Glendale LLC v. Amco Insurance Company
Filing
20
ORDER granting 11 Motion for Partial Summary Judgment; denying 15 Motion for Partial Summary Judgment. Signed by Chief Judge Robert J. Conrad, Jr on 4/23/2012. (bsw)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:11-cv-3-RJC-DCK
GLENDALE LLC d/b/a WESTERN
SIZZLIN,
Plaintiff,
)
)
)
)
v.
)
)
AMCO INSURANCE COMPANY d/b/a )
NATIONWIDE MUTUAL INSURANCE )
COMPANY,
)
Defendant.
)
)
ORDER
THIS MATTER comes before the Court on Plaintiff Glendale LLC d/b/a Western
Sizzlin’s (“Plaintiff”) Motion for Partial Summary Judgment, (Doc. No. 11), and Defendant
Amco Insurance Company d/b/a Nationwide Mutual Insurance Company’s (“Defendant”)
Motion for Partial Summary Judgment, (Doc. No. 15).
I.
BACKGROUND
Since 1994, Plaintiff has owned and operated a Western Sizzlin restaurant in Gastonia,
North Carolina. (Doc. No. 13-2: Allen Sisler (“Sisler”) Dep. at 6). On September 29, 2008, the
restaurant suffered a fire that damaged the building and its contents. (Doc. Nos. 1-3 at 4; 2 at 2).
Defendant insured the restaurant under Nationwide Premier Businessowner Policy # ACP
2212352296 (“Policy”). (Doc. Nos. 1-3 at 3; 2 at 2).
On or about October 1, 2008, a meeting was held at the site to inspect damage caused by
the fire. (Doc. No. 13-2: Sisler Dep. at 11). Allen Sisler, an officer of Plaintiff, Mike Austin,
Defendant’s adjuster, and several contractors were present. (Id.). The parties then solicited bids
to repair the damage. (Id.). Beam Construction submitted a bid for $215,238. (Id. at 16). C.H.
& Sons submitted a bid for $507,570. (Id.). Belfor submitted a bid for $507,204. (Id. at 17).
Sidbury Group submitted a bid for $506,111. (Doc. No. 1-3: Complaint at 6). Pinnix
Construction submitted a bid for $516,000. (Doc. No. 13-2 at 17).
Beam acknowledged that the work it quoted was significantly less involved than that
proposed by the other contractors and would not result in a structure sound enough to secure a
Certificate of Occupancy or allow the restaurant to re-open for business. (Doc. No. 11-1 at 2).
Defendant claims, however, that the Beam’s proposed work would return the restaurant to its
pre-fire state, suggesting that the restaurant was in rather poor condition before the fire struck.
(Doc. Nos. 16; 11-6: Defendant’s letter to Plaintiff).
In March 2009, Plaintiff invoked the Policy’s appraisal clause. The clause states:
If we and you disagree on the amount of loss, either may make written demand
for an appraisal of the loss. In this event, each party will select a competent and
impartial appraiser after receiving a written request from the other, and will
advise the other party of the name of such appraiser within 20 days. The two
appraisers will select an umpire. If appraisers cannot agree, either may request
that selection be made by a judge of a court having jurisdiction. The appraisers
will state separately the value of property and the amount of loss. If they fail to
agree, they will submit their differences to the umpire. A decision agreed to by
any two will be binding. Each party will:
a.
Pay its chosen appraiser; and
b.
Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal, we will still retain our right to deny the claim.
(Doc. No. 11-3: Policy Excerpt). Pursuant to this clause, Plaintiff named Jim Stewart
(“Stewart”) as its appraiser. (Doc. No. 13-7). After some initial delay, Defendant named
Harrison Jones (“Jones”) as its appraiser. (Id.). Stewart and Jones selected Paul Woody
(“Woody”) as the umpire. (Id.).
Stewart, Plaintiff’s appraiser, wrote Woody, the umpire, a letter on April 13, 2010,
valuing building loss at $520,911.58, the contents replacement cost at $304,607.30 and the actual
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value contents loss at $190,562.74. (Doc. No. 13-8). Jones, Defendant’s appraiser, wrote
Woody a letter on June 15, 2010, valuing the reasonable cost of building repairs at $187,281.64,
the contents damage at $19,512.40, and $14,838.94 for perishable food items lost in the fire.
(Doc. No. 11-5). The parties do not contest the $14,838.94 for food losses. (Id.).
Jones also told Woody that the “appraisal process is intended to fix the amount of loss
under the policy for items that are included and covered within the policy.” (Doc. No. 11-5:
Jones Letter at 1). Jones wrote that “items which would be excluded as part of the insurance
contract should not be included within this appraisal process/award or, at the very least, be
identified separately.” (Id.). Jones advised Woody that they “should not include other needed
maintenance or repair of non-related conditions.” (Id.). Jones further wrote that they “should
consider what caused the respective conditions,” and that “if the damages are preexisting . . . or
if they are caused by poor maintenance . . . then they should not be included in our appraisal
award for the insurance claim for the fire event of September 29, 2008.” (Id. at 2). Jones
explained that “not only would this be unfair, but it would also be incorrect because the contract
(insurance policy) between the two parties (insurance company and insured) excludes preexisting conditions or repairs not needed due to the covered cause of loss. In this appraisal the
cause of loss is the fire event of September 29, 2008.” (Id.).
As to any repair to the restaurant’s roof, Jones wrote that Plaintiff “has an obligation to
protect the property from future damages. In this case, the roof has had minimal temporary
localized protection but yet still allowing ongoing damage not directly related to the fire event.
Basically the building has been left to sit and deteriorate.” (Id. at 3). Woody agreed that some
amount of damage was caused by Plaintiff’s post-fire neglect rather than the fire and excluded
such repairs from his award. (Doc. No. 13-14: Woody Dep. at 14, 25).
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As to the valuation of the lost building contents, Jones informed Woody of a post-fire
break-in which resulted in some of the contents being stolen. (Id. at 4). Jones wrote that “[t]his
theft has had no bearing on the value of the fire damage for these items in my opinion,”
interpreting the Policy to exclude coverage for losses from such a post-fire theft. (Id.). Stewart
does not appear to have reached such an issue because he had already deemed those items total
losses from the fire. (Doc. No. 18-4). Woody did not testify as to how he treated these items.
(Doc. No. 13-14: Woody Dep.).
Woody signed an award appraising Plaintiff’s losses on August 26, 2010. (Doc. No. 114). Jones signed the award five days later, on August 31, 2010. (Id.). The award separately
listed a replacement cost and an actual cash value for repairs to the building, contents/equipment,
and perishables. (Id.). Woody and Jones found that the building’s replacement cost of repairs
was $286,745 and the actual cash value of building repairs was $252,897. (Id.). They found the
replacement cost of the contents was $49,350, while the actual cash value of repairs to the
contents was $27,494. (Id.). They appraised the loss to perishables at $14,839. (Id.).
Plaintiff alleges that Defendant never sent it any payment under the award. (Doc. No. 13 at 7). Defendant explains that this is because it is unsure of whom it should send the proceeds.
(Doc. No. 17 at 3). Plaintiff brought suit against Defendant on November 29, 2010. (Doc. No.
1-3 at 11). Plaintiff moved for partial summary judgment on March 1, 2012, asking the Court to
declare the appraisal award invalid. (Doc. No. 11). Plaintiff asserts a breach of contract claim,
alleging that the Defendant failed to pay a reasonable claims settlement in violation of the
Policy. (Doc. No. 1-3). Defendant filed a cross motion for summary judgment on March 13,
2012, asking the Court to enter summary judgment in its favor on Plaintiff’s breach of contract
claim. (Doc. No. 15).
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II.
STANDARD OF REVIEW
Summary judgment shall be granted “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 Court’s task is no different where cross motions for summary judgment are
filed. “The role of the court is to ‘rule on each party's motion on an individual and separate
basis, determining, in each case, whether a judgment may be entered in accordance with the Rule
56 standard.’” Subterranean Constr. Co., Inc. v. W.D. Curran & Assocs., Inc., No. 04-3861, 2005
WL 2065231, at *2 (quoting Towne Mgmt. Corp. v. Hartford Acc. & Indem. Co., 627 F. Supp.
170, 172 (D. Md. 1985)). “However, when cross-motions for summary judgment demonstrate a
basic agreement concerning what legal theories and material facts are dispositive, they ‘may be
probative of the non-existence of a factual dispute.’” Id. (quoting Shook v. United States, 713
F.2d 662, 665 (11th Cir. 1983)).
A factual dispute is genuine “if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A fact is material only if it might affect the outcome of the suit under governing law. Id. The
movant has the “initial responsibility of informing the district 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
citations omitted).
Once this initial burden is met, the burden shifts to the nonmoving party. The
nonmoving party “must set forth specific facts showing that there is a genuine issue for trial.”
Id. at 322 n.3. The nonmoving party may not rely upon mere allegations or denials of
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allegations in his pleadings to defeat a motion for summary judgment. Id. at 324. The
nonmoving party must present sufficient evidence from which “a reasonable jury could return a
verdict for the nonmoving party.” Anderson, 477 U.S. at 248; accord Sylvia Dev. Corp. v.
Calvert Cnty., Md., 48 F.3d 810, 818 (4th Cir. 1995).
When ruling on a summary judgment motion, a court must view the evidence and any
inferences from the evidence in the light most favorable to the nonmoving party. Anderson, 477
U.S. at 255. “‘Where the record taken as a whole could not lead a rational trier of fact to find for
the nonmoving party, there is no genuine issue for trial.’” Ricci v. DeStefano, 129 S. Ct. 2658,
2677 (2009) (quoting Matsushita v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
III.
ANALYSIS
Plaintiff argues that the appraisal award is invalid and should not be dispositive as to the
loss determination for damage to its restaurant building, contents, or perishable goods. (Doc.
No. 11-1 at 4). Plaintiff argues that the award should be declared invalid because it: (1) does not
comply with North Carolina General Statutes Sections 58-44-15 & 58-44-16; (2) does not
comply with the Policy; and (3) improperly includes issues of coverage and causation.
Defendant argues that the award should be declared valid and binding as to the valuation
of building, contents, and perishable losses. (Doc. No. 16 at 9). Defendant asks the Court to
confirm the award because the contractual appraisal provisions were followed and there is no
evidence of fraud, duress, or other impeaching circumstances. (Id. at 9-20). Plaintiff argues that
there is a genuine issue of material fact on the fraud, duress, or impeaching circumstances issue.
(Doc. No. 11-1 at 12).
The Court finds that the award’s valuation of building damage is invalid due to the
appraisers’ improper consideration of causation issues. Genuine issues of material fact prevent
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summary judgment in either party’s favor as to the award’s appraisal of the restaurant’s contents.
The parties agree as to the loss valuation regarding perishable goods and, therefore, the agreed
amount of $14,839 is binding. Therefore, Plaintiff’s Motion for Partial Summary Judgment,
(Doc. No. 11), is GRANTED IN PART AND DENIED IN PART and Defendant’s Motion for
Partial Summary Judgment, (Doc. No. 15), is DENIED.
In a case with an appraisal clause identical to the parties’ agreement set out above, the
Fourth Circuit held that parties are not bound by the appraiser’s determinations of coverage
issues. High Country Arts and Crafts Guild v. Hartford Fire Ins., 126 F.3d 629, 634 (4th Cir.
1997). The North Carolina Supreme Court has also observed that “[a]s a general rule, the sole
purpose of an appraisal is to determine the amount of damage . . . An Appraisal does not
necessarily determine total amount due under the policy. . . Generally . . . whether the loss . . .
was caused by a covered risk is a question for the jury. Similarly, whether . . . the loss falls
within a policy definition is a question of fact.” N.C. Farm Bureau Mut. Ins. Co., Inc. v. Sadler,
711 S.E.2d 114, 117-18 (N.C. 2011) (quoting 15 Lee R. Russ & Thomas F. Segalla, Couch on
Insurance 3d § 210:42 (Dec. 1999)). The appraisal clause in Sadler explicitly barred the
appraisers from interpreting the insurance policy or considering causation or coverage issues, but
even without this explicit language the appraisers’ consideration of any issue beyond the amount
of loss is improper. High Country, 126 F.3d at 634. North Carolina law does not empower
appraisers to make causation or coverage determinations. Id.; Sadler, 711 S.E.2d at 117-18; see
also Markham v. Nationwide Mut. Fire Ins. Co., 481 S.E.2d 349, 355 (N.C. Ct. App. 1997)
(holding that is for the jury to determine causation and coverage questions); Wood v. Mich.
Millers Mut. Fire Ins. Co., 96 S.E.2d 28, 29 (N.C. 1957) (holding that determining which of
three possible causes for certain damage was a job for the jury).
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The Sadler court rejected an appraisal award where the appraisers purported to separate
loss amounts caused by wind (covered under the insurance policy) from those caused by mold
(subject to a coverage limit). 711 S.E.2d at 117. The court held that “the finder of fact must
‘determine whether the ultimate cause of the claimed damages falls within the scope of the
policy’s exclusionary provisions, as defined by the trial court.’” Id. at 118 (quoting Markham v.
Nationwide Mut. Fire Ins. Co., 481 S.E.2d 349, 355 (N.C. Ct. App. 1997)).
In High Country, the appraisers interpreted the insurance policy to only allow coverage
for the first sixty days of lost business income and valued the business income loss at $26,518.
The Fourth Circuit found that the policy covered twelve months of business income loss and
held that the parties were not bound by the appraisers’ coverage determination. 126 F.3d at 634.
Nonetheless, the circuit held that the parties could be bound by the appraisers’ finding that the
business income loss for the first sixty days was $26,518. Id. Thus, this circuit employs a blue
pencil approach to overreaching appraisal awards. Parties are not bound by an appraiser’s
coverage or causation determinations, but any valid loss valuation within the same award is
binding. Id.
Plaintiff argues that the award should be thrown out in its entirety because evidence
suggests that the appraisers excluded pre-existing conditions. (Doc. No. 11-1 at 11). This
argument takes the bar on causation and coverage determinations too far. Appraisers are tasked
with evaluating the “amount of loss.” (Doc. No. 11-3: Policy Excerpt). This language
authorizes the appraisers to assign a value to the damage done by a given event. One cannot
measure a loss without determining a starting point. Thus, the appraisers appropriately excluded
conditions that they determined were present before the fire. What is not appropriate for an
appraiser to decide is how much of the deterioration resulted from a covered cause and how
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much came from an uncovered cause. See Sadler, 711 S.E.2d at 117.
Defendant concedes that the appraisers are not entrusted with the task of causation
determination. (Doc. No. 16 at 14). But Defendant argues that there is no causation question in
this case, stating that “[i]t can be said decisively that the subject fire caused the losses that are
the subject of Glendale’s claim.” (Id.). Defendant’s appraisers, however, disagree with its
decisive statement.
Jones and Woody testified that they excluded repairs for some amount damage to the
restaurant based on their belief that some damage was caused by Plaintiff’s neglect of the
charred restaurant rather than directly by the fire and that the Policy excluded such damages.
(Doc. Nos. 11-5: Jones Letter at 3; Doc. No. 13-14: Woody Dep. at 14, 25). Like the wind
versus mold determination in Sadler, these judgments reflect causation and coverage decisions
that should not be part of the appraisal process. Because the appraisers did not separate their
estimated roof repair costs from repairs to other parts of the building, the Court cannot save any
part of their building repair appraisal. Neither party has shown whether damages caused by
owner neglect following a fire would be covered under the Policy. But even assuming they are
not, the appraisers were not the proper parties to determine which damage was caused directly
by the fire and which damage resulted instead from Plaintiff’s alleged post-fire neglect. That is a
jury question. Sadler, 711 S.E.2d at 118. Thus, this portion of the award is non-binding as a
matter of law.
As to the valuation of the lost building contents, Jones told Woody that he did not believe
the Policy covered losses from any post-fire theft. (Doc. No. 11-5: Jones Letter at 4). Woody
did not testify as to how he treated these items. (Doc. No. 13-14: Woody Dep.). Jones’s
testimony, however, is enough to create an issue of fact over whether the award excluded losses
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from this theft. Such an exclusion would reflect an impermissible determination that the Policy
did not cover such losses and, possibly, an impermissible causation analysis that the fire did not
lead to the theft. Neither party has shown whether the Policy would cover such losses or detailed
the events surrounding this theft. If the fire made the restaurant vulnerable to theft such losses
might be compensable under the Policy.1 Thus, the Court cannot conclude as a matter of law
that the appraisers’ improper policy and causation analysis was harmless. Likewise, the Court
cannot conclude as a matter of law that this portion of the award excluded losses that should
have been covered. Issues of fact remain over whether the award excluded theft losses, whether
such losses are covered under the Policy, and if they are, what is the loss amount.
The perishables loss amount should never have been submitted to the umpire. The
appraisal agreement provides that “[t]he appraisers will state separately the value of property and
the amount of loss. If they fail to agree, they will submit their differences to the umpire. A
decision agreed to by any two will be binding.” (Doc. No. 11-3: Policy Excerpt). Plaintiff’s and
Defendant’s appraisers agreed that the amount of perishable food loss was $14,838.94. (Doc.
Nos. 18 at 5; 18-13). Thus, their agreed amount was binding before Woody even became
involved.
Next, the Court must address Plaintiff’s arguments that the award is invalid because it (1)
does not comply with North Carolina General Statutes Sections 58-44-15 & 58-44-16 and (2)
does not comply with the Policy. If Plaintiff is entitled to summary judgment on these grounds,
the above issues of fact would be immaterial.
Plaintiff argues that the award is invalid because it does not comply with North Carolina
1
The Court expresses no opinion as to whether such losses could be compensable under
the Policy because neither party has presented the Policy in full.
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General Statutes Sections 58-44-15 and 58-44-16. (Doc. No. 11-1 at 5). These sections
incorporate an appraisal clause into every North Carolina insurance contract. N.C. GEN . STAT .
§§ 58-44-15 & 58-44-16; see also Boyd v. Ins. Co., 96 S.E.2d 703, 707 (N.C. 1957). The
wording of the parties’ appraisal clause varies slightly from Section 58-44-16(f)(14). While the
parties’ contract provides:
The appraisers will state separately the value of property and the amount of loss.
If they fail to agree, they will submit their differences to the umpire. A decision
agreed to by any two will be binding.
North Carolina General Statutes Section 58-44-16(f)(14) provides:
The appraisers shall then appraise the loss, stating separately actual cash value
and loss to each item; and, failing to agree, shall submit only their differences to
the umpire. An award in writing, so itemized, of any two when filed with this
insurer shall determine the amount of actual cash value and loss.
Highlighting two portions of Section 58-44-16’s language, Plaintiff argues that the
appraisers’ award failed to sufficiently “itemize” “each item.” (Doc. No. 11-1 at 6). Plaintiff
acknowledges that Woody and Jones’s award separately listed the replacement cost of repairs
and the actual cash value of repairs to the building, its contents, and perishable goods. (Id.). But
Plaintiff argues this was not sufficient itemization. (Id.). Plaintiff concedes that the appraisers
did not have to separately set out “each fork, knife, table, or cooking appliance damaged in the
fire.” (Doc. No. 18 at 3). Instead, Plaintiff argues that the law required Woody’s final award to
match the level of specificity used in Stewart’s submissions to the panel. (Id.). Plaintiff has not
supported his argument that Stewart’s example is the “just right” level of itemization with any
case law. Nor has Plaintiff shown the Court any case where a court has thrown out an award for
insufficient itemization. This argument is DENIED.
Plaintiff also argues that the award does not comply with the Policy because it does not
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“state separately the value of property and the amount of loss.” (Doc. No. 11-1 at 7). Plaintiff is
correct that the award does not place a value on the unrepaired property. (Doc. No. 11-4).
Instead, it lists two different types of repair valuations for losses to the building, its contents, and
the perishable goods. (Id.). However, Plaintiff’s argument assumes that the Court must
invalidate the whole award because of the appraisers’ omissions of a separate valuation of the
present property condition. But under High Country, any valid portion of an appraisal binds the
parties, even if some other part of the award is missing or improper. 126 F.3d at 634. Therefore,
this argument is also DENIED.
The Court does not reach Defendant’s arguments regarding the general sufficiency of the
award because it has already found that the building appraisal was invalid and genuine issues of
material fact remain over whether the appraisers improperly injected causation and coverage
issues into the contents valuation. Likewise, the Court does not reach the validity of Plaintiff’s
fraud, bias, duress, and impeaching circumstances defenses to the enforceability of the award.
IV.
CONCLUSION
The award’s valuation of building damage is invalid due to the appraisers’ improper
consideration of causation issues. Genuine issues of material fact prevent summary judgment in
either party’s favor as to the award’s appraisal of the restaurant’s contents. The parties agree as
to the loss valuation regarding perishable goods and, therefore, the agreed amount of $14,839 is
binding. Therefore, Plaintiff’s Motion for Partial Summary Judgment, (Doc. No. 11), is
GRANTED IN PART AND DENIED IN PART and Defendant’s Motion for Partial Summary
Judgment, (Doc. No. 15), is DENIED.
IT IS, THEREFORE, ORDERED that:
1.
Plaintiff’s Motion for Partial Summary Judgment, (Doc. No. 11), is GRANTED
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IN PART AND DENIED IN PART; and
2.
Defendant’s Motion for Partial Summary Judgment, (Doc. No. 15), is DENIED.
Signed: April 23, 2012
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