United States District Court, N.D. Alabama, Southern Division
OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE.
case concerns whether a commercial insurance policy covers
water damage from a leaking roof. Brookwood, LLC owns a
building that suffered water damage from a leak. The leak
damaged the building and a tenant's property. Brookwood
made claims under its insurance policy with Travelers
Property Casualty Company of America, and Travelers denied
those claims. Travelers now requests a declaratory judgment
that its policy does not provide coverage for the damages
incurred by Brookwood and its tenant.
makes three arguments in support of its request for a
declaratory judgment. First, it asserts that the damages are
not covered because the policy excludes coverage for all of
the possible causes of the leak. It also asserts that its
policy does not provide coverage for Brookwood's economic
losses, including repairs to the building and the loss of
rental income from its tenant. And finally, Travelers asserts
that its policy does not provide coverage for damages to
personal property owned by Brookwood's tenant because the
lease between Brookwood and its tenant allocates to the
tenant the risk of loss to the tenant's property, and
thus it is not damage Brookwood is legally obligated to pay.
Brookwood, in contrast, maintains that the possible causes of
the leak are not excluded and that the “insured
contract” exception to the contractual liability
exclusion in the liability policy restores coverage for the
damage to the tenant's property.
counterclaims, alleging bad faith on Travelers's part.
Travelers moved for summary judgment as to all claims; that
motion has been fully briefed. (Docs. 41, 45, 50). For the
reasons stated in this Memorandum Opinion, the court
WILL GRANT the Motion for Summary Judgment.
STANDARD OF REVIEW
judgment allows a trial court to decide cases when no genuine
issues of material fact are present and the moving party is
entitled to judgment as a matter of law. See Fed. R.
Civ. P. 56(a). When a district court reviews a motion for
summary judgment, it must determine two things: (1) whether
any genuine issues of material fact exist; and if none, (2)
whether the moving party is entitled to judgment as a matter
of law. Id.
reviewing the evidence submitted, the court must view all
evidence and factual inferences drawn from it in the light
most favorable to the non-moving party. See Augusta Iron
& Steel Works, Inc. v. Emp'rs Ins. of Wausau,
835 F.2d 855, 856 (11th Cir. 1988) (citation omitted).
However, the non-moving party “need not be given the
benefit of every inference but only of every reasonable
inference.” Graham v. State Farm Mut. Ins.
Co., 193 F.3d 1274, 1282 (11th Cir. 1999) (citation
FACTUAL AND PROCEDURAL HISTORY
Brookwood owns the Raymond James building, located at 2900
U.S. Highway 280 in Birmingham, Alabama. Brookwood is a named
insured in a commercial insurance policy issued by Travelers
that provided coverage for the Raymond James building from
April 30, 2014 through April 30, 2015. The policy contains
two sections relevant here: the Deluxe Property
(“Property”) Policy and the Commercial General
Liability (“CGL”) Policy.
parties do not dispute that the roof of the Raymond James
building leaked, causing damage to the building and to a
tenant's property, on or about November 16, 2014, when
the Birmingham area received approximately 2.43 inches of
rain and experienced winds of up to 24 miles per hour.
Specifically, rain entered the roof through openings in the
roof's EPDM membrane. At issue is what caused the openings in
the roof's EPDM membrane and whether the Property and/or
CGL Policies provide coverage for the damage caused by the
rain leaking through those openings.
September 19, 2014, prior to the leak, Mr. Tyler Hixson of
Hixson Consultants inspected the Raymond James building's
18-year-old roof and provided a report to Brookwood with his
findings and recommendations. The report noted that the EPDM
roofing membrane had disbonded in several places, such that
“[s]ignificant water entry can occur”; that the
EPDM membrane was denatured, patched, and, in multiple
locations, open where it met the base flashing; that bridging
membrane had been employed; that the ballast had been
displaced in some locations, exposing the membrane to
accelerated UV deterioration; and that certain areas were
unsealed or incompletely sealed. The Hixson report
recommended reseaming open and disbonded seams; replacing the
denatured membrane and membrane patches; monitoring the
bridging membrane; redistributing displaced ballast;
installing pitch pocket filler; and resealing the membrane
and inadequately sealed areas. The parties dispute whether
Mr. Hixson's recommendations constituted needed repairs
or items that would, if performed, maximize the longevity of
the roof, and his report does not clarify the nature of his
hired Leak Solutions to perform the recommended work. Leak
Solutions employees started work on the roof on November 4,
2014 and worked through November 7, 2014; they did not return
during the week of November 10-14, 2014, or apparently,
during the weekend of November 14-16. On November 4, 2014,
Brookwood's building engineer, Marlon McElroy, observed
Leak Solutions employees using metal shovels to scrape
ballast on the roof in the area where the leak at issue in
this case later occurred. Upon their departure on November 7,
Leak Solutions employees left the EPDM membrane unrepaired
and exposed in multiple areas.
received .11 inches of rain on November 6, 2014, which did
not damage the Raymond James building. (Doc. 43-20 at ECF
129). Then, on or about November 16, Birmingham received
nearly two-and-a-half inches of rain. On November 17, 2014, a
representative of McWane, Inc., one of Brookwood's
tenants, informed Mr. McElroy that rain had leaked into its
leased space in the Raymond James building over the weekend
of November 14. Brookwood reported the loss to Travelers on
November 17 and requested coverage under the Property Policy.
claim professional Cory Blankenship; Cindy Ritchie,
Brookwood's building manager; Mr. McElroy; and a Hixson
representative inspected the building on November 24, 2014.
During that inspection, the Hixson representative suggested
that thermal shock caused the EPDM membrane to contract and
detach from the wall. Travelers subsequently retained Charles
Whitley, an engineer, to inspect the loss and provide an
opinion as to its cause.
Whitley inspected the building on December 8, 2014 along with
Mr. McElroy, who informed Mr. Whitley both that Leak
Solutions had worked on the roof beginning on November 4,
2014 and that he had seen the Leak Solutions employees using
their shovels to scrape ballast. Mr. Whitley did not inspect
the building until after the roof had been repaired and did
not take any measurements during his inspection. He examined
the interior damage and the area of the roof where the water
had entered, basing his assessment of the entry point on the
location of the interior damage. On December 11, 2014, after
researching weather and other conditions and reviewing the
information provided to him, which included Brookwood's
timeline of events, he issued a report to Travelers. The
timeline that he relied on details when Leak Solutions worked
on the roof and the fact that its employees left the roof
exposed when they departed on November 7, 2014.
Whitley's report to Travelers opined that the removal of
the ballast would have made the membrane more susceptible to
temperature changes and UV degradation and that UV exposure
and wind could have damaged the seams. Further, he stated
that shoveling the ballast could have created openings in the
membrane through which water entered into the building's
interior. Mr. Whitley testified that he obtained no evidence
of any punctures or holes in the membrane. Mr. Whitley also
testified that he had considered, and eliminated from
consideration, wind as a cause of the roof damage, and had
not specifically investigated how wind could have affected
the Raymond James building's roof. However, he testified
that he had confirmed from weather reports that wind speeds
had not exceeded 24 miles per hour during the time the roof
was uncovered, and that based on his personal experience,
“the wind speeds [of up to 24 miles per hour] were not
sufficient to have caused any type of uplift on this
roof.” (Doc. 43-6 at deposition 53:2-4).
Whitley opined that Leak Solutions's substandard repair
work enabled rain to enter the building through the EPDM
membrane and damage the interior. Specifically, his report
states that both dragging ballast and metal shovels across
the membrane, and failing to restore the displaced ballast
for 12 days, could have caused seam separation. Mr. Whitley
opined that thermal shock did not cause the membrane damage
because temperatures changed gradually in the days preceding
the leak and because thermal shock does not affect flexible
materials like the EPDM membrane. Based on Mr. Whitley's
report and information from Brookwood, Travelers denied
Brookwood's claim under the Property Policy on December
contrast to Mr. Whitley's report, Brookwood's expert,
Ben Hixson, identified in his December 23, 2014 report three
potential causes of the seam damage that could have operated
separately or in some combination: thermal shock, foot
traffic in conjunction with use of the roof to hold weights
(by window washer personnel who performed their work shortly
before Leak Solutions), and foot traffic by Leak Solutions.
During his deposition, Mr. Hixson agreed that thermal shock
is defined as “the expansion and contraction of the
roof system due to extreme temperature changes.” (Doc.
43-19 at deposition 115:8-15). He stated that thermal shock
could occur where the temperature is warm, causing the seams
to “pull apart, ” or cold, where “the
thermal movement would be drawing together.” (Doc.
43-19 at deposition 106:5-16). Mr. Hixson explained that
thermal shock could occur suddenly or slowly. Birmingham
temperatures reached a high of 76 on November 11 before
falling to a low of 23 on both November 14 and 15, 2014.
Hixson testified that, although he had not conducted the
investigation necessary to form an opinion as to whether wind
caused the membrane detachment here, he could not rule out
wind uplift as a possible cause of the detachment.
Specifically, he noted that, although EPDM roofing can
generally withstand 30-miles-per-hour winds, he did not know
what wind speed would suffice to move unballasted roofing,
and agreed that if the ballast had been left in place, the
risk of wind uplift “would have been a whole lot
less.” (Doc. 43-19 at deposition 91:1-4).
Hixson had previously noted in his report that “the
field membrane over the leakage area was not
adversely made more susceptible for wind uplift potential
because the vast majority of the roof area remained covered
with the membrane manufacturer's required ten to thirteen
pounds ballast rock per square foot.” (Doc. 43-20 at
ECF 129) (emphasis added). But during his deposition, Mr.
Hixson called the potential for “wind vortexes” a
possible contributing factor to the membrane damage. At the
end of his deposition, Mr. Hixson separately noted that
“[e]ven a hard rain impact could have caused the
brittle, spliced adhesive to fail.” (Doc. 43-19 at
Hixson stated that the facts that the seams were already
stressed and were left exposed could, separately and
together, make the seams more vulnerable to failure from
other causes. He also testified that employing a metal shovel
to move ballast across EPDM risked accelerating the failure
of brittle seams; he further stated that the shovel could
puncture or gouge the seams, though he had found no evidence
of such puncturing/gouging in the EPDM membrane here. He
clarified that he could not exclude shoveling over the
membrane as a cause of the detached seams but did not
maintain that was a primary possible cause of the openings.
Hixson testified that Leak Solutions's using metal
shovels to move ballast and then leaving the membrane exposed
amounted to “a failure of Leak Solutions to perform
their work in a manner that's representative of the
industry and the standard of care [the] industry
uses[.]” (Doc. 43-19 at deposition 72:4-8). However, in
contrast, he had earlier maintained in his report that,
“[w]hile some repair contractors use a wide soft
bristle broom . . . this shovel procedure pulling ballast is
normal and is the predominant means contractors employ to
move ballast in preparation to start examining seams and
performing seam repairs” and further that
“[m]oving rock ballast off walls and exposing field
seams is not considered faulty work or workmanship . . .
.” (Doc. 43-20 at ECF 128-30).
corporate representative Ritchie Royston testified that wind
and temperature changes, including thermal shock, would be
covered causes of loss but that shrinking and expansion were
specifically excluded causes of loss; thus, thermal shock,
even if it caused the shrinking and expansion, could not
“create a covered cause of loss” in the context
of the EPDM roof. (Doc. 43-23 at deposition 46:8).
Travelers denied Brookwood's claim under the Property
Policy, Brookwood submitted to Travelers a claim for coverage
under the CGL Policy on December 19, 2014. Brookwood's
claimed damages included (1) the cost of repairing the
interior damage; (2) the cost of replacing its tenant,
McWane's, damaged furniture; and (3) an approximately
$61, 000 rent reduction Brookwood provided to McWane. Email
communications show that Travelers professionals handling the
CGL claim reviewed the facts and relevant documents and,
after determining that “the contractor that was doing
the work may have been the proximate cause of causing this
roof leak and subsequent damage, ” attempted to help
Brookwood recover damages from Leak Solutions and its
insurance carrier, as well as assess Brookwood's
potential liability to McWane. (Doc. 43-5 at ECF 4).
rental agreement between Brookwood and its tenant McWane
provides, in relevant part, that Brookwood would make
“necessary repairs” to the building and
“repair any damage to Tenant's Premises that occurs
as a result of or in connection with the repair of such
defective condition . . . .” (Doc. 43-21 at ECF 6-7).
The agreement further required that “[McWane] shall
maintain insurance written on an ‘all-risk' or
broad form for the full replacement cost of its furniture,
furnishings, fixtures, improvements and other property,
” with the policy waiving the right of subrogation
against Brookwood where McWane could obtain such language.
(Id. at ECF 8). And the lease provided for abatement
of the rent if the premises were, through no fault of McWane,
further discussions between Travelers and Brookwood, the
parties continue to disagree about whether the CGL Policy
covers the claimed damages. Travelers filed this suit in June
2015, seeking a declaratory judgment that it owes no coverage
for the rain damage to the Raymond James building and
McWane's property, under either the Property or CGL
Policies. Brookwood separately filed suit against Leak
Solutions in July 2016, alleging that the water damage was
the result of Leak Solutions's negligent and wanton
actions. That case remains pending in Jefferson County
parties agree that this court should apply Alabama
substantive law to this dispute. See St. Paul Fire &
Marine Ins. Co. v. ERA Oxford Realty Co. Greystone, LLC,
572 F.3d 893, 894 n.1 (11th Cir. 2009) (citing Cherokee
Ins. Co., Inc. v. Sanches, 975 So.2d 287, 292 (Ala.
2007)) (explaining that when a federal court sitting in
diversity in Alabama interprets an Alabama insurance policy,
it applies Alabama substantive law). Under Alabama law, the
insured bears the burden of initially proving coverage under
the policy. See FCCI, Inc. v. Capstone Process Sys.,
LLC, 49 F.Supp.3d 995, 998 (N.D. Ala. 2014) (citing
Colonial Life & Acc. Ins. Co. v. Collins, 194
So.2d 532, 535 (Ala. 1967)). The insurer bears the burden of
demonstrating that an exclusion to coverage applies.
Pennsylvania Nat. Mut. Cas. Ins. Co. v. St. Catherine of
Siena Parish, 790 F.3d 1173, 1181 (11th Cir. 2015)
(citing Acceptance Ins. Co. v. Brown, 832 So.2d 1,
12 (Ala. 2001)). But the insured is responsible for showing
that an exception to an exclusion restores coverage. See
USF Ins. Co. v. Metcalf Realty Co., Inc., No.
2:12-cv-02529-AKK, 2013 WL 4679833, at *5 (N.D. Ala. Aug. 30,
2013) (citation omitted).
to coverage are interpreted as narrowly as possible to
maximize coverage, and are construed strongly against the
insurance company that issued the policy.”
Pennsylvania Nat. Mut. Cas. Ins. Co. v. Roberts Bros.,
Inc., 550 F.Supp.2d 1295, 1303 (S.D. Ala. 2008) (citing
Porterfield v. Audubon Indem. Co., 856 So.2d 789,
806 (Ala. 2002)). But by the same token, “[i]f there is
no ambiguity, courts must enforce insurance contracts as
written and cannot defeat express provisions in a policy by
making a new contract for the parties.” See
Id. (quoting Shrader v. Emp'rs Mut. Cas.
Co., 907 So.2d 1026, 1034 (Ala. 2005)). “The issue
whether a contract is ambiguous or unambiguous is a question
of law for a court to decide. If the terms within a contract
are plain and unambiguous, the construction of the contract
and its legal effect become questions of law for the court .
. . .” State Farm Fire & Cas. Co. v.
Slade, 747 So.2d 293, 308 (Ala. 1999) (citing and
quoting McDonald v. U.S. Die Casting & Dev. Co.,
585 So.2d 853, 855 (Ala. 1991)).
Coverage Under Property Policy
Property Policy is an “all-risk” policy, meaning
that it provides coverage for all physical damage to covered
property unless a cause of loss is specifically
excluded or limited. See St. Paul Fire & Marine Ins.
Co. v. Britt, 203 So.3d 804, 809-10 (Ala. 2016)
(citations omitted) (describing all-risk policies as covering
all fortuitous losses that are not attributable to the
insured's misconduct or fraud and that are not
parties do not dispute that Brookwood has met its burden to
demonstrate initial coverage; namely, that its covered
property was fortuitously physically damaged through no
misconduct or fraud on Brookwood's part. But Travelers
points to the Rain Limitation in section D. Limitations 1.c.
(1) that excludes coverage for rain damage to the interior of
the covered building or personal property unless the
building first sustains damage by a covered loss to its
roof. The Rain Limitation provides that interior
damage caused by rain is covered if “[t]he
building or structure first sustains damage by a Covered
Cause of Loss to its roof or walls through which the rain . .
. enters[.]” (Doc. 43-17 at ECF 48).
has established that the damage to McWane's space and
property was caused by rain, so the damage is excluded
unless Brookwood shows that the interior rain damage
was caused by a covered cause. Accordingly, to survive
summary judgment, Brookwood must produce evidence on which a
reasonable jury could find that the rain damage was caused by
a “covered cause of loss.” (Doc. 43-17 at ECF
48). A genuine dispute of fact exists regarding causation,
but the court finds the dispute immaterial because none of
the proposed causes of the rain damage expounded by Brookwood
entitle it to recovery under the Property Policy.
contends that wind, temperature change, and thermal shock are
all covered causes of loss that possibly caused the
leak, thus preventing application of the Rain Limitation; it
maintains that these covered causes are not inconsistent with
faulty workmanship by Leak Solutions. Travelers asserts that Leak
Solutions's faulty repair work caused the damage to the
EPDM membrane that permitted water to leak into the building
and that defective workmanship is an excluded cause of loss.
The court notes that the only type of faulty workmanship at
issue is Leak Solutions's use of metal shovels to move
ballast and its failure to restore the ballast to cover the
membrane when workers left the job site on November 7, 2014.
to the extent faulty workmanship, inadequate maintenance,
and/or wear and tear caused the roof damage, they are
excluded causes of loss. (Doc. 43-17 at ECF 45, 46 (providing
that loss or damage from wear and tear or from
“[f]aulty, inadequate or defective” workmanship
or maintenance is not covered)). Brookwood argues that the
fact that the roof did not leak after the rainfall on
November 6, 2014, proves that faulty workmanship did not
cause the roof damage. Leak Solutions's actions on
November 7, particularly leaving the job site without
restoring ballast, may have still been the primary cause of
the roof damage; further, even a showing that faulty
workmanship did not cause the seam damage does not meet
Brookwood's burden to show that an exception to the Rain
Limitation applies-namely, that a covered cause of
loss produced the damage.
Brookwood's proposed causal agents, the parties agree
that temperature change may be a covered cause of loss. But
these facts do not simply involve temperature change that
produced damage that then permitted rain to enter the
building. Rather, on this record, temperature change could
only have caused damage to the Raymond James building by
causing thermal shock.
thermal shock, on these facts, is not a covered cause of
loss. Thermal shock is a reaction to temperature
changes; it is defined as “the expansion and
contraction of the roof system due to extreme
temperature changes.” (Doc. 43-19 at Mr. Hixson's
deposition 115:9-11). The Property Policy specifically
excludes coverage for damage caused by or resulting from
“[s]ettling, cracking, shrinking, bulging, or
expansion.” (Doc. 43-17 at ECF 45) (emphasis
added). “Shrink” is defined as “to contract
to a less extent . . .” and is a synonym for
“contract”; the two terms may be used
interchangeably. See Shrink, Merriam-Webster
(last visited September 6, 2017). The plain language of the
policy thus excludes thermal shock as a covered cause of loss
when it causes cracking, shrinking, and expanding. Brookwood
argues that Travelers is precluded from arguing that the
shrinking/expansion provision applies because it failed to
investigate thermal shock as a potential cause of the roof
damage. But it cites no authority for this proposition.
also argues that the shrinking/expansion and wear and tear
exclusions do not apply because section C.2.i of the policy
provides that Travelers will provide coverage when an
excluded cause of loss “results in” a
“specified cause of loss.” One specified cause of
loss is a windstorm, and Brookwood contends that the storm
that occurred on the same day as the damage to the roof
qualifies as a windstorm, meaning that, as Brookwood reads
the policy, the damage should be covered. Brookwood's
argument misses the mark. Even if the storm was a windstorm,
and therefore a “specified cause of loss, ” it
would not be covered under section C.2.i of the policy. That
section provides coverage for an excluded cause ...