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Hamilton v. Northfield Insurance Company

United States Court of Appeals, Tenth Circuit

December 18, 2018

BILLY HAMILTON, Plaintiff - Appellant/Cross-Appelle
NORTHFIELD INSURANCE COMPANY, Defendant-Appellee/Cross-Appellant.

          Appeal from the United States District Court for the Eastern District of Oklahoma (D.C. No. 6:16-CV-00519-RAW)

          Kris Ted Ledford of Ledford Law Firm, Owasso, Oklahoma, for Plaintiff-Appellant/Cross-Appellee.

          Darrell W. Downs and Jacob R. Daniel (R. Stratton Taylor and Mark H. Ramsey with them on the brief), of Taylor, Foster, Mallett, Downs, Ramsey & Russell, P.C., Claremore, Oklahoma, for Defendant-Appellee/Cross-Appellant.

          Before TYMKOVICH, Chief Judge, McKAY, and CARSON, Circuit Judges.


         Billy Hamilton appeals the district court's order granting summary judgment in favor of defendant Northfield Insurance Company as to Mr. Hamilton's claim for breach of the implied duty of good faith and fair dealing and his accompanying request for punitive damages. Mr. Hamilton also challenges the court's conclusion, following a jury verdict in his favor on his breach of contract claim, that he was not the prevailing party for purposes of attorney fees and prejudgment interest under Oklahoma statute. Lastly, anticipating remand of the bad faith claim, Mr. Hamilton argues the court erred in prohibiting certain cross-examination of Northfield's expert witnesses. Northfield, in turn, cross-appeals the court's denial of its motion for judgment as a matter of law as to Mr. Hamilton's breach of contract claim. The insurance company also challenges the court's rulings on Mr. Hamilton's expert witness report and testimony. For the following reasons, we affirm.[1]


         In March 2015, Mr. Hamilton purchased a Northfield insurance policy for a commercial building in Council Hill, Oklahoma. Northfield had a third party inspect the property for underwriting purposes in May. The underwriting survey report concluded the risk was "Satisfactory with Recommendation Compliance" and identified eight recommendations, including that potholes be filled, graffiti be removed, and a broken window be repaired. (Appellant's App. at 249.) The insurance policy included a limitation for:

The interior of any building or structure, or to personal property in the building or structure, caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or
(2) The loss or damage is caused by or results from thawing of snow, sleet or ice on the building or structure.

(Id. at 173.)

         Mr. Hamilton's tenant informed him the roof was leaking in June 2015. Because Mr. Hamilton had some experience installing and repairing metal roofs, he inspected the roof himself, noticing that he "could feel the metal moving because of numerous loose screws which were sticking up from the metal roofing." (Id. at 308.) Mr. Hamilton and his brothers tightened the loose screws, coated any screws that would not tighten with tar and installed new screws near these screws, and applied another coat of tar at a transition point on the roof where it appeared to be leaking. A few months later, the tenant again notified Mr. Hamilton the roof was leaking, and Mr. Hamilton again made the same efforts to repair the leak. Finally, after the tenant informed him the roof was leaking in December 2015, Mr. Hamilton reported the leak and the resulting interior damage to Northfield.

         Mr. Hamilton's claim was assigned to a Northfield claims adjuster. The claims adjuster contacted Mr. Hamilton, who told him about the roof and his attempted repairs. The claims adjuster did not "ask him about the type of repairs he tried to make" or keep a record of what repairs Mr. Hamilton said he had made. (Id. at 205.) That same month, a field adjuster went to the property to take photographs and collect data for submission to the claims adjuster. The field adjuster found "an opening in the exterior of [the] building which would allow water in" at the transition point on the roof and determined that was where the water had entered. (Id. at 390-93.) The parties dispute whether the field adjuster knew Mr. Hamilton had applied tar to the roof earlier that year.

         The claims adjuster concluded that the damage was not covered under the insurance policy because "[v]isibly [they] could not see any wind damage." (Id. at 206.) In February 2016, the claims adjuster sent Mr. Hamilton a letter informing him that Northfield was denying his claim. The letter stated Northfield had made this decision because "there was no evidence of any openings caused by storm damage" and the policy did not cover damage caused by "[w]ear and tear"; "corrosion, decay, [or] deterioration"; "cracking, shrinking[, ] or expansion"; or "faulty[, ] inadequate[, ] or defective . . . workmanship[ or] repair, . . . [, m]aterials used in repair, construction, renovation[, ] or remodeling[, or m]aintenance." (Id. at 208, 210.) The letter also noted that Northfield's position was based on "the information presently available" and invited Mr. Hamilton to send Northfield further information he considered relevant. (Id. at 210.)

         One week later, Northfield sent Mr. Hamilton a letter notifying him that it would not renew his policy when it expired the following month. The notice identified the reason for nonrenewal as "Underwriting Guidelines." (Id. at 501.) According to Mr. Hamilton, Northfield told him the nonrenewal decision had come from a third party. Northfield's response to one of Mr. Hamilton's requests for production also stated, "The decision to nonrenew the Plaintiff's policy was made by Graham Rogers, Inc.[, which] . . . was the underwriting agent for the subject insurance policy." (Id. at 506.) During a deposition, however, a Graham Rogers employee stated Northfield had made the nonrenewal decision. Internal Northfield emails from February 2016 also indicate a Northfield employee suggested nonrenewal upon noting Mr. Hamilton's insurance claim and a lack of information regarding his fulfillment of the underwriting recommendations.

         After Northfield denied the claim, Mr. Hamilton contacted a roofer, Bernie Akles, to obtain his opinion regarding the cause of the leaking roof. When Mr. Akles inspected the roof, he found that he "was able to move some of the metal panels up and down with [his] hand." (Id. at 435.) Based on his experience as a roofer, his inspection of the roof, and Mr. Hamilton's explanation of his repair efforts, Mr. Akles "determined that wind had caused the damage." (Id.) He stated he could "easily see that wind had caused the screws holding the metal roofing to raise" and "[w]ind whipping across the roof in an uneven up and down direction (like the way wind causes a flag to move) overstressed the tar at the high-to-low transition causing an opening at the tar which allowed rainwater to enter the building." (Id. at 435-36.)

         Mr. Hamilton informed Northfield of Mr. Akles' opinion in March 2016, prompting Northfield to ask for a letter from the roofer. Mr. Hamilton then sent Northfield a letter from Mr. Akles' roofing company, which stated, "Upon inspection of the roof there is evidence of extreme winds stripping screws up from the decking up to 3/4" and more allowing water to come through damaging many areas in the building." (Id. at 437.) The claims adjuster forwarded this letter to someone else at Northfield, who agreed "that it is not likely that wind would lift the roof and set back down with screws intact and no other damages present," "but also agreed that given the size of the roof and the potential size of the claim, an engineer opinion [wa]s warranted." (Id. at 428.)

         At that point, Northfield retained Rimkus Consulting Group, Inc., "to determine if wind damage to the roofing had occurred, and if so, the extent of that damage, from storms reportedly occurring in the month of December 2015." (Id. at 215.) A Rimkus engineer, inspected the roof with Mr. Hamilton and Mr. Akles present. Based on his inspection, the engineer concluded "[w]ind did not cause damage to the metal roofing or its attachments" and "[t]he water intrusion is from a failed sealant joint in the roofing at the high-to-low roofing connection." (Id. at 216.) In April 2016, Northfield sent Mr. Hamilton a second notice informing him it was denying his claim because the engineer's inspection indicated the roof leak was caused by "lack of or deferred maintenance." (Id. at 499.)

         In November 2016, Mr. Hamilton sued Northfield in Oklahoma state court, alleging breach of contract and breach of the implied covenant of good faith and fair dealing. Northfield removed the case to federal court. In May 2017, Northfield filed a motion to strike Mr. Akles' expert report or in the alternative to preclude his testimony under Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993). The district court denied both requests. Northfield also filed a motion for summary judgment, which the court granted as to bad faith and punitive damages but denied as to breach of contract.

         Mr. Hamilton's attorney sent Northfield's attorneys an email including a revised draft pretrial order in June 2017. In that communication, Mr. Hamilton's counsel asked Northfield's attorneys to send him "a serious settlement offer" the following week, noting that he had "almost $12k in hard costs invested in this case thus far" and was conveying that information "because that figure impacts how much of any settlement Mr. Hamilton would receive." (Id. at 938.) Counsel for Northfield responded that the insurance company was "willing to offer $45, 000 to settle this case," observing that they "believe[d] this [wa]s a fair offer as it [wa]s more than three times the actual damages in this case." (Id. at 939.) Northfield's counsel also stated, "Based upon your out of pocket litigation expenses, this ...

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