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Reef Enterprises v. Wright National Flood Insurance Company

United States District Court, S.D. Mississippi, Southern Division

March 3, 2017

REEF ENTERPRISES, a Mississippi Corporation doing business as Jordan River Steamer PLAINTIFF
v.
WRIGHT NATIONAL FLOOD INSURANCE COMPANY, formerly known as Fidelity National Indemnity Insurance Company, a Texas Corporation DEFENDANT

          MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S [15] MOTION FOR SUMMARY JUDGMENT

          HALIL SULEYMAN OZERDEN UNITED STATES DISTRICT JUDGE

         BEFORE THE COURT is the Motion [15] for Summary Judgment filed by Defendant Wright National Flood Insurance Company, formerly known as Fidelity National Indemnity Insurance Company, a Texas Corporation. This Motion is fully briefed. Having considered the Motion, related pleadings, the record, and relevant legal authority, the Court is of the opinion that Defendant's Motion [15] for Summary Judgment should be granted, and that Plaintiff's claims should be dismissed with prejudice.

         I. BACKGROUND

         A. Factual background

         Plaintiff Reef Enterprises, Inc., a Mississippi corporation, doing business as Jordan River Steamer[1] (“Plaintiff” or “Reef”), held a Standard Flood Insurance Policy (“SFIP”) from December 8, 2011, to December 8, 2012, issued by Defendant Wright National Flood Insurance Company, formerly known as Fidelity National Indemnity Insurance Company, a Texas Corporation (“Defendant” or “Wright”). See SFIP [1-2] at 1-22. Wright operated as a Write-Your-Own (“WYO”) carrier participating in the National Flood Insurance Program (“NFIP”). See Policy Declarations [16-1] at 10; Aff. of Carolann Whitfield [16-1] at 2.

         The SFIP issued to Plaintiff insured its non-residential property in Kiln, Mississippi, and included coverage of $500, 000.00 for the building and $210, 000.00 for contents. Policy Declarations [13-1] at 1. Plaintiff operated a restaurant at this location (the “Property”). Colonial's Final Report [16-1] at 94.

         On August 28, 2012, “heavy rains associated with Hurricane Isaac caused a temporary and general condition of flooding” which damaged Plaintiff's building. Id. at 95. After receiving Plaintiff's flood claim, Defendant assigned Colonial Claims Corporation (“Colonial”) to inspect the Property, which in turn assigned adjuster Ray Orlando (“Orlando”). Aff. of Carolann Whitfield [16-1] at 3. Orlando contacted Plaintiff on August 30, 2012, and inspected the Property with Plaintiff on September 1, 2012. Id.; Colonial's Final Report [16-1] at 95. Plaintiff hired a public adjuster, Scott Favre, to advocate on its behalf. See, e.g., Plauche Letter [16-1] at 100; Favre Letter [16-1] at 99; Colonial's Final Report [16-1] at 97.

         Orlando discovered that the Property had sustained two prior flood losses. Aff. of Carolann Whitfield [16-1] at 3; Colonial's Final Report [16-1] at 95. One occurred during Hurricane Katrina in 2005, and the other on September 1, 2008. Colonial's Final Report [16-1] at 95. “The insured was paid a total of $348, 687.35” for these two prior losses. Id.

         “Orlando asked the Plaintiff to produce receipts and/or other evidence that the prior flood damages were repaired.” Aff. of Carolann Whitfield [16-1] at 3. Orlando reported to Wright that Reef's President, Hank Plauche, told him that Plauche had

completed the work [for the prior losses, ] and we said that was fine and informed him we would need the invoices for the repairs. He told us he didn't have any receipts or they were destroyed in the flood. We told him we might be able to use the photos from the prior to determine if repairs were made and then we asked him if he could give us the name of the contractor he used, to which he told us he couldn't remember his name. We pressed the name of the contractor then asked if he did the work himself without a contractor and he told us yes. We asked if his accountant might have some documentation from when he filed his taxes and the insured told us he didn't think so. We finished our inspection and left. Some time went by and we got nothing from the insured, then the prior came to us. We reviewed the prior and noticed right away a lot of similarities in the contents and building items.

         Colonial's Action Request [16-1] at 35.

         On November 6, 2012, Plaintiff's public adjuster “compiled a packet of information to turn over to [Orlando].” Favre Letter [16-1] at 98. This included:

1. Ten pictures post Hurricane Gustav (09/2008) showing the scope of work that was completed by Jourdan [sic] River Steamer. Said pictures show an extensive scope of work including, but not limited to, flooring, electrical, sheetrock, plumbing, insulation, painting and rebuilding of bar. The business owner subcontracted the rebuild himself and a lot of the expenses are documented in the below printouts.
2. Receipts from Big Tray.
3. Breakdown of purchases from Associated Food & Equipment.
4. Breakdown of purchases from Cisco.
5. Breakdown of purchases from PayPal.
6. Breakdown of purchases from American Express.
7. Breakdown of purchases from QuickBooks from an array of Building Supply distributors and Equipment distributors. As you can see, Mr. Plauche has been replacing items from 2008 thru this date in an effort to recover from Hurricane Gustav.

Id.

         Plaintiff submitted a signed Proof of Loss dated November 29, 2012, which sought $710, 000.00 under the SFIP. Proof of Loss [16-1] at 103. On November 30, 2012, Orlando recommended that Wright reject the proof of loss. Orlando Report [16-1] at 102.

         On January 8, 2013, Plaintiff's public adjuster forwarded a letter from Plauche to Wright and Colonial asking for a new adjuster to be assigned to the flood claim. Favre Letter [16-1] at 99; Plauche Letter [16-1] at 100. According to Plauche, “[w]e were asked for all receipts for that period and I told him that our files were flooded during the storm.” Plauche Letter [16-1] at 100. According to Plauche, “[w]e have spent day after day compiling as much info as we could from venders and quick books and are able to back them up with canceled checks form [sic] the bank, but that just seems to fall and [sic] deaf ears.” Id.

         On January 17, 2013, Wright rejected the Proof of Loss. Wright Letter [16-1] at 104. Wright referred to items for which payment had been made for prior flood claims and which had not been repaired or replaced, citing the SFIP at section VII, General Conditions. Id. Wright informed Plaintiff

[p]lease have your public adjuster continue to work with the independent adjuster to bring this claim to an amicable conclusion. Any documentation that you can provide to verify that repairs were made and/or replacements were purchased will be reviewed and judged on its merits.
By stating the above, Fidelity National Indemnity Insurance Company does not waive any of its rights, but specifically reserves any and all of its rights under the policy of insurance and Federal Law.
In accordance with VII. GENERAL CONDITIONS, R. Suit Against Us, should you wish to challenge Fidelity National Property and Casualty Insurance Company's position in this matter, you must file a lawsuit within 12 months of the denial of claim letter, and your lawsuit must be filed in federal court.

Id. at 105 (emphasis in original).

         “Based on his observations and the documentation submitted by Plaintiff, Orlando prepared a building damage estimate in the amount of $137, 925.98 RCV [Replacement Cost Value]; $111, 560.41 ACV [Actual Cash Value] and a contents estimate of $102, 815.97 RCV; $75, 158.71 ACV.” Aff. of Carolann Whitfield [16-1] at 4; see also Damage Estimate [16-1] at 43. On June 30, 2013, Orlando issued a Final Report to Wright. Final Report [16-1] at 94. Orlando explained that “[t]here are a few items we recommend for denial due to lack of documentation showing repaired or replaced. These items are also included in our estimate but have a $0.00 dollar amount.” Id. at 95.

         On July 10, 2013, Plaintiff executed another sworn Proof of Loss. Proof of Loss [16-1] at 106. In the new Proof of Loss, Plaintiff claimed a net amount under the policy of $186, 719.12, id., which matched the actual cash value total calculated by Wright's adjuster Orlando, see Damage Estimate [16-1] at 43. On July 11, 2013, Wright submitted a request to FEMA for a waiver for Plaintiff's late-signed Proof of Loss. E-Mail [22-1] at 1-2. Wright explained to FEMA that

[t]he Proof of Loss is late mainly due to the length of time it took the insured to provide documentation that damages from a prior flood had been repaired. The adjuster wrote extremely detailed reports delineating each building item and [sic] that had been damaged in the prior flood. He then compared photographs from both floods in order to determine what exactly had been repaired and/or replaced within the time period between the two flood events. The same methodology was utilized with the contents portion of the claim. In ...

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