Edgewood Manor Apartment Homes Llc v. Rsui Indem. Co., Case No. 08–C–0920.

• Decision Date: 23 March 2011
• Docket Number: Case No. 08–C–0920.
• Citation: 782 F.Supp.2d 716
• Parties: EDGEWOOD MANOR APARTMENT HOMES LLC, Southland Management Corporation, Plaintiffs,v.RSUI INDEMNITY COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

782 F.Supp.2d 716

EDGEWOOD MANOR APARTMENT HOMES LLC, Southland Management Corporation, Plaintiffs,

v.RSUI INDEMNITY COMPANY, Defendant.

Case No. 08–C–0920.

United States District Court, E.D. Wisconsin.

March 23, 2011.

Jeffrey A. Evans, Robert F. Johnson, Cook & Franke SC, Milwaukee, WI, for Plaintiffs.Courtney E. Murphy, Jacob R. Zissu, Clausen Miller PC, New York, NY, Patrick D. McNally, Patryk W. Silver, Brian D. Baird, Borgelt Powell Peterson & Frauen SC, Milwaukee, WI, for Defendant.

DECISION AND ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT (DOC. # 11), GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (DOC. # 38), AND SETTING SCHEDULING CONFERENCE

C.N. CLEVERT, JR., Chief Judge.

Plaintiffs, Edgewood Manor Apartment Homes LLC (Edgewood Manor) and Southland Management Corporation (Southland), filed this lawsuit against defendant, RSUI Indemnity Company, asserting that (1) RSUI has denied its obligation to reimburse it for repairs, replacement and code upgrades under Southland's insurance policy and should be directed to pay over $1.5 million, and (2) RSUI's refusal to pay was in bad faith, justifying compensatory and punitive damages, along with attorneys' fees.

Earlier, the court denied RSUI's motion to dismiss, finding that Georgia law governed the statute of limitations for plaintiffs' contract claim rather than Mississippi law, because the significant event giving rise to that claim occurred in Georgia. Since that decision, the parties have not filed any additional motion addressing the Georgia statute of limitations period. Therefore, the court turns to the merits of the claims addressed by the pending motions for summary judgment.

As discussed in this court's order of June 14, 2010, 2010 WL 2430996, diversity jurisdiction exists inasmuch as more than $75,000 is at issue and the parties are diverse. The members and partners of the entities behind Edgewood Manor are citizens of New York, New Jersey, Delaware, Illinois, Virginia, and California. Also, according to the Complaint, plaintiff Southland is a citizen of Mississippi. The Answer confirmed that defendant RSUI Indemnity Company is a citizen of New Hampshire and Georgia.

Plaintiffs seek summary judgment on their contract claim and summary judgment on liability regarding their bad faith claim. RSUI's cross-motion for summary judgment, seeks dismissal of the case.¹ The court's review of the parties' briefs raised questions regarding plaintiffs' standing, and a letter from plaintiffs regarding repair and replacement of the property suggested that the posture of the case might have changed. As a result, on June 24, 2010, the court held a status conference and oral argument hearing regarding the summary judgment motions. Following the hearing, the parties were permitted to file supplemental materials, which the court has now considered.

SUMMARY JUDGMENT STANDARD

Summary judgment is proper if the depositions, documents, affidavits or declarations, stipulations, and admissions, show that 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), (c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the initial burden of demonstrating it is entitled to summary judgment. Celotex Corp., 477 U.S. at 323, 106 S.Ct. 2548. Once this burden is met, the nonmoving party must designate facts to support or defend each element of its cause of action, showing that there is a genuine issue for trial. Id. at 322–24, 106 S.Ct. 2548. In analyzing whether a question of fact exists, the court construes the evidence in the light most favorable to the party opposing the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The mere existence of a factual dispute does not defeat a summary judgment motion; there must be a genuine issue of material fact for the case to survive. Id. at 247–48, 106 S.Ct. 2505. “Material” means that the factual dispute must be outcome-determinative under governing law. Contreras v. City of Chicago, 119 F.3d 1286, 1291 (7th Cir.1997). Failure to support any essential element of a claim renders all other facts immaterial. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. To establish that a question of fact is “genuine,” the nonmoving party must present specific and sufficient evidence that, if believed by a jury, would support a verdict in its favor. Anderson, 477 U.S. at 249, 106 S.Ct. 2505; see Fed.R.Civ.P. 56(e).

Because the parties in this case filed cross-motions for summary judgment, many facts are not contested. When no genuine issue of material fact exists, the sole question is whether the moving party is entitled to judgment as a matter of law. Logan v. Commercial Union Ins. Co., 96 F.3d 971, 978 (7th Cir.1996). Nevertheless, when both parties have moved for summary judgment, both are required to show that no genuine issues of material fact exist, with the facts taken in the light most favorable to the party opposing each motion. Neither party is entitled to summary judgment if genuine issues of material fact exist. Lac Courte Oreilles Band of Lake Superior Chippewa Indians v. Voigt, 700 F.2d 341, 349 (7th Cir.1983). The proper procedure is to assess the merits of each summary judgment motion independently. See Santaella v. Metro. Life Ins. Co., 123 F.3d 456, 461 (7th Cir.1997). That one party fails to satisfy its burden of establishing that no genuine issue of material fact exists respecting its motion and that it is entitled to a judgment as a matter of law does not automatically indicate that the opposing party has satisfied its burden and must be granted summary judgment on the other motion. See 10A Charles Alan Wright et al., Federal Practice & Procedure § 2720 (3d ed.1998).

UNDISPUTED FACTS

RSUI issued Policy No. NHD 338373 to Southland for the period effective from December 1, 2004 to December 1, 2005 (the “RSUI Policy”). (Pls.' Stmt. of Undisputed Material Facts (“PSUMF”) ¶ 1; Def.'s Stmt. of Undisputed Material Facts (“DSUMF”) ¶ 1.²) Pursuant to the terms of the RSUI Policy, RSUI agreed to provide Commercial Property Coverage for a building located at 3318 39th Avenue, Gulfport, Mississippi (the “Property”), and other properties. (PSUMF ¶ 2; Def.'s Resp. to Pls.' Stmt. of Undisputed Material Facts (“Def.'s Resp.”) ¶ 3; DSUMF ¶ 4.) The RSUI Policy provides for excess insurance over and above coverage afforded under a primary insurance policy issued by Westchester Surplus Lines Insurance Company, policy number D35928716 002 (the “Westchester Policy”). (DSUMF ¶¶ 2, 3; PSUMF ¶ 4.)

In accordance with the Excess Physical Damage Coverage Form, RSUI agreed, subject to the limitations, terms, and conditions in the RSUI Policy,

to indemnify the Insured named in the schedule herein in respect of direct physical loss or damage to the property described in the schedule ... occurring during the period stated in the schedule and caused by any of such perils as are set forth in Item three of the schedule, and which are also covered by and defined in the policy(ies) specified in the schedule and issued by the “Primary Insurer(s)” stated therein. (PSUMF ¶ 5; Def.'s Resp. ¶ 5; DSUMF ¶ 5.) In addition, the RSUI Policy provides that “[i]n respect of the perils hereby insured against, this Policy is subject to the same warranties, terms and conditions ... as are contained in or as may be added to the policy(ies) of the primary insurer(s) prior to the happening of a loss for which claim is made hereunder.” (Def.'s Resp. ¶ 5; DSUMF ¶ 5.)

The RSUI Policy contains a provision on “Transfer Of Your Rights And Duties Under This Policy,” which states: “Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.” (Def.'s Resp. ¶ 5; DSUMF ¶ 5; West Decl. ¶ 2, Ex. 1 at 14.) (The court will refer to this provision as the “no-transfer” provision.) The RSUI Policy's terms could be “amended or waived only by endorsement issued by [RSUI] and made a part of this policy.” (DSUMF ¶¶ 5, 6.)

According to the Westchester Policy's declarations pages, which the parties do not dispute apply to the RSUI Policy as well, commercial coverage includes coverage options for “agreed value” and “replacement cost.” (PSUMF ¶ 6; West. Decl. filed 1/21/09, Ex. 1 at 24.) The provision regarding replacement costs under the Westchester Policy states that “Replacement Cost (without deduction for depreciation) replaces Actual Cash Value in the Loss Condition, Valuation, of this Coverage Form.” (PSUMF ¶ 8; West Decl. filed 1/21/09, Ex. 1 at 47.)

Importantly, the Westchester Policy further states that the insurer “will not pay on a replacement cost basis for any loss or damage: (1) Until the lost or damaged property is actually repaired or replaced; and (2) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage.” (Def.'s Resp. ¶ 8; DSUMF ¶ 7; West Decl. filed 1/21/09, Ex. 1 at 48 (¶ G.3.d.).) (The court will refer to this as the “replacement cost requirement.”) Replacement cost reimbursement for tenants' improvements will not be paid “if others pay for repairs or replacement.” (West Decl. filed 1/21/09, Ex. 1 at 48 (¶ G.3.d.(4)), at 45 (¶ E.7.e.).) (The court will refer to this as the “tenants' improvements” provisions.) Further, the insurer will not pay replacement costs greater than the limit of insurance applicable to the particular property, the cost to replace the lost property with property of comparable material and quality and used for the same purpose, or the amount actually spent on repair and replacement, whichever is lowest. ( Id. at 48 (¶ G.3.e.).)

Commercial coverage under the Westchester Policy includes an additional $500,000 for “Ordinance or Law Coverage” for all buildings and premises. (PSUMF ¶ 7; DSUMF ¶¶ 10–12.) The...