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Hometown Community Association, Inc. v. Philadelphia Indemnity Insurance Co.

United States District Court, D. Colorado

December 12, 2017

HOMETOWN COMMUNITY ASSOCIATION, INC., Plaintiff,
v.
PHILADELPHIA INDEMNITY INSURANCE COMPANY, Defendant.

          ORDER ON MOTION TO DISMISS OR ALTERNATIVELY TO STRIKE

          R. Brooke Jackson United States District Judge

         This matter is before the Court on defendant Philadelphia Indemnity Insurance Company's motion to dismiss plaintiff Hometown Community Association, Inc.'s complaint and amended complaint, ECF Nos. 2, 32. Alternatively, Philadelphia moves to strike various paragraphs in the amended complaint. For the reasons stated below, Hometown's motion to dismiss or alternatively to strike is GRANTED in part and DENIED in part. The Court holds that payment of the appraisal award mooted the breach of contract claim but did not necessarily moot the bad faith claims.

         I. FACTS

         Hometown is a residential townhome association in Arvada, Colorado that was insured by defendant Philadelphia. ECF No. 31 at 2. On July 7, 2014 a hailstorm damaged Hometown's property. Id. This lawsuit stems from a subsequent disagreement between Hometown and Philadelphia over the insurance coverage for the damage Hometown sustained.

         A. The Insurance Policy.

         At the time of the hailstorm, Hometown maintained a commercial property insurance policy with Philadelphia. The policy provided that Philadelphia would pay for physical loss to covered property as a result of covered causes of loss. ECF No. 2-1 at 103. Additionally, the policy contained an appraisal clause, which stated:

2. Appraisal
If we and you disagree on the value of the property or the amount of "loss", either may make written demand for an appraisal of the "loss". In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of "loss". If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and b. Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal, we will still retain our right to deny the claim.

Id. at 117 (emphasis in original).

         B. Events Following the Storm.

         On March 28, 2015, eight months after the storm, Hometown submitted a claim to Philadelphia for the damage caused by the storm. ECF No. 31 at 2. On April 1, 2015, four days after filing its initial claim, Hometown contracted for painting on townhomes and flower boxes that had been damaged in the storm. Id. On May 8, 2015 Philadelphia acknowledged coverage for Hometown's March 28, 2015 claim. Id. However, on May 14, 2015 Philadelphia's adjuster Mr. Tom Bonnot denied Hometown's April 1st claim for painting and its claim for damage to windows, claiming that Hometown was responsible for these repairs. Id.

         On May 21, 2015 Mr. Bonnot assessed the damage to Hometown's property, employing for this purpose Unified Building Sciences, Inc. (“UBS”). Id. at 3. Philadelphia also solicited bids from three contractors, including BluSky Restoration Contractors, LLC, to determine the cost of the required repairs. Id. Around the same time, Hometown employed HomeGuard Restoration to inspect the damage. Id. Despite objections from Hometown, Philadelphia chose BluSky's bid as the basis of its claim payment. Id. On August 31, 2015 Philadelphia used BluSky's bid to issue an actual cash value claim of $152, 096.49 (after applying Hometown's deductible) in satisfaction of Hometown's claim. Id.

         On December 1, 2015 Mr. Bonnot revised the scope of repairs to include additional damages and painting, but this revised scope still excluded some repairs Hometown thought necessary. Mr. Bonnot passed these adjustments to UBS and BluSky for revised estimates. Id. On February 8, 2016 BluSky revised its proposal, and UBS revised its scope and cost report to account for these adjustments. Id. On February 15, 2016 HomeGuard submitted its own revised estimate of damages “in an attempt to reach an agreement with respect to the scope of the covered repairs.” Id.

         Mr. Bonnot informed Philadelphia on February 26, 2016 that BluSky's revised estimate now totaled $446, 585.83. Id. This amount included an undisputed value of $95, 872.81 above Philadelphia's previous payment. Id. at 3-4. However, Philadelphia did not make an additional payment of this amount at this time. Id. On March 25 and April 22, 2016 Mr. Bonnot reminded Philadelphia of the remaining unpaid $95, 872.01, but it was not paid. Id.

         Meanwhile, on March 3, 2016 Hometown had invoked the insurance policy's appraisal clause by issuing a written demand for an appraisal of the loss. Id. The parties each appointed an appraiser, but on May 3, 2016 Philadelphia's appraiser informed Hometown's appraiser that he would not review the file until the parties had appointed an independent umpire. Id. He eventually did look at the matter, but the two appraisers were unable to agree on the cost of repair. Id. at 5. Philadelphia's appraiser would not discuss the appointment of an impartial umpire with Hometown's appraiser, insisting instead that the parties should obtain a court-appointed umpire. Id. Accordingly, Hometown filed a petition for appointment of an umpire in Jefferson County District Court. Id. On August 30, 2016 Hometown removed the appointment action to the United States District Court for the District of Colorado on diversity grounds. Id. After a magistrate judge expressed skepticism about the federal court's jurisdiction over the case, the parties stipulated to remand the matter to state court on October 18, 2016. Id. The court selected an umpire on November 22, 2016. Id. at 6.

         On January 31, 2017, now 11 months after Mr. Bonnot had informed Philadelphia of his increased damages figure, the court-appointed umpire issued an appraisal award that provided a total actual cash value of $515, 580.43, along with a depreciation figure of $32, 909.39. Id. Three days later, on February 3, 2017 Philadelphia issued a check for $186, 429.30, reflecting the award's actual cash value less Philadelphia's previous payment and Hometown's deductible. Philadelphia has not yet paid the depreciation amount of $32, 909.39 despite having inspected the property and confirmed that the repair work has been completed. Id.

         C. Procedural History.

         Hometown filed this suit in the Jefferson County District Court on March 6, 2017. Philadelphia removed the case to the United States District Court for the District of Colorado on March 28, 2017. ECF No. 1 at 2. On the same day Philadelphia moved this Court to dismiss the case, or alternatively, to strike all paragraphs alleging either litigation or appraisal conduct as a basis for a bad faith claim. ECF No. 2. The initial motion to dismiss was fully briefed (see ECF Nos. 2, 14, 15) when Hometown amended its complaint on October 10, 2017. ECF No. 31. Because the amended complaint was largely similar to the original complaint, I instructed the parties to file short supplements incorporating their prior briefing should Philadelphia move to dismiss the amended complaint. ECF No. 30. Accordingly, Philadelphia filed its supplement to the original motion to dismiss on October 31, 2017, and Hometown filed its supplemental response on November 9, 2017. ECF Nos. 32, 34. Philadelphia's alternative motion to strike was expanded to include all paragraphs relating to depreciation payments. ECF No. 32 at 4-7.

         II. STANDARD OF REVIEW

         To survive a 12(b)(6) motion to dismiss, the complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A plausible claim is a claim that “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While the Court must accept the well-pleaded allegations of the complaint as true and construe them in the light most favorable to the plaintiff, Robbins v. Wilkie, 300 F.3d 1208, 1210 (10th Cir. 2002), purely conclusory allegations are not entitled to be presumed true, Iqbal, 556 U.S. at 681. However, so long as the plaintiff offers sufficient factual allegations such that the right to relief is raised above the speculative level, he has met the threshold pleading standard. See, e.g., Twombly, 550 U.S. at 556; Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008).

         According to Rule 12(b)(6), the Court may only consider facts alleged within the complaint. See Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991). “Should the court receive and consider materials outside the complaint, the court may convert a Rule 12(b)(6) motion to a motion for summary judgment if the parties have notice of the changed status and the nonmovant responded by supplying its own extrinsic evidence.” MacKinney v. Allstate Fire and Cas. Ins. Co., 16-CV-01447-NYW, 2016 WL 7034977, at *3-4 (D. Colo. Dec. 1, 2016). However, the Court may consider documents referred to in the complaint that are central to a ...


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