Opinion
CIVIL ACTION NO. 2:18-CV-00237
2023-03-08
KABIR MARINA GRAND HOTEL, LTD., Plaintiff, v. LANDMARK AMERICAN INSURANCE COMPANY, Defendant.
Richard D. Daly, Maria Rizkalla Gerguis, Daly & Black, P.C., Houston, TX, for Plaintiff. Jay W. Brown, Bruce Ramsey Wilkin, Cameron Marshall Dernick, Shackelford Bowen McKinley & Norton, LLP, Houston, TX, Justin Keith Ratley, Munsch Hardt Kopf & Harr, PC, Houston, TX, for Defendant.
Richard D. Daly, Maria Rizkalla Gerguis, Daly & Black, P.C., Houston, TX, for Plaintiff. Jay W. Brown, Bruce Ramsey Wilkin, Cameron Marshall Dernick, Shackelford Bowen McKinley & Norton, LLP, Houston, TX, Justin Keith Ratley, Munsch Hardt Kopf & Harr, PC, Houston, TX, for Defendant. ORDER ON SCOPE OF TRIAL NELVA GONZALES RAMOS, UNITED STATES DISTRICT JUDGE
Before the Court is the parties' Joint Statement on the Scope of Trial, together with each party's separate brief on those disputed issues. D.E. 88, 96, 102. Landmark asks the Court, pursuant to Federal Rule of Civil Procedure 16(c)(2)(A), (J), (L) to clarify the issues so that they may properly formulate the final pretrial order and prepare for trial. The Court approaches this task as a practical matter stemming from the Court's Order on Pending Motions (D.E. 74) and not as a substitute for summary judgment procedure. The disputed issues are set out below, along with the Court's clarification, if any. Issue 5: Whether Landmark's nonpayment of the appraisal award constitutes a breach of the policy (i.e., breach of contract).
Landmark contends that it could not breach the policy unless and until the amounts included in the appraisal award are allocated between covered and uncovered losses and it fails to pay the covered amount. D.E. 88, p. 3. Its brief did not elaborate on this issue. See D.E. 96. Kabir did not address this issue. See D.E. 102.
Nothing in the Court's prior order eliminates any question of fact regarding Landmark's duty to pay a covered claim under the insurance policy issued to Kabir. Therefore, the jury may be asked whether Landmark breached the policy by failing to pay all or any part of the appraisal award when that award was issued. The parties are welcome to request jury instructions regarding the relevant policy terms and duties of insurance carriers and will be free to present evidence and argument regarding how much, if any, of the appraisal award constitutes covered losses. Issue 7: Whether the policy's $1,000,000 Ordinance or Law sublimit applies to Kabir's insurance claim and, in turn, the appraisal award.
Landmark seeks enforcement of the $1,000,000 Ordinance or Law sublimit according to the face of the policy. D.E. 88, 96. Kabir does not address that specific issue. See D.E. 102. Nothing in the Court's prior rulings suggests that the Ordinance or Law sublimit does not apply. And nothing prevents Landmark from arguing that, as a matter of law, such damages are limited by the policy even after the jury's verdict.
However, it is a separate question whether the types of damages that fall within the scope of the Ordinance or Law sublimit have been exacerbated by any unreasonable delay caused by Landmark's alleged prevention of Kabir's repairs. Under the prevention doctrine, breach of contract damages in addition to policy limits may be awarded to redress an unreasonable delay in payment that results in different damages or higher repair costs. See generally, D.E. 74 (citing Dickler v. CIGNA Prop. & Cas. Co., 957 F.2d 1088, 1096 (3d Cir. 1992) (allowing damages for condemnation of the property caused by the insurance carrier's delay of payment of policy proceeds, preventing repairs)). So while the enforceability of the sublimit is a matter of law as a part of policy construction, it does not necessarily cabin the types of damages that might apply for breach of contract under the prevention doctrine.
Nothing before the Court prevents the parties from presenting evidence and argument consistent with the prevention doctrine, including whether Landmark unreasonably delayed repairs and whether any such delay caused additional damages, including the inflation of Ordinance or Law repairs.
Issue 9: Whether Kabir can obtain a judgment on an RCV basis.
Landmark acknowledges that the Court's order (D.E. 74) notes that, if the jury makes appropriate findings under the prevention doctrine, Kabir may recover RCV damages after making the necessary repairs. However, it argues that no such payment may be ordered until the repairs are made, meaning that the claim is not ripe for adjudication at this time. D.E. 88; 96, pp. 2-5. Kabir responds that any breach of the duty to first repair the property before qualifying for RCV damages is excused by Landmark's prior breach of denying its ACV claim. D.E. 102, pp. 2-7.
Neither party has, at this time, submitted authority that construes the issue of an excused breach in the prevention doctrine/RCV context. However, the Court previously distinguished between the enforceability of the deadline for repairs (a timing matter subject to principles of estoppel and waiver) and the requirement to perform the repairs before triggering payment of policy proceeds (a policy coverage term that may not be rewritten). Only the deadline appeared to be excused by the insurance company's delay. D.E. 74, p. 11. And that deadline may be extended, not necessarily eliminated. See D.E. 74, pp. 11-12 (citing Dickler as extending the deadline by one year from judgment).
The cases that Kabir cites address different issues. Edward & Edna Elbaor Family P'ship #4 v. State Farm Lloyds, No. 4:18-CV-00556-O, 2019 WL 4055178, at *5 (N.D. Tex. May 14, 2019), held that there was a question of fact whether the insured cooperated with the carrier in contracting to get the work done or if the carrier prevented the work by unreasonably rejecting bids. In Lundgren v. Empire Indemnity Insurance Co., No. CIV.A. G-10-351, 2013 WL 2385236, at *2 (S.D. Tex. May 30, 2013), the court held that the deadline for rebuilding was equitably tolled by the government's prohibition on rebuilding and where the plaintiff filed suit within the two-year deadline. In Axis Surplus Insurance Co. v. Caribbean Beach Club Ass'n, Inc., 164 So. 3d 684, 689 (Fla. Dist. Ct. App. 2014), the court held that the deadline for rebuilding could not be enforced while the carrier participated in, or benefited from, the delay, failed to inform the insured of its intent to rely on the deadline, and failed to show any prejudice associated with the delay. None of the cases addressed whether the requirement to get the work done remained a prerequisite to payment of policy proceeds after a delay in rebuilding.
Consequently, there is nothing to preclude a jury issue that reviews the RCV damages liquidated by the appraisal award for allocation to covered or noncovered perils. The question of whether or when any RCV damages are payable may be addressed by posttrial, prejudgment motions focusing on the appropriate remedy. The parties may then suggest ways to enforce any new deadline and review proof that the repair(s) allocated to a covered peril were actually made within the new deadline.
Potential remedies include, but are not limited to:
• Payment of the RCV amounts into the registry of the Court, with a process for documenting proof of repairs, and the return of any unused amounts at the end of the deadline to Landmark;The Court will not preclude the jury from allocating RCV damages in this trial even if they are not yet payable.
• Partial final judgments; and
• Bifurcation or severance of remaining issues.
Issue 10: Whether Kabir has the burden of proof on the allocation of its covered versus noncovered losses, if any.
Neither party addressed this issue beyond characterizing it as disputed. Previously, the parties agreed that the burden of proof on allocation rested on Kabir and the Court so held. D.E. 74, p. 3. No clarification is necessary.
Issue 12: Whether Kabir is entitled to recover damages pursuant to Chapter 541 of the Texas Insurance Code.
Landmark contends that it is not liable under Chapter 541 because it has not engaged in any conduct proscribed by the statute. D.E. 88. Neither party further addressed the issue. This is tantamount to a no-evidence motion for summary judgment and is not procedurally proper at this time. It is an issue for trial. Issue 13: Whether Kabir is entitled to recover prompt pay interest penalties pursuant to Chapter 542 of the Texas Insurance Code.
Neither party addressed this issue beyond listing it as disputed. The Court has been given no reason to clarify anything in this regard and it remains an issue for trial or posttrial motion.
ORDERED on March 8, 2023.