Torres d/b/a USA Flower Shop v. American Economy Insurance Company

Filing 19

ORDER granting 12 Motion for Summary Judgment; denying as moot 17 Motion for Leave to File. (Signed by Magistrate Judge Stephen Wm Smith) Parties notified. (jmarchand)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION MA R T IN TORRES D/B/A USA FLOWER SHOP Plaintiff, v. § § § § § AM E R IC A N ECONOMY INSURANCE COMPANY, § Defendant. § ORDER B e fo re the court is a motion for summary judgment (Dkt. 12) filed by d e fe n d a n t American Economy Insurance Company (AEIC). For the reasons stated b e lo w , AEIC's motion is granted. Background T h is Hurricane Ike suit involves a claim of property damage to a flower shop le a s e d by plaintiff Martin Torres. The property coverage of the policy issued by A E IC contained limits of $12,000 for business personal property and $1,000 for s p o ila g e coverage of perishable stock. On October 23, 2008, Torres reported d a m a g e to the flower shop caused by the hurricane, including wind damage to the e x te rio r of the building, loss of flower inventory, and damage to the compressor f o r one of the shop's large walk-in coolers. On October 29, 2008, AEIC sent an a d ju s te r to conduct an inspection of the property. During the inspection, Torres in d ic a te d that he paid for repairs to the building but did not have invoices for the 1

CIVIL ACTION H-09-3038

s p o ile d flowers or the building repairs. After several requests from AEIC, Torres su b m itte d invoices and receipts on November 25, 2008. Missing from his

d o cu m e n ta tio n was information regarding Torres' ownership of the building and d a m a g e to the cooler compressor. AEIC followed up with several requests for the missing documentation. On D e c e m b e r 4, 2008, Torres called AEIC to discuss his claim. During that call, T o r re s reported that "the cooler was damaged from all the electricity outages that c a m e back on and off." (Ex. A-7 at 9, Dkt. 12-4). Torres also requested a Spanishsp e a k in g assistant, which AEIC later provided. Torres never provided documentation showing the value of the damaged flo w e r stock, the cause of damage to the cooler compressor, supporting d o cu m e n ta tio n showing his ownership of the building, or a lease agreement for the flo w e r shop. By letter dated March 27, 2009 AEIC issued payment of $1,000 in s p o ila g e coverage, the policy limit, to Torres. The letter further explained that b e c a u se Torres still had not provided documentation related to cooler damage and th e building improvements, AEIC was unable to further assist Torres with his re m a in in g claims. Torres filed suit on August 17, 2009 claiming that AEIC failed to adequately co m p en sate him under the policy. In turn AEIC files this motion for summary

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ju d g m e n t, the basis of which is twofold:(1) Torres cannot raise a genuine issue of m a te ria l fact that his damages are covered by the policy, and (2) Torres' failure to c o o p e ra te in the investigation abrogates AEIC's duty to compensate him for his dam ages. S u m m a r y Judgment Standard T o obtain summary judgment, AEIC bears the burden of demonstrating that " th e pleadings, depositions, answers to interrogatories, and admissions on file, to g e th e r with the affidavits, if any, show that there is no genuine issue as to any m a te ria l fact" and therefore judgment is appropriate as a matter of law. FED. R. CIV. P . 56(c). Summary judgment should issue if, after having adequate time for d is c o v e r y , Torres has produced insufficient evidence to create a jury question on o n e or more of the essential elements of his claims. Celotex Corp. v. Catrett, 477 U .S . 317, 327 (1986). Conversely, where AEIC has the burden of proof, it must e sta b lis h , as a matter of law, every essential element of its defense before Torres c a n be obligated to produce specific facts to rebut the defense. Chaplin v. Nations C r e d it Corp., 307 F.3d 368, 372 (5th Cir. 2002). In determining the existence of a genuine issue of material fact, the court will draw all inferences arising from the fa c ts in the light most favorable to the nonmoving party. Hotard v. State Farm Fire & Cas. Co., 286 F.3d 814, 817 (5th Cir. 2002).

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R e q u e s t for Continuance In his response to AEIC's motion for summary judgment (Dkt. 13), Torres re q u e s ts a continuance pursuant to FED. R. CIV. P. 56(f) in order for him to p e rfo rm discovery before the court rules on the motion for summary judgment. ( D k t. 13 at 1-2.). Rule 56(f) authorizes a court to grant a continuance to respond to a summary judgment motion when the nonmovant has not had an opportunity to conduct discovery that is essential to his opposition to the motion for summary ju d g m e n t. Adams v. Travelers Indem. Co., 465 F.3d 156 (5th Cir. 2006). A party o p p o s in g summary judgment under Rule 56(f) must demonstrate: (1) why

a d d itio n a l discovery is needed and (2) how the additional discovery will likely c re a te a genuine issue of material fact. Brown v. Miss. Valley State Univ., 311 F.3d 3 2 8 , 333 n.5 (5th Cir. 2002). In one cursory sentence, Torres argues that further discovery is necessary b e c au s e "it is anticipated that Defendant's corporate representatives will offer te s tim o n y applicable to Plaintiffs federal and state law claims." (Dkt. 13). Beyond sta tin g the obvious, nowhere does Torres identify the discovery he needs to a d e q u a te ly respond to the motion, and the affidavit counsel refers to in his r e s p o n s e is merely a recitation of the one-sentence argument presented in Torres' b rie f. (See P. Ex. A, Dkt 13-1).

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A party seeking a Rule 56(f) continuance "must be able to demonstrate how p o stp o n em en t and additional discovery will allow him to defeat summary ju d g m e n t; it is not enough to 'rely on vague assertions that discovery will produce n e e d e d , but unspecified, facts.'" Stearns Airport Equip. Co., Inc. v. FMC Corp., 170 F .3 d 518, 535 (5th Cir. 1999) (citing Washington v. Allstate Insurance Co., 901 F.2d 1 2 8 1 , 1285 (5th Cir.1990)). Torres' wholesale failure to identify the allegedly n e e d e d discovery dooms his Rule 56(f) request. The court also notes that the d e fe n d a n t's motion has now been pending for over three months, during which t i m e Torres has not been precluded from pursuing any discovery he deemed n e c e ss a ry . Torres' request for a Rule 56(f) continuance is denied. Analysis A. Power failure exclusion Torres is suing AEIC in part to collect for damage done to his walk-in cooler c o m p re s s o r. AEIC refused to compensate Torres for the cooler damage, claiming th a t according to Torres, the damage was caused by power surges, an event e x c lu d e d under its power failure exclusion. (D. Ex. A-7, Dkt. 12-4). The power fa ilu re exclusion reads as follows: We will not pay for loss or damage caused directly or indirectly by a n y of the following... A. Power Failure

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T h e failure of power or other utility service supplied to the d e s c r ib e d premises, however caused, if failure occurs away from the d e s c r ib e d premises. Failure includes lack of sufficient capacity and re d u c tio n in supply. But if the failure of power or other utility service re su lts in Covered Cause of Loss, we will pay for the loss or damage c a u se d by that Covered Cause of Loss. This exclusion does not apply to loss or damage to "computers" and "electronic data" ( D . Ex. A-1, Dkt. 12-2) (emphasis added). T h e plain language of the policy precludes recovery for damage to property c a u s e d by power failures occurring away from the premises, i.e. at the utility's p o w e r station. See Southern Surgery Ctr., LLC v. Fid. & Guar. Ins. Co., No.

2 : 0 7 c v 1 8 , 2008 U.S. Dist. LEXIS 80636 at *18, 2008 WL 4549871 at *7 (S.D. Miss. O c t . 10, 2008) (power failure exclusion held to be plain and unambiguous); M a p le to w n Foods v. Motorists Mut. Ins. Co., 662 N.E.2d 48, 50 (Ohio App. 1995) ( p o w e r failure occurring at a utility station is "away from the premises"). Although n o Texas cases have construed the exclusion found in AEIC's policy, courts from o th e r jurisdictions have consistently held that similar exclusions preclude coverage fo r losses caused by power failures occurring away from the insured premises. See G ie s v. City of Gering, 695 N.W.2d 180, 190-195 (Neb. App. 2005). In Gies, the court held that a power failure exclusion in an AEIC policy-- id e n tic a l to the exclusion here--was unambiguous and precluded coverage for d a m a g e to a refrigeration compressor motor that resulted from a power failure at

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a substation away from the meat packing business. Id. See also Lake's Bryan Store In c . V. Auto-owners Ins. Co., 589 N.W.2d 608, 610 (S.D. 1999)(power failure e x c lu s io n unambiguously precluded coverage for business interruption loss caused b y power failure resulting from ice storm damage to power lines outside premises). B a s e d on Torres' October 29, 2008 statement that his building lost power for s ix to seven days, and his December 4, 2008 statement about electrical outages d a m a g in g the compressor, the power failure exclusion applies to the cooler c o m p r es s o r damage. Despite repeated requests for additional evidence, Torres f a il e d to provide AEIC with documentation showing that damage to the cooler c o m p re s s o r resulted from anything other than the excluded power failure he d e sc rib e d . Nor has Torres presented any such evidence to the court. Torres does not claim the damage caused to his cooler compressor was c a u s e d by a power outage that occurred on the residence premises. Nor does he d is p u t e the damage resulted from anything other than the excluded power failure. A s a result, Torres has not produced evidence raising a jury question as to the e x iste n c e of a covered claim for cooler compressor damage . See Royal Surplus Lines In s. Co. v. Brownsville Indep. Sch. Dist., 404 F. Supp. 2d 942, 949 (S.D. Tex. 2005). B. Business Personal Property Coverage In addition to the cooler compressor damage, Torres' claim also included

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d a m a g e to portions of the building, including a telephone line attached to the b u i l d i n g , a plywood garbage can enclosure on the building's exterior, and the e x te rio r building trim. Because Torres is a leasing tenant who does not have b u ild in g coverage under his policy, coverage for these losses depends on whether th e damage was to business personal property. Torres has the burden of showing that the building components satisfied one o f the five categories of business personal property. Federated Mut. Ins. Co. V. G r a p e v in e Excavation, Inc. 197 F.3d 720, 723 (5th Cir. 1999). The policy defines b u sin e ss personal property as follows: Property you own that is used in your business; Property of others that is in your care, custody, or control, e x c e p t as otherwise provided in Loss Payment Property Loss C o n d itio n Paragraph E.5.d(3)(b); (3) Tenant's improvements and betterments. Improvements and b e t te r m e n ts are fixtures, alterations, installations or additions: (a) M a d e a part of the building or structures you o c c u p y but do not own; and (b) Y o u acquired or made at your expense but cannot leg a lly remove; (4) Leased personal property which you have the contractual r e sp o n s ib ility to insure, unless otherwise provided for under p a r a g ra p h 1.b.(2); and (5) E x te r io r building glass, if you are a tenant and no Limit of In s u ra n c e is shown in the Declaration for Building Property. T h e glass must be owned by you or in your care, custody or c o n tro l. (D. Ex. A-1, Dkt. 12-2). Undisputed facts demonstrate that AEIC attempted to get information from (1) (2)

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T o rre s on how, when, and where the damage occurred as well as information re g ard in g the quantities, costs, values and amount of the claimed loss. (D. Ex A-14 a t 11, Dkt. 12-4). Despite several opportunities to comply, Torres failed to provide an y documentation supporting his belief that the repairs made to the building were c o v e re d as business personal property. Although in his response Torres argues that h e experienced a language barrier when dealing with AEIC, Torres had access to A E IC 's language line so that he could communicate his concerns. (D. Ex. A-8, Dkt. 1 2 -4 ). Torres' actions violated AEIC's cooperation clause which in this circuit p r ec lu d e s recovery. See Certain Underwriters at Lloyd's of London v. Corporate Pines R e a lty Corp., No. 06-3361, 2008 WL 5245622, at 9-11 (S.D. Tex. 2008) aff'd 355 F e d . Appx. 778 (5th Cir. 2009) (court held insured's failure to cooperate prevented p ro p e r investigation and adjustment of the claim created a bona fide dispute p re c lu d in g recovery); Ressler v. Gen. Am. Life Ins. Co., 561 F. Supp.2d 691, 2007 W L 1091024, at *4 (E.D. Tex. April 10, 2007) (court found insured's wife had a d u ty to give the insurer "the necessary information or to cooperate in its in v e s t ig a t io n ." ) Torres' reported his loss on October 23, 2008. On October 27, 2008, AEIC b e g a n what would become multiple attempts to get documentation from Torres

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s u p p o rtin g his claim. Torres indicated that he paid for repairs to the building but A E IC needed documentation showing ownership of the damaged building c o m p o n e n t s. AEIC told Torres that he should turn the building repair costs over to the building owner unless he had proof that he owned or otherwise had coverage fo r the damaged building components. Between December 23, 2008 and March 26, 2 0 0 9 , AEIC made four separate attempts to get supporting documentation from T o rr e s, to no avail. Almost two years after Torres filed his claim, supporting documentation e sta b lish in g ownership has yet to be produced to AEIC, and no such evidence is p re s e n t before us. Torres responds that AEIC had free access to evaluate the value o f the damaged property, but that is beside the point. AEIC does not dispute that d a m a g e occurred nor that repairs took place. The issue is whether the damage was c o v e re d under Torres' policy. Torres had an obligation under the policy to

c o o p e ra te in the investigation of the claim by providing documents supporting c o v e ra g e and he failed to do so. Again, because Torres has failed to raise a genuine is s u e of material fact with respect to coverage, summary judgment on his breach of c o n tra c t and remaining claims is appropriate. C. Bad Faith Precluded As stated earlier, Torres' bad faith cause of action under common-law and the

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T e x a s Insurance code is negated by the determination in the breach of contract c laim that there was no coverage. Am. Motorists Ins. Co. v. Fodge, 63 S.W.3d 801, 8 0 4 (Tex. 2001). AEIC's motion for summary judgment on Torres' bad faith claims is granted. Conclusion F or the reasons discussed above, AEIC's motion for summary judgment (Dkt. 1 2 ) is granted.1 S ig n ed at Houston, Texas on June 8, 2010.

Because this ruling is dispositive of Torres' claim, his unopposed motion for leave to designate expert witnesses (Dkt. 17) is denied as moot. 11

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