Chisholm Props. S. Beach v. Arch Specialty Ins. Co.
| Decision Date | 04 February 2022 |
| Docket Number | 21-cv-22960-BLOOM/Otazo-Reyes |
| Parties | CHISHOLM PROPERTIES SOUTH BEACH, INC., Plaintiff, v. ARCH SPECIALTY INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of Florida |
ORDER ON MOTION TO DISMISS
THIS CAUSE is before the Court upon Defendant Arch Specialty Insurance Company's (“Defendant”) Motion to Dismiss Plaintiff's Complaint for Declaratory Relief, ECF No. [9] (“Motion”). Plaintiff Chisholm Properties South Beach, Inc. (“Plaintiff”) filed a Response to Defendant's Motion, ECF No. [19] (“Response”), to which Defendant filed a Reply, ECF No. [20] (“Reply”). The Court has carefully reviewed the Motion, all opposing and supporting submissions, the record in this case, the applicable law, and is otherwise fully advised. For the reasons set forth below, the Motion is granted.
Plaintiff initiated this action for declaratory judgment, pursuant to 28 U.S.C. § 2201, on August 16, 2021. ECF No. [1] (“Complaint”). Plaintiff purchased a commercial property insurance policy, Policy No. ESP 7303227-01, from Defendant effective during the period of April 15, 2017 to April 15, 2018. Id. ¶ 8; ECF No. [1-1] (“Policy”). According to the Complaint, on or about September 10, 2017, the subject commercial property was damaged as a result of Hurricane Irma. ECF No. [1] ¶¶ 11-12. Plaintiff and Defendant submitted the claim to appraisal, and in December 2019, the parties' designated appraisers agreed to an umpire. Id. ¶¶ 13-14. In June 2020, the appraisal award was entered. Id. ¶ 15; ECF No [9-1]. The appraisal award provides, in pertinent part: (1) the actual cash value for the “window” loss is $290, 875.00 (replacement cost value of $447, 500.00 less depreciation of $156, 625.00); (2) the “Ordinance & Law” coverage shall be “[a]s incurred, subject to policy provisions[;]” and (3) the “appraisal award reflects the agreed damages and costs associated with the damages” and “[t]he amounts . . . are subject to previous payments, deductible(s), depreciation (if applicable), the terms and conditions of the policy, and the laws of the State of Florida.” ECF No. [1] ¶ 15; ECF No. [9-1] at 1. The umpire's estimate accompanying the award states the following as to the window loss: ECF No. [1] ¶ 21; ECF No. [9-1] at 8.
Defendant paid out the appraisal award monies but withheld $156, 625.00 in window-related depreciation and $78, 249.00 in deductible. ECF No. [1] ¶ 16. Following the conclusion of appraisal, the parties engaged in discussions to arrive at a global resolution of Plaintiff's claim that “the withheld depreciation, the deductible, the obvious Ordinance or Law monies” should be attributed to the windows, as well as “coverage for professional expenses.” Id. ¶ 17. The attempt for a global resolution resulted in an impasse and Plaintiff “was left with no choice other than to incur significant time and money developing a window-related Ordinance or Law portfolio to present to [Defendant.]” Id. ¶ 18.
In April 2021, Plaintiff completed its Ordinance or Law portfolio and transmitted it to Defendant. Id. ¶ 19; see also ECF No. [1-3] (“Portfolio”). Plaintiff alleges that “[t]he window-related Ordinance or Law portfolio developed by [Plaintiff's] enlisted professionals totaled $1, 499, 600.00, which was not at all far off from the $1, 000, 000.00 [Plaintiff] had estimated during global resolution discussions and many months earlier.” ECF No. [1] ¶ 19; see also ECF No. [1-3]. In transmitting the Ordinance or Law portfolio, Plaintiff requested that Defendant: (1) “release the $78, 249.00 in deductible under industry absorption of deductible principles[;]” (2) “release the $156, 625.00 in withheld window-related ‘depreciation' in conjunction with covering the $1, 499, 600.00 window job[;]” and (3) confirm “that it would over the professional expenses incurred by [Plaintiff] in formulating the Ordinance or Law portfolio.” Id. ¶ 20.
Thereafter, by letter dated July 15, 2021, “[Defendant] proclaimed that [Plaintiffs] Ordinance or Law claim was not covered.” Id. ¶ 21; see also ECF No. [1-4] (“July Letter”). Plaintiff maintains that it suffered adverse effects due to Defendant's “wayward” claim and/or coverage determination. ECF No. [1] ¶ 22. For example, “[Plaintiff] was scheduled to undertake Property renovations to remain competitive in the hospitality industry over the last few years and has been unable to do so because it makes zero sense to complete such renovations until the subject window job has been performed” and “[Plaintiff] cannot reasonably complete the subject window job amidst [Defendant's] incorrect contention that no Ordinance or Law coverage is owed.” Id.
Based on the foregoing, Plaintiff maintains that it is “presently in genuine doubt and uncertain as to its rights, status, and privileges under the Policy” regarding: (1) “its right to recoup deductible now (actually a long time ago)[;]” (2) “[Defendant's] obligation to provide Ordinance or Law coverage stemming from Hurricane Irma (and all intertwined coverages, such as coverage for professional expense and the release of withheld window-related ‘depreciation')[;]” and (3) [Defendant's] two-year time-barred pronouncement (uttered for the first time by an Arch adjuster nearly four years after Hurricane Irma, and uttered in renege as to [Defendant's] agreement to keep the [c]laim open in relation to Ordinance or Law and other aspects of the [c]laim.” Id. ¶ 30.
Defendant now seeks dismissal of the Complaint, raising five overarching arguments. ECF No. [9]. First, “[t]he plain language of the policy requires the application of the deductible to the loss” and “[t]here is no policy language that would suggest an occasion where payment of the deductible is not required.” Id. at 7. Defendant contends that the appraisal award states, consistent with the policy, that “[t]he [awarded] amounts are subject to previous payments, deductible(s), depreciation (if applicable), the terms and conditions of the policy, and the laws of the State of Florida.” Id.; see also ECF No. [9-1] at 1. Second, Defendant maintains that its obligations under the policy were satisfied-“[t]he umpire awarded $447, 500.00 at replacement cost and applied $156, 625.00 in depreciation to arrive at an actual cash value of $290.875.00, which [Defendant] paid.” ECF No. [9] at 9. Third, “Plaintiff cannot recover replacement cost value or Ordinance or Law because Plaintiff has not repaired or replaced the windows” and, “[w]ithout such repairs, “there are no repair costs to indemnify.” Id. at 10. Fourth, “[b]ecuase the property was not repaired or replaced within [two years], Plaintiff is not entitled to claim entitlement to Ordinance or Law pursuant to the policy's plan language.” Id. at 11. Lastly, Plaintiff has no right to assert a claim for declaratory relief because an adequate remedy at law for breach of contract exists. Id. at 12.
Plaintiff responds with five main points. ECF No. [19]. First, the “only relevant inquiry” to the Court's dismissal analysis is Plaintiff's right to pursue the declarations as to coverage rights. Id. at 5. According to Plaintiff, the “biggest ticket” item is as follows:
Chisholm wishes to resolve the parties' dispute (which such dispute arises out of Arch's adverse July 15, 2021, coverage position letter) now (rather than later) because of the prima facie “uncertainty” / “insecurity” lacing the situation - Ordinance or Law coverage is only triggered when incurred; i.e., Chisholm has to undertake the approximate $1, 500, 000.00 window job out-of-pocket in order to someday enjoy reimbursement under the Policy's Ordinance or Law coverage. It is the “someday” that Chisholm is “insecure” about in the face of the carrier's adverse July 15, 2021, coverage position letter. And when dealing with such high value, Chisholm does not wish to roll the dice as to that “someday.”
Id. at 6-7. Second, “absorption of deductible should have occurred in relation to the subject Hurricane Irma claim” in accordance with the policy and industry standard.” Id. at 7. Third, Defendant conflates “direct window damage ($477, 500.000 as determined by the binding appraisal process) with total amount needed to complete the window job (approximately $1, 500, 000.00, with approximately $1, 000, 000.00 of that being ordinance or law related.)” Id. at 13. Fourth, while Plaintiff agrees that “it is not entitled to an Ordinance or Law benefits until the window job is carried out” Plaintiff “quarrel[s] with [Defendant's] notion that [Plaintiff] is not entitled to Ordinance or Law coverage until the window job is carried out.” Id. at 13. Finally, Plaintiff argues that its request for declaratory relief is proper because “[t]here is nothing in the law or in equity that requires [Plaintiff] to incur approximately $1, 500, 000.00 performing the overall window job on the hope that [Defendant] will straighten up, then submit a supplemental claim to [Defendant], then wait for [Defendant] to deny the claim, and then sue [Defendant] for breach of contract.” Id. at 18-19.
The Motion is ripe for the Court's consideration.
A pleading in a civil action must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Although a complaint “does not need detailed factual allegations ” it must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 ...
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