Tamko Bldg. Prods., Inc. v. Factual Mut. Ins. Co.

• Decision Date: 21 August 2012
• Docket Number: Case No. 4:10CV891 CDP.
• Parties: TAMKO BUILDING PRODUCTS, INC., Plaintiff, v. FACTUAL MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

890 F.Supp.2d 1129

TAMKO BUILDING PRODUCTS, INC., Plaintiff,

v.FACTUAL MUTUAL INSURANCE COMPANY, Defendant.

Case No. 4:10CV891 CDP.

United States District Court,

E.D. Missouri,

Eastern Division.

Aug. 21, 2012.

M. Todd Lowther, Spencer M. Taylor, Balch and Bingham LLP, Birmingham, AL, David H. Luce, Carmody MacDonald P.C., St. Louis, MO, for Plaintiff.

H. Kent Munson, The Stolar Partnership LLP, St. Louis, MO, Jason Michael Setty, Jeffrey A. Wothers, Owen J. Curley, Niles and Barton, Baltimore, MD, for Defendant.

MEMORANDUM AND ORDER

CATHERINE D. PERRY, District Judge.

Plaintiff TAMKO Building Products, Inc. is a manufacturer of roofing products. In late 2008, TAMKO's supplier of asphalt flux was unable to supply it with an adequate amount of this product, and TAMKO was forced to shut down its Frederick, Maryland facility for approximately one month. TAMKO held an insurance policy with defendant Factory Mutual Insurance Company, and it submitted a claim for the damages it allegedly suffered during the shutdown.

Factory Mutual refused to pay the claim, and invoked an appraisal provision seeking an appraisal of any damages. TAMKO filed this suit seeking to recover under the policy and alleging vexatious refusal to pay. Factory Mutual filed a counterclaim seeking a declaration of no coverage.

Based on the undisputed evidence before me, I conclude that the loss here is covered by the policy, and so TAMKO is entitled to summary judgment on the coverage issue. I also agree with TAMKO that the appraisal award is void and unenforceable. I will grant Factory Mutual summary judgment on TAMKO's other claims, and so the only issue remaining for trial is the amount TAMKO is owed under the policy.

Background

TAMKO is a manufacturer of roofing materials, including various types of asphalt shingles. In order to produce those shingles, TAMKO purchases coating grade asphalt from its supplier Bitumar USA, Inc. Bitumar produces the coating grade asphalt using a product called asphalt flux, which it purchases from Irving Oil, Ltd. Irving operates an oil refinery in New Brunswick, Canada. Its operations consist of a three-room monobuoy located in the Bay of Fundy, to which ships dock while unloading oil, and a pipeline system connecting the monobuoy to the onshore storage tanks. Collectively, the monobuoy and subsea pipeline is referred to as a “single point mooring” (SPM) system.

In August 2008, Irving Oil shut down its pipeline because of damage to the pipeline and a subsequent oil leak. Because of the shutdown, Bitumar was unable to obtain asphalt flux from Irving Oil, so TAMKO was unable to receive coating grade asphalt from Bitumar. TAMKO therefore slowed and eventually stopped production completely on September 15, 2008, and it resumed operation on October 12, 2008. TAMKO alleges that the shut down caused a loss of approximately $12 million.

Factory Mutual issued Commercial Property Insurance Policy FM469 to TAMKO for the policy period from June 1, 2008 to June 1, 2009. TAMKO submitted a claim for its loss to Factory Mutual in September 2008. The parties exchanged information for approximately nine months before Factory Mutual decided that it would not cover TAMKO's claim. They continued to negotiate and exchange documents, however, until May 2010, when TAMKO filed this suit. In response, Factory Mutual demanded appraisal pursuant to the terms of the policy.

Factory Mutual chose Peter Hagen to serve as its appraiser, and TAMKO chose Ken Sorenson. Those appraisers then selected Steve Rosenthal as the neutral umpire. During the appraisal, TAMKO became suspicious that Hagen was not disinterested because of previous business interactions between Hagen and Factory Mutual. The appraisal concluded with an award of $3,569,261. Thereafter, TAMKO amended its complaint to add a fraud and suppression count related to the appraisal. Factory Mutual filed a motion to dismiss the newly added counts, which I previously denied. I also ordered Factory Mutual to produce discovery regarding any bias of its chosen appraiser.

TAMKO now moves for summary judgment, seeking a declaration that the policy provides coverage for its loss and that the appraisal was void and unenforceable because Hagen and Rosenthal were not disinterested. Factory Mutual seeks summary judgment on TAMKO's second amended complaint and seeks to enforce the appraisal award. The parties also filed several motions to exclude or limit expert testimony.

Discussion

In determining whether summary judgment should issue, I must view the facts and inferences from the facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The moving party has the burden to establish both the absence of a genuine issue of material fact, and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met this burden, the nonmoving party may not rest on the allegations in its pleadings but by affidavit or other evidence must set forth specific facts showing that a genuine issue of material fact exists. Fed.R.Civ.P. 56(e).

Under Missouri law, which applies to this diversity case, the rules governing the interpretation of insurance polices are well settled. Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 77 (Mo.1998) (en banc). A court must apply the general rules of contract construction when interpreting an insurance policy, because insurance policies are contracts. Todd v. Missouri United Sch. Ins. Council, 223 S.W.3d 156, 160 (Mo.2007) (en banc). A court must give the contract's terms their plain and ordinary meaning, unless a term is ambiguous. Farmland Indus., Inc. v. Republic Ins. Co., 941 S.W.2d 505, 508 (Mo.1997) (en banc). A term's plain and ordinary meaning is the meaning that an average layperson would give the term. Farmland Indus., Inc., 941 S.W.2d at 508. In addition, a court “should not interpret policy provisions in isolation but rather evaluate policies as a whole.” Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 135 (Mo.2009). Finally, in interpreting an insurance contract, the court must “endeavor to give each provision a reasonable meaning and to avoid an interpretation that renders some provisions useless or redundant.” Dibben v. Shelter Ins. Co., 261 S.W.3d 553, 556 (Mo.Ct.App.2008).

A term is ambiguous only if the terms are “reasonably and fairly open to different constructions, and there is duplicity, indistinctness, or uncertainty of meaning.” Miller's Classified Ins. Co. v. French, 295 S.W.3d 524, 526 (Mo.Ct.App.2009) (citations and internal quotation marks omitted). When an ambiguity exists in an insurance policy, the court must interpret the policy in favor of the insured. Todd, 223 S.W.3d at 160. If, however, the policy is unambiguous, the court must enforce the contract's terms as written. Id.

Coverage Under the Policy

Generally, to establish a prima facie case of coverage under an insurance policy under Missouri law, the insured must demonstrate: (1) “issuance and deliveryof the insurance policy,” (2) “payment of the premium,” (3) “a loss caused by a peril insured against,” and (4) “notice of loss and proof of the loss given to the insurer as the policy requires.” Nixon v. Life Investors Ins. Co. of America, 675 S.W.2d 676, 679 (Mo.Ct.App.1984). The element at issue in this case is whether the loss was caused by a peril against which TAMKO was insured—specifically whether it occurred at a location insured under the policy.

The insurance policy in this case provides “dependent time element” coverage, which it describes as follows: “This Policy covers the Actual Loss Sustained and EXTRA EXPENSE incurred by the Insured during the PERIOD OF LIABILITY directly resulting from physical loss or damage of the type insured to property of the type insured at Dependent Time Element Locations located within the TERRITORY of this Policy.” The policy then defines a “dependent time element location” as:

(i) Any Location:

(a) of a direct customer, supplier, contract manufacturer or contract service provider to the Insured.

(b) of any company under a royalty, licensing fee or commission agreement with the Insured.

(ii) Any Location of a company that is a direct or indirect customer, supplier, contract manufacturer or contract service provider to a Location described in a)(i) above.

In the policy's Declarations, it more broadly defines an “Insured Location” under the policy as follows:

A. The coverages under this Policy apply to an Insured Location unless otherwise provided.

Insured Location is a location:

1) listed on a Schedule of Locations, Appendix A attached to this Policy.

2) covered as a Miscellaneous Unnamed Location.

3) covered under the terms and conditions of the Automatic Coverage or Errors and Omissions provisions.

B. References and Application. The following term(s) wherever used in this Policy means:

1) Miscellaneous Unnamed Location: A Location owned, leased or rented by the Insured but not specified in the Schedule of Locations.

2) Location:

a) as specified in the Schedule of Locations, or

b) if not specified in the Schedule of Locations, a Location is a building, yard, dock, wharf, pier or bulkhead (or any group of the foregoing) bounded on all sides by public streets, clear land space or open waterways, each not less than fifty feet wide. Any bridge or tunnel crossing such street, space or waterway will render such separation inoperative for the purpose of this Reference and Application.

The only location specified in the Schedule of Locations in the policy relevant to this analysis is TAMKO's facility in Frederick, Maryland.

The parties' arguments regarding coverage under the policy for TAMKO's loss center around the policy's ...