United States District Court, N.D. Texas, Dallas Division
CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, SYNDICATE NOS. 2003, 1414, 0510, 4472, 1183, 1200, AND 4444, SUBSCRIBING TO POLICY NUMBER NJL440003612, Plaintiff,
LOWEN VALLEY VIEW, LLC and PANADE II LTD. d/b/a HILTON GARDEN INN, Defendants.
MEMORANDUM OPINION AND ORDER
J. BOYLE UNITED STATES DISTRICT JUDGE.
the Court is Plaintiff Certain Underwriters at Lloyd's of
London, Syndicate Nos. 2003, 1414, 0510, 4472, 1183, 1200,
and 4444, Subscribing to Policy Number NJL440003612's
(Plaintiff or Underwriters) Amended Motion for Summary
Judgment. Doc. 46. For the reasons explained below,
Plaintiff's Motion is GRANTED.
an insurance coverage dispute involving hail damage to a
hotel. Defendants Lowen Valley View, LLC and Panade II Ltd.
d/b/a Hilton Garden Inn (collectively Defendants) own and
operate the Hilton Garden Inn in Irving, Texas. Doc. 34,
Defs.' Resp. to Pl.'s Mot. Summ. J. 4 [hereinafter
Defs.' Resp.]. Underwriters issued a standard commercial
property insurance policy (the Policy) to Defendants covering
the hotel for the period from June 2, 2012, to June 2, 2013.
Doc. 47, Pl.'s Br. in Supp. of Am. Mot. Summ. J. 2
[hereinafter Pl.'s Br.]. The Policy, by its terms,
covered “direct physical loss or damage to Covered
Property at the premises described in the Declarations caused
by or resulting from any Covered Cause of Loss.”
Id. (referencing Doc. 48, Pl.'s App. in Supp. of
Am. Mot. Summ. J. [hereinafter Pl.'s App.] 133, Ex. D,
Building and Personal Property Coverage Form). The parties do
not dispute that hail was a covered cause of loss under the
Policy. See Doc. 11, Defs.' Answer &
Countercls. ¶ 26; see also Doc. 47, Pl.'s
November 2014, Ajay Desai, the vice president of the company
that manages the hotel, was evaluating the property for
potential capital improvement projects. Doc. 34, Defs.'
Resp. 5. Noticing that “the shingles on the top of the
hotel looked bad, ” Desai contacted a roofing
contractor, who inspected the property and found evidence of
significant hail damage to the various roofing systems at the
property. Id. On December 22, 2014, this roofing
contractor obtained a weather history report from a company
called Weather Fusion/Point Data, which noted several hail
events at or near the hotel between the dates of January 1,
2006, and December 21, 2014. Id. (citing Doc. 48,
Pl.'s App. 209-11, Ex. G, Weather Fusion/PointData
the report, dated December 22, 2014, noted nine events of
hail “at location” between January 1, 2006, and
December 21, 2014, five of which had “estimated maximum
hail size” of greater than one inch. See Doc.
48, Pl.'s App. 209-11, Ex. G, Weather Fusion/Point Data
Report. Of the nine hail events noted “at location,
” seven occurred before the policy period, one after,
and one during, on June 13, 2012. See Id. The event
with the largest “estimated maximum hail size”
noted “at location” was on May 24, 2011. See
Id. And of the five events with “estimated maximum
hail size” greater than one inch, only the June 13,
2012 event occurred during the policy period; the other four
occurred prior to the policy period. See id.
roofing contractor provided a copy of the Weather
Fusion/PointData report to Desai, who in turn provided a copy
to Defendants' insurance agent on December 29, 2014. Doc.
34, Defs.' Resp. 5; Doc. 47, Pl.'s Br. 3.
Defendants' insurance agent filed a hail claim with
Underwriters on behalf of Defendants on the same day. Doc.
34, Defs.' Resp. 5; Doc. 47, Pl.'s Br. 3. The
description of the damage provided to Underwriters was
“roof damage due to hail, ” and the date of loss
listed on the Property Loss Notice was June 13, 2012, the
date of the only hail event noted on the Weather
Fusion/PointData report provided to the insurance agent that
occurred during the policy period. Doc. 48, Pl.'s App.
204-05, Ex. E, Property Loss Notice.
receiving notice of the claim from the agent, Underwriters
assigned the investigation of the claim to Frontier
Adjusters, which sent an independent adjuster, Derek Phipps,
to inspect the property for hail damage in mid-January 2015.
Doc. 34, Defs.' Resp. 5; Doc. 47, Pl.'s Br. 4; Doc.
48, Pl.'s App. 231-38, Ex. J, Phipps Damage
Estimate. When assigned the job, Phipps received
only the Property Loss Notice, which included no information
about the Policy or its coverage and no special instructions
for the inspection. Doc. 48, Pl.'s App. 205, Ex. E,
Property Loss Notice; Doc. 33, Defs.' App. in Supp. of
Resp. to Pl.'s Am. Mot. Summ. J. [hereinafter Defs.'
App.] 52-55, Ex. D, Dep. of Derek Phipps.
physically inspecting the property, Phipps consulted National
Oceanic and Atmospheric Administration (NOAA) reports online,
which he used to confirm that a hail storm had in fact
occurred in the area and on the date of loss provided to him
by Frontier Adjusters. Doc. 33, Defs.' App. 65-66, Ex. D,
Dep. of Derek Phipps. Phipps's computer log notes from
January 16, 2015, indicate that he found significant hail
damage to the roofs and exterior siding upon inspection of
the property. Id. at 412, Ex. K, Phipps Computer Log
Notes. Phipps determined that the roofs would require
replacement rather than repair, and on January 19, 2015,
prepared an estimate of what it would cost to replace the
roofs. Doc. 48, Pl.'s App. 231-38, Ex. J, Phipps Damage
Estimate. Phipps submitted his estimate to Frontier
Adjusters through a web-based computer program. Doc. 33,
Defs.' App. 73, Ex. D, Dep. of Derek Phipps.
March 2, 2015, Underwriters-through an authorized claims
administrator, Peninsula Insurance Bureau-sent a
“reservation of rights” letter to Defendants,
which indicated that the initial investigation had revealed
“potential coverage issues, ” namely “late
reporting of the loss.” Id. at 239-42, Ex. K,
Reservation of Rights Letter. Therefore, the letter stated,
the investigation would proceed “under a full
reservation of rights.” Id. It also directed
Defendants to the specific policy language requiring
“prompt notice of the loss or damage.”
Id. (quoting Doc. 48, Pl.'s App. 35, Building
and Personal Property Coverage Form, Part E.3.a.2). Finally,
the letter noted that “any recommendations made by the
adjuster [were] subject to the Underwriters' review and
approval.” Id. at 242.
Underwriters-through Frontier Adjusters-engaged a company
called Haag Engineering to “determine the extent of
hailstone impact damage to the roofing and siding” and
to “evaluate when hail damage might have
occurred.” Doc. 33, Defs.' App. 243, Ex. G, Haag
Report No. 1. Haag's first report, dated April 8, 2015,
noted that “[a] date of June 13, 2012 was provided with
our assignment.” Id. at 244. After inspecting
the property on March 17, 2015, and consulting weather
history reports from the National Climatic Data Center,
CoreLogic (formerly Weather Fusion, the same company that
provided the initial weather history reports to
Defendants' roofing contractor), and NOAA, Haag concluded
that “the most recent hailstorm with
hailstones large enough to cause the damage we observed was
on June 13, 2012.” Id. at 250 (emphasis
added). Notably, the CoreLogic report attached to Haag's
report contained the same history of hail events found in the
Weather Fusion/PointData report provided to Desai and
Defendants' insurance agent prior to the filing of the
claim. Compare Doc. 48, Pl.'s App. 209-11, Ex.
G, Weather Fusion/PointData Report (provided to Desai and
insurance agent), with Doc. 33, Defs.' App.
263-64, Ex. G, Haag Report No. 1 (CoreLogic report attached
to Haag Report No. 1).
second report from Haag Engineering, ordered specifically to
“discuss the likelihood that damage occurred between
December 29, 2012 and December 29, 2014, ” again noted
that Haag had “no reason to believe the dents occurred
more recently than the June 13, 2012 date
given.” Id. at 363-64, Ex. H, Haag Report No.
2 (emphasis added). This report also for the first time
identified “June 13, 2012 as the most likely
date damage occurred.” Id. at 363 (emphasis
added). As discussed below, Defendants place much weight on
this slight change in wording.
December 2015, Underwriters requested an Examination Under
Oath of Ajay Desai, vice president of the hotel's
property management company. Doc. 34, Defs.' Resp. 8. The
Examination took place in January 2016. There, Desai
described how he first noticed the condition of the roofs in
November 2014 and how he sent the Weather Fusion/PointData
report to the insurance agent, who Desai suspected then chose
the date of loss to report to the insurer. See
generally Doc. 33, Defs.' App. Ex. C, Exam. Under
Oath of Ajay Desai; see also Doc. 48, Pl.'s App.
208, Ex. F, Exam. Under Oath of Ajay Desai (“I think
they looked at the history and they probably saw which period
had the highest amount of hail and -- I assume that's how
they determined where to file the claim.”).
later, on February 18, 2016, Underwriters denied
Defendants' claim “based on [Defendants']
failure to give timely notice.” Doc. 48, Pl.'s App.
246-49, Ex. M, Denial Letter. The Denial Letter again
directed Defendants to the “prompt notice”
requirement in the Policy and stated that Defendants
“failed to give notice of the damage to the Property
until over two and a half years after the alleged
hailstorm.” Id. at 248. The Letter indicated
that this “late notice has prejudiced Underwriters'
ability to properly investigate the claim and pay only for
damage that occurred during the policy period.”
Id. at 249.
same day, February 18, 2016, Underwriters also filed its
Original Complaint and Request for Declaratory Judgment,
asking the Court to declare “that there is no coverage
under [the Policy] for the reported hail damage because
Defendants violated the policy's notice condition and
Underwriters suffered prejudice as a result.” Doc. 1,
Pl.'s Original Compl. & Req. for Declaratory J.
¶ 21. Defendants later counterclaimed for declaratory
judgment, breach of the insurance contract, and multiple
violations of §§ 541 and 542 of the Texas Insurance
Code. Doc. 11, Defs.' Answer &
now moves for summary judgment on Defendants' breach of
contract and Texas Insurance Code counterclaims. Doc. 46,
Pl.'s Am. Mot. Summ. J [hereinafter Pl.'s
Mot.].Defendants responded (Doc. 32), and
Plaintiff replied (Doc. 43). Therefore, Plaintiff's Motion
is now ripe for review.
judgment is appropriate “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). A dispute “is ‘genuine'
if the evidence is sufficient for a reasonable jury to return
a verdict for the non-moving party.” Burrell v. Dr.
Pepper/Seven Up Bottling Grp., 482 F.3d 408, 411 (5th
Cir. 2007). And a fact “is ‘material' if its
resolution could affect the outcome of the action.”
summary judgment movant bears the burden of proving that no
genuine issue of material fact exists. Latimer v.
Smithkline & French Labs., 919 F.2d 301, 303 (5th
Cir. 1990). Usually, this requires the movant to identify
“those portions of the pleadings, depositions, answers
to interrogatories, and admissions on file, together with
affidavits, if any, which it believes demonstrate the absence
of a genuine issue of material fact.” Celotex Corp.
v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation
marks omitted). But if the non-movant ultimately bears the
burden of proof at trial, the movant may satisfy its burden
just by pointing to the absence of evidence supporting the
non-movant's case. Id. at 322-23.
movant meets that burden, then it falls to the non-movant to
“show with significant probative evidence that there
exists a genuine issue of material fact.” Hamilton
v. Segue Software Inc., 232 F.3d 473, 477 (5th Cir.
2000) (internal quotation marks omitted) (citing Conkling
v. Turner, 18 F.3d 1285, 1295 (5th Cir. 1994)). And
significant probative evidence is just that: significant.
See Little v. Liquid Air Corp., 37 F.3d 1069, 1075
(5th Cir. 1994) (per curiam). “[M]etaphysical doubt as
to material facts, ” “conclusory allegations,
” “unsubstantiated assertions, ” or a mere
“scintilla of evidence” will not do.
Id.(internal citations and quotation marks omitted).
Rather, “the non-movant must go beyond the pleadings
and present specific facts indicating a genuine issue for
trial.” Bluebonnet Hotel Ventures, L.L.C. v. Wells
Fargo Bank, N.A., 754 F.3d 272, 276 (5th Cir. 2014)
(citing Celotex, 477 U.S. at 324).
sure, the court views evidence in the light most favorable to
the non-movant when determining whether a genuine issue
exists. Munoz v. Orr, 200 F.3d 291, 302 (5th Cir.
2000). But it need not “sift through the record in
search of evidence to support a party's opposition to
summary judgment.” Ragas v. Tenn. Gas Pipeline
Co., 136 F.3d 455, 458 (5th Cir. 1998) (quoting
Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16
& n.7 (5th Cir. 1992)). Simply put, the non-movant must
“identify specific evidence in the record” and
“articulate the precise manner in which that evidence
supports [its] claim.” Id. If it cannot, then
the court must grant summary judgment. Little, 37
F.3d at 1076.
Defendants' Evidentiary Objections
turning to the merits of Plaintiff's Motion, the Court
must first address Defendants' objections to
Plaintiff's summary judgment evidence. Defendants object
to paragraphs 10, 11, 12, 13, and 16 of the affidavit of
Derek Phipps, which is attached as Exhibit H to
Plaintiff's Amended Motion for Summary Judgment. Doc. 35,
Defs.' Objs. to Pl.'s Evid. in Supp. of Summ. J.
[hereinafter Defs.' Objs.].
noted above, Phipps was the independent adjuster sent by
Frontier Adjusters-on behalf of Underwriters-to investigate
the property a few weeks after the hail claim was filed. Doc.
34, Defs.' Resp. 5; Doc. 47, Pl.'s Br. 4. Plaintiff
provided an affidavit from Phipps as part of its summary
judgment evidence. See Doc. 48, Pl.'s App.
212-15, Ex. H, Aff. of Derek Phipps. The affidavit is dated
July 25, 2016-roughly five months after the claim was denied
and this lawsuit was filed-and it describes generally how
Phipps's investigation was affected by the two and a half
year gap between the time of the reported loss in June 2012
and the filing and investigation of the claim in December
2014 and January 2015. Id.
entirety of the challenged portion of Phipps's affidavit
states the following:
10. “The late notice of the claim impacted the
investigation in the following ways:
a. I was unable to inspect the insured property immediately
after the loss.
b. I was unable to document the condition of the roof
immediately following the Loss.
c. I was unable to determine if the roof or exterior
elevations had been impacted by other weather events or other
non-covered perils preceding the Loss.
d. I lost the opportunity to quantify the damage present at
the insured premises immediately after the Loss.
e. I lost the opportunity to interview witnesses who may have
known the prior condition of the roof and the impact of the
f. The condition of the roofs changed significantly between
the time of the alleged hail storm and the date notice was
finally given, making investigation of the existence and
extent of the related damage nearly impossible.”
11. “As a result of the late notice of the claim, the
investigation was severely hindered.”
12. “As a result of the late notice of the claim, I
could not conduct a full and fair investigation of the
circumstances surrounding the Loss in order to determine