Greenbrier Hotel Corporation, et. al. v. Lexington Insurance Company, et. al.

Filing 111

MEMORANDUM OPINION AND ORDER: denying the Plaintiff's 104 MOTION for Reconsideration of January 4, 2018 Order and Judgment Order. Signed by Judge Irene C. Berger on 6/11/2018. (cc: attys; any unrepresented party) (btm)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
BECKLEY DIVISION

GREENBRIER HOTEL CORPORATION, et al.,
Plaintiffs,
v.

CIVIL ACTION NO. 5:14-cv-15201

LEXINGTON INSURANCE COMPANY, et al.,
Defendants.

MEMORANDUM OPINION AND ORDER

The Court has reviewed the Plaintiffs’ Motion for Reconsideration of January 4, 2018
Order and Judgment Order (Document 104) and supporting memorandum (Document 105), the
Defendants’ Memorandum of Law in Opposition to Plaintiffs’ Motion for Reconsideration of
January 4, 2018 Order and Judgment Order (Document 107), and the Plaintiffs’ Reply in Support
of Reconsideration of January 4, 2018 Order and Judgment Order (Document 109).
This case has had a somewhat convoluted history. The Plaintiff, referred to collectively
as “the Greenbrier,” filed a Complaint (Document 1-1) in the Circuit Court of Greenbrier County,
West Virginia, on March 14, 2014. The Greenbrier sought recovery from the Defendants, a group
of insurers, for damages arising from a 2012 derecho windstorm. The derecho occurred on June
29, 2012, and the Greenbrier hosted its Greenbrier Classic golf tournament just days later. The
tournament went forward as scheduled, and the Insurers promptly paid portions of the Greenbrier’s
claim. However, the Insurers largely denied a business interruption claim related to a projected
increase in profits following the Greenbrier Classic. That denial is the subject of this lawsuit.

The Insurers requested that the case be dismissed or stayed pending appraisal.

On

February 18, 2015, the Court granted the motion and entered a stay to permit appraisal in
accordance with the insurance policies. (See Memorandum Opinion and Order, Document 75.)
On May 1, 2017, after receiving notice that the appraisal process was complete, the Court entered
an order lifting the stay and setting a schedule for the filing of any motions to overturn the appraisal
award. (See Order, Document 79.) The appraisal panel1 determined that the Insurers owed an
additional $57,000, but found that the Greenbrier was not entitled to the remainder of its
$16,497,138.63 claim.
The Greenbrier filed a motion to vacate the decision of the appraiser/umpire on May 23,
2017. On June 13, 2017, the Insurers filed a cross-motion seeking partial summary judgment on
the underlying complaint as a result of the appraisal decision.

The Court denied the motion to

vacate and granted the cross-motion for partial summary judgment. (See Memorandum Opinion
and Order, Document 93.)
The Greenbrier’s amended complaint (Document 1-3) contains the following counts:
Count One: Breach of the Insurance Contract; Count Two: Declaratory Relief determining that
appraisal was not required; and Count Three: Unfair and Unlawful Claims Practices. The Court
found that the first opinion staying the case pending appraisal resolved Count Two, and the second
opinion granting partial summary judgment and enforcing the appraisal award resolved Count One.
Therefore, the Court requested that the Greenbrier indicate whether it intended to pursue Count
Three and what type of discovery it anticipated. The Greenbrier responded that it intended to

1 The panel consisted of an appraiser selected by the Insurers, an appraiser selected by the Greenbrier, and an umpire
selected jointly by the two appraisers. The appraiser selected by the Greenbrier disagreed with the award and
maintained that the Greenbrier was entitled to its full claim.

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proceed with Count Three, but might wish to appeal the Court’s prior decisions before proceeding.2
The Insurers filed a response contending that the Greenbrier would have no damages that were not
premised on the success of Count One, the improper refusal to pay the Greenbrier’s claim.
Upon careful review of the amended complaint, the Court ordered that Count Three be
dismissed, explaining that it appeared to be dependent on the success of Count One. (See Order,
Document 101.) The Greenbrier seeks reconsideration.
STANDARD OF REVIEW
Rule 59(e) of the Federal Rules of Civil Procedure permits a motion to alter or amend a
judgment within 28 days of the entry of judgment. The Fourth Circuit has “recognized that there
are three grounds for amending an earlier judgment: (1) to accommodate an intervening change in
controlling law; (2) to account for new evidence not available at trial; or (3) to correct a clear error
of law or prevent manifest injustice.” Pac. Ins. Co. v. Am. Nat. Fire Ins. Co., 148 F.3d 396, 403
(4th Cir. 1998). “Rule 59(e) motions may not be used, however, to raise arguments which could
have been raised prior to the issuance of the judgment, nor may they be used to argue a case under
a novel legal theory that the party had the ability to address in the first instance.” Id. The Fourth
Circuit has further cautioned that reconsideration after entry of judgment should be used sparingly.
Id.
Rule 60(b), in turn, permits relief from a final judgment for the following reasons:
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable diligence, could
not have been discovered in time to move for a new trial under Rule
59(b);
(3) fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
2 The Greenbrier obtained new counsel after submitting this response.

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(4) the judgment is void;
(5) the judgment has been satisfied, released or discharged; it is
based on an earlier judgment that has been reversed or vacated; or
applying it prospectively is no longer equitable; or
(6) any other reason that justifies relief.
Fed. R. Civ. P. 60(b). “[A] motion filed under both Rule 59(e) and Rule 60(b) should be analyzed
only under Rule 59(e) if it was filed [within the time frame set forth in Rule 59(e)] and seeks to
correct [] judgment.” Robinson v. Wix Filtration Corp. LLC, 599 F.3d 403, 412 (4th Cir. 2010)
(referencing a ten-day limit in the prior version of the rule, now amended to permit Rule 59(e)
motions filed within 28 days). Because the Greenbrier’s motion was filed within 28 days of entry
of judgment, the Court will review it in accordance with Rule 59(e).3

DISCUSSION
The Greenbrier argues that the Court erred in finding that there was no insurance coverage
on which to premise a claim for unfair and unlawful claims practices. It argues that the Court’s
rulings on Counts One and Two did not “determine[] the scope of coverage available under the
relevant insurance policies.” (Mem. at 10.) Even if the coverage issues were fully resolved, the
Greenbrier argues, West Virginia law permits statutory bad faith claims without a wrongful denial
of coverage. In addition, the Greenbrier contends that the appraisal award is advisory and not
binding. Finally, the Greenbrier argues that the Court’s order dismissing Count Three and
entering judgment denied its due process right to be heard because it had no notice that the Court
was considering dismissal.

3 The Court notes, however, that the Greenbrier’s arguments that the Court’s factual and legal conclusions were
erroneous and that the Court dismissed Count Three without proper process would result in the same analysis and
outcome under either standard.

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The Insurers argue that the Greenbrier’s motion “results from their retention of new
counsel” with a new litigation strategy rather than any effort to correct an injustice. They stress
that Counts One and Two have been fully litigated, and motions for reconsideration are not proper
when based on arguments that were or could have been presented during initial consideration.
The Insurers further contend that Count Three, as pled, depended on Count One and was no longer
viable after the Court granted summary judgment as to Count One. Because Count Three was no
longer viable after judgment had been granted to the Insurers as to Count One, the Insurers argue
that further notice that the Court was considering dismissing Count Three was unnecessary.
As an initial matter, the Court finds that the opinion compelling appraisal fully resolved
Count Two, which sought a declaration that appraisal was not required. The opinion denying the
motion to vacate the appraisal award and granting partial summary judgment to the Insurers fully
resolved Count One, which alleged that the Insurers wrongfully failed to pay the Greenbrier’s
insurance claim. The Greenbrier has not presented new facts, new legal precedent, or any grounds
for finding that the Court’s rulings on those issues constitute manifest injustice. The argument
that the scope of coverage has yet to be determined is simply an alternative legal argument that
could have been presented in earlier stages of the litigation. The appraisal decision determined
that the evidence did not support the Greenbrier’s claimed loss, and the Court found that decision
to be enforceable. Without a loss, dispute about whether the policies would cover the loss is
irrelevant. Thus, to the extent the Greenbrier seeks reconsideration or alteration of the Court’s
rulings on Counts One and Two, the motion should be denied.
The Court dismissed Count Three without full briefing from the parties, and finds that full
consideration of the Greenbrier’s arguments presented as to Count Three is appropriate. The

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Court will view those arguments under the standard applicable to a motion for judgment on the
pleadings, with consideration of the prior orders resolving certain allegations.
Count Three alleges that the Insurers knew or should have known that there were amounts
due and payable under the policies, but refused to make such payments. It alleges that the Insurers
reviewed claims information selectively and misinterpreted the evidence and the policies to
support their refusal to pay the Greenbrier’s claim, that they offered less than the amount due to
the Greenbrier, and that they unreasonably delayed resolution of the claims. Count Three further
asserts that the Insurers did not provide a reasonable explanation for their refusal to pay the
Greenbrier’s claim in full, and they unlawfully used out-of-state insurance adjusters and
investigators. The Greenbrier alleges damages “as set forth above,” and seeks punitive damages.
(Am. Compl. at ¶ 50.)
The Unfair Trade Practices Act (UTPA) sets forth a list of unfair claims settlement
practices that may form the basis for liability against insurance companies that repeatedly engage
in such practices. W.Va. Code § 33-1-4(9). The West Virginia Supreme Court has found a
private right of action to litigate violations of the UTPA, though it has noted that “[i]t would seem
apparent that some of the provisions of W. Va. Code, 33-11-4(9), would be unlikely predicates on
which to base a cause of action, since their violation would not be the proximate cause of any
damages.” Jenkins v. J. C. Penney Cas. Ins. Co., 280 S.E.2d 252, n. 10 (W. Va. 1981), overruled
on other grounds by State ex rel. State Farm Fire & Cas. Co. v. Madden, 451 S.E.2d 721 (W. Va.
1994). Although common law bad faith claims require that the insured substantially prevail on
the underlying contract dispute, a UTPA or Jenkins action “predicates entitlement to relief solely
upon violation of the West Virginia Unfair Trade Practices Act, W. Va. Code § 33–11–4(9), where

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such violation arises from a ‘general business practice’ on the part of the insurer.” Syl. Pt. 5,
Lemasters v. Nationwide Mut. Ins. Co., 751 S.E.2d 735, 737–38 (W. Va. 2013); but see Cava v.
Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 753 S.E.2d 1, 9, n. 6 (2013) (noting a general rule that
“a court must find that there is coverage before there can be common law bad faith and UTPA
claims against an insurance company.”)
The Court’s order dismissing Count Three noted the general rule requiring a finding of
coverage without referencing the case law holding that UTPA violations do not require that the
insured substantially prevail on the underlying insurance claim. The Court’s order was also
confusingly phrased in its reference to a ‘finding of coverage.’ In this case, there is no dispute
that the policies provided coverage for the types of claims pursued by the Greenbrier.4 The issue
in Count One revolved around the extent of the loss and whether the Insurers wrongfully denied
the Greenbrier’s claim.

The appraisal opinion and the Court’s opinion as to Count One

established not that there was no coverage, but that there was no wrongful denial of coverage.
The problem with Count Three, as the Insurers argue, arises from the nature of the factual
allegations contained in Count Three, combined with the Court’s prior opinions resolving Counts
One and Two. The Court’s ruling as to Count Two established that the Insurers timely demanded
appraisal and were entitled, under the terms of the policies, to have the amount of the Greenbrier’s
loss determined through the appraisal process. In the opinion declining to vacate the appraisal
and granting judgment to the Insurers as to Count One, the Court determined that the Insurers had
promptly paid the amount of loss that they substantiated, timely demanded appraisal to resolve the

4 Had the case proceeded differently, the Court recognizes that the Insurers could have asserted that the business loss
provisions did not provide coverage for the specific losses suffered by the Greenbrier. Because the appraisal panel
determined that the Greenbrier did not suffer the claimed losses, the scope of that provision was not explored in this
litigation.

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dispute regarding the remainder of the Greenbrier’s claim, and promptly paid the amount found
due during the appraisal process. As the Court explained above, reconsideration is not an
appropriate avenue to challenge those conclusions.
The problem that remains with Count Three is that it does not appear to the Court to contain
factual allegations in support of the alleged UTPA violations that are not centered on the Insurers’
(a) invocation of the appraisal process or (b) refusal to pay the Greenbrier’s full $17 million
business loss claim. The Greenbrier contends that Count Three “alleges, among other things, that
the Defendants were unfair and did not act in good faith in the manner in which they investigated
and adjusted Plaintiffs’ loss.” (Pl.’s Reply at 1.) Bare allegations of “unfairness” and recitations
of statutory language are not sufficient to state a claim.

The factual underpinning to the

allegations of unfairness rests on the Insurers’ refusal to pay the full claim submitted by the
Greenbrier. The only other factual allegations relevant to Count Three relate to whether certain
insurance adjusters or investigators were licensed in West Virginia. The Greenbrier alleges that
those asserted violations “may be directly and proximately causally related to the claim handling
improprieties,” which resulted in the refusal to pay the full claim. (Am. Compl. at ¶ 48.) In
short, Count Three cannot survive without Counts One and Two because the Court’s decisions
resolving Counts One and Two eliminate the foundation of the factual allegations and the potential
basis for any damages award. Therefore, although the Court finds that the Greenbrier is entitled
to have its arguments heard and addressed with a fuller explanation than that contained in the
January 4, 2018 Order, the motion for reconsideration must be denied because Count Three does
not state a claim that survives the judgments previously entered on Counts One and Two.

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CONCLUSION
Wherefore, after thorough review and careful consideration, the Court ORDERS that the
Plaintiffs’ Motion for Reconsideration of January 4, 2018 Order and Judgment Order (Document
104) be DENIED.
The Court DIRECTS the Clerk to send a certified copy of this Order to counsel of record
and to any unrepresented party.
ENTER:

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June 11, 2018