Ridgeview Center LLC v. Canopius U.S. Insurance Inc.

          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 ...