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Wak Inc. v. Ohio Security Insurance Co.

United States District Court, D. Colorado

February 21, 2019

WAK INC., d/b/a Marrakech Café, Plaintiff,



         THIS MATTER comes before the Court upon the Defendant's Motion for Summary Judgment (# 48), the Plaintiff's Response (# 52), and the Defendant's Reply (# 53). For the reasons that follow, the motion is granted.


         The Court exercises jurisdiction under 28 U.S.C. § 1332.

         II. BACKGROUND[1]

         This is a case in which the Plaintiff, Wak Inc. (Wak) seeks to recover insurance benefits for hail damage. Wak owns commercial property located in Denver, Colorado, which was insured under a casualty insurance policy (Policy) issued by Liberty Mutual Insurance and underwritten by Defendant Ohio Security Insurance Co. (Ohio) In May 2014, Wak's property was damaged in a hail storm. Wak submitted an insurance claim to Ohio, which determined that the value of the claim was $734.92, below Wak's $1, 000 deductible. As a result, Ohio issued a “partial denial” in July 2014 and did not pay the claim.

         During July 2014, Wak personnel made numerous phone calls to Ohio in which they stated that Wak intended to hire its own engineer to inspect the property. Wak brought suit in May 2015, but voluntarily dismissed it without prejudice.

         In September 2015, Wak invoked the appraisal provision of the Policy. Ohio requested a sworn proof of loss and provided the necessary forms. Wak submitted its proof of loss in the amount of $213, 868.31 in November 2015. While the parties moved through the appraisal process, Ohio requested Wak refrain from commencing repairs so it could reinspect the property. The reinspection was delayed a few times due to weather and appraiser availability. Ultimately, the parties submitted their position statements to the umpire in July 2016, and a hearing was held in August 2016. In September, the umpire issued an appraisal award of $136, 032.78 for replacement cost and $91, 822.12 in actual cash value. Ohio promptly paid, and Wak accepted that sum.

         Wak brought this suit in May 2016 before the Policy's statute of limitations expired, and the parties jointly moved to administratively close the case while they completed the appraisal process (# 19). Wak asserted three causes of action: (1) breach of contract based on denial/failure to pay its insurance claim, (2) breach of the implied covenant of good faith and fair dealing based on denial of the claim and forcing Wak to submit to the appraisal process, and (3) a violation of C.R.S. §§ 10-3-1115, 1116 based on unreasonable delay of the claim. The Court sua sponte raised concerns (# 38) as to its subject-matter jurisdiction because the action was filed before the appraisal was complete, and according to the Policy. It appeared that completion of the appraisal process was a condition precedent to Ohio's obligation to pay and thus to Wak's breach-of-contract claim for failure to pay. After briefing on the subject, the Court issued an order addressing Wak's standing to sue and dismissing the breach-of-contract claim. The other two claims remain. Ohio now moves for summary judgment on both claims (# 48).


         Rule 56 of the Federal Rules of Civil Procedure facilitates the entry of a judgment only if no trial is necessary. See White v. York Int'l Corp., 45 F.3d 357, 360 (10th Cir. 1995). Summary adjudication is authorized when there is no genuine dispute as to any material fact and a party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Substantive law governs what facts are material and what issues must be determined. It also specifies the elements that must be proved for a given claim or defense, sets the standard of proof, and identifies the party with the burden of proof. See Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986); Kaiser-Francis OilCo.v.Producer=sGasCo., 870 F.2d 563, 565 (10th Cir. 1989). A factual dispute is “genuine” and summary judgment is precluded if the evidence presented in support of and opposition to the motion is so contradictory that, if presented at trial, a judgment could enter for either party. See Anderson, 477 U.S. at 248. When considering a summary judgment motion, a court views all evidence in the light most favorable to the non-moving party, thereby favoring the right to a trial. See Garrett v. Hewlett Packard Co., 305 F.3d 1210, 1213 (10th Cir. 2002).

         When the moving party does not have the burden of proof at trial, it must point to an absence of sufficient evidence to establish the claim or defense that the non-movant is obligated to prove. If the respondent comes forward with sufficient competent evidence to establish a prima facie claim or defense, a trial is required. If the respondent fails to produce sufficient competent evidence to establish its claim or defense, then the movant is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).


         This action arises solely from the parties' disagreement as to the amount of Wak's loss. In viewing the parties' arguments, it is helpful to keep in mind two provisions of the Policy.

         The first provision lists the insured's duties in the event of loss, which include the duty to submit a sworn proof of loss:

Send us a signed, sworn proof of loss containing the information we request to investigate the claim. You must do this within 60 days after our request. (# 48-11 at 12.)

         It is undisputed that although the hail storm occurred in 2014. Although Wak disagreed with Ohio's initial quantification of its loss, Wak did not submit its sworn proof of loss to Ohio until November 2015.

         The second provision states that if the parties disagree as to the amount of loss, either can invoke an appraisal process:

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 ...

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