Ochsner Clinic Foundation v. Lexington Insurance Company et al

Filing 152

ORDER DENYING 69 Motion for Partial Summary Judgment on Insurance Coverage for Roof Insulation Code Upgrades because it has not pointed to evidence that demonstrates that, as a matter of law, Lexington is liable for the cost of installing roof insulation under the insurance policy. Signed by Judge Nannette Jolivette Brown on 11/7/2016. (mmv)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
OCHSNER CLINIC FOUNDATION

CIVIL ACTION

VERSUS

NO. 15-2313

LEXINGTON INSURANCE COMPANY

SECTION: “G”(2)

ORDER
In this litigation, Plaintiff Ochsner Clinic Foundation (“Ochsner”) alleges that Defendant
Lexington Insurance Company (“Lexington”) breached its insurance policy by failing to pay
additional amounts owed to Ochsner, and that Lexington acted in bad faith during the adjustment
process.1 Pending before the Court are Lexington’s “Motion for Partial Summary Judgment on
Ochsner’s Property-Related Claims”2 and Ochsner’s “Motion for Partial Summary Judgment on
Insurance Coverage for Roof Insulation Code Upgrades.” 3 Having reviewed the motions, the
memoranda in support, the memoranda in opposition, the record, and the applicable law, the Court
will grant Lexington’s motion for partial summary judgment and deny Ochsner’s motion for partial
summary judgment.
I. Background
A.

Factual Background
In this case, Ochsner alleges that Lexington sold a Certificate of Property Facultative

Reinsurance (“certificate”) to Ochsner for the term of May 31, 2011, through May 31, 2012.4 The

1

See Rec. Doc. 1-1; Rec. Doc. 11 at 2–3.

2

Rec. Doc. 65.

3

Rec. Doc. 69.

4

Rec. Doc. 1-1 at 2.

1

certificate made Lexington the reinsurer of Ochsner System Protection Company’s (“OSPC”) allrisks Commercial Property Policy (“insurance policy”).5 The insurance policy covered a former
warehouse located at 1401 Jefferson Highway that Ochsner was repurposing to serve as an
expanded internal medicine practice.6 On June 10, 2012, construction on the building began and
was scheduled to be completed by June 2012.7 On August 24, 2011, a portion of the building’s
roof collapsed during the renovation, causing property damage and delaying the clinic’s opening.8
Afterwards, Ochsner made a claim under the insurance policy for indemnification of the
losses it alleges to have suffered as a result of the roof collapse. 9 According to Ochsner, on
September 23, 2011, Lexington informed Ochsner that it was taking “full control of the
investigation, defense, adjustment, and settlement of any claim.”10 Ochsner states that by doing
so, OSPC did not have any role in handling Ochsner’s insurance claim, and that Lexington became,
“for all practical and legal purposes, the direct insurer of Ochsner.”11
Ochsner argues that Lexington’s subsequent tactics, disputes, and arguments regarding the
insurance policy’s coverage unnecessarily delayed work on the collapsed building, increased the
cost of the repurposing project, and caused Ochsner to suffer further business interruption losses.12

5

Id.; Rec. Doc. 68-2 at 3.

6

Rec. Doc. 1-1 at 2; Rec. Doc. 68-2 at 4.

7

Rec. Doc. 60-1 at 4.

8

Rec. Doc. 1-1 at 2.

9

Id.; Rec. Doc. 68-2 at 4; Rec. Doc. 60-1 at 5.

10

Rec. Doc. 1-1 at 2.

11

Id. at 3.

12

Rec. Doc. 1-1 at 4.

2

Ochsner also alleges that Lexington has still not paid the full amount of Ochsner’s property damage
claim or business interruption losses claim.13 Accordingly, Ochsner argues that Lexington has
breached its obligations under the insurance policy.14 Moreover, Ochsner asserts that Lexington’s
actions, such as allegedly prolonging the investigation, adjustment, and payment process, amount
to bad-faith conduct in violation of La. Rev. Stat. §§ 22:1892 and 22:1973. 15 Lexington, by
contrast, asserts that it timely investigated, adjusted, and paid undisputed amounts of losses in
Ochsner’s claim as soon as Lexington learned of the claim. 16 Lexington contends that it
consistently worked with Ochsner to resolve any disputes over the scope of coverage while
continuing to make payments throughout the adjustment process.17
B.

Procedural Background
On June 26, 2014, Ochsner filed a Petition for Damages in the 24th Judicial District Court

for the Parish of Jefferson, State of Louisiana.18 On June 25, 2015, Lexington removed the case
to this Court after Ochsner voluntarily dismissed the only non-diverse defendant, OSPC, and
stipulated that Lexington is the proper defendant in this matter.19 On August 30, 2016, Lexington
and Ochsner filed the instant motions.20 On September 6, 2016, Lexington and Ochsner filed their

13

Id. at 4–5.

14

Id. at 5.

15

Id.

16

See Rec. Doc. 60-1 at 5–7.

17

Id. at 7–8.

18

Id.

19

Rec. Doc. 1 at 1–2.

20

Rec. Docs. 65, 69.

3

oppositions.21 On September 27, 2016, Lexington and Ochsner filed their replies.22 On October
26, 2016, the Court held oral arguments on all of the parties’ motions for partial summary
judgment.23
II. Parties’ Arguments
A.
Lexington’s Motion for Partial Summary Judgment on Ochsner’s Property-Related
Claims
Lexington’s Arguments in Support of the Motion

1.

In this motion, Lexington contends that it has already paid Ochsner more than $6.6 million
for property damage related to the collapsed construction project and asserts that summary
judgment is proper because Lexington has satisfied its obligation for Ochsner’s property losses.24
Specifically, Lexington argues it has no further obligation under the terms of the insurance policy
for (1) Ochsner’s construction “escalation costs,” i.e. the increased costs for work that did not
involve remediating damage caused by the collapse, and (2) the cost of roof insulation.25
Lexington states that the parties originally agreed that Lexington is only required to pay
the costs to restore the building to its condition at the time of collapse, and not the cost of the
planned renovations. 26 However, Lexington avers that Ochsner now seeks “escalation costs,”
claiming that the collapse and subsequent delays increased the costs of its planned renovations by

21

Rec. Docs. 80, 82.

22

Rec. Docs. 121,123.

23

Rec. Docs. 149, 150.

24

Rec. Doc. 65-1 at 2.

25

Id.

26

Id.

4

nearly $1.6 million.27 Lexington represents that Ochsner’s theory is that the delays in construction
following the collapse forced it to rebid some of the construction work that had not yet begun,
resulting in more costly bids for materials and labor.28 Lexington argues that such costs are not
covered by the insurance policy’s “repair or replace” provision, as they are “mere inflationary cost
increases” for work Ochsner planned on doing before the collapse.29
Lexington also asserts that Ochsner seeks $363,652 for the hypothetical costs of installing
insulation in the roof of the collapsed portion of the building, citing a provision of the insurance
policy that provides payment of the increased costs of repair when necessary to comply with local
building codes. 30 Lexington argues that at the time of the collapse, “most of the roof of the
collapsed section was not insulated” and “was essentially a shelled out construction site.” 31
Lexington avers that it has already paid the costs of rebuilding the concrete roof as it was prior to
the collapse.32 Lexington states that the “increased cost of construction” provision only applies if
the damaged property is actually rebuilt or replaced.33 However, Lexington argues that Ochsner
never rebuilt or replaced the collapsed section of the roof.34 Moreover, Lexington contends that
no building code requires roof insulation “to put the building back as it was—as an empty shell

27

Id. at 3.

28

Id. at 12.

29

Id. at 3. During oral arguments, Ochsner stipulated to the fact that the insurance policy does not cover
Ochsner’s construction “escalation costs” claim. Rec. Doc. 150 at 85.
30

Rec. Doc. 65-1 at 3.

31

Id. at 3, 5.

32

Id. at 18.

33

Id. at 3.

34

Id. at 18.

5

(i.e., without windows or doors), open to the elements and under construction.”35 According to
Lexington, Ochsner contends that the Louisiana energy code requiring insulation upgrade,
ASHRAE 90.1-2007 (“ASHRAE 90.1”), 36 requires installation of an insulated roof if the
collapsed section were to be rebuilt. 37 However, Lexington argues that it does not apply “to
structures whose heating or cooling systems fall below certain capacity limits.”38 Here, Lexington
states that the structure did not have heating or cooling equipment at all at the time of collapse. 39
Lexington avers that its engineering consultant testified in a deposition that Louisiana building
codes are “silent with respect to the energy requirements of essentially a steel shell of a warehouse
that is not occupied, not conditioned, has no electrical or plumbing to speak of and has no
certificate of occupancy.”40
Ochsner’s Opposition to Lexington’s Motion

2.

Ochsner opposes Lexington’s motion for partial summary judgment on Ochsner’s property
damage-related claims.41 Ochsner argues that it has never contended the escalation costs were
covered by the all risks insurance policy; rather, Ochsner contends they are recoverable as damages
for Lexington’s bad-faith breaches of its obligations, which “needlessly delayed the completion of

35

Id. at 3.

36

ASHRAE 90.1-2007 are building energy standards promulgated by the American Society of Heating,
Refrigerating, and Air-Conditioning Engineers, Inc. (“ASHRAE”). See Rec. Doc. 65-6 at 2.
37

Rec. Doc. 65-1 at 22.

38

Id.

39

Id.

40

Id. at 23.

41

Rec. Doc. 82.

6

the clinic.”42 According to Ochsner, under La. Rev. Stat. § 22:1973, Lexington is liable for any
general or special damages sustained as a result of Lexington’s alleged bad faith conduct.43 Thus,
Ochsner alleges that “at least a portion of those additional costs” are recoverable as damages for
Lexington’s bad faith conduct during its adjustment of Ochsner’s property-damage loss. 44
Ochsner contends that the precise amount of escalation costs is an issue of fact for trial.45
Ochsner further asserts that Lexington’s argument that ASHRAE 90.1 does not apply here
“is based on a fundamental misconception—that, under the applicable codes, a building can lose
its occupancy classification while it is being renovated.”46 Ochsner avers that the International
Building Code (“IBC”) applied in Jefferson Parish at the time of the collapse, and that, under the
IBC, a building’s occupancy classification only changes when a parish building official certifies
that it complies with the new classification requirements. 47 According to Ochsner, a building
retains its old classification, whether vacant or occupied, until that time.48 Here, Ochsner asserts
that the building had not been certified as an internal medicine clinic at the time of the collapse,
and thus, under the IBC, was still classified as a warehouse.49 Accordingly, Ochsner argues that it

42

Id. at 1.

43

Id. at 10.

44

Id. at 9–10.

45

Id.

46

Id. at 2.

47

Id. at 2–3.

48

Id. at 3.

49

Id.

7

is erroneous to describe the building as a “shell” to which the building codes do not apply.50
Ochsner avers that the condition of the building, including whether it was heated or cooled at the
time of the collapse, is immaterial to its classification; at the moment of collapse, Ochsner argues,
it was classified as a warehouse.51 Ochsner states that the governing building standards required
that the building, if rebuilt, had to meet the requirements of a building classified as a warehouse,
which includes the installation of an insulated roof. 52 Thus, Ochsner asserts that the all risks
insurance policy entitles Ochsner to payment to rebuild that section to comply with the current
codes applicable to warehouses, which includes the insulation requirements for the roof.53
C.

Lexington’s Reply to Ochsner’s Opposition
Lexington alleges that “for nearly four years” Ochsner has characterized its “escalation

costs” claim as part of its claim for property damages under the insurance policy, not as a bad faith
damages claim.54 Lexington avers that in order to “avoid any further vacillation” by Ochsner, the
Court “should grant summary judgment on Lexington’s Policy-based defense to escalation
costs.”55
Lexington also asserts that the IBC’s occupancy classification is distinct from the
ASHRAE 90.1’s roof insulation requirements.56 Lexington argues that applicability of the energy

50

Id.

51

Id. at 16.

52

Id. at 19.

53

Id. at 3.

54

Rec. Doc. 123 at 2.

55

Id. at 2.

56

Id. at 6.

8

code governing roof insulation is based on a building’s energy capacity, not its occupancy
classification. 57 Lexington states that a hollowed-out building with no heating or cooling
equipment does not trigger the roof insulation requirement that applies only to buildings with
certain minimal levels of heating and cooling systems. 58 Thus, Lexington contends that roof
insulation is not covered by the insurance policy that measures loss based on the conditions at the
time of collapse.59 Lexington argues that coverage is based on “actual” damaged property at the
time of collapse, and not on “some hypothetical version of a building of a particular occupancy
classification.”60 Lexington avers that the policy only covers work needed to comply with building
codes “regulating the repair or reconstruction” of the actual “damaged property.” 61 Lexington
asserts that Ochsner misinterprets the deposition of Doug May, a Lexington employee, who
testified that the policy covers code upgrades “for the occupancy of the building at the time of
loss.”62 Lexington states that May, who is “not a code expert,” used the term “occupancy” as a
shorthand for the condition of the building at the time of the collapse, and regardless, such extrinsic
evidence cannot vary the plain language of the code.63
Moreover, even if the building codes would have required an insulated roof, Lexington
argues that Ochsner has never shown that the insurance policy’s requirement that the damaged

57

Id. at 2.

58

Id. at 2–3, 6.

59

Id. at 2–3.

60

Id. at 6 (emphasis in original).

61

Id.

62

Id. at 7.

63

Id.

9

property be actually rebuilt or replaced was satisfied.64 Instead, Lexington asserts that Ochsner
demolished the roof rather than replace it and turned the area into an open outdoor space. 65
Lexington states that Ochsner erroneously argues that because Lexington agreed to repair the
replacement cost value of the damaged property even though Ochsner did not rebuild that property,
it thus waived its right to enforce the code upgrade provision as well.66 Lexington states that it
expressly reserved all its rights under the policy repeatedly, including its rights under the
Demolition Provision of the policy. 67 Moreover, Lexington avers that it did not make any
representations regarding coverage for code upgrades.68
B.
Ochsner’s Motion for Partial Summary Judgment on Insurance Coverage for Roof
Insulation Code Upgrades
Ochsner’s Arguments in Support of the Motion

1.

Relatedly, Ochsner moves the Court for partial summary judgment on the issue of whether
the insurance policy covers code upgrades for roof insulation in the damaged building.69 Ochsner
argues that the all risks policy covers increased costs for upgrades to damaged buildings needed to
comply with current code requirements. 70 Ochsner alleges that Doug May, Lexington’s Vice
President of Property Claims, and Bill Lamond, Lexington’s Property Claims Examiner, both

64

Id. at 8.

65

Id.

66

Id. at 9–10.

67

Id. at 10.

68

Id. at 11.

69

Rec. Doc. 69.

70

Id. at 4, 6.

10

testified in their depositions that the policy covers these upgrades. 71 Ochsner also states that
Lexington’s corporate representative witness confirmed the policy provides coverage for code
upgrades for a warehouse.72 Accordingly, Ochsner argues that, based on the clear language of the
all-risks policy and the deposition testimony of Lexington’s employees, Lexington is liable under
the policy for the cost of code upgrades for roof insulation to the warehouse.73
Lexington’s Opposition to the Motion

2.

Lexington opposes Ochsner’s motion for partial summary judgment on insurance coverage
for roof insulation code upgrades.74 Lexington contends that the insurance policy’s Demolition
Provision covers code upgrades only if such upgrades are necessary “in order to comply with the
minimum requirements of such law or ordinance regulating the repair or reconstruction of the
damaged property on the same site.”75 Lexington asserts that the applicable code provision that
would require roof insulation, ASHRAE 90.1, only applies if the building contains heating or
cooling systems that meet certain minimal capacity limits.76 Lexington avers that at the time of
the collapse, the building had no heaters, HVAC, operating sprinkler system, or exterior windows
or doors in place, and only had minimal electrical power necessary for construction. 77 Thus,
Lexington argues that a building without heating and cooling systems does not trigger the insulated

71

Id. at 4.

72

Id. at 5.

73

Id. at 8–9.

74

Rec. Doc. 80.

75

Id. at 9.

76

Id. at 5.

77

Id.

11

roof requirement of ASHRAE 90.1. 78 Lexington contends that Ochsner has only cited the
testimony of Lexington employees that the policy, in some circumstances, provides coverage for
code upgrades appropriate to a warehouse.79 According to Lexington, they did not testify that the
policy required these specific code upgrades for this specific collapsed building. 80 Rather,
Lexington asserts that Ochsner has not shown that any building codes require these upgrades to
restore “this actual building to what it was at the ‘time and place of the loss’ – i.e., a former
warehouse with no heating or cooling and no exterior windows or doors.”81
Additionally, as asserted in its own motion for partial summary judgment, Lexington states
that Ochsner has never rebuilt the collapsed section of the building, and instead developed a revised
plan to use a non-collapsed section of the building.82 Lexington argues that the insurance policy’s
Demolition Provision contains express language that Lexington “shall not be liable for any
increased cost of construction loss unless the damaged property is actually rebuilt or replaced.”83
Thus, Lexington argues it is not liable for the costs of roof insulation that was never installed in a
roof that was never replaced.84

78

Id.

79

Id. at 8.

80

Id. at 9, 11.

81

Id. (emphasis in the original).

82

Id. at 8, 13.

83

Id. at 13.

84

Id.

12

Ochsner’s Reply to Lexington’s Opposition

3.

First, Ochsner contends that it did, in fact, rebuild or replace the damaged property. 85
Ochsner states that before it proceeded with its plan to rebuild, it asked Lexington to confirm that
its coverage would not be impacted.86 However, Ochsner avers that when Lexington promised
that it would “provide replacement cost coverage to rebuild at the same site,” it did not warn
Ochsner that shifting its clinic to an undamaged portion of the warehouse would deprive it of code
upgrade coverage.87 Moreover, Ochsner alleges that Lexington paid for other code upgrades, and
agreed to pay for repairs to the building to today’s building standards.88
Second, Ochsner contends that the building code requires roof insulation for the damaged
warehouse.89 Ochsner argues that Lexington incorrectly focuses on the building’s condition and
not its occupancy classification under the code.90 Ochsner avers that Jefferson Parish had adopted
the IBC, which creates a system of classifying all buildings by occupancy.91 Ochsner contends
that the building was indisputably classified as a warehouse at the time of collapse, and the
building’s condition at the time of the collapse, including if it was heated or cooled, is immaterial.92
Ochsner states that the building was classified as storage/warehouse when the renovation began,

85

Rec. Doc. 121 at 2–3.

86

Id. at 2.

87

Id.

88

Id. at 2–3.

89

Id. at 4.

90

Id. at 4–5.

91

Id. at 5.

92

Id.

13

and this had not changed by the collapse.93 Ochsner argues that, despite “Lexington’s litigation
spin,” Lexington’s claims representatives testified in their depositions that occupancy, not
condition, determines code upgrades here: “[Code-upgrade coverage] is for the occupancy of the
building at the time of loss.”94
III. Law and Analysis
A.

Legal Standard for Summary Judgment
Summary judgment is appropriate when the pleadings, the discovery, and any affidavits

show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.”95 When assessing whether a dispute as to any material fact exists, the court
considers “all of the evidence in the record but refrains from making credibility determinations or
weighing the evidence.”96 All reasonable inferences are drawn in favor of the nonmoving party,
but “unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and
conclusions of law’ are insufficient to either support or defeat a motion for summary judgment.”97
If the record, as a whole, “could not lead a rational trier of fact to find for the non-moving party,”
then no genuine issue of fact exists and the moving party is entitled to judgment as a matter of
law.98 The nonmoving party may not rest upon the pleadings, but must identify specific facts in

93

Id. at 7.

94

Id. at 8 (alteration in the original).

95
Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
96

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398–99 (5th Cir. 2008).

97

Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.

98

Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986).

14

the record and articulate the precise manner in which that evidence establishes a genuine issue for
trial.99
The party seeking summary judgment bears the initial responsibility of informing the Court
of the basis for its motion and identifying those portions of the record that it believes demonstrate
the absence of a genuine issue of material fact.100 Thereafter, the nonmoving party should “identify
specific evidence in the record, and articulate” precisely how that evidence supports his claims.101
To withstand a motion for summary judgment, the nonmoving party must show that there is a
genuine issue for trial by presenting evidence of specific facts.102 The nonmovant’s burden of
demonstrating a genuine issue of material fact is not satisfied merely by creating “some
metaphysical doubt as to the material facts,” “by conclusory allegations,” by “unsubstantiated
assertions,” or “by only a scintilla of evidence.”103 Rather, a factual dispute precludes a grant of
summary judgment only if the evidence is sufficient to permit a reasonable trier of fact to find for
the nonmoving party. Hearsay evidence and unsworn documents that cannot be presented in a form
that would be admissible in evidence at trial do not qualify as competent opposing evidence.104
B.

Analysis
Lexington argues that it is entitled to summary judgment on Ochsner’s claim for its

construction “escalation costs” under the insurance policy and Ochsner’s claim for roof insulation

99

See Celotex, 477 U.S. at 325; Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).

100

Celotex, 477 U.S. at 323.

101

Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994), cert. denied, 513 U.S. 871 (1994).

102

Bellard v. Gautreaux, 675 F.3d 454, 460 (5th Cir. 2012) (citing Anderson v. Liberty, 477 U.S. 242, 248–

49 (1996)).
103

Little, 37 F.3d at 1075.

104

Martin v. John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987); Fed. R .Civ. P. 56(c)(2).

15

code upgrades to its building.105 In a separate motion, Ochsner seeks summary judgment on the
issue of whether the insurance policy covers code upgrades for roof insulation in Ochsner’s
building at the time of the collapse. 106 The Court first notes that Ochsner stipulated at oral
argument that the insurance policy does not cover Ochsner’s construction “escalation costs.”107
Rather, Ochsner asserts that Lexington is liable under La. Rev. Stat. § 22:1973 for these damages
as a result of Lexington’s alleged bad faith conduct in the adjustment process, which is not at issue
in this motion.108 In light of Ochsner’s stipulation and the fact that no evidence has been presented
that the insurance policy covers Ochsner’s construction “escalation costs,” the Court finds that
there are no genuine issues of material fact in dispute here. Accordingly, the Court will grant in
part Lexington’s motion for partial summary judgment, to the extent that Ochsner has not produced
any evidence that the insurance policy covers Ochsner’s construction “escalation costs.”109
Next, both parties seek summary judgment on the issue of whether the insurance policy
covers roof insulation code upgrades in Ochsner’s warehouse at the time of the collapse. 110
Ochsner asserts that the all risks insurance policy requires Lexington to pay for the costs of
building upgrades needed to comply with current code requirements, and that the applicable code

105

Rec. Doc. 65-1 at 2.

106

Rec. Doc. 69.

See Rec. Doc. 150 at 85. Lexington’s counsel asserted that the policy did not cover the escalation costs
and stated that “Ochsner has finally agreed with that.” Id. When the Court asked Ochsner’s counsel if Ochsner
stipulated to that, Ochsner responded “[y]es, Your Honor. They’re not covered under the policy, but the mere fact that
they’re not covered doesn’t mean that they’re not recoverable in this litigation as damages as a result of Lexington’s
bad-faith breach of the policy conditions.” Id.
107

Rec. Doc. 82 at 1 (“Ochsner has never contended that those [escalation] costs are covered by the All Risks
Policy. Part of those costs are nonetheless recoverable as damages for Lexington’s bad-faith breaches of its
obligations.”).
108

Because Lexington’s motion does not seek summary judgment on the issue of whether Lexington is liable
under La. Rev. Stat. § 22:1973 for these “escalation costs,” the Court will not address that question here.
109

110

Rec. Docs. 65, 69.

16

required roof insulation to be installed.111 Lexington does not contest that the insurance policy
includes such a provision that requires Lexington to pay for applicable code upgrades.112 Rather,
Lexington argues that, at the time of the collapse, no building ordinance required the installation
of roof insulation in Ochsner’s building, and that Ochsner never actually replaced the collapsed
roof or paid these costs as required by the insurance policy.113
First, Lexington contends that Ochsner is not entitled to recover the costs for roof insulation
in its building because no building code required it at the time of the collapse.114 Lexington argues
that the applicable building energy code regarding insulated roofs, ASHRAE 90.1, only applies to
structures whose heating or cooling systems meet certain minimum capacity limits.115 Lexington
asserts that at the moment of collapse, the building clearly fell below the capacity limits, as the
structure did not have any heating or cooling equipment and lacked the windows and doors needed
to heat or cool the building.116 Lexington asserts that it is not required to pay for code upgrades
that would not have applied to the “empty, gutted former warehouse that was open to the elements”
that existed at the time of collapse.117
In response, Ochsner agrees that “[w]hether Ochsner is entitled to coverage for roof
insulation depends solely on whether ASHRAE applies to the hypothetical rebuilt warehouse that
Lexington priced.”118 However, Ochsner asserts that at the time of the collapse, its building was

111

Rec. Doc. 69-2 at 4.

112

Rec. Doc. 65-1 at 3–4.

113

Id.

114

Id. at 21.

115

Id. at 22.

116

Id.

117

Id.

118

Rec. Doc. 82 at 16.

17

still classified under the International Building Code (“IBC”) as a warehouse, and thus, according
to Ochsner, ASHRAE 90.1’s roof insulation requirements applies.119 Ochsner argues that the fact
that the building was not heated or cooled at the time of collapse “is immaterial,” because both the
Jefferson Parish Code and the IBC required a building to meet the applicable code requirements
of its occupancy classification.120 Ochsner alleges that no one disputes the building was classified
as a storage/warehouse under IBC Section 311, and “the fact that the building collapsed during a
stage of construction in which it was temporarily open to the air does not change this.”121
First, the Court notes that both parties agree that that the insurance policy covers the
increased costs of replacing or repairing its damaged property that are necessary to comply with
the building codes “at the time of the loss.” 122 The parties also agree that the code provision
requiring the installation of roof insulation in certain buildings is ASHRAE 90.1.123 The purpose
of ASHRAE 90.1 is to “provide minimum requirements for the energy-efficient design” of certain
buildings.124 Section 2.2(a) of ASHRAE 90.1 provides that the standard applies to “the envelope
of buildings, provided that the enclosed spaces are (1) heated by a heating system whose output
capacity is greater than or equal to 3.4 Btu/h·ft2 or (2) cooled by a cooling system whose sensible
output capacity is greater than or equal to 5 Btu/h·ft2.”
Here, Lexington presents evidence from the construction superintendent, Sparkman Long,

119

Id. at 3.

120

Id. at 16, 18.

121

Id. at 19 (emphasis in original).

122

See Rec. Doc. 65-1 at 21 (Lexington noting that the insurance policy covers increased costs associated
with code upgrades where the direct physical loss or damage “causes the enforcement of any law, ordinance,
governmental directive or standard in effect at the time of loss or damage.” (emphasis added)); Rec. Doc. 82 at 11
(Ochsner stating that the all risks policy covers increased costs in repairing or reconstructing its damaged property
“necessary to comply with building codes in force at the time of the loss.” (emphasis added)).
123

See Rec. Docs. 65-6, 65-7.

124

Rec. Doc. 65-6 at 5.

18

that the collapsed section of Ochsner’s building lacked heating and cooling equipment at the time
of the collapse.125 Lexington also points to photographs of the building prior to the collapse that
Lexington represents shows that the doors and windows had been removed and demonstrates that
the building was “exposed to the elements” and could not have been heated or cooled. 126
Moreover, Ochsner neither contests Lexington’s assertion that the collapsed section of the building
lacked heating and cooling equipment nor offers any evidence that its building had any heating or
cooling capacity at that time.127 Ochsner also does not argue that its building met the minimum
heating or cooling thresholds that Lexington asserts would trigger the roof insulation requirements
under ASHRAE 90.1.128
Rather, Ochsner contends that the building’s classification as a storage building/warehouse
under the IBC Section 311 triggers the energy code’s roof insulation requirements.129 However,
Ochsner did not state, in any of the memoranda filed in support of its motion or in opposition to
Lexington’s motion or at oral argument, what provision or standard it relies on to argue that the

125

See Rec. Doc. 65-3 at 28–29 (Sparkman Long testifying that he did not have knowledge of any heaters,
air conditioning, doors, or windows in the collapsed section of the building, and that “[i]t was a warehouse, so I don’t
recall heat.”); Rec. Doc. 150 at 89 (stating at oral arguments that Sparkman Long, the construction superintendent,
provided “undisputed” testimony that at the time of the loss, “there was no heating and there was no cooling for the
collapsed section. It was a construction site.”); Rec. Doc. 65-5 at 32–35 (demonstrating that MKA employee Kevin
McCoy stated in letter to James Britsch that “[a]t the time of the collapse, the unoccupied warehouse was neither
heated nor cooled and there was no equipment in place to provide this conditioning in the collapsed and subsequently
demolished areas.”)
126

See Rec. Doc. 65-2 at 199–117 (photographs of the building prior to the collapse); Rec. Doc. 150 at 89
(describing the photographs at oral argument).
127
See Rec. Doc. 82 at 16 (Ochsner stating that Lexington’s argument is that ASHRAE 90.1 energy code
does not apply “because the building was open to the air (i.e., not capable of being heated or cooled) at the time of the
collapse,” but that the “fact that it was not heated or cooled at that moment is immaterial.”); Rec. Doc. 121 at 5
(Ochsner again contending that it “is immaterial whether the building was ‘heated or cooled,’ ‘abandoned,’
‘unfinished,’ ‘unconditioned,’ ‘shelled-out,’ ‘open to the elements,’ [or] a ‘former warehouse.’”)
128
Rec. Doc. 82 at 16–19. See Rec. Doc. 150 at 93 (Ochsner stating at oral argument that “the question is
was the roof insulation that Ochsner seeks payment for mandated by the applicable building codes at the time of the
collapse? The answer is yes. ASHRAE does apply.”).
129

Id.

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building’s classification as storage/warehouse triggers ASHRAE 90.1’s requirements for an
insulated roof. As stated above, the clear language of ASHRAE 90.1 defines its coverage in terms
of a building’s energy capacity limits, and not in terms of a building’s classification under the
separate IBC standards. Moreover, Ochsner has not provided any support for its argument that a
building classified as storage/warehouse under the IBC independently requires roof insulation even
if it lacked any heating or cooling capacity. Accordingly, the Court finds that Ochsner has not
presented any evidence or code provision to support its argument that the building’s IBC
classification triggers the roof insulation requirement of ASHRAE 90.1.
Ochsner does point to deposition testimony from various witnesses that Ochsner argues
supports its position that ASHRAE 90.1 applies in this instance.130 Ochsner represents that two of
Lexington’s senior personnel, Doug May and Bill Lamond, testified that the all-risks policy
covered code upgrades for roof insulation for a warehouse.131 However, Ochsner failed to point
to any statement or admission by May and Lamond in their depositions where they made such a
concession. Rather, the deposition testimony offered by Ochsner shows only that Lexington’s
representatives stated that the insurance policy would cover code upgrades to warehouses
generally, which Lexington does not contest, but that neither witness conceded that ASHRAE
90.1’s roof insulation requirements applied here.132 Moreover, other witnesses cited by Ochsner
in support of its theory testified in direct contradiction to Ochsner’s argument. For example,
Lexington’s expert, Lee Connell, testified in his deposition that ASHRAE 90.1 only applied if, at

130

Rec. Doc. 69-2 at 4–5.

131

Id. at 4–5, 7–8.

132

See, e.g., Rec. Doc. 82 at 16 & n.50 (citing the deposition of Lexington executive Doug May, who testified
that “the policy covers the code that is necessary for that occupancy” at the time of the loss and that code coverage for
a warehouse would be triggered); id. at 19 & n.60 (stating that Lexington’s expert, Lee Connell, confirmed that the
insurance policy entitles Ochsner to code upgrades for a warehouse generally); see also Rec. Doc. 69-2 at 7 & n. 19–
21 (asserting that Bill Lamond, Lexington’s Property Claims Examiner, agreed that Lexington must pay for whatever
code upgrades are required for a roof of a warehouse).

20

the time of the collapse, “what collapsed had been heated and cooled and they were to rebuild it,
then I believe you would rebuild it according to the current code.”133 Moreover, Ochsner has not
pointed to any evidence that these witnesses are code experts, or that their testimony supports a
different interpretation of the plain language of ASHRAE 90.1. Accordingly, the Court finds that
the deposition testimony pointed to by Ochsner does not provide support for its argument that the
ASHRAE 90.1 requirements applied to its building. Therefore, under this theory, there are no
material facts in dispute.
For the first time at oral argument, Ochsner asserted a new theory that because, according
to Ochsner, the building had a sprinkler system at the time of collapse, “the codes” require that the
building must be heated to at least 40 degrees Fahrenheit, which, Ochsner asserts, for a building
the size of Ochsner’s warehouse, would exceed the minimum threshold requirements under
ASHRAE 90.1 that would trigger its insulated roof requirements.134 Ochsner also averred at oral
argument that because the building was classified as a storage facility, “there are certain
requirements that go along with that, including sprinklers, including heating, and heating triggers
the ASHRAE code.”135 However, when the Court asked Ochsner to identify what code provision
requires a sprinkler system in Ochsner’s building, Ochsner was unable to do so.136 Ochsner also
failed to point to the code provision that it suggests would require a building with a sprinkler
system to be heated, and Ochsner provided no evidence at all that the heating requirement for a
sprinkler system would be sufficient to meet the minimum heating requirements that trigger
AHSRAE 90.1’s roof insulation requirement.

133

See Rec. Doc. 82-2 at 10.

134

Rec. Doc. 150 at 93.

135

Id. at 96.

Rec. Doc. 150 at 97 (Ochsner stating that “[t]here would be a code provision on that. And, Your Honor,
I can’t point to it right now . . . .”).
136

21

While there is some dispute as to whether or not the building had a sprinkler system at the
time of the collapse, 137 a factual dispute may only defeat summary judgment when it is
“material.” 138 As the Supreme Court held in Anderson v. Liberty Lobby, Inc., “this standard
provides that the mere existence of some alleged factual dispute between the parties will not defeat
an otherwise properly supported motion for summary judgment; the requirement is that there be
no genuine issue of material fact.”139
Here, whether or not a sprinkler system existed in Ochsner’s building is immaterial,
because Ochsner has not provided any evidence, law, or case citations to support its argument that,
through some unidentified chain of code provisions, ASHRAE 90.1’s roof insulation requirement
would be triggered if Ochsner could establish that a sufficient sprinkler system existed at the time
of the collapse. While Ochsner stated at oral argument that sprinklers and heating were required
because the building was classified as a storage facility, the Court again notes that Ochsner has not
pointed to any IBC provisions or other code provisions that require either. Ochsner also generally
averred at oral argument that sprinkler systems must be heated “under the National Fire Prevention
- - the NFPA.”140 However, Ochsner failed to point to which of the hundreds of standards and
provisions promulgated by the NFPA regulating many different types of sprinkler systems would

137
For example, during oral argument Ochsner pointed to the deposition testimony of Sparkman Long, which
Ochsner averred supports its argument that it is “undisputed” that the building still had “sprinkler piping, main lines,
sprinkler pipes, and sprinkler heads.” Id. However, in that deposition, Long actually stated that there were “possibly”
some main sprinkler lines left in the collapsed area at the time of the collapse, but that he believed all the lines inside
the building were “capped and cut through” and that the “branch piping” and accompanying “sprinkler heads” would
have been removed by that point. Rec. Doc. 65-3 at 30. Ochsner also points to pictures from the day of the collapse
that show water “shooting up from broken sprinkler pipes,” but that does not address whether a full sprinkler system
existed at the time of the collapse. Rec. Doc. 150 at 98.

Fed. R. Civ. P 56 (a) (“The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” (Emphasis added)).
138

139

477 U.S. 242, 247–48 (1986) (emphasis in original).

140

Rec. Doc. 150 at 99.

22

apply here.141 Moreover, Ochsner has not pointed to any evidence or testimony that the unknown
code would apply to the warehouse sprinkler system in the condition that existed at the time of the
collapse.142 Finally, Ochsner failed to provide any support for its argument that the level of heating
that Ochsner alleges is required for its sprinkler system alone would be sufficient to meet the
minimum heating requirement that triggers ASHRAE 90.1.143 As the Fifth Circuit has repeatedly
stated, “unsubstantiated assertions are not competent summary judgment evidence,” and a district
court does not have a duty under Rule 56 “to sift through the record in search of evidence to support
a party's opposition to summary judgment.”144 Thus, even taking the evidence in the light most
favorable to Ochsner and assuming there was a fully functioning sprinkler system at the time of
the collapse, Ochsner has not produced evidence that it would then be entitled to the costs of roof
insulation under ASHRAE 90.1.
Under Federal Rule of Civil Procedure 56, the party moving for summary judgment bears
the initial burden of demonstrating that there are no genuine issues of material fact and that it is
entitled to a judgment as a matter of law.145 Here, the Court finds that Lexington has presented
sufficient evidence that the collapsed section of Ochsner’s building did not meet the minimum

See “List of NFPA codes and Standards,” National Fire Protection Association,
http://www.nfpa.org/codes-and-standards/all-codes-and-standards/list-of-codes-and-standards (listing NFPA Code
No. 1 through NFPA Code No. 8506).
141

See Rec. Doc. 150 at 97 (Ochsner pointing to Long’s deposition for support that there was a sprinkler
system in its building); Rec. Doc. 65-3 at 30 (Long testifying in his deposition that parts of the alleged sprinkler system
were cut or removed).
142

In the deposition of Lee Connell attached to Ochsner’s opposition memorandum to Lexington’s motion,
he suggests that Ochsner could “[f]ind a more direct way of heating the sprinkler system if that is what you want to
do without heating the entire structure just for the sprinkler system. Good grief.” Rec. Doc. 82-2 at 7.
143

144
Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 324
(1986); Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915 & n. 7 (5th Cir. 1992)).
145

See Hunt v. Cromartie, 526 U.S. 541, 549 (1999); Provident Life & Accident Ins. Co. v. Goel, 274 F.3d
984, 991 (5th Cir.2001); Tavernini v. Bank of Am., N.A., No. 4:12CV420, 2014 WL 1290063, at *3 (E.D. Tex. Mar.
31, 2014).

23

heating and cooling levels necessary to trigger ASHRAE 90.1’s roof insulation requirements. Once
the moving party satisfies its summary judgment burden by showing there are no genuine issues
of material fact for trial, the nonmoving party must “set forth and support by summary judgment
evidence specific facts showing the existence of a genuine issue for trial.” 146 Ochsner must look
beyond its pleadings and “designate specific facts in the record to show that there is a genuine
issue for trial.”147
Here, the Court finds that Ochsner has failed to present competent evidence supporting its
assertion that the roof insulation requirements under ASHRAE 90.1 applied to its warehouse.
Ochsner has presented no evidence that the building contained heating and cooling equipment that
would meet the minimum requirements of ASHRAE 90.1, or that being classified as a storage
facility under the IBC requires the building to be heated to that level. Moreover, though Ochsner
argued for the first time at oral arguments that a sprinkler system can trigger heating requirements
in another unidentified code which would be sufficient to then trigger ASHRAE 90.1, Ochsner
failed to point to the law or facts in the record that would support such a theory. Accordingly, the
Court finds that there are no genuine issues of material fact here, and that Ochsner has not pointed
to evidence that substantiates its assertion that Lexington is liable for the cost of installing roof
insulation under the insurance policy “such that a reasonable jury could return a verdict for the
nonmoving party.”148
IV. Conclusion
Considering Lexington’s motion for partial summary judgment, and based on the
foregoing, the Court concludes that, drawing all reasonable inferences in favor of Ochsner, there

146

Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255–57 (1986)).
147

Stults v. Conoco, Inc., 76 F.3d 651, 655 (5th Cir. 1996)).

148

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

24

are no genuine issues of material fact here. Thus, Lexington is entitled to summary judgment on
its claim that it is not liable under the insurance policy for Ochsner’s increased “construction costs”
or the cost of installing roof insulation in Ochsner’s warehouse. Likewise, Ochsner has failed to
point to sufficient evidence or facts in the record that support its assertion that an applicable code
provision required roof insulation to be installed in Ochsner’s warehouse at the time of the
collapse.149 Accordingly,
IT IS HEREBY ORDERED that Lexington’s “Motion for Partial Summary Judgment on
Ochsner’s Property-Related Claims”150 is GRANTED to the extent that Lexington is not liable
for Ochsner’s construction “escalation costs” under the parties’ insurance policy and to the extent
that Lexington is not liable for the cost of installing roof insulation. Ochsner has not provided the
Court with any evidence beyond unsubstantiated assertions that an applicable code provision
required the installation of roof insulation in Ochsner’s warehouse at the time of the collapse. The
Court does not address whether Lexington is liable for Ochsner’s construction “escalation costs”
under La. Rev. Stat. § 22:1973 as Ochsner appears to aver.

149
Because the Court finds that there is no genuine issue of material fact regarding whether a code provision
required roof insulation at the time of the collapse, the Court will not address Lexington’s second argument that the
insurance policy does not cover roof insulation because the roof was never repaired or replaced.
150

Rec. Doc. 65.

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IT IS FURTHER ORDERED that Ochsner’s “Motion for Partial Summary Judgment on
Insurance Coverage for Roof Insulation Code Upgrades”151 is DENIED because it has not pointed
to evidence that demonstrates that, as a matter of law, Lexington is liable for the cost of installing
roof insulation under the insurance policy.
NEW ORLEANS, LOUISIANA, this ______ day of November, 2016.
7th

________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

151

Rec. Doc. 69.

26