United States District Court, N.D. Alabama, Southern Division
DAVID PROCTOR UNITED STATES DISTRICT JUDGE
comes to contracts, language matters. A party's rights
and obligations under a contract are largely determined by
the language of the contract. It is axiomatic that courts
must pay close attention to each phrase of a contract when
interpreting and determining the parties' rights under
that instrument. The same is true of the parties to a
contract, particularly before they sign it. Just as courts
must scrutinize contractual language in resolving disputes
between contractual partners, contracting parties generally
have a duty to read their contracts before signing on the
case involves unmet expectations regarding how an insurer
performed under an insurance contract. The question though is
whether Plaintiffs' unmet expectations are grounded in
the contract's language. After careful review, the court
finds they are not.
court has before it Defendant's motion for summary
judgment. (Doc. # 28). The parties have fully briefed the
motion (Docs. # 29, 30, 32), and it is under submission.
After careful review, and for the reasons explained below,
the court concludes that Defendant's motion for summary
judgment is due to be granted.
to the court's summary judgment requirements,
“[a]ll material facts set forth in the statement
required of the moving party will be deemed to be admitted
for summary judgment purposes unless controverted by the
response of the party opposing summary judgment.” (Doc.
# 21 at 7) (emphasis omitted). Here, Plaintiffs (who oppose
summary judgment) have not controverted Defendant's
statement of undisputed material facts (Doc. # 29 at 4-11),
and the court therefore deems them admitted for summary
Timothy Yeager and Desired Temp Services Contractors, Inc.
(collectively, “DTSC”) purchased a commercial
general liability insurance policy from Defendant Nationwide
Property and Casualty Insurance Company
(“Nationwide”). Yeager testified that he did not
review the insurance policy he purchased from Nationwide
because he is not an insurance expert and trusted his
Nationwide Agent to provide a policy that would meet
DTSC's needs. (Doc. # 29-15 at 133-36). The policy's
insuring agreement provides, in relevant part:
We [Nationwide] will pay those sums that the insured [DTSC]
becomes legally obligated to pay as damages because of
“bodily injury” or “property damage”
to which this insurance applies. We will have the right and
duty to defend the insured against any “suit”
seeking those damages. However, we will have no duty to
defend the insured against any “suit” seeking
damages for “bodily injury” or “property
damage” to which this insurance does not apply. We may,
at our discretion, investigate any “occurrence”
and settle any claim or “suit” that may result.
. . . .
No other obligation or liability to pay sums or perform acts
or services is covered unless explicitly provided for under
Supplementary Payments - Coverages A and
(Doc. # 29-2 at 18).
Bakery, famous for its delicious pastries, retained DTSC to
expand its production facility in Shelby County, Alabama.
(Doc. # 29-3 at 2-3). While expanding the production
facility, DTSC negligently applied a chemical sealant without
proper ventilation, and the sealant's fumes contaminated
finished inventory and raw ingredients stored in a nearby
freezer. (Doc. # 29-4 at 13-14).
parties agree that DTSC was negligent in its application of
the chemical sealant and liable to Edgar's Bakery for
damages caused by that negligence. (Docs. # 29 at 2; 30 at
5). On February 20, 2017, DTSC notified Nationwide of the
incident, thereby initiating the claims review process. (Doc.
# 29-4 at 13-14). Nationwide then contacted Edgar's
Bakery to request documentation to support its losses.
(Id. at 13). Edgar's responded by providing
Nationwide its first computation of losses: $74, 083.
(Id.). In the days immediately after being notified
of the claim, Nationwide contacted Yeager (DTSC's
principal) to obtain more information about the incident and
requested additional information from Edgar's in support
of its losses. (Id. at 12-13).
March 1, 2017, just over a week after initially receiving the
claim, Nationwide determined that its insurance policy with
DTSC covered the economic losses sustained by Edgar's
Bakery as a result of DTSC's negligence. (Id. at
14) (“Coverage is clear”); (Id. at
11-12) (concluding that coverage was not precluded by the
policy's pollution exclusion and stating “appears
coverage will apply”). At that time, a Nationwide
employee noted that it remained to be seen if the $74, 083
loss figure could “all be supported with
documentation” and stated that he was “working
with associate as to documentation to request from
[claimant].” (Id. at 11).
March 20, 2017, in response to Nationwide's prior
request, Edgar's Bakery provided some documentation in
support of its losses. (Id. at 11). But Nationwide
determined the documentation was inadequate because it
largely consisted of handwritten notes and did not provide
sufficient information to verify Edgar's Bakery's
losses. (Id.; Doc. # 29-5 at 96, 111-13). Nationwide
therefore sent Edgar's Bakery an email detailing the
deficiencies and providing specific examples of the
information it was seeking. (Doc. # 29-4 at 11) (discussing
additional documentation Nationwide would need to
substantiate the loss, including tax documents, invoices, and
sales sheets); see also (Doc. # 29-5 at 111-13). On
March 21, 2017, Nationwide called Edgar's Bakery to
further explain the deficiencies in its documentation and to
provide “some ideas to substantiate the loss.”
(Doc. # 29-4 at 11).
8, 2017, Edgar's Bakery provided Nationwide with
supplemental documentation. (Id. at 10). Nationwide
then sent the supplemental documentation to an in-house
forensic accountant for review. (Id.). Nationwide
also notified Edgar's Bakery that this forensic
accountant would be reaching out directly to Edgar's
“to get the correct information to resolve the
2, 2017, Nationwide's in-house forensic accountant
informed the claims adjuster that the documentation provided
by Edgar's Bakery supported “just over” $35,
000 in losses. (Id. at 9). Nationwide's
accountant advised that he was confident in his analysis and
that with the information provided thus far he would
“have difficulty ever supporting damages north
of” $40, 000. (Id.). After the claims adjuster
learned that Edgar's Bakery was considering filing suit
against DTSC, and recognizing that there was some “grey
area” in the damages estimation, Nationwide authorized
a settlement offer of $40, 000 to Edgar's Bakery.
(Id.). This settlement offer was made on or before
June 14, 2017-within four months of Nationwide first being
notified of the incident. (Id.).
Nationwide's $40, 000 settlement offer, settlement
negotiations ensued between Edgar's Bakery and Nationwide
but ultimately broke down on July 12, 2017. (Id.).
Edgar's Bakery retained counsel shortly thereafter.
August 23, 2017, counsel for Edgar's Bakery sent a formal
demand letter to Nationwide, insisting that Nationwide tender
a check to Edgar's Bakery for $83, 497 within 45 days.
(Doc. # 29-6 at 99). The letter was accompanied by
Edgar's Bakery first forensic accounting report, which
calculated Edgar's Bakery's losses as being between
$84, 006 and $86, 243. (Id. at 100-06). Nationwide
referred the report to its in-house forensic accountant for
review. (Doc. # 29-4 at 8). The in-house accountant advised
that “all [the report] did was take [Nationwide's]
spreadsheets and change the numbers to reflect the amount
that [Edgar's Bakery is] looking for.”
(Id.). After consulting with his manager,
Nationwide's in-house accountant recommended having a
third-party vendor provide a “second opinion”
“just to further our case.” (Id.).
September 6, 2017, Nationwide had retained a third-party
forensic accountant to evaluate Edgar's Bakery's
losses. (Id.). Nationwide received the third-party
accountant's report on October 2, 2017. (Id. at
7). The report concluded that the documentation submitted by
Edgar's Bakery supported losses totaling $37, 423.
(Id.; Doc. # 29-6 at 86). The third-party accountant
disagreed with Edgar's Bakery's forensic accounting
report on two main points: (1) the inclusion of fixed
overhead costs in the replacement cost of the damaged product
and (2) Edgar's Bakery's view ...