Lamar Advert. Co. v. Zurich Am. Ins. Co.

• Decision Date: 29 March 2021
• Docket Number: CIVIL ACTION NO. 18-1060-JWD-RLB
• Parties: LAMAR ADVERTISING COMPANY v. ZURICH AMERICAN INSURANCE COMPANY
• Court: U.S. District Court — Middle District of Louisiana

LAMAR ADVERTISING COMPANY v. ZURICH AMERICAN INSURANCE COMPANY

CIVIL ACTION NO. 18-1060-JWD-RLB

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF LOUISIANA

March 29, 2021

RULING AND ORDER

This matter is before the Court on two Motions for Partial Summary Judgment. The first Motion for Partial Summary Judgment (Doc. 105) was filed by Defendant Zurich American Insurance Company ("Zurich" or "Defendant"). Plaintiff Lamar Advertising Company ("Lamar" or "Plaintiff") opposes the motion. (Doc. 118.) Zurich filed a reply. (Doc. 128.)

The second Motion for Partial Summary Judgment Regarding Zurich's Failure to Pay for Any of Lamar's Lost Business Income (Doc. 111) was filed by Lamar. Zurich opposes the motion. (Doc. 120.) Lamar filed a reply. (Doc. 129.)

Oral argument is not necessary. The Court has carefully considered the law, facts in the record, and arguments and submissions of the parties and is prepared to rule. For the following reasons, both motions are denied.

I. Background

A. Relevant Facts

Zurich issued and delivered Policy No. MLP 4856733-06 ("Policy"), an "all risks" commercial property insurance policy, to Lamar at 5551 Corporate Boulevard, Baton Rouge, Louisiana 70808. (Lamar's Statement of Material Facts That Are Not in Dispute ("SMF") ¶ 1, Doc. 111-2; Zurich's Opposing Statement of Material Facts ("OSMF") ¶ 1, Doc. 120-1.)¹ The Policy was in effect from March 1, 2017 to March 1, 2018. (SMF ¶ 3; OSMF ¶ 3.) Lamar is the "First Named Insured" under the Policy. (SMF ¶ 4; OSMF ¶ 4.) Lamar's Puerto Rico office is an "Insured Location" under the Policy. (SMF ¶ 5; OSMF ¶ 5.)

Hurricane Maria made landfall in Puerto Rico on September 20, 2017, as a Category 4 hurricane, and damaged Lamar's Puerto Rico office and its contents. (SMF ¶ 6; OSMF ¶ 6.) Hurricane Maria was a "Named Storm" and a "Covered Cause of Loss" as defined by the Policy. (Id.) Zurich received notice that Lamar's Puerto Rico office was damaged by Hurricane Maria on September 22, 2017.² (SMF ¶ 7; OSMF ¶ 7.)

Thereafter, Zurich's representatives inspected damages caused by Hurricane Maria at Lamar's Puerto Rico office on October 11, 2017, October 18, 2017, October 23, 2017, October 31, 2017, April 13, 2018, and May 12, 2018. (SMF ¶ 8; OSMF ¶ 8.)

On October 13, 2017, Zurich received the following documents from Lamar: (a) "before" hurricane photos; (b) "after" hurricane photos; (c) a copy of the lease agreement for Lamar's Puerto Rico office; (d) a cost summary of improvements and furniture, fixtures, and equipment in the office prior to the Hurricane (totaling more than $1.3 million); (e) an invoice for 80% cleanup and 75% of gypsum demolition; and (f) an e-mail outlining the cost for cleanup and gypsum demolition. (SMF ¶ 9; OSMF ¶ 9.)

On March 19, 2018, Zurich's representatives received documentation estimating that Lamar had sustained more than $4 million in total business income losses as a result of Hurricane Maria. (SMF ¶ 12; OSMF ¶ 12.)

On July 13, 2018, Zurich's representatives received documentation estimating that at least $1,111,189 of Lamar's total business income losses were attributable to a suspension of Lamar's business activities at its Puerto Rico office. (SMF ¶ 13; OSMF ¶ 13.) In reaching this number, Lamar took its total estimated business income loss of $5 million and allocated it between those losses attributable to income lost from damage to "billboards" and income loss attributable to damage to the "office." (MDD Dep., Doc. 110-3 at 16-17.)

On March 18, 2019, Zurich's representatives received the following documents: a copy of Lamar's lease for its Puerto Rico office; detailed monthly statements from January 2014 through March 2018; monthly revenues broken down by charted panel from January 2014 to March 2018; a list of contracts that were put on hold due to Hurricane Maria; and payroll information from January 1, 2017 to March 31, 2018. (SMF ¶ 15; OSMF ¶ 15.)

B. Zurich's "Estimate"

Zurich retained Brian Mohlenhoff to serve as its expert in forensic accounting in this action. Mohlenhoff is employed by Matson, Driscoll, and Damico, LLP ("MDD") and served as its Rule 30(b)(6) corporate representative.

In March 2019, MDD prepared an estimate of the amount of business income loss Lamar sustained attributable to its Puerto Rico office. The parties heavily dispute this document and its significance.

Specifically, Lamar contends that MDD calculated its business income loss and estimated that was more than $1 but less than $500,000. It cites to the following deposition testimony:

Q. Okay. For office related was it less than five hundred thousand dollars?

A. I believe so....

Q. Okay. Was it more than a dollar?

A. Yes.

(MDD Dep., Doc. 110-3 at 12-13.)

Zurich, on the other hand, denies this assertion based on Mohlenhoff's and MDD's testimony that the estimate was a "corrected claim" which was prepared and given solely for purposes of mediation. (MDD Dep., Doc. 120-4 at 11-12, 13-14; Mohlenhoff Dep., Doc. 120-5 at 13-17, 18-20.) According to Mohlenhoff, MDD's "corrected claim" is actually Lamar's July 2018 claim presentation with numbers that reflect its own profit and loss statements. (MDD Dep., Doc. 110-3 at 18; Mohlenhoff Dep., Doc. 120-5 at 17.) Additionally, MDD testified that it disagreed with the allocation used in Lamar's July 2018 claim and explained that it would allocate the loss based on revenues by looking at "the various sources of revenue that were achieved for this operation and where they were from and apply what was related to billboard and what was related to the office." (MDD Dep., Doc. 120-4 at 8-10.)

In response, Lamar argues that the fact that Mohlenhoff calls them " 'corrected claims' does not change the undisputed fact that Zurich's accountants could, and did, prepare estimates of the amount of business interruption loss resulting from damage" to Lamar's office. (Doc. 129-1 at 1-2.)³

Lamar points out that Mohlenhoff, in his capacity as MDD's corporate representative, testified that prior to his deposition, he reviewed unredacted versions of certain business lossestimates prepared by MDD for mediation purposes. (MDD Dep., Doc 110-3 at 6-7.) As to that estimate, Mohlenhoff testified:

Q. And in the unredacted version that you looked at of that document was there any Business Interruption loss estimates of the office that MDD prepared?

A. Yes. It was utilizing the claim percentages....

Q. Did you make any assumptions in forming that estimate?

A. We utilized what we had to make some corrections to the claim where we felt weren't correct for, for trending and expenses.... I was asked by the attorneys to come up with an estimate of loss based on the documentation I had and to utilize what I had to come up with something to go to mediation and try to settle the file....

(MDD Dep., Doc 110-3 at 7, 8-9.)

Moreover, during MDD's deposition in March 2019, it testified that it currently had enough information to prepare an estimate of at least $1. (MDD Dep., Doc. 110-3 at 23.)

Q. ...Does MDD currently have enough information to prepare any estimate of Lamar's Business Interruption loss that's attributable to damage to the Puerto Rico office?

A. Yes, I have information, but I cannot attribute.

Q. And you have enough information to prepare an estimate?

A. Any is a big word.

Q. Any estimate?

A. That's my -

Q. Any estimate—

A. - so it's clear any -

Q. - one dollar?

A. You can - yeah

Q. Okay, it has enough information?

A. It can be very high level not real specific, but you can, yes.

(MDD Dep., Doc. 110-3 at 23-24; Doc. 120-4 at 14 ("Q. - - but MDD came to an estimate, correct? A. - - for settlement purposes in a mediation only, for no other reason.").)

C. Lamar's Estimate

Lamar retained Ralph Stephens as its expert forensic accountant to calculate its business income loss resulting from Hurricane Maria for the period of September 20, 2017 through March 2018. (Stephens Rep., Doc. 105-5 at 5.) On August 30, 2019, Zurich's representatives received Stephens' report, which provides in part:

Hurricane Maria made landfall in Puerto Rico on September 20, 2017, causing damage to Lamar Advertising Company's business operations in Puerto Rico. It is estimated that the Puerto Rican operation's total business interruption loss ranges from approximately $3,077,000 to $3,926,000.

To determine the business interruption loss that is attributable to the office building that housed Lamar Advertising Company's business operations in Puerto Rico, the scope of operations at the office building and the value the office building adds to the Puerto Rican operations revenue generation were considered. A majority of the operations occurs at this office building, including sales, billing, billboard design, staging, and other activities. The office building is an integral and critical part of the revenue generation for Lamar's Puerto Rican operations. Based on these considerations, a 50 percent allocation of business interruption loss is appropriate.

Based on the importance of the office building, the business interruption loss attributable to the office building as a result of Hurricane Maria is estimated to range from approximately $1,539,000 to $1,963,000.

Although the allocation based on importance is an appropriate approach, an alternative allocation method based on expenses was also considered. Based on an expense allocation, the business interruption loss attributable to the office building as a result of Hurricane Maria is estimated to range from approximately $663,000 to $859,000.

(Stephens Rep., Doc. 105-5 at 3.)

In reaching these estimates, Stephens explains in his report that:

... the Office and the billboards were dependent on each other and reported together within Lamar PR's financial statements. As such, the business interruption loss incurred by Lamar PR will need to be allocated between the Office and the billboards because the Zurich Policy covers business interruption loss resulting from a suspension of Lamar PR's business activities at the Office.

(Id. at 14.)

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