Advance Cable Company, LLC et al v. The Cincinnati Insurance Company
Filing
145
ORDER denying 104 Motion to Dismiss ; granting in part and denying in part 117 Motion for Clarification. ; denying 131 Motion to Strike ; denying 133 Motion to Strike. Signed by District Judge William M. Conley on 6/20/14. (rep)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
ADVANCE CABLE COMPANY, LLC, and
PINEHURST COMMERCIAL INVESTMENTS,
LLC,
Plaintiffs,
OPINION & ORDER
v.
13-cv-229-wmc
THE CINCINNATI INSURANCE COMPANY,
Defendant.
Plaintiffs Advance Cable Company, LLC (“Advance Cable”) and Pinehurst
Commercial Investments, LLC (“Pinehurst”) allege that defendant The Cincinnati
Insurance Company (“Cincinnati Insurance”) breached an insurance policy by refusing to
provide coverage for denting to the roof of one of its insured properties caused by hail. The
court previously found that the policy provides coverage for the denting in question as a
matter of law but granted summary judgment to Cincinnati Insurance on plaintiffs’ separate
claim of bad faith. (See Opinion & Order (dkt. #109).) This order addresses various issues
raised following that ruling.
Cincinnati Insurance asks the court to dismiss Advance Cable and Pinehurst as
plaintiffs and substitute the Welton Family Limited Partnership (“Welton”), on the grounds
that Welton is the real party in interest in this suit. (Dkt. #104.) This motion will be
denied. In addition, the parties seek clarification of this court’s summary judgment order
and, in particular, whether this court intended to foreclose all measures of damages other
than diminution of value.
(Dkt. #117.)
The court will grant this request in part, by
clarifying that its order on summary judgment was not intended to prescribe a different
damages formula than that on which the parties had agreed, but deny the motion in all
other respects. Finally, Cincinnati Insurance has filed two motions to strike. (Dkt. ##131,
133.) The court takes up each of those motions in this opinion as well.
BACKGROUND
Plaintiffs Advance Cable and Pinehurst are limited liability companies whose owner
and sole member is Michael G. Larson, an adult citizen of the state of Wisconsin.
Defendant Cincinnati Insurance is a foreign insurance company incorporated under the laws
of Ohio, with its principal place of business in Fairfield, Ohio. This court has diversity
jurisdiction over this action pursuant to 28 U.S.C. § 1332.
Cincinnati Insurance issued Commercial Primary Policy number EPP 003 30 85 /
EBA 003 30 85 (“the Policy) for blanket building coverage to Advance Cable, effective from
August 1, 2010 until August 1, 2013.
The Policy covered, among other properties, a
building at 2113 Eagle Drive (“the Property”), which is the property at the center of this
dispute. Under the Policy, in the event of covered loss, Cincinnati Insurance may:
(1) Pay the value of lost or damaged property;
(2) Pay the cost of repairing or replacing the lost or damaged
property;
(3) Take all or any part of the property at an agreed or appraised
value; or
(4) Repair, rebuild or replace the property with other property of
like kind and quality.
(Michael G. Larson Aff. Ex. 1 (dkt. #42-1) ECF 47.)
On April 3, 2011, the town of Middleton, Wisconsin was hit by a hailstorm, which
caused denting to the roof of the Property as well as to a soft metal vent top and the fins of
air conditioning units. At that time, Advance Cable was the sole owner of the Policy, while
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Pinehurst was a named insured under the Policy. Cincinnati Insurance paid for the denting
to the vent top and air conditioning units but did not pay for denting to the roof itself. At
some point, Pinehurst filed a claim for that denting with Cincinnati Insurance.
While the claim was pending, Pinehurst sold the Property to Welton Family Limited
Partnership (“Welton”), dents and all.
On February 13, 2012, the date of the sale,
Pinehurst and Welton entered into a “Roof Provision Addendum,” which provides that
Welton’s offer to purchase is contingent on the following:
1.) As noted by buyer’s expert upon inspection of the roof there
was determined to be significant hail damage, and
2.) Seller is currently working with Seller’s insurance to file a
claim for damages, and
3.) Buyer wishes to pursue the purchase of the property
contingent upon Seller continuing to use its best faith and
commercially reasonable efforts to obtain a claim for
damages, and
4.) Should Seller receive an amount for the claim of damages,
Seller shall transfer any and all such sums to Buyer to repair
the damages, and
5.) Seller agrees to engage Ken Brayton with Target
Construction as Seller’s consultant to work with the
insurance company on receiving the appropriate claim.
(Michael G. Larson Aff. Ex. 1 (dkt. #57-1).)
On April 11, 2012, the date of the closing, Pinehurst and Welton entered into a
“Roof Repair Agreement,” which provides:
A. Buyer and Seller entered into a Commercial Offer to
Purchase dated February 13, 2012 which was accepted
February 20, 2012 (the “Offer”) for the property locate[d] at
2101-2113 Eagle Drive, Middleton, Wisconsin (the
“Property”).
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B. The Offer includes a Roof Provision Addendum which
provides a method of addressing the damage to the roof of
the Property, but the roof issues have not yet been fully
resolved.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
1. Insurance Claim. Seller shall continue to work with Target
Construction to evaluate and document the hail damage to
the roof of the Property. If not already filed, Seller shall
promptly file with Seller’s property and casualty insurance
company a claim for said hail damage. Seller shall provide to
Buyer a copy of the claim once filed with the insurance
company no later than April 30, 2012. If Seller’s claim is
denied, Seller shall, in good faith, pursue the denial of claim
to ensure that the denial is absolute and final and would not
be overturned based on provided additional information
requested by the insurance company.
Notwithstanding
Seller’s efforts to pursue the insurance claim, if Seller’s
insurance company denies Seller’s claim and all appeals
thereof, Seller shall have no further obligation with respect to
the roof repairs.
2. Claim Proceeds. If Seller’s claim is accepted and paid by
Seller’s insurance company, Seller shall immediately upon
receipt of said claim payment, deliver the entire claim
payment, less any costs incurred from third parties by Seller,
to Buyer to permit Buyer to have the roof repaired.
3. Failure to Pursue. If Seller fails to file an insurance claim
for the hail damage then Seller shall pay to Buyer the cost of
the roof repair as determined by Target Construction. If the
claim is not filed by April 30, 2012, then Seller shall incur
this payment obligation and the payment shall be due to
Buyer no later than August 1, 2012. Notwithstanding this
foregoing, if Seller provides Buyer with a copy of the claim,
as required herein, on or before April 30, 2012, Seller shall
have no payment obligation hereunder.
(Mark W. Rattan Decl. Ex. C (dkt. #108-3).)
Advance Cable and Pinehurst filed this lawsuit against Cincinnati Insurance on April
2, 2013, alleging separate claims for breach of contract and bad faith. Both parties moved
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for summary judgment, and on March 12, 2014, the court ruled that the Policy provided
coverage for the claimed denting as a matter of law. However, the court also dismissed
plaintiffs’ claim for bad faith because the information before Cincinnati Insurance at the
time was that the denting affected neither the structural integrity nor the cosmetics of the
roof.
Under the circumstances, the court found that Cincinnati Insurance was not
objectively unreasonable in debating its need to pay Advance Cable, even though it should
not have based its opposition on a lack of coverage under the Policy. (See Opinion & Order
(dkt. #109).)
On April 21, 2014, Cincinnati Insurance moved for clarification, asking whether the
court had intended to foreclose all forms of damages except for diminution of value damages
and, if so, requested additional time for the parties to find diminution of value experts. As
requested by the parties, the court held a telephonic status conference on April 28, 2014, to
establish a briefing schedule on the motion for clarification.
OPINION
I. Motion to Dismiss
Federal Rule of Civil Procedure 17 requires that an action “be prosecuted in the
name of the real party in interest.” Fed. R. Civ. P. 17(a)(1). The rule goes on to state that
“[t]he court may not dismiss an action for failure to prosecute in the name of the real party
in interest until, after an objection, a reasonable time has been allowed for the real party in
interest to ratify, join, or be substituted into the action.” Fed. R. Civ. P. 17(a)(3). “After
ratification, joinder, or substitution, the action proceeds as if it had been originally
commenced by the real party in interest.” Id. To determine a party’s standing as the real
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party in interest in a diversity action, courts must look to applicable state substantive law -in this case, the law of Wisconsin. Am. Nat’l Bank & Trust Co. of Chi. v. Weyerhaeuser Co.,
692 F.2d 455, 459-60 (7th Cir. 1982). Where that applicable substantive law confers an
enforceable right on a party, that party is the real party in interest for the right in question.
See Race v. Hay, 28 F.R.D. 354, 355 (N.D. Ind. 1961); 4 James Wm. Moore et al., Moore’s
Federal Practice § 17:10[1] (3d ed. 2013) (“If state or federal substantive law confers on one
an enforceable right, that party is a real party in interest with respect to that right or
interest.”).
A. Pinehurst
Cincinnati Insurance first argues that Pinehurst is no longer the real party in interest
here, because it has assigned its claim to Welton. In support, it points out that under the
Roof Provision Addendum, Pinehurst is required not only to assert an insurance claim
against Cincinnati Insurance but also to transfer any proceeds from the claim to Welton and
engage Target Construction as a consultant in prosecuting the claim. Furthermore, Larson
testified in his deposition that he is not financially responsible for the prosecution of the
claim; Cincinnati Insurance contends that this justifies an inference that Welton is funding
the litigation, further demonstrating Welton’s status as the real party in interest.
Plaintiffs respond that while they may have assigned the right to the proceeds of the
claim to Welton, they have not assigned the claim itself. To illustrate this distinction, they
rely on Edgewood Manor Apartment Homes, LLC v. RSUI Indemnity Co., 733 F.3d 761 (7th Cir.
2013).
In Edgewood Manor, a hurricane damaged an apartment complex owned by
Edgewood Associates and insured by a policy issued by RSUI. Southland was the named
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insured on that policy.
During negotiations over replacement-cost proceeds, Edgewood
Associates and Southland entered into an agreement to sell the complex to Gorman & Co.,
which thereafter assigned its right to purchase the property to Edgewood Manor, a newlycreated entity of which Gorman & Co. was the managing partner. The parties executed an
agreement under which Southland retained ownership of the replacement-costs claim but
appointed Edgewood Manor as its attorney-in-fact with respect to negotiations with RSUI.
Southland also promised to direct proceeds of the replacement-cost claim to an escrow
agent; through a series of transactions via other entities, Edgewood Manor would then
receive those proceeds.
The Seventh Circuit considered first whether Edgewood Manor had standing to
pursue a claim against RSUI. The court concluded that, while Edgewood Manor may have
had constitutional standing based on its indirect interest in the monetary proceeds of the
replacement-cost claim, it lacked standing under the prudential rule that a litigant cannot
sue to enforce the legal rights of another. Id. at 771. The court further explained that as
the named insured, Southland continued to own the replacement-cost insurance claim, and
that even though Edgewood Manor had a contractual right to recover from Southland some of
the replacement-cost claim proceeds, it lacked a legal right to recover from RSUI those
proceeds.
Id. at 771-72.
Accordingly, the Seventh Circuit affirmed the district court’s
decision to dismiss Edgewood Manor’s claim for lack of standing. Id. at 772.
The Seventh Circuit then considered whether Southland retained an insurable
interest such that it could enforce its rights under the policy. Turning to Mississippi law as
the applicable substantive law to decide this issue, the court found that an insured must
have an insurable interest at the time of contract formation for the insurance contract to be
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effective. Id. at 773 (citing Necaise v. U.S.A.A. Cas. Co., 644 So.2d 253, 257 (Miss. 1992)).
“But Mississippi law,” the court explained, “does not require that an insured continue to
hold its interest in the damaged property through the filing of a lawsuit[.]” Id. at 772.
Indeed, the Seventh Circuit noted that “the parties . . . identified no authority suggesting
that any state, let alone Mississippi, requires that an insured continue to maintain an
insurable interest in the property while the claim is being negotiated and through litigation.
That rule would be hard to justify.” Id. at 773. Accordingly, the court held that Southland
retained an insurable interest in the property and the post-loss, pre-lawsuit sale was
“irrelevant.” Id.
Factually speaking, this case is nearly identical to Edgewood Manor. Moreover, there
can be no doubt that Pinehurst has an insurable interest in the property under Wisconsin
law. As of April 3, 2011, when the hailstorm occurred, Pinehurst owned the Property and
was a named insured under the Policy. In Wisconsin, the rights of insureds against an
insurer are fixed at the time of the loss. Rock Cnty. Sav. & Trust Co. v. London Assurance Co.,
17 Wis. 2d 618, 620, 117 N.W.2d 676 (1962); 2 Arnold P. Anderson, Wisconsin Insurance
Law § 6.65 (6th ed. 2010). While the parties cite little case law on this point, it also
appears that in Wisconsin, as in Mississippi, intervening transactions do not affect that
insurable interest once established. See Nolden v. Mut. Ben. Life Ins. Co., 80 Wis. 2d 353,
374, 259 N.W.2d 75 (1977) (“The right of an insured to recover for a loss covered by the
policy is determined as of the date of the loss, the [Wisconsin Supreme C]ourt said, and
this right is unaffected by subsequent events.”) (discussing Kolehouse v. Conn. Fire Ins. Co.,
267 Wis. 120, 128, 65 N.W.2d 28 (1954)); Musselman v. Serv. Fire Ins. Co. of N.Y., 267
Wis. 130, 132-33, 65 N.W.2d 33 (1954) (“The attempted foreclosure sale of the damaged
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vehicle subsequent to the date of collision loss . . . did not affect the insurable interest of
Universal C.I.T. at the time of loss.”). Just as Southland did in Edgewood Manor, therefore,
Pinehurst retains the insurable interest it had at the time of loss, and the intervening sale to
Welton is irrelevant.
Similarly, as in Edgewood Manor, Cincinnati Insurance’s proposed substitute plaintiff
Welton does not have standing to sue. At the time of the sale, Pinehurst did not transfer to
Welton the right to receive the insurance proceeds from Cincinnati Insurance.
Rather,
Welton has only a contractual right to recover the proceeds from Pinehurst. Cf. Edgewood
Manor, 733 F.3d at 771 (“Edgewood Manor apparently has a contractual right to recover
from Southland some or all of the proceeds Southland may receive from RSUI[.]”) (emphasis
in original). The additional facts on which Cincinnati Insurance places so much emphasis -for example, Welton's de facto authority to accept or reject settlement offers, and Pinehurst’s
agreement to use a particular consultant -- are irrelevant, just as they were in Edgewood
Manor. For example, the Seventh Circuit noted that Edgewood Manor became Southland’s
“attorney-in-fact” in its negotiations with RSUI, id. at 766, but that fact did not affect the
court’s determination that Edgewood lacked standing to sue on a replacement-cost claim.
See id. at 771-72. Thus, the court agrees with plaintiffs that Welton lacks prudential, if not
constitutional, standing under the Edgewood Manor holding, further illustrating why
Pinehurst, not Welton, is the real party in interest in this suit.
Even if Pinehurst were not initially the real party in interest in this suit, the court
would still deny Cincinnati Insurance’s motion to substitute parties, because Welton has
ratified this suit. Rule 17(a)(3) provides that “[t]he court may not dismiss an action for
failure to prosecute in the name of the real party in interest until, after an objection, a
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reasonable time has been allowed for the real party in interest to ratify, join, or be
substituted into the action. After ratification, joinder, or substitution, the action proceeds
as if it had been originally commenced by the real party in interest.”
Here, following
Cincinnati Insurance’s Motion to Stay Briefing on Summary Judgment, in which it
suggested that plaintiffs were not the real parties in interest, the sole General Partner of
Welton, Kurtis D. Welton, submitted an affidavit to the court that read in relevant part:
If and to the extent that Welton Family Limited Partnership is
deemed a real party in interest in this case:
a. Welton Family Limited Partnership hereby ratifies this case
in its entirety;
b. Welton Family Limited Partnership hereby authorizes the
continuation, with the present parties and caption, of this
case; and
c. Welton Family Limited Partnership hereby agrees to be
bound by any result, including any orders and judgments, in
this case.
(Kurtis D. Welton Aff. (dkt. #75) ¶ 8.)
Under Seventh Circuit precedent, this is sufficient to effect ratification.
See
CWCapital Asset Mgmt., LLC v. Chi. Properties, LLC, 610 F.3d 497, 502 (7th Cir. 2010)
(finding ratification when trustee submitted an uncontradicted affidavit to the district court
ratifying the suit). Logically, this makes sense: the object of the real party in interest rule is
to protect defendants from multiple liability. See RK Co. v. See, 622 F.3d 846, 850 (7th Cir.
2010); see also In re Integrated Agric., Inc., 313 B.R. 419, 426 (Bankr. C.D. Ill. 2004)
(ratification is “a mechanism to provide the defendant with the same protection of finality
and res judicata that would have been achieved if the suit was brought by the ratifying
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party”). Here, Welton has agreed to be bound by any result in this case, precluding it from
maintaining a second suit on the Policy, and so the goals of ratification have been satisfied.1
B. Advance Cable
In the alternative, Cincinnati Insurance asks the court to dismiss Advance Cable,
arguing that because it owned the Policy but not the Property, it is only tenuously
connected to this case. Advance Cable responds that it is a proper party, though not a
necessary one, under Fed. R. Civ. P. 17(a)(1)(F), which provides that:
The following may sue in their own names without joining the
person for whose benefit the action is brought:
… (F) A party with whom or in whose name a contract has been
made for another’s benefit.
The court agrees. Advance Cable is the sole owner of the Policy and the only named party
to the contract with Cincinnati Insurance. It is suing on behalf of Pinehurst, the owner of
the Property insured under that Policy. The fact that any monetary recovery ultimately
inures to Pinehurst (and then to Welton) is irrelevant, since the language of the Rule itself
1
Cincinnati Insurance responds only briefly, arguing that ratification does not excuse Welton from
being joined in the suit and does not preclude the court from dismissing Pinehurst and Advance
Cable. In support, it cites a single statement from Posley v Clarian Health, No. 1:11-cv-1511-TWPMJD, 2012 WL 4101914, at *4 (S.D. Ind. Sept. 17, 2012), in which the court noted that
“ratification allows the real party in interest to join the lawsuit and avoid dismissal.” Likely that
court was using the verb join in the general, rather than in the strictly legal, sense, since it goes on to
state in the same paragraph, that “[r]atification is an alternative to joinder or substitution of the real
party in interest.” Id. (emphasis added). Although this court need not decide this issue here, this
interpretation is consistent with the language of Fed. R. Civ. P. 17, which allows the real party in
interest “to ratify, join, or be substituted into the action” to cure the defect. See Fed. R. Civ. P.
17(a)(3) (emphasis added). More importantly, Cincinnati Insurance has pointed to no case in which
ratification was held to be insufficient, and Seventh Circuit case law assumes that ratification,
without joinder or substitution, is sufficient. See CWCapital, 610 F.3d at 502. Indeed, since the
principal purpose of Rule 17 is to protect defendants from multiple liability and that protection is
accomplished by ratification, it would serve little purpose to require both ratification and joinder or
substitution.
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contemplates the benefit going to “another.” Thus, Advance Cable need not be dismissed
from this suit.2
II. Motion for Clarification
Cincinnati Insurance’s motion for clarification essentially seeks a declaration that
damages in this case are effectively limited to a diminution of value measurement by virtue
of the court’s summary judgment opinion. As the court indicated at the status conference
held on April 28, 2014, it did not intend in its ruling on summary judgment to limit either
side to a diminution of value analysis, particularly given that: (1) the parties agree this is
not a diminution of value case; and (2) the Policy itself does not provide for such damages.
Rather, the court’s intent was to explain why, in its view, Cincinnati Insurance had the right
to debate coverage under the Policy, given the facts in its possession. The court’s ruling on
bad faith also should not, and was not intended to, affect the parties’ arguments with
respect to damages.
In its motion, Cincinnati Insurance also argues that replacement cost is unavailable
as a matter of law, because Advance Cable did not commence repairs within two years as
required by the Policy. As Advance Cable accurately points out, although styled a motion
for clarification, this argument amounts to a second, late-filed motion for summary
judgment.
Regardless of how amenable this issue might ordinarily be to resolution on
summary judgment, Cincinnati Insurance is not entitled to a ruling on that issue as a matter
of law now, months past the dispositive motion deadline and after its first motion for
In so holding, the court nevertheless expects the parties to cooperate in streamlining the
presentation of the evidence at trial to avoid unnecessary and potentially confusing factual
complexities including simplifying ownership.
2
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summary judgment proved largely unsuccessful.3
Accordingly, this aspect of Cincinnati
Insurance’s request for “clarification” is denied.
III. Request for Reconsideration
In its response to Cincinnati Insurance’s motion for clarification, Advance Cable asks
the court to reconsider its summary judgment ruling dismissing plaintiff’s bad faith claim.4
That request will be denied.
Advance Cable argues that the plain text of the Policy does not support Cincinnati
Insurance’s decision to deny coverage. More specifically, it argues, via the incorporation of
two of its previous briefs on bad faith (dkt. ##96, 106), that Cincinnati Insurance never
conducted the required neutral investigation and analysis to determine whether there was
coverage for the hail denting, meaning the claim could not have been “fairly debatable.” See
Miller v. Safeco Ins. Co. of Am., 761 F. Supp. 2d 813, 821 (E.D. Wis. 2010) (whether a claim
is fairly debatable implicates whether the facts are properly investigated and developed, as
well as whether the results of the investigation were subjected to a reasonable evaluation
and review).
Advance Cable actually appears to concede that Cincinnati Insurance
conducted at least some investigation, but argues that Cincinnati Insurance could not have
conducted the required “reasonable evaluation and review,” because under the plain
language of the Policy, the question of diminution of value is immaterial. (See Pl.’s Br.
Opp’n Mot. Strike (dkt. #135) 4.) The Policy does not condition payment upon some
In any event, the parties appear to dispute whether repair work on the Property began within two
years and whether Cincinnati Insurance’s denial of coverage precludes its reliance on the two-year
provision in the Policy under the doctrine of prevention. These issues also need to be decided.
4
Cincinnati Insurance formally moved the court to strike that section of the brief (dkt. #131), but it
is really arguing that the court should deny the request for reconsideration, not that it should strike
that request. Accordingly, the motion to strike is denied.
3
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diminution of value in the property covered, nor does it predicate coverage on the “need to
pay.” Rather, it is the terms of the Policy that must direct a reasonable insurer’s coverage
decisions. Thus, Advance Cable argues, while Cincinnati Insurance may have assessed the
roof denting in good faith, its decision to deny coverage without any reference to the terms
of the Policy was objectively unreasonable or, at a minimum, presents a jury question,
rather than a question for this court to resolve as a matter of law.
Whatever merit there may be in Advance Cable’s argument for reconsideration, it
suffers from a fundamental defect: it was not raised on summary judgment. Motions for
reconsideration are intended only to correct manifest errors of law or present newlydiscovered evidence. They are not “vehicle[s] for rearguing previously rejected motions” or
means “to introduce new evidence that could have been presented earlier.” Oto v. Metro. Life
Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000). Possibly in anticipation of this defect, Advance
Cable passingly suggests that the court’s ruling on summary judgment essentially adopted
an argument Cincinnati Insurance never made, denying Advance Cable the opportunity to
respond. This is untrue. Cincinnati Insurance essentially argued, however poorly, that the
denting was not a “loss” because it was purely cosmetic and not visible from the ground.
On this the court agreed, indicating that the denting, due to its placement and (for
summary judgment purposes) minor nature, had not necessarily caused a “loss” -- what had
Advance Cable lost, after all, if there was no structural, financial or cosmetic impact? -- but
went on to hold that because “loss” was defined in the Policy as “loss or damage,” the terms
had different meanings, and under Wisconsin insurance law, “damage” usually requires only
some discernible physical alteration.
While this makes Cincinnati Insurance’s original
position on coverage wrong, the court continues to hold that Cincinnati Insurance’s failure
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to discern or act on this distinction between the definitions of “loss” and “damage” under
the law is not enough for a finding of bad faith.
IV. Motion to Strike
Finally, Cincinnati Insurance has filed a motion to strike the affidavits and
supplemental reports of Advance Cable’s roofing expert, David J. Tilsen, and bad faith
expert, Peter R. Kochenburger. Both purport to be “supplemental reports,” but neither in
fact supplements the experts’ previous reports.
Rather, Kochenburger’s “supplemental”
expert report responds to Cincinnati Insurance’s motion for clarification, while Tilsen’s
“supplemental opinions” respond directly to the April 4, 2014 report of Gregory J. Phillips,
Cincinnati Insurance’s roofing expert.5 “Supplementation pursuant to Rule 26(e) is limited
to matters raised in an expert’s first report[.]” (See Prelim. Pretrial Conference Order (dkt.
#36) 1.) Furthermore, neither report was served five days before the corresponding expert’s
deposition, which violates the pretrial conference order as well. (See id. at 1-2.) Thus, both
reports are untimely and, pursuant to Fed. R. Civ. P. 37(c)(1), should be stricken “unless
the failure was substantially justified or is harmless.”
Advance Cable first argues that Cincinnati Insurance has not been prejudiced by the
Kochenburger report.
Kochenburger’s new report provides his opinions as to why
diminution of value and the economic waste doctrine are not applicable here. Because
Cincinnati Insurance maintains that it is not actually advocating for diminution of value,
Advance Cable argues, Kochenburger’s report is harmless, serving only to oppose a theory
that Cincinnati Insurance is not even advancing. But this is not an argument for allowing
The parties stipulated to this later disclosure date for Gregory Phillips’ report due to weatherrelated delays in the inspection of the Property. (See dkt. #112.)
5
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the report. Rather, it indicates the motion to strike is moot because the report has no
relevance and will not be proffered, particularly in light of the fact that the court has
expressly declined to give the parties additional time to find diminution of value experts,
essentially removing those damages from the case.
Next, Advance Cable argues that its late disclosure of Tilsen’s supplemental opinions
is substantially justified.
Tilsen initially provided a “like kind” estimate of repair costs
consistent with the language of the Policy itself, which requires that the property be
“repaired or replaced with other property of generally the same construction and used for
the same purpose as the lost or damaged property.” (See Michael G. Larson Aff. Ex. 1 (dkt.
#42-1) ECF 52.) When Phillips submitted his report of April 4, 2014, however, he raised
for the first time the potential for the use of alternative roof systems. In this way, Advance
Cable argues, Tilsen’s supplemental opinions simply respond to a newly-introduced damages
theory about which it could not have known (given the Policy language) until it received the
Phillips report.
While this explanation does not cure its untimeliness, it does to some extent account
for it. Moreover, since the report really only responds directly to Cincinnati Insurance’s
own expert, will not disrupt the trial, and was not withheld by Advance Cable out of any
willfulness or bad faith, the court is inclined to allow its use in rebuttal only, provided it
proves relevant. See David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003).
ORDER
IT IS ORDERED that:
1) Defendant The Cincinnati Insurance Company’s motion to dismiss (dkt. #104) is
DENIED.
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2) Defendant’s motion for clarification (dkt. #117) is GRANTED IN PART and
DENIED IN PART, consistent with the opinion above.
3) Defendant’s motion to strike request for reconsideration (dkt. #131) is DENIED.
4) Defendant’s motion to strike expert affidavits and reports (dkt. #133) is
DENIED AS MOOT with respect to Kochenberger’s “supplemental” report and
DENIED generally with respect to Tilsen’s “supplemental” report.
Entered this 20th day of June, 2014.
BY THE COURT:
/s/
________________________________________
WILLIAM M. CONLEY
District Judge
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