Colony Bank v. Hanover Insurance Company

Filing 58

ORDER granting in part and denying in part 48 Motion in Limine. Ordered by Judge Clay D. Land on 8/23/2012 (pgs)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
COLUMBUS DIVISION
COLONY BANK,

*

Plaintiff,

*

vs.

*

HANOVER INSURANCE COMPANY,

*

Defendant.

CASE NO. 4:10-CV-131 (CDL)

*
O R D E R

Presently pending before the Court is Hanover’s Motion in
Limine regarding the measure of damages (ECF No. 48).

Defendant

The

that

Hanover

Insurance

Company

(“Hanover”)

contends

the

proper measure of damages is the “actual economic loss to Colony
Bank and diminution of the value of its loan that was caused by
Hanover.”

Def.’s Mem. in Supp. of Mot. in Limine re Measure of

Damages 1, ECF No. 49.

Plaintiff Colony Bank (“Colony”) argues

that the proper measure of damages is the amount Colony would
have received after the fire loss had it force-placed coverage
with another insurance company upon learning of the nonrenewal
of the Hanover policy.

In its motion in limine, Hanover seeks

to exclude any evidence or argument that ties Colony’s damages
to the limits of the insurance policy Hanover issued to cover
the insured property.

A brief description of the nature of the claim to be tried
is helpful to understanding the proper measure of damages in
this

action

and

to

resolving

the

pending

motion

in

limine.

Colony holds the mortgage on property known as River Mill, a
rental and special event facility.

Hanover insured the River

Mill property and listed Colony as a loss payee in its insurance
policy.

Hanover declined to renew the policy and, according to

Colony, failed to notify Colony of the nonrenewal, which Colony
contends it was required to do under the terms of the policy.
After the nonrenewal and before Colony allegedly learned of the
nonrenewal,

a

fire

caused

substantial

damage

to

River

Mill.

Colony asserts a claim against Hanover for breach of contract,
contending that Hanover breached its duty to notify Colony of
the nonrenewal of the policy and that this breach caused the
property

to

be

uninsured,

which

has

resulted

in

a

loss

to

Colony.

The nature of this alleged loss is the subject of the

motion in limine.
Under

basic

contract

law

damages

principles,

it

appears

clear that the proper measure of damages in this action is the
amount of damages that reasonably flowed from Hanover’s alleged
failure to notify Colony of the nonrenewal.

If the jury finds

that Hanover’s failure to notify Colony caused an absence of
coverage that would have otherwise been in place, then Colony is
entitled to recover any losses proximately caused by the absence

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of insurance coverage.

Any award of damages should place Colony

in the same position it would have been in had it been notified
of the lapse in coverage—no better and no worse.

Of course,

Colony must present evidence that convinces the jury that had it
known of the lapse in coverage, it would have obtained forceplaced coverage before the fire.

Moreover, it must demonstrate,

without inviting the jury to engage in speculation, the nature
of that coverage and what it would have recovered under it.
Hanover of course may explore whether the existence of other
insurance covering the River Mill property would have affected
the amount of any recovery by Colony under the force-placed
coverage.
likely

Relevant evidence on this issue would include the

terms

payments

made

of
to

any

force-placed

the

owner

of

coverage
River

Mill

and

whether

under

its

any
own

replacement policy would be required to be offset against any
recovery under a force-placed policy.
Consistent with the foregoing, Hanover’s motion in limine
regarding “certain measure of damages” (ECF No. 48) is granted
in part and denied in part to the extent set forth in this
Order.

While Colony’s damages are not limited to the diminution

of the value of its loan caused by Hanover’s failure to notify
it of the lapse in coverage, Colony also is not automatically
entitled to recover the amount that may be paid under a forceplaced insurance policy.

Colony must convince the jury that

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such

specific

coverage

would

have

been

obtained,

and

what

amounts it would have likely ultimately received, taking into
consideration other relevant circumstances including replacement
insurance obtained by the owner of the property.
damages principle will be:

The guiding

under all of the circumstances and

without engaging in speculation, what would Colony have likely
recovered had it replaced the Hanover coverage upon learning of
the nonrenewal of the Hanover policy.

IT IS SO ORDERED, this 23rd day of August, 2012.
S/Clay D. Land
CLAY D. LAND
UNITED STATES DISTRICT JUDGE

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