Brit UW Ltd. v. D.S. Ladner Holdings, LLC

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BRIT UW LIMITED PLAINTIFF/COUNTER-DEFENDANT v. D.S. LADNER HOLDINGS, LLC, and DAS HOLDINGS LLC DEFENDANTS/COUNTERCLAIMANTS v. IAS CLAIM SERVICES COUNTER-DEFENDANT

CIVIL No. 1:21-cv-280-HSO-RPM

United States District Court, S.D. Mississippi, Southern Division

July 31, 2023

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF BRIT UW LIMITED'S MOTION [89] TO STRIKE THE DECLARATION [78-1] OF JOHN ROSETTI; DENYING DEFENDANTS D.S. LADNER HOLDINGS LLC, AND DAS HOLDINGS LLC'S MOTION [74] FOR PARTIAL SUMMARY JUDGMENT ON THE ISSUE OF NOTICE; AND DENYING PLAINTIFF BRIT UW LIMITED'S MOTION [76] FOR SUMMARY JUDGMENT

HALIL SULEYMAN OZERDEN, UNITED STATES DISTRICT JUDGE

BEFORE THE COURT are Defendants D.S. Ladner Holdings, LLC and DAS Holdings LLC's Motion [74] for Partial Summary Judgment on the Issue of Notice; Plaintiff Brit UW Limited's Motion [76] for Summary Judgment;^[1] and Plaintiff Brit UW Limited's Motion [89] to Strike the Declaration [78-1] of John Rosetti, which Defendants D.S. Ladner Holdings, LLC and DAS Holdings LLC submitted in support of their Response [78] to Plaintiff's Motion [76] for Summary Judgment.

After consideration of the record in this case and relevant legal authority, the Court finds that Plaintiff Brit UW Limited's Motion [89] to Strike should be granted, that Defendants D.S. Ladner Holdings, LLC and DAS Holdings LLC's Motion [82] for Partial Summary Judgment should be denied, and that Brit's Motion [74] for Summary Judgment should be denied.

I. BACKGROUND

A. Factual background

Defendants/Counterclaimants D.S. Ladner Holdings, LLC and DAS Holdings LLC (collectively, the “Ladner LLCs” or “Ladner”) own real estate holdings consisting of “over two hundred (200) doors located in the Gulfport, Mississippi area,” including both “single residential units” and “multi-residential units.” Decl. [74-1] at 1 (Declaration of the Ladner LLCs' managing member Steven Ladner). On November 17, 2019, the Ladner LLCs purchased two real estate owned asset protection insurance policies (the “Policies”) for their real estate portfolio through the Lloyd's of London insurance market. See id.; Policy [1-2]; Policy [1-3]. One Policy [1-2] only secured non-flood risks, see Policy [1-2], while the other included an “REI FLOOD ENDORSEMENT” and “insure[d] losses resulting from the peril of FLOOD,” Policy [1-3] at 4. Plaintiff Brit UW Limited (“Plaintiff” or “Brit”) was a subscriber to both Policies. See Compl. [1]; Policy [1-2]; Policy [1-3].

The Policies “cover[ed] all property and/or interest at risk as of 12:01 AM (Standard Time at place of issuance) on 11/17/2019 and continue[d] in force until 12:01 AM (Standard Time at place of issuance) on 11/17/2020.” Policy [1-2] at 8; Policy [1-3] at 10. According to Brit, “the Policies do not provide coverage for any specific property, but only provide coverage for properties that Ladner reported and paid premiums for on a monthly basis.” Mem. [77] at 2-3. Under the Policies, the Ladner LLCs were “required to report to Underwriters, on or before the tenth (10th) day of each month, a complete transaction report including the full replacement cost of each property to be insured,” and premiums were calculated and paid each month. Policy [1-2] at 8 (emphasis removed); Policy [1-3] at 10 (emphasis removed). The Ladner LLC's Memorandum explains that this allows “the flexibility to add and delete properties as they are bought and sold” and allows premiums to fluctuate, “resulting in a lower overall average cost.” Mem. [79] at 8.

In order to advise of loss or damage to property, the Policies each contained a notice provision which stated as follows:

NOTICE OF LOSS, DUTIES AND RESPONSIBILITIES

The Assured shall immediately report in writing, to the Underwriters, a description of every claimed loss or damage which occurs and may become a claim under this insurance immediately after it becomes known to the Assured. You may make a claim for loss or damage covered under this policy/certificate if you notify Underwriters, but in no case, later [sic] than 30 days following the date of loss or damage.

Policy [1-2] at 19 (emphasis in original); Policy [1-3] at 21 (emphasis in original).

During the Policy period, on October 28 and 29, 2020, Hurricane Zeta struck the Gulfport, Mississippi, area causing heavy rains, storm surge, and strong winds, resulting in damages to the Ladner LLCs' properties. See Decl. [74-1] at 1-2. The Ladner LLCs' managing member, Steven Ladner (“Mr. Ladner”), purportedly began to visit its insured properties immediately after the storm “to make an assessment of the most visibly damaged locations.” Id. at 2. According to Mr. Ladner, beginning on or around November 2, 2020, he “continually reported damage” to the properties to the Ladner LLCs' insurance agent to the extent Mr. Ladner was able to access them because of downed trees and power lines, and the insurance agent began reporting claims to the insurer. Id.

Brit assigned the formal claims handling process to IAS Claim Services (“IAS”), which in turn hired field adjuster Lucas McCoy (“Mr. McCoy”). Id. Mr. Ladner believed that Mr. McCoy's repair cost estimates were very low, and “between December 2020 and January 2021, [Mr. Ladner] asked a contractor named Chuck Vance to review Mr. McCoy's inspection reports.” Id. Mr. Vance determined that the property damage was “grossly undervalued.” Id. Mr. Ladner requested that Mr. McCoy reinspect the properties, and Mr. Vance accompanied Mr. McCoy during those visits. Id. According to Mr. Ladner, “[u]pon reinspection, the estimated damage calculations more than quadrupled and, as to some properties, the Ladner LLCs received supplemental actual cash value (‘ACV') payments for some previously-inspected properties that had been off by tens of thousands of dollars.” Id. at 2-3.

Ms. Ladner's Declaration states that Mr. McCoy's schedule only permitted him to inspect the Ladner LLCs' properties on certain days and that Mr. McCoy could only visit two or three houses per day. Mr. Ladner avers that “[d]amages relating to specific location losses would be reported in groups as Mr. McCoy was able to access the properties and complete his field reports,” and that this reporting processing, which was “the product of Mr. McCoy's schedule,” was approved by the Ladner LLCs, Mr. McCoy, and IAS. Id. Mr. Ladner has identified six properties as “examples of location losses that, with the approval of IAS, were reported after the Policies expired, reported outside of the thirty (30) day reporting periods, adjusted by IAS, and paid by Certain Underwriters at Lloyd's, London,” and he states that “[a]pproximately twenty-six (26) location losses were resolved with little issue.” Id. However, when the Ladner LLCs “began to submit higher value claims,” Mr. Ladner states that “valuation began to be questioned,” and “[i]t was at this point that IAS changed its position on coverage.” Id. Additional losses were denied by Brit as outside of the Policies' 30-day reporting period. Id. at 4.

B. Procedural history

On August 26, 2021, Brit filed a Complaint [1] against the Ladner LLCs in this Court seeking a declaration regarding its coverage obligations for damages the Ladner LLCs' properties sustained during Hurricane Zeta. See Compl. [1]. Brit alleges that, while the Ladner LLCs submitted 23 timely property damage claims in compliance with the Policies' 30-day notice provision, they made 88 late-reported claims, and they purportedly “continue[ ] to late report additional claims for property damage in breach of the Policies' clear and unambiguous language.” Id. at 8-9. The Complaint seeks declarations that the Ladner LLCs failed to comply with the Policies' notice provisions, that Brit has been prejudiced by the Ladner LLCs' failure to comply, that Brit owes no obligation to the Ladner LLCs, and that the Ladner LLCs' “material breach of the Policies warrants a denial of coverage for any claims late reported after November 27, 2020, or more than 30 days following the October 28, 2020 date of loss.” Id. at 10.

The Ladner LLCs filed an Answer [13] to the Complaint [1], followed by an Amended Answer and a Counterclaim [41] against Brit, which added IAS Claims Services (“IAS”) as a Counter-Defendant.^[2] See Am. Countercl. [41]. The Ladner LLCs advance claims against Brit for bad faith breach of contract, breach of the duty of faith and fair dealing, equitable estoppel, and respondeat superior, see id. at 10-12, and claims against IAS for “grossly negligent adjusting of claim,” and “grossly negligent misrepresentation,” id. at 12-16. The Ladner LLCs also raised a “respondeat superior” claim against IAS, id. at 16, which the Court dismissed upon IAS's Motion [83] because it is not an independent cause of action, see Order [100] at 12-13.

The Ladner LLCs have filed a Motion [74] for Partial Summary Judgment on the Issue of Notice. See Mot. [74]. They state that their Motion [74] “centers around the legal question of whether the 30 day notice provision is a triggering condition of coverage or is a condition that could be waived, and/or entitles the Ladner LLCs to argue estoppel, and/or would require Brit to prove prejudice due to any delay.” Id. at 2. The Ladner LLCs take the position that “[t]he 30 day notice provision is a condition subsequent to coverage, i.e. a forfeiture provision, and the Ladner LLCs are entitled to partial summary judgment.” Id.

Brit has filed its own Motion [76] for Summary Judgment on its main declaratory judgment claim “on the limited issue of whether Brit's Policies provide coverage for claims reported by the Defendants more than 30 days after Hurricane Zeta, the reported dated of loss.” Mot. [76] at 1. Brit asks that “the Court grant summary judgment that Ladner is not...