Hastings Mut. Ins. Co. v. Mengel Dairy Farms, LLC, Case No. 5:19CV1728

• Decision Date: 19 May 2020
• Docket Number: Case No. 5:19CV1728
• Citation: 461 F.Supp.3d 655
• Parties: HASTINGS MUTUAL INSURANCE CO., Plaintiff-Counterdefendant, v. MENGEL DAIRY FARMS, LLC, Defendant-Counterclaimant.
• Court: U.S. District Court — Northern District of Ohio

461 F.Supp.3d 655

HASTINGS MUTUAL INSURANCE CO., Plaintiff-Counterdefendant,

v.MENGEL DAIRY FARMS, LLC, Defendant-Counterclaimant.

Case No. 5:19CV1728

United States District Court, N.D. Ohio, Eastern Division.

Signed May 19, 2020

Ronald A. Rispo, Randy L. Taylor, Weston Hurd, Cleveland, OH, for Plaintiff-Counterdefendant.

John F. Burke, III, Cleveland, OH, for Defendant-Counterclaimant.

MEMORANDUM OF OPINION AND ORDER [Resolving ECF No. 37 ]

PEARSON, J.

Pending is Plaintiff-Counterdefendant Hastings Mutual Insurance Co. ("Hastings")’ motion for summary judgment. ECF No. 37. The matter has been fully briefed. ECF Nos. 37, 44, and 47. For the reasons explained below, the motion is granted in part and denied in part.

I. Background

A. First Insurance Claim

This litigation concerns the death of several cows and calves ("livestock") at Defendant-Counterclaimant Mengel Dairy Farms, LLC ("Mengel")’s location. Beginning in September 2018, Mengel experienced a loss of livestock, milk production, and profits. ECF No. 21 at PageID #: 228, ¶ 4. Mengel was unaware of the cause of these losses. Id. During all relevant times, Mengel had an insurance policy ("the Policy") with Hastings. ECF No. 1-1. Mengel filed a claim for the death of the livestock, cost of investigation and repairs, and lost business profits ("First Insurance Claim") in February 2019. ECF No. 51 at PageID #: 881, ¶ 10; ECF No. 37-1.

Mengel retained Concept Electric, Inc. ("Concept") to determine the cause of the losses. ECF No. 21 at PageID #: 229, ¶ 8. Concept discovered a stray electric current was present on the property. See ECF No. 51 at PageID #: 882, ¶ 19; ECF No. 44-4. In March 2019, Hastings sent a consultant, Jesus Lopez of Fire and Explosion Consultants LLC ("FEC"), to investigate. ECF No. 44-13 at PageID #: 714, 717. Hastings’ Claim Notes indicate that Lopez found no stray voltage on site during the inspection. Id. at PageID #: 714. Although Lopez found no stray voltage that day, the Claim Notes provide that the "engineer believes it has been there" and caused the losses on the dairy farm. Id. at PageID #: 713. The notes state: "Coverage: Appears electrocution is the cause. High voltage caused the cows to stop eating and production to fail. Cows and calves died." Id. Lopez issued a report in late May 2019, indicating that "electrical stray currents that produce electrical stray voltages of sufficient magnitude to cause the detriment to the cows’ and calves health exists." ECF No. 44-5 at PageID #: 657; ECF No. 21 at PageID #: 229, ¶¶ 9-10. Hastings investigated the claim until July 2019. See ECF No. 51; ECF No. 44-13.

After investigating the incident, Hastings partially accepted the First Insurance Claim, paying for the death of the livestock and the cost of investigating the stray voltages but rejecting coverage regarding loss of business income. ECF No. 51 at PageID #: 883, ¶ 30; ECF No. 1 at PageID #: 3-4, ¶¶ 19-22. In late July 2019, Hastings commenced the instant declaratory action to determine whether the loss of business income was covered under the Policy. See ECF No. 51 at PageID #: 883, ¶ 31; ECF No. 1.

B. Second Insurance Claim

After this lawsuit was filed, Mengel submitted an additional claim for death of livestock, costs of additional investigation and repair, and additional lost profits. ("Second Insurance Claim") to Hastings. ECF No. 51 at PageID #: 884, ¶ 32; ECF No. 21 at PageID #: 229, ¶¶ 17-18. On November 6, 2019, Hastings issued a letter on Mengel's Second Insurance Claim, informing Mengel that Hastings was reserving its rights to contest coverage, its Second Insurance Claim may be subject to exclusions under the Policy, and that there was an ongoing investigation into the second claim. See ECF No. 37-4. The letter also suggests the investigation has been hindered in part by Mengel and requests Mengel's cooperation with the investigation of the Second Insurance Claim. See id. The reservation of rights letter did not outright deny coverage for the claim. See id.

Mengel subsequently amended its counterclaims against Hastings to include the Second Insurance Claim. See ECF No. 21. Hastings contends that it is waiting to decide coverage for the Second Insurance Claim until the Court rules on its declaratory action. See ECF No. 47 at PageID #: 737.

C. Hastings’ Declaratory Judgment Claims

Hastings invokes two claims for declaratory judgment. The Court discusses the relevant Policy provisions and declaratory judgments sought below.

1. First Claim for Declaratory Judgment-Farm Business Income And Extra Expense

Under the Policy, Hastings will cover loss of business income "sustain[ed] due to the necessary suspension of your operations during the period of restoration." ECF No. 1-1 at PageID #: 91. The loss of business income "must be caused by or result from a Peril Insured Against." Id.

Hastings seeks a declaratory judgment holding that (1) Mengel never suspended its operations and (2) coverage for the loss or damage resulting from the stray voltage on the property is not triggered when Mengel was not subject to a "necessary suspension" of farming operations. ECF No. 1 at PageID #: 7.

2. Second Claim for Declaratory Judgment- "Perils Insured Against"

The Policy provides coverage for the insured when a myriad of perils occur on the property. See ECF No. 1-1 at PageID #: 35. Under the Policy, Hastings covers the death or destruction of livestock "which results directly from or is made necessary by," including among other things, "electrocution." Id. at PageID #: 36.

Relative to this second claim, Hastings seeks a declaratory judgment finding that: (1) Mengel's loss or damage must be caused by or result from a "Peril Insured Against" in order to trigger coverage; (2) Mengel's loss or damages was caused directly by dehydration, which in turn was the result of the livestock's reaction to the intermittent stray electric current; and (3) coverage for loss or damages is not triggered when it was not caused by or the result from a "Peril Insured Against." ECF No. 1 at PageID #: 7.

D. Mengel's Counterclaims

Mengel filed counterclaims for (1) breach of contract; (2) insurance bad faith; (3) breach of good faith and fair dealing; and (4) unjust enrichment. ECF No. 21. Hastings filed the pending motion for summary judgment on all of its claims for declaratory relief and Mengel's counterclaims.

II. Standard of Review

Summary judgment is appropriately granted when the pleadings, the discovery and disclosure materials on file, and any affidavits 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); see also Johnson v. Karnes , 398 F.3d 868, 873 (6th Cir. 2005). The moving party is not required to file affidavits or other similar materials negating a claim on which its opponent bears the burden of proof, so long as the movant relies upon the absence of the essential element in the pleadings, depositions, answers to interrogatories, and admissions on file. Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party must "show that the non-moving party has failed to establish an essential element of his case upon which he would bear the ultimate burden of proof at trial." Guarino v. Brookfield Twp. Trs. , 980 F.2d 399, 403 (6th Cir. 1992).

Once the movant makes a properly supported motion, the burden shifts to the non-moving party to demonstrate the existence of a genuine dispute. An opposing party may not simply rely on its pleadings; rather, it must "produce evidence that results in a conflict of material fact to be resolved by a jury." Cox v. Ky. Dep't of Transp. , 53 F.3d 146, 150 (6th Cir. 1995). To defeat the motion, the non-moving party must "show that there is doubt as to the material facts and that the record, taken as a whole, does not lead to a judgment for the movant." Guarino , 980 F.2d at 403. In reviewing a motion for summary judgment, the Court views the evidence in the light most favorable to the non-moving party when deciding whether a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Adickes v. S.H. Kress & Co. , 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).

"The mere existence of some factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment ...." Scott v. Harris , 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). The fact in dispute must be "material," and the dispute itself must be "genuine." A fact is "material" only if its resolution will affect the outcome of the lawsuit. Scott , 550 U.S. at 380, 127 S.Ct. 1769. In determining whether a factual issue is "genuine," the Court assesses whether the evidence is such that a reasonable jury could find that the non-moving party is entitled to a verdict. Id. ("[Summary judgment] will not lie ... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.").

III. Discussion

Hastings asserts three bases for its summary judgment motion: (1) the Policy is not triggered because there was no "electrocution;" (2) Mengel is not owed coverage for loss of business income under the Policy because there was no "necessary suspension;" and (3) Mengel's counterclaims must be dismissed because Hastings did not owe Mengel coverage. The Court considers each of these matters below.

A. "Perils Insured Against" Under the Policy

Hastings’ second claim for declaratory judgment demands separate findings from the Court: (1) an interpretation of the term "electrocution" in the Policy and (2) a fact determination that the livestock died from means other than electrocution. The request for interpretation of the policy provision is a matter of law for the Court to decide. The determination of cause...