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Newport News Holdings, LLC v. Great American Insurance Co.

United States District Court, E.D. Virginia, Newport News Division

July 2, 2018

NEWPORT NEWS HOLDINGS, LLC, Plaintiff,
v.
GREAT AMERICAN INSURANCE COMPANY, d/b/a Great American Insurance Group, Defendant.

          OPINION & ORDER

          Henry Coke Morgan, Jr., Senior United States District Judge.

         This matter comes before the Court on Plaintiff Newport News Holdings, LLC's ("Newport News Holdings" or "Plaintiffs") Motion for Partial Summary Judgment ("Plaintiffs Motion"), Doc. 50, and Defendant, Great American Insurance Company's ("GAIC", or "Defendant") Motion for Summary Judgment ("Defendant's Motion"), Doc. 39 (collectively "Motions for Summary Judgment). For the reasons stated herein, the Court DENIES both Motions for Summary Judgment.

         I. BACKGROUND & PROCEDURAL HISTORY

         This case involves Plaintiff, the owner of a hotel in Newport News, suing Defendant, its insurance company, for denying coverage of damage that occurred as a result of vandalism to its hotel. See Doc. 1, Ex. 1 ("Compl.").

         Plaintiff filed its complaint in the Circuit Court for the City of Newport News on September 26, 2017. See Compl. Defendant timely removed the case to this Court on October 31, 2017. Doc. 1. On November 27, 2017, the Parties joints moved to bifurcate the bad faith claims from the remainder of the insurance claims. Doc. 13. The Court GRANTED that bifurcation on November 28, 2017. Doc. 14.

         On November 30, Plaintiff filed a Motion to Quash Defendant's subpoena duces tecum in regard to Plaintiffs expert witness. Doc. 15. On January 31, 2018, this Court entered an Order GRANTING Plaintiffs Motion to Quash. Doc. 22.

         On March 9, 2018, Plaintiff filed a Motion to Compel Discovery Responses from Defendant. Doc. 24. On April 12, 2018, Defendant filed a Cross-Motion to Compel Discovery from Plaintiff. Doc. 30. On April 26, 2018, the Court heard oral argument on Plaintiff and Defendant's Motions to Compel. Doc. 36. On May 3, 2018, this Court entered an Order GRANTING Plaintiffs Motion to Compel IN PART and GRANTING Defendant's Motion to Compel IN PART. Doc. 38. Defendant and Plaintiff filed their respective Motions for Summary Judgement and Partial Summary Judgment on May 14, 2018. Docs. 39, 50. On May 14, 2018, this Court also entered an Order for Expedited Briefing on Plaintiff and Defendant's Motions for Summary Judgment and Partial Summary Judgment. Doc. 49. Plaintiff and Defendant filed responses in Opposition to their respective Motions for Summary Judgment and Partial Summary Judgment on May 24, 2018. Docs. 59, 60. Plaintiff and Defendant replied on May 29, 2018. Docs. 61, 62.

         II. LEGAL STANDARDS

         A. Summary Judgment

         Summary judgment under Rule 56 is appropriate only when the court, viewing the record as a whole and in the light most favorable to the nonmoving party, determines that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; see, e.g.. Celotex Corp. v. Catrett 477 U.S. 317, 322-24 (1986); Anderson v. Liberty Lobby. Inc.. 477 U.S. 242, 248-50 (1986); Terry's Floor Fashions v. Burlington Indus.. 763 F.2d 604, 610 (4th Cir. 1985). Once a party has properly filed evidence supporting the motion for summary judgment, the nonmoving party may not rest upon mere allegations in the pleadings but must instead set forth specific facts illustrating genuine issues for trial. Celotex. 477 U.S. at 322-24. Such facts must be presented in the form of exhibits and sworn affidavits. Failure to rebut the motion with such evidence will result in summary judgment when appropriate. "[T]he plain language of Rule 56(c) mandates the entry of summary judgment. .. against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322.

         A mere scintilla of evidence is insufficient to withstand a motion for summary judgment. Rather, the evidence must be such that the factfinder reasonably could find for the nonmoving party. See Anderson. 477 U.S. at 252. Although the court must draw all justifiable inferences in favor of the nonmoving party, in order to successfully defeat a motion for summary judgment, a nonmoving party cannot rely on "mere belief or conjecture, or the allegations and denials contained in his pleadings." Dovle v. Sentry Ins.. 877 F.Supp. 1002, 1005 (E.D. Va. 1995) (citing Celotex. 477 U.S. at 324).

         B. Applicable Law

         A federal court sitting in diversity jurisdiction must apply the substantive law of the forum state, including that state's choice of law rule. Erie R. Co. v. Tompkins. 304 U.S. 64, 78 (1938). "Under Virginia law, a contract is made when the last act to complete it is performed, and in the context of an insurance policy, the last act is the delivery of the policy to the insured." Res. Bankshares Corp. v. St. Paul Mercury Ins. Co.. 407 F.3d 631, 635-36 (4th Cir. 2005) (citing Seabulk Offshore. Ltd. v. Am. Home Assurance Co.. 377 F.3d 408, 419 (4th Cir. 2004); Buchanan v. Doe, 246 Va. 67, 431 S.E.2d 289, 291 (1993) ("generally, the law of the place where an insurance contract is written and delivered controls issues as to its coverage.")). It is undisputed that the contract for insurance was delivered and executed in Virginia.

         Under Virginia law, when the terms in a contract are clear and unambiguous, then the contract is construed according to its plain meaning. TravCo Ins. Co. v. Ward. 284 Va. 547, 552, 736 S.E.2d 321, 325 (2012). "Words that the parties used are normally given their usual, ordinary, and popular meaning. No word or clause in the contract will be treated as meaningless if a reasonable meaning can be given to it, and there is a presumption that the parties have not used words needlessly." Id., (citing City of Chesapeake v. States Self-Insurers Risk Retention Group. Inc.. 271 Va. 574, 579, 628 S.E.2d 539, 542 (2006) (internal quotations omitted)).

         The question of whether a writing is ambiguous is a question of law for the Court. Pennsylvania Nat. Mut. Cas. Ins. Co. v. Block Roofing Corp.. 754 F.Supp.2d 819, 823-24 (E.D. Va. 2010) (citing Riverton Investment Corp. v. United States. 170 F.Supp.2d 608, 613 (W.D.Va.2001) (citing Virginia law). "A contract is not ambiguous merely because the parties disagree as to the meaning of the terms used." TM Delmarva Power. L.L.C. v. NCP of Virginia. L.L.C.. 263 Va. 116, 557 S.E.2d 199, 200 (2002). The Court may not strain to find ambiguities in a policy provision. Pennsylvania Nat. Mut. Cas. Ins. Co.. 754 F.Supp.2d at 823. A policy provision is ambiguous only when, in context, it is capable of more than one reasonable meaning. Id. Further, Virginia law construes ambiguities in insurance contracts against the insurer:

Insurance policies are contracts whose language is ordinarily selected by insurers rather than by policyholders. The courts, accordingly, have been consistent in construing the language of such policies, where there is doubt as to their meaning, in favor of that interpretation which grants coverage, rather than that which withholds it. Where two constructions are equally possible, that most favorable to the insured will be adopted. Language in a policy purporting to exclude certain events from coverage will be construed most strongly against the insurer.

Gov't Employees Ins. Co. v. Moore. 266 Va. 155, 165, 580 S.E.2d 823, 828 (2003).

         III. ANALYSIS

         A. Undisputed Facts

         On November 13, 2015, Plaintiff purchased a property located at 6128 Jefferson Ave., Newport News, VA 23605 ("The Hotel"), and obtained a one-year commercial property policy from Defendant to insure the Hotel against all casualty risks ("The Policy"). Doc. 51 at 5, 6; See Doc. 40 at 6. Plaintiff paid the full premium for the insurance. Doc. 51 at 6. In the process of obtaining the insurance, Plaintiff, through insurance agents, told Defendant that the Hotel was not currently operational, but that Plaintiff expected to open the Hotel on January 1, 2016, after Plaintiff was able to make "any minor/cosmetic repairs necessary." Doc. 52-10 at 2; Doc. 41-4 at 3.

         In early December, Plaintiff had the property inspected by the Health Department, and had a contractor visit the property to evaluate how long it would take to complete repair work on the property. Doc. 51 at 9-10. Between November 13, 2015 and January 26, 2016, police visited the Hotel on several occasions to investigate incidents of trespass and vandalism. Doc. 51 at 11-12. During part of this time, two of the Hotel's owners, Bharat Patel ("B. Patel"), and Sanjay Patel ("S. Patel") (collectively "the Hotel Owners"), were out of the country from mid-December until late January. Doc. 51 at 10. Therefore, they had an individual named Nick Sheth ("Sheth"), visit the property while they were gone.[1] Id. At the end of December, Sheth became aware that there were vandals on the property. Doc. 51 at 11. The police contacted Sheth on December 30, 2015 regarding a possible theft at the hotel. Id. On January 14, 2016, the police came to the building again, this time in regard to a broken pipe that had caused water to release in the kitchen. Id. at 12. At that time, Sheth cut off the water supply to the kitchen. Doc. 51 at 12. B. Patel and S. Patel returned from their trip on or about January 22 and January 25, 2016.

         On the morning of January 26, 2016, two persons were arrested leaving the hotel, and the following morning, Sheth discovered that the water supply line of the toilet in room 510 had been cut, causing water to leak down to the first floor (the "January 26 Loss"). Id; See also Doc. 40 at 2. Plaintiff contacted GAIC on January 27, 2016, and Defendant hired an adjuster to inspect the property. The adjuster inspected the property on January 29, 2016 and February 3, 2016. Doc. 40 at 2. On February 11, 2016, the adjuster provided Plaintiff with a timeline of events based on their conversations regarding the January 26 Loss. Id. at 7. Defendant also hired various individuals to provide an estimate for the scope of damage related to the cut toilet supply line and the any repairs related to the cut toilet supply line. Doc. 40 at 7. Their report determined that the losses were valued at $657, 187.88. Doc. 51 at 15. On March 7, 2017, Plaintiff submitted its Sworn Proof of Loss, in which it stated that the full cost to repair or replace the Building damage caused by the January 26, 2016 vandalism is $1, 582, 832.12 and the cost to repair or replace the Business Personal Property is $405, 832.66. Doc. 40, Ex. 14. Their Sworn Proof of Loss was based on an estimate they obtained from Atlantic Estimating, LLC and Rollins Inventory. Doc. 40 at 9; Doc. 59 at 13. On May 25, 2017, Defendant denied Plaintiffs insurance policy citing the following provisions:

         G. Vacancy

         1. Description of Terms

a. As used in the Vacancy Condition, the term building and the term vacant have the following meaning set forth in (1) and (2) below....
(2) When this policy is issued to the owner or general lessee of a building, building means the entire building. Such building is vacant unless at least 31% of its total square footage is:
(a) rented to a lessee or sub-lessee and used by the lessee or sub-lessee to conduct its ...

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