Shadid LLC v. Aspen Specialty Insurance Company
ORDER denying 39 Motion for Summary Judgment. Signed by Honorable Timothy D. DeGiusti on 2/14/2018. (mb)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
CHARLES A. SHADID, L.L.C.,
ASPEN SPECIALTY INSURANCE
Case No. CIV-15-595-D
Before the Court is Defendant Aspen Specialty Insurance Company’s Motion for
Summary Judgment [Doc. No. 39], filed pursuant to Fed. R. Civ. P. 56. Defendant seeks
a judgment in its favor on all claims asserted in the Second Amended Complaint [Doc.
No. 8] and, alternatively, seeks a determination of issues regarding recoverable damages.
Plaintiff Charles A. Shadid, L.L.C. has responded in opposition to the Motion, and
Defendant has replied.
With permission, Plaintiff has also filed a supplemental exhibit of
deposition testimony discussed in its brief, for which the transcript was unavailable when
the brief was filed. 1
The Motion is fully briefed and ripe for decision.
Plaintiff brings this diversity action to recover damages for breach of contract and
breach of the insurer’s duty of good faith and fair dealing related to a commercial insurance
policy and an insured loss from a May 31, 2013 tornado allegedly affecting 20 properties.
To the extent Plaintiff’s Supplement [Doc. No. 64] presents additional argument and
responds to contentions in Defendant’s reply brief, the filing constitutes a supplemental or surreply
brief that was not authorized by the Court’s Order [Doc. No.63], and is disregarded.
See Second Am. Compl. [Doc. No. 8], ¶ 6.
Defendant seeks summary judgment on all
claims based on Plaintiff’s alleged failure to cooperate in an investigation of the insurance
claim, which allegedly prevented Defendant from completing a coverage decision or an
adjustment of the claim.
Alternatively, Defendant contends it is entitled to summary
judgment on Plaintiff’s bad faith claim because the undisputed facts show Defendant acted
reasonably in its investigation and denial of the insurance claim.
seeks a determination as a matter of law of two issues regarding the amount of damages
that Plaintiff can recover under the policy.
Plaintiff denies that all relevant facts are
undisputed and that summary judgment is proper on any claim or issue.
Standard of Decision
Summary judgment is proper “if the movant shows that there is no genuine dispute
as to any material fact and that the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a).
A material fact is one that “might affect the outcome of the suit
under the governing law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A dispute is genuine if the evidence is such that a reasonable jury could return a verdict for
Id. at 255.
All facts and reasonable inferences must be viewed in the light
most favorable to the nonmovant.
If a party who would bear the burden of proof at
trial lacks sufficient evidence on an essential element of its claim or defense, all other
factual issues concerning the claim or defense become immaterial.
Catrett, 477 U.S. 317, 322 (1986).
Celotex Corp. v.
The movant bears the burden of demonstrating the absence of a dispute of material
fact warranting summary judgment.
Celotex, 477 U.S. at 322-23.
If the movant carries
this burden, the nonmovant must then go beyond the pleadings and “set forth specific facts”
that would be admissible in evidence and that show a genuine issue for trial.
Anderson, 477 U.S. at 248; Celotex, 477 U.S. at 324; Adler v. Wal-Mart Stores, Inc., 144
F.3d 664, 671 (10th Cir. 1998).
“To accomplish this, the facts must be identified by
reference to affidavits, deposition transcripts, or specific exhibits incorporated therein.”
Adler, 144 F.3d at 671; see also Fed. R. Civ. P. 56(c)(1)(A).
“The court need consider
only the cited materials, but may consider other materials in the record.”
See Fed. R. Civ.
The Court’s inquiry is whether the facts and evidence identified by the parties
present “a sufficient disagreement to require submission to a jury or whether it is so onesided that one party must prevail as a matter of law.”
Anderson, 477 U.S. at 251-52.
Statement of Undisputed Facts 2
From August 20, 2012, until August 20, 2013, Plaintiff had property insurance
coverage for 25 commercial properties under an insurance policy issued by Defendant to
Charles A. Shadid, Charles A. Shadid LLC, and Charles A. Shadid Revocable Trust.
Defendant received written notice of a property loss dated August 15, 2013; the notice
This statement includes material facts that are properly supported and are not opposed
in the manner required by Rule 56(c). It should be noted that Plaintiff responds to Defendant’s
statement of facts by opposing many paragraphs (and sometimes several paragraphs at once) with
lengthy narrative statements, many of which span multiple pages. While some statements in
these narratives are accompanied by citations to the record, many are not. This briefing practice
is largely an effort by Plaintiff’s counsel to argue his case, and is not helpful to the Court.
listed the date of loss as May 31, 2013, and described the loss as storm damage to one of
the properties, Lakeshore Shopping Center. 3
On August 16, 2013, Defendant assigned
the claim to Associated Claims Management, Inc. (“ACM”) for field adjustment.
in August 2013, Mr. Shadid indicated that he intended to inspect more insured properties
and, if warranted, add other properties to the claim.
On August 27, 2013, a representative
of ACM notified Plaintiff that ACM would be scheduling inspections of all 25 properties
and would be requesting information about prior claims, major repairs, and maintenance
history for the properties. On August 30, 2013, ACM was notified by a public adjuster,
Jerry Renfroe, that Plaintiff had hired him to handle the insurance claim, and a schedule
for coordinating the property inspections was discussed.
ACM sent a letter to Mr. Shadid dated September 4, 2013, asking for information
regarding the properties and damages resulting from the loss.
of information requested for each property:
The letter listed five items
1) specific repairs or repair estimates for the
loss; 2) dates the properties were acquired; 3) major exterior repairs to roofs or siding
during the past 10 years; 4) other insurance claims filed on the properties while they were
under his care or control; and 5) a list of all property insurance policies covering the
properties during the past 10 years.
As to other claims, ACM directed Mr. Shadid “to
Mr. Shadid denies submitting this notice; he has testified that he orally reported the loss
to the agent who procured the policy within a few days after he observed hail damage to the subject
property. Mr. Shadid also denies assigning the date of May 31, 2013, to the loss; he states in an
affidavit that he did not know the date and someone else supplied it. See Shadid Aff. [Doc.
No. 50-2], ¶ 3. However, Mr. Shadid testified in his deposition that he noticed the hail damage
soon after the May 31, 2013 storm. See Shadid Dep. [Doc. No. 50-3], 124:10-13.
include claims #s, policy #s, and names of insurers, estimates, correspondence, and final
See Def.’s Ex. 8 [Doc. No. 39-8].
As support for these
requests, ACM referred to a policy provision regarding an insured’s duties in the event of
On September 5, 2013, ACM and Mr. Renfroe agreed on dates for the property
inspections to occur.
On September 19, 2013, ACM asked Mr. Renfroe to provide
documents regarding prior building repairs and insurance claims for Plaintiff’s properties.
From September 23 through 26, 2013, ACM inspected all 25 properties.
had previously made an insurance claim against a different insurer for a hailstorm loss in
May 2010 involving many of the same properties.
The inspections showed that some
roofs had been only partially replaced and some roofs appeared to predate the 2010
hailstorm, and that there was preexisting hail damage to some rooftop components and
Mr. Shadid responded to ACM’s written request for information by letter dated
September 23, 2013. 4
Rather than addressing each numbered item in ACM’s letter,
Mr. Shadid provided a response to each duty listed in the policy provision.
responses, Mr. Shaded included a summary of repairs that had been made to each property
after the loss, the cost of each repair, and a date and check number for the repair (primarily
June 25-27 or August 2, 2013).
Regarding an inventory of damaged property, Mr. Shadid
“Damages are being assessed at the present time with Insurer’s adjuster, Ken
Smith and Insured’s public adjuster, Jerry Renfroe starting 9/23/2013.”
It is unclear from the record when ACM received the letter.
See Def.’s Ex. 15
[Doc. No. 39-15] at 3 (ECF page numbering).
Mr. Shadid supplemented this statement
in a similar letter dated October 10, 2013 (Def.’s Ex. 16 [Doc. No. 39-16]), by providing
an itemized repair estimate (Def.’s Ex. 17 [Doc. No. 39-17) prepared by the public adjuster.
In Defendant’s view, this estimate failed to account for pre-existing damage or partial
repairs and wrongly included full replacement costs of all building roofs, rooftop
components, heating and cooling units, and other structural components. In Plaintiff’s
view, the estimate accounted for non-covered items, such as pre-existing damage or wear
and tear, as depreciation.
This initial volley was followed by a series of letters, first from ACM on
November 4 and then from Defendant’s counsel on November 22 and December 8, 2013,
followed by Mr. Shadid’s response on December 13, 2013.
The letters concerned
Defendant’s requests for additional information and documents, and a request for an
examination under oath (“EUO”).
Defendant took Mr. Shadid’s EUO on January 16,
Among other things, Mr. Shadid stated that Plaintiff was involved in litigation
regarding its 2010 insurance claim and that Plaintiff had filed other insurance claims
regarding some of the properties.
After the EUO, Defendant learned that Plaintiff had
made another insurance claim related to hail damage in May 2012 that Defendant believed
included some or all of the same properties involved in the May 2013 loss.
Beginning with a letter from Defendant’s counsel to Plaintiff’s counsel dated
February 7, 2014, and a response from Plaintiff’s counsel dated March 18, 2014, the parties
began a discussion of Defendant’s requests for documents and photographs related to the
2010 and 2012 insurance claims and documents regarding any major exterior repairs for
the past 10 years.
The discussion continued in letters exchanged between ACM and
Mr. Shadid in April, May and June of 2014.
Defendant generally took the position that
this information was needed to evaluate the condition of the roofs before the May 2013
loss and to determine covered property damage. Plaintiff generally took the position that
it had provided all relevant information and responsive documents (totaling more than 600
pages) and that Defendant’s requests for additional materials were unreasonable and
Plaintiff also asserted that a confidentiality provision in its settlement
agreement regarding the 2010 insurance claim prevented the disclosure of information
regarding the amount of the 2010 loss, and Plaintiff made requests of ACM and Defendant
for the production of documents generated or reviewed during the inspections and
investigation of the May 2013 loss.
In July 2014, however, Plaintiff’s insurance agent
provided a list of completed roof repairs for properties related to the 2010 insurance claim.
Defendant retained engineers to evaluate the damage to Plaintiff’s properties related
to the May 2013 loss.
May 14, 2014.
The engineers and ACM inspected the properties from May 5 to
The engineers also researched hail events, and considered the repair
information supplied by Plaintiff and its agent. The engineers prepared reports for each
of Plaintiff’s 25 properties and provided the reports to ACM, Defendant, and its counsel.
By letter dated February 15, 2015, Defendant informed Plaintiff that it had concluded the
claim investigation and had decided to deny the claim for the following reasons:
Through its investigation, Aspen was unable to confirm that any
property sustained hail damage on the reported date of loss. To the contrary,
Aspen’s investigation revealed that the properties sustained significant hail
losses in the years prior to the inception of the Aspen policy. Indeed, we have
learned that the insured asserted claims for damages sustained during these
prior weather events, but has refused to disclose any information regarding
the scope of the damage sustained to the properties citing a confidentiality
agreement as a part of the settlement of the prior claims. Information
provided by the insured regard [sic] the scope of roofing repairs was scant.
Aspen was unable to determine the actual scope of roofing repairs associated
with the prior weather events as a predicate to determining what portions of
the properties may have been affected on the date of this claim. Moreover,
historical weather data supports the conclusion that any hail associated with
the May 31, 2013 weather event would have not been of significant size to
cause damage to the properties. Accordingly, the claim is being denied for
lack of sufficient evidence of the occurrence of a covered loss on May 31,
2013, and for lack of cooperation of the insured in providing information to
substantiate the claim.
Def.’s Ex. 34 [Doc. No. 39-4] at 4 (ECF page numbering).
Insured’s Failure to Cooperate in Investigating and Adjusting the Claim
Defendant raises as a bar to recovery under the policy that Plaintiff breached a
contractual obligation to cooperate in the investigation of the insurance claim.
argues that it “was forced to deny the claim” because Plaintiff “refus[ed] to cooperate in
the investigation” and failed to provide necessary information to determine coverage and
adjust the claim.
See Def.’s Mot. Summ. J. at 21. Plaintiff denies that it failed to
cooperate or prevented Defendant from reaching a coverage decision.
“An insured . . . has an obligation to cooperate with the insurer, which is both
contractual and implied in law.”
First Bank of Turley v. Fid. & Deposit Ins. Co., 928 P.2d
298, 304 (Okla. 1996) (footnotes omitted).
An insured’s failure to cooperate is an
affirmative defense in a breach of contract action against the insurer for payment due under
See id. at 304 n.21; see also O’Neill v. Long, 54 P.3d 109, 116 n. 11 (Okla.
In addition to establishing a failure to cooperate, the insurer must show the
insured’s conduct “was prejudicial to its interest.”
See O’Neill, 54 P.3d at 116 n.11.
“What constitutes lack of cooperation is a question of fact.”
Iowa Home Mut. Cas. Co. v.
Fulkerson, 255 F.2d 242, 245 (10th Cir. 1958); see State Farm Mut. Auto. Ins. Co. v. Koval,
146 F.2d 118, 120 (10th Cir. 1944) (“Under the weight of authority, to constitute a breach
of a cooperation clause by the insured, there must be a lack of cooperation in some
substantial and material respect that results in prejudice to the insurer; whether there has
been such a breach is a question of fact; and such a breach is an affirmative defense, the
burden of establishing which rests on the insurer.”).
Upon consideration of the facts shown by the summary judgment record, the Court
finds that Defendant has not shown it is entitled to judgment as a matter of law on its
defense of failure to cooperate. Defendant cites policy provisions requiring an insured to
provide “a description of . . . the direct physical loss or damage,” to permit an examination
of the insured’s “books and records,” and to cooperate “in the investigation or settlement
of the claim.”
See Def.’s Mot. [Doc. No. 39] at 15; Def.’s Ex. 2 [Doc. No. 39-2] at 27-28
(ECF page numbering).
The facts on which Defendant relies to establish a breach of these
duties, however, or a breach of the implied duty of cooperation, concern Defendant’s
demands for particular information it deemed necessary under its view of the issues raised
by Plaintiff’s prior losses and claims outside the policy period.
Defendant does not
explain why Plaintiff was obligated to provide information concerning the condition of the
insured properties before the policy period, which was presumably included in Defendant’s
underwriting of the policy or its initial assessment of the insured risk.
In short, Plaintiff has demonstrated genuine disputes of material facts regarding both
its alleged lack of cooperation and prejudice to Defendant.
Therefore, the Court finds
summary judgment is inappropriate on this basis.
Bad Faith Claim
Plaintiff claims Defendant engaged in bad faith by failing to conduct a timely and
reasonable investigation and adjustment of the insurance claim, resulting in the denial of
Defendant asserts in support of its Motion that Plaintiff cannot
establish bad faith because Defendant investigated and denied the claim to the best of its
ability in light of Plaintiff’s lack of cooperation and failure to provide adequate responses
to Defendant’s multiple requests for information and documents.
Under Oklahoma law, Defendant has an “‘implied-in-law duty to act in good faith
and deal fairly with the insured to ensure that the policy benefits are received.’”
v. Mid Century Ins. Co., 121 P.3d 1080, 1093 (Okla. 2005) (quoting Christian v. Am. Home
Assur. Co., 577 P.2d 899, 901 (Okla. 1977)); accord Newport v. USAA, 11 P.3d 190, 195
“[A]n insurer’s right to resist payment or resort to a judicial forum to
resolve a legitimate dispute” is well-established.
Gov’t Employees Ins. Co. v. Quine, 264
P.3d 1245, 1249 (Okla. 2011); see Ball v. Wilshire Ins. Co., 221 P.3d 717, 725 (Okla.
2009); Brown v. Patel, 157 P.3d 117, 126-27 (Okla. 2007).
“However, when presented
with a claim by its insured, an insurer ‘must conduct an investigation reasonably
appropriate under the circumstances’ and ‘the claim must be paid promptly unless the
insurer has a reasonable belief that the claim is legally or factually insufficient.’”
Newport, 11 P.3d at 195 (quoting Manis v. Hartford Fire Ins. Co., 681 P.2d 760, 762 (Okla.
1984)); see Buzzard v. Farmers Ins. Co., 824 P.2d 1105, 1109 (Okla. 1991).
duty “to timely and properly investigate an insurance claim is intrinsic to an insurer’s
contractual duty to timely pay a valid claim.”
Brown, 157 P.3d at 122 (emphasis omitted).
“‘If there is conflicting evidence from which different inferences may be drawn regarding
the reasonableness of [an] insurer’s conduct, then what is reasonable is always a question
to be determined by the trier of fact by a consideration of the circumstances in each case.’”
Newport, 11 P.3d at 195 (quoting McCorkle v. Great Atl. Ins. Co., 637 P.2d 583, 587 (Okla.
1981)); accord Badillo, 121 P.3d at 1093.
Upon consideration of the summary judgment record, viewed in the light most
favorable to Plaintiff as required by Rule 56, the Court finds that a genuine dispute of
material facts precludes summary judgment on the issue of bad faith conduct. Regardless
whether the Court would reach the same conclusions, Plaintiff has presented minimally
sufficient facts from which reasonable jurors could find that Defendant did not conduct a
timely investigation and assessment of the damage to Plaintiff’s properties that was
appropriate under the circumstances, and that Defendant unreasonably denied the claim
based on Plaintiff’s alleged failure to cooperate in the investigation of the loss and failure
to establish that a loss occurred during the policy period.
In short, the reasonableness of
Defendant’s conduct to ensure that Plaintiff received the benefits of its property insurance
under the circumstances is reasonably subject to different conclusions.
Therefore, the Court finds that Plaintiff has demonstrated a genuine dispute of
material fact regarding its bad faith claim, and that Defendant is not entitled summary
judgment on this claim.
Contractual Damages Issues
Losses Before the Effective Date of the Policy
Defendant seeks a ruling that Plaintiff cannot recover damages for any loss that
occurred before the effective date of the policy.
It raises this issue on a hypothetical basis,
without reference to any undisputed facts, based solely on language of the policy that
provides coverage for a loss or damage commencing during the policy period. Defendant
asks the Court to declare “that Aspen is not liable for any losses or damages that may be
found at trial to have been sustained at [Plaintiff’s] properties outside the policy period.”
See Def.’s Mot. at 26.
The purpose of this proposed declaration is unclear. The Court
declines to assume that an insured loss occurred and to issue an advisory ruling that is
apparently directed at how to account for any prior damage and incomplete repair to a
property in calculating the amount of Plaintiff’s damages.
empowered to issue” advisory opinions.
“[F]ederal courts are not
McKinney v. Gannett Co., 694 F.2d 1240, 1247-
48 (10th Cir. 1982) (citing FCC v. Pacifica Found., 438 U.S. 726, (1978); Herb v. Pitcairn,
324 U.S. 117 (1945); Aetna Life Ins. Co. v. Haworth, 300 U.S. 227 (1937)).
Replacement Cost Coverage
Under a replacement cost provision of the policy, Plaintiff was entitled to payment
for the cost to repair or replace the premises only upon completion of the repair or
replacement; until that time, Plaintiff was entitled to receive the actual cash value of the
damaged part of the property at the time of the loss.
Without presenting any properly
supported facts showing that Plaintiff sold a subject property before completing repairs to
damage from a covered loss, Defendant seeks a declaration “that it is only liable for the
actual cash value of that portion of the property the jury may determine to have been
damaged as a result of the May 31, 2013 storm for those properties which [Plaintiff] has
See Def.’s Mot. at 27.
The Court again declines to issue an advisory opinion.
For these reasons, the Court finds that Defendant is not entitled to summary
judgment on any claim or issue.
IT IS THEREFORE ORDERED that Defendant Aspen Specialty Insurance
Company’s Motion for Summary Judgment [Doc. No. 39] is DENIED.
IT IS FURTHER ORDERED that pursuant to the Order of August 3, 2016 [Doc.
No. 47], the new deadline to complete discovery and file trial submissions is 30 days from
the date of this Order.
IT IS SO ORDERED this 14th day of February, 2018.
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