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Cobblestone Condominium Association, Inc. v. Travelers Casualty Insurance Company of America

United States District Court, N.D. Alabama, Northeastern Division

March 27, 2019




         This diversity action involves an insurance coverage dispute. Plaintiff Cobblestone Condominium Association bought an insurance policy from defendant Travelers Casualty Insurance Company of America that provided damage coverage for its condominiums. Cobblestone filed two claims under the policy, the first relating to building damage from a fire and the second to roof damage from a storm. The parties agree that both claims are covered under the insurance policy. Cobblestone invoked the policy's appraisal provision after the parties could not agree on a damage amount for the two claims, but the appraisal process went awry, and Cobblestone filed this lawsuit alleging breach of contract and bad faith.0F[1]

         Cobblestone seeks partial summary judgment on its breach of contract claims, asking the Court to find as a matter of law that Travelers was required to participate in the appraisal process on the fire and roof claims under the terms of the insurance policy but failed to do so. (Doc. 51). Travelers asks the Court to enter judgment in its favor with respect to Cobblestone's breach of contract and bad faith claims. (Doc. 48). For the reasons described below, the Court grants Cobblestone's motion as to the fire claim only, and it denies Travelers's motion except as to Cobblestone's claim of bad faith regarding the roof.


         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). To demonstrate that there is a genuine dispute as to a material fact that precludes summary judgment, a party opposing a motion for summary judgment must cite “to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Fed.R.Civ.P. 56(c)(1)(A).

         When considering a motion for summary judgment, a district court must view the evidence in the record in the light most favorable to the non-moving party and draw reasonable inferences in favor of the non-moving party. White v. Beltram Edge Tool Supply, Inc., 789 F.3d 1188, 1191 (11th Cir. 2015). “A litigant's self-serving statements based on personal knowledge or observation can defeat summary judgment.” United States v. Stein, 881 F.3d 853, 857 (11th Cir. 2018); see Feliciano v. City of Miami Beach, 707 F.3d 1244, 1253 (11th Cir. 2013) (“To be sure, Feliciano's sworn statements are self-serving, but that alone does not permit us to disregard them at the summary judgment stage.”). Even if a district court doubts the veracity of the evidence, the court cannot make credibility determinations of the evidence; that is the work of a factfinder. Feliciano, 707 F.3d at 1252 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). Still, conclusory statements in a declaration cannot by themselves create a genuine issue of material fact. See Stein, 881 F.3d at 857 (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990)).

         Cross motions for summary judgment do not alter the Rule 56 standard. See United States v. Oakley, 744 F.2d 1553, 1555-56 (11th Cir. 1984) (“Cross motions for summary judgment will not, in themselves, warrant the court in granting summary judgment unless one of the parties is entitled to judgment as a matter of law on facts that are not genuinely disputed.”). “In practice, cross motions for summary judgment may be probative of the nonexistence of a factual dispute, but this procedural posture does not automatically empower the court to dispense with the determination whether questions of material fact exist.” Georgia State Conference of NAACP v. Fayette Cty. Bd. of Comm'rs, 775 F.3d 1336, 1345 (11th Cir. 2015) (quoting Lac Courte Oreilles Band of Lake Superior Chippewa Indians v. Voigt, 700 F.2d 341, 349 (7th Cir. 1983)) (internal quotation marks and brackets omitted). “If both parties proceed on the same legal theory and rely on the same material facts ... the case is ripe for summary judgment.” NAACP, 775 F.3d at 1345 (quoting Shook v. United States, 713 F.2d 662, 665 (11th Cir. 1983)) (internal quotation marks omitted) (alteration supplied by NAACP).


         Cobblestone is an association of condominium homeowners in Huntsville, Alabama. (Doc. 45-1, pp. 2-3; Doc. 45-3, p. 5, tr. p. 14). Cobblestone's property consists of 26 residential two-story buildings, each with four downstairs and four upstairs units. (Doc. 46-10, p. 4; Doc. 46-11, pp. 25-27). Travelers issued a condominium-homeowners insurance policy to Cobblestone. (Doc. 55, p. 4). The policy covered all of the condominium units in the Cobblestone complex during the coverage period. (See Doc. 45-1). It is undisputed that Cobblestone paid its premiums for the relevant coverage year and that the insurance policy was in full force and effect when the two incidents in question took place. (Doc. 37, pp. 1, 2, ¶¶ 1, 5; Doc. 55, p. 4).

         In 2015, Cobblestone made two separate claims under the insurance policy regarding physical damage to its condominiums. The first claim stemmed from a fire, and the second claim concerned roof damage resulting from hail and wind in a storm. (Docs. 46-10, 46-11). The parties do not dispute that the policy provides coverage for the two losses. (Doc. 55, p. 4).

         Cobblestone's insurance policy contains an appraisal provision. (Doc. 55, p. 4; Doc. 45-1, p. 64). In the insurance context, appraisal is a dispute resolution technique wherein a representative for each party works with an umpire to resolve disputes concerning the amount of an insured's loss. (Doc. 45-1, p. 64). The appraisal provision of the insurance policy states:


4. Legal Action Against Us
If we and you disagree on the value of the property, the amount of Net Income and operating expense or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property, the amount of Net Income and operating expense or the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any of the two will be binding. Each party will:
a. Pay its chosen appraiser;
b. Bear the other expenses of the appraisal and umpire equally.

(Doc. 45-1, p. 64). Travelers initially agreed to submit Cobblestone's fire claim to appraisal, but Travelers later withdrew from the appraisal process. (Doc. 55, p. 5). With respect to Cobblestone's roof claim, Travelers rejected Cobblestone's demand for appraisal as premature. (Doc. 55, p. 5).

         A. The Fire Claim

         On February 17, 2015, a fire occurred in Building T of the Cobblestone complex. (Doc. 46-10; Doc. 45-3, p. 11, tr. p. 37; Doc. 45-4, p. 50). The fire destroyed four units and seriously damaged four additional units within Building T. (Doc. 46-10).1F[2] On March 26, 2015, Travelers estimated that the “replacement cost value” to restore Building T to its pre-loss condition would be $826, 047.78. (Doc. 45-15, p. 2). After deducting amounts for depreciation, Travelers paid Cobblestone an “actual cash value” on the fire claim of $649, 424.73. (Doc. 55, p. 4).2F[3] Travelers indicated that the amount withheld for depreciation would be payable upon completion of repairs up to the actual amount spent for the repairs. (Doc. 45-15, p. 2). During its investigation of the fire loss, Travelers obtained a “Marshall & Swift” report, dated March 16, 2015, which estimated a total “ground up” reconstruction cost for Building T at $1, 167, 060. (See Doc. 45-4, p. 35, tr. pp. 134-35). 3F[4]

         On April 1, 2015, Cobblestone retained The Howarth Group to represent it with respect to the fire claim. (Doc. 45-20, p. 2). One week later, The Howarth Group demanded appraisal of the fire loss under the insurance policy. (Doc. 45-21, p. 2). Without providing details to Travelers, The Howarth Group stated that Cobblestone had “several differences with the settlement offer provided by [Travelers].” (Doc. 45-21, p. 2). Chuck Howarth of The Howarth Group later testified that Travelers's estimate omitted numerous basic items such as plumbing supply lines, paint, primer, framing, electrical wiring, outlets, switches, and panel boxes, among other items necessary to restore Building T to its pre-loss condition and to bring the building into compliance with city building codes:

It was obvious that the . . . estimate on which [Travelers relied] left a lot of damage out. There's holes in the estimate that are surprising. There are things - there are parts of the building he just left out. And this is the kind of stuff that a first-year adjustor would not leave out. This was a surprise to me. And those errors were duplicated room after room after room. . . . [W]e agreed on the general work. Just put the stuff you left out in the estimate.

(Doc. 50-17, p. 17, tr. p. 63; see pp. 17-25, tr. pp. 63-103).

         On April 16, 2015, Travelers rejected Cobblestone's demand for appraisal as premature. (Doc. 45-22, pp. 2-3). Travelers explained that Cobblestone had not “presented its formal claim for damages, ” leaving it “unable to identify any differences that may exist with our offer and Cobblestone's claim.” (Doc. 45-22, p. 2). On June 9, 2015, The Howarth Group provided Travelers with a proof of loss and estimate on the fire claim, which reflected a replacement cost value of $1, 129, 388.57 and an actual cash value of $993, 861.94. (Doc. 45-23, pp. 2-172). Arthur Grandinetti prepared the estimate on behalf of The Howarth Group. (Doc. 45-23, p. 2). One week later, Travelers rejected Mr. Grandinetti's estimate: “we must reject the proof of loss since we are not in agreement on the amount of the damages.” (Doc. 45-24, p. 2). Travelers cited the estimate's omission of an actual cash value and requested additional information. (Doc. 45-24, p. 2). Cobblestone denied Travelers's request and insisted on proceeding with appraisal. (Doc. 45-25, p. 2). On July 6, 2015, Travelers responded to Cobblestone's request to continue with appraisal: “we are in agreement to proceed with the appraisal process at this time. We have retained Harrison Jones . . . as our appraiser.” (Doc. 45-26, p. 2). On July 17, 2015, Travelers and Cobblestone formally submitted the fire claim to appraisal. (Doc. 50-2, p. 2). The parties mutually agreed to the appointment of Dale Mullin as the umpire. (Doc. 50-3, p. 2).

         While the parties engaged in appraisal conversations, Cobblestone hired an architectural and engineering firm, Bird and Kamback, LLC, to create plans to rebuild Building T and to secure bids for the construction. (Doc. 45-27, pp. 37-40). Cobblestone asserts that it retained Bird and Kamback in an effort to comply with multiple citations from the City of Huntsville requiring that Cobblestone either tear down the damaged building or produce blue prints with plans for rebuilding. Cobblestone also wanted to “have an available contractor ready to begin construction once the umpire awarded damages [through appraisal].” (Doc. 26, p. 4; see Doc. 26-7, p. 4, ¶¶ 11-12). Travelers does not dispute that Cobblestone was permitted to seek out contractors and to secure bids in anticipation of construction. (Doc. 50-13, p. 10, tr. p. 36).

         On October 6, 2015, Mr. Grandinetti and Mr. Jones, as appraisers for Cobblestone and Travelers, respectively, met with the umpire at the Cobblestone property to conduct a walk-through. (Doc. 45-33, p. 19, tr. p. 69). Mr. Jones testified that several weeks before the onsite meeting, he learned that Cobblestone was soliciting bids on the project through an architect and engineering firm. (Doc. 45-33, p. 19, tr. pp. 70-71). After the topic of the bids surfaced, the parties discontinued the meeting pending submission and production of the bids. (Doc. 45-33, pp. 20, 23, tr. pp. 75-76, 87-88; Doc. 45-11, p. 17, tr. pp. 62-63).

         On October 9, 2015, Bird and Kamback received sealed bids from local contractors. (Doc. 46-27, p. 2, ¶ 4; Doc. 46-28, p. 1, ¶ 1; Doc. 46-29, p. 3, ¶ 6; Doc. 47-1, p. 2, ¶ 4). On October 12, 2015, Travelers requested copies of the bids. (Docs. 45-35, 46-3). Chris Scaife, president of Cobblestone's homeowners association, declined to produce the bids and instead instructed Bird and Kamback to return the bids unopened to the bidders. (Doc. 46-2, p. 2). Mr. Scaife testified that Cobblestone did not open the bids and that Cobblestone returned the sealed bids to the bidders. (Doc. 45-12, p. 38, tr. pp. 146-48). Mr. Scaife explained in an email to Bird and Kamback:

We had assumed the Referee in the independent appraisal would have had his final meeting with both sides before the bids were due. The meeting did not take place until afterwards as it was rescheduled a couple / few times. Your specs were based on insurance information to ensure we did not overspec the project and obtain offers that were over and above our final settlement amount. We need to settle with the insurer before we determine the price payable to the contractors. We don't want the referee to request the bid packages and award us a dollar amount based on the lowest compliant offer.
Please advise the offerors that we are awaiting settlement with the insurance company and don't want to hold onto offers that have expired. We also don't want them to believe that we opened their offers and are trying to conduct an auction. Returning their packages to them unopened will give them the surety that we have not favored one over the other.

(Doc. 46-2, p. 2).

         On October 29, 2015, Travelers wrote to Cobblestone, stating:

Until we receive the [bid] documents and have an opportunity to review them were are not in position to go further with the appraisal on the building.

(Doc. 46-3, p. 2). On November 11, 2015, Travelers followed up on its requests for the bids and informed Cobblestone that it was “suspending the appraisal process pending receipt and an opportunity to review the previously requested documents that we have not yet received.” (Doc. 46-4, p. 2). Cobblestone's fire claim has lay dormant since Travelers withdrew its participation from the appraisal process.

         B. The Roof Claim

         In June of 2015, a thunderstorm with high winds and hail damaged roofs in the Cobblestone complex. (Doc. 46-11, pp. 25-30). Cobblestone filed a claim under its insurance policy with Travelers. (Doc. 45-11). The parties dispute the number of roofs impacted-Cobblestone contends that the roofs of all 26 buildings in the complex were damaged while Travelers maintains that the roofs of only eight buildings suffered damage. (Doc. 51, p. 3, n. 2). On June 24, 2015, Travelers inspected approximately half of the roofs in the complex. (Doc. 50-8, p. 7, tr. p. 20). Twenty-two of the roofs were replaced in 2009 pursuant to a separate storm damage claim, (Doc. 46-12, pp. 5-6; see Docs. 46-13, Doc. 46-14), and, according to Travelers's adjuster, the newer roofs did not need to be replaced, (Doc. 50-8, p. 20, tr. pp. 20-21). Following Travelers's inspection, the company agreed to repair damaged shingles on eight roofs in the complex using a hand-seal or gluing process. (Doc. 45-12, p. 11, tr. p. 38; Doc. 46-16, pp. 1-13). Travelers initially paid Cobblestone $17, 238.55 on the roof claim, which included a $1, 000 deductible. (Doc. 46-16, p. 9, Doc. 45-12, p. 11, tr. pp. 37-38).

         After receiving Travelers's estimate, Cobblestone retained Superior Roofing to provide an estimate. (Doc. 45-12, pp. 12-13, tr. pp. 43-45). Superior Roofing examined the damaged roofs on August 5, 2019 and determined that the roofs could not be repaired using the hand-seal or gluing method proposed by Travelers. (Doc. 45-12, p. 11, tr. p. 38). Superior Roofing estimated that it would cost $121, 280.00 to repair the roofs. (Doc. 46-18, p. 2; Doc. 45-12, p. 5).

         On August 25, 2015, Cobblestone demanded appraisal on the roof claim. (Doc. 46-19, p. 2). Travelers did not submit to appraisal but instead agreed to pay the Superior Roofing estimate at a replacement cost value of $114, 466.88. (Doc. 46-20, p. 11; Doc. 45-12, p. 15, tr. p. 54). After depreciation, Travelers paid Cobblestone $57, 798.50 on the roof claim. (Doc. 45-12, p. 15, tr. p. 54; Doc. 45-13, p. 16). On September 17, 2015, Cobblestone demanded appraisal on the roof claim for a second time and advised that The Howard Group would serve as its appraiser. (Doc. 46-22, pp. 2-3). Travelers responded on December 2, 2015, rejecting Cobblestone's demand for appraisal as premature. (Doc. 46-23, pp. 2-3). Travelers explained that Cobblestone had not “presented its formal claim for damages as a result of wind damage, ” leaving it “unable to identify any differences that may exist with our offer and Cobblestone's claim.” (Doc. 46-23, p. 2). The Howarth Group retained an expert, Dr. Neil B. Hall, Ph. D., to assess the roof damage. (Doc. 46-25, p. 8, tr. p. 27). Based on a report prepared by Dr. Hall, The Howarth Group ...

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