Tex. Friends Chabad-Lubavitch, Inc. v. Nova Cas. Co.

Decision Date12 May 2021
Docket NumberCivil Action No. H-20-0388
Citation539 F.Supp.3d 669
CourtU.S. District Court — Southern District of Texas

Hunter Milam Klein, Green & Klein, Houston, TX, for Plaintiff.

Peri Hayriye Alkas, Phelps Dunbar LLP, Houston, TX, for Defendant.



Plaintiff Texas Friends Chabad-Lubavitch, Inc. ("Plaintiff") seeks to recover insurance proceeds and damages from defendant Nova Casualty Company ("Defendant") for breach of contract, unfair settlement practices, failure to promptly pay a claim, and breach of the common-law duty of good faith and fair dealing.1 Pending before the court are Plaintiff Texas Friends Chabad-Lubavitch, Inc.’s Motion for Partial Summary Judgment Against Defendant Nova Casualty Company and Memorandum in Support Thereof ("Plaintiff's MPSJ") (Docket Entry No. 18) and Defendant's, Nova Casualty Company's, Motion for Summary Judgment ("Defendant's MSJ") (Docket Entry No. 19). For the reasons explained below, Plaintiff's MPSJ will be denied, and Defendant's MSJ will be granted in part and denied in part.

I. Factual and Procedural Background

Plaintiff operates the Chabad-Lubavitch Center (the "Center"), located at 10900 Fondren Road, Houston, Texas 77096.2 This case concerns three buildings at the Center: the Main Education Building containing the Synagogue and Torah Day School ("Main Building") and Annexes ## 12 and 13 ("Annexes").3 The Main Building is a two-story structure.4 At the time of Hurricane Harvey the Main Building had three different roof surfaces: the eastern section had a modified bitumen (flat) roofing membrane, the middle section had a thermoplastic polyolefin ("TPO") roof,5 and the western section had a rubber tile play surface.6 The Annexes are converted apartment buildings used as classrooms and additional storage.7 Defendant insured the Main Building and Annexes under a Commercial Property Policy No. CFl-ML-10001305-00 (the "Policy").8 The effective dates for the Policy are June 14, 2017, to June 14, 2018.9

Hurricane Harvey impacted the Center from August 25, 2017, through August 29, 2017.10 Defendant retained a meteorologist who estimates that the amount of rainfall at the Center was between 30-35 inches.11 Plaintiff retained an engineer who estimates that the rainfall was between 35-40 inches.12

Plaintiff asserts and Defendant does not deny that water leaked into the Main Building during Hurricane Harvey and caused substantial damage to the building's interior,13 but the parties disagree as to how the leak occurred. Defendant argues that water penetrated the Main Building through unsealed separations that had formed around the building's roof and windows before Hurricane Harvey.14 Plaintiff's engineer agreed that some of the separations in the flashing seals predated Hurricane Harvey,15 but Plaintiff also argues that "additional water intrusion occurred through seals which became separated due to the immense weight and pressure from the rain collecting on the roof."16 The Annexes also sustained water damage, and the means of entry there is also disputed. Plaintiff argues that the volume of water during Hurricane Harvey overwhelmed the buildings’ gutters,17 while Defendant argues that the water intruded through "pre-existing openings ...."18

Plaintiff timely made a claim with Defendant, and Defendant assigned a claim number 19-00087854 000.19 On January 8, 2018, Defendant sent Plaintiff a letter denying Plaintiff's claim.20 The letter explained that "the roof did not sustain damage from a covered cause of loss" and that there was therefore "no applicable coverage for the leaking roof or resulting interior water damage in this incident."21 The letter further explained that windows at the property "were found to be leaking on multiple elevations[,]" that there was "sustained repeated leakage and the caulking [was] worn allowing water seepage[,]" and that "[c]ontinuous water seepage, wear and tear and maintenance are excluded."22 Defendant found some storm-related damage to the fencing around the Center but valued the damage at below the Policy's deductible.23 The letter also acknowledged damage caused by "[f]lood and surface water" as well as "[e]arth movement, settlement and cracking[,]" all of which Defendant said were excluded under the Policy.24

On January 7, 2020, Plaintiff filed suit against Defendant in the 333rd Judicial District Court of Harris County, Texas.25 Plaintiff asserted (i) breach of contract, (ii) unfair settlement practices, (iii) violation of the Texas Prompt Payment of Claims Act ("TPPCA"), and (iv) breach of the duty of good faith and fair dealing.26

On February 4, 2020, Defendant timely removed the case to this court on the basis of diversity jurisdiction.27 On June 16, 2020, Plaintiff filed its First Amended Petition.28 Plaintiff moved for partial summary judgment on March 5, 2021,29 and Defendant moved for summary judgment that same day.30 Defendant filed a response to Plaintiff's MPSJ on March 25, 2021.31 Plaintiff filed a response to Defendant's MSJ on March 26, 2021.32 Plaintiff filed a reply in support of its own motion for partial summary judgment on April 1, 2021.33

II. Standard of Review

Summary judgment is proper when "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). A material fact is one likely to reasonably affect the outcome of a case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The moving party is entitled to judgment as a matter of law if "the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

A party moving for summary judgment "must ‘demonstrate the absence of a genuine issue of material fact,’ but need not negate the elements of the nonmovant's case." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam) (quoting Celotex, 106 S. Ct. at 2553 ). If the moving party meets this burden, Rule 56 (c) requires the nonmovant to go beyond the pleadings and show by admissible evidence that specific facts exist over which there is a genuine issue for trial. Id.

In establishing a genuine dispute of material fact, the party opposing summary judgment must set forth specific facts establishing a genuine dispute worthy of trial.

Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992). "[C]onclusory allegations unsupported by concrete and particular facts will not prevent an award of summary judgment." Duffy v. Leading Edge Products, Inc., 44 F.3d 308, 312 (5th Cir. 1995).

In reviewing the evidence "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the. evidence." Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 120 S. Ct. 2097, 2110, 147 L.Ed.2d 105 (2000). The court resolves factual controversies in favor of the nonmovant, "but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Little, 37 F.3d at 1075.

When a movant presents sufficient evidence that no genuine dispute of material fact exists, the burden of production shifts to the non-movant. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). If a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact, the court may:

(1) give an opportunity to properly support or address the fact;
(2) consider the fact undisputed for purposes of the motion;
(3) grant summary judgment if the motion and supporting materials–including the facts considered undisputed–show that the movant is entitled to it; or
(4) issue any other appropriate order.

Fed. R. Civ. P. 56(e).

III. The Policy
A. "Covered Cause of Loss"

The Policy states that Defendant will pay for "direct physical loss of or damage to Covered Property ... caused by or resulting from any Covered Cause of Loss."34 The Policy further provides that "[w]hen Special is shown in the Declarations, Covered Cause of Loss means direct physical loss unless the loss is excluded or limited in [the Policy]."35 The Policy's Declaration pages include the word "Special" under the heading "Covered Causes of Loss."36 The court will therefore consider direct physical damage to covered property as a Covered Cause of Loss unless an exclusion or limitation applies.

B. Limitations

Section C of the Policy, entitled "Limitations," provides in part that

1. We will not pay for loss of or damage to property, as described and limited in this section. In addition, we will not pay for any loss that is a consequence of loss or damage as described and limited in this section.
c. The interior of any building or structure, or to personal property in the building or structure, caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or (2) The loss or damage is caused by or results from thawing of snow, sleet or ice on the building or structure.37

The court construes Limitation 1(c)(1) as precluding coverage for water damage to a building's interior unless the building first sustained damage by a Covered Cause of Loss that allowed the water to enter.

C. Exclusions and Exceptions

Section B of the Policy provides that Defendant "will not pay for loss or damage caused by or resulting from"38 several enumerated Exclusions, such as "wear and tear;" "decay, deterioration, hidden or latent defect or any quality...

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