If Policy Says Building Coverage is “Not Provided” There Can be no Claim
Barry Zalma
Feb 5, 2024
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Post 4728
Plaintiff Kota Me Patates LLC (“KMP”) filed a motion to compel appraisal to abate an insurance coverage dispute. Defendant Nationwide Mutual Fire Insurance Company responded with a separate motion for summary judgment asserting that the policy does not cover KMP’s claimed losses.
In Kota Me Patates LLC v. Nationwide Mutual Fire Insurance Company, No. 4:23-cv-01573, United States District Court, S.D. Texas, Houston Division (December 21, 2023) the USDC’s magistrate judge recommended a resolution of the disputes.
BACKGROUND
KMP had a business insurance policy with Nationwide (the “Policy”), effective from January 1, 2020 to January 1, 2021. The Policy states that it “includes Buildings …, Business Personal Property …, or both, depending on whether a Limit of Insurance is shown in the Declarations for that type of property.” (emphasis added). The referenced Declarations page explicitly states that coverage for KMP’s building is “NOT PROVIDED[.]”
On January 24, 2022, a year after expiration of the policy a representative from the office of KMP’s attorney contacted Nationwide to report a claim for structural damage to KMP’s property. The damage allegedly resulted from a plant explosion two years earlier, on January 24, 2020.
KMP sued Nationwide in Texas state court. Nationwide removed the suit to the USDC. In the meantime, Nationwide contacted KMP’s counsel to obtain more information about KMP’s claim. Eventually, KMP’s attorney sent a formal notice of claim, stating that KMP intended to invoke the Policy’s appraisal provision. Nationwide requested more information, including an opportunity to inspect the asserted damage and a sworn proof of loss. KMP failed to provide the information that Nationwide requested. Nationwide therefore denied coverage for the loss, noting that KMP failed to provide a description of how, when and where the loss or damage occurred, did not provide prompt notice of the loss or damage, and failed to submit a signed, sworn proof of loss as requested.
Despite filing the suit months earlier, KMP’s attorney finally sent Nationwide a demand letter on October 2, 2022. The letter included an estimate of $92,508.92 to repair KMP’s structure. KMP then filed a motion to compel appraisal and abate the suit. Nationwide instead filed a motion for summary judgment.
ANALYSIS
Nationwide sought summary judgment on KMP’s breach of contract claim on multiple grounds, including that the Policy does not cover KMP’s claim for damages to its building. Given the clear Policy language, the Court had no need to address Nationwide’s alternative contentions.
The Policy provides zero coverage for any damage to the building. Because Nationwide did not breach the Policy by denying coverage, it is entitled to summary judgment on KMP’s breach-of-contract claim.
Nationwide also argued that KMP cannot recover on its extracontractual claims for breach of the common law duty of good faith and fair dealing, violations of the Deceptive Trade Practices Act (“DTPA”) and Chapters 541 and 542 of the Texas Insurance Code, common law fraud, and civil conspiracy. The USDC noted that the lack of coverage, coupled with the lack of any injury independent of Policy benefits, forecloses any extracontractual basis for relief.
Mere allegations do not constitute competent summary judgment evidence. Bare allegations that an insurer “misrepresented the scope of” coverage are not sufficient to show that the misrepresentation induced the purchase.
KMP’s Request For Appraisal Was Denied.
The disposition of KMP’s breach of contract claim defeats its request to compel appraisal. The purpose of appraisal is to resolve disputes concerning a property’s value or the amount of a covered loss. Appraisal is pointless when, as here, the Policy explicitly states that the loss is not covered.
ZALMA OPINION
The KMP claim was incompetent on many bases, not the least of which was a claim for damage to a building that the policy explicitly said in bold print that building coverage was “NOT PROVIDED.” Add to that a two year late report, no compliance with policy conditions, and a spurious argument for tort damages and the Magistrate apparently had no choice but to recommend granting Nationwide’s motion and sending KMP and its counsel home with a total loss. Counsel for KMP apparently failed to read the Declarations page of the policy. A total waste of time for the litigants and the court.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
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Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
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When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
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When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive and became a consultant and expert witness for lawyers representing insurers and lawyers ...
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See the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
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