Travelers Property Casualty Company of Amercia v. Brookwood LLC
MEMORANDUM OPINION. Signed by Chief Judge Karon O Bowdre on 9/6/2017. (JLC)
2017 Sep-06 PM 12:53
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
CASUALTY COMPANY OF
This case concerns whether a commercial insurance policy covers water damage from a
leaking roof. Brookwood, LLC owns a building that suffered water damage from a leak. The
leak damaged the building and a tenant’s property. Brookwood made claims under its insurance
policy with Travelers Property Casualty Company of America, and Travelers denied those
claims. Travelers now requests a declaratory judgment that its policy does not provide coverage
for the damages incurred by Brookwood and its tenant.
Travelers makes three arguments in support of its request for a declaratory judgment.
First, it asserts that the damages are not covered because the policy excludes coverage for all of
the possible causes of the leak. It also asserts that its policy does not provide coverage for
Brookwood’s economic losses, including repairs to the building and the loss of rental income
from its tenant. And finally, Travelers asserts that its policy does not provide coverage for
damages to personal property owned by Brookwood’s tenant because the lease between
Brookwood and its tenant allocates to the tenant the risk of loss to the tenant’s property, and thus
it is not damage Brookwood is legally obligated to pay. Brookwood, in contrast, maintains that
the possible causes of the leak are not excluded and that the “insured contract” exception to the
contractual liability exclusion in the liability policy restores coverage for the damage to the
Brookwood counterclaims, alleging bad faith on Travelers’s part. Travelers moved for
summary judgment as to all claims; that motion has been fully briefed. (Docs. 41, 45, 50). For the
reasons stated in this Memorandum Opinion, the court WILL GRANT the Motion for Summary
STANDARD OF REVIEW
Summary judgment allows a trial court to decide cases when no genuine issues of
material fact are present and the moving party is entitled to judgment as a matter of law. See FED.
R. CIV. P. 56(a). When a district court reviews a motion for summary judgment, it must
determine two things: (1) whether any genuine issues of material fact exist; and if none, (2)
whether the moving party is entitled to judgment as a matter of law. Id.
In reviewing the evidence submitted, the court must view all evidence and factual
inferences drawn from it in the light most favorable to the non-moving party. See Augusta Iron &
Steel Works, Inc. v. Emp’rs Ins. of Wausau, 835 F.2d 855, 856 (11th Cir. 1988) (citation
omitted). However, the non-moving party “need not be given the benefit of every inference but
only of every reasonable inference.” Graham v. State Farm Mut. Ins. Co., 193 F.3d 1274, 1282
(11th Cir. 1999) (citation omitted).
FACTUAL AND PROCEDURAL HISTORY
Defendant Brookwood owns the Raymond James building, located at 2900 U.S. Highway
280 in Birmingham, Alabama. Brookwood is a named insured in a commercial insurance policy
issued by Travelers that provided coverage for the Raymond James building from April 30, 2014
through April 30, 2015. The policy contains two sections relevant here: the Deluxe Property
(“Property”) Policy and the Commercial General Liability (“CGL”) Policy.1
The parties do not dispute that the roof of the Raymond James building leaked, causing
damage to the building and to a tenant’s property, on or about November 16, 2014, when the
Birmingham area received approximately 2.43 inches of rain and experienced winds of up to 24
miles per hour. Specifically, rain entered the roof through openings in the roof’s EPDM
membrane.2 At issue is what caused the openings in the roof’s EPDM membrane and whether the
Property and/or CGL Policies provide coverage for the damage caused by the rain leaking
through those openings.
On September 19, 2014, prior to the leak, Mr. Tyler Hixson of Hixson Consultants
inspected the Raymond James building’s 18-year-old roof and provided a report to Brookwood
with his findings and recommendations. The report noted that the EPDM roofing membrane had
disbonded in several places, such that “[s]ignificant water entry can occur”; that the EPDM
membrane was denatured, patched, and, in multiple locations, open where it met the base
flashing; that bridging membrane had been employed; that the ballast had been displaced in some
The relevant portions of those two policies are attached as Appendix A to this
“EPDM is an extremely durable synthetic rubber roofing membrane (ethylene propylene
diene terpolymer) widely used in low-slope buildings in the United States and worldwide. . . .
EPDM can be installed either fully adhered, mechanically attached or ballasted, with the seams
of the roofing system sealed with liquid adhesives or specially formulated tape.” What Is
EPDM?, EPDM ROOFING ASSOC., http://www.epdmroofs.org/what-is-epdm (last visited
September 6, 2017).
locations, exposing the membrane to accelerated UV deterioration; and that certain areas were
unsealed or incompletely sealed. The Hixson report recommended reseaming open and
disbonded seams; replacing the denatured membrane and membrane patches; monitoring the
bridging membrane; redistributing displaced ballast; installing pitch pocket filler; and resealing
the membrane and inadequately sealed areas. The parties dispute whether Mr. Hixson’s
recommendations constituted needed repairs or items that would, if performed, maximize the
longevity of the roof, and his report does not clarify the nature of his recommendations.
Brookwood hired Leak Solutions to perform the recommended work. Leak Solutions
employees started work on the roof on November 4, 2014 and worked through November 7,
2014; they did not return during the week of November 10–14, 2014, or apparently, during the
weekend of November 14-16. On November 4, 2014, Brookwood’s building engineer, Marlon
McElroy, observed Leak Solutions employees using metal shovels to scrape ballast on the roof in
the area where the leak at issue in this case later occurred. Upon their departure on November 7,
Leak Solutions employees left the EPDM membrane unrepaired and exposed in multiple areas.
Birmingham received .11 inches of rain on November 6, 2014, which did not damage the
Raymond James building. (Doc. 43-20 at ECF 129). Then, on or about November 16,
Birmingham received nearly two-and-a-half inches of rain. On November 17, 2014, a
representative of McWane, Inc., one of Brookwood’s tenants, informed Mr. McElroy that rain
had leaked into its leased space in the Raymond James building over the weekend of November
14. Brookwood reported the loss to Travelers on November 17 and requested coverage under the
Travelers claim professional Cory Blankenship; Cindy Ritchie, Brookwood’s building
manager; Mr. McElroy; and a Hixson representative inspected the building on November 24,
2014. During that inspection, the Hixson representative suggested that thermal shock caused the
EPDM membrane to contract and detach from the wall. Travelers subsequently retained Charles
Whitley, an engineer, to inspect the loss and provide an opinion as to its cause.
Mr. Whitley inspected the building on December 8, 2014 along with Mr. McElroy, who
informed Mr. Whitley both that Leak Solutions had worked on the roof beginning on November
4, 2014 and that he had seen the Leak Solutions employees using their shovels to scrape ballast.
Mr. Whitley did not inspect the building until after the roof had been repaired and did not take
any measurements during his inspection. He examined the interior damage and the area of the
roof where the water had entered, basing his assessment of the entry point on the location of the
interior damage. On December 11, 2014, after researching weather and other conditions and
reviewing the information provided to him, which included Brookwood’s timeline of events, he
issued a report to Travelers. The timeline that he relied on details when Leak Solutions worked
on the roof and the fact that its employees left the roof exposed when they departed on November
Mr. Whitley’s report to Travelers opined that the removal of the ballast would have made
the membrane more susceptible to temperature changes and UV degradation and that UV
exposure and wind could have damaged the seams. Further, he stated that shoveling the ballast
could have created openings in the membrane through which water entered into the building’s
interior. Mr. Whitley testified that he obtained no evidence of any punctures or holes in the
membrane. Mr. Whitley also testified that he had considered, and eliminated from consideration,
wind as a cause of the roof damage, and had not specifically investigated how wind could have
affected the Raymond James building’s roof. However, he testified that he had confirmed from
weather reports that wind speeds had not exceeded 24 miles per hour during the time the roof
was uncovered, and that based on his personal experience, “the wind speeds [of up to 24 miles
per hour] were not sufficient to have caused any type of uplift on this roof.” (Doc. 43-6 at
Mr. Whitley opined that Leak Solutions’s substandard repair work enabled rain to enter
the building through the EPDM membrane and damage the interior. Specifically, his report states
that both dragging ballast and metal shovels across the membrane, and failing to restore the
displaced ballast for 12 days, could have caused seam separation. Mr. Whitley opined that
thermal shock did not cause the membrane damage because temperatures changed gradually in
the days preceding the leak and because thermal shock does not affect flexible materials like the
EPDM membrane. Based on Mr. Whitley’s report and information from Brookwood, Travelers
denied Brookwood’s claim under the Property Policy on December 16, 2014.
In contrast to Mr. Whitley’s report, Brookwood’s expert, Ben Hixson, identified in his
December 23, 2014 report three potential causes of the seam damage that could have operated
separately or in some combination: thermal shock, foot traffic in conjunction with use of the roof
to hold weights (by window washer personnel who performed their work shortly before Leak
Solutions), and foot traffic by Leak Solutions. During his deposition, Mr. Hixson agreed that
thermal shock is defined as “the expansion and contraction of the roof system due to extreme
temperature changes.” (Doc. 43-19 at deposition 115:8–15). He stated that thermal shock could
occur where the temperature is warm, causing the seams to “pull apart,” or cold, where “the
thermal movement would be drawing together.” (Doc. 43-19 at deposition 106:5–16). Mr.
Hixson explained that thermal shock could occur suddenly or slowly. Birmingham temperatures
reached a high of 76 on November 11 before falling to a low of 23 on both November 14 and 15,
Mr. Hixson testified that, although he had not conducted the investigation necessary to
form an opinion as to whether wind caused the membrane detachment here, he could not rule out
wind uplift as a possible cause of the detachment. Specifically, he noted that, although EPDM
roofing can generally withstand 30-miles-per-hour winds, he did not know what wind speed
would suffice to move unballasted roofing, and agreed that if the ballast had been left in place,
the risk of wind uplift “would have been a whole lot less.” (Doc. 43-19 at deposition 91:1–4).
Mr. Hixson had previously noted in his report that “the field membrane over the leakage
area was not adversely made more susceptible for wind uplift potential because the vast majority
of the roof area remained covered with the membrane manufacturer’s required ten to thirteen
pounds ballast rock per square foot.” (Doc. 43-20 at ECF 129) (emphasis added). But during his
deposition, Mr. Hixson called the potential for “wind vortexes” a possible contributing factor to
the membrane damage. At the end of his deposition, Mr. Hixson separately noted that “[e]ven a
hard rain impact could have caused the brittle, spliced adhesive to fail.” (Doc. 43-19 at
Mr. Hixson stated that the facts that the seams were already stressed and were left
exposed could, separately and together, make the seams more vulnerable to failure from other
causes. He also testified that employing a metal shovel to move ballast across EPDM risked
accelerating the failure of brittle seams; he further stated that the shovel could puncture or gouge
the seams, though he had found no evidence of such puncturing/gouging in the EPDM membrane
here. He clarified that he could not exclude shoveling over the membrane as a cause of the
detached seams but did not maintain that was a primary possible cause of the openings.
Mr. Hixson testified that Leak Solutions’s using metal shovels to move ballast and then
leaving the membrane exposed amounted to “a failure of Leak Solutions to perform their work in
a manner that’s representative of the industry and the standard of care [the] industry uses[.]”
(Doc. 43-19 at deposition 72:4–8). However, in contrast, he had earlier maintained in his report
that, “[w]hile some repair contractors use a wide soft bristle broom . . . this shovel procedure
pulling ballast is normal and is the predominant means contractors employ to move ballast in
preparation to start examining seams and performing seam repairs” and further that “[m]oving
rock ballast off walls and exposing field seams is not considered faulty work or workmanship . . .
.” (Doc. 43-20 at ECF 128–30).
Travelers’s corporate representative Ritchie Royston testified that wind and temperature
changes, including thermal shock, would be covered causes of loss but that shrinking and
expansion were specifically excluded causes of loss; thus, thermal shock, even if it caused the
shrinking and expansion, could not “create a covered cause of loss” in the context of the EPDM
roof. (Doc. 43-23 at deposition 46:8).
After Travelers denied Brookwood’s claim under the Property Policy, Brookwood
submitted to Travelers a claim for coverage under the CGL Policy on December 19, 2014.
Brookwood’s claimed damages included (1) the cost of repairing the interior damage; (2) the cost
of replacing its tenant, McWane’s, damaged furniture; and (3) an approximately $61,000 rent
reduction Brookwood provided to McWane. Email communications show that Travelers
professionals handling the CGL claim reviewed the facts and relevant documents and, after
determining that “the contractor that was doing the work may have been the proximate cause of
causing this roof leak and subsequent damage,” attempted to help Brookwood recover damages
from Leak Solutions and its insurance carrier, as well as assess Brookwood’s potential liability to
McWane. (Doc. 43-5 at ECF 4).
The rental agreement between Brookwood and its tenant McWane provides, in relevant
part, that Brookwood would make “necessary repairs” to the building and “repair any damage to
Tenant’s Premises that occurs as a result of or in connection with the repair of such defective
condition . . . .” (Doc. 43-21 at ECF 6–7). The agreement further required that “[McWane] shall
maintain insurance written on an ‘all-risk’ or broad form for the full replacement cost of its
furniture, furnishings, fixtures, improvements and other property,” with the policy waiving the
right of subrogation against Brookwood where McWane could obtain such language. (Id. at ECF
8). And the lease provided for abatement of the rent if the premises were, through no fault of
McWane, rendered uninhabitable.3
Despite further discussions between Travelers and Brookwood, the parties continue to
disagree about whether the CGL Policy covers the claimed damages. Travelers filed this suit in
June 2015, seeking a declaratory judgment that it owes no coverage for the rain damage to the
Raymond James building and McWane’s property, under either the Property or CGL Policies.
Brookwood separately filed suit against Leak Solutions in July 2016, alleging that the water
damage was the result of Leak Solutions’s negligent and wanton actions. That case remains
pending in Jefferson County Circuit Court.
The relevant portions of the lease are attached in full as Appendix B to this
The parties agree that this court should apply Alabama substantive law to this dispute. See
St. Paul Fire & Marine Ins. Co. v. ERA Oxford Realty Co. Greystone, LLC, 572 F.3d 893, 894
n.1 (11th Cir. 2009) (citing Cherokee Ins. Co., Inc. v. Sanches, 975 So. 2d 287, 292 (Ala. 2007))
(explaining that when a federal court sitting in diversity in Alabama interprets an Alabama
insurance policy, it applies Alabama substantive law). Under Alabama law, the insured bears the
burden of initially proving coverage under the policy. See FCCI, Inc. v. Capstone Process Sys.,
LLC, 49 F. Supp. 3d 995, 998 (N.D. Ala. 2014) (citing Colonial Life & Acc. Ins. Co. v. Collins,
194 So. 2d 532, 535 (Ala. 1967)). The insurer bears the burden of demonstrating that an
exclusion to coverage applies. Pennsylvania Nat. Mut. Cas. Ins. Co. v. St. Catherine of Siena
Parish, 790 F.3d 1173, 1181 (11th Cir. 2015) (citing Acceptance Ins. Co. v. Brown, 832 So.2d 1,
12 (Ala. 2001)). But the insured is responsible for showing that an exception to an exclusion
restores coverage. See USF Ins. Co. v. Metcalf Realty Co., Inc., No. 2:12-cv-02529-AKK, 2013
WL 4679833, at *5 (N.D. Ala. Aug. 30, 2013) (citation omitted).
“Exceptions to coverage are interpreted as narrowly as possible to maximize coverage,
and are construed strongly against the insurance company that issued the policy.” Pennsylvania
Nat. Mut. Cas. Ins. Co. v. Roberts Bros., Inc., 550 F. Supp. 2d 1295, 1303 (S.D. Ala. 2008)
(citing Porterfield v. Audubon Indem. Co., 856 So. 2d 789, 806 (Ala. 2002)). But by the same
token, “[i]f there is no ambiguity, courts must enforce insurance contracts as written and cannot
defeat express provisions in a policy by making a new contract for the parties.” See id. (quoting
Shrader v. Emp’rs Mut. Cas. Co., 907 So. 2d 1026, 1034 (Ala. 2005)). “The issue whether a
contract is ambiguous or unambiguous is a question of law for a court to decide. If the terms
within a contract are plain and unambiguous, the construction of the contract and its legal effect
become questions of law for the court . . . .” State Farm Fire & Cas. Co. v. Slade, 747 So. 2d
293, 308 (Ala. 1999) (citing and quoting McDonald v. U.S. Die Casting & Dev. Co., 585 So. 2d
853, 855 (Ala. 1991)).
Coverage Under Property Policy
The Property Policy is an “all-risk” policy, meaning that it provides coverage for all
physical damage to covered property unless a cause of loss is specifically excluded or limited.
See St. Paul Fire & Marine Ins. Co. v. Britt, 203 So. 3d 804, 809–10 (Ala. 2016) (citations
omitted) (describing all-risk policies as covering all fortuitous losses that are not attributable to
the insured’s misconduct or fraud and that are not specifically excluded).
The parties do not dispute that Brookwood has met its burden to demonstrate initial
coverage; namely, that its covered property was fortuitously physically damaged through no
misconduct or fraud on Brookwood’s part. But Travelers points to the Rain Limitation in section
D. Limitations 1.c.(1) that excludes coverage for rain damage to the interior of the covered
building or personal property unless the building first sustains damage by a covered loss to its
roof.4 The Rain Limitation provides that interior damage caused by rain is covered if “[t]he
building or structure first sustains damage by a Covered Cause of Loss to its roof or walls
through which the rain . . . enters[.]” (Doc. 43-17 at ECF 48).
Travelers has established that the damage to McWane’s space and property was caused by
The parties have not briefed the question of whether the damage to the roof itself is
covered by the Property Policy. However, the court notes that its analysis of whether a covered
cause of loss caused the damage to the roof, in its determination of whether an exception to the
Rain Limitation applies, necessarily means that the damage to the roof is not covered.
rain, so the damage is excluded unless Brookwood shows that the interior rain damage was
caused by a covered cause. Accordingly, to survive summary judgment, Brookwood must
produce evidence on which a reasonable jury could find that the rain damage was caused by a
“covered cause of loss.” (Doc. 43-17 at ECF 48). A genuine dispute of fact exists regarding
causation, but the court finds the dispute immaterial because none of the proposed causes of the
rain damage expounded by Brookwood entitle it to recovery under the Property Policy.
Brookwood contends that wind, temperature change, and thermal shock are all covered
causes of loss that possibly caused the leak, thus preventing application of the Rain Limitation; it
maintains that these covered causes are not inconsistent with faulty workmanship by Leak
Solutions.5 Travelers asserts that Leak Solutions’s faulty repair work caused the damage to the
EPDM membrane that permitted water to leak into the building and that defective workmanship
is an excluded cause of loss. The court notes that the only type of faulty workmanship at issue is
Leak Solutions’s use of metal shovels to move ballast and its failure to restore the ballast to
cover the membrane when workers left the job site on November 7, 2014.
First, to the extent faulty workmanship, inadequate maintenance, and/or wear and tear
The court notes that Brookwood, in its statement of facts, references in list
form—several times without citation—various elements to which the roof was exposed and
which potentially caused the seam failure. For example, it maintains, “Ben Hixson testified that
either temperature changes, thermal shock, wind, foot traffic, or rain impact could have been a
cause of loss of the rain intrusion.” (Doc. 45 at 12). However, in argument throughout the rest of
the brief, Brookwood advances only three potential causes of the loss. Accordingly, the court
considers only those three potential causes in determining whether Brookwood has met its
burden to establish coverage, both because it is incumbent upon Brookwood to demonstrate that
a jury could find the application of an exception to an exclusion from coverage and because
“[t]he court need only consider cited materials” in deciding whether to enter summary judgment.
See FED. R. CIV. P. 56(c)(3). Brookwood has presented neither argument in briefing nor evidence
explaining why UV degradation, rain impact, or foot traffic is a covered cause of loss that would
bring the interior damage at issue here back within the coverage of the Property Policy.
caused the roof damage, they are excluded causes of loss. (Doc. 43-17 at ECF 45, 46 (providing
that loss or damage from wear and tear or from “[f]aulty, inadequate or defective” workmanship
or maintenance is not covered)). Brookwood argues that the fact that the roof did not leak after
the rainfall on November 6, 2014, proves that faulty workmanship did not cause the roof damage.
Leak Solutions’s actions on November 7, particularly leaving the job site without restoring
ballast, may have still been the primary cause of the roof damage; further, even a showing that
faulty workmanship did not cause the seam damage does not meet Brookwood’s burden to show
that an exception to the Rain Limitation applies—namely, that a covered cause of loss produced
As to Brookwood’s proposed causal agents, the parties agree that temperature change
may be a covered cause of loss. But these facts do not simply involve temperature change that
produced damage that then permitted rain to enter the building. Rather, on this record,
temperature change could only have caused damage to the Raymond James building by causing
And thermal shock, on these facts, is not a covered cause of loss. Thermal shock is a
reaction to temperature changes; it is defined as “the expansion and contraction of the roof
system due to extreme temperature changes.” (Doc. 43-19 at Mr. Hixson’s deposition 115:9–11).
The Property Policy specifically excludes coverage for damage caused by or resulting from
Brookwood notes in part of a line in its brief that Mr. Hixson opined that the extreme
hot-to-cold temperature change “would have been sufficient to . . . melt the exposed EPDM’s
adhesive seams.” (Doc. 45 at 20). However, the cited portions of the record say no such thing.
Mr. Hixson’s opinion on the effect of the temperature changes was limited to his position that the
expansion and contraction of the membrane could have caused the seams to disbond, thus
permitting water entry.
“[s]ettling, cracking, shrinking, bulging, or expansion.” (Doc. 43-17 at ECF 45) (emphasis
added). “Shrink” is defined as “to contract to a less extent . . .” and is a synonym for “contract”;
the two terms may be used interchangeably. See Shrink, MERRIAM-WEBSTER DICTIONARY,
https://www.merriam-webster.com/dictionary/shrink (last visited September 6, 2017). The plain
language of the policy thus excludes thermal shock as a covered cause of loss when it causes
cracking, shrinking, and expanding. Brookwood argues that Travelers is precluded from arguing
that the shrinking/expansion provision applies because it failed to investigate thermal shock as a
potential cause of the roof damage. But it cites no authority for this proposition.
Brookwood also argues that the shrinking/expansion and wear and tear exclusions do not
apply because section C.2.i of the policy provides that Travelers will provide coverage when an
excluded cause of loss “results in” a “specified cause of loss.” One specified cause of loss is a
windstorm, and Brookwood contends that the storm that occurred on the same day as the damage
to the roof qualifies as a windstorm, meaning that, as Brookwood reads the policy, the damage
should be covered. Brookwood’s argument misses the mark. Even if the storm was a
windstorm, and therefore a “specified cause of loss,” it would not be covered under section C.2.i
of the policy. That section provides coverage for an excluded cause of loss when that excluded
cause of loss “results in” a specified cause of loss. The shrinking/expansion of the roof or the
wear and tear did not “result in” the windstorm.
For the same reason, the “ensuing loss” exception to the faulty workmanship and
maintenance exclusions in section C.3.c. of the policy does not apply. That section provides: “If
an excluded cause of loss that is listed in 3.c. above [including faulty workmanship or inadequate
maintenance] results in a Covered Cause of Loss, we will pay for the resulting loss or damage
caused by that Covered Cause of Loss. . . .” (Doc. 43-17 at ECF 46). But neither faulty
workmanship nor inadequate maintenance could have caused either thermal shock or wind. That
covered causes of loss “occurred after any alleged improper workmanship, repair, construction,
or maintenance on behalf of Leak Solutions,” as Brookwood argues, is insufficient to trigger the
application of the exception. (Doc. 45 at 25) (emphasis added); see Travelers Indem. Co. v. Bd.
of Cty. Comm’rs, No. 10-cv-02160-MSK-CBS, 2012 WL 1059976, at *4 (D. Colo. Mar. 29,
2012) (reading identical policy language providing coverage for any “resulting loss” where an
excluded cause of loss “results in a Covered Cause of Loss” as requiring causation: “In other
words, although a construction defect, itself, is not covered by the policy, if the defect causes (i.e.
‘results in’) a ‘Covered Cause of Loss,’ and that ‘Covered Cause’ in turn results in property
damage, the resulting property loss is covered.”).
Finally, Brookwood has produced at best only a scintilla of evidence showing that wind
damage was a cause of the leak, which is insufficient to meet its summary judgment burden to
produce evidence to create a genuine issue of material fact about whether an exception to the
Rain Limitation applies. See Anderson, 477 U.S. at 252 (“The mere existence of a scintilla of
evidence in support of the plaintiff’s position will be insufficient; there must be evidence on
which the jury could reasonably find for the plaintiff.”). Neither expert investigated wind as a
cause of the membrane damage. Mr. Hixson testified only that he could not rule it out as a
possible cause of the roof leak, despite stating in his report that “the field membrane over the
leakage area was not adversely made more susceptible for wind uplift potential . . . .” (Doc. 4320 at ECF 129) (emphasis added).
Mr. Hixson’s deposition testimony that directly contradicts his earlier report is
insufficient to create a jury question as to whether wind damage, which is indisputably a covered
cause of loss, caused the relevant damage here. Accord Divine Motel Grp., LLC v. Rockhill Ins.
Co., No. 3:14-cv-31-J-34JRK, 2015 WL 4095449, at *8 (M.D. Fla. July 7, 2015) (finding that no
genuine issue of material fact existed where one expert testified outside the scope of his
investigation about his opinion, formed after examining only two pictures of the damage, that
wind “could not be ruled out” as a cause of damage, because the opposing expert definitively
ruled out wind as a cause of the damage).
Because Brookwood has failed to meet its burden to produce evidence on which a jury
could find that a covered cause of loss produced the leak through which the rain entered, thus
establishing the applicability of an exception to the Rain Limitation, it cannot recover under the
Property Policy any damages incurred as a result of the November 16, 2014 roof leak. Accord
Divine, 2015 WL 4095449, at *7, 10 (granting summary judgment to insurer because the insured
“fail[ed] to identify what other ‘Covered Cause of Loss’ caused the damage to the roof or walls
to permit the rain to enter”). Because no coverage exists under the Property Policy, the court
WILL GRANT summary judgment for Travelers on its request for a declaratory judgment as to
Coverage Under CGL Policy
The “Insuring Agreement” provision of the liability policy provides: “We will pay those
sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or
‘property damage’ to which this insurance applies.” (Doc. 43-17 at ECF 99).
Section 2.j.(1) excludes from coverage property damage to property Brookwood “own[s],
rent[s], or occup[ies], including any costs or expenses incurred by [Brookwood], or any other
person, organization or entity, for repair, replacement, enhancement, restoration or
maintenance of such property for any reason, including prevention of injury to a person or
damage to another’s property . . . .” (Doc. 43-18 at ECF 4) (emphasis added). The policy
defines “property damage” as “[p]hysical injury to tangible property, including all resulting loss
of use of that property.” (Id. at ECF 15) (emphasis added). These provisions clearly exempt
from CGL Policy coverage both the reimbursement Brookwood seeks for repairing the Raymond
James building and the loss of rental income from McWane.
As for the cost of replacing McWane’s furniture, Brookwood was never “legally
obligated” to pay for McWane’s furniture, for two reasons. (Doc. 43-17 at ECF 99). First, the
rental agreement between Brookwood and McWane provides: “Landlord shall repair any damage
to Tenant’s Premises that occurs as a result of or in connection with the repair of such defective
condition, but Landlord shall not be responsible for other damages resulting from such defective
condition.” (Doc. 43-21 at ECF 7). In other words, Brookwood was responsible for making
“necessary repairs” to defects in the roof and other parts of the building itself, including water
damage to the space rented by McWane, but was not liable for damages caused by those defects.
(Id. at ECF 6). Second, the lease allocates the risk of loss of McWane’s furnishings to McWane
and requires that McWane’s insurer waive the right of subrogation against Brookwood.
Brookwood argues that the “insured contract” exception to the contractual liability
exclusion (section I.2.b.(2)) provides coverage for the reimbursements it seeks. The contractual
liability provision, section I.2.b., excludes coverage for “‘property damage’ for which the insured
is obligated to pay damages by reason of the assumption of liability in a contract or agreement.”
(Doc. 43-18 at ECF 2).
As another judge in this district recently explained:
Under Alabama law, the purpose of contractual exclusions such as the
present one is not to exclude liability for claims sounding in contract
but, instead, to exclude an insured’s liability to a third party that the
insured expressly assumed in an indemnity, or hold-harmless
agreement. As the Fifth Circuit stated in a persuasive opinion, Ingalls
Shipbuilding v. Federal Insurance Co., 410 F.3d 214 (5th Cir. 2005),
courts “have consistently interpreted the phrase ‘liability assumed by
the insured under any contract’ to apply only to indemnification and
hold-harmless agreements, whereby the insured agrees to ‘assume’
the tort liability of another. This phrase does not refer to the insured’s
breaches of its own contracts.” Id. at 222 (quoting 1 Barry R. Ostrager
& Thomas R. Newman, Handbook on Insurance Coverage Disputes
§ 7.05, at 460 (12th ed. 2004)).
Owens Ins. Co. v. Alabama Powersport Auction, LLC, No. 5:14–cv–00147–CLS, 2015 WL
3439126, at *10 (N.D. Ala. May 28, 2015). Thus, damages owed by Brookwood to a third party
under an indemnity agreement would not be covered because of the contractual liability
exclusion. But damages owed by Brookwood to McWane for breach of the parties’ own rental
contract are covered by the liability policy if not otherwise excluded.
However, that fact does not mean that the CGL Policy provides coverage for the expenses
incurred by Brookwood in fulfilling its contractual obligations. Section 2.j.(1) makes clear that
the Policy provides no coverage for repairs to Brookwood’s own property. And the rental
agreement allocates the risk of loss to McWane’s furniture to McWane. Thus, by the terms of the
rental contract, Brookwood is not “legally obligated to pay” for damages to McWane’s personal
property caused by the leak on or about November 16, 2014.
Accordingly, Brookwood may not recover the reimbursements it seeks under the CGL
Policy. The court WILL GRANT summary judgment to Travelers on its request for a
declaratory judgment as to that policy.
Brookwood counterclaims for bad faith, alleging that Travelers denied a claim that is
covered under Brookwood’s policy. The Alabama Supreme Court expressly rejected the
“argument that the tort of bad faith provides a cause of action that is separate and independent of
an insurance contract.” Slade, 747 So. 2d at 318. An insured’s claim of bad faith against the
insurer may succeed only when the insured is entitled to coverage under its policy. Id. at 317
(“[W]hen this Court recognized the tort of bad faith, it intended to limit liability under that tort to
those instances in which the insured’s losses were covered under the policy.”). Thus,
Brookwood’s bad faith investigation claim fails, as do all versions of bad faith claims, because
Travelers owed no coverage and thus did not breach the insurance contract. See id. at 318 (“[T]o
prove a bad-faith-failure-to-investigate claim, the insured must prove that a proper investigation
would have revealed that the insured’s loss was covered under the terms of the contract. This
result preserves the link between contractual liability and bad-faith liability . . . .”).
Because Brookwood is not entitled to coverage under its commercial Travelers policy, its
counterclaims fail as a matter of law. Travelers is entitled to summary judgment on these
Because Brookwood has failed to meet its burden to establish that an exception to the
Rain Limitation applies, the Property Policy does not provide coverage for damages stemming
from the Raymond James building’s roof leak on or about November 16, 2014. Nor does the
CGL policy provide coverage for those damages. Given that its Travelers policy does not provide
coverage, Brookwood’s counterclaims fail as a matter of law. Thus, the court WILL GRANT
Travelers’s Motion for Summary Judgment and enter a declaratory judgment in its favor as to
coverage under the commercial policy and enter judgment in its favor on Brookwood’s
The court will enter a separate final Order consistent with this opinion.
DONE this 6th day of September, 2017.
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE
EXCERPTS FROM INSURANCE POLICY
We will pay for direct physical loss of or damage to Covered Property caused by or resulting
from a Covered Cause of Loss.
COVERED CAUSES OF LOSS
Covered Causes of Loss means RISKS OF DIRECT PHYSICAL LOSS unless the loss is:
Excluded in Section C., Exclusions;
Limited in Section D., Limitations; . . .
We will not pay for loss or damage caused by or resulting from any of the
Other Types of Losses
Wear and tear;
Settling, cracking, shrinking, bulging, or
But if an excluded cause of loss that is listed in Paragraphs (1)
through (7) above results in any of the “specified causes of loss” or
building glass breakage, we will pay for the loss or damage caused by
such “specified causes of loss” or building glass breakage.
We will not pay for loss or damage caused by or resulting from any of the
following, 3.a. through 3.c. . . .
Faulty, inadequate or defective:
Design, specifications, workmanship, repair, construction,
renovation, remodeling, grading, compaction;
of part or all of any property on or off the described premises.
If an excluded cause of loss that is listed in 3.c above results in a
Covered Cause of Loss, we will pay for the resulting loss or damage
caused by that Covered Cause of Loss. . . .
The following limitations apply to all coverage forms and endorsements unless otherwise
We will not pay for loss of or damage to property, as described and limited
in this section. In addition, we will not pay for any loss that is a consequence
of loss or damage as described and limited in this section.
The “interior of a building or structure”, or to personal property in the
building or structure caused by or resulting from rain, snow, sleet, ice,
sand or dust, whether driven by wind or not, unless:
The building or structure first sustains damage by a Covered
Cause of Loss to its roof or walls through which the rain,
snow, sleet, ice, or sand or dust enters; . . . .
“Specified Causes of Loss” means the following: Fire; lightning; explosion;
windstorm or hail; . . . .
(Doc. 43-17 at ECF 22, 39, 42, 45–48, 57).
SECTION I – COVERAGES
COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY
We will pay those sums that the insured becomes legally obligated to pay as
damages because of “bodily injury” or “property damage” to which this
insurance applies. . . .
This insurance does not apply to:
“Bodily injury” or “property damage” for which the insured is obligated to
pay damages by reason of the assumption of liability in a contract or
agreement. This exclusion does not apply to liability for damages:
Assumed in a contract or agreement that is an “insured contract”,
provided the “bodily injury” or “property damage” occurs subsequent
to the execution of the contract or agreement. . . .
Damage To Property
“Property damage” to:
Property you own, rent, or occupy, including any costs or expenses
incurred by you, or any other person, organization or entity, for repair,
replacement, enhancement, restoration or maintenance of such
property for any reason, including prevention of injury to a person or
damage to another’s property; . . . .
SECTION V – DEFINITIONS
“Insured contract” means:
A contract for a lease of premises. . . .
“Property damage” means:
Physical injury to tangible property, including all resulting loss of use of that
property. . . .
(Doc. 43-17 at ECF 99; Doc. 43-18 at ECF 1, 4, 12–13, 15).
EXCERPTS FROM RENTAL AGREEMENT
Landlord at its expense . . . shall make necessary repairs to the roof, structural
parts, outside walls, elevators, heating, air conditioning, electrical, plumbing and
other utility systems of Building, and within the Premises to ceiling tile and
fixtures appertaining to utility systems . . . . Tenant shall at once report in writing
to Landlord any defective condition known to Tenant which Landlord is required
to repair. Landlord shall repair any damage to Tenant’s Premises that occurs as a
result of or in connection with the repair of such defective condition, but Landlord
shall not be responsible for other damages resulting from such defective
Tenant shall maintain insurance written on an “all-risk” or broad form for the full
replacement cost of its furniture, furnishings, fixtures, improvements and other
property. Tenant agrees, if obtainable, to include in Tenant’s policy or policies
appropriate clauses pursuant to which the insurance company or companies (i)
waive the right of subrogation against Landlord or any tenant of space in the
Building or both with respect to losses payable under such policy or policies and
(ii) agree that such policy or policies shall not be invalidated by such waiver of
The Rent shall, to the extent the Premises have been rendered untenantable, be
proportionately abated from the date of any fire or casualty not caused by the fault
or negligence of Tenant, Tenant’s servants, agents, employees or invitees, until
the Premises are repaired, and shall be adjusted as of the date of the fire or
casualty in the event this Lease is terminated pursuant to Paragraph 11(a) hereof.
(Doc. 43-21 at ECF 6–9).
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