Phx. Ins. Co. v. Infogroup, Inc.

• Decision Date: 30 November 2015
• Docket Number: No. 1:13–cv–00005–JAJ–CFB,1:13–cv–00005–JAJ–CFB
• Citation: 147 F.Supp.3d 815
• Parties: The Phoenix Insurance Company, Plaintiff, v. Infogroup, Inc., Defendant.
• Court: U.S. District Court — Southern District of Iowa

147 F.Supp.3d 815

The Phoenix Insurance Company, Plaintiff,

v.Infogroup, Inc., Defendant.

No. 1:13–cv–00005–JAJ–CFB

United States District Court, S.D. Iowa, Western Division.

Signed November 30, 2015

Benjamin Michael Weston, Lederer Weston Craig PLC, West Des Moines, IA, J. Michael Weston, Lederer Weston Craig PLC, Cedar Rapids, IA, Eric J. Shukis, Kirk M. Zapp, Matthew S. Ponzi, Foran Glennon Palandech Ponzi & Rudloff PC, Chicago, IL, for Plaintiff.

Jill Robb Ackerman, Heidi A. Guttau-Fox, Baird Holm LLP, Omaha, NE, Daniel H. Rylaarsdam, Mary Craig Calkins, Kilpatrick Townsend & Stockton LLP, Beverly Hills, CA, Eric Matthew Gold, Kilpatrick Townsend & Stockton LLP, Washington, DC, for Defendant.

ORDER

JOHN A. JARVEY, Chief Judge

In June 2011, Defendant Infogroup, Inc., relocated its business due to a threat of flooding posed by the nearby Missouri river. Infogroup is a data provider, meaning Infogroup provides comprehensive verified and customized databases, stored and utilized on Infogroup's servers, to internet companies and other businesses to support sales, marketing, and information services. Defendant submitted a claim to its insurance provider, Plaintiff, The Phoenix Insurance Company, seeking compensation for its relocation costs and associated expenses. After initially providing Defendant with an advance to cover expenses, Plaintiff determined that Defendant's claimed expenses were not fully covered under its insurance policy, and filed a petition in this Court seeking declaratory relief and restitution, requesting return of the money it overpaid for Defendant's expenses.

This matter comes before the Court pursuant to the parties' March 13, 2015, cross motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. Both parties filed response briefs on April 10, 2015, and final reply briefs in support of their respective motions for summary judgment on May 15, 2015. The Court held oral argument on the parties' cross motions for summary judgment on August 20, 2015.¹ Both motions for summary judgment focus whether Defendant suffered any physical damage, and whether the threat of flooding or loss of use was sufficient to trigger coverage under the relevant insurance policy provisions.

I. STATEMENT OF UNDISPUTED MATERIAL FACTS

Except as noted below, Court finds the following undisputed facts: Plaintiff, Phoenix Insurance Company, insured Defendant, Infogroup, Inc.'s business buildings and relevant personal business property, including Defendant's data and data processing equipment, between March 22, 2011, and March 22, 2012. Defendant's insurance policy through Plaintiff contains three key provisions: the “Extra Expense” clause, the “Preservation of Property” clause, and the “Protection of Property” clause. The policy also contains a “Data Endorsement.”

The Extra Expense provision reads, in relevant part:

3. Additional Coverages—Unless otherwise indicated in the Declarations, the following Additional Coverages apply:

a. Extra Expense

Extra expense means reasonable and necessary expenses you incur during the “period of restoration”² that you would not have incurred if there had been no direct physical loss of or damage to property at the premises described in the Declarations caused by or resulting from a Covered Cause of Loss.

(1) We will pay your Extra Expense to avoid or minimize the suspension of business and to continue “operations”:

a. At the described premises; or

b. At replacement premises or temporary locations, including

i. Relocation expenses;

ii. Costs to equip and operate the replacement premises or temporary locations; and

iii. Expediting expenses.

The Preservation of Property clause reads, in relevant part:

4. Additional Coverages—Unless otherwise indicated in the Declarations, the following Additional Coverages apply:

[...]

c. Preservation of Property

If it is necessary to move Covered Property from the described premises to preserve it from loss or damage by a Covered Cause of Loss, we will pay for:

1) Any direct physical loss or damage to this property...

[...]

2) The cost to remove the property from the described premises.

Coverage will end when any of the following first occurs:

1) When the policy is amended to provide insurance at the new location;

2) The property is returned to the original location; or

3) This policy expires.

The Protection of Property clause reads, in relevant part:

F. Loss Conditions

[...]

3. Duties in the Event of Loss or Damage

a. You must see that the following are done in the event of loss of or damage to Covered Property:

[...]

(5) Take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim.

[...]

4. Loss Payment

a. In the event of loss or damage covered by this coverage form, at our option, we will [reimburse costs in one of various ways].

The Data Endorsement reads, in relevant part, as follows:

A. Changes to the Deluxe Property Coverage Form

The insurance coverage provided under the Deluxe Property Coverage Form for direct physical loss or damage to Your Business Personal Property and Personal Property of Others applies to direct physical loss or damage to ‘Electronic Data Processing Equipment’ and ‘Electronic Data Processing Data and Media’ [subject to certain limitations].

Defendant's policy insured three properties in Carter Lake, Iowa, including two data centers and a combination office and warehouse, and the personal business property contained at each property. The Carter Lake properties were located near the Missouri River. In late May, 2011, the Army Corps of Engineers issued several news releases warning of the Missouri River's high water levels and potential flooding. On or about June 1, 2011, Defendant decided to move and relocate its business operations and data centers away due to the threat of flooding, and, as of that time, did not intend to return to the Carter Lake facilities. On June 1, 2011, Defendant contacted its insurance broker, Aon Risk Solutions (“Aon”) to communicate with Plaintiff about the move. On July 19, 2011, after Defendant had already begun moving, Plaintiff advanced $500,000 to Defendant for anticipated claims under the Preservation of Property and Claim Data Expense³ provisions of the policy. Plaintiff claims that it maintained throughout its communications with Defendant that the policy would cover only the costs to move covered property to preserve it from flood damage, but would not include the costs to establish a new operating facility.

On August 22, 2011, heavy rain left surface water in the parking lot at the Carter Lake facilities. The parties dispute whether this water caused any physical loss or damage and whether the water entered any of the Carter Lake buildings. Defendant also claims to have suffered other relatively minor property damage during July and August, 2011, including damage to an uninterruptable power source and damage to a server. Plaintiff disputes whether this harm occurred, but agrees Defendant's parking lot was flooded for the period of one day. The threat of flood from the Missouri River ended in October, 2011, if not before. On October 21, 2011, Defendant, through Aon, submitted a claim in the gross amount of $9,524,260 ($8,974,260 net after subtracting Defendant's $50,000 deductible and the $500,000 advance), requesting payment pursuant to the Preservation of Property clause. [Dkt. 64–6 PP. 4, 10]. Plaintiff responded that it would not reimburse Plaintiff's business income loss or costs to re-establish business under the Extra Expense clause because there was no direct physical loss or damage.

On May 16, 2012, Aon submitted an updated claim submission, modifying its October 21, 2011, claim submission. This addendum requested payment of $12,190,614 ($11,640,614 after subtracting Defendant's $50,000 deductible and the $500,000 advance). This claim submission was for a larger amount because it included 18 moths of co-location rent at Defendant's new location. Plaintiff responded that it did not agree that the entirety of Defendant's claimed expenses were covered under the policy, and instead concluded that Defendant's covered expenses totaled less than the $500,000 advance. The parties agree that Plaintiff's position on coverage under the policy, as originally articulated in early June, 2011, never changed during the adjustment of the claim and remained consistent throughout. Defendant's Resistance [Dkt. 72–1 P. 68].

Plaintiff filed a complaint on February 20, 2013, seeking declaratory judgment that the Defendant is not entitled to coverage under the Extra Expense coverage because the Carter Lake locations sustained no direct physical damage, that the Preservation of Property clause covers only $251,514.19, and that Plaintiff owes Defendant no further coverage. Plaintiff also to recoup the difference between its $500,000 advance and the amount it argues it allegedly owed Defendant: $248,458.81. Defendant filed a counterclaim on April 22, 2013, claiming Plaintiff breached its contract with Defendant, that Plaintiff breached the implied covenant of good faith and fair dealing, and seeking declaratory judgment that Plaintiff must honor the policy as Defendant interprets it. Both parties filed motions for summary judgment on March 13, 2015.

II. SUMMARY JUDGMENT STANDARD

Federal Rule of Civil Procedure 56 provides that a “court shall grant summary judgment if the movant shows 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 Kountze ex rel. Hitchcock Found. v. Gaines, 536 F.3d 813, 817 (8th Cir.2008) (“[S]ummary judgment is appropriate where the pleadings, discovery materials, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to summary judgment as a matter of law.”); Farm Bureau Life Ins. v. Holmes Murphy, 831 N.W.2d 129 (I...