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Rothberg v. Cincinnati Insurance Co.

March 27, 2008

GLENDA ROTHBERG, AS EXECUTOR OF ESTATE OF GLENN MORRIS, SR. AND ) ATTORNEY-IN-FACT FOR FAYNELL MORRIS PLAINTIFF,
v.
CINCINNATI INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Chief Judge Curtis L. Collier

MEMORANDUM

Before the Court is defendant Cincinnati Insurance Company's ("Defendant") motion for summary judgment (Court File No. 60) and motion to strike (Court File No. 108) and plaintiff Glenda Rothberg's ("Plaintiff") motion for partial summary judgment (Court File No. 92) and motion for judicial notice (Court File No. 114). The Court has considered the associated briefs and other submissions of Plaintiff (Court File Nos. 93, 100, 101, 102, 115, 116) and Defendant (Court File Nos. 61, 62, 98, 109, 112, 113). For the following reasons, the Court will GRANT IN PART and DENY IN PART Defendant's motion for summary judgment (Court File No. 60), DENY Defendant's motion to strike (Court File No. 108), DENY Plaintiff's motion for partial summary judgment (Court File No. 92), and GRANT Plaintiff's motion for judicial notice (Court File No. 114).*fn1

I. RELEVANT FACTS

This case concerns a house on Elder Mountain, which was owned by Glenn Morris, Sr.*fn2 and was insured under a homeowner's policy issued by Defendant for April 22, 2005 through April 22, 2006. Behind the house was a deck containing a swimming pool and patio, which were supported by a retaining wall over a slope. On June 6, 2005, the pool/patio area and concrete retaining wall were damaged in a collapse that Plaintiff alleges resulted from hydrostatic pressure or, in the alternative, a landslide. The insurance policy has a large deductible for damage caused by a landslide and no deductible for damage caused by hydrostatic pressure. Plaintiff contends she is entitled to recover under the insurance policy. Plaintiff also contends Defendant made various misrepresentations to the insured. Defendant contends the collapse resulted from a landslide and that regardless it has no duty to pay for the damage under the homeowner's policy.

Glenn Morris, Jr.*fn3 had power-of-attorney to act on his father's behalf (Court File No. 62-52, p. 1). He was in Russia when the wall collapsed, and returned shortly afterwards (Court File No. 100-4, p. 2). When the collapse occurred, Jennifer Lively, an employee of Morris, reported the damage to Defendant (Court File No. 100-5, p. 3). Lisa Reason, an insurance adjuster for Defendant, investigated the claim for damages at the property (Court File No. 62-3). She hired Tri-State Drilling and Testing ("Tri-State") to investigate the loss. Based on what Reason says were oral representations from Q.T. Morphis of Tri-State, Reason believed the loss was caused by a landslide, and she told that to Morris (Court File Nos. 62-3, 100-4). However, Plaintiff contends Tri-State actually told Reason that hydrostatic pressure caused the collapse. In a letter from Tri-State to Reason, which was signed by Morphis and a second person, Tri-State concludes that water built up "until pore water pressure became excessive and the slope beneath the deck failed" (Court File No. 100-5, p. 15). Defendant's other expert, Rami Mishu, agrees that "pore water pressure" generally means hydrostatic pressure (Court File No. 100-6, p. 10). Morris was unaware of Tri-State's written report (Court File No. 100-4, p. 2).

At Defendant's request, Mishu also visited the property. He reached a "preliminary opinion" that the loss was caused by a landslide, and noted that he "disagree[s] with Tri-StateTesting's theory of wall failure" (Court File No. 100-6, pp. 20-22).

On October 26, 2005, Defendant sent a letter to Morris (Court File No. 100-4). Plaintiff contends this letter contained multiple misrepresentations. The letter stated that Reason retained an expert who determined there was a landslide (Court File No. 100-4, p. 7). The letter then stated that Morris had disagreed with that determination, so Defendant hired Mishu to examine the property (Court File No. 100-4, p. 8). The letter from Defendant to Morris states that Mishu had determined the cause was a landslide. Plaintiff contends the letter overstated Mishu's "preliminary opinion" and failed to note that Mishu has previously done work for Defendant's counsel (Court File No. 100-6, p. 6). The letter also states that a company hired by Morris concurred that the damage was caused by a landslide, and therefore "this issue has been resolved." (Court File No. 100-4, p. 8). The letter then discusses the insurance coverage (Court File No. 100-4, p. 9). The letter states the deductible would be $130,100, and Defendant would need to receive documentation, proof of loss, and estimates of repair prior to payment.

Defendant's letter also discussed the "importance of making repairs." Describing Mishu as a "certified Geological and Civil Engineer," the letter states Mishu believes there are "risks of substantial further damage, including catastrophic damage to the home if immediate repairs are not made," and the importance of completing these repairs before winter (Court File No. 100-4, p. 10). As a result of the letter, Morris hired an engineering company to recommend a plan to stabilize the slope and/or repair it (Court File No. 100-4, p. 4). That company, S&ME, recommended a soil nail wall, which it then constructed (Court File No. 100-4, p. 4).

Plaintiff contends there are four misrepresentations in Defendant's letter. First, the letter states an outside expert for Defendant had determined the cause of loss was a landslide, which Plaintiff contends was false. Second, the letter relied on another outside expert, Mishu, but failed to disclose Mishu was retained by Defendant's outside counsel and had previously provided litigation support to that attorney. Third, the letter states Mishu "confirmed that it was a landslide," which Plaintiff contends is false because Mishu gave only a "preliminary" opinion and did not confirm anything but instead disagreed with the earlier opinion from Tri-State. Fourth, the letter suggests the loss would be paid subject to a landslide deductible, but Plaintiff contends Defendant was actively seeking to avoid coverage.

As evidence Defendant was seeking to avoid coverage, Plaintiff notes that Defendant's counsel contacted Allstate Insurance, which previously had a policy on the home (Court File No. 100-7). Counsel told Allstate he was investigating the insured for fraud (Court File No. 100-7). Plaintiff contends it was misleading for Defendant to inform Morris the claim would be paid subject to a deductible while simultaneously initiating a fraud investigation and not informing Morris there would be no payment.

There had been a previous mudslide, in 2004, in which the previous insurer, Allstate, denied payment of the claim (Court File No. 62-2, pp. 3-4). Near the time when the insurance policy was bought, Diana Ringer, the insurance agent who obtained the insurance policy from Defendant, did a search that retrieves claims from various insurance carriers (Court File No. 100-9, p. 17). As a result of that search, Ringer learned of the mudslide claim, which she asked Morris about. He told her it was a claim for a mudslide and Allstate had not paid it (Court File No. 100-9, pp. 6-7). Ringer included the fact of a mudslide on the ACORD she sent to Defendant (Court File No. 100-9, pp. 8-9, 34), and Defendant knew about the 2004 mudslide prior to issuing the insurance policy (Court File No. 100-9, pp. 19-22). Furthermore, Plaintiff's insurance application identifies a 2004 mudslide, and indicates that no claim was paid (Court File No. 100-9, p. 34). However, Plaintiff's insurance application is checked "no" where it asks about prior landslides (Court File No. 62-14, ¶ 10). Defendant contends it was misled, but Plaintiff disputes Defendant's contentions either the ACORD or insurance application contain false or misleading statements.

Plaintiff obtained experts, C. Lee Mason and Timothy Siegel,*fn4 who each determined the retaining wall collapsed as the result of hydrostatic pressure that was intensified during a period of heavy rainfall, and not by a landslide (Court File Nos. 100-2, 100-14).

Siegel also states that the retaining wall was attached to the dwelling because it served as part of the home's foundation system (Court File No. 100-3). The retaining wall and deck were a necessary part of the structural system and were connected by concrete to the main portion of the dwelling (Court File No. 100-3). Siegel also opined that installing the soil nail wall was necessary to stabilize the ground beneath the house (Court File No. 100-3). Aside from the soil nail wall, Plaintiff has not had any other work done behind the house to stabilize the property (Court File No. 62-10, p. 5).

On May 20, 2005, between the dates when the insurance policy started and the retaining wall collapsed, Defendant had Keith Mandella appraise the property. He determined the property's value to be over $5 million, almost twice the previous appraised value. After the claim, Defendant indicated it would not renew the insurance policy and gave the higher appraisal value for the house (Court File No. 100-9, pp. 22-23), which Plaintiff contends was intended to increase premiums. Mandella's inspection noted the risk of earth movement and that the home was built on a hillside, as well as signs of erosion and cracks in the foundation (Court File No. 62-15, p. 4). Mandella pointed out the erosion issue to Morris, who stated he was already aware of the problem (Court File No. 113-2, p. 3). The inspection report stated, "A large area of rear yard on the hillside of risk appears to have significant erosion problems . . . . The area is close to slipping if not attended to." (Court File No. 62-15, p. 8). Plaintiff contends Defendant could have canceled the insurance policy within 60 days of its issuance (Court File No. 62-9, p. 26).

Based on a letter from Qore Property Sciences, Defendant became aware of potential problems with the retaining wall (Court File No. 62-5). There is indication of a partial failure of the retaining wall in 2003 (Court File No. 62-5, pp. 1, 11). There had also been problems with the pool leaking (Court File No. 62-2, pp. 5-6). In the spring of 2005, Morris noticed three to 4 four cracks or fissures near the wall (Court File Nos. 62-2, pp. 7-8; 62-10, p. 4). After the initial landslide, Morris contacted a few engineers and a construction company to look at the wall, but did not see any urgency (Court File No. 62-2, p. 9, 62-10, p. 3). Never did Morris or anyone connected to him tell Reason of any pre-existed or prior damage to the retaining wall, prior landslides, nor of prior claims related to mudslides or problems with the retaining wall, including open fissures (Court File No. 62-3). The Qore report was requested by Plaintiff's pool repairman, Greg Minton, who read the report and was not concerned about the wall collapsing (Court File No. 102-11).

On December 14, 2005, Morris filed a proof of loss, which stated the cause of loss is "still under investigation" and the amount of damage yet to be determined (Court File No. 62-7).*fn5 The following month, on January 23, 2006, Plaintiff filed a proof of loss, which stated that "based upon the opinion of the exp[erts] hired by Cincinnati Insurance Company as summarized in the attached correspondence we acquiesce in the conclusion that the loss was caused by landslide." (Court File No. 62-8). It was not until January 2006 Defendant received a damage estimate (Court File No. 62-14, ¶ 22). Defendant decided to deny payment in spring of 2006 because it believed the covered loss under the landslide policy would be less than the deductible (Court File No. 62-14, ¶ 21).

Plaintiff alleges breach of contract, violation of the Tennessee Consumer Protection Act, intentional/negligent misrepresentation, and bad faith failure to pay promptly (Court File No. 105). Defendant filed a counterclaim alleging it is entitled to recover attorney's fees. Defendant seeks summary judgment on all claims. Plaintiff seeks partial summary judgment, only on her claim under the Tennessee Consumer Protection Act.

II. MOTION TO STRIKE AND MOTION FOR JUDICIAL NOTICE

Defendant filed a motion to strike parts of four affidavits submitted by Plaintiff. The Court will DENY the motion because the evidence at issue does not affect the outcome of the summary judgment motions.

A. Glenda Rothberg

Defendant moves to strike parts of Rothberg's affidavit dealing with the course of negotiations between her counsel and Defendant's counsel. The testimony is not necessary ...


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