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LRP Hotels of Carolina, LLC v. Westfield Insurance Co.

United States District Court, E.D. North Carolina, Eastern Division

October 31, 2014



JAMES C. DEVER, III, District Judge.

On March 11, 2013, LRP Hotels of Carolina, LLC ("LRP" or "plaintiff') filed a complaint against Westfield Insurance Company ("Westfield" or "defendant") in Lenoir County Superior Court. See Compl. [D.E. 1-1]. The dispute involves an insurance claim that LRP filed with Westfield concerning damage LRP' s hotel in Kinston, North Carolina allegedly sustained in August 2011 due to Hurricane Irene. LRP asserts the following claims against Westfield: (1) breach of contract; (2) unfair and deceptive trade practices; (3) breach of covenant of good faith and fair dealings; (4) fraud; (5) negligent misrepresentation; and (6) negligence. See Compl. ¶¶ 35-77. On April 16, 2013, Westfield timely removed the action based on diversity jurisdiction. See [D.E. 1]. On June 30, 2014, Westfield moved for partial summary judgment concerning: (1) a portion of the breach of contract claim; (2) the unfair and deceptive trade practices claim; (3) the breach of covenant of good faith and fair dealing claim; (4) the fraud claim; (5) the negligent misrepresentation claim; and (6) the negligence claim [D.E. 26]. On July 21, 2014, LRP responded in opposition [D.E. 30]. On August 4, 2014, Westfield replied [D.E. 31]. On October 31, 2014, the court heard oral argument. As explained below, the court grants Westfield's motion for partial summary judgment.


In August 2011, LRP purchased a hotel in Kinston, North Carolina. See Marupov Dep. [D.E. 29-2] 5 (p. 25 of deposition). The hotel was built in 1986. See McClancey Dep. [D.E. 29-4] 3 (p. 39 of deposition). Before purchasing the hotel, LRP did not retain anyone to inspect the hotel. See Patel Dep. [D.E. 29-3] 3 (p. 21 of deposition). LRP was unaware of the age or the service life of the hotel's roof or windows. Id . 12-14 (pp. 40-42 of deposition).

LRP purchased insurance from Westfield concerning the hotel. See [D.E. 29-5] 1-183 (copy of insurance policy). On August 27, 2011, Hurricane Irene hit Kinston, North Carolina and damaged the hotel. See Compl. ¶ 9. LRP made an insurance claim for damages to the hotel. See id. ¶ 13. Within ten days of the claim, Westfield retained an independent engineer (Rimkus Consulting Group), an independent general contractor (Forney & WeyGant), and an independent accountant (Sanderford & Associates, P.A.) to inspect the hotel and analyze the damage.

Rimkus Consulting Group opined that Hurricane Irene caused certain damage to the roof, the exterior fence in the pool area, and the exterior storage building. See Rimkus Report [D.E. 29-6] 1-54; [D.E. 29-7] 1-5. Rimkus Consulting Group also opined that Hurricane Irene did not cause some of the claimed damage, including damage to some windows and water damage in some rooms. See [D.E. 29-6] 5-6, 14-16.

After Westfield investigated the claim, Westfield determined that LRP suffered covered losses of $24, 958.63. After deducting $1, 000 for the deductible, Westfield paid LRP $23, 958.63. See [D.E. 29-8] 2-3. The covered damages that Westfield paid for were $20, 854.36 for building repairs (less the $1, 000 deductible), $720 for sign repair, $1, 441.89 for a card reader, and $942.38 for spoiled food. See id. LRP contends that covered damages to the hotel far exceed $24, 958.63. On March 6, 2013, LRP filed this suit.

Summary judgment is appropriate when, after reviewing the record taken as a whole, no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby. Inc. , 477 U.S. 242, 247-48 (1986). The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323 (1986). Once the moving party has met its burden, the nonmoving party may not rest on the allegations or denials in its pleading, Anderson , 477 U.S. at 248-49, but "must come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587 (1986) (emphasis removed) (quotation omitted). A trial court reviewing a motion for summary judgment should determine whether a genuine issue of material fact exists for trial. Anderson , 477 U.S. at 249. In making this determination, the court must view the evidence and the inferences drawn therefrom in the light most favorable to the nonmoving party. Scott v. Harris , 550 U.S. 372, 378 (2007).

The court has jurisdiction based on diversity, and North Carolina law governs plaintiff's claims. Thus, this court must determine how the Supreme Court of North Carolina would rule. See, e.g., Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C. , 433 F.3d 365, 369 (4th Cir. 2005). "If the Supreme Court of [North] Carolina has spoken neither directly or indirectly on the particular issue before us, [this court is] called upon to predict how that court would rule if presented with the issue." Id . (quotation omitted). In making that prediction, the court may consider opinions of the North Carolina Court of Appeals, treatises, and the practices of other states. Id.


LRP contends that Westfield breached its contract with LRP by failing to pay for all covered losses under the insurance policy. See Compl. ¶¶ 34-37. In order to prove breach of contract under North Carolina law, a plaintiff must prove (1) the existence of a valid contract, and (2) a breach of the terms of the contract. See, e.g., McLamb v. T.P. Inc. , 173 N.C.App. 586, 588, 619 S.E.2d 577, 580 (2005), disc. rev. denied, 360 N.C. 290 , 627 S.E.2d 621 (2006); Poor v. Hill , 138 N.C.App. 19, 26, 530 S.E.2d 838, 843 (2000); Jackson v. Carolina Hardwood Co. , 120 N.C.App. 870, 871, 463 S.E.2d 571, 572 (1995). An insurance policy is a contract, and the policy's provisions govern the rights and duties of the contracting parties. See Gaston Cnty. Dyeing Mach. Co. v. Northfield Ins. Co. , 351 N.C. 293, 299, 524 S.E.2d 558, 563 (2000); C.D. Spangler Constr. Co. v. Indus. Crankshaft & Eng'g Co., Inc. , 326 N.C. 133, 142, 388 S.E.2d 557, 562 (1990).

In LRP's breach of contract claim, LRP contends that Westfield had a duty under the policy to investigate and pay policy benefits for covered storm damage resulting from wind, rain, and water intrusion relating to or arising out of Hurricane Irene. See Compl. ¶¶ 34-37. LRP contends that Hurricane Irene caused extensive covered storm damage, including damage to: (1) the roof; (2) interior rooms; (3) the pool area; (4) a storage area; (5) trees; (6) a card reader; (7) the Hampton Inn sign; (8) food; and, (9) HVAC units. See id. ¶¶ 9-10; Marupov Dep. 43-44, 49-50, 58-59, 69; Patel Dep. 37; McClancy Expert Report [D.E. 29-9]-[D.E. 29-13]. LRP also contends that it lost revenue and incurred extra expenses for LRP employees. Patel Dep. 30. LRP contends that Westfield breached the insurance contract when it refused to pay for covered storm damage.

Westfield responds that, other than the roof, it paid for all covered storm damages under the policy. See Def's Br. in Supp. of Mot. for SJ. [D.E. 29] 12. As for the roof, Westfield contends that the parties have a legitimate dispute about what damage is covered. See id. 6-7, 13.

At oral argument, the court concluded that the only genuine issue of material fact that remains in the case concerns damage to the roof. The other alleged damages have been paid, are not covered, or LRP ...

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