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Troutman v. QBE Insurance Corp.

United States District Court, W.D. North Carolina, Charlotte Division

June 7, 2018




         THIS MATTER is before the court on plaintiff's Motion for Partial Summary Judgment (#16), defendant's Motion for Summary Judgment (#20), and the parties' Joint Motion for Continuance of Trial Setting (#29). Having considered the parties' motions and reviewed the pleadings, the court enters the following Order.

         I. Background

         On or about October 23, 2015, plaintiffs experienced a significant water and sewage intrusion into their home due to a broken sewer lateral leading to their property. The sewer lateral in question was located in the street and off the plaintiffs' property. Companies involved with installing a fiber optic network in and around the Charlotte area engaged in underground boring and struck the sewer lateral. As a result, a large amount of water, sewage, and other materials entered plaintiffs' home through a downstairs toilet.

         Plaintiffs contacted representatives from companies involved, in order to request that they remediate the damage to the home and pay for all necessary repairs. During this process, plaintiffs were informed that remaining in the home was hazardous to their health and the health of their teenage daughter, and were advised on October 25, 2015 to vacate the property until cleanup and necessary repairs were completed.

         The same day, plaintiffs contacted defendant to report a claim pursuant to their homeowners insurance policy. On October 26, 2015, plaintiffs were advised that defendant would pay for them to stay in a hotel due to the damage to the home. In accepting the claim, defendant also agreed to provide plaintiffs with additional living expenses pursuant to the policy. The next day, defendant sent letters to plaintiffs confirming the coverage on their policy.

         Over the next several months, plaintiffs attempted to resolve their claim with the companies involved in striking the sewer lateral, but were unsuccessful in reaching an agreement. During these negotiations, defendant continued paying plaintiffs' hotel expenses. Defendant provided additional authorization to the plaintiffs' hotel multiple times over the next several months, and paid a total of $33, 143.73 for plaintiffs' hotel expenses.

         However, on March 15, 2016, defendant sent an email to plaintiffs indicating that the policy only provided benefits for the length of time that it takes to make repairs to the home, and that sufficient time had elapsed for repairs to be completed. As a result, defendant would not pay for plaintiffs' hotel beyond April 1, 2016. Plaintiffs contacted defendant via phone on March 16, 2016, and were informed that their claim was subject to an endorsement on the policy that limited total coverage for their claim to $10, 000. On March 18, 2016, plaintiffs again spoke to defendant, and defendant agreed to pay for hotel expenses through May 1, 2016. On March 24, 2016, after reviewing photographs and a work order from the City of Charlotte showing what repairs had been made, defendant confirmed with plaintiffs that coverage for the loss was limited to $10, 000 due to the endorsement and that defendant would not pay for any hotel expenses beyond May 1, 2016.

         Plaintiffs proceeded to hire counsel in April of 2016. Plaintiffs' counsel sent a letter to defendant on April 27, 2016, asking for defendant to review their denial of additional benefits for hotel expenses and that it agree to pay for repairs to plaintiffs' home, given that the companies involved appeared unwilling to do so. Defendant responded via letter on May 5, 2016, stating that its investigation showed that the sewer issue happened off the premises of plaintiffs' home and reasserted that plaintiffs' claim was subject to an endorsement limiting coverage for the loss to $10, 000. Defendant also indicated in the letter than any additional claims related to this loss were denied and that defendant was closing its file.

         Plaintiffs proceeded to file suit in August of 2016, against defendant and the companies involved with breaking the sewer lateral, with the City of Charlotte later added as a third party defendant. Claims with other parties were resolved and dismissed from this action on August 3, 2017. On August 4, 2017, defendant removed this matter to this court pursuant to diversity jurisdiction under 28 U.S.C. § 1332(a) and (c). Essentially, plaintiffs allege that their homeowner's policy, provided through defendant, is not subject to the endorsement limiting their claim to $10, 000 and move for summary judgment on this issue. Defendant argues that the endorsement is valid and applicable to plaintiffs' situation, and that plaintiffs' other allegations, specifically bad faith and unfair and deceptive trade practices claims, fail as a matter of law.

         II. Legal Standard

         Summary judgment is warranted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A factual dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material only if it may affect the suit's outcome under governing law. Id. The movant has the “initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal citations omitted). The burden then shifts to the nonmoving party. That party “must set forth specific facts showing that there is a genuine issue for trial.” Id. at 322 n.3. The nonmoving party may not rely upon mere allegations or denials of allegations in pleadings to defeat a motion for summary judgment. Id. at 324. Instead, that party must present sufficient evidence from which “a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248; accord Sylvia Dev. Corp. v. Calvert Cnty., Md., 48 F.3d 810, 818 (4th Cir. 1995).

         The Court views evidence and any inferences from evidence in the light most favorable to the nonmoving party. Anderson, 477 U.S. at 255. “‘Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.'” Ricci v. DeStefano, 557 U.S. 557, 586 (2009) (quoting Matsushita v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). The question posed by summary judgment is whether the evidence “is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 252.

         Where insurance policies are concerned, the courts of the State of North Carolina have long held that insurance policy provisions should be “construed liberally so as to provide coverage, whenever possible by reasonable construction.” State Capital Ins. Co. v. Nationwide Mut. Ins. Co., 318 N.C. 534, 539 (1986) (citing Moore v. Hartford Fire Ins. Co., 270 N.C. 532 (1967)). The effect is to broaden coverage available to the insured, such that “provisions which exclude liability of insurance companies are not favored and therefore all ambiguous provisions will be construed against the insurer and in favor of the insured.” Id. (citing Wachovia Bank & Trust Co. v. Westchester Fire Ins. Co., 276 N.C. 348 (1970)).

         When interpreting a policy's language and terms, “[i]f no definition is given, non-technical words are to be given their meaning in ordinary speech, unless the context clearly indicates another meaning was intended.” Woods v. Nationwide Mut. Ins. Co., 295 N.C. 500, 506 (1978). Should words or provisions be ambiguous or “capable of several reasonable interpretations, the doubts will be resolved against the insurance company and in favor of the policyholder.” Id. In determining the meaning of a policy's terms, the court must strive for consistency, and ensure that the “various terms of the policy are to be harmoniously construed, and if possible, every word and every provision is to be given effect.” Id. Finally, determining the meaning of policy language is a question of law for the court. Wachovia, 276 N.C. at 354 (citations omitted).

         III. Discussion

         The court has reviewed the parties' pleadings and the rest of the record. Plaintiff makes three claims against defendant in their Complaint (#1-1): breach of contract, bad faith, and unfair and deceptive trade practices, all based on plaintiffs' homeowners insurance policy with defendant. The court will consider plaintiffs' claims in turn.

         1. Plaintiffs' breach of contract claim

         First, the court will consider plaintiffs' breach of contract claim. The relevant portions of the insurance policy are as follows:


A. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.
3. Water

This means:
a. Flood, surface water, waves, including tidal wave and tsunami, tides, tidal wave, overflow of any body of water, or spray from any of these, all whether or not driven by wind, including storm surge;
b. Water which:
(1) Backs up through sewers or drains; or
(2) Overflows or is otherwise discharged from a sump, sump pump or related equipment;
c. Water below the surface of the ground, including water which exerts pressure on, or seeps, leaks or flows through a building, sidewalk, driveway, patio, foundation, swimming pool or other structure; or
d. Waterborne material carried or otherwise moved by any of the water referred to in A.3.a. through A.3.c. ...

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