Barnard Pipeline, Inc. v. Travelers Property Casualty Corp.
Filing
71
ORDER denying 45 Motion for Summary Judgment; granting in part and denying in part 30 Motion for Partial Summary Judgment. Travelers' first and fourth affirmative defenses are STRICKEN. Signed by Chief Judge Dana L. Christensen on 3/13/2014. (dle)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
BARNARD PIPELINE, INC.,
a Montana Corporation,
CV 13–07–BU–DLC
Plaintiff,
ORDER
vs.
TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA,
Defendant.
Before the Court are the parties cross motions for partial summary
judgment. Jurisdiction is based on diversity. For the reasons explained, the Court
grants Plaintiff’s motion for partial summary judgment in part and denies it in part
and denies Defendant’s cross motion for partial summary judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Barnard Pipeline, Inc., (“Barnard”) brings this action against its
insurer, Defendant Travelers Property Casualty Company of America
(“Travelers”), for a declaratory judgment that Travelers is obligated to provide
coverage for losses claimed by Barnard under a builder’s risk policy issued by
Travelers to Barnard. Barnard also asserts a claim of insurance bad faith against
Travelers. The parties’ cross motions seek summary judgment on Barnard’s claim
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for coverage. Barnard’s motion also seeks dismissal of some of Travelers’
affirmative defenses.
Barnard contracted with Kern River Gas Transmission Company to
complete the Apex Pipeline Expansion Wasatch Loop project (“the Project”),
which involved the construction and installation of a 28-mile gas pipeline along a
right of way traveling through the Wasatch Mountain Range in Utah. Travelers
reviewed the agreement between Kern and Barnard and insured Barnard under a
builder’s risk policy (“the Policy”). Travelers issued the Policy in October 2010.
The first phase of the Project involved construction and/or improvement of
various roads to access the right of way. The first phase of the Project also
involved the clearing of vegetation, stripping of topsoil, and leveling and/or
grading of the right of way. The object of this excavation work was to get a level,
safe, and compacted soil surface on which to perform the next phase of work.
Once prepared, the right of way was used as a route of travel for heavy equipment
and also used as a working surface for constructing and installing the pipe.
After preparation and excavation of the right of way, the plan of
construction was that Barnard would then dig a trench along the right of way,
string the pipe along side the trench, perform any bending of the pipe as necessary,
weld sections of the pipe together, and then install the pipe in the trench. After the
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pipe was installed and the trench backfilled, the right of way was then reseeded
and restored to a more “natural” condition.
Through the fall and winter of 2010, the Wasatch Range received an
unusually high amount of precipitation The record high levels of precipitation
damaged various access roads Barnard had constructed and made travel and work
along the right of way exceedingly difficult. Barnard was forced to regrade the
right of way, and place the saturated soil along the right of way. The soil could
not be removed from the right of way and this additional soil, piled within the
right of way, narrowed the available work space. The heavy precipitation, the
saturated soil, and the constricted work space led to various increases in
equipment and labor costs. The precipitation also caused damage to Barnard’s
various access roads, which required continuous maintenance and repair work.
In December of 2011, Barnard filed claims with Travelers based on damage
to the access roads and certain environmental control equipment and losses
associated with damage to the right of way. Travelers reviewed the claim and
ultimately paid Barnard for losses associated with damage to the roads and
environmental control equipment, but denied Barnard’s claim to the extent it
sought payment for losses associated with damages to the right of way. Travelers
concluded that the access roads and environmental control equipment were
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“Covered Property” under the Policy which had sustained direct physical loss or
damage from a “Covered Cause of Loss.” Travelers concluded that the right of
way was not “Covered Property,” but was instead “land” for which coverage was
expressly excluded under the Policy. Travelers also denied that the right of way
had sustained direct physical loss or damage.
Travelers sent Barnard a reservation of rights letter detailing these coverage
determinations on August 23, 2013, approximately eight months after Barnard
filed the instant action. In the letter, Travelers details some of the Policy
provisions it deems pivotal, and goes on to explain, in part, why Travelers deemed
the losses associated with damage to the roads to be covered, while it deemed
losses associated with damage to the right of way not to be covered:
We understand that part of Barnard’s claim is for repair to
the project access roads. The project description on the
Declarations page expressly includes ‘project access roads’
and therefore Travelers is accepting this element of
Barnard’s claim. . . . Land is not covered property under
the policy. The land making up the right-of way is
distinguished from project access roads which are
expressly identified in the policy Declarations. Further
Travelers does not agree that land which becomes saturated is ‘damaged.’
Id. at 3-4 (emphasis added). Travelers thus paid for Barnard’s “expenses to repair
only access roads that Barnard constructed or improved for the purposes of this
project” and the damage to various environmental control equipment, and denied
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the balance of the claim. Id. Travelers paid Barnard $1,486,949.00, and denied
the remaining claimed losses which amounted to over $17 million.
The Policy’s insuring agreement states: “We will pay for direct physical loss
of or damage to Covered Property from any of the Covered Causes of Loss.”
(Doc. 55-1 at 20.) “Covered Property” is defined as “Builder’s Risk,” id., which is
itself a defined term. Id. at 34. “Builder’s Risk” is defined in the Policy as
follows:
“Builders’ Risk” means:
Property described in the Declarations under “Builders’
Risk” owned by you or for which you are legally liable
consisting of:
a.
Buildings or structures including temporary
structures while being constructed, erected or
fabricated at the “job site”
...
“Builders’ Risk” does not include:
...
c.
Land (including land on which the property is
located) or water.
Id. Thus, “Builder’s Risk” (and by extension “Covered Property”) is defined in
the Policy and by reference to “Property described in the Declarations under
“Builders’ Risk.” Id.
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The Declarations Page reads as follows:
I.
COVERED PROPERTY AND LIMITS OF INSURANCE
IM PAK COVERAGE
“BUILDERS’ RISK”
We cover only the buildings and structures shown below:
LOCATION, DESCRIPTION AND COINSURANCE PERCENTAGE
“Job Site”
1
Building Number
1
Description
[]
APEX PIPELINE EXPANSION
WASATCH LOOP SPANNING DAVIS,
SALT LAKE & MORGAN COUNTIES
UTAH, INCLUDING THE PROJECT
ACCESS ROADS AND ALL PIPE
STORAGE SITES IN CONNECTION
WITH THIS PROJECT.
(Doc. 55-1 at 11.) “Job site” is defined in the policy as “the premises where the
‘Builders’ Risk’ will be permanently located at completion of the construction,
installation, erection or fabrication.” Id. at 37. “Project” is defined as “the total
construction of all Covered Property at the ‘job site.’” Id. at 38. The terms
“buildings” and “structures” are not defined. However, pursuant to the definition
of “Builders’ Risk”, the terms “buildings” and “structures” include “temporary
structures while being constructed erected or fabricated at the ‘job site.’” (Doc. 551 at 34.)
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SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate “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.” Fed. R.Civ. P. 56(a). The movant bears the initial burden of
informing the Court of the basis for its motion and identifying those portions of
“the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, which it believes demonstrate the absence of a
genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986) (internal quotation marks omitted). The movant’s burden is satisfied when
the documentary evidence produced by the parties permits only one conclusion.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52 (1986). Where the moving
party has met its initial burden, the party opposing the motion “may not rest upon
the mere allegations or denials of his pleading, but . . . must set forth specific facts
showing that there is a genuine issue for trial.” Id. at 248 (internal quotation
marks omitted).
APPLICABLE LAW
A federal court sitting in diversity applies the substantive law of the forum
state. Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). In this case, the Court
applies Montana law.
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Interpretation of Insurance Contracts
In Montana, the interpretation of an insurance contract is a question of law.
Marie Deonier & Assoc. v. Paul Revere Life Ins. Co., 9 P.3d 622, 630 (Mont.
2000). In interpreting an insurance contract, the court “will read the insurance
policy as a whole, and will if possible, reconcile its various parts to give each
meaning and effect.” Farmers Alliance Mut. Ins. Co. v. Holeman, 961 P.2d 114,
119 (Mont. 1998). The language of an insurance policy governs if it is clear and
explicit. Marie Deonier & Assoc., 9 P.3d at 630.
“Any ambiguity in an insurance policy must be construed in favor of the
insured and in favor of extending coverage.” Hardy v. Progressive Specialty Ins.
Co., 67 P.3d 892, 896 (Mont. 2003). “An ambiguity exists where the contract,
when taken as a whole, is reasonably subject to two different interpretations.” Id.
“Whether an ambiguity exists is determined through the eyes of ‘a consumer with
average intelligence but not trained in the law or insurance business.’” Id.
(quoting Holeman, 961 P.2d at 119).
“[E]xclusions and words of limitation in a policy must be strictly construed
against the insurer regardless of whether or not they are ambiguous.” Leibrand v.
National Farmers Union Property and Cas. Co., 898 P.2d 1220, 1224 (Mont.
1995) (citing Aetna Ins. Co. v. Cameron, 633 P.2d 1212, 1214 (Mont. 1981)).
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“[E]xclusions from coverage will be narrowly and strictly construed because they
are contrary to the fundamental protective purpose of an insurance policy.”
Revelation Industries, Inc. v. St. Paul Fire & Marine Ins. Co. 206 P.3d 919, 929
(Mont. 2009) (quoting Wellcome v. Home Ins. Co., 849 P.2d 190, 192 (Mont.
1993)).
Montana follows the “reasonable expectations doctrine,” which provides
that “[t]he objectively reasonable expectations of applicants and intended
beneficiaries regarding the terms of insurance contracts will be honored even
though painstaking study of the policy provisions would have negated those
expectations.” Fisher ex. rel. McCartney v. State Farm Mut. Auto. Ins. Co., 305
P.3d 861, 867 (Mont. 2013) (quoting Transamerica Ins. Co. v. Royle, 656 P.2d
820, 824 (Mont. 1983)). The reasonable expectations doctrine is inapplicable
when the terms of a policy are clear and explicit. Id. (citing Am Family Mut. Ins.
Co. v. Livengood, 970 P.2d 1054, 1059 (Mont. 1998)). Application of the
reasonable expectations doctrine is also generally unnecessary where policy
provisions are ambiguous, because a finding of ambiguous insurance terms
obviates the need for its application. Id.
An insured bears the initial burden to establish that a claim falls within the
basic scope of the insurance coverage. Travelers Cas. and Sur. Co. v. Ribi
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Immunochem Research, Inc., 108 P.3d 469, 476 (Mont. 2005). Once the insured
meets this initial burden, the insurer has the burden of proving the applicability of
an exclusionary clause. Id.
ANALYSIS
I.
Coverage under the Policy
Travelers contends there is no coverage for Barnard’s claimed losses
associated with damage to the right of way for two reasons: (1) the right of way is
not “Covered Property”, but rather is “land”; and (2) because the right of way is
“land,” there was no direct physical loss or damage to it. Thus, Travelers’ second
contention really hinges on the first. That is, if the Court determines that the right
of way is not “land,” but is “Covered Property,” Travelers loses its argument that
the right of way did not sustain direct physical loss or damage.1 Travelers does
not dispute that the historic precipitation levels are a “Covered Cause of Loss.”
Barnard contends that the right of way is “Covered Property.” It notes that
“Covered Property” is defined as “Builders’ Risk” which includes all buildings
and structures, even temporary structures, described on the Declarations page.
Barnard emphasizes the expansive description of “Builders’ Risk” provided on the
Declarations page. Barnard asserts that the work required to prepare the right of
1
Notably, Travelers determined that the access roads, which were subject to the same
precipitation event, suffered direct physical loss or damage.
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way was extremely costly and notes that the cost of this work was included in the
limits of insurance and the calculation of the premium Barnard paid for the Policy.
Barnard points out that the work done on the right of way altered the natural state
of the land and served a critical function in completing the Project. Once cleared,
excavated, and graded, the right of way became both a lane of travel for heavy
equipment and a work platform for construction and installation of the pipe.2
Ultimately, Barnard asserts that the cleared, excavated, and leveled right of way
meets both the legal and common definition of “structure,” and thus should
constitute “Covered Property” under the Policy.
Travelers contends that the clearing, excavating, and leveling of the ground
where the pipe was to be laid did not transform the land into a structure, as that
term is commonly understood. Travelers contends that the Court need not look to
a dictionary definition of the word “structure” to resolve this issue. Travelers
notes that the right of way, even after the work performed on it, was comprised
only of soil. Travelers further contends that applying the definition of structure
urged by Barnard is inconsistent with the Policy when viewed as a whole, because
the Policy provides additional coverage for “‘Builders’ Risk’ Site Preparation,”
2
Though Travelers protests the characterization of the right of way as a “temporary work
platform” or “access road,” it does not contest the fact that heavy equipment used the right of
way as a lane of travel or the fact that much of the work of stringing, bending, and constructing
the pipeline occurred along the right of way.
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which would be rendered unnecessary if excavating a job site transformed the site
into a structure. (Doc. 55-1 at 21.)
The Court concludes that Barnard has the better argument. The problem
with Travelers’ position is that it runs contrary to the canons of interpretation of an
insurance contract, in particular, that any ambiguities must be construed against
the insurer and in favor of the insured, and that exclusions must be narrowly and
strictly construed against the insurer. Hardy, 67 P.3d at 896; Revelation
Industries, Inc., 206 P.3d at 929. Furthermore, the Court is not persuaded that the
work done to the right of way did not render it a structure, or temporary structure,
as that term is understood pursuant to the provisions of the Policy.
The Montana Supreme Court has approved the use of dictionaries to
interpret the terms of an insurance contract. Farmers Union Mut. Ins. Co. v.
Horton, 67 P.3d 285, 289 (Mont. 2003). Travelers does not, and cannot, dispute
that the cleared, excavated, and leveled right of way meets the definition of
“structure” as defined in legal and common dictionaries. The Policy does not
define the term “structure.” As the author of the Policy, Travelers was obligated
to draft a more restrictive definition of the term, if the common and legal
definition of the term was to be regarded as too expansive. Black’s Law
Dictionary defines “structure” as “[a]ny construction, production, or piece of work
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artificially built up or composed of parts purposefully joined together.” Black’s
Law Dictionary 1559 (9th Ed.). Webster’s New World Dictionary defines
structure as “something built or constructed, as a building or dam.” Webster’s
New World Dictionary 429 (4th Ed.). These definitions are not inconsistent with
what one would typically consider to be a structure.
The right of way existed as raw land before Barnard began working there.
Barnard then extensively changed the inert natural state of this land, through the
use of various heavy machinery, turning it into something “artificial” and
“purposely joined together,” free of vegetation, level, compact, and more useful
for Barnard’s construction purposes. Barnard used the cleared right of way as a
place to perform various work tasks and as a lane of travel for its machinery.
Indeed, as Travelers admits, the photo of the excavated right of way submitted
with Barnard’s brief appears very much like a large road. Though the right of way
may not be the first thing that comes to mind when one thinks of a “structure,” the
excavated right of way cannot be easily excluded from the general category of
things falling within the broad meaning of the word.
The Policy does not limit a broad definition of the word “structure.” Indeed,
the Policy invites the reader to be flexible with one’s ordinary understanding of
the terms “buildings and structures.” According to the definitions section of the
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Policy, “buildings or structures including temporary structures” is part of what is
meant by the term “Builders’ Risk,” which in turn is what is meant by “Covered
Property.” (Doc. 55-1 at 34.) Though it may be difficult to think of “Builders’
Risk” as synonymous with “buildings and structures,” that is what the Policy
requires. “Builders’ Risk” is then further defined by reference to the Declarations
page.
On the Declarations page, under the heading of “Covered Property,”
“Builders’ Risk” appears. Below this, the Declarations page states that “We cover
only the buildings and structures shown below.” Given this, it would be
reasonable to expect to find a list of the “buildings and structures” that the Policy
covers. In this case, however, instead of a list of addresses for, or specific
descriptions of, certain buildings and structures, one finds, under the heading
“Description,” the following language: “APEX PIPELINE EXPANSION
WASATCH LOOP SPANNING DAVIS, SALT LAKE & MORGAN COUNTIES,
UTAH, INCLUDING THE PROJECT ACCESS ROADS AND ALL PIPE
STORAGE SITES IN CONNECTION WITH THIS PROJECT.” (Doc. 55-1 at
11.) Thus, the Declarations Page presents the “buildings and structures shown
below” in a manner that includes the entire Project. It is also notable that on the
same line as the expansive project description, one finds that the Policy identifies
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only “1” building. Id.
The Policy thus appears to cover, in a unified, all-encompassing manner, the
Project as described. The “Covered Property” is the “Builders’ Risk,” which is in
turn “the buildings and structures” as described in the expansive, all-caps language
on the Declarations Page.
Indeed, Travelers’ reservation of rights letter refers to the description on the
Declarations page as “[t]he project description on the Declarations page.” (Doc.
31-1 at 3.) Though Travelers’ statement of undisputed facts suggests differently –
that the all-caps language describes the “job site” (Doc. 47 at 10), rather than the
project description – the deposition testimony cited for this proposition does not
support Travelers’ assertion. The testimony of Ms. Young stands for the
proposition that the all-caps language describes both the “job site” and the
“project.” Given that the “job site” is apparently not covered by the Policy (Doc.
55-1 at 37), and that the “project” is covered (id. at 38), this is a confusing
explanation indeed.
The Court concludes that the Policy’s Declarations page and definition of
“Builders’ Risk,” when read for the purpose of determining what is to be
considered “Covered Property,” is ambiguous in this case. Accordingly, the
Court will “interpret any doubts in coverage strictly against the insurer.” Brabeck
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v. Employers Mut. Cas. Co., 16 P.3d 355, 357 (Mont. 2000). The Court thus holds
that the right of way, after it had been cleared, excavated, and leveled constituted a
“structure,” and was therefore “Covered Property” under the Policy.
Furthermore, the Court holds that the land exclusion, which must be
construed narrowly and strictly against Travelers, does not preclude coverage.
Construing the exclusion narrowly, the land exclusion does not clearly exclude
coverage for the right of way after it had been intentionally and systematically
altered from its natural state in order to improve its functional capacity for
completion of the Project. The conclusions of other courts dealing with similar
issues are in accord with the Court’s reasoning here. Klockner Stadler Hurter,
Ltd. v. Insurance Co. of the St. of Penn., 780 F.Supp. 148, 157-58 (S.D. N.Y.
1991) (holding that land exclusion did not preclude coverage for damage to
excavated site); M.A. Mortensen Co. v. Indemnity Ins. Co. of North America, 1999,
WL 33911358, **6-7 (D. Minn. Dec. 23, 1999) (holding that compacted soil used
in subgrade did not constitute “land” as term was used in exclusion).3
Finally, the Court is not persuaded that interpreting the Policy in this
manner is impermissibly inconsistent with the Policy’s additional coverage for
Site Preparation. First, the additional coverage for site preparation cannot serve to
3
The Court notes that case law on point is particularly sparse, but that Travelers has cited
no cases to the Court that support its reading of the land exclusion.
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exclude coverage otherwise available under the Policy’s basic grant of insurance.
To do so would turn the protective purpose for purchasing insurance on its head.
Second, the Court finds persuasive Barnard’s position that this additional coverage
generally pertains to instances in which damage to a building or structure gives
rise to the need for additional site preparation. Here, the Court finds that the right
of way constitutes a “structure” under the Policy.
The Court further holds that the right of way sustained “direct physical loss
or damage” as those terms are used in the Policy. Travelers, as noted above, does
not really contest otherwise. Travelers’ argument in this regard is premised on the
proposition that “land” cannot be damaged, but the Court rejects Travelers’
assertion that the right of way remained “land” after it was cleared, excavated,
leveled, and used in the course of construction. Furthermore, the Court agrees
with Barnard that the phrase “direct physical loss or damage” suggests “that there
was an initial satisfactory state that was changed by some external event into an
unsatisfactory state.” Dupuy v. USAA Cas. Ins. Co., 2012 WL 832291, *2 (M.D.
La. Mar. 9, 2012) (quoting Trinity Indus., Inc. v. Ins. Co. of N. Am., 916 F.2d 267,
270-72 (5th Cir. 1990)). The damage to the right of way from the extreme
precipitation event meets this definition of direct “physical loss or damage.”
Accordingly, the Court holds that the Policy provides coverage for damage
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to the right of way. Barnard’s motion will therefore be granted to the extent it
seeks a judicial declaration regarding coverage.
II.
Travelers’ Affirmative Defenses
Barnard moves for summary judgment on several of Travelers’ affirmative
defenses. Barnard contends that it is entitled to summary judgment on Travelers’
affirmative defenses because Travelers can point to no evidence to support the
defenses. Barnard contends that Travelers was obligated to raise the issues raised
by its affirmative defenses in its reservation of rights letter, and that Travelers
failed to do so. Travelers contends that issues of fact remain with respect to many
of its affirmative defenses. Travelers contends that it had no obligation to include
all potential defenses in its reservation of rights letter.
As an initial matter, the Court concludes that Travelers was not obligated to
detail all potential defenses in its reservation of rights letter and that it has not
waived nor is estopped from asserting other policy defenses. “Waiver is a
voluntary and intentional relinquishment of a known right or claim.” Edwards v.
Cascade County, 212 P.3d 289, 295 (Mont. 2009). Travelers’ reservation of rights
letter expressly reserves Travelers’ right to pursue additional applicable policy
defenses. Thus, Barnard has always been on notice of Travelers’ intention to
pursue all available policy defenses.
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In addition, while Montana law requires an insurer to “promptly provide a
reasonable explanation of the basis in the insurance policy in relation to the facts
or applicable law for denial of a claim,” Mont. Code Ann. § 33-18-201(14), an
insurer does not waive all policy defenses that are not included in a reservation of
rights letter. Portal Pipe Line Co. v. Stonewall Ins. Co., 845 P.2d 746, 749-750
(Mont. 1993); EOTT Energy Operation Ltd. Partnership v. Certain Underwriters
at Lloyd’s of London, 59 F.Supp.2d 1072, 1078 (D. Mont. 1999). In Portal Pipe
Line, the Montana Supreme Court rejected the contention that an insurance
company is limited to those defenses detailed in a reservation of rights letter when
the insured fails to demonstrate prejudice. Portal Pipe Line Co., 845 P.2d at 750.
In so holding, the Court in Portal distinguished the situation before it from that
presented in Safeco Insurance Company v. Ellinghouse, 725 P.2d 217 (Mont.
186), wherein an insurer was estopped from denying coverage to its insured when
the insurer had initially accepted coverage of the claim and assumed defense of the
claim without reservation. Here, by contrast, Barnard has always been on notice
of Travelers’ intention to assert all applicable policy defenses. Accordingly,
Barnard fails to demonstrate that Travelers has waived, or should be estopped
from, asserting defenses beyond those detailed in Travelers’ reservation of rights
letter.
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A.
First Affirmative Defense: Failure to State a Claim.
Travelers does not contest Barnard’s motion for summary judgment with
respect to Travelers’ first affirmative defense, that Barnard has failed to state a
claim for which relief may be granted. Accordingly, the motion is deemed welltaken and the Court strikes Traveler’s first affirmative defense.
B.
Second Affirmative Defense: Failure to Mitigate.
Barnard contends it is entitled to summary judgment on Travelers’ failure to
mitigate defense. Barnard contends that deposition testimony reveals that
Travelers has no evidence to support this defense. Travelers counters that
disputed issues of fact remain. In particular, Travelers asserts that Barnard’s
decision never to pursue potential contract rights in its contract with Kern exhibit
a failure to mitigate damages.
The Court concludes that summary judgment on this defense is
inappropriate. First, Barnard has not explained why the mitigation defense should
be dismissed with regard to damages Barnard is claiming beyond those owed to it
under the Policy. Second, Travelers points to provisions in Barnard’s underlying
contract with Kern which arguably could have been utilized by Barnard to avoid
or reduce some of Barnard’s damages. The record does not reveal that only one
conclusion can be reached with regard to this issue. Accordingly, Barnard’s
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motion with respect to Travelers’ second affirmative defense will be denied.
C.
Third Affirmative Defense: Extent of Damages Claimed.
Barnard argues that Travelers’ agents admitted in deposition testimony that
Travelers has no evidence to dispute the damages Barnard has claimed for the
damage to the right of way. Travelers disputes this characterization of the
deposition testimony, and cites its expert reports in which they opine that
Barnard’s claimed damages are inflated and overstated. In addition, Travelers
contends that once it decided there was no coverage for losses associated with
damages to the right of way, it had no duty to, and did not, further investigate the
details of Barnard’s claim. Travelers asserts it retains the right to investigate and
contest Barnard’s claimed losses.
Given Travelers’ expert reports and the circumstances of Travelers’
coverage determination, the Court concludes that disputed issues of fact remain
with respect to the extent of damages claimed by Barnard. Summary judgment as
to Travelers’ third affirmative defense is therefore unwarranted.
D.
Fourth Affirmative Defense: Travelers met its contractual
obligations.
Barnard asserts that the Court should strike Travelers’ fourth affirmative
defense because Travelers fails to cite any specific provision which supports its
defense. Travelers does not specifically address Barnard’s arguments with respect
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to this defense other than to assert that no coverage for Barnard’s claims was due
because of the land exclusion. Travelers’ arguments about coverage have been
rejected. Therefore, the Court strikes the fourth affirmative defense.
E.
Fifth Affirmative Defense: Plaintiff’s recovery is limited by
various provisions of the Policy.
Barnard contends it is entitled to summary judgment on Travelers’ fifth
affirmative defense which states that Barnard’s recovery is limited by the terms of
the Policy. Here, Barnard contends that Travelers’ citation to only two Policy
provisions in its denial letter limits Travelers’ ability to use other policy defenses
in this litigation. As noted above, Travelers’ reservation of rights letter expressly
reserves all policy defenses. Furthermore, as discussed above, Travelers has
submitted expert reports which raise issues of disputed fact with respect to the
damages claimed by Barnard. Travelers retains the right to assert appropriate
policy defenses applicable to the claimed losses associated with damage to the
right of way. Accordingly, the Court denies Barnard’s motion with respect to
Travelers’ fifth affirmative defense.
F.
Eighth Affirmative Defense: Plaintiff failed to meet all of its
contractual obligations under the Policy.
Here again, Barnard cites the reservation of rights letter as grounds to
dismiss Travelers’ defense that Barnard failed to meet all of its contractual
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obligations. As previously explained, Travelers was not obligated to cite any and
all policy defenses in its reservation of rights letter. The letter expressly reserves
the right to raise other policy defenses Furthermore, Travelers contends that there
are questions of fact with respect to Barnard’s contractual obligations to provide
prompt notice of claims, to cooperate with Travelers investigation into claims, to
submit to an examination under oath, and to provide a description of how, when
and where the loss occurred. Travelers contends Barnard failed to give notice of
its loss for at least two months after the weather event began, resisted and
interfered with Travelers’ examination, and was slow in providing support for its
claimed losses. Travelers thus contends that issues of fact remain with respect to
Barnard’s conduct relative to its contractual obligations and Barnard’s bad faith
claim. The Court concludes that disputed issues of fact remain with respect to
Travelers’ eighth affirmative defense. Summary judgment on Travelers’ eighth
affirmative defense is therefore denied.
IT IS ORDERED that Barnard’s motion for partial summary judgment (Doc.
30) is GRANTED IN PART AND DENIED IN PART. Barnard’s motion is
GRANTED to the extent it seeks a judicial declaration that the Policy provides
coverage for damage to the right of way. Barnard’s motion is also GRANTED
with respect to Travelers’ first and fourth affirmative defenses. Barnard’s motion
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is DENIED in all other respects.
IT IS FURTHER ORDERED that Travelers’ first and fourth affirmative
defenses are STRICKEN.
IT IS FURTHER ORDERED that Travelers’ motion for partial summary
judgment (Doc. 45) is DENIED
DATED this 13th day of March 2014.
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