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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Post 5219
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An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
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Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
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When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
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