Summit Mgmt. Servs. v. Falls Lake Fire & Cas. Co.

Decision Date27 January 2022
Docket NumberCivil Action 5:21-cv-00110-KDB-DSC
CourtU.S. District Court — Western District of North Carolina



Civil Action No. 5:21-cv-00110-KDB-DSC

United States District Court, W.D. North Carolina, Charlotte Division

January 27, 2022


David S. Cayer United States Magistrate Judge

THIS MATTER is before the Court on Plaintiffs' Motion for Partial Judgment on the Pleadings (Document #18), Defendants' Motion for Judgment on the Pleadings (Document #21), and the parties' briefs.

The Motion has been referred to the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1) and is now ripe for the Court's consideration.


Accepting the factual allegations of the Complaint as true, Plaintiffs own and operate the Riverwalk Apartment Complex located in Denver, North Carolina. Doc. 1. Defendant insurance companies provided Plaintiffs with a policy that insured the property from March 31, 2020 until March 31, 2021. Doc. 1-2, Ex. B. On or about August 13, 2020, eight ground-level units sustained damage from water entering the building during a rain event. Doc. 1.

Plaintiffs retained the engineering firm ESP Associates to investigate the cause and origin of the water damage. Id. ESP Associates determined that backup or overflow from sewers or drains caused an overflow of stormwater, which entered the eight units and caused substantial damage.


Id. Plaintiffs filed a claim with Defendants stating that the damage was caused by sewer and drainage back up. Id. Defendants retained an independent adjuster through Engle Martin & Associates to assist with the claim. Defendants and Engle Martin thereafter hired the engineering firm EFI Global to inspect and advise on the cause of the back-up. EFI Global similarly determined that a backup of the storm sewer network piping led to an overflow of rainwater that caused the damage. Id.

Defendants denied Plaintiffs' insurance claim based upon the policy's exclusion of coverage for “floods.” Id. After receiving the denial letter and in accordance with the need for further inspection, Plaintiffs, at their own expense, hired the engineering firm HICAPS to provide a neutral and unbiased investigation of the loss. Id. HICAPS concluded “[t]he storm drainage system did not drain properly during the rain event because of obstructions in the storm drain system.” Id.

On April 20, 2021, Plaintiffs prepared a Sworn Statement in Proof of Loss valuing the claim at $325, 971.87. Id. In response, Defendants reopened the claim and submitted the Sworn Proof of Loss and supporting documentation to EFI Global. EFI Global issued a supplemental report that concluded as follows: “EFI confirms our original cause of the water intrusion into Building 6903 of the Riverwalk Apartments was a result of the inundation and subsequent backup of the storm sewer network system. The sediment, debris, and/or trash within the storm drain piping as well as the debris reportedly on top of the drain inlet DI-A20 coupled with the relatively high precipitation rate (4.75-inches/hour) both likely contributed to the inundation of the storm sewer network system.” Id. Defendants again denied the claim and reiterated their position that there was no coverage because the damages were caused, at least in part, by “flooding.” Id.


Plaintiffs filed their Complaint on July 7, 2021 alleging: (1) breach of contract; (2) breach of good-faith and fair dealing; and (3) unfair and deceptive trade practices under North Carolina law. Doc. 21. On September 30, 2021, Plaintiffs filed a Motion for Partial Judgment on the Pleadings. Doc. 18. Plaintiffs argue that they are entitled to judgment on the pleadings as to their breach of contract claim. They allege the water damage is covered under the policy because it was caused by the backup or overflow from sewers or drains. Doc. 19.

Defendants filed a Motion for Judgment on the Pleadings on October 15, 2021. Doc 21. They argue that they are entitled to judgment on the pleadings on all claims because Plaintiffs' damage: (1) “results from sewer or sump overflow resulting from ‘Flood, '” or (2) results from “runoff of surface waters from any source, ” or (3) resulted in damage to the “interior of any ‘building' or structure caused by or resulting from rain[, ]” each of which is expressly excluded from coverage. Defendants claim that any one of those provisions excludes coverage even if it is not the sole cause of Plaintiffs' damages so long as it “contributes concurrently or in any sequence to the loss or damage” as provided in the anti-concurrent causation clause language. Id. Further, Defendants argue they are entitled to judgment as a matter of law as to Plaintiffs' bad faith and unfair and deceptive trade practices claims due to lack of coverage, non-recognition of the claim, lack of aggravating factors, and because they properly investigated the claim and reasonably relied on the policy language. Id.


A. Standard of Review

Pursuant to Rule 12(c), “[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). In evaluating a motion for judgment on the pleadings, the trial court may consider the pleadings and any materials


referenced in or attached to the pleadings which are incorporated by reference. See Fed. R. Civ. P. 10(c); Fayetteville Invs. v. Com. Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991). The trial court may also consider documents attached to a motion for judgment on the pleadings so long as those documents are “integral to the complaint” and authentic. Philips v. Pitt Cnty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009); see Rockville Cars, LLC v. City of Rockville, 891 F.3d 141, 145 (4th Cir. 2018).

Such a motion is decided using the same standard that applies to a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted. Deutsche Bank Nat'l Trust Co. v. I.R.S., 361 Fed. App'x 527, 529 (4th Cir. 2010); Walker v. Kelly, 589 F.3d 127, 138 (4th Cir. 2009). In reviewing a Rule 12(b)(6) motion, “the court should accept as true all well pleaded allegations and should view the complaint in a light most favorable to the plaintiff.” Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). The plaintiff's “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.” Id. at 563. A complaint attacked by a Rule 12(b)(6) motion to dismiss will survive if it contains enough facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

In Iqbal, the Supreme Court articulated a two-step process for determining whether a complaint meets this plausibility standard. First, the court identifies allegations that, because they are no more than conclusions, are not entitled to the assumption of truth. Id. “Threadbare recitals


of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555) (allegation that government officials adopted challenged policy “because of” its adverse effects on protected group was conclusory and not assumed to be true). Although the pleading requirements stated in “Rule 8 [of the Federal Rules of Civil Procedure] mark [] a notable and generous departure from the hyper technical, code pleading regime of a prior era . . . it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Id. at 678-79.

Second, to the extent there are well pleaded factual allegations, the court should assume their truth and then determine whether they plausibly give rise to an entitlement to relief. Id. at 679. “Determining whether a complaint contains sufficient facts to state a plausible claim for relief “will . . . be a context specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. “Where the well pleaded facts do not permit the...

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