Haman, Inc. v. Chubb Custom Ins. Co.

Decision Date31 March 2021
Docket NumberCIVIL ACTION NO. 2:18-CV-01534-KOB
PartiesHAMAN, INC., Plaintiff, v. CHUBB CUSTOM INSURANCE COMPANY, Defendant.
CourtU.S. District Court — Northern District of Alabama
MEMORANDUM OPINION

This case involves a lengthy and contentious insurance coverage dispute involving a Knights Inn motel in Bessemer, Alabama. Haman, Inc., has owned the Knights Inn since 1995. Chubb Custom Insurance Company insured the property at the time of the two events leading to this lawsuit—a fire on March 22, 2014, that damaged the motel's "Studio Inn"; and high winds resulting from a nearby tornado on April 28, 2014, that allegedly damaged the motel's three roofs and caused interior water damage. Haman submitted three claims to Chubb for these two incidents—first a claim for fire damage to 36 rooms and a stairwell in the Studio Inn; then an additional claim for smoke and soot damage to all 80 rooms in the Studio Inn; and lastly a claim for alleged wind damage to the three roofs and interior water damage allegedly resulting from the roof damage.

The parties agree that the damage to the 36 rooms resulting from the fire is covered under the policy and that fire and wind damage are covered causes of loss. On the fire claim, Chubb initially agreed to submit the claim to appraisal in August 2015 but backed out partially through the process: first asserting that coverage issues were implicated, and later asserting that Haman's appraiser, Chuck Howarth, was not "impartial," as required under the insurance policy's appraisal provision. On the "wind claim," Chubb refused to submit to the appraisal process, asserting that because of questions over causation, the dispute was not appropriate for appraisal and that Haman had not timely notified Chubb of the loss.

Because Chubb stopped the appraisal process on the fire claim and refused to submit to appraisal on the wind claim, Haman brought suit. A first suit filed in state circuit court in February 2016 was dismissed; the court found that Haman had not complied with its post-loss obligations. In August 2018, Haman filed another action in circuit court, which Chubb removed to this court.

The case now comes before the court on Haman's motion for partial summary judgment (doc. 88) and Chubb's motion for summary judgment (doc. 102). Haman seeks partial summary judgment in its favor and against Chubb on Haman's breach of contract claim as it relates to Chubb's alleged breach of the insurance policy's appraisal provision. Haman asks the court to find as a matter of law that Chubb breached the parties' contract by refusing to honor the appraisal provision as to both the fire and wind claims. Defendant Chubb filed a response(doc. 123), and Haman filed a reply (doc. 129).

Defendant Chubb seeks summary judgment as to each of Haman's claims against it: (1) specific performance to submit to appraisal, (2) breach of contract, and (3) bad faith. (Doc. 102). Chubb asserts that it is entitled to summary judgment on Haman's specific performance claim, asserting that appraisal for the fire claim and the wind claim would be inappropriate given the cause of loss issues, that Haman did not comply with post-loss obligations, and that Mr. Howarth was not an impartial appraiser. Chubb asserts that it is entitled to summary judgment on Haman's breach of contract claim as it relates to the fire claim because Haman has no admissible evidence to show that the disputed damages were caused by covered causes of loss. Chubb asserts that it is entitled to summary judgment on Haman's breach of contract claim as it relates to the wind claim because Haman did not timely file notice of the claim and because Haman has no admissible evidence to show that the disputed damages were caused by covered causes of loss. Lastly, Chubb asserts that it is entitled to summary judgment on Haman's bad faith claim because Chubb did not act unreasonably in its handling of Haman's claims. Plaintiff Haman filed a response (doc. 121), and Chubb filed a reply (doc. 139).

The motions are now ripe for review. After considering the submissions of the parties and the record evidence, the court DENIES Plaintiff's motion for partial summary judgment for its breach of contract claim as it relates to theappraisal provision; DENIES Defendant's motion for summary judgment as to the breach of contract claim as it relates to the fire claim but GRANTS Defendant's motion for summary judgment as to the breach of contract claim as it relates to the wind claim; GRANTS Defendant's motion for summary judgment as to the bad faith claim; and GRANTS Defendant's motion for summary judgment as to specific performance to compel appraisal on both the fire and the wind claims.

The court notes that in a previous memorandum opinion (doc. 150), it granted Chubb's motion to exclude the testimony of Haman's expert Charles ("Chuck") Howarth on the disputed cause of loss issues but denied Chubb's motion to exclude the testimony of Haman's expert Thomas J. Irmiter on the cause of loss issues. The court denied Chubb's motion to reconsider the court's ruling regarding Mr. Irmiter's opinions. (Doc. 156). In making its findings in this Opinion, the court has not considered Mr. Howarth's opinions on causation but has considered Mr. Irmiter's to the extent appropriate.

I. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 56(a), a court may grant summary judgment on a claim or defense when the moving party establishes that (1) no genuine disputes of material fact exist, and (2) the moving party is entitled to judgment as a matter of law.

The moving party bears the initial burden of "informing the district court ofthe basis of its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P. 56).

The burden then shifts to the non-moving party "to demonstrate that there is indeed a material issue of fact that precludes summary judgment." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). The court must "view the evidence presented through the prism of the substantive evidentiary burden," to determine whether a jury could reasonably return a verdict for the non-moving party based on the evidence the nonmoving party presented. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986). The court must also view the evidence in the record in the light most favorable to the non-moving party, drawing reasonable inferences in its favor. White v. Beltram Edge Tool Supply, Inc., 789 F.3d 1188, 1191 (11th Cir. 2015). Inferences can create genuine issues of material fact. Carlson v. FedEx Ground Package Sys., Inc., 787 F.3d 1313, 1318 (11th Cir. 2015). But "[a] mere 'scintilla' of evidence supporting the [nonmoving] party's position will not suffice; there must be enough of a showing that the jury would reasonably find for that party." Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990).

In considering the evidence, the court may not make credibility determinations or weigh the evidence, both of which are "jury functions." Feliciano v. City of Miami Beach, 707 F.3d 1244, 1252 (11th Cir. 2013) (quoting Liberty Lobby, Inc., 477 U.S. at 255) (internal quotations omitted).

II. FACTS AND BACKGROUND

Since 1995, Haman, Inc., has owned a Knights Inn motel in Bessemer, Alabama. The Knights Inn consists of three buildings: the "Studio Inn," an 80-room building designed for extended-stay customers; a second building with event spaces and guest rooms for short-term customers; and a third building with a lobby, restaurant and bar, swimming pool, and office.

Chubb Custom Insurance Company insured the Knights Inn with a commercial property insurance policy at the time of the two events that led to this lawsuit—a fire that burned the Studio Inn on March 22, 2014 (the "fire claim") and winds resulting from a nearby tornado, which allegedly damaged the Inn on April 28, 2014 (the "wind claim").

The Chubb policy, 99783420-00, included coverage for all risks of direct physical loss—excluding earthquakes or floods—that were not otherwise excluded or limited by the policy. Haman paid all insurance premiums at the relevant times. Haman purchased coverage of $1.15 million for the Studio Inn and $1.6 million for the other two motel buildings. The policy included an appraisal provision, whichallowed the parties to demand appraisal when they "disagree[d] on the value of the property or the amount of loss."

A. The "Fire Claim"

On March 22, 2014, a fire damaged the Studio Inn. (Doc. 38-1). Haman timely reported the damage, and on September 30, 2014, Haman submitted a sworn partial proof of loss, prepared by Chubb's adjuster Brent Perich, claiming structural fire damages of $466,838.73 (not reduced to actual cash value or for depreciation). (Docs. 38-1; 90-53, Perich depo. at 81). On the same date, Haman also submitted a sworn partial proof of loss for the building's contents for $26,481.40. (Doc. 90-7).

In November 2014, Chubb paid for the fire damage in an adjusted payment of $357,401.93 for the structural damage; on a date unclear from the record, Chubb paid $27,601.01 for the contents. (Docs. 105-33, 116-1 ¶ 8).

On January 29, 2015, Haman retained The Howarth Group, an insurance claim consulting firm based near Nashville, TN, to determine its amount of loss for the fire claim. (Doc. 38-5). On February 25, 2015, Chuck Howarth, of The Howarth Group, invoked appraisal on Haman's behalf for the fire claim. (Id.). When he did so, he produced his appraisal employment agreement with information regarding his fee redacted from it. (Id.). According to Mr. Howarth,"there was a lot more [fire] damage than there was being allowed for in [Chubb's] estimate." (Doc. 123-2, Howarth EUO at 23).

In April 2015, representatives from The Howarth...

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