Welton Enters., Inc. v. Cincinnati Ins. Co.
| Citation | 131 F.Supp.3d 827 |
| Decision Date | 15 September 2015 |
| Docket Number | No. 13–cv–227–wmc.,13–cv–227–wmc. |
| Parties | WELTON ENTERPRISES, INC., Welton Family Limited Partnerships and 3PP Plus Limited Partnership, Plaintiffs, v. The CINCINNATI INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Western District of Wisconsin |
Ryan M. Wiesner, Timothy John Casper, Murphy Desmond SC, Madison, WI, for Plaintiffs.
Mark W. Rattan, Brendan Daniel Corcoran, Stephanie L. Dykeman, Litchfield Cavo LLP, Brookfield, WI, for Defendant.
WILLIAM M. CONLEY
, District Judge.
In April of 2011, a hailstorm dented the rooftops of numerous structures in Middleton, Wisconsin, giving rise to the usual insurance claims, sales of property, settlements and lawsuits. Many of the latter centered around whether the applicable commercial insurance policies provide coverage. Among those structures were commercial buildings owned by the plaintiffs, Welton Enterprises, Inc., Welton Family Limited Partnerships and 3PP Plus Limited Partnership (collectively, "Welton"). More than four years later, Welton and the insurer of those buildings, The Cincinnati Insurance Company ("Cincinnati Insurance"), continue to litigate this question.
Cincinnati Insurance contends that because the denting is purely cosmetic and is not visible from the ground, it does not constitute "direct physical loss" under the applicable policy; it also asserts various coverage defenses, including non-cooperation. Welton, on the other hand, argues that the policy provides coverage regardless of the nature of the denting and maintains that Cincinnati Insurance's insistence to the contrary constitutes bad faith.
Before this court is Cincinnati Insurance's motion for summary judgment (dkt. # 95). For the reasons that follow, the court concludes that the denting to Welton's roofs constitutes "direct physical loss," whether cosmetic or not, and will deny Cincinnati Insurance's motion on that point. At the same time, Cincinnati Insurance is entitled to summary judgment on Welton's claim that its position on coverage constituted bad faith. Finally, the court will deny Cincinnati Insurance's motion as regards its newly-asserted coverage defenses.
The April 3, 2011, hailstorm dented the roofs of twelve commercial buildings owned by Welton. At the time, those buildings were insured by a commercial policy that included the following "Coverage" language in Section A: "We will pay for direct physical ‘loss' to Covered Property at the ‘premises' caused by or resulting from any Covered Cause of Loss." (Aff. of Bruce P. Graham Ex. A (dkt. # 98–1) Page 3 [hereinafter "Policy"].)1 The Policy defines "loss" as "accidental loss or damage," but does not define "direct" or "physical." (See id. at 33–35 ("Definitions").)
In the event of a covered loss, Cincinnati Insurance has four options under the terms of the Policy, two of which are relevant here: (1) "[p]ay the value of lost or damaged property" or (2) "[p]ay the cost of repairing or replacing the lost or damaged property." (Id. at 28.) The Policy provides that Cincinnati Insurance will determine the value of covered property at " ‘Actual Cash Value’ as of the time of ‘loss,’ " subject to certain exceptions not relevant to this lawsuit. (Id. at 30.) Actual Cash Value ("ACV") "means replacement cost less a deduction that reflects depreciation, age, condition and obsolescence." (Id. at 33.) In contrast, "Replacement Cost" does not include a deduction for depreciation and replaces ACV if elected. (Id. )
Section D.3 of the Policy also imposes certain "Duties In The Event of Loss or Damage" on the insured, Welton, "in order for coverage to apply [.]" (Id. at 27.) In relevant part, those duties include:
(Id. )
, a companion federal case to this one, this court concluded on summary judgment that that the "direct physical ‘loss' " language established coverage even for non-structural, non-visible denting to metal roof panels. See id. at *7–12. The court also held, however, that Cincinnati Insurance's position was fairly debatable, and granted Cincinnati Insurance summary judgment on that claim. Id. at *12–15; see also Advance Cable Co., LLC v. Cincinnati Ins. Co., No. 13–cv–229–wmc, 2014 WL 2808628, at *7 (W.D.Wis. June 20, 2014)
(). The Seventh Circuit affirmed both conclusions on appeal. See Advance Cable Co., LLC v. Cincinnati Ins. Co., 788 F.3d 743, 746–49 (7th Cir.2015). The Advance Cable case did not, however, involve any additional coverage defenses, such as non-cooperation.
In addition, plaintiffs would make much of Cincinnati Insurance losing a similar construction argument over the phrase "direct physical loss" in a separate lawsuit brought against it by Hy Cite/Welton, LLC, in the Circuit Court for Dane County, Wisconsin, although that decision amounts to a one-page order issued in April of 2015, which denied Cincinnati Insurance's motion for summary judgment "for reasons set forth on the record during the hearing." Not only does it appear no transcript was ever requested for that hearing, preventing this court from determining the basis for the order, but a final judgment has yet to be entered by the circuit court. See Hy Cite/Welton, LLC v. Cincinnati Insurance Company, No. 2013CV002123 (Wis. Cir. Ct. Dane County Apr. 27, 2015).
On this record, exactly when Welton first discovered the denting to its roof remains unclear. Welton's brief states that it first discovered the damage in the summer of 2011, when Scott Martin of Great Lakes Roofing inspected them, but its citation to Martin's affidavit in support is flawed in two respects. First, Martin does not say he inspected the roofs in summer; he says only that he went on the roofs "after the April 3, 2011 hail storm." (Aff. of Scott A. Martin (dkt. # 115–1) ¶ 4.) Second, Martin's affidavit describes his inspection of property located at 2113 Eagle Drive in Middleton—property that was a part of Advance Cable case, but does not appear to be part of the present case.
There is evidence that on September 27, 2011, Joanna Burish, Welton's CEO, sent an e-mail to agents Robyn Henslin and Steve Squires at Hausmann–Johnson Insurance ("Hausmann") asking how to arrange for the inspection of certain properties for hail damage.2 (Aff. of Timothy J. Casper Ex. H (dkt. # 115–8).) Henslin responded the next day, indicating that she had forwarded the list of buildings to Hausmann's in-house claims person, Nick Veech. Veech e-mailed Burish on September 28, providing the names of roofing contractors to whom he had sent the addresses to be inspected. (Decl. of Mark W. Rattan Ex. C (dkt. # 97–3).) Veech also wrote that once they had determined "the extent of the damage to the buildings," Burish should inform him so he could "get the claim information put together and sent in to Cincinnati." (Id. )
On November 18, Burish e-mailed Henslin and Squires indicating that the roofers Veech had recommended had not worked out and that they had retained Great Lakes Roofing to inspect the roofs. (Decl. of Mark W. Rattan Ex. E (dkt. # 97–5).) Squires responded asking Burish to "send a list of the properties you want to make a claim on along with any reports that you have." (Aff. of Timothy J. Casper Ex. G (dkt. # 115–7).) Squires further copied Veech and Curt Jorgenson, Cincinnati Insurance's claims representative, on this e-mail. (See id. )
On November 21, Jessie Reed of Hausmann responded to Burish's e-mail asking for a list of damaged locations. Burish responded that Martin would provide the list of damaged properties along with further details. (Id. ) The next day, Reed e-mailed again, indicating that she had not yet received the list of damaged properties. (Id. ) Burish then provided the same list of highlighted buildings she had previously submitted as Welton's CEO in late September. (Id. )
In the end, Welton apparently never provided Cincinnati Insurance with a copy of any report from Martin or Great Lakes Roofing regarding its actual loss claim. (Aff. of Curt Jorgenson (dkt. # 99) ¶ 5.) On November 22, Welton did submit an "Accord Form" to Hausmann entitled "Property Loss Notice," which apparently was intended to provide formal notification of "[h]ail damage to various locations." (Aff. of Bruce P. Graham Ex. B (dkt. # 98–2).) Hausmann provided that form to Cincinnati Insurance the same day.
In response to this form, Cincinnati Insurance retained a roofing expert, Greg Phillips of Structural Research, Inc. ("SRI"), to inspect the buildings. On December 7 and 9, Phillips inspected the twelve buildings at issue and provided a report. (Decl. of Mark W. Rattan Ex. G (dkt. # 97–7).) The SRI report concluded that several of the identified buildings had "[m]etal roofing panel denting characteristic of hail impact," which varied "from barely discernable to approximately 1? in overall diameter." (Id. at WEL 03166.) The report went on to conclude:
It is our opinion that the metal roof panel denting we observed will not affect the performance of the panels (roofs) or detract from the panels ['] (roofs['] ) life expectancy. Panel denting caused by hail impact will not affect the panels['] ability to resist corrosion due to the galvanized panel plating. The denting that occurred as a result of hail impact was relatively minor and cannot be...
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