Presbyterian Healthcare Servs. v. Factory Mut. Ins. Co.

• Decision Date: 11 January 2021
• Docket Number: No. 1:19-cv-00952-WJ-JFR,1:19-cv-00952-WJ-JFR
• Citation: 512 F.Supp.3d 1169
• Parties: PRESBYTERIAN HEALTHCARE SERVICES, a New Mexico nonprofit corporation, Plaintiff, v. FACTORY MUTUAL INSURANCE COMPANY, a/k/a FM Global, a Rhode Island limited liability company, Defendant.
• Court: U.S. District Court — District of New Mexico

512 F.Supp.3d 1169

PRESBYTERIAN HEALTHCARE SERVICES, a New Mexico nonprofit corporation, Plaintiff,

v.FACTORY MUTUAL INSURANCE COMPANY, a/k/a FM Global, a Rhode Island limited liability company, Defendant.

No. 1:19-cv-00952-WJ-JFR

United States District Court, D. New Mexico.

Filed January 11, 2021

Andrew G. Schultz, Rodey Dickason Sloan Akin & Robb, P.A., Albuquerque, NM, for Plaintiff.

Erica Ann Ramsey, Robins Kaplan LLP, Sioux Falls, SD, Alfred A. Park, Lawrence M. Marcus, Park & Associates, LLC, Albuquerque, NM, Scott G. Johnson, Robins Kaplan LLP, Minneapolis, MN, for Defendant.

MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT and GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

WILLIAM P. JOHNSON, CHIEF UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court upon cross-motions for summary judgment: Defendant Factory Mutual Insurance Company's Motion for Summary Judgment, filed November 2, 2020 (Doc. 50 ) ("FMI Motion") and Plaintiff Presbyterian Healthcare Services’ Phase I Motion for Partial Summary Judgment, filed November 2, 2020 (Doc. 51 ) ("PHS Motion"). Having considered the parties pleadings and the applicable law, the Court finds that the FMI Motion is not well-taken and is therefore DENIED. In contrast, the PHS Motion is well-taken and is therefore GRANTED.

BACKGROUND

I. Procedural History

This action centers on an insurance claim related to an August 31, 2013 failure of the electrical system at Presbyterian Hospital ("the Hospital") in downtown Albuquerque, New Mexico, and the resulting replacement of the Hospital's electrical infrastructure. Plaintiff Healthcare Services ("PHS") held property insurance via Policy No. UC211 (the "Policy"), which was issued by the Defendant, Factory Mutual Insurance Company ("FMI"). In November of 2017, after a lengthy investigation, FMI determined that the Policy did not cover certain upgrades to the Hospital's electrical system and denied coverage for those portions of PHS's claim. PHS disputed this denial of coverage and filed its Complaint against FMI in state court on August 30, 2019.¹ The Complaint contains three counts: Breach of Contract and the Covenant of Good Faith and Fair Dealing (Count I); Violation of the New Mexico Insurance Code (Count II); and, Violation of the New Mexico Unfair Practices Act (Count III). Docs. 1-1 & 19.² FMI removed the action pursuant to 28 U.S.C. § 1441(b), invoking this Court's original jurisdiction under 28 U.S.C. § 1332. Doc. 1. In its Answer, FMI asserts, among other defenses,³ that PHS's claims are barred by a "time-to-sue" provision in the Policy. Doc. 24 at 8–9.

II. Facts⁴

FMI issued the Policy to PHS in September of 2012. FMI SUMF ¶ 1. The Policy contained, in relevant part, a "Demolition and Increased Cost of Construction" ("DICC") provision and a "time-to-sue" provision. The DICC provision states that the Policy covers the reasonable and necessary costs incurred to satisfy the minimum requirements of the enforcement of any law or ordinance regulating the demolition, construction, repair, replacement or use of buildings, structures, machinery or equipment at an insured location. Such law or ordinance must be in force on the date of insured physical loss or damage and its enforcement must be a direct result of such insured physical loss or damage. Under certain circumstances, the DICC provision provides coverage for the cost of demolishing physically undamaged portions of an insured property and rebuilding these portions in a manner to satisfy the law being enforced. FMI SUMF ¶ 2; PHS SUMF ¶ 5. The "time-to-sue" provision states, in relevant part, "No suit, action or proceeding for the recovery of any claim will be sustained in any court of law or equity unless... legal action is started within twelve months after inception of the loss." FMI SUMF ¶ 3.

The inception of loss in this case occurred on Saturday, August 31, 2013 at approximately 10:00 a.m., when the incoming power to the Hospital shut off, causing loss of electrical power. When Hospital staff and utility personnel worked to reestablish power, their efforts resulted in an explosion in the Hospital's power distribution and grounding system. Id. ¶ 4–5. PHS claims that to comply with all current safety standards and regulations, it was required to redesign and update its entire electrical system configuration in a manner that separated the normal and emergency power systems, which included replacing equipment that did not sustain direct physical damage from the August 31, 2013 event. Id. ¶ 6. PHS took the position was that it was required to comply with these regulatory provisions even if not directly ordered to do so. PHS SUMF ¶ 14. FMI took the position that the DICC provision did not provide coverage for the updating the reconfiguration of undamaged equipment unless and until an "Authority Having Jurisdiction" issued an order requiring implementation of an applicable code or ordinance. Id. ¶ 15; FMI SUMF ¶ 13. PHS sought the full cost of this reconfiguration in its property damages claim (hereinafter, the "disputed portion of the claim").⁵ PHS SUMF ¶ 14.

George Retamoza was FMI's adjuster for this claim. Id. ¶ 21. FMI investigated the disputed portion of the property damage claim for several years. FMI SUMF ¶¶ 7–20. Correspondence between the parties shows that PHS made several substantive attempts to provide documentation supporting its position that the DICC position covered its reconfiguration of the Hospital's electrical infrastructure. With each round of correspondence, FMI indicated that it would review the submitted documentation. FMI regularly asked for more information and even scheduled teleconferences and in person meetings to discuss the disputed portion of the claim. Finally, on November 14, 2017, FMI sent a letter notifying PHS that the information and documentation provided did not satisfy the DICC provision's enforcement requirement, and therefore the Company would not would not respond to the costs associated with separating the Hospital's normal and emergency electrical power systems. FMI SUMF ¶¶ 19–20.

On February 27, 2018, Robert Frey, PHS's insurance broker, sent an e-mail to FMI in which Mr. Frey claimed that PHS had met its burden of proof through PHS's submission of material from the New Mexico Department of Health. Id. ¶ 21. On July 12, 2018, FMI sent a letter to Mr. Frey stating that FMI's coverage position remained unchanged. Id. ¶ 22. On February 7, 2019, Mr. Frey sent an email to Jeffrey Casillas, FMI's Vice President and Los Angeles Operation Claims Manager, that discussed comments from John Heck, one of the engineers hired by PHS. Id. ¶ 23. FMI forwarded Mr. Heck's comments to its own retained consultant for review, but, on February 19, 2019, FMI ultimately reaffirmed its November 14, 2017 denial of liability. PHS SUMF ¶ 41; FMI SUMF ¶ 24.

III. Parties’ Cross-Motions for Summary Judgment

The sole question before the Court in deciding these cross-motions is whether it may determine, as a matter of law, the effect of the "time-to-sue" provision on this lawsuit. The FMI Motion argues that the time-to-sue provision bars all claims brought by PHS in this lawsuit because FMI did not waive the time-to-sue provision, nor is it estopped from asserting the provision as a defense. The PHS Motion argues that FMI waived any right it might possess under the time-to-sue provision and that PHS timely filed this lawsuit within the applicable statute of limitations period.

LEGAL STANDARD

Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). A fact is "material" if it could have an effect on the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Hardy v. S.F. Phosphates Ltd. Co. , 185 F.3d 1076, 1079 (10th Cir. 1999). "The movant bears the initial burden of ‘show[ing] that there is an absence of evidence to support the nonmoving party's case.’ " Herrera v. Santa Fe Pub. Schs. , 956 F. Supp. 2d 1191, 1221 (D.N.M. 2013) (quoting Bacchus Indus., Inc. v. Arvin Indus. , Inc., 939 F.2d 887, 891 (10th Cir. 1991) ). Once the movant meets this burden, the party opposing a summary judgment motion "must bring forward specific facts showing a genuine issue for trial as to those dispositive matters for which it carries the burden of proof." Kannady v. City of Kiowa , 590 F.3d 1161, 1169 (10th Cir. 2010).

However, merely establishing the absence of genuinely disputed facts will not carry the day for the summary judgment movant. The movant must also demonstrate that the applicable controlling law requires a decision in the movant's favor. Conversely, to defeat summary judgment, the nonmovant must articulate a viable legal theory entitling it to relief. See Swanson v. Fields , 814 F.Supp. 1007, 1010 (D. Kan. 1993) "The question... is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Becker v. Bateman , 709 F.3d 1019, 1022 (10th Cir. 2013) (quoting Shero v. City of Grove , 510 F.3d 1196, 1200 (10th Cir. 2007) ). "On summary judgment the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion." Becker , 709 F.3d at 1022 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). The parties’ filing of cross-motions for summary judgment does not change this standard of review. Burrows v. Cherokee Cty. Sheriff's Officers, No. CIV.A. 00-3333-GTV, 2005 WL 1185620, at *1 (D. Kan. May 18, 2005) (citing Taft Broadcasting Co. v. U.S. , 929 F.2d 240, 249 (6th Cir. 1991) ). However, having determined that PHS prevails on its motion for partial summary judgement, the Court will view all facts underlying these cross-motions...