Opinion
Case No. 1:00-CV-255
April 15, 2003
OPINION
This matter is before the Court on Plaintiff's Motion for Summary Judgment. The Court has reviewed the pleadings filed by the parties and does not believe oral argument is necessary. L. Civ. R. 7.2(d). The Court will deny Plaintiff's Motion.
I. Background
Plaintiff is an insurance company that provided Defendants with property insurance. Coverage was provided for computer business equipment used in operating a telemarketing business out of call centers throughout the country. On or about November 12, 1998, Defendants ceased operations at all facilities due to inability to cover expenses. At that time, the managers were instructed to release the employees, shut down the equipment, and lock the doors behind them.
Defendants are three companies all of which were named insureds on the policy issued by Plaintiff. Campaign Tel provided telemarketing services to political campaigns and candidates. National Market Share handled similar non-political business. Campaign Consulting Corp. handled building leases.
Defendants' call centers were located in Urbandale, Iowa; Tampa, Florida; Allentown, Pennsylvania; Grand Rapids, Michigan; Springfield, Illinois; Houston, Texas; and Sacramento, California. The call centers and their employees were supported by an office in Englewood, New Jersey and a data facility in Norcross (Atlanta), Georgia.
Defendants' line of credit was canceled. This caused Defendants to bounce payroll checks and checks to vendors.
In approximately February 1999, Defendants submitted six claims to Plaintiff to recover for losses to equipment due to theft and/or vandalism. The claims totaled $2,182,068.00. Plaintiff denied the claims on the basis that Defendants could not quantify any covered loss that occurred within the policy period. At the same time, Plaintiff filed the instant action for declaratory relief, seeking a declaration that there is no insurance coverage for the alleged losses and that Plaintiff properly denied the insurance claims.
Defendants submitted claims for the following facilities: Tampa, Springfield, Urbandale, Grand Rapids, Allentown, and Atlanta.
II. Standard of Review and Applicable Federal Rules
Review of a motion for summary judgment requires the Court to determine if there is no genuine issue as to any material fact such that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). It is the function of the Court to decide "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The question is "whether a fair-minded jury could return a verdict for the [non-moving party] on the evidence presented." Id. at 252. The facts are to be considered in a light most favorable to the nonmoving party, and ". . . all justifiable inferences are to be drawn in his favor." Schaffer v. A.O. Smith Harvestore Prod., Inc., 74 F.3d 722, 727 (6th Cir. 1996) (quoting Anderson, 477 U.S. at 255) (other citations omitted). The non-moving party may not rest on its pleadings but must present "specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986) (quoting Fed.R.Civ.P. 56(e)).
The Court applies Michigan substantive law in this matter because jurisdiction is founded on diversity of the parties. Equitable Life Assurance Soc'y of the United States v. Poe, 143 F.3d 1013, 1016 (6th Cir. 1998) (citing Erie R.R. v. Tompkins, 304 U.S. 64 (1938)).
III. Analysis
Plaintiff asserts that Defendants must prove the following three things in order to state a valid insurance claim: 1) a covered peril caused it to suffer a loss; 2) the loss is quantifiable; 3) the loss occurred during the period the policy was in effect. According to Plaintiff, Defendants cannot show their loss was due to "direct physical loss," as required by the policy nor can they accurately state the dollar amount of their covered loss. Finally, Plaintiff argues Defendants cannot establish that their insurance policy with Plaintiff was in effect at the time of their loss. Upon review of the record, the Court finds there is a question of fact as to all of these issues making summary judgment in this matter inappropriate.
In an action to recover on an insurance claim, the insured carries the burden of demonstrating the loss is covered by the provisions of the policy. Clark v. Hacker, 76 N.W.2d 806, 809 (1956). The insurer bears the burden of proving an exclusion to coverage applies. Roddis Lumber Veneer Co. v. Am. Alliance Ins. Co. of New York, 47 N.W.2d 23, 28 (1951). The Sixth Circuit Court of Appeals stated it succinctly: "A claimant under an insurance policy must prove the existence and validity of the policy and the details of the claim. The burden of establishing that a loss results from a cause falling within a policy exclusion is on the insurer." First Am. Nat'l Bank v. Fidelity Deposit Co. of Maryland, 5 F.3d 982, 984-85 (6th Cir. 1993) (internal citations omitted).
Defendants' insurance policy provided for payment for "loss to Covered Property [computerized business equipment] from any of the Covered Causes of Loss." (Plaintiff's Motion for Summary Judgment, attach. B). The policy defined "Covered Causes of Loss" as "Risks of Direct Physical `Loss' except those causes of `loss' listed in the Exclusions." Id. The relevant exclusions stated "[I]f `loss' by any of the `specified causes of loss' results, we will pay for that resulting `loss' caused by the `specified causes of loss'. . . . We will not pay for `loss' caused by or resulting from any of the following: Suspension, lapse or cancellation of any lease, license, contract, or order." Id. `Loss' is defined in the policy as "accidental loss or damage." Id. `Specified causes of loss' included vandalism. Id. Theft is not mentioned anywhere in the policy and no other exclusions are relevant to this matter.
Addressing Plaintiff's first contention, Defendants have failed to demonstrate the claimed loss was a covered loss, the Court finds there is a question of fact on this matter. Defendants argue that they received reports of vandalism and theft occurring at different facilities. (Examination Under Oath of Alan Cooper, October 1, 1999, 66; Examination Under Oath of Melody Medina, October 1, 1999, 81; Statement Under Oath of Robert Stoloff, October 20, 1999, 33-34; Examination Under Oath of Ron Benson, November 18, 1999, 63, 67, 71). Plaintiff suggests that in fact, most of the equipment was removed legally by landlords, sheriffs, lessors, and Defendants' customers. (Plaintiff's Brief in Support of Motion for Summary Judgment, 9-10; Examination Under Oath of Steven Goldberg, August 4, 1999, 123). Plaintiff does not dispute its liability for loss due to theft or vandalism; rather, it argues, since Defendants cannot prove conclusively the full amount of their claimed loss is due to theft or vandalism, they cannot recover at all. This is an incorrect assessment of the law.
There are multiple decisions finding insurance companies liable for loss due to theft based on circumstantial evidence. See e.g. Coastal Plains Feeders, Inc. v. Hartford Fire Ins. Co., 545 F.2d 448, 451-53 (5th Cir. 1977) (finding circumstantial evidence indicating cattle were stolen and did not mysteriously disappear sufficient to recover under insurance policy); Emery v. Ocean Acc. Guarantee Co., 176 N.W. 566, 567-68 (1920). In Emery v. Ocean Acc. Guarantee Co. the court found sufficient evidence to substantiate the jury finding a pin was stolen based on insured's testimony and the fact that employees had access to the house from which the jewelry was stolen during the period in which the pin disappeared. Id. The court held that credibility was a question for the jury. Id. (internal citations omitted). This Court finds this case to be similar. Whether Defendants accounting of their loss is inaccurate, as Plaintiff claims, is a matter for the trier of fact to determine. All this Court can find is whether sufficient evidence has been presented to raise a material question of fact as to the cause of loss. It is for the trier of fact to determine whether Defendants have proven their loss was due to theft or vandalism or some other covered loss.
Plaintiff next argues Defendants must quantify their loss. According to Plaintiff since Defendants admit the amount of their claimed loss is based on a guess, they have not met their burden of proof. The response to this argument is similar to that for the previous argument. Defendants have presented sufficient facts to substantiate their grounds for the claim amounts they submitted. Defendant substantiated their claim amounts with invoices for equipment they claim was at the relevant location. Defendants could not provide any more proof of the amount of their loss because disgruntled landlords prohibited their entry into the facilities to conduct an inventory of remaining equipment. However, Plaintiff conducted an inventory at four sites, for three of which Defendants submitted claims. Defendants may rely on Plaintiff's inventory as a basis for the amount of loss claimed. Any question as to the veracity of Defendants' claims is for the trier of fact to resolve. "Merely because the damages may be uncertain in amount or cannot be shown with certainty in the exact amount does not mean that they cannot be recovered. It is sufficient if the evidence shows the extent of the damage as a matter of just and reasonable inference, although the result be only approximate." Welder's Supply Inc. v. Am. Employers' Ins. Co., 358 F.2d 593, 602 (6th Cir. 1966) (quoting Lee Shops, Inc. v. Schatten-Cypress Co., 350 F.2d 12, 18 (6th Cir. 1965) and Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562 (1931)).
An inventory was also done at the Atlanta facility by a former employee of Defendants, however, it proved to be not useful as it was just a list of serial numbers.
Defendants more difficult burden is proving the fact of damage, not the amount of damage. Broan Mfg. Co. v. Assoc. Distrib. Inc., 923 F.2d 1232, 1235, 1239 (6th Cir. 1991); Meier v. Holt, 80 N.W.2d 207, 212 (1956) (concurring opinion). However, as stated above, Defendants have presented sufficient evidence to raise a question as to the fact of loss in this case. It is for the trier of fact to determine whether they have met their burden of proof on both of these issues.
Plaintiff's third contention is that Defendants have not proven the policy was in effect at the time of their loss. Defendants claim their loss occurred between November 10 and November 15, 1998, depending on the facility at issue. Both parties agree that the policy was in effect at least until November 30, 1998. There is a question as to whether the policy was in effect as late as January 1999. Plaintiff argues that Defendants have no idea when the loss occurred because they have not been back to any of the facilities, with the exception of Atlanta, since they closed their doors on approximately November 12, 1998. Plaintiff states that even if Defendants rely on the inventories done by Plaintiff, those did not occur until February 1999 and cannot be relied on to show loss while the policy was in effect.
The policy initially was written for the period June 1, 1998 through June 1, 1999.
The record contains evidence that shortly before and soon after closing their doors, Defendants received information regarding thefts and vandalism at the facilities. Plaintiff has not demonstrated that no theft and no vandalism occurred on the days Defendants claim. "As the period for which the policies were written had not expired when the loss occurred, defendants [insurers] had the burden to show that the insurance was not in force at that time." Aetna Inc. Co. v. Kennedy, 301 U.S. 389, 395 (1937). While it is not entirely clear when the loss occurred, neither side has presented sufficient evidence to demonstrate the absence of a question regarding a material fact with respect to this issue.
In general, the Court finds Plaintiff's claims that Defendants' evidence is confusing, inconsistent and incomplete is not sufficient to show that there is no evidence indicating the existence of questions of material fact. Defendants' evidence may not be sufficient to meet their burden of proof, but that is for the trier of fact to determine. Defendants' evidence does demonstrate the existence of questions regarding material facts in this case. There are questions as to whether Defendants' loss was due to theft and/or vandalism, and if it was, whether their entire loss was due to those causes. Also, there is a question as to when the loss occurred. Because nothing is entirely clear from the current record, this is the exact sort of case where summary judgment is improper.
IV. Conclusion
Therefore, the Court will deny Plaintiff's Motion. An Order consistent with this Opinion will be entered.
ORDER
In accordance with an Opinion filed this day,
IT IS HEREBY ORDERED that Plaintiff's Motion for Summary Judgment (Dkt. No. 32) is DENIED.