United States District Court, D. Colorado
RECOMMENDATION OF UNITED STATES MAGISTRATE
JUDGE
Michael E. Hegarty, United States Magistrate Judge.
This
action arises out of damage to the real property of the
Plaintiff Ridgeview Center LLC (“Plaintiff”),
allegedly caused by a hail storm on May 8, 2017. Defendant
Canopius U.S. Insurance, Inc. (“Defendant”),
which insured the property during the relevant period, filed
a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) seeking
dismissal of Plaintiff's breach of contract claim or a
stay of the proceedings pending an appraisal process.
Defendant also argues that Plaintiff failed to state
plausible claims for bad faith breach of insurance contract
(“common law bad faith”) and violations of Colo.
Rev. Stat. §§ 10-3-1115 and -1116 (“statutory
bad faith”), and Plaintiff prematurely requested an
award of exemplary damages under Colorado law.[1] In response,
Plaintiff concedes the need for an appraisal[2] and that its
exemplary damages request is premature[3]; accordingly, the
only issue remaining for the Court to determine is whether
Plaintiff states plausible bad faith claims. For the reasons
that follow, this Court respectfully recommends that the
Honorable Robert E. Blackburn grant in part and deny in part
the Defendant's motion.
STATEMENT
OF FACTS
The
following are relevant factual allegations (as opposed to
legal conclusions, bare assertions, or merely conclusory
allegations) made by Plaintiff in the operative Amended
Complaint, which are taken as true for analysis under
Fed.R.Civ.P. 12(b)(6) pursuant to Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009).
Plaintiff,
through its owner and registered agent, Joseph DeMott,
purchased commercial property insurance from Defendant,
Policy Number CUS046000456 (“Policy”), to insure
its single story commercial building located at 9005-9105 W
44th Ave, Wheat Ridge, Colorado 80033
(“Property”) for the period April 10, 2017 to
April 10, 2018. The Policy covered losses due to, among other
things, damages to Plaintiff's building caused by hail.
On May
8, 2017, a hail storm caused interior and exterior damage to
the roof and other parts of the Property. Plaintiff timely
filed with Defendant an insurance claim under the Policy for
damages to the Property from the hail storm, which is a
covered loss under the Policy. That is, on or about May 8,
2017, Mr. DeMott called his insurance broker, Sheri Gurule,
to report the Property damage caused by the hail storm.
Defendant
assigned claim number 50876JS to this insurance loss and
hired Blair & Company as a Third-Party Claims
Administrator to investigate the loss and adjust the claim.
Blair & Company assigned the file to employee Julie
Stehnike. On May 17, 2017, Ms. Stehnike sent a claims
adjuster, Brandon Thompson, to inspect the damage to the
Property. Despite the extensive damage, Mr. Thompson's
inspection lasted only one hour and did not include an
interior inspection of the Property. Mr. Thompson also failed
to provide Mr. DeMott with any written documentation or
information regarding the claim.
Shortly
following Mr. Thompson's initial inspection, Plaintiff
contracted with Colorado Continental Roofing and Solar
(“CCRS”) to provide Plaintiff with a damage
estimate. At or about this time, Defendant hired John Gimple,
P.E., from Gimple Engineering to inspect the roof. Mr.
Thompson and Mr. Gimple returned to the Property to conduct a
damage inspection on behalf of Defendant. Plaintiff provided
Mr. Gimple and Mr. Thompson the opportunity to walk the
Property (including both the exterior and interior of the
building) and to ask questions regarding the scope of repair.
Upon climbing onto and seeing the roof, Mr. Gimple told Mr.
DeMott that the roof was “destroyed.” Mr. Gimple
immediately called Ms. Stehnike to explain the significance
of the damage and stated that, in his opinion, the roof was
as bad as it gets. A few minutes later, and while Mr. Gimple
was still on the Property's premises, Ms. Stehnike called
Mr. DeMott and stated, “you are getting a new
roof.”
Despite
this statement, on June 14, 2017, Defendant provided
Plaintiff with Mr. Thompson's replacement cost value
(“RCV”) estimate totaling $165, 195.29, which was
insufficient to replace the Property's roof. Mr. Thompson
was a residential claim inspector and had no prior experience
contracting, estimating, or inspecting commercial flat roof
claims. Due to Mr. Thompson's lack of knowledge,
training, and experience, he produced an estimate that was
significantly lower than what it should have been.
On June
27, 2017, Plaintiff provided Defendant with CCRS's RCV
estimate totaling $723, 413.76. However, Defendant relied on
Mr. Thompson's estimate in refusing to pay CCRS's
estimate and failed to take any further action over the next
ten months.
On or
about March 15, 2018, Defendant hired contractor, Jeff
Herber, to conduct a second inspection of the Property and
provide Defendant with a revised estimate. On May 3, 2018,
Defendant provided Plaintiff with Mr. Herber's revised
RCV estimate totaling $335, 257.74. Both Mr. Thompson's
and Mr. Herber's estimates failed to consider and/or
properly value numerous damages and other line items,
including but not limited to the SPF, pitch pans, gutters,
interior repairs, termination bars, roofing, signage, rear
sheds, gravity vents/restaurant fans, ceiling panels,
sheathing, grow area, and siding. However, Defendant
continued to rely on its own estimates.
After
receiving Defendant's revised estimate, on May 23, 2018,
Plaintiff hired Bryan Hubbard from United Restoration to
conduct a second inspection. Mr. Hubbard conducted a thorough
inspection of the Property and generated an RCV estimate
totaling $965, 528.09, which was provided to Defendant.
Defendant refused to pay the United Restoration estimate.
Accordingly, on June 19, 2018, Plaintiff hired a Colorado
licensed public adjuster, Martin Shields, M.C.E., P.E.,
LEED-AP, of Shields Engineering Group, Inc.
(“SEG”) to assist the Plaintiff with its
insurance claim. SEG conducted its own thorough investigation
of the Property and determined Mr. Herbert's and Mr.
Thompson's estimates contained numerous missing or
drastically undervalued line items including but not limited
to the Property's HVAC, interior and exterior elevations,
outdoor signage, SPF, sheathing, emergency repairs, and
elastomeric coating, as well as all items listed above.
On July
17, 2018, Simon Chavez, SEG Project Architect, and Mr.
Hubbard from United Restoration met with Mr. Gimple and Mr.
Herber at the Property to allow Defendant once again to
inspect the Property. During this inspection, Plaintiff gave
Mr. Gimple and Mr. Herber the opportunity to walk the
Property (including both the exterior and interior of the
building) and to ask questions regarding the scope of repair.
Mr. Gimple's and Mr. Herber's inspection lasted
approximately one hour and they declined to inspect the
building's interior.
On
September 10, 2018, Defendant provided Plaintiff with its
revised RCV estimate totaling $347, 825.75. The estimate
failed to include the items listed above. Consequently, on
October 19, 2018, Plaintiff retained Thomas Miller, P.E.,
from Structural Engineering and Inspections, Inc.
(“SEI”). On October 29, 2018, SEI conducted an
extensive and thorough inspection of the Property and
determined the scope of damage was in fact, greater than that
reported by SEG. However, Defendant failed to pay actual cash
value for the Property loss. Plaintiff believes that
Defendant hired Mr. Heber, Mr. Gimple, and Mr. Thompson,
because they ...