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Danville Commercial Industrial Storage, LLC v. Selective Insurance Co. of South Carolina

United States District Court, W.D. Virginia, Danville Division

December 18, 2018



          Hon. Jackson L. Kiser Senior United States District Judge.

         This matter is before the Court on Defendants' various Motions to Dismiss [ECF Nos. 20, 23.] Following full briefing by the parties, I heard oral arguments on the motions on November 27. [ECF No. 42.] I have reviewed the pleadings, the facts and arguments of the parties, and the relevant law, making the matter ripe for disposition. For the reasons stated herein, I will grant the motions to dismiss and grant Plaintiffs fourteen (14) days to file an amended complaint, if they so choose.


         Despite a 30-page Complaint and over 800 pages of exhibits, this case is a run-of-the-mill insurance dispute. Plaintiffs Danville Commercial Industrial Storage, LLC (“DCIS”), and North American Mold Technology, LLC (“NAMT”) occupied a building at 265 Corning Drive in Danville (“the property”). DCIS owned the building; NAMT leased space there. Defendant Selective Insurance Company of South Carolina (“Selective”) provided a commercial insurance policy on the property. Defendant James Pebbles (“Pebbles”) is an Executive General Adjuster and employee of Selective.

         From April 1, 2016, to April 1, 2017, DCIS and NAMT were insured by Selective under Policy Number S2218036. The property was listed in the insurance policy as a covered location. During the early morning hours of July 3, 2016, portions of the property were damaged during a severe weather event.[2] As a result, a portion of the roof at the property collapsed, resulting in broken water, electrical, and gas lines as well as flooding of interior sections of the premises. (Compl. ¶ 31.)

         The incident was immediately reported to Selective and assigned claim number SELE1/5890. The original adjuster's maximum adjustment authority was $250, 000, but he was ultimately replaced Pebbles, an adjuster with unlimited adjustment authority. (Id. ¶ 34.)

         DCIS and NAMT retained several architects and experts to represent their interests during the claims process. Lyle Hogan with Fincastle Engineering and Ralph Walden, a certified commercial roofing inspector, prepared a report dated August 9, 2016, concluding that the roof collapse was the result of multiple influences, including extraordinary rainfall activity, inadequate roof drainage, and the mass of multiple roof layers. (Compl. Ex. B.) Their conclusions were shared with Pebbles and Selective. Selective also retained several experts to assist it in determining the cause and extent of the damage at the property.

         Pebbles, on behalf of Selective, also retained Carville Evering to inspect personal property of third parties in possession of NAMT that was damaged when the roof collapsed. After receiving Evering's report, Pebbles began advancing the position that there was no coverage over third-party's items in NAMT's possession at the time of the loss.

         Around July 18, 2016, Pebbles retained Haywood Parker and In-Line Consulting to serve as a construction consultant and prepare a replacement cost estimate for the damage to the property. “Limiting himself solely to the area of the roof collapse, Parker . . . generated a ‘preliminary' estimate on August 2, 2016[, ] of replacement cost at $187, 420.19.” [Compl. ¶ 45.] Plaintiffs assert that, to date, that estimate has not been revised, amended, or finalized.

         Around October 11, 2016, Pebbles retained Kim Winchell and H.B. Fishman, Inc., to prepare a Roof Inspection Report regarding the portion of the roof that had not collapsed, as well as an under-deck inspection to determine the overall condition of the roof and the existence of any additional damages. On November 14, 2016, Winchell and H.B. Fishman issued a report concluding that all areas of the roof “suffer from lack of maintenance, blistering as a result of moisture built into the roofing systems, ponding water and [sections of the roof] having outlived their intended services lives.” [Compl. ¶ 50.] As a result, Winchell and H.B. Fishman ultimately concluded that moisture trapped in the roof and chronic leaks experienced post-July 3 were not causally related to the July 3 weather event.[3]

         At Pebbles request, Winchell and H.B. Fishman collected and analyzed weather data from July 3, despite the fact that Winchell had no credentials as a meteorologist, weather expert, or weather consultant. Winchell provided a second report on November 18 devoted exclusively to analysis of weather data and conclusions drawn therefrom. Pebbles incorporated this report when he stated in a December 19 letter: “Mr. Winchell's report clearly shows a significant increase in precipitation prior to and post loss” and, therefore, “[t]he interior leaks you are observing are the result of excess precipitation saturating the multiple layers of roofing to a point where they become visible leaks in the building.” [Compl. ¶ 66.]

         In response to Winchell's analysis and Pebbles's letter, DCIS and NAMT hired Howard Altschule and Forensic Weather Consultants to investigate the issue of the weather at the property on July 3. Altschule concluded that, “[o]n July 3rd, 2016, . . . light to moderate and heavy rain (including some torrential downpours at times) occurred from approximately 12:29 a.m. through 1:18 a.m.. [a total of 49 minutes and that] [t]he thunderstorms were particularly intense between 12:37 a.m. and 1:11 a.m. [34 minutes] and strong downdraft wind gusts up to 50-60 miles per hour occurred at the incident location.” [Compl. ¶ 71.] Altschule ultimately concluded that “2.76 inches of rain accumulated and strong downdraft wind gusts of up to 50-60 miles per hour” occurred at the property on July 3. [Compl. ¶ 74.]

         Walden's[4] report addressed the impact of rapid rain water buildup, like that which occurred on July 3, its need to drain somewhere, and the causal connection of the chronic water leakage issue post-July 3. Walden concluded that the July 3rd damage and the leaks post-July 3 were caused by the July 3 weather event. [Compl. ¶ 77.] He further noted that evidence of pre-July 3 water infiltration and resulting degradation of metal decking was limited, and areas of rusting around ribs and intermediate surfaces was, in many cases, not indicative of long-term moisture migration into and onto the deck from above. [Compl. ¶ 78.] All information gathered by DCIS, NAMT, or its experts was tendered to Selective and Pebbles.

         On February 2, 2017, Selective sent notice to DCIS and NAMT that it was not renewing any of its coverage on the property as a result of “unfavorable loss history and loss ratio of 1, 368%.” [Compl. ¶ 83.] ¶ 1, 368% loss ratio, when compared to a premium payment of $60, 152.51, equates to a loss history of $882, 887.02, yet ...

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