Opinion
No. 01-3654-CV-S-SOW
August 14, 2003
ORDER
Before the Court are defendant Factory Mutual Insurance Company's Motion for Summary Judgment on Plaintiffs' Greenville, South Carolina Hotel Claims (Doc. #106), defendant Factory Mutual Insurance Company's Motion for Summary Judgment on Plaintiffs' Kansas City, Missouri Hotel Claims (Doc. #115), defendant St. Paul Fire and Marine Insurance Company's Motion for Summary Judgment on Plaintiffs Greenville, South Carolina Hotel Claims (Doc. #117), defendant St. Paul Fire and Marine Insurance Company's Motion for Summary Judgment on Plaintiffs' Kansas City, Missouri Hotel Claims (Doc. #132), and defendant Factory Mutual Insurance Company's Motion for Summary Judgment on Plaintiffs' Greensboro, North Carolina Hotel Claims (Doc. #138).
I. Background
Plaintiffs brought this lawsuit asserting that they are entitled to insurance coverage under property insurance policies for water intrusion-related damages at several of their hotels. Defendant Factory Mutual Insurance Company moves for summary judgment on plaintiffs' claims, arguing that the alleged water intrusion-related damages were known to plaintiffs years prior to the inception of plaintiffs' property insurance policies with defendant. The undisputed material facts relevant to the pending motions for summary judgment are as follows:
Defendant Factory Mutual Insurance Company (hereinafter "Factory Mutual") issued two insurance policies to plaintiffs pursuant to which plaintiffs have brought this lawsuit. The term of the first of those two policies began on October 1, 1997. The term of the second policy began on October 1, 1999. In a Sworn Proof of Loss letter dated November 17, 2000, plaintiffs' claimed that "water is infiltrating the exterior wall system of many of our hotels through unsealed window components." In a Sworn Proof of Loss, dated January 24, 2001, plaintiffs stated that "the combination of the defects of the window thermal breaks, combined with poorly designed windowsill finishing, has allowed uncontrolled water infiltration into finished interior wall surfaces."
A. Greenville, South Carolina Hotel
Bill Mead, plaintiffs' Regional Vice President for the Greenville, South Carolina (hereinafter referred to as "Greenville") hotel, was aware of a "moisture problem" at the Greenville hotel in 1994. Specifically, Mr. Mead "started noticing . . . mildew problems in the rooms, especially the exterior wall. . . ." In the fall of 1995, Patrick Wilson, the general manager of plaintiffs' Greenville hotel, informed Bill George, Vice President of Capital Planning and Asset Management for plaintiffs, that particular rooms in the Greenville hotel were showing signs of water intrusion such as vinyl starting to peel and pink spots on the vinyl. Pink spots are the first indicator of mildew.
In 1995, plaintiffs hired Lear Associates, Inc. ("Lear") to evaluate the Greenville hotel and provide a report as to the cause of the interior mildew problems. Lear issued a report that confirmed the existence of active water leaks into the walls at the hotel. The report stated that the cause of the problems was water intrusion caused by roof leaks and cracks, together with Exterior Insulation and Finishing System ("EIFS") failure.
Based upon this report, plaintiffs began repairs at the Greenville hotel in the spring of 1996. These repairs included work on the roof and skylights, replacement of perimeter wall flashing and roof coping repair, caulking around windows, repair of cracks in the EIFS exterior, and the application of an elastomeric coating on repaired exterior skin at a total cost to plaintiffs of $450,000. By the summer of 1997, plaintiffs again began to see peeling vinyl and pink spots in the end walls of the hotel suites.
Lear was called in to investigate and concluded that plaintiffs' application of the elastomeric coating on the repaired exterior skin had trapped water in the walls. Lear advised plaintiffs that removal of the vinyl wall coverings from the end walls of the suites would dry out the walls and solve the problem. In the fall and winter of 1997, plaintiffs removed the vinyl wall coverings from the end walls and the walls were painted. In the spring of 1998, after heavy rains, employees at the Greenville hotel again noticed moisture on the walls and pink spots.
In March of 1998, plaintiffs hired Russell J. Kenney to investigate the water intrusion, to determine the cause, nature and scope of the damages, and to recommend repairs. Mr. Kenney has opined that the water intrusion problems experienced due to roof leaks and cracks in the EIFS in 1995 and 1996 were successfully identified by Lear Associates, Inc. and repaired.
In addition, Mr. Kenney claims to have detected repairs made by an unknown third party to the windows, "repairing the breach caused by the thermal break shrinkage." Mr. Kenney removed one window from the hotel for field testing in September of 1998 and concluded from his field test that the water intrusion problems at the Greenville hotel in 1998 were specifically caused by problems with the shrinkage of the thermal break seals in the window units installed in the hotel.
In 1999, plaintiffs began making the repairs recommended by Mr. Kenney. It is the cost of these repairs for which plaintiffs seek coverage under the policy of insurance issued by defendant. Defendant denied plaintiffs claim on January 21, 2002.
B. Kansas City, Missouri Hotel
Plaintiffs' Kansas City, Missouri (hereinafter referred to as "Kansas City") hotel opened in 1989. Marvin Kueffler, Director of Engineering for the hotel from 1989 through 1995, was aware of water-intrusion-related problems at the hotel within two years of the hotel's opening. Mr. Kueffler described having problems with the "windowed walls" that would cause the vinyl wall covering to come apart in addition to pink spots and blue spots appearing on such walls.
Jeff Drollinger, plaintiffs' Executive Housekeeper at the Kansas City hotel, observed evidence of water intrusion-related problems at the hotel as early as March of 1990 in the form of wet carpet. Later, Mr. Drollinger also noticed the problems with the vinyl wall coverings peeling back and spots appearing on the wall coverings. Similarly, Rick Beran, plaintiffs' General Manager for the hotel, was aware of water-intrusion problems at the hotel by March of 1992. Mr. Beran has testified in his deposition that "there was, like, a [sic] pink-and blue-colored stains underneath the windows." Lonnie Funk, a former Regional Vice President for the Kansas City hotel, was aware of water intrusion-related problems at the hotel within two to three years after the hotel opened.
Initially, the manufacturer of the windows in the Kansas City hotel, EFCO, attempted to repair the windows in the hotel by drilling into the window frame and injecting silicone sealant. These repairs were performed sometime between 1992 and 1994.
In 1993, plaintiffs' retained a consultant, Russell J. Kenney to investigate cracking of the EIFS cladding. Mr. Kenney found that the damage due to water intrusion was caused by crack development in the EIFS. Mr. Kenney recommended over $1,000,000 in repairs to alleviate the water intrusion-related problems at the Kansas City hotel. Mr. Kenney also suggested window leak testing. Plaintiffs elected to spend approximately $400,000 on repairs and did not include window testing. The repairs that were completed in 1994 included repairing the EIFS, resealing the building's exterior, and caulking every window.
Defendant Factory Mutual states, based upon the deposition testimony of plaintiffs' employees, that shortly after the 1994 repairs, plaintiffs became aware that the repairs had been unsuccessful in alleviating the water intrusion-related problems. Mr. Funk, the former Regional Vice President for the Kansas City hotel, testified that the repairs made by Mr. Kenney in 1994 did not solve the water intrusion problem at the hotel. Mr. Funk stated, "We were right back to the deterioration of the wall around the windows and the mold and the mildew problems." Mr. Kueffler, Director of Engineering for the hotel at that time, testified that Mr. Kenney's repairs "probably slowed it down," but that it did not "entirely" stop leaking. Mr. Kueffler stated, "I remember the water problem always being there." Plaintiffs do not dispute these statements or provide any evidence to the contrary.
Plaintiffs add that a remodeling contractor noted the existence of excessive water on the interior of the exterior walls in some parts of the hotel in June of 1999. Plaintiffs retained Mr. Kenney to investigate the cause or causes of the water penetration. Mr. Kenney's investigation, in June of 1999, allegedly led to the discovery that the pre-1993 repairs performed by EFCO were designed to correct a phenomena known as thermal break shrinkage in the windows. Mr. Kenney performed his first test on the windows in June of 1999.
Plaintiffs state that water damage caused by leakage at the window systems did not recur at the locations previously worked on by EFCO. Plaintiffs state that the water damage and/or leaks were at openings in the window frames in new locations depending on the extent of the repair overlay and the shrinkage of the original thermal break material.
Mr. Kenney conducted additional tests on the windows in 2001. At that time, the windows were completely removed from the Kansas City hotel. Mr. Kenney has offered the opinion that the leaks and resulting water damage occurred only after late 1997 because "the original repairs did not fail and were, in fact, effective. . . ."
Plaintiffs submitted their original Proof of Loss on January 24, 2001. Defendant denied plaintiffs' claim on January 22, 2002.
C. Greensboro, North Carolina Hotel
Plaintiffs' Greensboro, North Carolina hotel opened in 1989. Martin McGahan, plaintiffs' Project Manager for the initial construction of the hotel, was aware of moisture problems within two to three weeks of the opening date. Mr. McGahan has testified that it was apparent that there was a "water infiltration problem" within the first year that the hotel was open.
During that first year, plaintiffs complained to the general contractor about water migrating into the outside exterior walls and EFCO, the window manufacturer, was brought in by the contractor to perform remedial repairs on the hotel windows. According to Mr. McGahan's testimony, it appeared that there were two possible points of water infiltration, the EIFS skin and the windows. The windows were considered the most likely source of water infiltration and, therefore, repairs were performed on the windows by injecting a silicone sealant. Mr. McGahan has opined that these repairs were not effective at stopping the water intrusion problems, characterizing them as "a Band-Aid approach at best of stopping the water intrusion into the building."
Guillermo Lara, plaintiffs' Suite Care Manager at the hotel from 1990 through 1994 or 1995 was aware of water intrusion-related problems soon after he began working at the hotel in 1990. Mr. Lara has testified that water intrusion was a continuous problem during the time he worked as the Suite Care Manager. Mr. Lara observed mildew under the windows. After it rained, Mr. Lara has testified that the walls underneath the windows would be wet.
Bill Mead, plaintiffs' Regional Vice President, became aware of water-intrusion related problems when he began working at the hotel in 1994. Mr. Mead was aware that the water intrusion-related problems occurred each time it rained. For two to three years prior to 1997, Mr. Mead planned to have the exterior of the hotel painted with a coating which he thought would remedy the water intrusion problems.
Since the same problems were occurring at the Greenville hotel, plaintiffs hired Lear Associates ("Lear"). Lear was to make repairs at the Greenville hotel and, if the repairs were successful, to perform the same repairs at the Greensboro hotel.
Robert Cauley, plaintiffs' Chief Engineer for the Greensboro hotel, was aware of damages to the interior of walls caused by water intrusion soon after he began working at the hotel in August or September of 1997. Mr. Cauley has described how employees would "cut the sheetrock out, pull the insulation out of the inside, because it was saturated, and re-sheetrock it and then put the paper back on." This type of repair work was being performed in August and September of 1997.
Lonnie Funk, plaintiffs' Executive Vice-President of Operations and Regional Vice-President until 1998, was aware that the problems in Greensboro were the same as the problems in Kansas City prior to 1998. Mr. Funk has testified in his deposition that the "issues were all the same." There was "a mold and mildew problem on the window wall" and depending on the severity of that problem, there "was deterioration of the carpet along that window wall, a musty smell in the sleeping rooms."
Plaintiffs' consultant, R.J. Kenney, has opined that cracks developed in a number of areas in the hotel because the windows were not installed according to specification at the time of construction.
Defendant Factory Mutual denied plaintiffs' claim for insurance coverage on January 21, 2002.
II. Standard
A motion for summary judgment should be granted if, viewing the evidence in the light most favorable to the non-moving party, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Rafos v. Outboard Marine Corp., 1 F.3d 707, 708 (8th Cir. 1993) (citingCelotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). A defendant who moves for summary judgment has the burden of showing that there is no genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). A plaintiff opposing a properly supported motion for summary judgment may not rest upon the allegations contained in the pleadings, "but must set forth specific facts showing there is a genuine issue for trial." Id.
III. Discussion
A. Greenville, South Carolina Hotel1. Manifestation of Plaintiffs' Loss
Defendant Factory Mutual argues that the water intrusion into the walls of plaintiffs' Greenville hotel began prior to the inception of the first insurance policy issued by defendant. Therefore, pursuant to the "loss-in-progress" doctrine, defendant argues that it is not liable for the loss. See United Capital Ins. Co. v. Hoodco, Inc., 974 S.W.2d 572, 575 (Mo.Ct.App. 1998) (quoting Inland Waters Pollution Control v. National Union 997 F.2d 172, 177 (6th Cir. 1993)).
Defendant contends that since plaintiffs were aware of water intrusion problems by 1994, three years prior to the inception of plaintiffs' first insurance policy with defendant in 1997, the loss manifested before the insurance policy began and defendant cannot be held liable for plaintiffs' losses. Defendant suggests that it is entitled to summary judgment.
It is a fundamental principle of property insurance law that a property insurer cannot insure against a loss that is known or apparent to the insured before the policy takes effect. Prudential-LMI Commercial Ins. Co. v. Superior Court 798 P.2d 1230, 1244 n. 7 (Cal. 1990). The "loss-in-progress' doctrine provides "that an insurer cannot insure against a loss that is known or apparent to the insured. United Capital Ins. Co. v. Hoodco, Inc., 974 S.W.2d at 575.
Defendant relies primarily on Prudential-LMI Commercial Ins. Co. v. Superior Court in which the California Supreme Court held that, "Where there is a gradual, continuous, and progressive loss over several policy periods, the carrier on the risk at the time of manifestation is solely responsible for all loss, whether discovered or undiscovered." 798 P.2d at 1246. In the Prudential-LMI case, the Court found that "insurers whose policy terms commence after initial manifestation of the loss are not responsible for any potential claim relating to the previously discovered and manifested loss." Id. at 1246-47. Manifestation is defined as "that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that his notification duty under the policy has been triggered." Id.
The focus is on whether the insured was or should have been aware of "appreciable damage." Id. at 1238. It is irrelevant whether the insured appreciated the specific defect or reason behind the damage.Fireman's Fund Ins. Co. v. Aetna Cas. Sur. Co., 273 Cal.Rptr. 431, 435 (Cal.Ct.App. 1990).
Defendant argues that since the water intrusion problem at plaintiffs' Greenville hotel had manifested by at least 1994, three years prior to the inception of plaintiffs' first insurance policy with defendant, defendant is entitled to summary judgment on plaintiffs' Greenville hotel claims. Plaintiffs have admitted that water intrusion-related damage had begun occurring at the Greenville hotel by at least 1994, three years before the inception of the first Factory Mutual Policy. While plaintiffs may not have been able to correctly identify and solve the source, or cause, of the water intrusion, the same appreciable damage was evident to plaintiffs from 1994 through the inception of plaintiffs' first insurance policy with defendant Factory Mutual.
The rationale behind the "loss in progress" doctrine is that,
To hold the insurer liable for a progressive and continuing property loss that was discovered before the carrier insured the risk "would be to impose upon the insurer a guaranty of the good quality of the [property insured] . . ., which liability under the policy the insurer has not assumed."Prudential-LMI, 798 F.2d at 1244 (quoting Greene v. Cheetham 293 F.2d 933, 937 (2th Cir. 1961)).
In addition, defendant contends that it is entitled to summary judgment because property insurance only insures against fortuities. Defendant suggests that plaintiffs have admitted that their loss was not a fortuitous loss with respect to defendant's insurance policies because the situation at the Greenville hotel was a loss-in-progress that was apparent to plaintiffs prior to the inception date of defendant's insurance policies.
"A fortuitous event is one which to the knowledge of the parties, is dependent upon chance." Couch on Insurance Law, § 148:50 (3d ed. 1996). Defendant Factory Mutual states that plaintiffs have admitted that their alleged loss was not a fortuitous loss as to the Factory Mutual policies because plaintiffs admit that they knew about the loss-in-progress at the Greenville hotel at the time they purchased the first Factory Mutual policy. When the damage manifests itself and continues into a successive carrier's coverage period, the continuous damage is no longer unusual, unexpected, or unforseen and, therefore, it is not covered. Cleveland Bd. of Ed. v. R.J. Stickle Int'l, 602 N.E.2d 353, 356 (Ohio Ct.App. 1991).
The fortuity doctrine is
rooted in preventing fraud on the part of an insured, who would obtain an insurance policy knowing he has suffered or is in imminent danger of suffering a loss, and who would fail to disclose these facts to the insurer.United Capital Ins. Co. v. Hoodco, Inc., 974 S.W.2d at 575. See also, Presley v. Nat'l Flood Insurers Ass'n, 399 F. Supp. 1242, 1244 (E.D. Mo. 1975). As defendant Factory Mutual suggests, plaintiffs knew they were having water intrusion at the hotel by at least 1994 and were still trying unsuccessfully to stop it during the fall of 1997.
In response, plaintiffs claim that defendant's motion for summary judgment should be denied because plaintiffs had no knowledge of the loss for which they are claiming coverage before the inception of their insurance policy with defendant in 1997. Plaintiffs suggest that while the Greenville hotel had experienced instances of water intrusion prior to October 1, 1997, plaintiffs had "diligently addressed each such instance by hiring consultants to investigate the damage and the cause, and to recommend appropriate repairs" (emphasis added). Plaintiffs state that they undertook all repairs recommended by their consultants. According to plaintiffs, "each time repairs were made, they were effective and were believed to be effective."
Plaintiffs characterize the water intrusion problems in the spring of 1998 as a new "instance" of water intrusion. Plaintiffs state that this is the damage for which they are seeking coverage under their policy of insurance with defendant. Plaintiffs have provided the opinion of their expert witness, Mr. Kenney, that plaintiffs could not have known of the damage to the interior walls of the Greenville hotel prior to October of 1998, one year after the inception of plaintiffs' insurance policy with defendant. Plaintiffs state that they did not know that the Greenville hotel was sustaining any ongoing damage to its walls at the inception of the insurance policy with defendant.
Plaintiffs advocate the application of the continuous-injury-trigger rule. Under this rule, any policy of insurance in effect during the occurrence of a progressive loss is triggered and the insured may recover under it. United Technologies Corp. v. American Home Assurance Co., 989 F. Supp. 128, 152-53 (D. Conn. 1997). As defendant points out in response, however, there are no first-party property insurance cases adopting the continuous-injury-trigger rule used in certain third-party liability insurance cases. In first-party property insurance claims, the manifestation trigger rule applies. Prudential-LMI, 798 P.2d at 1246. Therefore, this Court will apply the manifestation trigger rule.
As noted above, plaintiffs contend that the loss for which they are seeking coverage did not manifest itself until September of 1998. Plaintiffs state that they had no reason to suspect that the Greenville hotel was sustaining damage in the wall cavities until Mr. Kenney removed a window in the fall of 1998. Defendant takes issue with plaintiffs' position, claiming that plaintiffs knew of "appreciable water intrusion" problems at the Greenville hotel prior to the inception of the insurance policies even if plaintiffs did not know the cause of the water intrusion problems.
As defendant Factory Mutual points out, plaintiffs spent hundreds of thousands of dollars between 1990 and October of 1997 investigating and making repairs relating to water intrusion at the Greenville hotel. Defendant argues that plaintiffs knew of the water intrusion and resulting damages even if plaintiffs were unable to identify and cure the source of the water intrusion.
It is undisputed that plaintiffs knew that the Greenville property was experiencing water intrusion during the summer of 1997, immediately prior to the inception of the first Factory Mutual policy. Plaintiffs knew that damages were occurring and were a certainty prior to the inception of the first Factory Mutual policy.
Accordingly, the Court finds that defendant Factory Mutual is entitled to summary judgment on its claims relating to the Greenville hotel.
2. Alleged Untimely Notice and Untimely Suit
Even if summary judgment were not being granted for the reasons stated above, defendant Factory Mutual has raised an additional meritorious basis for granting summary judgment in its favor. Defendant Factory Mutual also argues that it is entitled to summary judgment because plaintiffs' Notice of Loss was untimely. Under the policies issued to plaintiffs by defendant, plaintiffs were required to provide defendant with "immediate" written notice of loss. Immediate notice has been defined as "within a reasonable time under the circumstances." Hayes v. Equitable Life Assur. Soc. of the U.S., 150 S.W.2d 1113 (Mo.Ct.App. 1941). In the case of a loss-in-progress, it has been held that the notice requirement is triggered upon manifestation of the loss.Prudential-LMI, 798 P.2d at 1247. In Prudential-LMI, the Court stated that "the more substantial or unusual the nature of the damage discovered by the insured (e.g. the greater the deviation from what a reasonable person would consider normal wear and tear), the greater the insured's duty to notify his insurer of the loss promptly and diligently." 798 P.2d at 1238. Defendant states that despite plaintiffs' knowledge of the loss-in-progress and resulting appreciable damage since 1994-1995, plaintiffs delayed their first notice to defendant until December 10, 1999.
Plaintiffs claim that they gave notice within a reasonable time under the circumstances. Plaintiffs state that the damage to the walls was discovered in October of 1998. According to plaintiffs, between October of 1998 and December of 1999 the damage was investigated further, bids were solicited, and contractors were hired to begin the repairs. Plaintiffs suggest that it was reasonable for them to provide notice of loss after they fully understood the nature and scope of the damage and cost of repairs. In addition, plaintiffs argue that defendant has not alleged that it was prejudiced by any delay in giving notice. See Weaver v. State Farm Mut. Auto. Inc. Co., 936 S.W.2d 818, 819-21 (Mo. banc 1997) (citations omitted) (notice given one year after loss sustained not prejudicial).
Defendant Factory Mutual suggests that the evidence before the Court establishes prejudice. By the time plaintiffs notified defendant Factory Mutual under the terms of the policy, plaintiffs were in the midst of making $1,172,215 in repairs. Defendant claims that the loss would have been substantially less at the time plaintiffs became aware of the alleged damages if prompt remedial action had been taken.
This Court finds that it was unreasonable for plaintiffs to wait one year and two months after allegedly becoming aware of the water intrusion-related damages for which it is seeking coverage to notify defendant Factory Mutual.
3. Motion of Defendant St. Paul Fire and Marine Insurance Company
Defendant St. Paul Fire and Marine Insurance Company has filed a motion joining defendant Factory Mutual's motion for summary judgment as to the Greenville, South Carolina hotel claims. For the reasons stated above, the motion for summary judgment is granted.
B. Kansas City, Missouri Hotel
1. Manifestation of Plaintiffs' Losses
As with the Greenville hotel, defendant Factory Mutual argues that it is entitled to summary judgment because plaintiffs' alleged losses started years before plaintiffs purchased their Factory Mutual insurance policies. Defendant points out that several of plaintiffs' employees who worked in the Kansas City hotel have testified in their depositions that they were aware of water intrusion into the walls of the hotel prior to the inception date of the first Factory Mutual insurance policy. Mr. Kueffler, Mr. Drollinger, Bob Martorana (a former General Manager), Mr. Beran, and Mr. Funk were all aware of water intrusion problems in plaintiffs' Kansas City hotel in the early 1990's, within the first few years that the hotel was open. The water intrusion into the hotel continually presented the same appreciable evidence inside the hotel: moisture and water along the external wall, wet carpet, peeling wallpaper, deteriorating wallboard, and mold and mildew spots.
A property insurer cannot insure against loss that is known or apparent to the insured before the policy takes effect. Prudential-LMI Commercial Ins. Co. v. Superior Court 798 P.2d at 1244 n. 7. See also, United Capital Ins. Co. v. Hoodco, Inc., 974 S.W.2d at 575 (quoting Inland Waters Pollution Control v. National Union 997 F.2d 172, 177 (6th Cir. 1993)). "Insurers whose policy terms commence after initial manifestation of the loss are not responsible for any potential claim relating to the previously discovered and manifested loss." Prudential-LMI, 798 P.2d at 1246-47. It is irrelevant whether the insured appreciated the specific defect or reason behind the damage. Fireman's Fund Ins. Co. v. Aetna Cas. Sur. Co., 273 Cal.Rptr. at 435.
Plaintiffs' employees have testified in their depositions that the water intrusion damage at the Kansas City, Missouri hotel was evident by at least 1990, seven years prior to the inception of plaintiffs' first Factory Mutual insurance policy. Plaintiffs had actual knowledge of the water intrusion damage prior to the purchase of the first insurance policy from defendant. In fact, plaintiffs had retained contractors and consultants in an effort to address the water intrusion damages. Plaintiffs' employees have testified, however, that the repairs were unsuccessful and that water intrusion continued to be a problem at the Kansas City hotel from the early 1990's through 1997 when plaintiffs purchased their first policy from defendant Factory Mutual.
Plaintiffs attempt to argue that there were "instances" of water intrusion at the Kansas City hotel and that "in each instance" they "undertook all repairs recommended by [their] consultants." This argument is contradicted by the undisputed facts related to the Kansas City hotel. Hotel employees have testified that water intrusion was an ongoing problem at the Kansas City hotel from shortly after the time it opened through the time period plaintiffs purchased insurance policies from defendant. In addition, plaintiffs did not undertake all of the repairs recommended by their consultant, Russell J. Kenney, in 1994. Mr. Kinney recommended $1,000,000 in repairs plus window testing. Plaintiffs made only $400,000 worth of those repairs and did not have the window testing done.
Therefore, for the same reasons stated above in relation to the Greenville hotel, the Court finds that defendant Factory Mutual is entitled to summary judgment on all of plaintiffs' claims relating to the Kansas City, Missouri hotel.
2. Motion of Defendant St. Paul Fire and Marine Insurance Company
Defendant St. Paul Fire and Marine Insurance Company also moves for summary judgment on plaintiffs' Kansas City, Missouri hotel claims, adopting the arguments advanced by defendant Factory Mutual. St. Paul Fire and Marine Insurance Company and Factory Mutual jointly subscribed on a quota-share basis to the first insurance contract at issue in this case and share the relevant terms, conditions, and exclusions as they relate to this case. For the reasons stated above, this motion is granted.
C. Greensboro, North Carolina Hotel
1. Manifestation of Plaintiffs' Losses
Again, defendants argue that they are entitled to summary judgment on all of plaintiffs' claims relating to the Greensboro, North Carolina hotel because plaintiffs' alleged losses were manifested prior to the inception of either of the insurance policies plaintiffs purchased from defendant. It is undisputed that plaintiffs were aware of water intrusion problems at the hotel within weeks of its opening in 1989. Mr. Mead, plaintiffs' Regional Vice President, had planned to have the outside of the building coated and repaired by Lear Associates in 1996 to address the water intrusion problem, but those plans were cancelled when the same type of repair proved ineffective at the Greenville hotel.
Plaintiffs do not dispute that Robert Cauley, plaintiffs' Chief Engineer for the hotel, has testified that he became aware of the water intrusion problem as soon as he began working at the hotel in August of 1997, two months prior to the inception of plaintiffs' first insurance policy with defendant Factory Mutual.
As with the two hotels discussed above, plaintiffs have admitted actual knowledge of an ongoing water intrusion problem at the Greensboro hotel for years prior to and continuing through the time plaintiffs purchased an insurance policy from defendant. In addition, plaintiffs have admitted that they planned to make repairs a few years prior to the time the first Factory Mutual policy began, but held off after similar repairs proved unsuccessful at another hotel.
In sum, at the time of the inception of plaintiffs' first policy with defendant Factory Mutual, plaintiffs were aware of the water intrusion problem and had been trying to solve the problem for many years. Accordingly, for the reasons discussed above, the Court finds that defendant is entitled to summary judgment on plaintiffs' claims relating to the Greensboro hotel.
IV. Conclusion
For the reasons stated above, it is herebyORDERED that defendant Factory Mutual Insurance Company's Motion for Summary Judgment on Plaintiffs' Greenville, South Carolina Hotel Claims (Doc. #106) is granted and summary judgment is entered in favor of defendant Factory Mutual Insurance Company on all of plaintiffs' claims relating to the Greenville, South Carolina hotel. It is further
ORDERED that defendant Factory Mutual Insurance Company's Motion for Summary Judgment on Plaintiffs' Kansas City, Missouri Hotel Claims (Doc. #115) is granted and summary judgment is entered in favor of defendant Factory Mutual Insurance Company on all of plaintiffs' claims relating to the Kansas City, Missouri hotel. It is further
ORDERED that defendant St. Paul Fire and Marine Insurance Company's Motion for Summary Judgment on Plaintiffs Greenville, South Carolina Hotel Claims (Doc. #117) is granted and summary judgment is entered in favor of defendant St. Paul Fire and Marine Insurance Company on all of plaintiffs' claims relating to the Greenville, South Carolina hotel. It is further
ORDERED that defendant St. Paul Fire and Marine Insurance Company's Motion for Summary Judgment on Plaintiffs' Kansas City, Missouri Hotel Claims (Doc. #132) is granted and summary judgment is entered in favor of defendant St. Paul Fire and Marine Insurance Company on all of plaintiffs' claims relating to the Kansas City, Missouri hotel. It is further
ORDERED that defendant Factory Mutual Insurance Company's Motion for Summary Judgment on Plaintiffs' Greensboro, North Carolina Hotel Claims (Doc. #138) is granted and summary judgment is entered in favor of defendant Factory Mutual on all of plaintiffs' claims relating to the Greensboro, North Carolina hotel.