Certain Underwriters At Lloyd's of London v. Lowen Valley View, LLC
| Decision Date | 21 July 2017 |
| Docket Number | CIVIL ACTION NO. 3:16-CV-0465-B |
| Parties | CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, SYNDICATE NOS. 2003, 1414, 0510, 4472, 1183, 1200, AND 4444, SUBSCRIBING TO POLICY NUMBER NJL440003612, Plaintiff, v. LOWEN VALLEY VIEW, LLC and PANADE II LTD. d/b/a HILTON GARDEN INN, Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Before the Court is Plaintiff Certain Underwriters at Lloyd's of London, Syndicate Nos. 2003, 1414, 0510, 4472, 1183, 1200, and 4444, Subscribing to Policy Number NJL440003612's (Plaintiff or Underwriters) Amended Motion for Summary Judgment. Doc. 46. For the reasons explained below, Plaintiff's Motion is GRANTED.
This is an insurance coverage dispute involving hail damage to a hotel. Defendants Lowen Valley View, LLC and Panade II Ltd. d/b/a Hilton Garden Inn (collectively Defendants) own and operate the Hilton Garden Inn in Irving, Texas. Doc. 34, Defs.' Resp. to Pl.'s Mot. Summ. J. 4 [hereinafter Defs.' Resp.]. Underwriters issued a standard commercial property insurance policy (the Policy) to Defendants covering the hotel for the period from June 2, 2012, to June 2, 2013. Doc. 47, Pl.'s Br. in Supp. of Am. Mot. Summ. J. 2 [hereinafter Pl.'s Br.]. The Policy, by its terms, covered "direct physical loss or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss." Id. . The parties do not dispute that hail was a covered cause of loss under the Policy. See Doc. 11, Defs.' Answer & Countercls. ¶ 26; see also Doc. 47, Pl.'s Br. 11.
In November 2014, Ajay Desai, the vice president of the company that manages the hotel, was evaluating the property for potential capital improvement projects. Doc. 34, Defs.' Resp. 5. Noticing that "the shingles on the top of the hotel looked bad," Desai contacted a roofing contractor, who inspected the property and found evidence of significant hail damage to the various roofing systems at the property. Id. On December 22, 2014, this roofing contractor obtained a weather history report from a company called Weather Fusion/Point Data, which noted several hail events at or near the hotel between the dates of January 1, 2006, and December 21, 2014. Id. (citing Doc. 48, Pl.'s App. 209-11, Ex. G, Weather Fusion/PointData Report).2
Specifically, the report, dated December 22, 2014, noted nine events of hail "at location" between January 1, 2006, and December 21, 2014, five of which had "estimated maximum hail size" of greater than one inch. See Doc. 48, Pl.'s App. 209-11, Ex. G, Weather Fusion/Point Data Report. Of the nine hail events noted "at location," seven occurred before the policy period, one after, and one during, on June 13, 2012. See id. The event with the largest "estimated maximum hail size" noted "at location" was on May 24, 2011. See id. And of the five events with "estimated maximum hail size" greater than one inch, only the June 13, 2012 event occurred during the policy period; the other four occurred prior to the policy period. See id.
Defendants' roofing contractor provided a copy of the Weather Fusion/PointData report to Desai, who in turn provided a copy to Defendants' insurance agent on December 29, 2014. Doc. 34, Defs.' Resp. 5; Doc. 47, Pl.'s Br. 3. Defendants' insurance agent filed a hail claim with Underwriters on behalf of Defendants on the same day. Doc. 34, Defs.' Resp. 5; Doc. 47, Pl.'s Br. 3. The description of the damage provided to Underwriters was "roof damage due to hail," and the date of loss listed on the Property Loss Notice was June 13, 2012, the date of the only hail event noted on the Weather Fusion/PointData report provided to the insurance agent that occurred during the policy period. Doc. 48, Pl.'s App. 204-05, Ex. E, Property Loss Notice.
After receiving notice of the claim from the agent, Underwriters assigned the investigation of the claim to Frontier Adjusters, which sent an independent adjuster, Derek Phipps, to inspect the property for hail damage in mid-January 2015. Doc. 34, Defs.' Resp. 5; Doc. 47, Pl.'s Br. 4; Doc. 48, Pl.'s App. 231-38, Ex. J, Phipps Damage Estimate.3 When assigned the job, Phipps received only the Property Loss Notice, which included no information about the Policy or its coverage and no special instructions for the inspection. Doc. 48, Pl.'s App. 205, Ex. E, Property Loss Notice; Doc. 33, Defs.' App. in Supp. of Resp. to Pl.'s Am. Mot. Summ. J. [hereinafter Defs.' App.] 52-55, Ex. D, Dep. of Derek Phipps.
Before physically inspecting the property, Phipps consulted National Oceanic and Atmospheric Administration (NOAA) reports online, which he used to confirm that a hail storm had in fact occurred in the area and on the date of loss provided to him by Frontier Adjusters. Doc. 33, Defs.' App. 65-66, Ex. D, Dep. of Derek Phipps. Phipps's computer log notes from January 16, 2015, indicate that he found significant hail damage to the roofs and exterior siding upon inspection of the property. Id. at 412, Ex. K, Phipps Computer Log Notes. Phipps determined that the roofs would require replacement rather than repair, and on January 19, 2015, prepared an estimate of what it would cost to replace the roofs. Doc. 48, Pl.'s App. 231-38, Ex. J, Phipps Damage Estimate.4 Phipps submitted his estimate to Frontier Adjusters through a web-based computer program. Doc. 33, Defs.' App. 73, Ex. D, Dep. of Derek Phipps.
On March 2, 2015, Underwriters—through an authorized claims administrator, Peninsula Insurance Bureau—sent a "reservation of rights" letter to Defendants, which indicated that the initial investigation had revealed "potential coverage issues," namely "late reporting of the loss." Id. at 239-42, Ex. K, Reservation of Rights Letter. Therefore, the letter stated, the investigation would proceed "under a full reservation of rights." Id. It also directed Defendants to the specific policy language requiring "prompt notice of the loss or damage." Id. (quoting Doc. 48, Pl.'s App. 35, Building and Personal Property Coverage Form, Part E.3.a.2). Finally, the letter noted that "any recommendations made by the adjuster [were] subject to the Underwriters' review and approval." Id. at 242.
Subsequently, Underwriters—through Frontier Adjusters—engaged a company called Haag Engineering to "determine the extent of hailstone impact damage to the roofing and siding" and to "evaluate when hail damage might have occurred." Doc. 33, Defs.' App. 243, Ex. G, Haag Report No. 1. Haag's first report, dated April 8, 2015, noted that "[a] date of June 13, 2012 was provided with our assignment." Id. at 244. After inspecting the property on March 17, 2015, and consulting weather history reports from the National Climatic Data Center, CoreLogic (formerly Weather Fusion, the same company that provided the initial weather history reports to Defendants' roofing contractor), and NOAA, Haag concluded that "the most recent hailstorm with hailstones large enough to cause the damage we observed was on June 13, 2012." Id. at 250 (emphasis added). Notably, the CoreLogic report attached to Haag's report contained the same history of hail events found in the Weather Fusion/PointData report provided to Desai and Defendants' insurance agent prior to the filing of the claim. Compare Doc. 48, Pl.'s App. 209-11, Ex. G, Weather Fusion/PointData Report (provided to Desai and insurance agent), with Doc. 33, Defs.' App. 263-64, Ex. G, Haag Report No. 1 ().
A second report from Haag Engineering, ordered specifically to "discuss the likelihood that damage occurred between December 29, 2012 and December 29, 2014," again noted that Haag had "no reason to believe the dents occurred more recently than the June 13, 2012 date given." Id. at 363-64, Ex. H, Haag Report No. 2 (emphasis added). This report also for the first time identified "June 13, 2012 as the most likely date damage occurred." Id. at 363 (emphasis added). As discussed below, Defendants place much weight on this slight change in wording.
In December 2015, Underwriters requested an Examination Under Oath of Ajay Desai, vice president of the hotel's property management company. Doc. 34, Defs.' Resp. 8. The Examination took place in January 2016. There, Desai described how he first noticed the condition of the roofs in November 2014 and how he sent the Weather Fusion/PointData report to the insurance agent, who Desai suspected then chose the date of loss to report to the insurer. See generally Doc. 33, Defs.' App. Ex. C, Exam. Under Oath of Ajay Desai; see also Doc. 48, Pl.'s App. 208, Ex. F, Exam. Under Oath of Ajay Desai ("I think they looked at the history and they probably saw which period had the highest amount of hail and -- I assume that's how they determined where to file the claim.").
A month later, on February 18, 2016, Underwriters denied Defendants' claim "based on [Defendants'] failure to give timely notice." Doc. 48, Pl.'s App. 246-49, Ex. M, Denial Letter. The Denial Letter again directed Defendants to the "prompt notice" requirement in the Policy and stated that Defendants "failed to give notice of the damage to the Property until over two and a half years after the alleged hailstorm." Id. at 248. The Letter indicated that this "late notice has prejudiced Underwriters' ability to properly investigate the claim and pay only for damage that occurred during the policy period." Id. at 249.
On the same day, February 18, 2016, Underwriters also filed its Original Complaint and Request for Declaratory Judgment, asking the Court to declare "that there is no coverage under [the Policy] for the reported hail damage because Defendants violated the policy's notice condition and Underwriters suffered prejudice as a result."...
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