Great Plains Ventures, Inc. v. Liberty Mut. Fire Ins. Co.

161 F.Supp.3d 970

Great Plains Ventures, Incorporated, Plaintiff,

v.Liberty Mutual Fire Insurance Company, Defendant.

Case No. 14-CV-1136-JAR

United States District Court, D. Kansas.

Signed February 11, 2016

David E. Rogers, Sharon E. Rye, Wyatt A. Hoch, Foulston Siefkin LLP, Wichita, KS, for Plaintiff.

C. Zachary Ransel, Jefferson D. Patten, Peter E. Kanaris, Fisher Kanaris PC, Chicago, IL, Jerry D. Hawkins, Hite, Fanning & Honeyman, LLP, Wichita, KS, for Defendant.

MEMORANDUM AND ORDER

JULIE A. ROBINSON, UNITED STATES DISTRICT JUDGE

Plaintiff Great Plains Ventures, Incorporated (“GPV”) brings this action to recover under an insurance policy issued by Liberty Mutual Fire Insurance Company (“Liberty Mutual”). This matter comes before the Court on GPV's Motion for Partial Summary Judgment (Doc. 104) on the issues of coverage and attorneys' fees. The matter is fully briefed and the Court is prepared to rule. For the reasons explained below, the Court grants in part and denies in part GPV's motion for summary judgment.

I. Summary Judgment Standard

Summary judgment is appropriate if the moving party demonstrates that there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law.¹ In applying this standard the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party.² “There is no genuine issue of material fact unless the evidence, construed in the light most favorable to the nonmoving party, is such that a reasonable jury could return a verdict for the nonmoving party.”³ A fact is “material” if, under the applicable substantive law, it is “essential to the proper disposition of the claim.”⁴ An issue of fact is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the non-moving party.”⁵

The moving party initially must show the absence of a genuine issue of material fact and entitlement to judgment as a matter of law.⁶ Where, as here, the moving party bears the burden of proof at trial, the moving party must submit evidence to establish the essential elements of its claim.⁷ Once the movant has met this initial burden, the burden shifts to the nonmoving party to “set forth specific facts showing that there is a genuine issue for trial.”⁸ The nonmoving party may not simply rest upon its pleadings to satisfy its burden.⁹ Rather, the nonmoving party must “set forth specific facts that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant.”¹⁰

II. Uncontroverted Facts

The following material facts are either uncontroverted, stipulated to for the purposes of summary judgment, or viewed in the light most favorable to Defendant.

The Policy and Covered Property

Plaintiff GPV is a holding company that has majority ownership in several manufacturing companies. Defendant Liberty Mutual issued policy of insurance number YU2-L4L-433977-032 (“Policy”) to GPV providing coverage for loss or damage to GPV's covered buildings, personal property, business income, and extra expense, subject to the Policy terms. The Policy had effective dates from September 1, 2012 through September 1, 2013. The Covered Property consists of one office building and four warehouses. These buildings are located at: 3504 N. Great Plains (the “3504 Building”); 5200 E. 35th Street North (the “5200 Building”); 5201 E. 36th Street North (the “5201 Building”); 5252 E. 36th Street North (the “5252 Building”); and 5260 E. 36th Street North (the “5260 Building”), all in Wichita, Kansas (collectively, “Covered Property”).

The 5201, 5252, and 5260 buildings all have low-pitched, standing seam metal roofs. The 5200 Building also has a low-pitched metal roof, but in 2012, a silicone-based coating was installed on that building's roof. The roof of the 3504 Building has a TPO membrane as well as a tower that is covered with a metal roof. Before issuing the Policy, Liberty Mutual inspected the roofs on the covered property on August 6, 2012, and found them to be in “overall good condition, with no unfavorable conditions observed.”¹¹

The Policy contains several clauses that are relevant to the scope of coverage. A section near the beginning of the document labeled “Insuring Agreement” states that “Subject to all the terms and conditions of this policy, we will pay for risks of direct physical loss or damage to covered property as a result of an occurrence , unless excluded.”¹² An “occurrence ” is defined as “all loss or damage attributable directly or indirectly to one (1) cause or series of similar causes.” The Policy also includes a section labeled “Coverages,” which describes coverage for certain types of covered property. In this section, the Policy states that “If coverage for real property is provided ... we will pay for a covered loss to your real property at or within one-thousand (1,000) feet of a covered location .” “Covered loss ” is defined as “a loss to covered property at a covered location resulting from a peril insured against .” “Real property ” is defined as “buildings and any other structure, including: (1) Completed additions, extensions, permanent fittings or fixtures; (2) Machinery and equipment used to service the buildings; [and] (3) Yard fixtures.” Hail is not an excluded cause of loss under the policy.

The Storm and the Claim

On May 19, 2013, a hail storm impacted the area in northeast Wichita in which the Covered Property is located. The hail caused damage to the siding and HVAC units of the Covered Property, and caused indentations to the roofs of the buildings. On May 21, 2013, GPV notified Liberty Mutual of the damage to the Covered Property resulting from the hail storm. Liberty Mutual retained NHI General Adjusters (“NHI”) and Engineering Design & Technology (“ED & T”) to assist with the investigation of GPV's claim.

Beginning on May 25, 2013, NHI conducted an inspection of the Covered Property on behalf of Liberty Mutual. Liberty Mutual sent GPV copies of NHI's appraisal of damage on August 1, 2013. The appraisal did not call for replacement of the metal seam roof panels on the 5201, 5252, or 5260 buildings. On August 27, 2013, engineer Kevin Kirchmer of ED & T inspected the roofs and examined the hail depressions under 10X magnification. Mr. Kirchmer submitted a report on behalf of ED & T to Liberty Mutual, dated September 11, 2013, that categorized the effects of hail to a metal roof as either functional, i.e. damage that reduces the expected service life of the roof, or aesthetic.¹³ The report concluded that the roofs on the 5201, 5252, and 5260 buildings did not show signs of “functional damage,” but only “hail-caused indentations” that were “aesthetic in nature and [were] not visible from the ground level.”¹⁴ According to the report, these indentations did not compromise the roofs' expected service life and did not warrant repair. Liberty Mutual also retained engineer Chris Kneppers from Madsen, Kneppers & Associates, and mechanical engineer Frank Grate, to examine the metal seam roofs. Mr. Knepper and Mr. Grate each concluded that the hail indentations did not affect the functionality or service life of the roofs.

On October 14, 2013, Dustin Robertson, then a general adjuster of complex claims for Liberty Mutual, sent an email summarizing the distinctions between functional and aesthetic damage to Marque Peer, GPV's Vice President of Development. Mr. Robertson explained that “minor impact damage or blemishes” to the roofs “would not be included in our scope of damage.”¹⁵ On December 12, 2013, Liberty Mutual sent GPV a letter offering to pay $611,883.51 as advance and partial payment for GPV's claim. Mr. Peer sent a letter on behalf of GPV to Liberty Mutual on January 13, 2014, with a Sworn Statement in Proof of Loss that claimed $4,393,135.42 in damage to the Covered Property, including damage to the roofs of the 5201, 5252, and 5260 buildings. GPV supported its claim for damage to the roofs with estimates from Bill Johnson of Evans Building Company, who recommended overlaying the roofs rather than fully replacing them. Mr. Johnson testified in his deposition that he based this recommendation on an inspection of GPV's roofs, during which he found indications that the hail indentations had caused physical damage to the roofs.

Liberty Mutual responded with a letter on February 17, 2014, stating that it disagreed with GPV's claimed loss of $4,393,135.42 and that “[t]he policy does not provide coverage for the amount sought.”¹⁶ Liberty Mutual ultimately paid GPV $611,883.51 as partial payment for damage to walls, doors, the rooftop tower of the 3504 Building, the metal roof of the 5200 Building, a gazebo, and repair to HVAC units on the Covered Property. This amount did not reflect compensation for repair of the roofs on the 5201, 5252, or 5260 buildings.¹⁷ Liberty Mutual requested that the parties submit the dispute concerning coverage of the metal seam roofs to appraisal. GPV declined to submit the dispute for appraisal and filed suit.

III. Discussion

A. Scope of Policy Coverage

Plaintiff seeks declaratory relief limited to the question whether the Policy provides coverage for the hail indentations on the metal seam roofs of the 5201, 5252, and 5260 buildings. For purposes of its summary judgment motion, Plaintiff does not contend that the hail caused functional or structural damage to the roofs.¹⁸ Instead, Plaintiff argues that the Policy provides coverage for the hail indentations regardless of whether the indentations caused functional or merely cosmetic damage.¹⁹ Defendant does not dispute that the hail storm created cosmetic dents in the roofs of the Covered Property, but argues that the Policy is limited to hail indentations that impact the “roofs' usefulness or function for normal purposes.”²⁰

The interpretation and legal effect of an insurance contract is a matter of law to be determined by the court.²¹ “If the facts are admitted, ... then...