Tristar Lodging, Inc. v. Arch Speciality Ins. Co.
| Decision Date | 01 June 2006 |
| Docket Number | No. 6:05-CV-98-ORL-DAB.,6:05-CV-98-ORL-DAB. |
| Citation | 434 F.Supp.2d 1286 |
| Parties | TRISTAR LODGING, INC., Plaintiff, v. ARCH SPECIALITY INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Middle District of Florida |
David J. Pettinato, Merlin Law Group, P.A., Tampa, FL, for Plaintiff.
Cecelia B. Skeen, J. Pablo Caceres, Butler Pappas Weihmuller Katz Craig LLP, Tampa, FL, for Defendant.
This cause came on for consideration without oral argument on the following motions filed herein:
THEREON it is ORDERED that the motion is DENIED.
THEREON it is ORDERED that the motion is DENIED.
THEREON it is ORDERED that the motion is DENIED.
"The first rule of hurricane coverage is that every broadcast must begin with palm trees bending in the wind." Carl Hiaasen.
This is a lawsuit about a different type of hurricane coverage—insurance coverage, following the damaging storms of 2004. According to the voluminous record,1 Plaintiff owns a Hampton Inn which is insured by Defendant, Arch Specialty Insurance Company. The property was damaged on August 13, 2004, by Hurricane Charley. On September 5, 2004, Hurricane Frances roared in, and more damages were incurred. The Policy provided for several different types of coverage, including building structural loss, business property loss and business interruption loss, and Plaintiff wrestled with the daunting task of assessing its significant damages in order to make and support appropriate claims to the insurer. Due to the extent and nature of the damage, the situation was fairly fluid, with Plaintiff making decisions to repair, replace or salvage, as it struggled to return the property to operational status. For the insurer's part, Plaintiff's understandable difficulties in clearly defining its losses led to understandable difficulties adjusting the losses. Plaintiff made several claims of loss to its insurer, some of which overlap in time. A chronology of these various claims is essential to analyze this suit for breach of contract.
After the Storms, but before any Formal Proofs of Loss were filed
It appears that the insurer (or the insurer's adjuster, Jack Goldin), and Plaintiff (or Plaintiff's representative, Public Adjuster Frank Fortson), had been in early communication following the hurricanes (Doc. No. 71-2). Before any proof of loss was filed, Plaintiff had discussions with the insurer, and the insurer sent experts to inspect the property (Doc. No. 71-2). On September 13, 2004, the insurer's architect emailed Plaintiff and requested various documents pertaining to re-roofing that had been done previously (Doc. No. 71-3). On September 27, 2004, Plaintiff received an advance in the amount of $200,000 (Doc. No. 70). On September 29, 2004, the insurer's contractor estimated the building damages at over a million dollars (Doc. No. 71-2 at 6).
First Proof of Loss—building damage claim
According to the Complaint, Plaintiff submitted a sworn Proof of Loss in the amount of $1,055,311.75 on October 4, 2004 (Doc. No. 1). This claim was for the "carrier's undisputed building estimate" (Doc. No. 71-2, at 4-5). As Plaintiff had received a $200,000 advance on September 27, 2004, an additional payment in the amount of $855,311.75 was made on November 3, 2004 (Doc. No. 70). Thus, the first sworn proof of loss was tendered on October 4, 2004 and paid in full by November 3, 2004.
Second Proof of Loss—building damage claim
Although not alleged in the Complaint, on October 20, 2004, Plaintiff, through its Public Adjuster, sent a second sworn proof of loss relating to the building damage, claiming a loss in the amount of $2,695,414.93 (Doc. No. 71-6 at 2-3).2 On November 17, 2004, the insurer sent a letter to Plaintiff's representative, acknowledging receipt of the second proof of loss, and noting that the "building value and loss is still being reviewed and is subject to adjustment" but due to the volume of information involved, more time was needed "to review the claim to give a proper decision on payment." (Doc. No. 75-7). The insurer requested a meeting at the Property with Plaintiff's contractor to "go over the scope and cost" and pledged to stay in weekly contact until the meeting was arranged. Id.
On December 6, 2004, Plaintiff filed suit against Arch Insurance Company in state court, for breach of the insurance contract.
On January 18, 2005, Arch Insurance Company removed the action to federal court, on the basis of diversity jurisdiction (Doc. No. 1). That same day, Arch Insurance Company moved to dismiss the complaint, asserting that Arch Insurance Company was not a party to the insurance contract; rather, Arch Speciality Insurance Company, a separate but affiliated company, was the correct party (Doc. No. 3).
On January 25, 2005, the parties met with their adjusters at the property (Doc. No. 71 at 8). On January 31, 2005, Arch Speciality formally invoked the right set forth in the Policy to an appraisal (as to the building loss) (Doc. No. 14-2).
On February 11, 2005, the District Court granted the motion to dismiss, dismissed the Complaint, and allowed Plaintiff 10 days to file an amended complaint against Arch Speciality Insurance Company (Doc. No. 16). An Amended Complaint was filed against the correct defendant (herein "Arch") on February 18, 2005 (Doc. No. 17). On March 9, 2005, Arch filed a motion to dismiss the Amended Complaint, asserting that documentation requests and the appraisal demand were outstanding, and compliance with the documentation and appraisal provisions of the Policy were conditions precedent to suit (Doc. No. 20). Plaintiff opposed the motion, contending that Arch waived its right to invoke appraisal and noting that appraisal was addressed only to the property loss and not other losses. On May 3, 2005, the District Court found that the appraisal process was properly invoked by Arch and granted the motion to dismiss, in part; staying the action for a period of 90 days to allow the appraisal process to take its course (Doc. No. 27). In its Order, the District Court noted: "Tristar does not contest that the appraisal provision marks a precondition to suit under the Policy." Id. at 2.
The appraisal process itself was fraught with conflict, and the wrangling is reflected in motions for protective orders, and various related hearings and proceedings. See Doc. Nos. 29-50. On October 11, 2005, however, the Parties' Appraisers and Umpire came to a final agreement and executed a Final Appraisal Award regarding the building damage claim (Doc. No. 51 and 52).3 The Appraisal Award was paid by the insurer on October 27, 2005 (Doc. No. 71-2 at 10).
On October 20, 2004, the Public Adjuster submitted a sworn Proof of Loss relating to a business personal property claim in the amount of $594,283.74 (Doc. No. 71-2 at 5).4 On November 17, 2004, the insurer sent Plaintiff a letter (described above), acknowledging receipt of the "contents" claim, and noting that the insurer was "continuing to review" the contents inventory submitted, but due to the volume of information, "this will take several days" and required adequate time to review the claim to give a proper decision (Doc. No. 75-7). The insurer requested a meeting on site. Id. It was noted that Plaintiff had contracted with a salvor to determine salvage value of the contents and to handle any resulting sale, and "this was acceptable" to Arch. Id.
As detailed above, Plaintiff filed suit in state court on December 6, 2004.
On December 28, 2004, a check was issued in the amount of $300,000 for an advance of business personal property, based on the October 20, 2004 proofs of loss. (Doc. No. 71-2 at 8).
On January 25, 2005, the parties met at the property. On February 18, 2005, Arch issued a $108,212.25 check for business property damage (Doc. No. 71-2 at 9). It appears that an additional check for $2,561.39 was tendered on July 12, 2005, for business personal property (Doc. No. 70 at 4, Doc. No. 71-2 at 9).
On October 20, 2005, the undersigned held a hearing, originally scheduled to supervise the appraisal process, and inquired as to the status of the case (Doc. No. 54). At that hearing, Plaintiff claimed that although the building claim was resolved by the appraisal, more monies were owed regarding a related, but as yet unarticulated, business interruption and expense claim.5 Arch asserted that it promptly adjusted the claims as they were documented, but that it had repeatedly requested additional documentation and Plaintiff had yet to present any other sufficient claim to adjust.6 Based on Plaintiff's representation that there was an unfinalized claim yet to be presented, the Court ordered Plaintiff to file an Amended Complaint, and to tender to Defendant "a complete and final proof of claim, with all necessary supporting documentation" no later than November 10, 2005 (Doc. No. 55).
Plaintiff provided documentation, as ordered, on the depreciation hold-back business personal property loss on November 10, 2005, and Arch paid it ($186,070.75) the next day (Doc. No. 68 at 2-3; Doc. No. 70-1 at 4).
Initial Business Interruption Claim—No Sworn Proof of Loss tendered
Although no formal sworn proof of loss was filed, Plaintiff contends that Arch "knew" that Plaintiff had sustained business income and extra expense losses, as the hotel was partially shut down from August 13, 2004 and fully shut down from September 5, 2004 through January 2005 (Doc. No. 71-2 at 2).
On September 17, 2004, following a telephone conversation between the parties' representatives, Plaintiff's adjuster forwarded three...
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