Tiger Fibers, LLC v. Aspen Specialty Ins. Co., 1:07cv1106 (AJT/TCB).

Decision Date16 January 2009
Docket NumberNo. 1:07cv1106 (AJT/TCB).,1:07cv1106 (AJT/TCB).
Citation594 F.Supp.2d 630
CourtU.S. District Court — Eastern District of Virginia
PartiesTIGER FIBERS, LLC, et al., Plaintiffs, v. ASPEN SPECIALTY INSURANCE COMPANY, Defendant.

C. Thomas Brown, Silver & Brown, Fairfax, VA, for Plaintiffs.

Christopher Abram Jones, Michael Curtis Gartner, Whiteford Taylor & Preston LLP, Falls Church, VA, for Defendant.

MEMORANDUM OPINION

ANTHONY J. TRENGA, District Judge.

This matter is before the Court on the Motion for Summary Judgment filed by Plaintiffs Atlantic Recycling Technologies, LLC ("Atlantic") and Tiger Fibers, LLC ("Tiger Fibers") and the Motion for Summary Judgment filed by Defendant Aspen Specialty Insurance Company ("Aspen"). These motions were filed on October 17, 2008, and this Court heard oral argument on these motions on November 14, 2008, following which this Court took these motions under advisement.

This case concerns the validity and application of an Aspen property casualty insurance policy with respect to Plaintiffs' claims as a result of a fire that occurred on December 7, 2005. As it pertains to Atlantic, the Aspen policy provides various property and business interruption insurance with respect to an insulation manufacturing business operated by Atlantic in a building located in Lawrenceville, Virginia, which Atlantic leases from the Industrial Development Authority of Brunswick County, Virginia (the "IDA property" or the "Lawrenceville property").1

Plaintiffs and Defendant have both moved for summary judgment. The Plaintiffs claim that the Aspen policy provides building coverage for damage to the Lawrenceville property, that the coverage is valid and enforceable and that Aspen breached the policy by failing to provide coverage for fire and smoke damage to the insured building.2 Aspen, however, claims that the building coverage is unenforceable. Aspen also argues that the Plaintiffs' other coverage claim for personal property damage is not ripe for adjudication and that Plaintiffs are not entitled to recover costs and attorney's fees pursuant to Va. Code Ann. § 38.2-209, which provides for such an award where the court determines that the insurer, not acting in good faith, either denied coverage or refused to make a payment under the policy.

There are several issues before the Court. Briefly summarized, the first issue is whether the building coverage provided by the Aspen Policy is the result of a "scrivener's error" or "mutual mistake." The second issue is whether Atlantic, as a lessee, has an "insurable interest" in the Lawrenceville property sufficient to support the policy's building coverage.3 The third issue is whether Atlantic's claim for "recoverable depreciation" with respect to its personal property claim is ripe for adjudication since there is no evidence that Plaintiffs have actually replaced that property, a condition precedent under the policy. The fourth issue is whether Plaintiffs have a claim for costs and attorney's fees under Va. Code Ann. § 38.2-209.

All parties contend that there are no genuine issues of material fact with respect to their respective motion and that each is entitled to summary judgment in their favor. For the reasons set forth herein, Plaintiffs' motion is GRANTED and Defendant's motion is GRANTED in part and DENIED in part.

I. BACKGROUND

Based on the parties' submissions and the representations of counsel at oral argument, the undisputed facts are as follows:

Atlantic owns and operates a manufacturing business at the Lawrenceville property, which is located at 853 Industrial Park Drive, Lawrenceville, Virginia 23868. In September, 2005, Aspen issued Policy PP000508 to Atlantic with respect to the Lawrenceville property (the "Aspen Policy"). At the time of the fire on December 7, 2005, the Aspen Policy was in full force and effect as to the Lawrenceville property.

At all material times herein, the Lawrenceville property has been owned by IDA and leased to Atlantic pursuant to a lease dated July 21, 2004. Lease, Pls.' Ex. 1.4 The initial term of the lease is five years with two five year renewal options. Id. at ¶ 3. The lease grants Atlantic an option to purchase the Lawrenceville property. Id. at ¶ 16. Under the terms of the purchase option, the purchase price is reduced by a portion of each monthly rental payment.5 The lease also requires Atlantic to maintain the property in "as good a condition" as it existed at the beginning of the lease term and to "restore possession of the Property to the IDA in good condition, reasonable wear and tear excepted." Id. at ¶¶ 11, 12, 18. If Atlantic "fails to maintain the Property as hereunder required, the IDA shall have the right to do so and in that event shall have the right to recover from [Atlantic] all costs expended by the IDA for that purpose." Id. at ¶ 11. The lease also allocates certain duties and responsibilities with respect to damage to the building. The lease requires IDA to maintain "property insurance" at Atlantic's expense. Id. at ¶ 9. In the event of damage to the building so extensive that it cannot be occupied by Atlantic, the lease provides that "for so long as such condition exists the rent otherwise due from [Atlantic] to the IDA shall be abated." Id. at ¶ 12. In the event of such damage, "IDA shall have the right and privilege, but neither the duty nor obligation, to effect such repairs as are necessary to restore the Property to a functional condition." Id. If IDA does not restore the building to a "functional condition," the lease is terminated without penalty to either party. Id.

In the summer of 2005, Plaintiffs contacted a licensed Virginia insurance agency, Franey Muha Alliant Insurance Services, Inc. ("Franey"), about obtaining insurance for both the Lawrenceville property and also the site located in Ronda, North Carolina. Plaintiffs' initial contact at Franey was Joseph E. Potter. Franey prepared an insurance proposal dated May 25, 2005 (the "May 25, 2005 Proposal").6 In August 2005, Franey contacted All Risks, Ltd. ("All Risks"),7 a licensed Virginia insurance broker, and submitted to All Risks an insurance application dated August 8, 2005 (the "August 8, 2005 Application").8 On August 24, 2005, All Risks, in turn, submitted the insurance application prepared by Franey to Aspen.

Upon receiving the August 8, 2005 Application, Aspen began its underwriting process, following which Aspen prepared and submitted to All Risks a quote for insurance coverage with respect to both the Lawrenceville property and the Ronda, North Carolina property. The parties do not dispute that this quote does not contain any proposal to extend building coverage. See Def.'s Stmt. of Undisputed Facts, ¶ 44; Pls.' Stmt. of Disputed Facts, ¶ 44. All Risks forwarded the quote to Franey. On September 1, 2005, Franey requested that All Risks "advise Aspen to bind coverage Short Term effective 9/1/05 to 8/1/06." See Email, Def.'s Ex. 24.

In response to All Risks' request to "bind coverage," Aspen prepared the Aspen Policy, which was reviewed on September 27, 2005 by Aspen's underwriter, Ethan Gow, and then signed by Aspen's "Authorized Representative." Aspen then mailed the Aspen Policy to All Risks on or about September 28, 2005. All Risks reviewed the Aspen Policy on October 4, 2005 and sent it to Franey, with a request to review the Aspen Policy. A copy of the Aspen Policy was also sent to the Plaintiffs with an attached notice on All Risks' letterhead that stated:

PLEASE REVIEW THIS POLICY CAREFULLY

THE COVERAGES AND TERMS OF THE POLICY MAY DIFFER FROM THOSE REQUESTED IN YOUR APPLICATION.

PLEASE REVIEW THIS POLICY AND ADVISE U.S. IMMEDIATELY IN WRITING OR BY FAX, IF YOU BELIEVE ANY CHANGES SHOULD BE MADE IN THE POLICY.

See Notice, Pls.' Ex. 15.

Franey also sent a copy of the Aspen Policy to Plaintiffs with a "Coverage Summary," which states that "[i]n the event of a discrepancy between this summary and the actual policy, the terms and conditions of the policy will prevail." Summary, Pls.' Ex. 16. The Aspen Policy further provides that "[t]his policy contains all the agreements between you and us concerning the insurance afforded. . . . This policy's terms can be amended or waived only by endorsement issued by us and made a part of this policy." Policy, Common Policy Conditions, Section B, Pls.' Ex. 9.

As originally issued, the Aspen Policy covered both the Lawrenceville property and the Ronda, North Carolina property for the period September 1, 2005 through August 1, 2006.9 The Aspen Policy provides three categories of property insurance coverage: (1) damage to the building structure itself; (2) damage to personal business property contained in the building; and (3) losses attributable to "business interruption." Specifically, the Summary of Insurance and

Special Provisions page states:

                Valuation
                           Coverage                                 RC      ACV     ALS    Other:    Coninsurance
                           Building                                 [x]     []      []      []         80%
                           Business Personal Property/Contents      [x]     []      []      []         80%
                           Business Interruption/Loss Income        []      []      []      [x]
                

Policy, Summary of Insurance and Special Provisions, Pls.' Ex. 9.

The specific terms of the coverages provided are found in the "ISO Special Forms" that apply to the Aspen Policy. Policy, Common Policy Declarations and Schedule of Applicable Forms, Pls.' Ex. 9. The applicable ISO Special Forms are listed in the Schedule of Applicable Forms. See id. Among the applicable ISO Special Forms is the "Building and Personal Property Coverage Form." That form provides that "[w]e [Aspen] will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss." Policy, Building and Personal Property Coverage...

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