Short v. N. Pointe Ins. Co.

• Decision Date: 29 April 2013
• Docket Number: No. 1:11-cv-00545-SEB-MJD,1:11-cv-00545-SEB-MJD
• Parties: ROBERT SHORT, Plaintiff, v. NORTH POINTE INSURANCE COMPANY, Defendant. NORTH POINTE INSURANCE COMPANY, Counter and Third-Party Plaintiff, v. ROBERT SHORT, JANET SHORT, and JPMORGAN CHASE BANK, N.A., Counter and Third-Party Defendant.
• Court: U.S. District Court — Southern District of Indiana

ROBERT SHORT, Plaintiff, v. NORTH POINTE INSURANCE COMPANY, Defendant.

NORTH POINTE INSURANCE COMPANY, Counter and Third-Party Plaintiff, v. ROBERT SHORT, JANET SHORT, and JPMORGAN CHASE BANK, N.A., Counter and Third-Party Defendant.

No. 1:11-cv-00545-SEB-MJD

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

Dated: April 29, 2013

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT AND MOTION

FOR LEAVE TO FILE AMENDED COMPLAINT

This cause is before the Court on the summary judgment motions filed by Third Party Defendant JP Chase Morgan Bank, N.A. ("Chase") [Docket No. 63] and Plaintiff Robert Short and Third-Party Defendant Janet Short ("the Shorts") [Docket No. 65], both on July 16, 2012, and the cross-motion for summary judgment filed by Defendant and Counter and Third-Party Plaintiff, North Pointe Insurance Company ("North Pointe") [Docket No. 69], filed on August 17, 2012. Also before the Court is the Shorts' Motionfor Leave to File Amended Complaint and Cross-Claim for Declaratory Judgment [Docket No. 100], filed on November 7, 2012, which seeks to add a bad faith claim against North Pointe and assert a cross-claim for declaratory relief against Chase.

For the reasons detailed in this entry, the Court DENIES Chase's motion for summary judgment and GRANTS IN PART and DENIES IN PART the Shorts' and North Pointe's motions. The Shorts' motion to amend is GRANTED.

Factual Background

Damage to the Property

In 1997, the Shorts purchased a home located at 9912 Mapleton Court, Fishers, Indiana 46038 ("the Property"). Chase issued a mortgage to Robert A. Short and Janet L. Short, Loan Number M 0906966359 ("Mortgage") for the Property. In the summer of 2009, the Shorts, along with their two daughters and Mr. Short's mother, traveled to Florida. The Shorts were unsure how long they would be staying in Florida as the trip was prompted by health concerns of Mr. Short's mother and one of the Shorts' daughters. The Shorts packed clothing and incidental possessions for the trip but did not take their furniture or other possessions to Florida. Because their long term plans were uncertain, the Shorts obtained their daughters' school records from their respective schools in Fishers, Indiana. The Shorts did not put the Property up for sale when they left for Florida and they hired a neighbor to maintain the lawn and look after the Property in their absence.

While in Florida, the Shorts initially signed a short-term, three-month lease for a condominium in Melbourne, Florida. Since that time, the Shorts have remained in Florida, renewing the lease in six-month increments. Not long after they arrived in Florida, the Shorts enrolled their daughters in Melbourne schools.

In late July or early August 2009, Mr. Short returned to the Property. At that time, he checked on the security of the Property, collected more of his daughters' clothing, and prepared the Property for an undetermined period of absence. Beyond their clothing and a few small possessions, the Shorts once again did not move their furniture or other personal property to Florida. Mr. Short also maintained the utilities and phone at the Property. Mr. Short's office remained in the Fishers home and, according to Mr. Short, he planned to return with some regularity in the fall. During his late summer 2009 visit to the Property, Mr. Short turned on the heat in case the weather turned cold before he returned. Mr. Short testified that, although the thermostat went lower, he turned the heat to 42 degrees Fahrenheit because he wanted to keep the Property temperature set in the 40s.

In late March 2010, a neighbor who was watching the Property telephoned the Shorts to inform them that there was a very large icicle hanging from the side of the house. Upon receiving this report, Mr. Short returned to the Property and found that the house had suffered severe water damage.¹ When he first arrived, Mr. Short investigated to determine the source of the damage with a plumber from Mister Quik. The MisterQuik plumber identified the cause of the water damage to be a broken copper water pipe. According to the Shorts' expert, Tim Dickson, the cause of the water damage was from water escaping a frozen burst copper pipe in the master bathroom. In his report, Mr. Dickson concluded: "Based on my visual inspection of the failed copper water supply pipe, it is my opinion the copper pipe ruptured due to the water within the pipe freezing. The water expanded as it froze within the pipe causing the copper pipe to tear longitudinally along the length of the pipe." T. Dickson Aff., Exh. C at 3.

North Pointe's expert, Tom Wood, agrees that the water loss at issue was due to a frozen pipe. In his report, Mr. Wood included the following findings:

1. The extensive water damage observed inside the residential structure at the time of our site investigations was the result of a pipe break in the second floor master bathroom.

2. The pipe break was the result of water freezing inside the copper pipe that supplies water to the valve of the master bathroom whirlpool tub.

3. The freeze and break of the copper supply pipe occurred as a result of inadequate heat in the structure.

4. Given the low heat condition inside the subject dwelling, it is more likely than not that multiple freeze cycles affecting the water supply pipe for the whirlpool tub occurred prior to the failure of the pipe.

Tom Wood Aff., Exh. B Water Damage Investigation Report at 2. Mr. Wood's report further provided:

Based on our experience and research, the minimum low heat setting for a residential structure that has not been winterized is 55 [degrees]. Obtaining a lower safe heat setting than 55 [degrees] would require evaluation of the structure and monitoring for freezing conditions inside the structure. It is our technical opinion, therefore, that a heat setting of 42 [degrees] is notappropriate for a residential structure in this geographic area. It is also our technical opinion that the low heat setting of 42 [degrees] did not provide sufficient heat in the subject dwelling to prevent the water supply pipes from freezing and was the underlying cause of the failure of the copper water supply pipe under the whirlpool tub.

Id. at 3.

The Insurance Policy

At the time the water damaged the Property, it was insured by North Pointe, which had issued to Mr. Short an insurance policy ("the Policy"), Policy Number NPHM303743, that provided property and liability coverage from October 23, 2009 through October 23, 2010. The Policy contained limits of $286,000 for the dwelling and $143,000 for personal property, and had a $1,000 deductible. The Policy listed Chase as the first mortgagee on the Property.

The Policy provisions relevant to this litigation include the following:

SECTION I - PROPERTY COVERAGES

A. Coverage A - Dwelling

a. The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling ...

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SECTION I - PERILS INSURED AGAINST

We insure for direct physical loss to the property described in Coverages A, B and C caused by any of the following perils unless the loss is excluded under Section I - Exclusions.

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12. Accidental Discharge Or Overflow Of Water Or Steam

a. This peril means accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance. ...

b. This peril does not include loss:

(1) On the "residence premises", if the dwelling has been vacant for more than 60 consecutive days immediately before the loss.

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(3) Caused by or resulting from freezing except as provided in Peril Insured Against 14. Freezing;

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d. Section I - Exclusion 3. Water Damage, Paragraphs a. and c. that apply to surface water and water below the surface of the ground do not apply to loss by water covered under this peril.

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14. Freezing

a. This peril means freezing of a plumbing, heating, air conditioning or automatic fire protective sprinkler system or of a household appliance but only if you have used reasonable care to:

(1) Maintain heat in the building; or

(2) Shut off the water supply and drain all systems and appliances of water.

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SECTION I - CONDITIONS

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K. Mortgage Clause

1. If a mortgagee is named in this policy, any loss payable under Coverage A or B will be paid to the mortgagee and you, as interests appear ....

2. If we deny your claim, that denial will not apply to a valid claim of the mortgagee ....

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4. If we pay the mortgagee for any loss and deny payment to you:

a. We are subrogated to all the rights of the mortgagee granted under the mortgage on the property; or

b. At our option, we may pay to the mortgagee the whole principal on the mortgage plus any accrued interest. In this event, we will receive a full assignment and transfer of the mortgage and all securities held as collateral to the mortgage debt.

5. Subrogation will not impair the right of the mortgagee to recover the full amount of the mortgagee's claim.

Docket No. 32-1 (Insurance Policy).

The Claim and Damage Estimates

On March 26, 2010, the Shorts notified North Pointe by telephone of their claim based on the water damage, and North Pointe acknowledged notice of the claim by letter issued on that same date. In that letter, North Pointe identified the "Claim Description" as "Burst pipe, water dmg." Shorts' Exh. 9 (March 26, 2010 letter). North Pointe assigned an independent adjuster, Marshall Simmons of Claims Consultants, LLC, to adjust the claim. On March 31, 2010, Mr. Simmons inspected the home and identified the "Peril" as "Plumbing Leak." Shorts' Exh. 11 (Initial Adjuster Report) at 1. At that time, Mr. Simmons identified the "Cause & Origin" of the water damage as follows:

This water loss occurred sometime in the month of March while the insured and his family were in Florida. The damage was caused by an upstairs plumbing leak in the master bathroom. First inspection revealed that several ceilings were collapsed on

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