Wheatridge Office, LLC v. Auto-Owners Ins. Co.

• Decision Date: 04 January 2022
• Docket Number: Civil Action No. 19-cv-00487-RM-STV
• Citation: 578 F.Supp.3d 1187
• Parties: WHEATRIDGE OFFICE, LLC, a Colorado corporation, Plaintiff, v. AUTO-OWNERS INSURANCE COMPANY, a Michigan corporation, Defendant.
• Court: U.S. District Court — District of Colorado

578 F.Supp.3d 1187

WHEATRIDGE OFFICE, LLC, a Colorado corporation, Plaintiff,

v.AUTO-OWNERS INSURANCE COMPANY, a Michigan corporation, Defendant.

Civil Action No. 19-cv-00487-RM-STV

United States District Court, D. Colorado.

Signed January 4, 2022

James Elliot O'Donnell, Ricardo Andres Rivera, Nathanael Thomas Archuleta, Furtado Law PC, Denver, CO, for Plaintiff.

Elayna M. Fiene, Linda J. Knight, Terence M. Ridley, Spencer Fane LLP, Denver, CO, for Defendant.

ORDER

RAYMOND P. MOORE, United States District Judge This is a property insurance dispute arising from hail damage to Plaintiff Wheatridge Office, LLC's ("Plaintiff" or "Wheatridge") commercial building in Wheat Ridge, Colorado. At issue now are the following motions: (1) Plaintiff's Motion for Partial Summary Judgment (ECF No. 118) on Defendant Auto-Owners Insurance Company's ("Defendant" or "Auto-Owners") counterclaims; (2) Defendant's Motion for Summary Judgment (ECF No. 120); (3) Plaintiff's Motion to Preclude or Limit Testimony of Gary Stevens, Peter Marxhausen and Mark Passamaneck (ECF No. 90); (4) Defendant's Motion to Exclude Expert Testimony of Chantal Roberts Pursuant to Fed. R. Evid. 702 (ECF No. 122); (5) Defendant's Motion to Exclude Expert Testimony of Mark Rothbauer Pursuant to Fed. R. Evid. 702 (ECF No. 123); (6) Plaintiff's Motion In Limine to Preclude After Acquired Evidence to Prove Past Fraudulent Intent (ECF No. 157); (7) Plaintiff's Motion In Limine For a Limiting Instruction on and Motion to Preclude Improper Argument on Defendant's Fairly Debatable Affirmative Defense (ECF No. 158); (8) Plaintiff's Motion In Limine to Preclude Testimony and Argument that Compass Adjusting's Contingency Agreement Creates a Moral Hazard (ECF No. 159); (9) Plaintiff's Motion In Limine for a Limiting Instruction on and/or to Preclude Improper Argument That Reliance on an Expert is an Affirmative Defense (ECF No. 160); (10) Plaintiff's Motion to Preclude Reference to the Consequence of Finding that Defendant Unreasonably Delayed or Denied Payment of Insurance Benefits (ECF No. 161); (11) Plaintiff's Motion In Limine for a Limiting Instruction on and/or to Preclude Improper Argument on Defendant's Failure to Cooperate Defense (ECF No. 162); (12) Plaintiff's Motion In Limine to Preclude Evidence of Steve Louden's Material and Labor Costs from ALM Roofing Services, LLC (ECF No. 163); (13) Plaintiff's Motion In Limine to Preclude Argument and Testimony that the Difference in Estimates’ Values Constitutes a Misrepresentation of Material Fact (ECF No. 164); and (14) Plaintiff's Combined Motion to Strike Late Witness Designation of Jerry Payne and Motion In Limine to Preclude Introduction into Evidence of His Axium Report (ECF No. 165) (collectively, "Motions"). The parties filed responses and, in some instances, replies. The Motions are ripe for resolution. Upon review of the Motions, relevant parts of the court record, and the applicable statutes and case law, and being otherwise fully advised, the Court finds and orders as follows.

I. BACKGROUND

Wheatridge owns a three-story office building located in Wheat Ridge, Colorado, that it purchased in 2016 (the "Building"). Prior to purchasing the Building, Wheatridge had an inspection of the property completed, which revealed some needed repairs, including some to the roof, and received a report from the inspectors (the "Axium Report"). Wheatridge insured the Building with Auto-Owners under a commercial property insurance policy, Policy No. 164632-74919537-16 (the "Policy"). (ECF No. 121-2.) Apparently Auto-Owners did not review the inspection report at that time. The Policy's provisions included coverage for damage caused by wind and hail. It also included an explanation of the insured's duties in the event of a loss, including the duty to promptly notify Auto-Owners of the loss, including descriptions of what happened, and the property involved, as well as a duty to "[s]end us a signed, sworn proof of loss containing the information we request to investigate the claim. You must do this within 60 days after our request," and to "[c]ooperate with us in the investigation or settlement of the claim." (ECF No. 121-2, pp. 10, 22.) The Policy also included a condition addressing concealment and misrepresentations by the insured:

A. Concealment, Misrepresentation or Fraud

This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning:

1. This Coverage Part;

2. The Covered Property;

3. Your interest in the Covered Property; or

4. A claim under this Coverage Part.

(ECF No. 121-2, p. 36.)

On July 5, 2017, Wheatridge made a claim for damage to the Building as a result of a hail and windstorm that took place on May 8, 2017. Auto-Owners then assigned the claim to an adjuster, Korrie Cole, and arranged to have the Building inspected. At that time, on July 10, 2017, Auto-Owners also sent Wheatridge a Request for Proof of Loss and Records, indicating that Wheatridge was obligated to submit a signed, sworn proof of loss within 60 days. (ECF No. 121-4.)

The company hired by Auto-Owners to inspect the Building submitted its conclusions and summary of loss to the insurers concluding that the Building had suffered some damage from the hail storm, including damage to 24 solar screens on second- and third-story windows, strikes to the tar and gravel roof covering, including some punctures in places where the roof curved upward, damage to the aluminum-coated parapet walls, and damage to flashing, roof vents, and the rooftop air conditioning unit. (ECF No. 121-5.) The company also noted that Wheatridge had reported interior water damage which the inspector observed in two rooms on the third floor of the Building. The report concluded that the total replacement cost for the damage was $20,180.04 and after accounting for recoverable depreciation the actual cash value of the loss was $15,359.17. Deducting from that amount the $10,000 deductible, the report recommended making payment for repairs in the amount of $5,359.17. If depreciation were recovered, the report recommended an additional payment of $4,820.87.

Wheatridge worked with a company called United Restoration to submit its own estimate for repairs. (ECF No. 121-7.) After visiting the property and utilizing estimating software called Xactimate, United Restoration submitted and estimate for the repairs totaling $233,232.57. The estimate included replacement of the Building's roof, removal and replacement of a wooden deck, and installation of new solar screens, among other things. After reviewing that estimate, Auto-Owners revised its estimate and paid Wheatridge an additional $2,547.47. (ECF No. 121-8.)

Apparently concluding that Auto-Owners’ assessment was still inadequate, Wheatridge hired a public adjusting firm, Compass Adjusting, Inc. ("Compass"). (ECF No. 121-9.) Wheatridge Gave Matt Latham and Mark Rothbauer of Compass authority to deal with Auto-Owners on all matters related to the claim. Compass produced its own estimate of the cost of the damages resulting from the storm, initially concluding it would cost $310,762.93 to make the necessary repairs which apparently included a full replacement of the Building's roof. (ECF No. 121-13.) In response to that conclusion, Auto-Owners hired Rimkus Consulting, a different engineering firm to reinspect the Building. Rimkus found some hail damage to the roof and recommended that the parapet membrane flashing be removed and replaced as well as the curb membrane flashing on the highest roof level. (ECF No. 121-15.) Rimkus also recommended removing and replacing all of the metal parapet caps on the upper roof levels. Based on the Rimkus report, Auto-Owners revised its estimate and issued an additional actual cash value payment of $3,005.69. (ECF No. 121-18.)

In June of 2018, Latham contacted Auto-Owners on behalf of Wheatridge to report that the Building's HVAC unit had "died" and that "there are no replacement parts." (ECF No. 121-19.) He, at least implicitly, attributed the system's failure to the hailstorm in May of 2017. He therefore informed Auto-Owners that it "must replace the unit." Latham also asked that Auto-Owners make a quick determination regarding coverage of the HVAC and to expedite the claim generally. Cole responded that Auto-Owners would be hiring a different HVAC company, HVACi, to further investigate the damage to the unit and to determine if it was caused by the hailstorm. Wheatridge, on advice of Compass, however, informed both HVACi and Auto-Owners that it would not permit HVACi to access the Building to perform its inspection. (ECF No. 121-20.) During this period Wheatridge had some repairs made to the HVAC unit and was able to improve its performance significantly, although it maintains that the unit is still not restored to its pre-loss condition. (ECF No. 121-12.)

Wheatridge continued to deny HVACi access to perform the inspection until December of 2018, when it relented, and the inspection was performed. (ECF No. 121-23.) HVACi's inspection report concluded that the unit had, in fact, been damaged by hail, although it also showed some wear and tear, and noted that the unit was 36 years old. HVACi recommended a settlement for $33,49.56, less applied depreciation of $21,382.17, for a total actual cash value settlement of $11,767.39. Rothbauer emailed Cole to dispute HVACi's conclusion that the unit could be repaired. (ECF No. 119-5.) HVACi informed Cole that replacement parts were available for the unit from the manufacturer. (ECF No. 119-5). Auto-Owners issued an additional check for $11,767.39. (ECF No. 121-24.) The parties continue to strongly disagree about the significance of these communications between Cole and Latham.

During this same period, the parties continued to disagree about the extent of the damage to the Building's roof. In September 2018,...