Guideone Elite Ins. Co. v. Ministries, CIVIL ACTION NO. 2:13-CV-134-KS-MTP
| Decision Date | 03 December 2015 |
| Docket Number | CIVIL ACTION NO. 2:13-CV-134-KS-MTP |
| Court | U.S. District Court — Southern District of Mississippi |
| Parties | GUIDEONE ELITE INSURANCE COMPANY, et al. PLAINTIFFS v. MOUNT CARMEL MINISTRIES, et al. DEFENDANTS |
GUIDEONE ELITE INSURANCE COMPANY, et al. PLAINTIFFS
v.
MOUNT CARMEL MINISTRIES, et al. DEFENDANTS
CIVIL ACTION NO. 2:13-CV-134-KS-MTP
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI EASTERN DIVISION
December 3, 2015
MEMORANDUM OPINION AND ORDER
For the reasons provided below, the Court awards Counter-Claimants Mt. Carmel Ministries, Alpha Christian School, and Seaway Bank and Trust Company $1,693,035.31 in benefits under the insurance policy issued by Counter-Defendant GuideOne Elite Insurance Company.
The Court provided the factual background of this case in a previous opinion. GuideOne Elite Ins. Co. v. Mt. Carmel Ministries, No. 2:13-CV-134-KS-MTP, 2015 U.S. Dist. LEXIS 912, at *2-*4 (S.D. Miss. Jan. 6, 2015). On April 7-10, 2015, the Court held a bench trial. At the close of the trial, the Court granted GuideOne's motion for judgment as a matter of law as to Mt. Carmel and Seaway's claims for punitive and extra-contractual damages. The Court later set a briefing schedule [183] for the only remaining issue in the case: the amount of contractual damages due under the policy for the tornado damage to the subject buildings. After consideration of the parties' briefs and the evidence presented at trial, the Court finds as follows.
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A. Stipulated Facts1
1. GuideOne issued a commercial property insurance policy to Mount Carmel Ministries and Alpha Christian School ("Mount Carmel"). The Policy's effective dates were July 7, 2012, to July 8, 2013.
2. On January 29, 2013, Mt. Carmel requested reinstatement of the Policy.
3. A tornado struck Mt. Carmel on February 10, 2013.
4. On February 18, 2013, GuideOne denied reinstatement of the Policy with knowledge that Mt. Carmel's property had been severely damaged in the tornado.
5. The Court previously found as a matter of law that GuideOne's notice of cancellation was ineffective, its cancellation was ineffective, its Policy was in effect on the date of loss, and that GuideOne breached the insurance contract with Seaway.
6. The tornado was a covered peril under the Policy.
7. After the tornado, Seaway, as mortgagee of the insured premises, and Mt. Carmel, as insured, submitted claims under the Policy.
8. GuideOne denied Mt. Carmel's and Seaway's claims under the Policy.
9. To date, GuideOne has tendered no payment to Seaway or Mt. Carmel on their claims.
B. Court's Findings of Fact2
1. The estimate provided by Seaway's expert, Douglas McColl, was based on an inspection that occurred approximately sixteen to seventeen months after the tornado - a year or more after Mt. Carmel's mitigation efforts had ceased. Therefore, McColl's
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estimate included damages caused by factors subsequent to the tornado, such as water intrusion, exposure to the elements, and humidity.
2. The estimate provided by Mt. Carmel's expert, David Landry, was based on an inspection that occurred approximately eleven months after the tornado - months after Mt. Carmel's mitigation efforts had ceased. Therefore, Landry's estimate included damages caused by factors subsequent to the tornado, such as water intrusion, exposure to the elements, and humidity.
3. The estimate provided by GuideOne's expert, Tom Stockdale, was based on an inspection that occurred less than two months after the tornado, while GuideOne's mitigation efforts were still effective. Therefore, of the options presented to the Court, Stockdale's estimate provides the clearest picture of the damages directly caused by the tornado.
4. The amount it would cost to repair or replace the direct physical loss of or damage to Mt. Carmel's Buildings A, B, and C caused by the tornado, with material of like kind and quality, subject to a deduction for deterioration, depreciation or obsolescence, is $1,693,035.31.
5. The market value of Mt. Carmel's Buildings A, B, and C is $2,450,000.00.
6. The "actual cash value" of Mt. Carmel's Buildings A, B, and C, as defined by the Policy, is $1,693,035.31.
7. Mt. Carmel failed to mitigate its damages insofar as it prematurely ceased mitigation efforts such as maintaining tarps on the roofs and treating mold and mildew growth.
8. Mt. Carmel's failure to sustain mitigation efforts caused the buildings to incur more damage than they would have otherwise.
9. At a minimum, it was feasible for Mt. Carmel to maintain tarps on the roofs and continue to treat mold and mildew with bleach.
A. Consequential Damages
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Citing general principles of contract law, Mt. Carmel argues that it should recover consequential damages - all reasonably foreseeable damages caused by GuideOne's failure to perform its contractual duties. Mississippi law is quite clear on this issue: "[I]nsurers who are not liable for punitive damages may nonetheless be liable for consequential or extra-contractual damages (e.g., reasonable attorney fees, court costs, and other economic losses) where their decision to deny the insured's claim is without a reasonably arguable basis but does not otherwise rise to the level of an independent tort." Broussard v. State Farm Fire & Cas. Co., 523 F.3d 618, 628 (5th Cir. 2008) (citing Andrew Jackson Life Ins. Co. v. Williams, 566 So. 2d 1172, 1186 n. 13 (Miss. 1990)).3
In two previous opinions [150, ] this Court held that GuideOne had a reasonably arguable basis for denying coverage. GuideOne, 2015 U.S. Dist. LEXIS 912 at *15-*16; GuideOne Elite Ins. Co. v. Mt. Carmel Ministries, No. 2:15-CV-134-KS-MTP, 2015 U.S. Dist. LEXIS 42681, at *5 (S.D. Miss. Apr. 1, 2015). At trial, the Court granted GuideOne's motion for judgment as a matter of law as to Mt. Carmel's claims for extra-contractual damages. The law of the case, therefore, is that Mt. Carmel is only entitled to the benefits owed under the policy - specifically, the "direct physical loss of or damage to" the subject buildings caused by the tornado.
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B. Contractual Damages
1. General Principles of Policy Interpretation
The Court's ultimate goal in applying an insurance policy is to "render a fair reading and interpretation of the policy by examining its express language and applying the ordinary and popular meaning to any undefined terms." Corban v. United Servs. Auto. Ass'n, 20 So. 3d 601, 609 (Miss. 2009). "In Mississippi, insurance policies are contracts, and as such, they are to be enforced according to their provisions." Id.
First, where an insurance policy is plain and unambiguous, a court must construe that instrument, like other contracts, exactly as written. Second, it reads the policy as a whole, thereby giving effect to all provisions. Third, it must read an insurance policy more strongly against the party drafting the policy and most favorably to the policy holder. Fourth, where it deems the terms of an insurance policy ambiguous or doubtful, it must interpret them most favorably to the insured and against the insurer. Fifth, when an insurance policy is subject to two equally reasonable interpretations, a court must adopt the one giving the greater indemnity to the insured. Sixth, where it discerns no practical difficulty in making the language of an insurance policy free from doubt, it must read any doubtful provision against the insurer. Seventh, it must interpret terms of insurance policies, particularly exclusion clauses, favorably to the insured wherever reasonably possible. Finally, although ambiguities of an insurance policy are construed against the insurer, a court must refrain from altering or changing a policy where terms are unambiguous, despite resulting hardship on the insured.
Nationwide Mut. Ins. Co. v. Lake Caroline, Inc., 515 F.3d 414, 419 (5th Cir. 2008); see also Corban, 20 So. 3d at 609; Guidant Mut. Ins. Co. v. Indem. Ins. Co. of N. Am., 13 So. 3d 1270, 1281 (Miss. 2009); United States Fid. & Guar. Co. v. Martin, 998 So. 2d 956, 963 (Miss. 2008).
2. Payment and Valuation Under the Policy
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The policy4 provides:
A. Coverage
We 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 Cause of Loss.5
It is undisputed that a tornado is a "Covered Cause of Loss," and that Buildings A, B, and C are "Covered Properties," described in the Declarations as "Risk No. 001" (A) and "Risk No. 002" (B, C).6 It is likewise undisputed that Buildings A, B, and C suffered a "direct physical loss" caused by the tornado. Therefore, GuideOne is obligated to pay for the direct physical damage to Buildings A, B, and C caused by the tornado.
Next, the policy explains how the loss is paid:
4. Loss Payment
a. In the event of loss or damage covered by this Coverage Form, at our option, we will either:
(1) Pay the value of lost or damaged property;
(2) Pay the cost of repairing or replacing the lost or damaged property . . . ;
(3) Take all or any part of the property at an agreed or appraised value; or
(4) Repair, rebuild or replace the property with other property of like kind and quality . . . ;
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We will determine the value of lost or damaged property, or the cost of its repair or replacement, in accordance with the applicable terms of the Valuation Condition in this Coverage Form or any applicable provision which amends or supersedes the Valuation Condition.7
Therefore, GuideOne agreed to pay for a loss according to one of these four methods, at their option.
The policy's "Valuation Condition" provides the method to determine the replacement cost or value of damaged property:
7. Valuation
We will determine the value of Covered Property in the event of loss or damage as follows:
a. At replacement cost (without deduction for depreciation) . . . .8
However, according to the Declarations,9 the policy included the "Actual Cash Value" endorsement, which is described in the "Optional Coverages" section:
3. Actual Cash Value
...Valuation of Covered Property will be determined at "actual cash value" regardless of whether that property has sustained partial or total loss or damage. The
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