Hudson Enterprises Inc et al v. Risk Placement Services Inc et al
ORDER: The Marina's motion for summary judgment, 34 , is denied. Underwriters' cross-motion, 46 , is granted. The second amended complaint will be dismissed with prejudice. Signed by Judge D. P. Marshall Jr. on 5/25/2016. (jak)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
HUDSON ENTERPRISES, INC.,
dfb/a River Valley Marina
CERTAIN UNDERWRITERS AT LLOYD'S
LONDON INSURANCE COMPANIES, Subscribing
to Policy #10NCG01559 and Agreement Numbers
NPPI1011456 and NPPI09112456
1. Seven inches of rain fell in the Little Maumelle River basin the night
of 30 April 2011. By morning on May 1st, the river had come out of its banks.
It covered some of the parking lots at the River Valley Marina, as well as the
ramps connecting several floating docks to the shore. There was heavy wind,
too. Five of the docks were lost that morning. They were covered by an
insurance policy that excluded losses" caused directly or indirectly" by flood.
The Marina argues that, as a matter of law, the dock loss wasn't caused by
flood. The insurers, Certain Underwriters at Lloyds London, argue that, as
a matter of law, it was.
2. The Policy. River Valley Marina is the doing-business name of
Hudson Enterprises, Inc., a corporation owned by Ray and Debra Hudson.
The Marina bought a commercial property insurance policy from the
Underwriters in January 2011. The one-year policy covered eight of the
Marina's docks, labeled A, B, C, E, F, G, I, and 0 (there was no H dock). The
policy had exclusions. This section said:
SECTION III - EXCLUSIONS
We will not pay for loss or damage caused directly or indirectly
by any of the following. Such loss or damage is excluded
regardless of any other cause or event that contributes
concurrently or in any sequence to the loss. These exclusions
apply whether or not the loss event results in widespread damage
affecting a substantial area, or remains localized - even when
restricted to the insured premises.
* * *
(a) Flood, surface water, waves, tides, tidal waves,
overflow of any body of water, or their spray, all
whether driven by wind or not[.]
N2 34-3 at 9. The parties argue over how to apply this flood exclusion.
3. What's a flood? The first question is whether the Court can interpret
and apply this policy as a matter of law. It can. The Marina argues that the
policy is ambiguous, because it doesn't define "flood." And, the Marina
continues, because the language is ambiguous, it must be construed against
the Underwriters. But an undefined term isn't automatically ambiguous.
Essex Insurance Co. v. Holder, 372 Ark. 535, 537, 261 S.W.3d 456, 458 (2008).
Mr. Hudson, for example, said the policy's flood language was clear; so did
Mrs. Hudson. NQ 48-1 at 71 & 48-7 at 23-24.* Besides, the Marina and the
Underwriters urge the Court to adopt the same definition of" flood": the one
used by the Arkansas Court of Appeals in Ebbing v. State Farm Fire & Casualty
Co., where that Court found the term unambiguous in a similar policy
provision. 67 Ark. App. 381, 386, 1 S.W.3d 459, 462 (1999). This Court
therefore holds that this common term in this policy is unambiguous. So the
policy's construction and legal effect are questions of law. Southall v. Farm
Bureau Mutual Insurance Co. of Arkansas, 276 Ark. 58, 60, 632 S.W.2d 420, 421
What, then, does the policy mean by flood? Ebbing tells us:
"Flood waters" are those waters above the highest line of the
ordinary flow of a stream, and generally speaking they have
overflowed a river, stream, or natural water course and have
formed a continuous body with the water flowing in the ordinary
67 Ark. App. at 386, 1 S.W.3d at 462 (quotation omitted).
4. Did a Flood Cause the Dock Loss? The parties agree that the
Underwriters must prove that the flood exclusion applies. NQ 47 at 6. Here
*All deposition citations are to deposition pagination.
are the undisputed facts, and, where disputed, the facts in the light most
favorable to the Marina. Anda v. Wickes Furniture Co., 517 F.3d 526, 531 (8th
River Valley Marina sits on the north bank of the Little Maumelle River.
The Marina is about two miles above the Little Maumelle' s confluence with
the Arkansas River. NQ 34-3 at 78 & 48-3 at 4. Most of the water falling into
the Little Maumelle basin drains into the River upstream from the Marina. In
2011, between 9:00 p.m. on April 30th and 3:00 a.m. on May 1st, more than
seven inches of rain fell in the basin. NQ 34-3 at 78. This was a 300-year rain
event. As Mr. Hudson put it: "It rained for three days. Hard. I mean it just
one, one storm after another storm." NQ 48-3 at 3. When you get that kind of
rain, he said, "you're fixin' to have problems." NQ 48-3 at 4.
Mr. Hudson made it to the Marina around 1:00 a.m. on May 1st. When
he got there, he "found water already higher than I had ever seen it around,
as far as the amounts of the rain that had fell." NQ 48-3 at 2. He started getting
people off their boats and getting campers moved to higher ground. His
stepson, Phillip Tidwell, helped. NQ 48-6 at 36-3 7. Soon the river had doubled
in speed. By 3:00 a.m., "it had come up a couple of feet and was beginning to
really roll[.]" NQ 52 at 2. At4:00 a.m., according to Mrs. Hudson, the river was
a little over its banks. NQ 48-7 at 90. By daylight, there was six inches of water
in the parking lot in front of E dock. NQ 48-1 at 134 & 48-7 at 91. Water was
starting to cover the gangplanks between the docks and the shore. NQ 48-5 at
29. Water wasn't the only problem; there was wind too. The wind on May
1st was probably the strongest Mr. Hudson had ever experienced. NQ 48-1 at
173. It nearly pushed his wife into the river. NQ 48-7 at 77. And it left tree
limbs strewn across the ground. NQ 48-5 at 47.
Tidwell took some photographs of E dock after daylight; these will be
important later. Then, sometime later that morning, Tidwell heard creaking
and popping and turned and saw docks starting to leave the bank. NQ 48-6 at
44, 46-47, 70. (Neither of the Hudsons saw any docks leaving.) Five docks
were lost: E, F, G, I, and 0. NQ 48-7 at 34. The others were mostly undamaged.
A few days after the loss, the Underwriters sent an adjuster, Mark Gray,
to take photographs and talk to the Hudsons. Toward the end of their talk,
Gray asked Mr. Hudson what was "the reason or the cause of the docks
pulling loose." NQ 48-1 at 312. Hudson answered: "The velocity of the
water." Ibid. This answer was part of a taped statement, but Gray didn't
record all his conversation with the Hudsons. They talked for about 20
minutes before the recorder started running. During that time, the Hudsons
told Gray about the high wind. They told him the wind was blowing at" an
unbelievable amount." Ng 48-7 at 44. They also told him about a dock tenant
who nearly lost her little dog to the wind. Ibid.
The Underwriters informed the Marina in late May 2011 that they
questioned coverage, based mostly on the Hudsons' statement to Gray about
the fast-moving water. Ng 34-3 at 35. In late June, they denied the claim.
N2 34-3 at 40. The Underwriters blamed the loss on "a flash flood that
occurred on the Little Maumelle River following heavy rains." Ibid.
Later that summer, though, Mrs. Hudson was going through the
photographs on her camera and happened to find the ones Tidwell had taken
on May 1st. NQ 48-7 at 3 7. (He'd used her camera.) These photos are at NQ 487 at 145-49 in the record. They show a power pole crashed into E dock. The
power-pole situation changed Mr. Hudson's mind about what caused the
loss. NQ 48-1at128. It was actually caused, Mr. Hudson came to see, by the
power pole. "[I]t split the [E] dock in half, and from there down, everything
is gone." N2 48-1 at 184. "[I]f the pole hadn't hit the dock, they'd still be
there." Ibid. This fallen pole was, according to Mr. Hudson, a symptom of the
great wind. Thus, the sole cause of dock coming free was wind: "Just the
wind- the wind and the tree limbs and the velocity of the wind." Ng 48-1 at
186. The Hudsons now deny that water had anything to do with the loss.
NQ 48-1 at 185-86 & 48-7 at 76.
Apart from the wind, however, this record shows a flood. To use the
parties' definition from Ebbing, on May 1st the waters of the Little Maumelle
at the Marina were" above the highest line of the ordinary flow[.]" They had
"overflowed a river, stream, or natural water course and [had] formed a
continuous body with the water flowing in the ordinary channel[.]" 67 Ark.
App. at 386, 1 S.W.3d at 462.
The best way to understand all this is through the photographs.
Tidwell' s May 1st photo of E dock says a lot. It's appended to this Order. The
parking lot is in the bottom left-hand corner. NQ 48-7 at 91. It's underwater.
Ibid. Mr. Hudson testified that the base of the fallen power pole, which is
underwater in this photo, is usually not in the water. NQ 48-1at129-30. The
land-end of the dock's gangplanks are underwater. Ibid. Compare this photo
with one that Gray took on May 5th. It shows where E dock used to be, and
it shows the gravel parking lot-dry four days after the storm-above the
river, outside the banks. NQ 48-1 at 152, 191. This photo is also appended.
Another set of photos shows a tree that was nicked by the corner of a dock
being carried downriver. NQ 48-1at160, 199. That dock's track shows where
the water's edge was on May 1st. NQ 48-1at160. In the Gray photos, the
water level is back to normal: about three feet below where it was on May 1st,
and about a foot-and-a-half below the bank. NQ 48-1 at 160-61. (This last
point, about the normal flow line, means there was a flood under both the
"outside the banks" and the "highest line of ordinary flow" definitions from
Ebbing. 67 Ark. App. at 386, 1 S.W.3d at 462.)
Mr. Hudson later agreed that the river had flooded. NQ 48-1at117, 200.
Mrs. Hudson also said that, at least in a few areas, the water exceeded the
banks. NQ 48-7 at 75. Tidwell added that there was water in places that were
normally dry. NQ 48-6 at 21. When he took the photographs, he recalled, the
river was overflowing its banks. NQ 48-6 at 57. James Blansett was living on
a boat at the Marina at the time. He said the water was over the shoreline of
the river; it was up on land that's normally dry. NQ 48-5 at 20, 26, 56-57.
In response to all this, the Marina emphasizes something said by the
Underwriters' expert. He looked at Tidwell' s May 1st photographs and said
the river was flowing "bank-full." NQ 34-3 at 79. And his report assumed the
stream was flowing "within its banks." Ibid. This looks like a conflict with
the Underwriters' theory of the case. But it's not. For one thing, the expert
equivocated. He said there was "clearly some flooding along the banks."
More importantly, his assumption was for a limited purpose:
calculating the water's velocity. Ibid. The point is that he didn't attribute any
current to the water outside the banks. Nor does the Marina's distinction
between low banks and high banks make its case- even if the parking lots
were low banks, they still were under six inches of water. On May 1st, then,
there was a flood at the Marina.
The remaining dispute is whether this flood directly or indirectly caused
the dock loss. Did the flood, in a natural and continuous sequence, produce
the loss, and would the loss have happened without the flood?
Hampshire Insurance Co. v. Frisby, 258 Ark. 39, 43, 522 S.W.2d 418, 420 (1975).
This flood caused this loss. Underwriters' expert, Mark Saunders, said
that all that rain on April 30th and May 1st flowed through the river with
extraordinary force. There was 75,000to110,000 pounds of force on the docks
that morning. Ng 48-16at14. The docks were held to shore with thick aircraft
cable. Ng 48-1at311 & 48-16at14. The cable carried most of the weight, but
its break strength was 14,400 pounds. Ng 48-1at311. These well-built docks
were simply outmatched by the water. Mrs. Hudson told Mark Gray as
much. She said they'd built these docks to withstand whatever Mother
Nature had to offer, but that they underestimated her this time. Ng 48-1
at 313. Hudson blamed the dock loss on the velocity of that water." NQ 48-1
The Marina is right that Saunders focuses on current, not high water.
But as Saunders says in his affidavit, the two are inseparable:
brought with it, and was the cause of, the current velocity[.]" NQ 48-16 at 3.
Current is what made this flood different from other floods where the
Arkansas has backed up into the Little Maumelle. NQ 48-6 at 99-100. The 2011
flood was exceptional because the water level at Murray Lake was as low as
the Corps of Engineers usually allows. NQ 48-16 at 9-10. The Corps was
planning for all the rain. The upshot is that the Little Maumelle got only
inches, as opposed to feet, into the Marina's parking lots, but it flowed much
faster on its path to the Arkansas. NQ 48-16at10. The Marina's dock loss, in
summary, was caused by flood.
A word about wind. Viewing things in the light most favorable to the
Marina, wind played a role in the loss of these five docks. But that fact
doesn't change the legal result. This policy says that even if flood wasn't the
sole cause, the exclusion still applies. NQ 34-3 at 9.
The Marina's motion for summary judgment, NQ 34, is denied.
Underwriters' cross-motion, Ng 46, is granted.
The second amended
complaint will be dismissed with prejudice.
D .P. Marshall Jr.
United States District Judge
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