damage until remediated. However, he does not know at what rate the mold grew within and among the buildings or which buildings were damaged first.

On October 17, 2003, Kingsmill notified certain owners that "[r]ecently, in the course of our on-going renovation of the units at Kingsmill, a significant amount of mold, mildew and moisture damage was discovered. This led to a resort-wide inspection,which revealed the presence of such conditions in many Kingsmill units." On October 24, 2003, Kingsmill sent a letter to owners that attributed the mold to excessive rainfall and a recent hurricane with an accompanying power outage. The letter discussed remediation plans, stating that all rental rooms would remain closed until remediated, that rooms would be emptied, "affected drywall" would be removed, and HVAC units would be inspected and cleaned if necessary. The letter also discussed Kingsmill's plans to renovate all rental units.

BPI required all owners to execute a Consent and Authorization ("Consent")³ prior to BPI remediating the mold. The Consent provided that the abatement of mold would be done at no cost to the owners. Further, the Consent provided, among other things, that it did not obligate BPI to proceed with the remediation project, that BPI did not admit liability, and that the owners gave irrevocable and blanket consent to BPI to take whatever actions it deemed necessary to remediate the mold. The Consent did not provide for a general release of claims the owners might have against BPI. BPI began requesting that owners execute the Consent by October 31, 2003.

BPI did not receive any claims from property owners, nor were any lawsuits filed against it, related to the mold issue. BPI did not enter into any settlement agreements with any of the property owners regarding the mold remediation. BPI received two letters from attorneys for unit owners in response to the Consent and a letter from anattorney for a Kingsmill homeowners' association. The letters from the attorneys from the unit owners expressed concerns about the form and content of the Consent. The letter from the attorney for the homeowners' association expressed a number of concerns about the extent and cause of the mold infestation and the means of remediation.

BPI began remediation related activity by November 25, 2003. On December 1, 2003, BPI first notified National Union of the Kingsmill mold problem. The remediation process extended into 2004. BPI did not finish gutting units until sometime after mid-March 2004. The remediation was substantially completed in June or July 2004.

National Union issued Umbrella Liability Policy BE 309 14 12 for the policy period of September 1, 1994 to July 1, 2003 (the 1994 policy). The 1994 policy...