Patel v. Scottsdale Ins. Co.
| Decision Date | 03 July 2012 |
| Docket Number | No. COA11–1198.,COA11–1198. |
| Citation | 728 S.E.2d 394 |
| Parties | Champak PATEL d/b/a Liberty Inn, Plaintiff v. SCOTTSDALE INSURANCE COMPANY, Defendant. |
| Court | North Carolina Court of Appeals |
OPINION TEXT STARTS HERE
Appeal by plaintiff from order entered 13 July 2011 by Judge Paul G. Gessner in Wake County Superior Court. Heard in the Court of Appeals 8 February 2012.
Brent Adams & Associates, by Brenton D. Adams and Ashley B. Currin, Charlotte, for Plaintiff-appellant.
Dean & Gibson, PLLC, Charlotte, by Jeremy S. Foster and Michael G. Gibson, for Defendant-appellee.
Plaintiff Champak Patel d/b/a Liberty Inn appeals from an order granting summary judgment in favor of Defendant Scottsdale Insurance Company. On appeal, Plaintiff contends that the trial court erred by entering summary judgment in favor of Defendant on the grounds that the record demonstrates the existence of a genuine issue of material fact sufficient to preclude the entry of judgment in Defendant's favor. After careful consideration of Plaintiff's challenge to the trial court's order in light of the record and the applicable law, we conclude that the trial court's order should be reversed and that this case should be remanded to the Wake County Superior Court for further proceedings not inconsistent with this opinion.
Plaintiff owned the Liberty Inn, which was a motel located in Tarboro, North Carolina. In August 2008, Plaintiff purchased an insurance policy applicable to the motel property under which he was insured against certain losses, including losses caused by fire. In early 2009, the motel was totally destroyed by fire. After Plaintiff filed a claim with Defendant, Defendant conducted an investigation for the purpose of determining, among other things, the amount of the loss payment to which Plaintiff was entitled under the policy.
As part of the investigation process, Defendant hired Crawford & Company to prepare an estimate of the cost of repairing the motel. After conducting an extensive analysis, Clyde A. Baker, an adjuster employed by Crawford & Company, determined that the motel had a replacement value of $346,500.39; that the “property to be repaired was subject to depreciation of $68,132.42;” that the “Actual Cash Value of the repairs is obtained by subtracting the depreciation from the Replacement Cost Value;” and that “the Actual Cash Value of the repairs to [the motel] is $278,367.97.” As Mr. Baker clearly stated, “[t]he repair estimate that I prepared does not reflect the [motel's] fair market value;” the amounts set out in his report do not “give the actual cash value” of the motel; and that the monetary figure “that I prepared ... provides only the estimated cost to repair the property.”
In addition, Defendant hired Moore & Piner, L.L.C., to conduct an appraisal of the market value of the motel building. According to Andy E. Piner, an appraiser with Moore & Piner, the fifty-one year old motel building had a market value of $76,533.00. In order to estimate the motel's market value immediately prior to the fire, Mr. Piner first determined that the cost of reproducing the motel would be $382,666.00. Next, Mr. Piner reduced this reproduction cost figure by a $306,133.00 allowance for depreciation. Unlike Mr. Baker, who based his depreciation figure solely on the physical deterioration of the motel property, Mr. Piner's depreciation estimate relied on market-related factors. More specifically, Mr. Piner utilized the Effective Age–Life method, which rests upon “the ratio of an improvement's Effective Age and its Total Economic Life Expectancy,” in order to determine an appropriate allowance for depreciation. In the course of applying the Average Age–Life method, Mr. Piner determined that the average “economic life expectancy” of the motel was 40 years; that, based on a comparison of the amount that the motel would need to earn in order to support a $382,666.00 investment and the amount that the motel was actually earning, the motel was 80% depreciated; and that a reduction in the reproduction cost amount to reflect an 80% depreciation allowance left a fair market value of $76,533.00. According to Mr. Piner, this valuation estimate, which used a cost-based approach, was consistent with the results he derived using an income-based approach.
In seeking to establish that a higher valuation was appropriate, Plaintiff employed David W. Duke, an appraiser with Tom Keith & Associates, Inc., “to appraise the market value of the structure or building located on the property in question separate and apart from the land upon which it sat as that market value existed just prior to the loss by fire.” Mr. Duke opined that the motel had a market value of $199,246.00. However, a careful examination of Mr. Duke's report indicates that he employed a “cost approach” that only recognized “physical depreciation.” Mr. Duke believed the “cost approach” to be an appropriate method of determining market value because, “[f]or insurance purposes, the courts have generally accepted the definition of market value to be the actual cash value or replacement cost new, less physical depreciation.” As a result, Mr. Duke developed his $199,246.00 estimate by subtracting $132,831.00 in physical depreciation from an estimated replacement cost of $332,077.00.
Finally, Plaintiff stated that he “owned the motel described in [the] Complaint” and that, “prior to the fire ... my motel building and structure was in good repair and ... in excellent condition.” According to Plaintiff, he had “purchased at least three motels during [his] life” and had “spent many years in the motel business.” Plaintiff also asserted that, in addition to his own motel-related experience, he had “family members and close friends who are and have for many years been in the motel business and in the business of buying and selling motels.” Based upon his own experience and what he knew of the experiences of his family and friends, Plaintiff believed that he had “obtained a knowledge of motel real estate values in eastern North Carolina.” As a result, Plaintiff opined that “the fair market value and the market value, which terms are synonymous, of the building structure of the motel ... immediately prior to the fire,” “separate and apart from the land upon which [his] motel sat ... was no less than $278,367.97.”
Based on this investigation, Defendant concluded, based on the provisions of the policy, that, since Mr. Baker's repair cost estimate exceeded Mr. Piner's market value estimate, it was obligated to pay an amount equal to Mr. Piner's market value estimate in settlement of Plaintiff's claim for damage to the motel building. As a result, Defendant paid Plaintiff $20,000.00 relating to Plaintiff's business personal property loss, $23,760.00 for debris removal, and $75,533.00 relating to the destruction of the motel building. Although Plaintiff did not dispute the payments that he received for loss of business personal property and debris removal, he did not agree with Defendant's estimate of the motel building's market value.
On 22 March 2010, Plaintiff filed a complaint against Defendant in which he sought compensatory and punitive damages for breach of contract, violation of N.C. Gen.Stat. § 58–63–15(11), infliction of emotional distress, and unfair or deceptive trade practices. In his complaint, Plaintiff alleged that, given the terms of the applicable insurance policy, Defendant owed Plaintiff the policy limit of $250,000.00 as compensation for the loss of the motel building. Defendant filed an answer and an amended answer on 29 June 2010 and 2 August 2010, respectively, in which it denied the material allegations of Plaintiff's complaint, asserted various defenses, and sought dismissal of Plaintiff's claims.
On 5 May 2011, Defendant filed a motion seeking entry of an order granting summary judgment for Defendant in which it alleged, in part, that:
The Plaintiff owned a motel which was destroyed by fire. The motel was insured by the Defendant at the time of the fire. The Defendant retained an independent adjuster to determine the cost of repairing the motel and also retained an independent appraiser to determine the actual cash value of the motel prior to the fire. The Plaintiff's insurance policy allowed the Defendant to settle the claim by electing to pay the Plaintiff either the cost to repair the damaged property or the actual cash value of the property prior to the fire. The Defendant has paid to the Plaintiff the actual cash value of the motel prior to the fire and has complied fully with the terms, conditions and requirements of the insurance policy....
In support of its motion, Defendant submitted various documents, including a copy of the applicable insurance policy; various discovery responses provided by or on behalf of Plaintiff; an affidavit executed by Mr. Baker, which was accompanied by a repair estimate; and an appraisal prepared by Mr. Piner. On 22 June 2011, Plaintiff filed a response to Defendant's summary judgment motion in which he submitted his own affidavit; that of Mr. Duke, which was accompanied by an appraisal report; and the deposition of Mr. Baker, and asserted that there were “disputed issues of material fact” which precluded the entry of summary judgment in favor of Defendant.
After a hearing conducted during the 29 June 2011 civil session of the Wake County Superior Court, at which it considered the arguments of counsel, the materials submitted by the parties, and Mr. Piner's deposition, the trial court entered an order on 13 July 2011 granting summary judgment in favor of Defendant. Plaintiff noted a timely appeal to this Court from the trial court's order.
According to N.C. Gen.Stat. § 1A–1, Rule 56(c), summary judgment is properly granted “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is...
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